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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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WALL DATA INCORPORATED
(NAME OF SUBJECT COMPANY)
WALL DATA INCORPORATED
(NAME OF PERSON(S) FILING STATEMENT)
COMMON SHARES, NO PAR VALUE
(TITLE OF CLASS OF SECURITIES)
932045107
(CUSIP NUMBER OF CLASS OF SECURITIES)
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KEVIN B. VITALE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WALL DATA INCORPORATED
11332 N.E. 122ND WAY
KIRKLAND, WASHINGTON, 98034
(425) 814-9255
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
ANDREW BOR
PERKINS COIE LLP
1201 THIRD AVENUE, SUITE 4800
SEATTLE, WASHINGTON 98101
(206) 583-8500
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Wall Data Incorporated, a Washington
corporation (the "Company"). The address of the principal executive offices of
the Company is 11332 N.E. 122nd Way, Kirkland, Washington 98034. The class of
equity securities to which this Solicitation/Recommendation Statement on
Schedule 14D-9 (this "Statement" or this "Schedule 14D-9") relates is common
stock, no par value (the "Common Stock"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer (the "Offer") disclosed in
a Tender Offer Statement on Schedule 14D-1 dated October 27, 1999 (the "Schedule
14D-1"), of NetManage, Inc., a Delaware corporation ("Parent"), and its
wholly-owned subsidiary, NetManage Acquisition Corporation, a Washington
corporation ("NetManage" or "Purchaser"), to purchase all of the outstanding
shares of Common Stock of the Company (the "Shares") at a price of $9.00 per
Share, net to the seller in cash and without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated October
27, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer Documents"). The Offer is being made pursuant to
an Agreement and Plan of Merger dated as of October 20, 1999 (the "Merger
Agreement") by and among the Company, Parent and Purchaser, pursuant to which,
at the effective time of the merger (the "Effective Time") Purchaser will be
merged with and into the Company (the "Merger"). A copy of the Merger Agreement
is filed as Exhibit 3 hereto and is incorporated herein by reference.
According to the Schedule 14D-1, the address of the principal executive
offices of Parent and Purchaser is 10725 N. DeAnza Blvd., Cupertino, California
95014.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) Except as described in this Statement, or in Annex B hereto, to the
knowledge of the Company, as of the date hereof, there are no material
contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest between the Company or its affiliates, the
Company, its executive officers, directors or affiliates, or Parent, the
Purchaser or their respective executive officers, directors or affiliates.
In January 1999, the Company entered into an Employment and Change of
Control Agreement with Kerry D. Palmer, the Company's Controller. The agreement
provides that Mr. Palmer will be employed by the Company for a term of two
years, with an automatic renewal for successive one-year terms unless cancelled
upon twelve months' notice. Termination without cause entitles the Mr. Palmer to
receive (1) one times his base salary, (2) a percentage of base salary equal to
the Executive Incentive Plan (as defined in the agreement) percentage for the
prior fiscal year and (3) COBRA (as defined in the agreement) premiums for
eighteen months. In the event of termination due to change of control, Mr.
Palmer will receive the benefits above, except that the salary multiple for Mr.
Palmer is one and one-half. A copy of Mr. Palmer's Employment and Change of
Control Agreement is filed as Exhibit 4 hereto and is incorporated herein by
reference. Certain other contracts, agreements, arrangements or understandings
between the Company or its affiliates and certain of its directors and executive
officers are described in Annex B hereto.
The Company has granted to certain directors and executive officers of the
Company options to acquire Common Stock, pursuant to the Company's Restated 1993
Stock Option Plan, (the "1993 Plan") and the Restated 1993 Stock Option Plan for
Non-Employee Directors (the "Non-Employee Director Plan") (together with the
1993 Plan, the "Plans"), filed herewith as Exhibits 5 and 6 respectively, and
incorporated in this Statement by reference. The Non-Employee Director Plan
provides, generally, that upon a merger, consolidation or acquisition of
property or stock as a result of which shareholders of the Company receive cash,
stock or other property in exchange for their shares of the Company's Common
Stock, the vesting of each option outstanding under the Non-Employee Director
Plan will accelerate and will become immediately
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exercisable in full under the terms of such plan immediately prior to the
Effective Time. The 1993 Plan provides, generally, that upon a merger,
consolidation or acquisition of property or stock, as a result of which
shareholders of the Company receive cash, stock, or other property in exchange
for their shares of Common Stock, any option granted under the 1993 Plan, unless
assumed, will terminate, but the optionee has the right to exercise all of his
or her options, whether or not vested, prior to the consummation of such merger.
Under the terms of the Merger Agreement, neither Parent nor Purchaser will
assume or continue any outstanding stock options under the Plans, or substitute
any additional options for such outstanding options. Consequently, immediately
prior to the Effective Time, such options will vest and become exercisable in
full.
Each executive officer and director of the Company will be entitled to the
same benefits and will be subject to the same restrictions as all other
optionees holding options pursuant to the Plans. However, at the request of
Parent and Purchaser, Kevin B. Vitale, President and Chief Executive Officer of
the Company, Richard P. Fox, Vice President and Chief Financial Officer of the
Company, Craig E. Shank, the Vice President and General Counsel of the Company,
and Kerry D. Palmer, the Company's Controller have entered into agreements with
the Company and Parent which supercede their existing change of control
agreements and employment agreements (the "New Agreements"). The New Agreements
in each case provide that the officer agrees to the termination of all options
that would otherwise accelerate upon consummation of the Merger and agrees not
to claim a constructive termination that he is entitled to under his existing
agreement, and instead, to continue his employment with the Company following
the Effective Time. In exchange, Parent has agreed to pay each officer the
severance amount he is otherwise entitled to under his existing agreement, in
twelve substantially equal semi-monthly installments plus an amount equal to (x)
$9.00 minus (y) the exercise price multiplied by (z) the number of shares
subject to accelerated option vesting. The payments terminate if the officer
resigns other than for a valid reason or is terminated for cause. The New
Agreements also provide that the officer's base pay will not be reduced and that
he will be eligible to participate in the Parent's bonus plan and employee stock
option plan at levels comparable to those of senior officers of other divisions
of the Parent.
The foregoing summary of the New Agreements is qualified in its entirety by
reference to the complete text of the New Agreements, copies of which are filed
as Exhibits 7 through 10 hereto and are incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of The Board of Directors
The Board of Directors of the Company (the "Board") has unanimously
approved the Merger Agreement and the Offer, and has determined that the Merger
Agreement, the Offer and the Merger are fair to and in the best interest of the
Company's shareholders (the "Shareholders"), and unanimously recommends that the
Shareholders accept the Offer.
A press release announcing the execution of the Merger Agreement is filed
herewith as Exhibit 11 and is incorporated herein by reference.
(b) Background; Reasons For The Board's Recommendation
In 1996, James Simpson, a former CEO and Chairman of the Board of the
Company, John Wall, the Company's former Chief Executive Officer and Kevin
Vitale, the Company's then Chief Operating Officer, met with Zvi Alon, President
and Chief Executive Officer of NetManage and the Chief Financial Officer and
Vice President of Human Resources of NetManage, and held preliminary discussions
about a possible business combination of NetManage and the Company. No further
discussions were held at that time.
In the late summer of 1998, Mr. Alon contacted Mr. Wall by telephone to
find out whether the Company was interested in pursuing discussions regarding a
possible business combination. No further discussions were held in response to
the call.
In December 1998, the Board determined that the Company's RUMBA and
Cyberprise businesses required different sales processes, different customer
contacts and distinct market positioning. The Company
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also faced challenges in allocating resources and prioritizing activities
between its RUMBA and Cyberprise businesses. As a result, the Board concluded
that it should evaluate strategic alternatives to enhance shareholder value. At
that time, the Company engaged Bear Stearns & Co. Inc. ("Bear Stearns") to
identify and evaluate potential strategic alternatives for the Company and its
two businesses, including: (i) a possible spin-off of the Cyberprise business
(ii) a sale of the RUMBA business, (iii) or a sale of the Company. Beginning in
March of 1999 and continuing through May of 1999 Bear Stearns contacted 24
entities regarding their interest in a transaction involving the Company. The
Company received indications of interest from five of these parties, including
NetManage.
On March 12, 1999, Mr. Wall contacted Mr. Alon by telephone. Mr. Alon and
Mr. Wall engaged in discussions about the Company's RUMBA business. Both parties
expressed an interest in having NetManage be among the potential partners the
Company was evaluating in its analysis with Bear Stearns.
On April 29, 1999, NetManage entered into a nondisclosure agreement with
the Company.
In May and June 1999, Mr. Wall and Mr. Alon spoke by telephone regarding
NetManage's interest in acquiring the RUMBA business.
On July 1, 1999, members of NetManage's senior management team, including
Mr. Alon, Gary Anderson, Pat Linehan, Peter Havart-Simkin and Judy Somerville,
met with John Wall, Kevin Vitale, Rick Fox and Craig Shank of the Company in
Bellevue, Washington to discuss the Company's business and possible partnering
between the Company and NetManage.
On July 14, 1999, Mr. Vitale and Mr. Fox met with Mr. Alon and Mr. Anderson
to discuss potential organizational structures and potential cost synergies in a
merger of NetManage and the Company.
On July 16, 1999, NetManage presented the Company with a written
acquisition proposal in which NetManage would acquire all of the Company's
outstanding capital stock in exchange for NetManage stock. Mr. Vitale and Mr.
Alon spoke by telephone several times to review the terms and valuation
described in the letter.
On July 19, 1999, NetManage submitted a revised proposal, and Mr. Vitale
and Mr. Alon continued to communicate by telephone to review the terms and
potential cost synergies.
From July 28, 1999 through August 4, 1999, members of the Company's senior
management team traveled to Cupertino, California to meet with NetManage senior
management, conduct mutual due diligence, review potential cost synergies and
negotiate merger agreement issues.
On August 4, 1999, after failing to reach agreement on valuation, NetManage
and the Company agreed to discontinue discussions about an acquisition of the
Company until the parties had an opportunity to review valuation with their
respective financial advisors.
During the week of August 9, 1999, Mr. Alon and Mr. Vitale communicated by
telephone to determine whether there was continued interest in a potential
transaction.
In August 1999, NetManage delivered a new proposal for a potential
acquisition of the Company. Mr. Vitale and Mr. Alon held several discussions by
telephone to review the proposal.
On August 26, 1999, the Board met to discuss offers the Company had
received. The Board determined that based on the value of the proposals
received, the Company should continue to operate independently, and that the
Company should terminate the analysis of strategic alternatives with Bear
Stearns unless a potential partner offered a substantially higher value for the
Company.
On August 27, 1999, Mr. Vitale telephoned Mr. Alon to notify Mr. Alon that
the Company had terminated its analysis of strategic alternatives with Bear
Stearns and would continue to operate independently. Mr. Vitale also told Mr.
Alon that the Board had rejected the most recent offer from NetManage and
confirmed to Mr. Alon that based on the proposed valuations, the Company would
move forward independently and was no longer interested in NetManage's merger
proposal.
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On August 30, 1999, the Company announced publicly that it had terminated
the analysis of strategic alternatives with Bear Stearns and would continue to
operate independently.
In early September 1999, Mr. Vitale and Mr. Alon spoke by telephone
regarding the parties' differences in valuation. Mr. Vitale confirmed that the
Company was not soliciting offers, had terminated the analysis of strategic
alternatives the Bear Stearns process and would not take proposals to the Board
of Directors unless they represented a substantially different value than those
made during August. Mr. Alon had similar conversations directly with Bear
Stearns.
On October 1, 1999, the Company received an unsolicited offer to purchase
all of the Company capital stock for cash from a third party, subject to certain
conditions. In a subsequent telephone call, this third party indicated that it
intended to proceed with a transaction even if it could not reach an agreement
with the Company.
In order to determine how to respond to this unsolicited offer, on October
5, 1999 the Company and Bear Stearns contacted four of the parties that had been
contacted over the summer to determine whether they would be interested in a
cash offer for the Company's shares. During the course of the next 10 days, the
Company received preliminary proposals from three of the four parties, including
NetManage.
On October 11, 1999, the Company received a proposal from NetManage to
purchase the Company for a value higher than in the unsolicited offer.
Indications of value from the other parties were substantially lower than
NetManage.
On October 14, 1999, the Company received a draft proposal from the same
party that submitted the initial unsolicited offer to purchase the Company for a
value potentially in excess of NetManage's proposal. Mr. Vitale telephoned
NetManage and others to notify them that their offers had been exceeded.
On October 15, 1999, NetManage delivered an offer to the Company to
purchase the Company for $9.00 per share, which was higher than any other offer.
The Company notified other participants by telephone and letter that best and
final offers needed to be delivered to the Company by noon of that same day. No
additional offers were received. In the afternoon of October 15th, the Company
and NetManage agreed to enter into exclusive negotiations until October 20,
1999. This agreement was later extended to October 21, 1999.
On October 16, 1999, Messrs. Vitale, Fox and Shank met with Messrs. Alon,
Anderson, Havart-Simkin, Linehan and Moore and Ms. Somerville to conduct a
review of the Company's current and prospective business, synergies and due
diligence.
From October 17 through October 20, the Company, NetManage and their
respective counsel negotiated and completed the Merger Agreement.
On October 20, 1999, the Company's Board approved the offer submitted by
NetManage and the Merger Agreement, and the parties executed the Merger
Agreement. Prior to October 20, 1999, Mr. Vitale discussed the status of
communications with NetManage with the Board of Directors at meetings held on
July 25, 1999, August 5, 1999, August 26, 1999 and October 5, 1999 and gave
periodic updates to individual Directors in the interim.
On the morning of October 21, 1999, the parties publicly announced the
signing of the Agreement.
In approving the Merger Agreement, the Offer and the Merger and in
recommending that shareholders of the Company tender their Shares pursuant to
the Offer, the Board considered a number of factors, including the following:
(i) the Board's familiarity with, and information provided by the
Company's management as to the business, financial condition, results of
operations, prospects for employee and management retention and recruiting,
current business strategy and future prospects of the Company, and
alternatives to organic growth of the Company, as well as the risks
involved in achieving the prospects and objectives in light of the current
market for the Company's products and services, and the historical and
current market price for the Shares;
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(ii) the unsolicited proposal from a third party to purchase the
Shares, as well as the impact of such a proposal on employee morale and
customer buying patterns, and the resulting impact on the Company's
financial condition and results of operations if the third party pursued an
unsolicited offer;
(iii) the terms of the Merger Agreement, including (a) the proposed
structure of the Offer cash tender offer, and (b) that financing is not a
condition to the Offer and the Acquisition, thereby enabling Shareholders
to obtain cash for their Shares quickly;
(iv) the per share price contemplated by the Merger Agreement at $9.00
represented a significant premium of approximately 58% to the closing price
of the Shares the day before the Board's approval of the Merger Agreement
and a 58% premium to the closing price of the shares during the five
trading days immediately prior to the Board's approval of the Merger
Agreement;
(v) the price contemplated by the Merger Agreement was higher than any
cash price proposed by any of the other parties with whom the Company or
Bear Stearns had discussions since December of 1998, the commencement of
Bear Stearns' analysis.
(vi) the process engaged in by the Company's management and Bear
Stearns, and the range of values indicated by potential transaction
partners;
(vii) the presentation of Bear Stearns at the October 20, 1999 Board
meeting and the opinion of Bear Stearns to the effect that, as of such
date, and based on the factors set forth therein, the consideration to be
paid by the Purchaser to the holders of the Shares in the Offer and the
Acquisition was fair to such holders from a financial point of view.
(viii) the Merger Agreement permits the Company to furnish nonpublic
information to, and to participate in negotiations with, any third party
that has submitted an unsolicited bona fide Acquisition Proposal (as
defined in the Merger Agreement) that constitutes, or is reasonably likely
to lead to, a Superior Proposal (as defined in the Merger Agreement), if
the Board determines in good faith that taking such action is necessary in
the exercise of its fiduciary obligations under applicable law and the
Merger Agreement permits the Board to terminate the Merger Agreement in
certain circumstances in the exercise of its fiduciary duties;
(ix) the termination provisions of the Merger Agreement, which under
certain circumstances could obligate the Company to pay a termination fee
of U.S. $5,000,000, and the Board's belief that such fee provisions would
not deter a higher offer and are consistent with similar transactions;
(x) the likelihood that the transaction would be consummated,
including the conditions to the Offer, and Parent's financial strength,
including its undertaking to provide Purchaser with all necessary funds to
purchase the Shares; and
(xi) a consideration of alternatives to the sale of the Company,
including without limitation, continuing to operate the Company as a public
company and not engaging in any extraordinary transaction, together with
the risks associated with such alternatives. Among the risks identified
were the following: risk of failing to achieve the Company's objectives as
a result of changes in the marketplace, failure to retain key employees or
failing to execute the Company's plans; risk that even if the Company
achieved its performance objectives it would not substantially increase
shareholder value; and the risk that capital markets decline particularly
in the small-capitalization technology stocks.
The foregoing discussion addresses the material information and factors
considered by the Board in its consideration of the Offer. In view of the
variety of factors and the amount of information considered, the Board did not
find it practicable to provide specific assessments of, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. The determination to recommend that Shareholders accept the Offer
was made after consideration of all of the factors taken as a whole. In
addition, individual members of the Board may have given different weights to
different factors.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Bear Stearns to render financial advisory services to
the Company in connection with a review of the Company's strategic alternatives
and to act as the exclusive financial advisor with respect to a sale of the
Company or any equity offerings by the Company. Pursuant to an engagement letter
dated December 18, 1998, as amended on June 3, 1999 the Company agreed to pay
Bear Stearns (a) an initial fee of $200,000 and (b) in connection with the sale
of the Company, a fee equal to 1.75% of the amount paid for the Company. The
Company also agreed to reimburse Bear Stearns for its reasonable out-of-pocket
costs and expenses, and to indemnify Bear Stearns against certain liabilities in
connection with the engagement.
Except as disclosed in this Statement, neither the Company nor any person
acting on its behalf currently intends to employ, retain or compensate any other
person to make solicitations or recommendations to security holders on its
behalf concerning the Offer of the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, the following individuals engaged in
transactions in the Shares: (i) Richard P. Fox, Vice President, Chief Financial
Officer and a member of the Board purchased 2,000 shares of Common Stock on
September 22, 1999, (ii) Robert J. Frankenberg, Chairman of the Board, purchased
5,000 shares of Common Stock on September 28, 1999, (iii) Bettie A. Steiger, a
member of the Board, purchased 3,000 shares of Common Stock on September 30,
1999, and (iv) Kevin B. Vitale, President and Chief Executive Officer and a
member of the Board, purchased 3,000 shares of Common Stock on September 22,
1999. The price per share for each of these transactions ranged from a low of
$5.31 to a high of $5.62 per share.
Also, during the past 60 days, options to purchase shares were granted on
September 22, 1999 at an option exercise price of $5.50 per share pursuant to
the terms and conditions of the Plans to the following persons: (i) Robert J.
Frankenberg, 7,500 option shares, (ii) Jeffrey A. Heimbuck, 7,500 options
shares, (iii) Henry N. Lewis, 7,500 option shares, (iv) David F. Millet, 7,500
option shares, (v) Steve Sarich, Jr., 7,500 option shares, (vi) Bettie A.
Steiger, 7,500 option shares, (vii) Kevin B. Vitale, 160,000 option shares,
(viii) Richard P. Fox, 60,000 option shares, (ix) Craig E. Shank, 60,000 option
shares, (x) Roger C. Fairchild, 40,000 option shares, (xi) Kerry D. Palmer,
20,000 option shares.
(b) To the Company's knowledge, each executive officer, director and
affiliate of the Company currently intends to tender all Shares to Purchaser
over which he or she has sole dispositive power as of the expiration date of the
Offer, unless to do so would subject such person to liability under Section
16(b) of the Securities Exchange Act of 1934, as amended.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company, (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company, (iii)
a tender offer for or other acquisition of securities by or of the Company or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth herein, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) THE WASHINGTON TAKEOVER ACT. The Washington Takeover Act (Chapter 19 of
the Washington Business Corporation Act) provides that if a target corporation
has an "acquiring person" as a shareholder, the target corporation may not
engage in any of the defined "significant business transactions" for a period of
five years following the time of the acquiring person's share acquisition unless
the significant business transaction
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or the purchase of shares by the acquiring person is approved prior to the
acquiring person's share acquisition by a majority of the members of the board
of directors of the target corporation. An "acquiring person" is a person who
beneficially owns 10% or more of the outstanding voting shares of the target
corporation. After the Washington Takeover Act's five-year moratorium, a
"significant business transaction" may proceed only if (i) it compiles with the
"fair price" provisions of the statute requiring that holders of common stock
receive value per share at least equal to the higher of two specified formulas,
or (ii) such transaction is approved at a shareholders meeting (by the majority
of shares entitled to vote excluding those shares held by the acquiring person)
held at least five years after the acquiring person purchased its shares.
Therefore, unless the board of directors (as it was composed before the
acquiring person acquired its shares) approves of either the transaction or the
acquisition by the acquiror of its shares, the Washington Takeover Act imposes a
five-year moratorium prohibiting the corporation from effecting any of the
enumerated significant business transactions even if its current board wants to
do so.
The "significant business transactions" covered by the Washington Takeover
Act include:
(i) a merger, share exchange or consolidation of the target
corporation with an acquiring person;
(ii) the sale, lease, exchange, mortgage, pledge, transfer or other
disposition or encumbrance of the target's assets to or with an acquiring
person over a threshold aggregate market value;
(iii) the termination, as a result of the acquiring person's
acquisition of at least 10% of the shares of the target corporation, of at
least 5% of the target corporation's (or a subsidiary's) employees employed
in Washington State over the five-year period following the share
acquisition time;
(iv) the issuance or transfer of shares, options, warrants or rights
to acquire its shares to, or the redemption from, an acquiring person by
the target corporation, except under limited circumstances;
(v) the liquidation or dissolution of the target proposed by or
pursuant to an agreement with an acquiring person;
(vi) the reclassification of securities of the target proposed by or
pursuant to an agreement with an acquiring person that increases the
proportionate share of the outstanding shares of a class or series of
voting shares or securities convertible into voting shares of a target
corporation that is directly or indirectly owned by an acquiring person,
except as the result of immaterial changes due to fractional shares
adjustments; or
(vii) receipt by an acquiring person of the direct or indirect
benefit, except proportionately as a shareholder of the target corporation,
of loans, advances, guarantees, pledges or other financial assistance or
tax credits or other tax advantages.
The moratorium provisions of the Washington Takeover Act do not apply to
the Offer or the Merger because the Board has approved the Offer and the Merger.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit 1. Offer to Purchase, dated October 27, 1999.+
Exhibit 2. Letter of Transmittal.+
Exhibit 3. Agreement and Plan of Merger, dated as of October 20, 1999,
by and among the Company, Parent and Purchaser.+
Exhibit 4. Employment and Change In Control Agreement, dated January
21, 1999 between the Company and Kerry D. Palmer.*
Exhibit 5. Restated 1993 Stock Option Plan, as amended.*
Exhibit 6. Restated 1993 Stock Option Plan for Non-Employee Directors,
as amended.*
Exhibit 7. Employment Agreement, dated as of October 20, 1999, by and
among the Company, Parent and Kevin B. Vitale.+
Exhibit 8. Employment Agreement, dated as of October 20, 1999, by and
among the Company, Parent and Richard P. Fox.+
Exhibit 9. Employment Agreement, dated as of October 20, 1999, by and
among the Company, Parent and Craig E. Shank.+
Exhibit 10. Employment Agreement, dated as of October 20, 1999, by and
among the Company, Parent and Kerry D. Palmer.+
Exhibit 11. Press Release, issued by Parent and the Company on October
21, 1999.+
Exhibit 12. Opinion of Bear Stearns, dated October 20, 1999 (attached
hereto as Annex A).*
</TABLE>
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* Filed herewith.
+ Filed as an exhibit to Parent's and Purchaser's Tender Offer Statement on
Schedule 14D-1, dated October 27, 1999, and incorporated herein by reference.
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 27, 1999
WALL DATA INCORPORATED
By: /s/ KEVIN B. VITALE
------------------------------------
Name: Kevin B. Vitale
Title: President and Chief Executive
Officer
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ANNEX A
[BEAR STEARNS LETTERHEAD]
October 20, 1999
The Board of Directors
Wall Data Incorporated
11332 NE 122nd Way
Kirkland, WA 98034-6931
Gentlemen:
We understand that Wall Data Incorporated ("Wall"), NetManage, Inc.
("NetManage") and NetManage Acquisition Corporation propose to enter into an
Acquisition Agreement dated October 20, 1999 (the "Agreement") pursuant to which
all outstanding shares of common stock of Wall will be exchanged for $9.00 in
cash per share (the "Consideration") by means of a tender offer (the "Tender
Offer") followed by a subsequent merger with NetManage Acquisition Corporation
(the "Merger"). The Agreement also provides for the cashing out of each
outstanding option to acquire Wall common stock at a price equal to the
Consideration less the applicable exercise price for such option (such series of
transactions herein collectively referred to as the "Transaction").
You have asked us to render our opinion as to whether the Consideration is
fair, from a financial point of view, to the shareholders of Wall.
In the course of performing our review and analyses for rendering this
opinion, we have:
- reviewed the Agreement;
- reviewed Wall's Annual Report to Shareholders on Form 10-K for the fiscal
year ended April 30, 1999 and its Quarterly Report on Form 10-Q for the
period ended July 31, 1999;
- reviewed certain operating and financial information, including
projections, provided to us by Wall's management relating to Wall's
businesses and prospects;
- met with certain members of Wall's senior management to discuss Wall's
businesses, operations, historical and projected financial results and
future prospects;
- reviewed the historical prices, valuation parameters and trading volume
of the common shares of Wall;
- reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which we deemed generally
comparable to Wall;
- reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Wall and the Transaction; and
- conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information, including
without limitation the projections provided to us by Wall. With respect to
Wall's projected financial results, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the senior management of Wall as to the expected future
performance of Wall. We have not assumed any responsibility for the independent
verification of any such information or of the projections provided to us, and
we have further relied upon the assurances of the senior managements of Wall
that they are unaware of any facts that would make the information, including
the projections, provided to us incomplete or misleading.
A-1
<PAGE> 12
In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities of Wall, nor have we been
furnished with any such appraisals. During the course of our engagement, we were
asked by the Board of Directors to solicit indications of interest from various
third parties regarding a transaction with Wall, and we have considered the
results of such solicitation in rendering our opinion. Our opinion is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof.
We have acted as a financial advisor to Wall in connection with the
Transaction and will receive a fee for such services. In the ordinary course of
business, Bear Stearns may actively trade the equity securities of Wall and/or
NetManage for our own account and for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is intended for the benefit and use of
the Board of Directors of Wall and does not constitute a recommendation to the
Board of Directors of Wall or any holders of Wall common stock as to whether to
tender their shares in the tender offer or how to vote their shares in
connection with the Merger. This opinion does not address Wall's underlying
business decision to pursue the Transaction. This letter is not to be used for
any other purpose, or reproduced, disseminated, quoted to or referred to at any
time, in whole or in part, without our prior written consent; provided, however,
that this letter may be included in its entirety in any tender offer document or
proxy statement to be distributed to the holders of Wall common stock in
connection with the Transaction.
Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration is fair, from a financial point of view, to the
shareholders of Wall.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ EDWARD RIMLAND
------------------------------------
Managing Director
A-2
<PAGE> 13
ANNEX B
WALL DATA INCORPORATED
11223 N.E. 122ND WAY
KIRKLAND, WASHINGTON 98304
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
The following information is being furnished to holders of the common
stock, no par value (the "Common Stock"), of Wall Data Incorporated, a
Washington corporation (the "Company"), in connection with the possible
designation by NetManage, Inc., a Delaware corporation ("NetManage"), of at
least a majority of the board of directors of the Company pursuant to the terms
of an Agreement and Plan of Merger, dated as of October 20, 1999 (the "Merger
Agreement"), by and among the Company, NetManage and NetManage Acquisition
Corporation, a Washington corporation and wholly owned subsidiary of NetManage
(the "Purchaser"). THIS INFORMATION IS BEING PROVIDED SOLELY FOR INFORMATIONAL
PURPOSES AND NOT IN CONNECTION WITH A VOTE OF THE COMPANY'S STOCKHOLDERS.
Pursuant to the Merger Agreement, the Purchaser has commenced a tender
offer (the "Offer") to purchase all of the outstanding shares of the Common
Stock. The Merger Agreement provides that promptly following the acquisition by
the Purchaser pursuant to the Offer of not less than fifty-one percent (51%) of
the shares of Common Stock outstanding on a fully diluted basis, NetManage shall
be entitled to designate a majority of the members of the Company's Board of
Directors. In addition, pursuant to the terms of the Merger Agreement, the
Company has agreed to, upon the request of NetManage, increase the size of its
Board of Directors and/or secure resignations to enable NetManage's designees to
be elected to the Board of Directors.
The information contained in this Annex B concerning the Purchaser has been
furnished to the Company by NetManage, and the Company assumes no responsibility
for the accuracy or completeness of any such information.
VOTING SECURITIES OF THE COMPANY
As of October 25, 1999 there were issued and outstanding 10,189,969 shares
of Common Stock, each of which entitles the holder to one vote.
B-1
<PAGE> 14
BOARD OF DIRECTORS,
ACQUISITION DESIGNEES AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
Certain information concerning directors of the Company as of October 25,
1999 is set forth below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
Robert J. Frankenberg.................. 52 Chairman of the Board of Directors Wall
Data; President and Chief Executive
Officer of Encanto Networks, Inc.
Jeffrey A. Heimbuck.................... 53 Former President and Chief Executive
Officer of Inmac Corporation
Henry N. Lewis......................... 60 Managing Director and Principal of
Computer Ventures Group Limited
David F. Millet........................ 55 Managing Director of Gemini Investments
Steve Sarich, Jr....................... 78 President of 321 Investment Co. and
President of C.S.S. Management Co.
Bettie A. Steiger...................... 65 President and Founder of Steiger
Associates
Kevin B. Vitale........................ 41 President and Chief Executive Officer
Richard P. Fox......................... 52 Vice President Finance, Chief Financial
Officer and Treasurer
</TABLE>
Robert J. Frankenberg has been Chairman of the Board since August 1997 and
a Director of the Company since December 1996. Since June 1997, Mr. Frankenberg
has been President and Chief Executive Officer of Encanto Networks, Inc., a
company that develops and markets Internet products. Mr. Frankenberg was Chief
Executive Officer and President of Novell, Inc. from April 1994 to August 1996,
and Chairman of the Board of Novell, Inc. from August 1994 to August 1996. From
February 1991 to April 1994 he was Vice President, General Manager of
Hewlett-Packard Company's ("H-P") Personal Information Products Group. Prior to
February 1991 he led H-P's Information Networks Group and Information Systems
Group. Mr. Frankenberg currently serves on the Board of Directors of Caere
Corporation, Daw Technologies, Inc., Electroglas, Inc., National Semiconductor
Corporation and Secure Computing Corporation. Mr. Frankenberg also serves on the
advisory board of the Sundance Film Festival and the Board of Trustees of
Westminster College.
Jeffrey A. Heimbuck has been a Director of the Company since December 1996.
From July 1992 through July 1996, Mr. Heimbuck was President and Chief Executive
Officer of Inmac Corporation. Prior to Inmac Corporation, he was President of
Quantum Commercial Products, a division of Quantum Corporation, manufacturer of
Winchester disk drives.
Henry N. Lewis has been a Director of the Company since January 1993. Since
1976, Mr. Lewis has been a Managing Director and a principal in Computer
Ventures Group Limited, a London-based investment company investing primarily in
the computer industry. Mr. Lewis is also a director of Action Computer Supplies
Limited, Action Computer Supplies Holdings, p.1.c. and CVG Investments Limited.
David F. Millet has been a Director of the Company since October 1992.
Since 1997, he has served as Managing Director of Gemini Investors, a private
investment firm, and since 1988, he has also served as President of Chatham
Venture Corporation, an investment advisory company. He is also President and a
director of Thomas Emery & Sons, LLC, a private investment company, and Chairman
of Holographix, Inc., a manufacturer of holographic optical components and
systems. Mr. Millet is also a director of View Tech, Inc., National
Telemanagement Corporation and Mohawk Metal Products.
Steve Sarich, Jr. has been a Director of the Company since June 1991. He
has been President of 321 Investment Co., a venture capital company, since 1980
and President of C.S.S. Management Co., a
B-2
<PAGE> 15
management company, since 1986. Mr. Sarich is also a director of Cyclopss
Corporation and Flo Scan Instrument Company.
Bettie A. Steiger has been a Director of the Company since May 1995. She is
President and Founder of Steiger Associates, a consulting firm which specializes
in business management and strategic marketing. From June 1988, Ms. Steiger
served in various capacities at Xerox Corporation ("Xerox"). She served as a
Principal for Xerox's Market and Technology Innovation Group ("MTI") from June
1992 until July 1998. MTI sponsors new business initiatives for Xerox based on
emerging technologies invented at Xerox. From December 1990 to June 1992, Ms.
Steiger was Worldwide Marketing Resident at Xerox's Palo Alto Research Center.
Formerly, Ms. Steiger was Vice President, Videotex, of the Gartner Group and the
Executive Director of the Association for Information and Image Management. She
is a founding member of Source Telecomputing Corporation ("The Source"). Ms.
Steiger is also a director of Alumnae Resources, ISIM, Inc., PubWeb.com, Inc.,
and B-Linked, Inc.
Kevin B. Vitale has been a Director and Chief Operating Officer of the
Company since July 1997. Mr. Vitale served as Executive Vice President of the
Company from April 1996 to July 1997 and Vice President, Operations and Services
from July 1993 to April 1996. Prior to joining the Company, Mr. Vitale was Vice
President, Corporate Quality and Customer Service of NetFRAME Systems
Incorporated from July 1989 to July 1993. Mr. Vitale also serves as a director
and the chairman of the Long Range Planning Committee for the Washington
Software Association. He is also a founding member of the Technical Support
Alliance Network ("TSANet"), where he served as a board member and Treasurer for
the past four years.
Mr. Fox has been a director since September 1999 and Vice President
Finance, Chief Financial Officer and Treasurer of the Company since April 1998.
Immediately prior to joining the Company, Mr. Fox was Senior Vice President of
PACCAR Inc. from March 1997 to January 1998. Prior to that, he was with Ernst &
Young LLP, becoming a partner in 1979. His last position was managing partner of
the firm's Seattle office. Mr. Fox serves on the Board of Trustees of the
Seattle Repertory Theatre and the Seattle Repertory Theatre Foundation.
RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES
The Merger Agreement provides that promptly upon the purchase by the
Purchaser pursuant to the Offer of such number of Shares which satisfies the
Minimum Condition (as defined in the Merger Agreement), NetManage shall be
entitled to designate a majority of the number of members of the Board. The
Company will, upon request of NetManage, promptly increase the size of the Board
and/or secure the resignations of such number of its incumbent directors as is
necessary to enable the nominees designated by NetManage to be elected to the
Board.
To date, NetManage has not provided the Company with the names of those
people it intends to nominate. It is expected that the NetManage designees may
assume office at any time following the purchase by Purchaser of such number of
shares which satisfies the Minimum Condition, which purchase cannot be earlier
than November 24, 1999, and that, upon assuming office, the NetManage designees
will thereafter constitute at least a majority of the Board.
BOARD COMMITTEES AND MEETINGS
During the last fiscal year, there were six meetings of the Board of
Directors. All Directors attended at least 75% of the meetings of the Board of
Directors and of the committees of which they were members.
The Board of Directors has established an Acquisition Committee, an Audit
Committee, a Compensation Committee and a Nominating Committee. Each of these
committees is responsible to the full Board of Directors. The functions
performed by these committees are summarized below.
Acquisition Committee. The Acquisition Committee formulates the Company's
acquisition strategy for review and approval by the Board of Directors. The
members of this committee are Mr. Frankenberg, Mr. Fox and Mr. Vitale. The
Acquisition Committee met once in the last fiscal year.
B-3
<PAGE> 16
Audit Committee. The Audit Committee reviews the scope and results of the
annual independent audit of the Company's books and records and reviews the
Company's finance and accounting policies. The members of this committee are Mr.
Lewis, Mr. Heimbuck and Mr. Millet. The Audit Committee met four times in the
last fiscal year.
Compensation Committee. The Compensation Committee administers certain of
the Company's incentive compensation plans and establishes certain policies
relating to such plans and other compensation and benefit matters. This
committee also establishes salaries, incentives and other forms of compensation
for executive officers. The members of this committee are Ms. Steiger, Mr.
Frankenberg, Mr. Millet and Mr. Sarich. The Compensation Committee met six times
in the last fiscal year.
Nominating Committee. The Nominating Committee makes recommendations to the
Board of Directors regarding the size and composition of the Board of Directors
and nominees for Director. The members of this committee are Mr. Lewis and Ms.
Steiger. The Nominating Committee met once in the last fiscal year. The
Nominating Committee does not consider nominees recommended by security holders.
DIRECTORS' COMPENSATION
Directors who are employees of the Company do not receive any fee for their
services as Directors. Directors who are not employees of the Company are paid a
$10,000 annual retainer plus $1,000 per meeting and $500 per telephonic meeting
of the Board of Directors and are reimbursed for their expenses incurred in
attending meetings. Non-employee Directors who are members of a committee of the
Board are paid $1,000 per committee meeting and $500 per telephonic meeting and
are reimbursed for their expenses incurred in attending committee meetings. In
addition, Mr. Frankenberg receives an annual cash retainer of $50,000 per year
for his services as Chairman of the Board.
Non-employee Directors are compensated for service on the Boards of
Directors of subsidiaries of the Company. They are paid an annual retainer of
$10,000 and $1,000 per day for attending subsidiary Board or committee meetings
that are not held on the same day as a Company Board or Committee meeting at
which the Director is in attendance. The Company compensates Directors for
services rendered at the request of the Company other than at or in preparation
for Board of Directors meetings or Committee meetings at the rate of $1,000 per
diem. In the fiscal year ending April 30, 1999, no payments were made for such
services.
Non-employee Directors also receive stock option grants under the Company's
1993 Stock Option Plan for Non-Employee Directors (the "Directors Plan"). Each
new non-employee Director upon election or appointment to the Board of Directors
receives an initial option to purchase 10,000 shares of Common Stock at an
exercise price equal to the fair market value per share of Common Stock on the
grant date. In addition, each non-employee Director automatically receives an
annual grant of options to purchase 2,500 shares of Common Stock at each annual
meeting of shareholders at which he or she is reelected or continues as a
Director at an exercise price per share equal to the fair market value per share
of Common Stock on the grant date. Options granted to non-employee Directors
upon their initial appointment or election will become fully vested and
exercisable four years from the date of grant, with 25% of the total option
becoming fully vested and exercisable on the first anniversary date of the grant
and 2.0833% becoming fully vested and exercisable each month thereafter. The
annual options granted as of each annual meeting of shareholders (including the
1999 Annual Meeting) will vest and become exercisable upon the date of the next
annual meeting of shareholders. Options granted under the Directors Plan
generally expire five years from the grant date.
In addition, in consideration of Mr. Frankenberg's assumption of the
position of Chairman of the Board, Mr. Frankenberg received a one-time option
under the Directors Plan to purchase 30,000 shares of Common Stock at an
exercise price equal to the fair market value per share of Common Stock on
October 28, 1997, the grant date. This option vests over three years, one-third
at each anniversary date, so long as Mr. Frankenberg continues serving as
Chairman of the Board. This option terminates six years from the date of grant,
except that early termination shall be based on Mr. Frankenberg's service as the
Company's outside Chairman of the Board rather than on his service as a
director.
B-4
<PAGE> 17
EXECUTIVE OFFICERS
Certain information concerning executive officers of the Company as of
October 25, 1999 is set forth below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
Kevin B. Vitale........................ 42 President and Chief Executive Officer
Richard P. Fox......................... 52 Vice President Finance, Chief Financial
Officer and Treasurer
Craig E. Shank......................... 40 Vice President, General Counsel and
Secretary
Roger C. Fairchild..................... Vice President, Worldwide Sales and
Service
Kerry D. Palmer........................ 47 Corporate Controller and Assistant
Secretary
</TABLE>
Mr. Vitale has been a Director and Chief Operating Officer of the Company
since July 1997. He served as Executive Vice President of the Company from April
1996 to July 1997 and Vice President, Operations and Services from July 1993 to
April 1996. Prior to joining the Company, Mr. Vitale was Vice President,
Corporate Quality and Customer Service of NetFRAME Systems Incorporated from
July 1989 to July 1993. Mr. Vitale also serves as a director and the chairman of
the Long Range Planning Committee for the Washington Software Association. He is
also a founding member of the Technical Support Alliance Network, where he
served as a board member and Treasurer for the past five years.
Mr. Fox has been a director since September 1999 and Vice President
Finance, Chief Financial Officer and Treasurer of the Company since April 1998.
Immediately prior to joining the Company, Mr. Fox was Senior Vice President of
PACCAR Inc. from March 1997 to January 1998. Prior to that, he was with Ernst &
Young LLP, becoming a partner in 1979. His last position was managing partner of
the firm's Seattle office. Mr. Fox serves on the Board of Trustees of the
Seattle Repertory Theatre Foundation.
Mr. Shank joined the Company as General Counsel in March 1998 and was
elected Vice President, General Counsel and Secretary of the Company in May
1998. Prior to joining the Company, he was a lawyer with the Perkins Coie LLP
law firm from November 1986 to May 1998, becoming a partner in January 1993.
Mr. Fairchild has been Vice President, Worldwide Sales and Service since
September 1999. Prior to that, he held positions of Vice President, Customer
Service and Vice President, Internet Business Development since joining the
Company in October 1997. From September 1994 through September 1997, Mr.
Fairchild was Vice President, Sales and Marketing at Muzak Limited Partnership.
Mr. Palmer joined the Company in December 1988 and has served as Corporate
Controller and Assistant Secretary since October 1994.
B-5
<PAGE> 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of October 25, 1999,
known to the Company regarding the beneficial ownership of Common Stock by (i)
each person known to the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock; (ii) each director of the Company; (iii) each of
the Company's executive officers who earned in excess of $100,000 from the
Company during fiscal 1998 (together, the "Named Officers"); and (iv) all
directors and executive officers as a group. The business address of each of the
following persons is 11332 N.E. 122nd Way, Kirkland, Washington 98034. The
following table does not reflect the effect of accelerated vesting as a result
of the Offer. See "Item 3: Identity and Background" in the accompanying Schedule
14D-9.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OUTSTANDING(2)
------------------------------------ ------------ --------------
<S> <C> <C>
State of Wisconsin Investment Board(3)
P.O. Box 7842
Madison, WI 53707......................................... 1,200,700 11.8%
George B. Bjurman & Associates and
Owen Thomas Barry III(4)
10100 Santa Monica Blvd
Los Angeles, CA 90067..................................... 632,868 6.2%
Dimensional Fund Advisors, Inc.(5)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401.................................... 522,500 5.1%
Robert J. Frankenberg(6).................................... 35,989 *
Jeffrey A. Heimbuck(7)...................................... 10,989 *
Henry N. Lewis(8)........................................... 47,573 *
David F. Millet(9).......................................... 12,239 *
Steve Sarich, Jr.(10)....................................... 148,109 1.5%
Bettie A. Steiger(11)....................................... 13,989 *
Kevin B. Vitale(12)......................................... 129,000 1.3%
Richard P. Fox(13).......................................... 54,232 *
Craig E. Shank(14).......................................... 17,266 *
All directors and officers as a group (11 persons)(15)...... 2,845,112 27.2%
</TABLE>
- ---------------
* Less than 1%.
(1) Based on publicly available information as of October 25, 1999.
(2) Percentage ownership is based upon 10,189,969 shares of Common Stock
outstanding as of October 25, 1999.
(3) Based on publicly available information as of October 25, 1999.
(4) Based on publicly available information as of October 25, 1999. George B.
Bjurman & Associates, George Andrew Bjurman and Owen Thomas Barry III share
voting and dispositive power of the 632,868 shares and are beneficial
owners of those shares.
(5) Based on publicly available information as of October 25, 1999.
(6) Represents options for 30,989 shares of Common Stock that are exercisable
within 60 days of October 25, 1999.
(7) Represents options for 10,989 shares of Common Stock that are exercisable
within 60 days of October 25, 1999.
(8) Includes 40,334 shares of Common Stock held of record by CVG Investments
Limited, a substantial majority of the capital stock of which is owned by
Mr. Lewis and members of his family. Also includes options for 7,239 shares
of Common Stock that are exercisable within 60 days of October 25, 1999.
B-6
<PAGE> 19
(9) Includes 5,000 shares of Common Stock held of record by Chatham Venture
Corporate Profit Sharing Plan & trust, held indirectly by Mr. Lewis. Also
includes options for 7,239 shares of Common Stock that are exercisable
within 60 days of October 25, 1999.
(10) Includes options for 7,239 shares of Common Stock that are exercisable
within 60 days of October 25, 1999.
(11) Represents options for 10,989 shares of Common Stock that are exercisable
within 60 days of October 25, 1999.
(12) Represents options for 126,000 shares of Common Stock that are exercisable
within 60 days of October 25, 1999.
(13) Includes options for 30,045 shares of Common Stock that are exercisable
within 60 days of October 25, 1999, and 2,187 shares of Common Stock
purchased pursuant to the Company's Employee Stock Purchase Plan.
(14) Includes options for 16,666 shares of Common Stock that are exercisable
within 60 days of October 25, 1999.
(15) Includes options for 265,330 shares of Common Stock that are exercisable
within 60 days of October 25, 1999.
B-7
<PAGE> 20
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation received by the Named
Officers for the following periods: (1) the fiscal year ended April 30, 1999
("Fiscal 1999"), (2) the four-month period from January 1, 1998 transitioning
the Company's fiscal year from a calendar year to a fiscal year ending April 30
(the "1998 Four-Month Period"), (3) the fiscal year ended December 31, 1997
("Fiscal 1997") and (4) the fiscal year ended December 31, 1996 ("Fiscal 1996").
This information includes the dollar values of base salaries, bonus awards, the
number of stock options granted and certain other compensation, if any, whether
paid or deferred. The Company does not grant stock appreciation rights and has
no long-term compensation benefits other than stock options.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
1998 FOUR-MONTH PERIOD AND ------------
ANNUAL COMPENSATION SECURITIES
-------------------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (#) ($)(2)
--------------------------- ----- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Kevin B. Vitale............................ 1999 $280,417 $ 101 74,000 $1,112
President and Chief Executive Officer 4 mos 70,000 -0- -0- 602
1997 203,750 37,976 65,000 306
1996 175,000 55,000 30,000 198
John R. Wall............................... 1999 333,333 101 117,000 1,112
President and Chief Executive Officer(3) 4 mos 75,000 -0- -0- 602
1997 218,750 40,689 80,000 306
1996 193,750 55,000 52,500(4) 198
Richard P. Fox............................. 1999 200,000 101 10,000 1,671
Vice President Finance, 4 mos 43,747 -0- -0- 64
Chief Financial Officer and Treasurer(5)
Barry Horn................................. 1999 154,799 81,947 -0- 1,694
Vice President Worldwide Sales(6) 4 mos 58,333 -0- 10,000 950
1997 43,750 32,108 40,000 216
Craig E. Shank............................. 1999 185,000 101 -0- 234
Vice President, General Counsel 4 mos 54,110 -0- 40,000 602
and Secretary(7)
</TABLE>
- ---------------
(1) In 1999, for all officers except Mr. Horn, such amounts represent payments
under the Company's Holiday Bonus Program, in which all of the Company's
employees participate; with respect to Mr. Horn, $81,896 represents sales
incentive bonuses and $101 represents a holiday bonus. With respect to prior
periods, such bonus amounts represent payments under the Company's
Management Incentive Plan.
(2) For all officers, amounts represent group term life premiums paid by the
Company during Fiscal 1999, the 1998 Four-Month Period, Fiscal 1997 and
Fiscal 1996, a $500 travel benefit for each of the officers' spouses during
the 1998 Four-Month Period and a $777 travel benefit for each of the
officers' spouses, with the exception of Mr. Shank's spouse, during Fiscal
1999.
(3) Mr. Wall resigned his position as President and Chief Executive and resigned
from the board of directors in August, 1999.
(4) Options granted in 1996 include the repricing of options granted in 1994
that were canceled in connection with an exchange of options with exercise
prices in excess of the then fair market value for new options with exercise
prices equal to the then fair market value.
(5) Mr. Fox's employment with the Company commenced April 8, 1998.
(6) Mr. Horn's employment with the Company commenced on October 3, 1997 and
terminated on February 26, 1999.
(7) Mr. Shank's employment with the Company commenced March 30, 1998.
B-8
<PAGE> 21
STOCK OPTION GRANTS DURING FISCAL 1999
The following table sets forth information concerning the grant of stock
options during Fiscal 1999 to the named executive officers.
OPTION GRANTS DURING FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL FAIR AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS MARKET STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE VALUE ON FOR OPTION TERM(4)(5)
OPTIONS EMPLOYEES IN PRICE DATE OF EXPIRATION ---------------------------
NAME GRANTED(#) FISCAL 1999 ($/SH) GRANT DATE 5%($) 10%($)
---- ---------- ------------ -------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John R. Wall............... 75,000(1) 9.1% $13.69 -- -- $ 645,718 $1,636,375
42,000(2) 5.1 13.69 -- -- 1,097,488 2,088,145
Kevin B. Vitale............ 50,000(1) 6.0 13.69 -- -- 430,478 1,090,917
24,000(2) 2.9 13.69 -- -- 786,418 1,446,857
Richard P. Fox............. 10,000(3) 1.2 13.69 -- -- 86,096 218,183
Barry Horn................. -- -- -- -- -- -- --
Craig E. Shank............. -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) Option becomes fully vested and exercisable four years from December 16,
1998, with 25% of the total option becoming fully vested and exercisable on
December 16, 1999 and 2.0833% becoming fully vested and exercisable each
month thereafter so long as employment with the Company continues. Upon the
occurrence of certain business combination transactions, the exercisability
of the options is accelerated.
(2) Option becomes fully vested and exercisable four years from May 20, 1998,
with 25% of the total option becoming fully vested and exercisable on May
20, 1999 and 2.0833% becoming fully vested and exercisable each month
thereafter so long as employment with the Company continues. Upon the
occurrence of certain business combination transactions, the exercisability
of the options is accelerated.
(3) Option becomes fully vested and exercisable four years from April 8, 1998,
with 25% of the total option becoming fully vested and exercisable on April
8, 1999 and 2.0833% becoming fully vested and exercisable each month
thereafter so long as employment with the Company continues. Upon the
occurrence of certain business combination transactions, the exercisability
of the options is accelerated.
(4) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates required by applicable regulations of the SEC and are
therefore not intended to forecast possible future appreciation, if any, of
the Common Stock price. Assumes all options are exercised at the end of
their respective 10-year terms. Actual gains, if any, on stock option
exercises depend on the future performance of the Common Stock and overall
stock market conditions, as well as the option holders' continued employment
through the vesting period. The amounts reflected in this table may not be
achieved.
(5) The increase in the market value of the holdings of all of the Company's
shareholders over a 10-year period, based on 10,151,162 shares of Common
Stock outstanding as of April 30, 1999, at assumed annual rates of
appreciation of 5% and 10% from a base price of $15.625 per share (the
closing market price as of April 30, 1999), would be $99,750,176 and $252,
786, 530, respectively.
B-9
<PAGE> 22
OPTION EXERCISES DURING FISCAL 1999
The following table sets forth information concerning the exercise of stock
options during Fiscal 1999 by the named executive officers, and their options
outstanding at the end of Fiscal 1999.
AGGREGATED OPTION EXERCISES DURING FISCAL 1999
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Wall............... 225,000 $3,076,875 62,499 227,834 $48,590 $397,364
Kevin B. Vitale............ -0- -0- 68,276 168,976 48,025 285,498
Richard P. Fox............. -0- -0- 18,750 56,250 11,953 35,859
Barry Horn................. -0- -0- 13,332 36,668 -0- 4,375
Craig E. Shank............. -0- -0- 10,833 29,167 4,739 12,761
</TABLE>
- ---------------
(1) Amounts equal the closing price of the Common Stock on April 30, 1999
($15.625 per share), less the option exercise price, multiplied by the
number of shares exercisable or unexercisable.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee, which is comprised of four non-employee Directors. The
Compensation Committee works with management to develop compensation plans for
the Company and is responsible for determining the compensation of each
executive officer and reporting such compensation to the Board of Directors.
The Company's executive compensation program is designed to align executive
compensation with the Company's business objectives and the executive's
individual performance, and to enable the Company to attract, retain and reward
executive officers who contribute, and are expected to continue to contribute,
to the Company's long-term success. In establishing executive compensation, the
Compensation Committee is guided by the following principles: (i) the total
compensation for executive officers should be sufficiently competitive with the
compensation paid by other high-growth companies in the software industry for
officers in comparable positions so that the Company can attract and retain
qualified executives and (ii) individual compensation should include components
that reflect the financial performance of the Company and the performance of the
individual.
The compensation of the Company's executive officers consists of a
combination of base salary, bonuses and equity-based compensation. In general,
the Company's compensation program favors bonuses based on operating profit and
individual merit as opposed to salary increases. The Compensation Committee
believes that executive compensation should be designed to motivate executives
to increase shareholder value, and further believes that executive officers can
best increase shareholder value through the Company's operating profit by
conceiving, developing and positioning the best products in the Company's chosen
markets. The Compensation Committee has also focused on maintaining total
compensation packages that are adequate to retain executives for the Company.
Compensation payments in excess of $1 million to the Chief Executive
Officer or the other four most highly compensated executive officers are subject
to a limitation on deductibility for the Company under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Certain performance-
based compensation is not subject to the limitation on deductibility. The
Compensation Committee does not expect cash compensation in fiscal 1999 to its
Chief Executive Officer or any other executive officer to be in excess of $1
million. The Company's 1993 Plan is designed to qualify for the
performance-based exception to the $1 million limitation on deductibility of
compensation payments.
B-10
<PAGE> 23
Base Salary. The Compensation Committee sets the base salary for executive
officers by reviewing the salaries for comparable positions in high-growth
companies in the Company's industry, the historical compensation levels of the
Company's executives and the executive's individual performance in the preceding
year (based on the factors discussed under "Merit Bonus Program" below). The
Compensation Committee utilizes salary surveys for reference purposes, but its
salary determinations are not subject to specific criteria. For 1995 and 1996,
base salary for Mr. Wall also reflected the Company's obligations under his
employment agreement. See "Employment Contracts, Termination of Employment and
Change of Control Arrangements." In fiscal 1999, the base salaries of the
executive officers as a group were increased, based in part on the individual
contributions of the executives and in part on the need to retain key
executives, at an average rate of approximately 16.6%.
Merit Bonus Program. Each year the Compensation Committee adopts a
management incentive plan that reflects the Compensation Committee's belief that
a portion of each executive officer's and other manager-level participant's
compensation should be tied to the achievement by the Company of its profit
goals and by each executive officer of his or her individual performance goals.
The 1999 Executive Incentive Plan (the "1999 Incentive Plan"), set operating
profit goals and a merit bonus pool. In addition, the 1999 Incentive Plan
provided for both an increase and a decrease in the merit bonus pool as a
function of the Company's actual operating profit. Under the 1997 Incentive
Plan, executive officers are entitled to receive a bonus of between 40% and 50%
of base salary if the Company achieved its profit goals for Fiscal 1999 and the
individual executive met or exceeded his or her performance expectations. Based
on the Company's performance during Fiscal 1999, the bonus pool was not funded
and the executive officers did not receive a bonus.
Stock-Based Compensation. Awards of stock options under the Company's stock
option plans are designed to more closely tie the long-term interests of the
Company's executives with those of its shareholders and to assist in the
retention of executives. The Compensation Committee selects the executive
officers, if any, to receive stock options and determines the number of shares
subject to each option. The Compensation Committee's determination of the size
of option grants is generally intended to reflect an executive's position with
the Company and his or her contributions to the Company. Options generally have
a four-year vesting period to encourage key employees to continue in the
Company's employ. The Compensation Committee reviews the outstanding unvested
options of the key executives from time to time and may grant additional options
to encourage the retention of key executives. In fiscal 1999, a total of 201,000
options were granted to the executive officers.
Chief Executive Officer Compensation. The compensation for Mr. Wall, the
Company's former Chief Executive Officer, was determined based on the same
policies and criteria as the compensation for the other executive officers. The
Compensation Committee reviewed Mr. Wall's base salary and increased it to
$325,000 from its 1998 level of $219,000. The Compensation Committee continued
to utilize the 1999 Incentive Plan to tie Mr. Wall's compensation to shareholder
value by encouraging him to meet and exceed the goals set forth in the Company's
operating profit plan. The Compensation Committee also granted to Mr. Wall
options to purchase 117,000 shares in fiscal 1999.
The Compensation Committee
Bettie A. Steiger
Robert J. Frankenberg
David F. Millet
Steve Sarich, Jr.
B-11
<PAGE> 24
STOCK PRICE PERFORMANCE
The graph set forth below compares the cumulative total return on the
Common Stock with the cumulative total returns of the NASDAQ Total U.S. Index
and the NASDAQ Computer and Data Processing Index, resulting from an initial
assumed investment of $100 in each and assuming the reinvestment of any
dividends, for the period beginning on the date of the Company's initial public
offering on March 15, 1993 and ending on April 30, 1999. Stock price performance
shown in the Performance Graph for the Common Stock is historical and not
necessarily indicative of future price performance.
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
WALL DATA, NASDAQ TOTAL U.S. INDEX AND
NASDAQ COMPUTER AND DATA PROCESSING INDEX
<TABLE>
<CAPTION>
NASDAQ COMPUTER AND
DATA PROCESSING INDEX NASDAQ TOTAL U.S. INDEX WALL DATA
--------------------- ----------------------- ---------
<S> <C> <C> <C>
3/15/93 100.00 100.00 100.00
12/31/93 100.00 112.00 176.00
12/31/94 122.00 109.00 175.00
12/31/95 185.00 155.00 73.00
12/31/96 229.00 190.00 66.00
12/31/97 281.00 233.00 60.00
4/30/98 374.00 277.00 68.00
4/30/99 571.00 376.00 69.00
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
In January 1999, the Company entered into Employment and Change of Control
Agreements with each of Messrs. Wall, Vitale, Fox and Shank (the "Executives").
Each agreement provides that the Executive will be employed by the Company for a
term of two years, with an automatic renewal for successive one-year terms
unless cancelled upon twelve months' notice. Termination without cause or for
good reason entitles the Executives to receive (1) two times base salary for
Messrs. Wall and Vitale and one times base salary for Messrs. Fox and Shank, (2)
a percentage of base salary equal to the Executive Incentive Plan percentage for
the prior fiscal year and (3) COBRA premiums for eighteen months. In the event
of termination due to change of control, the Executives will receive the
benefits above, except that the salary multiple for Messrs. Wall and Vitale is
two and one-half and for Messrs. Fox and Shank is one and one-half.
Upon a merger (other than a merger of the Company in which the holders of
Common Stock immediately prior to the merger have the same proportionate
ownership of common stock in the surviving corporation immediately after the
merger), consolidation, acquisition of property or stock, separation,
reorganization (other than a mere reincorporation or the creation of a holding
company) or liquidation of the Company, as a result of which the Company's
shareholders receive cash, stock or other property in exchange for or in
connection with their shares of Common Stock, options granted under the 1983 and
the 1993 Amended and Restated Stock Option Plans will terminate (with certain
exceptions), but the optionee will
B-12
<PAGE> 25
have the right immediately prior to any such merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation to exercise his
or her option in whole or in part whether or not the vesting requirements set
forth in the option agreement have been satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 14, 1999, the Company loaned $860,000 to John R. Wall, the
Company's former CEO, which loan is to be repaid by Mr. Wall in accordance with
the terms of a promissory note by Mr. Wall in favor of the Company (the "Note").
The Note accrues interest at a rate of 5.28% per year. The accrued interest is
due on April 15, 2000, April 15, 2001 and April 15, 2002, and the principal
amount of the Note and any unpaid interest is due on April 15, 2003. The Note
will become due and immediately payable upon any disposition by Mr. Wall of his
shares of the Company's Common Stock. As of August 18, 1999, the entire
principal amount remained outstanding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's securities, to file with the SEC initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, Directors and greater-than-10% shareholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes that, during the year ended December
31, 1998, its executive officers, Directors and greater-than-10% shareholders
complied with all Section 16(a) filing requirements.
B-13
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit 1. Offer to Purchase, dated October 27, 1999.+
Exhibit 2. Letter of Transmittal.+
Exhibit 3. Agreement and Plan of Merger, dated as of October 20, 1999,
by and among the Company, Parent and Purchaser.+
Exhibit 4. Employment and Change in Control Agreement, dated January
21, 1999 between the Company and Kerry D. Palmer.*
Exhibit 5. Restated 1993 Stock Option Plan, as amended.*
Exhibit 6. Restated 1993 Stock Option Plan for Non-Employee Directors,
as amended.*
Exhibit 7. Employment Agreement, dated as of October 20, 1999, by and
among the Company, Parent and Kevin B. Vitale.+
Exhibit 8. Employment Agreement, dated as of October 20, 1999, by and
among the Company, Parent and Richard P. Fox.+
Exhibit 9. Employment Agreement, dated as of October 20, 1999, by and
among the Company, Parent and Craig E. Shank.+
Exhibit 10. Employment Agreement, dated as of October 20, 1999, by and
among the Company, Parent and Kerry D. Palmer.+
Exhibit 11. Press Release, issued by Parent and the Company on October
21, 1999.+
Exhibit 12. Opinion of Bear Stearns, dated October 20, 1999 (attached
hereto as Annex A).*
</TABLE>
- ---------------
* Filed herewith.
+ Filed as an exhibit to Parent's and Purchaser's Tender Offer Statement on
Schedule 14D-1, dated October 27, 1999, and incorporated herein by reference.
<PAGE> 1
EXHIBIT 4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of January 21,
1999, between Wall Data Incorporated, a Washington corporation ("Employer"), and
Kerry D. Palmer ("Employee");
RECITALS
WHEREAS, Employer desires to continue to employ Employee upon the terms
and conditions set forth herein; and
WHEREAS, Employee is willing to provide services to Employer upon the
terms and conditions set forth herein;
AGREEMENT
NOW, THEREFORE, for and in consideration of the foregoing premises and
for other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT
Employer will employ Employee and Employee will accept employment by
Employer as its Controller. Employee will have the authority, subject to
Employer's Articles of Incorporation and Bylaws, as may be granted from time to
time by the Board of Directors of Employer. Employee will perform the duties
customarily performed by the Controller of a corporation which is similar to
Employer and such other duties as may be assigned from time to time by the Board
of Directors of Employer, which relate to the business of Employer, its
subsidiaries, its parent corporation, or any business ventures in which
Employer, its subsidiaries or its parent corporation may participate.
2. ATTENTION AND EFFORT
Employee will devote all his productive time, ability, attention and
effort to the business and affairs of Employer and the discharge of the
responsibilities assigned to him hereunder, and will use his reasonable best
efforts to perform faithfully and efficiently such responsibilities. It shall
not be a violation of this Agreement for Employee to (a) serve on corporate,
civic or charitable boards or committees approved in advance by Employer's
President, (b) deliver lectures, fulfill speaking engagements or teach at
educational institutions, (c) manage personal investments, so long as such
activities do not significantly interfere with the performance of Employee's
<PAGE> 2
responsibilities in accordance with this Agreement and (d) other activities
approved in advance by Employer.
3. TERM
Unless otherwise terminated pursuant to Section 6 hereof, Employee's
term of employment under this Agreement shall expire on the second anniversary
of the date of this Agreement (the "Initial Term"). At the end of the Initial
Term and each subsequent Renewal Term (as hereinafter defined), the term of this
Agreement shall be automatically renewed and extended for a period of one year
(the "Renewal Term"), unless either party hereto delivers a written termination
notice to the other party at least 12 months prior to the end of the Initial
Term or the then-current Renewal Term (as the case may be).
4. COMPENSATION
During the term of this Agreement, Employer agrees to pay or cause to
be paid to Employee, and Employee agrees to accept in exchange for the services
rendered hereunder by him, the following compensation:
4.1. BASE SALARY
Employee's compensation shall consist, in part, of an annual base
salary of One Hundred Sixteen Thousand Dollars ($116,000), before all customary
payroll deductions. Such annual base salary shall be paid in substantially equal
installments and at the same intervals as other officers of Employer are paid.
The Board of Directors of Employer, or a committee thereof, shall determine any
increases in the annual base salary in future years.
4.2. BONUS
Employee may be entitled to receive, in addition to the annual base
salary described above, an annual bonus in an amount to be determined by the
Board of Directors of Employer, or a committee thereof, in its sole discretion
and consistent with bonus plans then in effect.
5. BENEFITS
During the term of this Agreement, Employee will be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in fringe benefit programs as shall be provided from time to time
by Employer.
-2-
<PAGE> 3
6. TERMINATION
Employee's employment pursuant to this Agreement may be terminated as
follows:
6.1. BY EMPLOYER
With or without Cause (as defined below), Employer may terminate
Employee's employment at any time during the term of employment upon giving
Notice of Termination (as defined below).
6.2. BY EMPLOYEE
With or without Good Reason (as defined below), Employee may terminate
his employment at any time upon giving Notice of Termination.
6.3. AUTOMATIC TERMINATION
This Agreement and Employee's employment hereunder shall terminate
automatically upon the death or Total Disability of Employee. The term "Total
Disability" as used herein shall mean Employee's inability (with such
accommodation as may be required by law and which places no undue burden on
Employer), as determined by a physician selected by Employer and acceptable to
Employee, to perform the duties set forth in Section 1 hereof for a period or
periods aggregating 120 calendar days in any 12-month period as a result of
physical or mental illness, loss of legal capacity or any other cause beyond
Employee's control, unless Employee is granted a leave of absence by the Board
of Directors of Employer. Employee and Employer hereby acknowledge that the
duties specified in Section 1 hereof are essential to Employee's position and
that Employee's ability to perform those duties is the essence of this
Agreement.
6.4. NOTICE
The term "Notice of Termination" shall mean at least 30 days' written
notice of termination of Employee's employment, during which period Employee's
employment and performance of services will continue; provided, however, that
Employer may, upon notice to Employee and without reducing Employee's
compensation during such period, excuse Employee from any or all of his duties
during such period. The effective date of the termination of Employee's
employment hereunder shall be the date on which such 30-day period expires.
-3-
<PAGE> 4
7. TERMINATION PAYMENTS
In the event of termination of Employee's employment, all compensation
and benefits set forth in this Agreement shall terminate, except as specifically
provided in this Section 7:
7.1. TERMINATION BY EMPLOYER
If Employer terminates Employee's employment without Cause prior to the
end of the term of this Agreement, Employee shall be entitled to receive (a)
severance payments equal to (i) one times Employee's annual base salary for the
year in which such termination occurred, plus (ii) a percentage of such annual
base salary equal to the percentage paid under Employer's Executive Incentive
Plan (or any successor plan) for the prior fiscal year, (b) any unpaid annual
base salary which has accrued for services already performed as of the date
termination of Employee's employment becomes effective and any compensation
previously deferred by Employee (together with accrued interest or earnings
thereon, if any) and any accrued vacation pay which would be payable under
Employer's standard policy, in each case to the extent not theretofore paid, and
(c) for 18 months from the termination date, premiums for health insurance
benefit continuation for Employee and his family members, if applicable, which
Employer provides to Employee under the provisions of the federal Comprehensive
Omnibus Budget Reconciliation Act of 1986, as amended ("COBRA"), to the extent
that Employer would have paid such premiums had Employee remained employed by
Employer. If employment is terminated by Employer for Cause, Employee shall not
be entitled to receive any of the foregoing benefits, other than those set forth
in clause (b) above.
7.2. TERMINATION BY EMPLOYEE
In the case of termination of Employee's employment for Good Reason,
Employee shall be entitled to receive those payments set forth in Sections
7.1(a), (b) and (c) hereof. In the case of the termination of Employee's
employment by Employee other than for Good Reason, Employee shall not be
entitled to any payments hereunder, other than those set forth in Section 7.1(b)
hereof.
7.3. DEATH AND TOTAL DISABILITY
In the case of a termination of Employee's employment as a result of
the Employee's death or Employee's Total Disability, Employee shall not be
entitled to receive any payments hereunder, other than those set forth in
Section 7.1(b) hereof.
-4-
<PAGE> 5
7.4. TERMINATION IN CONNECTION WITH A CHANGE OF CONTROL
Employee and Employer shall enter into a Change of Control Agreement,
in the form attached hereto as Exhibit A. Notwithstanding Sections 7.1 and 7.2
hereof and in full substitution of all payments otherwise due thereunder, if a
Change of Control (as defined in such agreement) of Employer occurs, this
Agreement shall terminate and the relationship between Employee and Employer
shall be governed in all respects by the Change of Control Agreement.
7.5. PAYMENT SCHEDULE
All payments under this Section 7 shall be made to Employee within
thirty working days of the effective date of termination except that payments
for COBRA premiums pursuant to Section 7.1(c) shall be made on a monthly basis.
7.6. CAUSE
Wherever reference is made in this Agreement to termination being with
or without Cause, "Cause" is limited to the occurrence of one or more of the
following events:
(a) Failure or refusal to carry out the lawful duties of
Employee described in Section 1 hereof or any directions of the Board
of Directors of Employer, which directions are reasonably consistent
with the duties herein set forth to be performed by Employee;
(b) Violation by Employee of a state or federal criminal law
involving the commission of a crime against Employer or any of its
subsidiaries;
(c) Deception, fraud, misrepresentation or dishonesty by
Employee; any incident materially compromising Employee's reputation or
ability to represent Employer with the public; any act or omission by
Employee which substantially impairs Employer's business, good will or
reputation; or
(d) Any other material violation of any provision of this
Agreement.
7.7. GOOD REASON
Wherever reference is made in this Agreement to termination being with
or without Good Reason, "Good Reason" is limited to the occurrence of one or
more of the following events:
(a) the reduction in Employee's annual base salary as
specified in Section 4.1 hereof or the reduction in the value of bonus
payments that Employee
-5-
<PAGE> 6
is eligible to receive under Section 4.2 hereof (provided, however,
that Good Reason shall not exist under this Section 7.7(a), in the
event Employee does not actually realize such values because of failure
to satisfy performance or other criteria applicable to such bonus
payments or equity awards);
(b) the material and substantial diminution or reduction
without his consent of Employee's authority, duties or
responsibilities;
(c) Employer requiring Employee without his consent to be
based at any offices or locations outside of King County, Washington;
or
(d) any breach by Employer of any other material provision of
this Agreement.
8. REPRESENTATIONS AND WARRANTIES
In order to induce Employer to enter into this Agreement, Employee
represents and warrants to Employer that neither the execution nor the
performance of this Agreement by Employee will violate or conflict in any way
with any other agreement by which Employee may be bound, or with any other
duties imposed upon Employee by corporate or other statutory or common law.
9. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than pursuant to the definition of Cause set forth in
Section 7.6 hereof, before such action is taken, the party asserting the breach
of this Agreement shall give the other party at least 20 days' prior written
notice of the existence and the nature of such breach before taking further
action hereunder and shall give the party purportedly in breach of this
Agreement the opportunity to correct such breach during the 20-day period.
10. CONFIDENTIALITY AGREEMENT
Employer and Employee agree that the Confidential Information,
Inventions and Nonsolicitation Agreement, dated December 13, 1988, between
Employer and Employee and attached hereto as Exhibit B shall remain in full
force and effect and survive the termination of Employee's employment.
11. FORM OF NOTICE
All notices given hereunder shall be given in writing, shall
specifically refer to this Agreement and shall be personally delivered or sent
by telecopy or other electronic
-6-
<PAGE> 7
facsimile transmission or by reputable overnight courier, at the address set
forth below or at such other address as may hereafter be designated by notice
given in compliance with the terms hereof. Such notice shall be effective upon
receipt or upon refusal of the addressee to accept delivery.
If to Employee: Kerry D. Palmer
17126 NE 163rd Pl.
Woodinville, WA 98072
If to Employer: Wall Data Incorporated
11332 NE 122nd Way
Kirkland, WA 98034-6931
Attn: General Counsel
Phone: (425) 814-9255
Facsimile: (425) 814-4372
Copy to: Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Attn: L. Michelle Wilson
Phone: (206) 583-8888
Facsimile: (206) 583-8500
12. ASSIGNMENT
This Agreement is personal to Employee and shall not be assignable by
Employee. Employer may assign its rights hereunder to (a) any corporation
resulting from any merger, consolidation, spin-off or other reorganization to
which Employer is a party or (b) any corporation, partnership, association or
other person to which Employer may transfer all or substantially all the assets
and business of Employer existing at such time. All the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.
13. WAIVERS
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
-7-
<PAGE> 8
14. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, nor consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by Employer
and Employee, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by Employer and Employee.
15. ARBITRATION
Any dispute arising under this Agreement shall be subject to
arbitration. The arbitration proceeding shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (the
"AAA Rules") then in effect, conducted by one arbitrator either mutually agreed
upon or selected in accordance with the AAA Rules, except that the parties
thereto shall have any right to discovery as would be permitted by the Federal
Rules of Civil Procedure for a period of 90 days following the commencement of
such arbitration and the arbitrator thereof shall resolve any dispute which
arises in connection with such discovery. The arbitration shall be conducted in
King County, Washington under the jurisdiction of the Seattle office of the
American Arbitration Association. The arbitrator shall have authority only to
interpret and apply the provisions of this Agreement and shall have no authority
to add to, subtract from, or otherwise modify the terms of this Agreement. Any
demand for arbitration must be made within 60 days of the event(s) giving rise
to the claim that this Agreement has been breached. The arbitrator's decision
shall be final and binding, and each party agrees to be bound by the
arbitrator's award subject, only to an appeal therefrom in accordance with the
laws of state of Washington. Either party may obtain judgment upon the
arbitrator's award in the Superior Court of King County, Washington.
16. APPLICABLE LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the state of Washington, without regard
to any rules governing conflicts of laws.
-8-
<PAGE> 9
17. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.
18. HEADINGS
All headings used herein are for convenience only and shall not in any
way affect the construction of, or be taken into consideration in interpreting,
this Agreement.
19. COUNTERPARTS
This Agreement, and any amendment or modification entered into pursuant
to Section 14 hereof, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
20. ENTIRE AGREEMENT
This Agreement on and as of the date hereof constitutes the entire
agreement between Employer and Employee with respect to the subject matter
hereof and all prior or contemporaneous oral or written communications,
understandings or agreements between Employer and Employee with respect to such
subject matter are hereby superseded and nullified in their entireties.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement on the date set forth above.
EMPLOYEE:
/s/ Kerry D. Palmer
-----------------------------------------
Kerry D. Palmer
EMPLOYER:
WALL DATA INCORPORATED
By /s/ Robert J. Frankenberg
--------------------------------------
Robert J. Frankenberg
Chairman of the Board
-10-
<PAGE> 11
EXHIBIT A
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (this "Agreement"), dated as of
January 21, 1999, is between WALL DATA INCORPORATED, a Washington corporation
(the "Company"), and KERRY D. PALMER (the "Employee").
RECITAL
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Employee, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in
Section 1.1 hereof) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Employee arising from the personal
uncertainties and risks created by a pending or threatened Change of Control, to
encourage the Employee's full attention and dedication to the Company currently
and in the event of any threatened or pending Change of Control, and to provide
the Employee with reasonable compensation and benefit arrangements upon a Change
of Control.
AGREEMENT
In order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
1. DEFINITIONS
1.1 CHANGE OF CONTROL
"Change of Control" shall have the definition set forth in Appendix A
to this Agreement, which is hereby incorporated by reference.
1.2 CHANGE OF CONTROL DATE
"Change of Control Date" shall mean the first date on which a Change of
Control occurs.
1.3 EMPLOYMENT PERIOD
"Employment Period" shall mean the two-year period commencing on the
Change of Control Date and ending on the second anniversary of such date.
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2. TERM
The term of this Agreement ("Term") shall be for the Initial Term and
any Renewal Term, as such terms are defined in the Employment Agreement, dated
the date hereof, between the Company and the Employee; provided, however, that
if a Change of Control occurs during the Term, the Term shall automatically
extend for the duration of the Employment Period.
3. EMPLOYMENT
3.1 EMPLOYMENT PERIOD
During the Employment Period, the Company hereby agrees to continue the
Employee in its employ or in the employ of its affiliated companies, and the
Employee hereby agrees to remain in the employ of the Company or its affiliated
companies, in accordance with the terms and provisions of this Agreement;
provided, however, that either the Company or the Employee may terminate the
employment relationship subject to the terms of this Agreement.
3.2 POSITION AND DUTIES
During the Employment Period, the Employee's title, position,
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 90-day period immediately preceding the Change
of Control Date.
3.3 LOCATION
During the Employment Period, the Employee's services shall be
performed at the Company's headquarters on the Change of Control Date or any
office which is subsequently designated as the headquarters of the Company and
is located in King County, Washington.
3.4 TERMINATION PRIOR TO CHANGE OF CONTROL
If prior to the Change of Control Date, the Employee's employment with
the Company or its affiliated companies terminates for any reason, then the
Employee shall have no further rights under this Agreement; provided, however,
that the Company may not avoid liability for any termination payments which
would have been required during the Employment Period pursuant to Section 8
hereof by terminating the Employee prior to the Employment Period where such
termination is carried out in anticipation of a Change of Control and the
principal motivating purpose is to avoid liability for such termination
payments.
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4. ATTENTION AND EFFORT
During the Employment Period, and excluding any periods of vacation and
sick leave to which the Employee is entitled, the Employee will devote all his
productive time, ability, attention and effort to the business and affairs of
the Company and the discharge of the responsibilities assigned to him hereunder,
and he will use his reasonable best efforts to perform faithfully and
efficiently such responsibilities. It shall not be a violation of this Agreement
for the Employee to (a) serve on corporate, civic or charitable boards or
committees approved in advance by the Company's President, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, (c) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Employee's responsibilities in accordance with this
Agreement and (d) other activities approved in advance by the Company. It is
expressly understood and agreed that to the extent any such activities have been
conducted by the Employee prior to the Employment Period, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) during the Employment Period shall not thereafter be deemed to
interfere with the performance of the Employee's responsibilities to the
Company.
5. COMPENSATION
As long as the Employee remains employed by the Company during the
Employment Period, the Company agrees to pay or cause to be paid to the
Employee, and the Employee agrees to accept in exchange for the services
rendered hereunder by him, the following compensation:
5.1 SALARY
The Employee shall receive an annual base salary (the "Annual Base
Salary") at least equal to the annual salary established by the Board or a
committee of the Board (the "Compensation Committee") for the fiscal year in
which the Change of Control Date occurs. The Annual Base Salary shall be paid in
substantially equal installments and at the same intervals as the salaries of
other employees of the Company are paid. The Board or the Compensation Committee
shall review the Annual Base Salary at least annually and shall determine in
good faith and consistent with any generally applicable Company policy any
increases for future years.
5.2 BONUS
In addition to Annual Base Salary, the Employee shall be awarded, for
each fiscal year ending during the Employment Period, an annual bonus (the
"Annual Bonus") in cash at least equal to the average annualized (for any fiscal
year consisting of less than 12 full months) bonus paid or payable, including by
reason of any
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deferral, to the Employee by the Company and its affiliated companies in respect
of the three fiscal years immediately preceding the fiscal year in which the
Change of Control Date occurs. Each such Annual Bonus shall be paid no later
than 90 days after the end of the fiscal year for which the Annual Bonus is
awarded, unless the Employee shall elect to defer the receipt of such Annual
Bonus.
6. BENEFITS
6.1 INCENTIVE, RETIREMENT AND WELFARE BENEFIT PLANS;
VACATION
During the Employment Period, the Employee shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as shall be generally made
available to other employees of the Company and its affiliated companies from
time to time during the Employment Period by action of the Board (or any person
or committee appointed by the Board to determine fringe benefit programs and
other emoluments), including, without limitation, paid vacations; any stock
purchase, savings or retirement plan, practice, policy or program; and all
welfare benefit plans, practices, policies or programs (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
or programs).
6.2 EXPENSES
During the Employment Period, the Employee shall be entitled to receive
prompt reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practices and procedures of the Company and its
affiliated companies in effect for the employees of the Company and its
affiliated companies during the Employment Period.
7. TERMINATION
During the Employment Period, employment of the Employee may be
terminated as follows:
7.1 BY THE COMPANY OR THE EMPLOYEE
At any time during the Employment Period, the Company may terminate the
employment of the Employee with or without Cause (as defined below), and the
Employee may terminate his employment for Good Reason (as defined below) or for
any reason, upon giving Notice of Termination (as defined below).
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7.2 AUTOMATIC TERMINATION
This Agreement and the Employee's employment during the Employment
Period shall terminate automatically upon the death or Total Disability of the
Employee. The term "Total Disability" as used herein shall mean the Employee's
inability (with such accommodation as may be required by law and which places no
undue burden on the Company), as determined by a physician selected by the
Company and acceptable to the Employee, to perform the duties set forth in
Section 3.2 hereof for a period or periods aggregating 120 calendar days in any
12-month period as a result of physical or mental illness, loss of legal
capacity or any other cause beyond the Employee's control, unless the Employee
is granted a leave of absence by the Board. The Employee and the Company hereby
acknowledge that the duties specified in Section 3.2 hereof are essential to the
Employee's position and that Employee's ability to perform those duties is the
essence of this Agreement.
7.3 NOTICE OF TERMINATION
Any termination by the Company or by the Employee during the Employment
Period shall be communicated by Notice of Termination to the other party given
in accordance with Section 11 hereof. The term "Notice of Termination" shall
mean a written notice which (a) indicates the specific termination provision in
this Agreement relied upon and (b) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated. The
failure by the Employee or the Company to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Employee or the Company hereunder or preclude
the Employee or the Company from asserting such fact or circumstance in
enforcing the Employee's or the Company's rights hereunder.
7.4 DATE OF TERMINATION
During the Employment Period, "Date of Termination" means (a) if the
Employee's employment is terminated by reason of death, at the end of the
calendar month in which the Employee's death occurs, (b) if the Employee's
employment is terminated by reason of Total Disability, immediately upon a
determination by the Company of the Employee's Total Disability, and (c) in all
other cases, five days after the effective date of notice pursuant to Section 11
hereof. The Employee's employment and performance of services will continue
during such five-day period; provided, however, that the Company may, upon
notice to the Employee and without reducing the Employee's compensation during
such period, excuse the Employee from any or all of his duties during such
period.
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8. TERMINATION PAYMENTS
In the event of termination of the Employee's employment during the
Employment Period, all compensation and benefits set forth in this Agreement
shall terminate, except as specifically provided in this Section 8.
8.1 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY
THE EMPLOYEE FOR GOOD REASON
If during the Employment Period the Company terminates the Employee's
employment other than for Cause or the Employee terminates his employment for
Good Reason, the Employee shall be entitled to:
(a) receive payment of the following accrued obligations (the
"Accrued Obligations"):
(i) the Employee's Annual Base Salary through the Date of
Termination to the extent not theretofore paid; and
(ii) any compensation previously deferred by the Employee
(together with accrued interest or earnings thereon, if any) and any
accrued vacation pay which would be payable under the Company's
standard policy, in each case to the extent not theretofore paid;
(b) for 18 months after the Date of Termination, Employee's
premiums for health insurance benefit continuation for Employee and his family
members, if applicable, which the Company provides to the Employee under the
provisions of the federal Comprehensive Omnibus Budget Reconciliation Act of
1986, as amended ("COBRA"), to the extent that the Company would have paid such
premiums had the Employee remained employed by the Company; and
(c) an amount as severance pay equal to one and one-half times
the Annual Base Salary for the fiscal year in which the Date of Termination
occurs, plus a percentage of such Annual Base Salary equal to the percentage
paid under the Company's Executive Incentive Plan (or any successor plan) for
the prior fiscal year (the "Severance Obligation").
8.2 TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON
If during the Employment Period the Employee's employment shall be
terminated by the Company for Cause or by the Employee for other than Good
Reason, this Agreement shall terminate without further obligation on the part of
the Company to the Employee, other than the Company's obligation to pay the
Employee
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(a) his Annual Base Salary through the Date of Termination, (b) the amount of
any compensation previously deferred by the Employee, and (c) any accrued
vacation pay which would be payable under the Company's standard policy, in each
case to the extent theretofore unpaid.
8.3 EXPIRATION OF TERM
In the case of a termination of the Employee's employment as a result
of the expiration of the Term of this Agreement, this Agreement shall terminate
without further obligation on the part of the Company to the Employee, other
than the Company's obligation to pay the Employee the Accrued Obligations.
8.4 TERMINATION BECAUSE OF DEATH OR TOTAL DISABILITY
If during the Employment Period the Employee's employment is terminated
by reason of the Employee's death or Total Disability, this Agreement shall
terminate automatically without further obligation on the part of the Company to
the Employee or his legal representatives under this Agreement, other than the
Company's obligation to pay the Employee the Accrued Obligations (which shall be
paid to the Employee's estate or beneficiary, as applicable in the case of the
Employee's death).
8.5 PAYMENT SCHEDULE
All payments of the Accrued Obligations and the Severance Obligation,
or any portion thereof payable pursuant to this Section 8, shall be made to the
Employee within thirty working days of the Date of Termination, except that
payments for COBRA premiums pursuant to Section 8.1(b) shall be made on a
monthly basis.
8.6 CAUSE
For purposes of this Agreement, "Cause" means cause given by the
Employee to the Company and shall be limited to the occurrence of one or more of
the following events:
(a) A clear refusal to carry out any material lawful duties of
the Employee or any directions of the Board, all reasonably consistent with the
duties described in Section 3.2 hereof, provided the Employee has been given
reasonable notice and opportunity to correct any such failure;
(b) Violation by the Employee of a state or federal criminal
law involving the commission of a crime against the Company or any of its
subsidiaries;
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(c) Deception, fraud, misrepresentation or dishonesty by the
Employee; any incident materially compromising the Employee's reputation or
ability to represent the Company with investors, customers or the public; or
(d) Any other material violation of any provision of this
Agreement by the Employee, subject to the notice and opportunity to cure
requirements of Section 10.
8.7 GOOD REASON
For purposes of this Agreement, "Good Reason" means
(a) The assignment to the Employee of any duties materially
inconsistent with the Employee's position, authority, duties or responsibilities
as contemplated by Section 3.2 hereof or any other action by the Company which
results in a material diminution in such position, authority, duties or
responsibilities;
(b) Any failure by the Company to comply with any of the
provisions of Section 5 or 6 hereof;
(c) The Company's requiring the Employee to be based at any
office or location other than that described in Section 3.3 hereof;
(d) Any failure by the Company to comply with and satisfy
Section 12 hereof, provided that the Company's successor has received at least
ten days' prior written notice from the Company or the Employee of the
requirements of Section 12 hereof; or
(e) Any other material violation of any provision of this
Agreement by the Company.
8.8 EXCESS PARACHUTE LIMITATION
If either the Company or the Employee receives confirmation from the
Company's independent tax counsel or its certified public accounting firm, or
such other accounting firm retained as independent certified public accountants
for the Company (the "Tax Advisor"), that any payment by the Company to the
Employee under this Agreement or otherwise would be considered to be an "excess
parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended, or any successor statute then in effect (the "Code"),
then the aggregate payments by the Company pursuant to this Agreement shall be
reduced to the highest amount that may be paid to the Employee by the Company
under this Agreement without having any portion of any amount payable to the
Employee by the Company or a related entity under this Agreement or otherwise
treated as such an "excess
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parachute payment," and, if permitted by applicable law and without adverse tax
consequence, such reduction shall be made to the last payment due hereunder. Any
payments made by the Company to the Employee under this Agreement which are
later confirmed by the Tax Advisor to be "excess parachute payments" shall be
considered by all parties to have been a loan by the Company to the Employee,
which loan shall be repaid by the Employee upon demand, together with interest
calculated at the lowest interest rate authorized for such loans under the Code,
without a requirement that further interest be imputed.
9. REPRESENTATIONS, WARRANTIES AND OTHER CONDITIONS
In order to induce the Company to enter into this Agreement, the
Employee represents and warrants to the Company that neither the execution nor
the performance of this Agreement by the Employee will violate or conflict in
any way with any other agreement by which the Employee may be bound or with any
other duties imposed upon Employee by corporate or other statutory or common
law.
10. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than pursuant to the definition of Cause set forth in
Section 8.6 hereof, before such action is taken, the party asserting the breach
of this Agreement shall give the other party at least ten days' prior written
notice of the existence and the nature of such breach before taking further
action hereunder and shall give the party purportedly in breach of this
Agreement the opportunity to correct such breach during the ten-day period.
11. FORM OF NOTICE
All notices given hereunder shall be given in writing, shall
specifically refer to this Agreement and shall be personally delivered or sent
by telecopy or other electronic facsimile transmission or by reputable overnight
courier, at the address set forth below or at such other address as may
hereafter be designated by notice given in compliance with the terms hereof.
Such notice shall be effective upon receipt or upon refusal of the addressee to
accept delivery.
If to Employee: Kerry D. Palmer
17126 NE 163rd Pl.
Woodinville, WA 98072
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If to Company: Wall Data Incorporated
11332 NE 122nd Way
Kirkland, WA 98034-6931
Attn: General Counsel
Phone: (425) 814-9255
Facsimile: (425) 814-4372
Copy to: Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Attn: L. Michelle Wilson
Phone: (206) 583-8888
Facsimile: (206) 583-8500
12. ASSIGNMENT
This Agreement is personal to the Employee and shall not be assignable
by the Employee. The Company shall assign to and require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean Wall Data Incorporated
and any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise. All the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.
13. WAIVERS
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
14. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, nor consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically
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identifying this Agreement and the provision intended to be amended, modified,
waived, terminated or discharged and signed by the Company and the Employee, and
each such amendment, modification, waiver, termination or discharge shall be
effective only in the specific instance and for the specific purpose for which
given. No provision of this Agreement shall be varied, contradicted or explained
by any oral agreement, course of dealing or performance or any other matter not
set forth in an agreement in writing and signed by the Company and the Employee.
15. APPLICABLE LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the state of Washington, without regard
to any rules governing conflicts of laws.
16. ARBITRATION
Any dispute arising under this Agreement shall be subject to
arbitration. The arbitration proceeding shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (the
"AAA Rules") then in effect, conducted by one arbitrator either mutually agreed
upon or selected in accordance with the AAA Rules, except that the parties
thereto shall have any right to discovery as would be permitted by the Federal
Rules of Civil Procedure for a period of 90 days following the commencement of
such arbitration and the arbitrator thereof shall resolve any dispute which
arises in connection with such discovery. The arbitration shall be conducted in
King County, Washington under the jurisdiction of the Seattle office of the
American Arbitration Association. The arbitrator shall have authority only to
interpret and apply the provisions of this Agreement and shall have no authority
to add to, subtract from, or otherwise modify the terms of this Agreement. Any
demand for arbitration must be made within 60 days of the event(s) giving rise
to the claim that this Agreement has been breached. The arbitrator's decision
shall be final and binding, and each party agrees to be bound by the
arbitrator's award subject, only to an appeal therefrom in accordance with the
laws of the state of Washington. Either party may obtain judgment upon the
arbitrator's award in the Superior Court of King County, Washington.
17. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, then, to the full extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or
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unenforceability shall not affect the validity, legality or enforceability of
any other provision hereof, and (c) any court or arbitrator having jurisdiction
thereover shall have the power to reform such provision to the extent necessary
for such provision to be enforceable under applicable law.
18. ENTIRE AGREEMENT
This Agreement on and as of the date hereof constitutes the entire
agreement between the Company and the Employee with respect to the subject
matter hereof and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and the Employee with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the Confidential Information, Inventions and Nonsolicitation
Agreement between the Employee and the Company, dated December 13, 1988, shall
continue in full force and effect and survive the termination of the Employee's
employment.
19. COUNTERPARTS
This Agreement may be executed in counterparts, each of which
counterpart shall be deemed an original, but all of which together shall
constitute one and the same instrument.
20. HEADINGS
All headings used herein are for convenience only and shall not in any
way affect the construction of, or be taken into consideration in interpreting,
this Agreement.
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IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement effective on the date first set forth above.
EMPLOYEE
/s/ Kerry D. Palmer
-----------------------------------------
Kerry D. Palmer
WALL DATA INCORPORATED
By /s/ John R. Wall
---------------------------------------
John R. Wall
Chief Executive Officer
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APPENDIX A TO
CHANGE OF CONTROL AGREEMENT BETWEEN
WALL DATA INCORPORATED
AND KERRY D. PALMER
For purposes of this Agreement, a "Change of Control" shall mean:
(a) A "Board Change" which, for purposes of this Agreement, shall have
occurred if a majority (excluding vacant seats) of the seats on the Company's
Board are occupied by individuals who were neither (i) nominated by a majority
of the Incumbent Directors nor (ii) appointed by directors so nominated. An
"Incumbent Director" is a member of the Board who has been either (i) nominated
by a majority of the directors of the Company then in office or (ii) appointed
by directors so nominated, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person (as hereinafter defined) other than the
Board; or
(b) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of (i) more than 50% of either (i) the then outstanding shares of
Common Stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following acquisitions
shall not constitute a Change of Control: (x) any acquisition by the Company,
(y) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (z)
any acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of subsection (c) of this
Appendix A are satisfied; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, immediately following such
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reorganization, merger or consolidation, (i) more than 50% of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same proportion as
their ownership immediately prior to such reorganization, merger or
consolidation of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or consolidation and any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 33% or more of the Outstanding Company
Common Stock or the Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 33% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors, and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such reorganization, merger
or consolidation were the Incumbent Directors at the time of the execution of
the initial agreement providing for such reorganization, merger or
consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other disposition
of all or substantially all the assets of the Company, other than to a
corporation with respect to which immediately following such sale or other
disposition, (A) more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company, any employee benefit plan (or related trust) of the
Company or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, 33% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case
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may be) beneficially owns, directly or indirectly, 33% or more of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (C) at least a
majority of the members of the board of directors of such corporation were
approved by a majority of the Incumbent Directors at the time of the execution
of the initial agreement or action of the Board providing for such sale or other
disposition of assets of the Company.
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EXHIBIT B
WALL DATA INCORPORATED
INVENTION AND CONFIDENTIAL INFORMATION AGREEMENT
In consideration of my employment or continued employment by Wall Data
Incorporated (the "Company"), the compensation paid to me in connection with
such employment, and the mutual undertakings set forth below, I agree as
follows:
1. CONFIDENTIAL INFORMATION: I shall not at any time during the period
of my employment or thereafter, except as required in the course of my
employment with the Company or as authorized in writing by an executive officer
of the Company other than myself, directly or indirectly use, disclose,
disseminate, reproduce, lecture on, or publish articles with respect to any
Confidential Information. "Confidential Information" means information not
generally known or recognized as standard practice, relating to the business of
the Company of any third parties with whom the Company deals, contributed to,
developed by, disclosed to, or known by me in my course of employment by the
Company, including but not limited to: Developments, as defined in Section 2
below, specifications, data, machinery, equipment, technology, research, test
procedures and results, know-how, manufacturing processes and products, services
used, identity and description of raw materials used, purchasing, accounting,
engineering, business methods, marketing, merchandising, selling, and servicing.
2. DEVELOPMENTS: "Development(s)" shall mean all inventions,
discoveries, concepts, and ideas, whether patentable or not. All Developments
made or conceived by me which relate directly to: (1) the subject matter of my
work for the Company, (2) the business of the Company, or (3) the Company's
actual or demonstrably anticipated research or development, are the property of
the Company whether or not patent applications are filed thereon and whether or
not the Developments are made or conceived solely by me or jointly with others.
I am to disclose promptly to the Company all such Developments made or conceived
by me during the period of my employment. This paragraph shall not apply if the
Development was made or conceived entirely on my own time and I used no
equipment, supplies, facilities or confidential information of the Company. Upon
request and at the expense of the Company, I shall:
<PAGE> 28
(a) make application in the United States and in foreign countries
for patent foreign countries for a patent on any such
Development specified by the Company;
(b) assign to the Company or its designee all of my right, title,
and interest in and to such Development, any patent
applications relating thereto, and any patents granted
thereon; and
(c) from time to time, at the request of the Company, execute all
instruments and render all such assistance as may reasonably
be required in order to protect the rights of the Company, or
its designee, and to vest in the Company or its designee all
rights to any such Development, patent applications, and
patents.
Each of my duties specified in this paragraph 2 shall survive
termination of my employment with the Company, to the extent such duties related
to Developments made or conceived by me during my employment. I have prepared
and attached hereto a list of all Developments, patent applications, and patents
made or conceived by me prior to my employment with the Company, which are
subject to prior agreements or which I desire to exclude from this Agreement, or
if no such list is attached, I hereby represent and warrant that there are no
such Developments, patent applications or patents.
3. INITIAL AND FINAL PATENT AWARDS: For each Development assigned to
the Company by me upon which an application for patent is filed in the United
States of America by or at the request of the Company, the Company shall pay me,
if I am the sole inventor, or my proportionate share, if I am one of several
joint investors:
(a) an Initial Patent Award of $100 upon the execution by me of
the initial patent application and instrument assigning the
Development, the patent application and any resulting patent
to the company; and
(b) a Final Minimum Patent Award of $500 upon issuance of the
patent resulting from such patent application. The actual
amounts of the awards in excess of the stated minimums shall
be determined by the Company in its sole discretion.
4. CREATIVE MATERIALS: All writings, drawings, designs or other
creative expressions conceived or prepared by me for the Company or which relate
to the business of the Company ("Creative Materials") are the property of the
Company whether or not copyright or trademark applications are filed thereon,
whether or not such Creative Materials are conceived or prepared solely by me or
jointly with others. I am to disclose promptly to the Company all such Creative
Materials conceived or
-2-
<PAGE> 29
prepared by me during the period of my employment. Upon request and at the
expense of the Company, I shall execute all instruments and render all such
assistance as may reasonably be required in order to protect the rights of the
Company or its designee and to vest in the Company or its designee all rights to
any such Creative Materials. Each of my duties specified in this paragraph 4
shall survive termination of my employment with the Company, to the extent such
duties related to Creative Materials conceived or prepared by me during my
employment.
5. MISCELLANEOUS: This agreement shall be binding upon and for the
benefit of me and the Company, and our respective successors, assigns, and
personal representatives; provided that I may not assign any of the benefits due
or to become due under this Agreement without the Company's written consent. In
the event of my death, benefits due or to become due hereunder shall become part
of my estate and be distributed to those lawfully entitled thereto. In any case
in which the Company determines that it has no interest in a Development or
other matter covered by this Agreement, the Company, by a written statement, may
release such Development or other matter to me. References to termination of
employment by the Company or with the Company shall mean termination of the
employment relationship between the Company and me, regardless of whether
termination is initiated by the Company or by me. If any one or more of the
provisions of this Agreement shall for any reason be excessively broad as to
duration, scope, activity, or subject, it shall be construed by limiting and
reducing such provisions, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear. This Agreement shall be governed by
the laws of the State of Washington.
NOTICE (REQUIRED BY WASHINGTON STATUTE): This Agreement does not apply
to an invention for which no equipment, supplies, facility, or trade secret
information of the Company was used and which was developed entirely on the
employee's own time, unless (a) the invention relates (I) directly to the
business of the Company, or (ii) to the Company's actual or demonstrably
anticipated research or development, or (b) the invention results from any work
performed by the employee for the Company.
DATED:
EMPLOYEE:
/s/ Kerry D. Palmer
-----------------------------------------
WALL DATA INCORPORATED
By /s/ Jane E. Graham
-------------------------------------
Its Administrative Assistant
-------------------------------------
-3-
<PAGE> 1
EXHIBIT 5
WALL DATA INCORPORATED
1993 STOCK OPTION PLAN
AS AMENDED AND RESTATED ON OCTOBER 15, 1996
SECTION 1. PURPOSE
The purpose of the 1993 Restated Stock Option Plan (this "Plan") is to
provide a means whereby selected employees, directors, officers, agents,
consultants, advisors and independent contractors of Wall Data Incorporated (the
"Company"), or of any parent or subsidiary (as defined in subsection 5.8 and
referred to hereinafter as "related corporations") thereof, may be granted
incentive stock options and/or nonqualified stock options to purchase the Common
Stock (as defined in Section 3) of the Company, in order to attract and retain
the services or advice of such employees, directors, officers, agents,
consultants, advisors and independent contractors and to provide added incentive
to such persons by encouraging stock ownership in the Company.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or a committee or committees (which term includes subcommittees)
appointed by, and consisting of two or more members of, the Board. The
administrator of this Plan shall hereinafter be referred to as the "Plan
Administrator." If and so long as the Common Stock is registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Board shall consider, in selecting the Plan Administrator and the
membership of any committee acting as Plan Administrator of the Plan with
respect to any persons subject or likely to become subject to Section 16 under
the Exchange Act, the provisions regarding (a) "outside directors," as
contemplated by Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and (b) "nonemployee directors," as contemplated by Rule 16b-3
under the Exchange Act. The Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible
Participants to different committees, subject to such limitations as the Board
deems appropriate.
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Committee members shall serve for such term as the Board may determine, subject
to removal by the Board at any time.
2.1 PROCEDURES
The Board shall designate one of the members of the Plan Administrator
as chairman. The Plan Administrator may hold meetings at such times and places
as it shall determine. The acts of a majority of the members of the Plan
Administrator present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Plan Administrator members, shall be valid acts of
the Plan Administrator.
2.2 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan,
the Plan Administrator shall have the authority, in its discretion, to determine
all matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price, and all other terms and conditions
of the options. Grants under this Plan need not be identical in any respect,
even when made simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Section 422 of the Code, the regulations
thereunder and any amendments thereto.
2.3 SECTION 16(b) COMPLIANCE AND BIFURCATION OF PLAN
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are officers
and directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning this Plan with respect to other participants.
SECTION 3. STOCK SUBJECT TO THIS PLAN
The stock subject to this Plan shall be the Company's Common Stock (the
"Common Stock") presently authorized but unissued or subsequently acquired by
the Company. Subject to adjustment as provided in Section 7, the aggregate
amount of Common Stock to be delivered upon the exercise of all options granted
under this
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<PAGE> 3
Plan shall not exceed (a) 835,000 shares as such Common Stock was constituted on
the effective date of this Plan, as restated, plus (b) an additional number of
shares of its Common Stock equal to the number of shares of Common Stock which
are currently reserved for issuance under this corporation's 1983 Restated Stock
Option Plan and which become available at and as of July 28, 1994 from the
unexercised portion of cancelled or terminated or expired options outstanding
under the 1983 Restated Stock Option Plan on the date hereof, up to a maximum of
1,625,000 shares of Common Stock (after giving effect to such 4:1 reverse stock
split). If any option granted under this Plan shall expire or be surrendered,
exchanged for another option, cancelled or terminated for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
thereupon again be available for purposes of this Plan, including for
replacement options which may be granted in exchange for such expired,
surrendered, exchanged, cancelled or terminated options.
SECTION 4. ELIGIBILITY
An incentive stock option may be granted only to any individual who, at
the time the option is granted, is an employee of the Company or any related
corporation. A nonqualified stock option may be granted to any employee,
director, officer, agent, consultant, advisor or independent contractor of the
Company or any related corporation, whether an individual or an entity. Any
party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee."
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with this
Plan. Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the
exercise of each option and the price per share at which such option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator, provided that the Plan Administrator shall act in good faith to
establish the exercise price which shall be not less than the fair market value
per share of the Common Stock at the time the option is granted with respect to
incentive stock options, and also provided that, with respect to incentive stock
options granted to greater than 10% shareholders, the exercise price shall be as
required by subsection 6.1. Notwithstanding the foregoing, the maximum number of
shares with respect to which an option or options may be granted to any Optionee
in any one fiscal year of the Company shall not exceed
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<PAGE> 4
100,000 shares except that the Company may make an additional one-time grant to
newly-hired employees of up to 150,000 shares (the "Maximum Annual Optionee
Grant").
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to
granting incentive stock options to greater than 10% shareholders, the term of
each incentive stock option shall be as established by the Plan Administrator
and, if not so established, shall be 10 years from the date it is granted but in
no event shall it exceed 10 years. The term of each nonqualified stock option
shall be as established by the Plan Administrator and, if not so established,
shall be 10 years. To ensure that the Company or related corporation will
achieve the purpose and receive the benefits contemplated in this Plan, any
option granted to any Optionee hereunder shall, unless the condition of this
sentence is waived or modified in the agreement evidencing the option or by
resolution adopted at any time by the Plan Administrator, be exercisable
according to the following schedule:
<TABLE>
<S> <C>
Period of Optionee's Continuous
Relationship With the Company or Related
Corporation From the Date the Option Is Portion of Total Option Which Is
Granted Exercisable
<S> <C>
After one year 25%
Each completed month thereafter An additional
2.0833%
</TABLE>
5.3 EXERCISE
Subject to the vesting schedule described in subsection 5.2, each option
may be exercised in whole or in part at any time and from time to time;
provided, however, that no fewer than 100 shares (or the remaining shares then
purchasable under the option, if less than 100 shares) may be purchased upon any
exercise of option rights hereunder and that only whole shares will be issued
pursuant to the exercise of any option. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are exercisable
solely by such Optionee. Options shall be exercised by delivery to the Company
of notice of the number of shares with respect to which the option is exercised,
together with payment of the exercise price.
5.4 PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an option shall be paid in
full to
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<PAGE> 5
the Company by delivery of consideration equal to the product of the option
exercise price and the number of shares purchased. Such consideration must be
paid in cash or by check, or, unless the Plan Administrator at any time
determines otherwise, a combination of cash and/or check and one or both of the
following alternative forms: (a) tendering Common Stock already owned by the
Optionee for at least six months (or any shorter period necessary to avoid a
charge to the Company's earnings for financial reporting purposes) having a fair
market value on the day prior to the exercise date equal to the aggregate option
exercise price; or (b) delivery of a properly executed exercise notice, together
with irrevocable instructions, to (i) a brokerage firm designated by the Company
to deliver promptly to the Company the aggregate amount of sale or loan proceeds
to pay the option exercise price and any withholding tax obligations that may
arise in connection with the exercise and (ii) the Company to deliver the
certificates for such purchased shares directly to such brokerage firm, all in
accordance with the regulations of the Federal Reserve Board.
In addition, the exercise price for shares purchased under an option may
be paid, either singly or in combination with one or more of the alternative
forms of payment authorized by this Section 5.4, by (y) delivery of a
full-recourse promissory note executed by the Optionee; provided that (i) such
note delivered in connection with an incentive stock option shall, and such note
delivered in connection with a nonqualified stock option may, in the sole
discretion of the Plan Administrator, bear interest at a rate specified by the
Plan Administrator but in no case less than the rate required to avoid
imputation of interest (taking into account any exceptions to the imputed
interest rules) for federal income tax purposes, (ii) the Plan Administrator in
its sole discretion shall specify the term and other provisions of such note at
the time an incentive stock option is granted or at any time prior to exercise
of a nonqualified stock option, (iii) the Plan Administrator may require that
the Optionee pledge to the Company for the purpose of securing the payment of
such note the shares of Common Stock to be issued to the Optionee upon exercise
of the option and may require that the certificate representing such shares be
held in escrow in order to perfect the Company's security interest, and (iv) the
Plan Administrator in its sole discretion may at any time restrict or rescind
this right upon notification to the Optionee; or (z) such other consideration as
the Plan Administrator may permit.
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5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation may require an Optionee to pay
the Company the amount of taxes required by any government to be withheld or
otherwise deducted and paid with respect to such payment. Subject to the Plan
and applicable law and unless the Plan Administrator determines otherwise, the
Optionee may satisfy withholding obligations, in whole or in part, by paying
cash, by electing to have the Company withhold shares of Common Stock or by
transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the fair market value of the withholding obligation. The Company
shall have the right to withhold from any shares of Common Stock issuable
pursuant to the exercise of an option or from any cash amounts otherwise due or
to become due from the Company to the Optionee an amount equal to such taxes.
5.6 HOLDING PERIODS
5.6.1 SECURITIES AND EXCHANGE ACT SECTION 16
If an individual subject to Section 16 of the Exchange Act sells shares
of Common Stock obtained upon the exercise of a stock option within six months
after the date the option was granted, such sale may result in short-swing
profit recovery under Section 16(b) of the Exchange Act.
5.6.2 TAXATION OF STOCK OPTIONS
In order to obtain certain tax benefits afforded to incentive stock
options under Section 422 of the Code, an Optionee must hold the shares issued
upon the exercise of an incentive stock option for two years after the date of
grant of the option and one year from the date of exercise. An Optionee may be
subject to the alternative minimum tax at the time of exercise of an incentive
stock option.
The Plan Administrator may require an Optionee to give the Company
prompt notice of any disposition of shares of Common Stock acquired by the
exercise of an incentive stock option prior to the expiration of such holding
periods.
Tax advice should be obtained when exercising any option and prior to
the disposition of the shares issued upon the exercise of any option.
5.7 NONTRANSFERABILITY OF OPTIONS
No option granted under the Plan may be assigned, pledged or transferred
by the Optionee other than by will or by the laws of descent and distribution,
and during
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the Optionee's lifetime, such options may be exercised only by the Optionee or a
permitted assignee or transferee of the Optionee (as provided below).
Notwithstanding the foregoing, and to the extent permitted by Section 422 of the
Code, the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit an Optionee to designate
a beneficiary who may exercise the option after the Optionee's death; provided,
however, that any option so assigned or transferred shall be subject to all the
same terms and conditions contained in the instrument evidencing the option.
5.8 TERMINATION OF RELATIONSHIP
If the Optionee's relationship with the Company or any related
corporation ceases for any reason other than termination for cause, death or
total disability, and unless by its terms the option sooner terminates or
expires, then the portion of the option which is not exercisable at the time of
such cessation shall terminate immediately upon such cessation, unless the Plan
Administrator determines otherwise, and the portion of the option which is
exercisable at the time of such cessation (i) may be exercised for a three-month
period after such cessation and (ii) shall terminate at the end of such period
following cessation as to all shares for which it has not theretofore been
exercised, unless the Plan Administrator determines otherwise. If, in the case
of an incentive stock option, an Optionee's relationship with the Company or any
related corporation changes (i.e., from employee to nonemployee, such as a
consultant), such change shall constitute a termination of an Optionee's
employment with the Company or any related corporation and the Optionee's
incentive stock option shall terminate in accordance with this subsection 5.8.
Upon the expiration of the three-month period following cessation of employment
in the case of an incentive stock option, or at any time prior to the expiration
of the option in the case of a nonqualified stock option, the Plan Administrator
shall have sole discretion in a particular circumstance to extend the exercise
period following such cessation to any date up to the termination or expiration
of the option. If, however, in the case of an incentive stock option, the
Optionee does not exercise the Optionee's option within three months after
cessation of employment, the option will no longer qualify as an incentive stock
option under the Code.
If an Optionee is terminated for cause, any option granted hereunder
shall automatically terminate as of the first discovery by the Company of any
reason for termination for cause, and such Optionee shall thereupon have no
right to purchase any shares pursuant to such option. "Termination for cause"
shall mean dismissal for
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<PAGE> 8
dishonesty, conviction or confession of a crime punishable by law (except minor
violations), fraud, misconduct or disclosure of confidential information. If an
Optionee's relationship with the Company or any related corporation is suspended
pending an investigation of whether or not the Optionee shall be terminated for
cause, all the Optionee's rights under any option granted hereunder likewise
shall be suspended during the period of investigation.
If an Optionee's relationship with the Company or any related
corporation ceases because of a total disability, the portion of the Optionee's
option which is exercisable at the time of such cessation shall not terminate
or, in the case of an incentive stock option, cease to be treated as an
incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical impairment
of the Optionee which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which causes
the Optionee to be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties for the Company and to be engaged in
any substantial gainful activity. Total disability shall be deemed to have
occurred on the first day after the Company and the two independent physicians
have furnished their opinion of total disability to the Plan Administrator.
Options granted under the Plan shall not be affected by any change of
relationship with the Company so long as the Optionee continues to be an
employee, director, officer, agent, consultant, advisor or independent
contractor of the Company or of a related corporation; however, a change in an
Optionee's status from an employee to a nonemployee (e.g., consultant or
independent contractor) shall result in the termination of an outstanding
incentive stock option held by such Optionee. The Plan Administrator, in its
absolute discretion, may determine all questions of whether particular leaves of
absence constitute a termination of services; provided, however, that with
respect to incentive stock options, such determination shall be subject to any
requirements contained in the Code. The foregoing notwithstanding, with respect
to incentive stock options, employment shall not be deemed to continue beyond
the first 90 days of such leave, unless the Optionee's reemployment rights are
guaranteed by statute or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When referring
to a parent corporation, the term "related corporation" shall mean any
corporation in an unbroken chain of
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<PAGE> 9
corporations ending with the Company if, at the time of the granting of the
option, each of the 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.
5.9 DEATH OF OPTIONEE
If an Optionee dies while he or she has a relationship with the Company
or any related corporation or within the three-month period (or 12-month period
in the case of totally disabled Optionees) following cessation of such
relationship, any option held by such Optionee to the extent that the Optionee
would have been entitled to exercise such option, may be exercised within one
year after his or her death by the personal representative of his or her estate
or by the person or persons to whom the Optionee's rights under the option shall
pass by will or by the applicable laws of descent and distribution.
5.10 NO STATUS AS SHAREHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a shareholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.11 CONTINUATION OF RELATIONSHIP
Nothing in this Plan or in any option granted pursuant to this Plan
shall confer upon any Optionee any right to continue in the employ or other
relationship of the Company or of a related corporation, or to interfere in any
way with the right of the Company or of any such related corporation to
terminate his or her employment or other relationship with the Company at any
time.
5.12 MODIFICATION AND AMENDMENT OF OPTION
Subject to the requirements of Code Section 422 with respect to
incentive stock options and to the terms and conditions and within the
limitations of this Plan, the Plan Administrator may modify or amend outstanding
options granted under this Plan. The modification or amendment of an outstanding
option shall not, without the consent of the Optionee, impair or diminish any of
his or her rights or any of the obligations of the Company under such option.
Except as otherwise provided in this Plan, no outstanding option shall be
terminated without the consent of the Optionee. Unless the Optionee agrees
otherwise, any changes or adjustments made to outstanding incentive stock
options granted under this Plan shall be made in such a
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manner so as not to constitute a "modification" as defined in Code Section
425(h) and so as not to cause any incentive stock option issued hereunder to
fail to continue to qualify as an incentive stock option as defined in Code
Section 422(b).
5.13 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan,
to the extent that the aggregate fair market value of the stock (determined at
the time the incentive stock option is granted) with respect to which incentive
stock options are exercisable for the first time by the Optionee during any
calendar year (under this Plan and all other incentive stock option plans of the
Company, a related corporation or a predecessor corporation) exceeds $100,000,
such options shall be treated as nonqualified stock options to the extent
required by Section 422 of the Code.
SECTION 6. GREATER THAN 10% SHAREHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If incentive stock options are granted under this Plan to employees who
own more than 10% of the total combined voting power of all classes of stock of
the Company or any related corporation, the term of such incentive stock options
shall not exceed five years and the exercise price shall be not less than 110%
of the fair market value of the Common Stock at the time the incentive stock
option is granted. This provision shall control notwithstanding any contrary
terms contained in an option agreement or any other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an
employee shall be deemed to own the stock owned, directly or indirectly, by or
for his or her brothers, sisters, spouse, ancestors and lineal descendants.
Stock owned, directly or indirectly, by or for a corporation, partnership,
estate or trust shall be deemed to be owned proportionately by or for its
shareholders, partners or beneficiaries. If an employee or a person related to
the employee owns an unexercised option or warrant to purchase stock of the
Company, the stock subject to that portion of the option or warrant which is
unexercised shall not be counted in determining stock ownership. For purposes of
this Section 6, stock owned by an employee shall include all stock actually
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be
granted
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under this Plan, the Maximum Annual Optionee Grant set forth in Section 5.1, the
number and class of shares covered by each outstanding option and the exercise
price per share thereof (but not the total price), shall all be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock of the Company resulting from a split-up or consolidation of shares or any
like capital adjustment, or the payment of any stock dividend.
7.1 EFFECT OF LIQUIDATION OR REORGANIZATION
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, upon a merger (other than a
merger of the Company in which the holders of Common Stock immediately prior to
the merger have the same proportionate ownership of Common Stock in the
surviving corporation immediately after the merger), consolidation, acquisition
of property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the shareholders of the Company receive cash,
stock or other property in exchange for or in connection with their shares of
Common Stock, any option granted hereunder shall terminate, but the Optionee
shall have the right immediately prior to any such merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation to
exercise such Optionee's option in whole or in part whether or not the vesting
requirements set forth in the option agreement have been satisfied.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted hereunder shall be converted into options
to purchase shares of Exchange Stock unless the Company and the corporation
issuing the Exchange Stock, in their sole discretion, determine that any or all
such options granted hereunder shall not be converted into options to purchase
shares of Exchange Stock but instead shall terminate in accordance with the
provisions of subsection 7.1.1. The amount and price of converted options shall
be determined by adjusting the amount and price of the options granted hereunder
in the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization.
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The converted options shall be fully vested whether or not the vesting
requirements set forth in the option agreement have been satisfied.
Upon a merger of the Company in which the holders of the Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock in the surviving corporation immediately after the merger, a mere
reincorporation or the creation of a holding company, each option outstanding
under the Plan shall be assumed or an equivalent option shall be substituted by
the successor corporation or a parent or subsidiary of such corporation, and the
vesting schedule set forth in the instrument evidencing the option shall
continue to apply to such assumed or equivalent option.
7.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments shall be made by the Board, and its
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. Unless an Optionee agrees otherwise, any
change or adjustment to an incentive stock option shall be made in such a manner
so as not to constitute a "modification" as defined in Code Section 425(h) and
so as not to cause his or her incentive stock option issued hereunder to fail to
continue to qualify as an incentive stock option as defined in Code Section
422(b).
SECTION 8. SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under this
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of any
shares hereunder. Inability of the Company to obtain from any regulatory body
having jurisdiction, the authority deemed by the Company's counsel to be
necessary for the lawful issuance and sale of any shares hereunder or the
unavailability of an exemption from registration for the issuance and sale of
any shares hereunder shall relieve the Company of any liability in respect of
the
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nonissuance or sale of such shares as to which such requisite authority shall
not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order against
any shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided (concurred in by
counsel for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange, all stock issued hereunder if not previously listed on such exchange
shall be authorized by that exchange for listing thereon prior to the issuance
thereof.
SECTION 9. AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may at any time suspend, amend or terminate this Plan,
provided that, to the extent required for compliance with Section 422 of the
Code or by any applicable law or regulation, the Company's shareholders must
approve any amendment which will:
(a) increase the total number of shares that may be issued under
this Plan;
(b) modify the class of participants eligible for participation
in this Plan; or
(c) otherwise require shareholder approval under any applicable
law or regulation.
Such shareholder approval must be obtained within 12 months of the
adoption
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by the Board of such amendment.
Any amendment made to this Plan which would constitute a "modification"
to incentive stock options outstanding on the date of such amendment, shall not
be applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
9.2 AUTOMATIC TERMINATION
Unless sooner terminated by the Board, this Plan shall terminate ten
years from the earlier of (a) the date on which this Plan is adopted by the
Board or (b) the date on which this Plan is approved by the shareholders of the
Company. No option may be granted after such termination or during any
suspension of this Plan. The amendment or termination of this Plan shall not,
without the consent of the option holder, impair or diminish any rights or
obligations under any option theretofore granted under this Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board so long as
it is approved by a majority of stock represented by shareholders voting either
in person or by proxy at a duly held shareholders' meeting any time within 12
months before or after the adoption of this Plan.
Plan adopted by the Board of Directors on January 7, 1993 and approved by the
shareholders on January 28, 1993; Restated Plan adopted by the Board of
Directors on March 16, 1994 and approved by the shareholders on May 19, 1994.
Plan amended and restated by the Board of Directors on October 15, 1996.
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AMENDMENT NO. 1 TO
WALL DATA INCORPORATED
1993 STOCK OPTION PLAN
AS AMENDED AND RESTATED ON OCTOBER 15, 1996
The Wall Data Incorporated 1993 Stock Option Plan (the "Plan") is
amended as follows:
1. Section 3 of the Plan is amended to read as follows:
The stock subject to this Plan shall be the Company's Common Stock (the
"Common Stock") presently authorized but unissued or subsequently
acquired by the Company. Subject to adjustment as provided in Section 7,
the aggregate amount of Common Stock to be delivered upon the exercise
of all options granted under this Plan shall not exceed 1,366,789 shares
of Common Stock. If any option granted under this Plan shall expire or
be surrendered, exchanged for another option, cancelled or terminated
for any reason without having been exercised in full, the unpurchased
shares subject thereto shall thereupon again be available for purposes
of this Plan, including for replacement options which may be granted in
exchange for such expired, surrendered, exchanged, cancelled or
terminated options.
The date of the adoption of this Amendment No. 1 by the Board of
Directors of the Company is March 11, 1998. The effective date of this Amendment
No. 1 shall be March 11, 1998, the date of adoption by the Board of Directors,
unless the Company's shareholders fail to approve this Amendment No. 1 at or
prior to the next annual meeting of the Company's shareholders.
<PAGE> 16
AMENDMENT NO. 2 TO
WALL DATA INCORPORATED
1993 STOCK OPTION PLAN
AS AMENDED AND RESTATED ON OCTOBER 15, 1996
The Wall Data Incorporated 1993 Stock Option Plan (the "Plan") is
amended as follows:
Section 5 of the Plan is amended to add a new Section 5.14 which
shall state as follows:
5.14 PROHIBITION AGAINST REPRICING
In no event shall any option issued and outstanding pursuant to
the terms of this Plan be repriced to a lower option price at
any time during the term of such option, without the prior
affirmative vote of holders of a majority of shares of stock of
the Company present at a meeting of shareholders in person or by
proxy and entitled to vote thereon. Any amendment or repeal of
this Section 5.14 shall require the affirmative vote of holders
of a majority of shares of stock of the Company present at a
meeting of shareholders in person or by proxy and entitled to
vote thereon.
The date of the adoption of this Amendment No. 2 by the Board of
Directors of the Company is April 20, 1999. The effective date of this Amendment
No. 2 shall be April 20, 1999, the date of adoption by the Board of Directors.
<PAGE> 1
EXHIBIT 6
WALL DATA INCORPORATED
1993 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
AS AMENDED AND RESTATED ON OCTOBER 15, 1996
SECTION 1. PURPOSES
The purposes of the Wall Data Incorporated 1993 Stock Option Plan for
Non-Employee Directors (the "Plan") are to attract and retain the services of
experienced and knowledgeable non-employee directors of Wall Data Incorporated
(the "Corporation") and to provide an incentive for such directors to increase
their proprietary interests in the Corporation's long-term success and progress.
SECTION 2. SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Section 6 hereof, the total
number of shares of the Corporation's common stock, no par value per share (the
"Common Stock"), for which options may be granted under the Plan is one hundred
fifty thousand (150,000) (the "Shares"). The Shares shall be shares presently
authorized but unissued and shall include shares representing the unexercised
portion of any option granted under the Plan which expires or terminates without
being exercised in full.
SECTION 3. ADMINISTRATION OF THE PLAN
The administrator of the Plan (the "Plan Administrator") shall be the
Board of Directors of the Corporation (the "Board"). Subject to the terms of the
Plan, the Plan Administrator shall have the power to construe the provisions of
the Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable. No member of the Plan Administrator shall participate in any vote by
the Plan Administrator on any matter materially affecting the rights of any such
member under the Plan.
SECTION 4. PARTICIPATION IN THE PLAN
Each member of the Board elected or appointed who is not otherwise an
employee of the Corporation or any parent or subsidiary corporation (an
"Eligible Director") shall automatically receive the grant of an option (the
"First Option") to purchase 2,500 shares if such director is elected as a
director at this Corporation's Annual Meeting of Shareholders on January 28,
1993. The First Option shall be automatically granted on the first day on which
the Corporation's Common Stock is
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publicly traded. Each Eligible Director whose initial election or appointment to
the Board of Directors occurs on or after January 29, 1993 and before March 15,
1996, shall automatically receive the grant of an option (the "Initial Option")
to purchase 5,000 shares; each Eligible Director whose initial election or
appointment to the Board of Directors occurs on or after March 15, 1996 shall
receive an Initial Option to purchase 10,000 shares. The Initial Option shall be
automatically granted on the day such Eligible Director is so elected or
appointed.
Commencing with the Annual Meeting of Shareholders as described in the
Corporation's Bylaws (the "Annual Meeting") for 1993 through the Annual Meeting
for 1995, each Eligible Director shall automatically receive the grant of an
option (the "Annual Option") to purchase 1,250 shares, except that the Annual
Options for 1993 shall be granted on the first day on which the Corporation's
Common Stock is publicly traded; and commencing with the Annual Meeting for 1996
(May 1996) each Eligible Director shall automatically receive an Annual Option
to purchase 2,500 shares. Each Eligible Director shall be entitled to receive an
Annual Option notwithstanding the receipt of a First Option or Initial Option in
the same calendar year.
SECTION 5. OPTION TERMS
Each option granted to an Eligible Director under the Plan and the
issuance of Shares thereunder shall be subject to the following terms:
5.1 OPTION AGREEMENT
Each option granted under the Plan shall be evidenced by an option
agreement (an "Agreement") duly executed on behalf of the Corporation. Each
Agreement shall comply with and be subject to the terms and conditions of the
Plan. Any Agreement may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Plan Administrator.
5.2 OPTION EXERCISE PRICE
The option exercise price for each option granted under the Plan shall
be the fair market value of the Shares covered by the option at the time the
option is granted. For purposes of the Plan, "fair market value" shall be the
average of the high and low sales prices at which the Common Stock was sold on
such date as reported by the NASDAQ National Market System on such date or, if
no Common Stock was traded on such date, on the next preceding date on which
Common Stock was so traded.
5.3 VESTING AND EXERCISABILITY
A First Option for an Eligible Director shall vest and become
exercisable 180
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<PAGE> 3
days after the date of grant of the First Option.
An Initial Option to an Eligible Director shall vest and become
exercisable in accordance with the following schedule:
<TABLE>
<CAPTION>
Period of Eligible Directors'
Continuous Service as a Director
With the Company From the Date the
Initial Option Portion of Total Option Which Is
is Granted Exercisable
<S> <C>
upon the first anniversary date of the 25%
Initial Option grant date
each completed month after such first An additional
anniversary date 2.0833%
</TABLE>
An Annual Option to an Eligible Director shall vest and become
exercisable upon the date of the Annual Meeting next following the date of grant
of such Annual Option.
5.4 TIME AND MANNER OF EXERCISE OF OPTION
Each option may be exercised in whole or in part at any time and from
time to time; provided, however, that no fewer than 100 Shares (or the remaining
Shares then purchasable under the option, if less than 100 Shares) may be
purchased upon any exercise of option rights hereunder and that only whole
Shares will be issued pursuant to the exercise of any option.
Any option may be exercised by giving written notice, signed by the
person exercising the option, to the Corporation stating the number of Shares
with respect to which the option is being exercised, accompanied by payment in
full for such Shares, which payment may be in whole or in part (i) in cash or by
check, (ii) in shares of Common Stock already owned for at least six (6) months
by the person exercising the option, valued at fair market value at the time of
such exercise, or (iii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker, to properly deliver to the
corporation the amount of sale or loan proceeds to pay the exercise price, all
in accordance with the regulations of the Federal Reserve Board.
5.5 TERM OF OPTIONS
Each option shall expire five years from the date of the granting
thereof, but shall be subject to earlier termination as follows:
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(a) In the event that an optionee ceases to be a director of the
Corporation for any reason other than the death or total disability of
the optionee, the unvested portion of the options granted to such
optionee shall terminate immediately and the vested portion of the
options granted to such optionee may be exercised by him or her only
within three months after the date such optionee ceases to be a director
of the Corporation.
(b) In the event of the death of an optionee, whether during the
optionee's service as a director or during the three-month period
referred to in Section 5.5(a), the unvested portion of the options
granted to such optionee shall terminate immediately and the vested
portion of the options granted to such optionee shall be exercisable,
and such options shall expire unless exercised within one year after the
date of the optionee's death, by the legal representatives or the estate
of such optionee, by any person or persons whom the optionee shall have
designated in writing on forms prescribed by and filed with the
Corporation or, if no such designation has been made, by the person or
persons to whom the optionee's rights have passed by will or the laws of
descent and distribution.
(c) If an Eligible Director's service as a Director of the
Company ceases because of a total disability, the unvested portion of
the options granted to such optionee shall terminate immediately and the
vested portion of the Eligible Director's option shall not terminate
until the end of the 12-month period following such cessation (unless by
its terms it sooner terminates and expires). As used in this Plan, the
term "total disability" refers to a mental or physical impairment of the
Eligible Director which is expected to result in death or which has
lasted or is expected to last for a continuous period of 12 months or
more and which causes the Eligible Director to be unable, in the opinion
of the Company and two independent physicians, to perform his or her
duties for the Company. Total disability shall be deemed to have
occurred on the first day after the Company and the independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
5.6 TRANSFERABILITY
During an optionee's lifetime, an option may be exercised only by the
optionee or a permitted assignee or transferee (as provided below). Options
granted under the Plan and the rights and privileges conferred thereby shall not
be subject to execution, attachment or similar process and may not be
transferred, assigned, pledged or hypothecated in any manner (whether by
operation of law or otherwise) other than by (a) will or the applicable laws of
descent and distribution, (b) pursuant to a qualified domestic relation order,
or (c) by gift or other transfer to either (i) a spouse or other
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immediate family member or (ii) any trust, partnership or other entity in which
the optionee or such optionee's spouse or other immediate family member has a
substantial beneficial interest; provided, however, that any option so assigned
or transferred shall be subject to all the same terms and conditions contained
in the instrument evidencing the award. In addition, a recipient of an option
may designate in writing during the optionee's lifetime a beneficiary to receive
and exercise options in the event of the optionee's death (as provided in
Section 5.5(b)). Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under the Plan or of any right or privilege
conferred thereby, contrary to the provisions of the Plan, or the sale or levy
or any attachment or similar process upon the rights and privileges conferred
hereby, shall be null and void.
5.7 HOLDING PERIOD
If an individual subject to Section 16 of the Exchange Act sells shares
of Common Stock obtained upon the exercise of any option granted under the Plan
within six (6) months after the date the option was granted, such sale may
result in short-swing profit liability under Section 16(b) of the Exchange Act.
5.8 PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER
Neither the recipient of an option under the Plan nor the optionee's
successor(s) in interest shall have any rights as a stockholder of the
Corporation with respect to any Shares subject to an option granted to such
person until such person becomes a holder of record of such Shares.
5.9 LIMITATION AS TO DIRECTORSHIP
Neither the Plan, nor the granting of an option, nor any other action
taken pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that an optionee has a right to continue as a
director for any period of time or at any particular rate of compensation.
5.10 REGULATORY APPROVAL AND COMPLIANCE
The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under the Plan,
or record as a holder of record of Shares the name of the individual exercising
an option under the Plan, without obtaining to the complete satisfaction of the
Plan Administrator the approval of all regulatory bodies deemed necessary by the
Plan Administrator, and without complying, to the Plan Administrator's complete
satisfaction, with all rules and regulations under federal, state or local law
deemed applicable by the Plan Administrator.
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SECTION 6. CAPITAL ADJUSTMENTS
The aggregate number of Shares with respect to which options may be
granted under the Plan, as provided in Section 2, the number of Shares subject
to each outstanding option and the price per share specified in such options,
shall all be proportionately adjusted for any increase or decrease in the number
of issued shares of common stock of the Corporation resulting from a subdivision
or consolidation of shares or any other similar capital adjustment or the
payment of a stock dividend.
In the event of any adjustment in the number of Shares covered by any
option, any fractional Shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full Shares
resulting from such adjustment.
Upon a merger (other than a merger of the Corporation in which the
holders of the Corporation's common stock immediately prior to the merger have
the same proportionate ownership of common stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, reorganization(other than a mere reincorporation or the creation of
a holding company) or liquidation of the Corporation (each a "corporate
transaction"), as a result of which the shareholders of the Corporation receive
cash, stock or other property in exchange for or in connection with their shares
of the Corporation's common stock, then the exercisability of each option
outstanding under the Plan shall be automatically accelerated so that each such
option shall, immediately prior to the specified effective date for any such
corporate transaction, become fully exercisable with respect to the total number
of Shares purchasable under such option and may be exercised for all or any
portion of such Shares. To the extent such option is not exercised, it shall
terminate, except that in the event of a corporate transaction in which
shareholders of the Corporation receive capital stock of another corporation in
exchange for their shares of the Corporation's common stock, such unexercised
option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
Any such assumed or equivalent option shall be fully exercisable with respect to
the total number of Shares purchasable under such option.
Upon a merger of the Company in which the holders of the Corporation's
common stock immediately prior to the merger have the same proportionate
ownership of common stock in the surviving corporation immediately after the
merger, a mere reincorporation or the creation of a holding company, each option
outstanding under the Plan shall be assumed or an equivalent option shall be
substituted by the successor corporation or a parent or subsidiary of such
corporation, and the vesting schedule set forth herein shall continue to apply
to such assumed or equivalent option.
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SECTION 7. EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of the Plan
shall be borne by the Corporation; none of such expenses shall be charged to any
optionee.
SECTION 8. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon adoption by the Corporation's
shareholders. The Plan shall continue in effect until it is terminated by action
of the Board or the Corporation's shareholders, but such termination shall not
affect the then-outstanding terms of any options.
SECTION 9. COMPLIANCE WITH RULE 16b-3
It is the intention of the Corporation that the Plan comply in all
respects with the requirements for a "formula plan" within the meaning
attributed to that term for purposes of Rule 16b-3 promulgated under Section
16(b) of the Exchange Act. Therefore, if any Plan provision is later found not
to be in compliance with such requirements, that provision shall be deemed null
and void, and in all events the Plan shall be construed in favor of its meeting
such requirements.
SECTION 10. TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend the Plan at any time, in its
sole and absolute discretion; provided, however, that if required to qualify the
Plan as a formula plan for purposes of Rule 16b-3 promulgated under Section
16(b) of the Exchange Act, no amendment may be made more than once every six (6)
months that would change the amount, price, timing or vesting of the options,
other than to comport with changes in the Internal Revenue Code of 1986, as
amended, or the rules and regulations promulgated thereunder; and provided,
further, that no amendment that would
(a) materially increase the number of Shares that may be issued
under the Plan, or
(b) otherwise require shareholder approval under any applicable
law or regulation
shall be made without the approval of the Corporation's shareholders.
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* * * * *
Adopted by the Corporation's Board of Directors on January 7, 1993 and
approved by the Corporation's shareholders on January 28, 1993.
Amendment No. 1 adopted by the Corporation's Board of Directors on March
18, 1996 and approved by the Corporation's shareholders on May 21, 1996.
Restated to incorporate Amendment No. 1 on March 18, 1996. Amended and Restated
on October 15, 1996.
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AMENDMENT NO. 1 TO
WALL DATA INCORPORATED
1993 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
AS AMENDED AND RESTATED ON OCTOBER 15, 1996
The Wall Data Incorporated 1993 Stock Option Plan For Non-Employee
Directors (the "Plan") is amended as follows:
1. Section 4 of the Plan is amended to add a new third paragraph as
follows:
In addition to the options set forth in the preceding paragraph
and effective October 28, 1997, Robert Frankenberg shall
automatically receive the grant of an option (the "Frankenberg
Option") to purchase 30,000 shares. The Frankenberg Option shall
vest and become exercisable over 3 years, one-third at each
anniversary date, except that vesting shall be based on Mr.
Frankenberg's period of continuous service as the Company's
outside Chairman of the Board rather than on his service as a
director. The Frankenberg Option shall terminate six (6) years
from the date of grant and otherwise in accordance with Section
5.5 of the Plan, except that early termination shall be based on
Mr. Frankenberg's service as the Company's outside Chairman of
the Board rather than on his service as a director.
The date of the adoption of this Amendment No. 1 by the Board of
Directors of the corporation is October 28, 1997. The effective date of this
Amendment No. 1 shall be October 28, 1997, the date of adoption by the Board of
Directors.
<PAGE> 10
AMENDMENT NO. 2 TO
WALL DATA INCORPORATED
1993 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
AS AMENDED AND RESTATED ON OCTOBER 15, 1996
The Wall Data Incorporated 1993 Stock Option Plan For Non-Employee
Directors (the "Plan") is amended as follows:
Section 5 of the Plan is amended to add a new Section 5.11, which
shall state as follows:
5.11 PROHIBITION AGAINST REPRICING
In no event shall any option issued and outstanding pursuant to
the terms of the Plan be repriced to a lower option price at any
time during the term of such option, without the prior
affirmative vote of holders of a majority of shares of stock of
the Corporation present at a meeting of shareholders in person or
by proxy and entitled to vote thereon. Any amendment or repeal of
this Section 5.11 shall require the affirmative vote of holders
of a majority of shares of stock of the Corporation present at a
meeting of shareholders in person or by proxy and entitled to
vote thereon.
The date of the adoption of this Amendment No. 2 by the Board of
Directors of the corporation is April 20, 1999. The effective date of this
Amendment No. 2 shall be April 20, 1999, the date of adoption by the Board of
Directors.
