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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INTERWOVEN, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF INTERWOVEN, INC.]
April 28, 2000
To Our Stockholders:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Interwoven, Inc. to be held at the Hyatt San Jose - Airport, 1740 North
First Street, San Jose, California, on Thursday, June 1, 2000, at 1:30 p.m.,
Pacific Time.
The matters to be acted upon at the meeting are described in detail in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
Please use this opportunity to take part in the Company's affairs by voting
on the business to come before this meeting. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE PRIOR TO THE MEETING SO THAT YOUR SHARES
WILL BE REPRESENTED AT THE MEETING. Returning the Proxy does not deprive you of
your right to attend the meeting and to vote your shares in person.
We hope to see you at the meeting.
Sincerely,
/s/ Martin W. Brauns
Martin W. Brauns
President and Chief Executive
Officer
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INTERWOVEN, INC.
1195 W. FREMONT AVENUE, SUITE 2000
SUNNYVALE, CALIFORNIA 94087
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
Interwoven, Inc. will be held at the Hyatt San Jose - Airport, 1740 North First
Street, San Jose, California, on Thursday, June 1, 2000, at 1:30 p.m., Pacific
Time.
At the meeting, you will be asked to consider and vote upon the following
matters:
1. The election of two Class I directors, each to serve until the third
annual meeting of stockholders following this meeting and until his
successor has been elected and qualified or until his earlier
resignation, death or removal. At the meeting, our Board of Directors
intends to present the following nominees for election as directors:
Martin W. Brauns
Anthony Zingale
2. A proposal to approve an amendment to the Interwoven, Inc. 1999 Equity
Incentive Plan increasing the number of shares reserved for issuance
thereunder by 2,000,000 shares.
3. A proposal to ratify the selection of PricewaterhouseCoopers LLP as our
independent accountants for the fiscal year ending December 31, 2000.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice. Only stockholders of record at the close of
business on April 14, 2000 are entitled to notice of and to vote at the meeting
or any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ David M. Allen
David M. Allen
Vice President and Chief Financial
Officer
Sunnyvale, California
April 28, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE,
DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE
MEETING.
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INTERWOVEN, INC.
1195 W. FREMONT AVENUE, SUITE 2000
SUNNYVALE, CALIFORNIA 94087
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PROXY STATEMENT
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April 28, 2000
The accompanying proxy is solicited on behalf of the Board of Directors of
Interwoven, Inc., a Delaware corporation, for use at our 2000 Annual Meeting of
Stockholders to be held at the Hyatt San Jose - Airport, 1740 North First
Street, San Jose, California, on Thursday, June 1, 2000, at 1:30 p.m., Pacific
Time (the "Meeting"). This Proxy Statement and the accompanying form of proxy
were first mailed to our stockholders on or about April 28, 2000. An annual
report for the year ended December 31, 1999 is enclosed with this Proxy
Statement.
Record Date; Quorum
Only holders of record of our common stock at the close of business on April
14, 2000 (the "Record Date") will be entitled to vote at the Meeting. The
presence at the Meeting (in person or by proxy) of a majority of the shares
outstanding on the Record Date will constitute a quorum for the transaction of
business at the Meeting. At the close of business on the Record Date, we had
23,970,300 shares of common stock outstanding and entitled to vote.
Voting Rights; Required Vote
Holders of our common stock are entitled to one vote for each share held as
of the Record Date. Shares of common stock may not be voted cumulatively. In
the event that a broker, bank, custodian, nominee or other record holder of our
common stock indicates on a proxy that it does not have discretionary authority
to vote certain shares on a particular matter (a "broker non-vote"), then those
shares will not be considered present and entitled to vote with respect to that
matter, although they will be counted in determining whether or not a quorum is
present at the Meeting.
Directors will be elected by a plurality of the votes cast by the shares of
common stock present in person or represented by proxy at the Meeting and
entitled to vote on the election of directors. Proposals No. 2 and 3 require
for approval the affirmative vote of the majority of the shares of common stock
present in person or represented by proxy at the Meeting that are voted for or
against the proposal. Abstentions and broker non-votes will not affect the
outcome of the vote. All votes will be tabulated by the inspector of elections
appointed for the Meeting, who will separately tabulate affirmative and
negative votes, abstentions and broker non-votes on each proposal.
Voting of Proxies
The proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors of Interwoven (the "Board") for use at the Meeting.
Stockholders are requested to complete, date and sign the accompanying proxy
card and promptly return it in the enclosed envelope or otherwise mail it to
Interwoven. All signed, returned proxies that are not revoked will be voted in
accordance with the instructions contained therein; however, returned signed
proxies that give no instructions as to how they should be voted on a
particular proposal at the Meeting will be counted as votes "for" such proposal
(or, in the case of the election of directors, as a vote "for" election to the
Board of all the nominees presented by the Board).
In the event that sufficient votes in favor of the proposals are not received
by the date of the Meeting, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitations
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of proxies. Any such adjournment would require the affirmative vote of the
majority of the outstanding shares present in person or represented by proxy at
the Meeting.
We will pay our expenses of soliciting proxies to be voted at the Meeting.
Following the original mailing of the proxies and other soliciting materials,
we and our agents may also solicit proxies by mail, telephone, telegraph or in
person. Following the original mailing of the proxies and other soliciting
materials, we will request that brokers, custodians, nominees and other record
holders of our common stock forward copies of the proxy and other soliciting
materials to persons for whom they hold shares of common stock and request
authority for the exercise of proxies. In such cases, we, upon the request of
the record holders, will reimburse such holders for their reasonable expenses.
Revocability of Proxies
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to the Meeting or at the Meeting prior to the vote
pursuant to the proxy. A proxy may be revoked by a writing delivered to us
stating that the proxy is revoked, by a subsequent proxy that is signed by the
person who signed the earlier proxy and is presented at the Meeting prior to
the vote, or by attendance at the Meeting and voting in person. Please note,
however, that if a stockholder's shares are held of record by a broker, bank or
other nominee and that stockholder wishes to vote at the Meeting, the
stockholder must bring to the Meeting a letter from the broker, bank or other
nominee confirming such stockholder's beneficial ownership of the shares and
that such broker, bank or other nominee is not voting such shares at the
Meeting.
Assumptions
Unless otherwise indicated, all stock prices and amounts contained in this
Proxy Statement reflect retrospectively the two-for-three reverse stock split
in October 1999 and the conversion of our preferred stock into common stock in
October 1999.
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PROPOSAL NO. 1--ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into equal classes. Each
class serves three years, with the terms of office of the respective classes
expiring in successive years. Directors in Class I will stand for election at
the Meeting. The terms of office of directors in Class II and Class III do not
expire until the annual meetings of stockholders held in 2001 and 2002,
respectively. The Board proposes that each of the Class I nominees named below,
both of whom are currently serving as Class I directors, be re-elected as a
Class I director for a three-year term expiring at the annual meeting of
stockholders in 2003 and until such director's successor is duly elected and
qualified or until such director's earlier resignation or removal. Shares
represented by the accompanying proxy will be voted "for" the election of each
of the two nominees named below unless the proxy is marked in such a manner as
to withhold authority so to vote. If any nominee for any reason is unable to
serve or for good cause will not serve, the proxies may be voted for such
substitute nominee as the proxy holder may determine. Each nominee has
consented to being named in this proxy statement and to serve if elected.
Nominees to the Board
The nominees, and their ages and occupations, are:
<TABLE>
<CAPTION>
Director
Name of Director Age Principal Occupation Since
---------------- --- -------------------- --------
<S> <C> <C> <C>
Martin W. Brauns.... 40 President and Chief Executive Officer, 1998
Interwoven, Inc.
Anthony Zingale(1).. 44 President, Clarify eBusiness Applications, 2000
Nortel Networks, Inc.
</TABLE>
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(1) Compensation Committee member.
Martin W. Brauns has been Interwoven's President and Chief Executive Officer
and a member of the Board of Directors ever since joining Interwoven in March
1998. Before joining Interwoven, Mr. Brauns served as President and Chief
Operating Officer of Sqribe Technologies, Inc., a software company, from July
1997 to November 1997. From March 1996 to June 1997, Mr. Brauns served in a
number of positions, including most recently as Vice President of North
American Sales, at Informix Software, Inc., a software company. From 1992 to
January 1996, Mr. Brauns served as Vice President of Worldwide Sales of Adaptec
Inc., a hardware and software manufacturer. Mr. Brauns holds a Bachelor of
Science in international business and a Master of Business Administration from
San Jose State University.
Anthony Zingale has been a director of Interwoven since April 2000. Mr.
Zingale has served as President, Clarify eBusiness Applications, Nortel
Networks, Inc., a telephony, data, eBusiness and wireless solutions provider
for Internet companies, since March 2000. From March 1998 to March 2000, Mr.
Zingale served as President, Chief Executive Officer and a director of Clarify,
Inc. (now known as Clarify, a Nortel Networks Company), a provider of eBusiness
solutions. From November 1997 to March 1998, Mr. Zingale served as an
independent consultant, and from 1989 to November 1997 he served in a variety
of executive management positions at Cadence Design Systems, Inc., an
electronic design automation software and services company, including most
recently as Senior Vice President of Worldwide Marketing. Mr. Zingale holds a
Bachelor of Science degree in electrical and computer engineering and a
Bachelor of Arts degree in business administration from the University of
Cincinnati.
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Continuing Directors
<TABLE>
<CAPTION>
Director
Name of Director Age Principal Occupation Since
---------------- --- -------------------- --------
<S> <C> <C> <C>
Ronald E.F. Codd(2)..... 44 President and Chief Executive Officer, 1999
Momentum Business Applications, Inc.
Kathryn C. Gould(1)..... 50 Managing Member, Foundation Capital 1998
Peng T. Ong............. 36 Chairman of the Board 1995
Mark C. Thompson(2)..... 42 Senior Vice President and Executive Producer, 1999
Charles Schwab & Co.
</TABLE>
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(1) Compensation Committee member.
(2) Audit Committee member.
Kathryn C. Gould has been a director of Interwoven since March 1998. She is a
founder of Foundation Capital, a venture capital firm, and has been a managing
member since December 1995. Since 1989, Ms. Gould has been a general partner of
Merrill, Pickard, Anderson & Eyre, a venture capital firm. Ms. Gould holds a
Bachelor of Science in physics from the University of Toronto and a Master of
Business Administration from the University of Chicago.
Peng T. Ong is our founder and Chairman of our Board of Directors. He also
served as a Vice President until January 2000. Prior to founding Interwoven,
Mr. Ong was a founder of Electric Classifieds, Inc., an Internet classifieds
company, and its Chief Architect from 1994 to 1995. From 1994 to December 1995,
he served as a consultant to Illustra Information Technologies, Inc., a
software company. Mr. Ong holds a Bachelor of Science in electrical engineering
from the University of Texas at Austin and a Master of Science in computer
science from the University of Illinois at Urbana-Champaign.
Ronald E.F. Codd has been a director of Interwoven since July 1999. Mr. Codd
has served as President, Chief Executive Officer and a director of Momentum
Business Applications, Inc., a publicly-held software company, since January
1999. From 1991 to December 1998, he served as Senior Vice President, Finance
and Administration, Chief Financial Officer and Secretary of PeopleSoft, Inc.,
an enterprise software developer. Mr. Codd also serves on the board of
directors of Adept Technology, Inc., a robotics manufacturer, and Intraware,
Inc., a provider of business-to-business e-commerce services. Mr. Codd holds a
Bachelor of Science in accounting from the University of California at Berkeley
and a Master of Management from the J.L. Kellogg Graduate School of Management
(Northwestern University).
Mark C. Thompson has been a director of Interwoven since July 1999. Since
1988, Mr. Thompson has served in a number of positions with Charles Schwab, a
financial services company, including most recently Senior Vice President and
Executive Producer of Schwab.com. Mr. Thompson holds a Bachelor of Arts in
international relations, and a Master of Arts in new media from Stanford
University.
There are no family relationships among any of our directors or officers.
Board of Directors Meetings and Committees
Board of Directors. During 1999, the Board met 12 times, including telephone
conference meetings. Except for Eileen Richardson, a former director, and Mark
Thompson, no director attended fewer than 75% of the aggregate of the total
number of meetings of the Board and of all committees of the Board on which
such director served held during the period such director served. Mr. Thompson
and Ms. Richardson attended 60% and 67% of the total number of such meetings,
respectively.
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
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Audit Committee. Messrs. Codd and Thompson are the current members of the
Audit Committee. The Audit Committee did not meet in 1999; rather, the Board
performed the Audit Committee's functions. The Audit Committee meets with our
independent accountants to review the adequacy of our internal control systems
and financial reporting procedures, reviews the general scope of our annual
audit and the fees charged by the independent accountants, and reviews and
monitors the performance of non-audit services by our auditors. It also reviews
the fairness of any proposed transaction between Interwoven and any officer,
director or other of our affiliates and performs such other functions as may be
required by any stock market upon which our common stock may be listed.
Compensation Committee. Ms. Gould and Mr. Zingale are the current members of
the Compensation Committee. The Compensation Committee met once during 1999.
The Compensation Committee recommends compensation for our officers and
employees, grants (or delegates authority to grant) options and stock awards
under the our employee benefit plans, and reviews and recommends adoption of
and amendments to stock option and employee benefit plans.
Director Compensation
Our directors receive no cash compensation for their services as directors
but are reimbursed for their reasonable expenses in attending Board and Board
committee meetings.
Under the 1999 Equity Incentive Plan, each director who is not our employee
is automatically granted an option to purchase 20,000 shares of common stock
under this plan, when he or she first becomes a member of the Board of
Directors. Subsequently, each non-employee director is automatically granted an
additional option to purchase 10,000 shares of common stock under this plan
following each annual meeting of stockholders, if the director has served
continuously as a member of the Board for at least one year. Each option
granted to directors under the Incentive Plan has a 10-year term and terminates
three months following the date the director ceases to be one of our directors
or consultants or 12 months following the date if the termination is due to
death or disability. All options granted to directors under the Incentive Plan
are fully vested and immediately exercisable as of the date of grant.
In July 1999, prior to adoption of the Incentive Plan, Messrs. Codd and
Thompson were each granted an option to purchase 20,000 shares of common stock
under the 1998 Stock Option Plan (the "1998 Plan") on terms substantially the
same as those under the 1999 Equity Incentive Plan. The 1998 Plan terminated
upon consummation of our initial public offering in October 1999, and no
additional options may be granted under it. Ms. Gould and Mark Saul, a former
director, were each granted an option to purchase 10,000 shares of common stock
under the Incentive Plan in October 1999.
The Board recommends a vote for the election
of each of the nominated directors.
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PROPOSAL NO. 2
AMENDMENT OF 1999 EQUITY INCENTIVE PLAN
Stockholders are being asked to approve an amendment to Interwoven's 1999
Equity Incentive Plan (the "Incentive Plan") to increase the number of shares
of common stock reserved for issuance thereunder by 2,000,000 shares, from
2,900,000 shares to 4,900,000 shares.
The Board believes that the increase in the number of shares reserved for
issuance under the Incentive Plan is in the best interests of Interwoven
because of the continuing need to provide stock options to attract, retain and
motivate quality employees and remain competitive in the industry. Granting
equity incentives under the Incentive Plan plays an important role in our
efforts to attract, retain and motivate employees of outstanding ability.
Competition for skilled engineering, sales and consulting personnel and other
key employees in the Internet software development industry is intense and the
use of significant stock options for retention and motivation of such personnel
is pervasive in the high technology industries. The Board believes that the
additional reserve of shares with respect to which equity incentives may be
granted will provide us with adequate flexibility to ensure that we can
continue to meet those goals and facilitate the expansion of our employee base.
The Board approved the proposed amendment on April 13, 2000, to be effective
upon stockholder approval. A summary of the principal provisions of the
Incentive Plan, assuming stockholder approval of the amendment, follows below.
Incentive Plan History
In July 1999 the Board adopted the Incentive Plan, and in September 1999 our
stockholders approved the Incentive Plan. The Board reserved 2,900,000 shares
for issuance under the Incentive Plan, in addition to any authorized shares not
issued or subject to outstanding grants under the 1996 Stock Option Plan and
1998 Plan (the "Prior Plans") on October 7, 1999, the date of our initial
public offering, and any shares issued under the Prior Plans that are forfeited
or repurchased by us or that are issuable upon exercise of options granted
under the Prior Plans that expire or become unexercisable for any reason
without having been exercised in full. If any option or other award terminates
without being exercised or issued, then the shares covered by the terminated
option or award generally are available under the Incentive Plan for future
grants or awards. The purpose of the Incentive Plan is to offer eligible
persons an opportunity to participate in Interwoven's future performance
through awards of incentive stock options, nonqualified stock options (at not
less than 85% of fair market value), restricted stock awards and stock bonuses.
The Incentive Plan serves as the successor to our Prior Plans which terminated
at the time of our initial public offering.
From the inception of the Incentive Plan until December 31, 1999, options to
purchase an aggregate of 466,001 shares of common stock were granted under the
Incentive Plan. No options were granted to the officers identified in the
Summary Compensation Table below. Our executive officers as of December 31,
1999 as a group (8 persons) were granted options to purchase a total of 104,000
shares and the current directors or nominees for election as a director who are
not executive officers as a group (4 persons) were granted options to purchase
a total of 10,000 shares. No options were granted to any associate of any
executive officer or director of Interwoven, and no other person received 5% or
more of such options.
Shares Under the Incentive Plan
The shares available for issuance under the Incentive Plan are authorized but
unissued shares of common stock. The Board has reserved an aggregate of
4,900,000 shares of common stock for issuance under the Incentive Plan. In
addition, any shares remaining unissued under the Prior Plans on the effective
date of the Incentive Plan, including any shares not issued or issuable upon
exercise of options granted pursuant to the Prior Plans that are forfeited or
repurchased by the us or that expire or become unexercisable for any reason
without having been exercised in full, are no longer available for distribution
under the Prior Plans but are
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available for distribution under the Incentive Plan. Shares that will again be
available for grant and issuance under the Incentive Plan include: (a) shares
that are subject to issuance upon exercise of options that cease to be subject
to these options for reasons other than option exercise; (b) shares issued
pursuant to the exercise of awards that are subsequently forfeited or
repurchased at the original purchase price; (c) shares subject to awards of
restricted stock that are subsequently forfeited or repurchased at the original
purchase price; and (d) shares that are subject to awards that otherwise
terminate without shares being issued. The number of shares covered by the
Incentive Plan is subject to proportional adjustment to reflect stock splits,
stock dividends, recapitalizations, subdivisions, combinations and other
similar events.
Eligibility
Employees, officers, directors, consultants, independent contractors and
advisors of Interwoven (and of its parent or any subsidiaries) are eligible to
receive awards under the Incentive Plan (the "Participants"). No Participant is
eligible to receive more than 1,000,000 shares of common stock in any calendar
year under the Incentive Plan, other than new employees of Interwoven
(including directors and officers who are also new employees) who are eligible
to receive up to a maximum of 1,500,000 shares of common stock in the calendar
year in which they commence their employment with us. As of December 31, 1999,
approximately 205 persons were eligible to participate in the Incentive Plan,
no shares had been issued upon exercise of options and 466,001 shares were
subject to outstanding options. As of that date, 2,433,999 shares were
available for future grant pursuant to the Incentive Plan, after taking into
account the proposed amendment to the Incentive Plan and the shares originally
reserved for issuance under the Prior Plans that have become available for
distribution under the Incentive Plan. The closing price of our common stock on
the Nasdaq National Market was $68.75 per share on April 13, 2000, the last
trading day before the Record Date.
Administration
The Incentive Plan is administered by the Compensation Committee, the members
of which are appointed by the Board (the "Committee"), or by the Board acting
as the Committee. The Committee currently consists of Kathryn Gould and Anthony
Zingale, each of whom are "non-employee directors," as defined in Rule 16b-3
under the Securities Exchange Act of 1934 (the "Exchange Act"), and "outside
directors," as defined pursuant to Section 162(m) of the Internal Revenue Code
(the "Code").
Except for automatic grants to non-employee directors, the Committee
determines the persons who are to receive awards, the number of shares subject
to each award and the terms and conditions of awards, subject to the terms of
the Incentive Plan. Except for automatic grants to each eligible director who
is not our employee, the Committee also has the authority to construe and
interpret any of the provisions of the Incentive Plan or any awards granted
thereunder.
Stock Options
The Incentive Plan permits the granting of options that are Incentive Stock
Options ("ISOs") that qualify under Section 422 of the Code or Nonqualified
Stock Options ("NQSOs"). ISOs may be granted only to employees (including
officers and directors who are also employees) of Interwoven or any parent or
subsidiary of Interwoven. The option exercise price for each ISO share must be
no less than 100% of the "fair market value" (as defined in the Incentive Plan)
of a share of common stock at the time of grant. The per share exercise price
of an ISO granted to a 10% stockholder must be no less than 110% of the fair
market value of a share of common stock at the time of grant. The option
exercise price for each NQSO share must be no less than 85% of the fair market
value of a share of common stock at the time of grant. Options granted under
the Incentive Plan have a maximum term of ten years. Awards granted under the
Incentive Plan may not be transferred in any manner other than by will or by
the laws of descent and distribution and may be exercised during the lifetime
of the optionee only by the optionee (unless otherwise determined by the
compensation committee and set forth in the award agreement with respect to
awards that are not ISOs).
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The exercise price of options granted under the Incentive Plan may be paid as
expressly approved by the Committee and as permitted by law at the time of
grant:
(1) in cash (by check);
(2) by cancellation of indebtedness of Interwoven to the Participant;
(3) by surrender of shares of common stock owned by the Participant for at
least six months or obtained in the public market and having a fair
market value on the date of surrender equal to the aggregate exercise
price of the option;
(4) by tender of a full recourse promissory note;
(5) by waiver of compensation due to or accrued by the Participant for
services rendered;
(6) by a "same-day sale" commitment from the Participant and a National
Association of Securities Dealers, Inc. ("NASD") broker;
(7) by a "margin" commitment from the Participant and an NASD broker; or
(8) by any combination of the foregoing.
Options granted under the Incentive Plan generally may be exercised for a
period of time after the termination of the optionee's employment by Interwoven
or by any of its subsidiaries. Options will generally terminate immediately
upon termination for cause.
Restricted Stock Awards
The Committee may grant Participants awards to purchase restricted stock
either in addition to, or in tandem with, other awards under the Incentive
Plan, under such terms, conditions and restrictions as the Committee may
determine. The purchase price for restricted stock will be determined by the
Committee. The purchase price for such awards will be determined by the
Committee on the date of the award (and in the case of an award granted to a
10% stockholder, the purchase price shall be 100% of fair market value) and can
be paid for in any of the forms of consideration listed in items (1) through
(5), or by any combination of such forms of consideration, in "Stock Options"
above, as are approved by the Committee at the time of grant. The Company has
not granted any restricted stock awards under the Incentive Plan.
Stock Bonuses
The Committee may grant Participants awards of stock bonuses either in
addition to, or in tandem with, other awards under the Incentive Plan, under
such terms, conditions and restrictions as the Committee may determine. During
1999, no shares were issued pursuant to stock bonus awards.
Automatic Grants to Directors
Under the Incentive Plan, each director who is not our employee is
automatically granted an option to purchase 20,000 shares of common stock under
the Incentive Plan, when he or she first becomes a member of the Board of
Directors. Subsequently, each non-employee director is automatically granted an
additional option to purchase 10,000 shares of common stock under the Incentive
Plan following each annual meeting of stockholders, if such member has been
continuously serving as a director for a period of one year or more since
becoming a member of the Board. Such options are granted with an exercise price
equal to the fair market value of our common stock on the date of grant. All
options granted to directors who are not are employees are 100% vested and
immediately exercisable.
Mergers, Consolidations, Change of Control
In the event of a merger, consolidation, dissolution or liquidation of the
Company, the sale of substantially all of the assets of Interwoven or any other
similar corporate transaction as defined in the Incentive Plan, the
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successor corporation may assume, replace or substitute equivalent awards in
exchange for those granted under the Incentive Plan or provide substantially
similar consideration, shares or other property as was provided to our
stockholders (after taking into account provisions of the awards). In the event
that the successor corporation does not assume or substitute awards, such
awards will expire upon the closing of such transaction at the time and upon
the conditions as the Board determines.
Amendment of the Incentive Plan
The Board may at any time terminate or amend the Incentive Plan, including
amending any form of award agreement or instrument to be executed pursuant to
the Incentive Plan. However, the Board may not amend the Incentive Plan in any
manner that requires stockholder approval pursuant to the Code or the
regulations promulgated thereunder.
Term of the Incentive Plan
Unless terminated earlier as provided in the Incentive Plan, the Incentive
Plan will expire on July 21, 2009, ten years after the date the Board adopted
it.
Federal Income Tax Information
The following is a general summary as of the date of this Proxy Statement of
the federal income tax consequences to Interwoven and Participants under the
Incentive Plan. Federal tax laws may change and the federal, state and local
tax consequences for any Participant will depend upon his or her individual
circumstances. Each Participant has been and is encouraged to seek the advice
of a qualified tax advisor regarding the tax consequences of participation in
the Incentive Plan.
Incentive Stock Options. A Participant will recognize no income upon grant of
an ISO and incur no tax on its exercise (unless the Participant is subject to
the alternative minimum tax ("AMT") as described below). If the Participant
holds shares acquired upon exercise of an ISO (the "ISO Shares") for more than
one year after the date the option was exercised and for more than two years
after the date the option was granted, the Participant generally will realize
capital gain or loss (rather than ordinary income or loss) upon disposition of
the ISO Shares. This gain or loss will be equal to the difference between the
amount realized upon such disposition and the amount paid for the ISO Shares.
If the Participant disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), the gain realized upon
such disposition, up to the difference between the fair market value of the ISO
Shares on the date of exercise (or, if less, the amount realized on a sale of
such shares) and the option exercise price, will be treated as ordinary income.
Any additional gain will be capital gain, taxed at a rate that depends upon the
amount of time the ISO Shares were held by the Participant.
Alternative Minimum Tax. The difference between the fair market value of the
ISO Shares on the date of exercise and the exercise price is an adjustment to
income for purposes of AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular tax) is 26% of an individual taxpayer's alternative minimum
taxable income (28% in the case of alternative minimum taxable income in excess
of $175,000). A maximum 20% AMT rate applies to the portion of alternative
minimum taxable income that would otherwise be taxable as net capital gain.
Alternative minimum taxable income is determined by adjusting regular taxable
income for certain items, increasing that income by certain tax preference
items (including the difference between the fair market value of the ISO Shares
on the date of exercise and the exercise price), and reducing this amount by
the applicable exemption amount ($45,000 in case of a joint return, subject to
reduction under certain circumstances). If a disqualifying disposition of the
ISO Shares occurs in the same calendar year as exercise of the ISO, there is no
AMT adjustment with respect to those ISO Shares. Also, upon a sale of ISO
Shares that is not a disqualifying disposition, alternative minimum taxable
income is reduced in the year of sale by the excess of the fair market value of
the ISO Shares at exercise over the amount paid for the ISO Shares.
9
<PAGE>
Nonqualified Stock Options. A Participant will not recognize any taxable
income at the time an NQSO is granted. However, upon exercise of an NQSO, the
Participant must include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the Participant's exercise price. The included amount must be treated as
ordinary income by the Participant and may be subject to withholding by
Interwoven (either by payment in cash or withholding out of the Participant's
salary). Upon resale of the shares by the Participant, any subsequent
appreciation or depreciation in the value of the shares will be treated as
capital gain or loss.
Restricted Stock and Stock Bonuses. Restricted stock and stock bonuses will
generally be subject to tax at the time of receipt, unless there are
restrictions that enable the Participant to defer tax. At the time the tax is
incurred, the tax treatment will be similar to that discussed above for NQSOs.
Maximum Tax Rates. The maximum tax rate applicable to ordinary income is
39.6%. Long-term capital gain is taxed at a maximum rate of 20%. To receive
long-term capital gain treatment, the stock must be held for more than one
year. Capital gains may be offset by capital losses and up to $3,000 of capital
losses may be offset annually against ordinary income.
Tax Treatment of the Company. Interwoven generally will be entitled to a
deduction in connection with the exercise of an NQSO by a Participant or the
receipt of restricted stock or stock bonuses by a Participant to the extent
that the Participant recognizes ordinary income, provided that Interwoven
timely reports such income to the Internal Revenue Service. Interwoven will be
entitled to a deduction in connection with the disposition of ISO Shares only
to the extent that the Participant recognizes ordinary income on a
disqualifying disposition of the ISO Shares.
ERISA. The Incentive Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 and is not qualified under
Section 401(a) of the Code.
The Board recommends a vote for the amendment of the 1999 Equity Incentive
Plan.
10
<PAGE>
NEW PLAN BENEFITS
The following table shows the options that are or will be granted in 2000 to
non-employee directors in the aggregate under the Incentive Plan, if the
nominees are elected and the continuing directors continue to serve. Anthony
Zingale was appointed to the Board in April 2000 and received an Initial Grant
at that time.
<TABLE>
<CAPTION>
Name and Position Exercise Price (per share) Number of Shares
----------------- -------------------------- ----------------
<S> <C> <C>
All current directors
who are not executive
officers, as a group
(5 persons)........... Fair market value on the date of grant 60,000
</TABLE>
Future awards to executive officers and employees of Interwoven under the
Incentive Plan and the Interwoven, Inc. 1999 Employee Stock Purchase Plan are
discretionary and cannot be determined at this time. We have therefore not
included a table that reflects such awards.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
We have selected PricewaterhouseCoopers LLP as our independent accountants to
perform the audit of our financial statements for the fiscal year ending
December 31, 2000, and the stockholders are being asked to ratify such
selection. PricewaterhouseCoopers LLP has been engaged as our independent
accountants since the year ended December 31, 1997. Representatives of
PricewaterhouseCoopers LLP will be present at the Meeting, will have the
opportunity to make a statement at the Meeting if they desire to do so, and
will be available to respond to appropriate questions.
The Board recommends a vote for the ratification
of the selection of PricewaterhouseCoopers LLP.
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of Interwoven common stock, as of April 14, 2000, by: (i) each
stockholder known by us to be the beneficial owner of more than 5% of our
common stock; (ii) each director and nominee; (iii) each Named Executive
Officer set forth in the Summary Compensation Table below; and (iv) all
directors and executive officers as a group.
The percentage of shares beneficially owned is based on 23,970,300 shares of
common stock outstanding as of April 14, 2000. Beneficial ownership is
determined under the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Unless indicated above, the persons and entities named in the table have sole
voting and sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. Shares of common stock
subject to options and warrants that are currently exercisable or exercisable
within 60 days of April 14, 2000 are deemed to be outstanding for the purpose
of computing the percentage ownership of that person but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.
<TABLE>
<CAPTION>
Shares
Shares Issuable Under
Amount of Subject to Options
Beneficial Repurchase Exercisable
Name of Beneficial Owner Ownership Right within 60 days Percent
- ------------------------ ---------- ---------- -------------- -------
<S> <C> <C> <C> <C>
Kathryn C. Gould(1).............. 2,926,895 -- 10,000 12.2%
Foundation Capital entities
70 Willow Road, Suite 200
Menlo Park, CA 94025
JK&B Entities(2)................. 2,113,046 -- -- 8.8
205 North Michigan Avenue,
Suite 808
Chicago, IL 60601
Peng T. Ong(3)................... 1,780,000 -- -- 7.4
Martin W. Brauns(4).............. 1,286,103 698,085 -- 5.4
Jozef Ruck....................... 246,666 185,000 -- 1.0
Michael A. Backlund(5)........... 224,998 158,747 26,666 *
Jack S. Jia(6)................... 194,333 101,179 -- *
Anthony Zingale.................. 20,000 -- 20,000 *
Mark C. Thompson................. 18,000 -- -- *
Ronald E.F. Codd................. 18,000 -- 18,000 *
All twelve directors and
executive officers as a
group(7)........................ 7,151,661 1,470,371 54,666 29.8%
</TABLE>
- --------
* Less than 1%
(1) Represents 2,590,970 shares held by Foundation Capital II, L.P., 180,077
shares held by Foundation Capital II Entrepreneurs Fund, L.L.C., and
145,848 shares held by Foundation Capital II Principals Fund, L.L.C.
Foundation Management II, L.L.C. is the general partner of Foundation
Capital II, L.P. Foundation Management II, L.L.C. is the managing member of
both Foundation Capital II Entrepreneurs Fund, L.L.C. and Foundation
Capital II Principals Fund, L.L.C. Kathryn Gould, one of our directors, is
a managing member of Foundation Management II, L.L.C. and shares voting and
investment power of these shares. Ms. Gould disclaims beneficial ownership
of these shares, except to the extent of her direct pecuniary interest in
these shares.
(2) Represents 1,475,503 shares held by JK&B Capital, L.P. and 637,543 shares
held by JK&B Capital II, L.P. JK&B Management, L.L.C. is the general
partner of JK&B Capital, L.P. and JK&B Capital II, L.P.
(3) Represents 890,000 shares of common stock held of record by Peng Tsin Ong
and 890,000 shares of common stock held of record by Wai Ping-Leong, his
spouse. Mr. Ong's address is c/o Interwoven, Inc., 1195 W. Fremont Avenue,
Suite 2000, Sunnyvale, CA 94087.
12
<PAGE>
(4) Represents 1,286,103 shares of common stock held of record by Martin W.
Brauns and Margaret R. Brauns, trustees U/D/T 1/9/95. Mr. Brauns' address
is c/o Interwoven, Inc., 1195 W. Fremont Avenue, Suite 2000, Sunnyvale, CA
94087.
(5) Includes 116,666 shares of common stock held of record by the Backlund
Family Trust.
(6) Includes 1,000 shares of common stock held by family members, as to which
Mr. Jia disclaims beneficial ownership.
(7) Includes 500 shares held by a relative of one executive officer, as to
which the officer disclaims beneficial ownership.
13
<PAGE>
EXECUTIVE OFFICERS
The names, ages and positions of our executive officers as of April 14, 2000
were as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Martin W. Brauns........ 40 President and Chief Executive Officer
David M. Allen.......... 41 Vice President and Chief Financial Officer
Michael A. Backlund..... 45 Senior Vice President of Worldwide Sales and Field Operations
Jeffrey E. Engelmann.... 38 Vice President of Product Marketing and Technology Partnerships
Jack S. Jia............. 37 Vice President of Engineering
Jozef Ruck.............. 48 Vice President of Corporate and Channels Marketing
John Van Siclen......... 43 Vice President of Corporate Development
</TABLE>
Martin W. Brauns has been President and Chief Executive Officer and a
director of Interwoven since March 1998. Before joining Interwoven, Mr. Brauns
served as President and Chief Operating Officer of Sqribe Technologies, Inc., a
software company, from July 1997 to November 1997. From March 1996 to June
1997, Mr. Brauns served in a number of positions, including most recently as
Vice President of North American Sales, at Informix Software, Inc., a software
company. From 1992 to January 1996, Mr. Brauns served as Vice President of
Worldwide Sales of Adaptec Inc., a hardware and software manufacturer. Mr.
Brauns holds a Bachelor of Science in international business and a Master of
Business Administration from San Jose State University.
David M. Allen has served as our Vice President and Chief Financial Officer
since joining Interwoven in March 1999. Before joining Interwoven, Mr. Allen
served as Vice President and Chief Financial Officer of Objective Systems
Integrators, Inc., a telecommunications network management company, from July
1996 to March 1999. From 1985 to July 1996, he served in a number of positions,
including most recently as Vice President and Chief Financial Officer, at
Telecommunications Techniques Corporation, a communications test equipment
manufacturing company. Mr. Allen holds a Bachelor of Science in accounting from
the University of Maryland.
Michael A. Backlund has served as our Senior Vice President of Worldwide
Sales and Field Operations since October 1999. From May 1998 to October 1999,
he served as our Vice President of Worldwide Sales. From January 1997 to May
1998, Mr. Backlund served in a number of positions at Computer Associates
International, a software company, including most recently as Vice President of
Divisional Sales. Prior to joining Interwoven, he was a founder of CMS
Communications, Inc., a telecommunications equipment company, and served in a
number of capacities from 1986 to December 1996, including most recently as
Vice President of Sales and Marketing. Mr. Backlund holds a Bachelor of Arts
and a Master of Arts in economics from the University of Southern California.
Jeffrey E. Engelmann has served as our Vice President of Product Marketing
and Technology Partnerships since January 2000. From January 1999 through
December 1999, he served as our Vice President of Business Development. Before
joining Interwoven in January 1999, Mr. Engelmann served as Executive
Operations Officer of the Internet division of IBM. From 1991 to December 1997,
he served in a number of development, consulting and sales positions with IBM,
including most recently as Business Unit Executive of eBusiness Solution Sales.
Mr. Engelmann holds a Bachelor of Science in chemical engineering and a
Bachelor of Arts in computer science from the University of Wisconsin at
Madison.
Jack S. Jia has served in a variety of positions, including most recently as
our Vice President of Engineering, since joining Interwoven in January 1997.
Prior to joining Interwoven, Mr. Jia was a founder of V-Max America, Inc., a
computer distribution company, and served as the Chief Executive Officer from
1993 to October 1998. From May 1995 to January 1997, he served as a Project
Manager at Silicon Graphics, Inc., a computer systems company, and from 1993 to
May 1995, he served in a number of senior engineering positions at Sun
Microsystems, Inc., a computer systems company. Mr. Jia holds a Bachelor of
Science in electrical
14
<PAGE>
engineering and a Master of Science in computer science from the Northern Jiao-
Tong University, Beijing, a Master of Science in electrical engineering from
Polytechnic University of New York, and a Master of Business Administration
from Santa Clara University.
Jozef Ruck has served as our Vice President of Corporate and Channels
Marketing since January 2000. From March 1999 through December 1999, he served
as our Vice President of Marketing. From April 1997 to April 1999, Mr. Ruck
served in a number of positions at Genesys Telecommunications Laboratories, a
call center software company, including most recently as Vice President of
Customer Marketing. From 1994 to March 1997, he served in a number of
positions, including most recently as Western Region Sales Director, at Network
Appliance, Inc., a data storage company. Mr. Ruck holds a Bachelor of Science
in mechanical engineering from Oregon State University and a Master of Business
Administration from Santa Clara University.
John Van Siclen has served as our Vice President of Corporate Development
since joining Interwoven in December 1999. From February 1997 to November 1999,
Mr. Van Siclen served as President and Chief Executive Officer of Perspecta,
Inc., a start-up Internet software company, that was acquired by Excite@Home in
October 1999. From February 1996 to February 1997, Mr. Van Siclen served as
Vice President, Alternate Channels at Informix Software, Inc., a database
software company. From 1990 through January 1996, Mr. Van Siclen held various
sales and marketing management positions, including, most recently, Vice
President of Worldwide Sales and Marketing, at NetFrame Systems, a network
systems company. Mr. Van Siclen holds a Bachelor of Arts in history from
Princeton University.
There are no family relationships among any of our directors or officers.
15
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities to Interwoven and its subsidiaries during
each of 1998 and 1999 to our Chief Executive Officer and our four other most
highly compensated executive officers who were serving as executive officers at
the end of 1999 (the "Named Executive Officers"). This information includes the
dollar values of base salaries and bonus awards, the number of shares subject
to stock options granted and certain other compensation, if any, whether paid
or deferred. The restricted stock value is calculated based upon a purchase
price of $0.18 per share for Mr. Brauns and a purchase price of $0.39 per share
for Mr. Ruck, and assuming an estimated fair market value on the date of grant
is equal to $17.00 per share, which was the initial public offering price of a
share of our common stock on October 8, 1999. On December 31, 1999, Mr. Brauns
held 1,333,333 shares of common stock and Mr. Ruck held 246,666 shares of
common stock pursuant to restricted stock award and subject to our right to
repurchase these shares upon termination of employment. Our right to repurchase
Mr. Brauns' shares expires ratably over a 48-month period that began in March
1998. Our right to repuchase Mr. Ruck's shares expired as to 53,333 shares on
March 15, 2000 and expires for the remaining shares ratably each month over
36 months thereafter. If declared by the Board, dividends will be paid on these
restricted stock awards. At December 31, 1999, the value of the restricted
stock awards was $161,926,626 for Mr. Brauns and $29,904,552 for Mr. Ruck,
based on the closing price per share of our common stock of $121.63 on that
date. We do not grant stock appreciation rights and have no long-term
compensation benefits other than stock options.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
----------------- ----------------------
Restricted Securities
Stock Underlying
Name and Principal Position Year Salary Bonus Awards Options
--------------------------- ---- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Martin W. Brauns................ 1999 $250,000 $300,000 $ -- 86,103
President and Chief Executive 1998 206,119 100,000 22,426,661 --
Officer
Peng T. Ong(1).................. 1999 135,000 108,000 -- --
Chairman of the Board 1998 114,315 125,000 -- --
Michael A. Backlund............. 1999 145,000 155,000 -- 93,332
Senior Vice President of 1998 80,826 65,450 -- 156,666
Worldwide Sales and Field
Operations
Jack S. Jia..................... 1999 115,000 92,000 -- 36,666
Vice President of Engineering 1998 104,988 55,000 -- 96,666
Jozef Ruck...................... 1999 115,606 60,000 4,097,122 --
Vice President of Corporate and 1998 -- -- -- --
Channels Marketing
</TABLE>
- --------
(1)Mr. Ong resigned from the office of Vice President of Professional Services
in January 2000.
The following table sets forth further information regarding option grants
pursuant to the 1998 Plan and the Incentive Plan during 1999 to each of the
Named Executive Officers.
All options granted under the 1998 Plan and the Incentive Plan are
immediately exercisable and are either incentive stock options or nonqualified
stock options. We have the right to repurchase the shares issued upon exercise
of these options at the original purchase price if they are unvested at the
time the grantee terminates employment with us. The repurchase right generally
lapses as to 25% of the shares on the first anniversary of the date of grant
and the remainder expire ratably over a 36-month period thereafter. We have
also granted nonqualified stock options that do not contain a repurchase right
or contain repurchase terms that are negotiated between the optionee and us.
Options expire ten years from the first date of employment. Options were
granted at an exercise price equal to the fair market value of our common
stock, as determined by our board of directors, on the date of grant. In 1999,
we granted to our employees and consultants option to purchase a total of
2,522,393 shares of common stock.
16
<PAGE>
In accordance with the rules of the Securities and Exchange Commission, the
table sets forth the hypothetical gains or "option spreads" that would exist
for the options at the end of their respective ten-year terms. These gains are
based on assumed rates of annual compound stock price appreciation of 5% and
10% from the date the option was granted to the end of the option term. The
potential realizable values at 5% and 10% appreciation are calculated by
assuming that the value of the shares appreciates at the indicated rate for the
entire term of the options and that the option is exercised at the exercise
price and sold on the last day of its term at the appreciated price. The 5% and
10% assumed annual compound rates of stock price appreciation are mandated by
the rules of the Securities and Exchange Commission and do not represent
Interwoven's estimate or projection of future common stock prices or values.
For options granted before our initial public offering in October 1999, we
assumed that the fair market value on the date of grant was $17.00 per share,
which was the initial public offering price.
Option Grants in 1999
<TABLE>
<CAPTION>
Potential Realizable Value
Number of Percentage of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to for Option Term
Options Employees in Exercise Price Expiration ----------------------------
Name Granted 1999 Per Share Date 5% 10%
- ---- ---------- ------------- -------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Martin W. Brauns........ 86,103 3.4% $0.39 03/18/09 $ 2,350,716 $ 3,763,013
Peng T. Ong............. -- -- -- -- -- --
Michael A. Backlund..... 66,666 2.7 0.39 01/28/09 1,820,062 2,913,546
13,333 0.5 7.64 07/22/09 267,343 486,036
13,333 0.5 14.00 10/06/09 182,545 401,238
Jack S. Jia............. 16,666 0.7 0.39 01/28/99 455,002 728,365
20,000 0.8 7.64 07/22/09 401,024 729,072
Jozef Ruck.............. -- -- -- -- -- --
</TABLE>
The following table presents the number of shares acquired and the value
realized upon exercise of stock options during 1999 and the number of shares of
common stock subject to "exercisable" and "unexercisable" stock options held as
of December 31, 1999 by each of the Named Executive Officers. Also presented
are values of "in-the-money" options, which represent the positive difference
between the exercise price of each outstanding stock option and the closing
price of our common stock as reported on the Nasdaq National Market on December
31, 1999, the last day of trading for 1999, which was $121.63. Each of these
options was exercisable immediately upon grant, subject to our right to
repurchase the option shares at the exercise price upon termination of the
optionee's employment. The repurchase right generally expires as to 25% of the
shares on the first anniversary of the date of grant and the remainder expires
ratably over the 36-month period thereafter. For option exercises before our
initial public offering in October 1999, the amounts shown under the column
"Value Realized" are based on the initial public offering price of $17.00 per
share, net of the exercise price.
Aggregate Option Exercises in 1999 and Year-End Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Year-End(1) at Year-End
Acquired on Value ------------------------- -------------------------
Name Exercise(1) Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin W. Brauns........ 86,103 $1,430,171 -- 722,221 $-- $87,840,129
Peng T. Ong............. -- -- -- -- -- --
Michael A. Backlund..... 66,666 1,107,322 -- 187,984 -- 22,863,554
Jack S. Jia............. 96,666 1,471,422 -- 116,317 -- 14,147,055
Jozef Ruck.............. -- -- -- -- -- --
</TABLE>
- --------
(1) Options granted under our stock option plans prior to our initial public
offering in October 1999 are generally exercisable immediately but the
shares acquired upon exercise are subject to lapsing rights of repurchase
at the exercise price. The heading "exercisable" refers to unexercised
options to purchase shares as to which our right of repurchase has lapsed.
The heading "unexercisable" refers to shares that we still have the right
to repurchase upon termination of the optionee's employment.
17
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Before July 1999, the compensation committee consisted of Mr. Brauns, Ms.
Gould and Eileen Richardson, a former director. No compensation decisions were
made by this committee before our initial public offering in October 1999;
rather, all compensation decisions were made by the full board of directors.
Form July 1999 to March 2000, our compensation committee consisted of Mark
Saul, a former director, and Ms. Gould. Since April 2000, our compensation
committee has consisted of Ms. Gould and Mr. Zingale, both of whom are "non-
employee directors" under federal securities laws and "outside directors" under
federal tax laws. No interlocking relationship exists between our board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has any interlocking relationship existed
in the past.
Entities associated with Foundation Capital purchased 146,666 shares of
Series E Preferred Stock at $8.49 per share in June 1999. Ms. Gould is a member
of Foundation Capital and may be deemed to own beneficially the shares held by
entities associated with Foundation Capital. Mark Saul, a former director and
member of the Compensation Committee, is a member of Foundation Capital but
does not own beneficially the shares held by entities associated with
Foundation Capital.
For a description of the loan between Mr. Brauns and us, please refer to
"Certain Relationships and Related Transactions--Loans to Executive Officers."
18
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
Prior to our initial public offering in October 1999, the Board (with Mr.
Brauns and Mr. Ong abstaining) made decisions about executive compensation,
including stock option grants. Thereafter, these decisions have been and will
be made by the Compensation Committee of the Board. References to the
"Committee" in this section are intended to be references to the Board prior to
the initial public offering and to the Compensation Committee thereafter. The
Compensation Committee consists of two independent non-employee directors,
neither of whom has any interlocking relationships as defined by the Securities
and Exchange Commission.
General Compensation Policy
The Committee acts on behalf of the Board to establish the general
compensation policy of Interwoven for all our employees. The Committee
typically reviews base salary levels and target bonuses for the Chief Executive
Officer ("CEO") and other executive officers and key employees near the
beginning of each year. The Committee administers our incentive and equity
plans, including the Incentive Plan and the 1999 Employee Stock Purchase Plan.
The Committee's approach to compensation of executive officers, including the
CEO, is to relate that compensation directly to corporate performance. We
relate a portion of each individual's total compensation to company-wide
revenue and profit objectives, as well as individual objectives that are
established at the beginning of the year. Cash compensation includes base
salary and potential cash bonuses. For long-term equity incentives for
executive officers we grant stock options, which have value only if the price
of the common stock increases above the grant price and the executive remains
with Interwoven for the period required for the options to vest.
In 1999 the Committee determined base salaries, incentive compensation and
stock option grants for executive officers based on its own experience, and for
2000 it intends to review surveys of prevailing compensation practices among
high-technology companies with whom Interwoven competes for executive talent.
The Committee compares the compensation of Interwoven's executive officers with
comparable positions at comparable companies to determine base salary, target
bonuses and target total cash compensation. The Committee, along with the CEO,
reviews this competitive market information for each executive level position
and the Committee alone review this information as to the CEO. Each executive
officer's performance for the past year and objectives for the coming year are
reviewed, together with that person's responsibility level and Interwoven's
performance compared to objectives, and performance targets are set for the
coming year.
1999 Executive Compensation
The entire Board of Directors (with Mr. Brauns and Mr. Ong abstaining) made
all executive compensation decisions in 1999 prior to our initial public
offering in October 1999, and the Compensation Committee made those decisions
thereafter. The following in paragraphs describe how those decisions were
reached.
Base Compensation. Compensation information was presented in February 1999.
The Board reviewed the recommendations and performance and market data and
established a 1999 base salary level for each executive officer, including the
CEO.
Incentive Compensation. Cash bonuses are awarded to the extent that an
executive officer achieves predetermined individual objectives and Interwoven
has met revenue and profit objectives set by the Board at the beginning of the
year. The CEO's subjective judgment of other executives' performance is a
factor in determining whether those individual objectives have been satisfied.
Cash bonuses to individuals are not limited, with the exception of the profit
factor of such bonus, which is limited to twice the amount of the relevant
individual's target for such profit factor. Performance is measured at the end
of the year. For 1999, 100% of individual executives' bonus compensation
depended on Interwoven revenues and profits achieving specified targets, with
the balance, if any, based on individual objectives that were set for each
individual executive.
19
<PAGE>
Stock Options. Stock options are an essential element of our executive
compensation packages. The Committee believes that equity-based compensation in
the form of stock options links the interests of management and stockholders by
focusing employees and management on increasing stockholder value. The actual
value of such equity-based compensation depends entirely on appreciation of the
common stock. Almost all of our full-time employees participate in our stock
plans.
In 1999, we granted stock options to aid in the retention of executive
officers and to align their interests with those of the stockholders. The stock
options generally become exercisable over a four-year period and are granted at
a price that is equal to the fair market value of our common stock on the date
of grant. Stock options typically are granted to executive officers when the
executive first joins Interwoven, or in connection with a significant change in
responsibilities, or occasionally to achieve equity within a peer group. In its
discretion the Committee may also grant stock options to executives to provide
greater incentives to continue their employment with Interwoven and to strive
to increase the value of our common stock. The Committee may, however, grant
additional stock options to executives for other reasons. The number of shares
subject to each stock option granted is within the discretion of the Committee
and is based on anticipated future contribution and ability to affect corporate
or business unit results, past performance or consistency within the
executive's peer group. In 1999, as part of an annual review of the stock
options held by our executive officers and managers, the Committee considered
these factors, as well as the number of options held by those executive
officers as of the date of grant that remained unvested.
For 2000, the Committee plans to consider granting options under the
Incentive Plan to executive officers based on the factors described above, with
particular attention to company-wide management objectives and the executive
officers' success in obtaining specific individual financial and operational
objectives for 2000, to Interwoven revenue and profit expectations and to the
number of options currently held by each executive officer that remain
unvested.
Company Performance and CEO Compensation. Mr. Brauns' base salary was
$250,000 in 1999, as it had been in 1998. Based upon the criteria set forth
above, the Committee awarded Mr. Brauns a bonus of $300,000 for 1999,
representing 300% of his 1999 target bonus. This incentive compensation was
based upon Mr. Brauns achieving corporate operating revenue and profit
objectives and performance relative to his individual goals. These objectives
included managing Interwoven's overall corporate business plan, meeting
profitability projections and sales targets, and strengthening Interwoven's
market position. The Committee also granted Mr. Brauns an immediately
exercisable option to purchase 86,103 shares of common stock, subject to our
right to repurchase all of these shares for four years, unless Mr. Brauns
achieved certain 1999 performance objectives, in which case our right to
repurchase these shares would expire as to 21,525 shares on January 1, 2000 and
would expire ratably as to the remaining shares over a 36-month period
thereafter. In granting this option, the Committee reviewed Mr. Brauns' prior
outstanding stock grants, the number of restricted shares that remained
unvested, the number of shares Mr. Brauns already owned that were not subject
to repurchase, and Interwoven's performance in 1998. The Committee believes
that this grant was appropriate because it provided the proper incentives to
Mr. Brauns for 1999 and beyond and takes account of his prior significant stock
holdings. The Committee reviewed compensation practices of comparable companies
in making these awards.
20
<PAGE>
Compliance with Section 162(m) of the Code. Interwoven intends to comply with
the requirements of Section 162(m) of the Code for 2000. The Incentive Plan is
already in compliance with Section 162(m) by limiting stock awards to named
executive officers. Interwoven does not expect cash compensation for 2000 to
any of its executive officers to be in excess of $1,000,000 or consequently
affected by the requirements of Section 162(m).
THE BOARD OF DIRECTORS
Martin W. Brauns
Ronald E.F. Codd
Kathryn C. Gould
Peng T. Ong
Mark C. Thompson
Anthony Zingale
21
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the Securities and
Exchange Commission and shall not be deemed to be incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Exchange Act,
except to the extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed soliciting material or filed under
such Acts.
The graph below compares the cumulative total stockholder return on our
common stock from October 7, 1999 (the effective date of our registration
statement with respect to our initial public offering) to December 31, 1999
with the cumulative total return on the Nasdaq Stock Market--U.S. Index and the
Chase H&Q Internet 100 Index over the same period (assuming the investment of
$100 in the common stock of Company and in each of the other indices on the
date of our initial public offering, and reinvestment of all dividends).
The comparisons in the graph below are based on historical data and are not
intended to forecast the possible future performance of our common stock.
Comparison of Three-Month Cumulative Total Return
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Nasdaq Stock Market-- Chase H&Q Internet
Interwoven, Inc. U.S. Index 100 Index
----------------------------- -------------------------- ------------------------
Market Price Investment Value Index Investment Value Index Investment Value
------------ ---------------- --------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
10/08/99................ $ 17.000 $100.00 $ 968.21 $100.00 $516.87 $100.00
12/31/99................ $121.625 $715.44 $1,359.43 $140.41 $912.76 $176.59
</TABLE>
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 1999 to the present, there are no currently proposed
transactions in which the amount involved exceeds $60,000 to which we or any of
our subsidiaries was (or is to be) a party and in which any executive officer,
director, 5% beneficial owner of our common stock or member of the immediate
family of any of the foregoing persons had (or will have) a direct or indirect
material interest, except for payments set forth under "Executive Compensation"
above and the transactions described below.
Preferred Stock Financing
In June 1999, we sold an aggregate of 2,263,136 shares of Series E Preferred
Stock at a purchase price of $8.49 per share. In connection with this sale of
our capital stock, entities associated with each of Foundation Capital, JK&B
Capital, Accel Partners and Draper Fisher Jurvetson purchased 146,666, 132,861,
72,039 and 1,313 shares of Series E Preferred Stock, respectively. Ms. Gould is
a member of Foundation Capital and may be deemed to own beneficially the shares
held by entities associated with Foundation Capital. Mark Saul, a former
director, is a member of Foundation Capital but does not own beneficially the
shares held by entities associated with Foundation Capital.
Employment Contracts with Management
Mr. Brauns, our President and Chief Executive Officer, entered into an
employment agreement with us in February 1998. This agreement establishes Mr.
Brauns' initial annual salary of $250,000 and eligibility for benefits and
bonuses tied to our revenues. This agreement also provides for his election to
the Board of Directors as a condition of employment. This agreement continues
until it is terminated upon written notice by Mr. Brauns or by us. If his
employment is terminated by us for cause or if he voluntarily elects to
terminate his employment, we must pay his salary and other benefits through the
date of his termination. If his employment is terminated by us without cause or
if he terminates his employment under some circumstances, we must pay his
benefits through the date of his termination and his salary for up to 12
additional months after this date, unless Mr. Brauns is employed full-time by
another employer.
Under this agreement, Mr. Brauns agreed to purchase 1,333,333 shares of
common stock at an exercise price of $0.18 per share. The shares purchased by
Mr. Brauns are subject to our right to repurchase the shares upon termination
of his employment. Our repurchase right expires ratably over a 48-month period
from March 1998. Our repurchase right also expires as to all of the shares in
the event that we merge or consolidate with another entity or sell all or
substantially all of our assets.
In connection with this stock purchase, we agreed to loan Mr. Brauns the
entire purchase price. This loan has been repaid in full. See "Certain
Relationships And Related Transactions--Loans to Executive Officers."
Mr. Ong's offer letter, dated February 29, 1996, provided for an initial
annual salary of $48,000 commencing on March 1, 1996. Mr. Ong's employment is
at will and may be terminated at any time, with or without formal cause.
Mr. Backlund's offer letter, dated May 1, 1998, provides for an initial
annual salary of $135,000 commencing on May 26, 1998 and eligibility for an
incentive bonus of up to $100,000. The offer letter also provides for
reimbursement for relocation expenses. Mr. Backlund received options to
purchase 156,666 shares of our common stock at an exercise price of $0.21 per
share under the 1996 Stock Option Plan of which options to purchase 39,166
shares vested on May 26, 1999 and the remainder will vest ratably over a 36-
month period thereafter. On January 28, 1999, Mr. Backlund received options to
purchase an additional 66,666 shares of our common stock at an exercise price
of $0.39 per share as a result of meeting revenue objectives in 1998 and in
lieu of a portion of his cash bonus earned in 1998. Mr. Backlund's employment
is at will and may be terminated at any time, with or without formal cause.
23
<PAGE>
Mr. Jia's offer letter, dated January 6, 1997, provides for an initial annual
salary of $70,000 commencing January 27, 1997. Mr. Jia received options to
purchase 60,000 shares of our common stock at an exercise price of $0.09 per
share under the 1996 Stock Option Plan, of which options to purchase 15,000
shares vested on January 28, 1998 and the remainder will vest ratably over a
36-month period thereafter. Mr. Jia's employment is at will and may be
terminated at any time, with or without formal cause.
Mr. Ruck's offer letter, dated February 18, 1999, provides for an initial
annual salary of $140,000 commencing on March 15, 1999 and eligibility for an
incentive bonus of $60,000. Pursuant to the offer letter, Mr. Ruck purchased
213,333 shares of our common stock at an exercise price of $0.39 per share. The
shares purchased by Mr. Ruck are subject to our right to repurchase all of the
shares of common stock upon termination of his employment. Our right to
repurchase his shares upon termination lapsed with respect to 53,333 shares on
March 15, 2000 and expires ratably as to the remaining shares over a 36-month
period thereafter. On March 18, 1999, Mr. Ruck purchased an additional 33,333
shares of our common stock at an exercise price of $0.39 per share, subject to
attainment of individual and corporate objectives, and subject to the same
repurchase rights described above. Also, pursuant to his offer letter, we
loaned Mr. Ruck $96,200 pursuant to two partial recourse secured promissory
notes representing the purchase price for his shares. These notes are described
further below under "Certain Relationships And Related Transactions--Loans to
Executive Officers." Mr. Ruck's employment is at will and may be terminated at
any time, with or without formal cause.
Loans to Executive Officers
In March 1998, we loaned $240,000 to Mr. Brauns, our President and Chief
Executive Officer, secured by a promissory note and stock pledge agreement, in
connection with his purchase of 1,333,333 shares of common stock. The note
accrued interest at a rate of 6% per year and has been paid in full. The
largest aggregate amount of indebtedness under this loan during 1999 was
$247,200.
In April 1999, we loaned an aggregate of $105,300 to Mr. Engelmann, our Vice
President of Product Marketing and Technology Partnerships, secured by two
promissory notes and a stock pledge agreement, in connection with his purchase
of 270,000 shares of common stock. In October 1999, the notes were amended to
adjust the repayment schedule in the event of an initial public offering of
common stock. The notes accrue interest at a rate of 6% per year. Interest is
payable annually. The principal sum of each note will become due and payable in
eighteen equal monthly installments beginning in October 2000. If Mr. Engelmann
breaches his obligations under the notes we may enforce our right to payment of
25% of the principal and any accrued interest out of any of Mr. Engelmann's
assets, but may enforce our right to payment of the balance due under the notes
only out of the stock subject to the stock pledge agreement. As of December 31,
1999, $109,723 remained outstanding under the notes.
In April 1999, we loaned an aggregate of $96,200 to Mr. Ruck, our Vice
President of Marketing, secured by two promissory notes and a stock pledge
agreement, in connection with his purchase of 246,666 shares of common stock.
In October 1999, the notes were amended to adjust the repayment schedule in the
event of an initial public offering of common stock. The notes accrue interest
at a rate of 6% per year. Interest is payable annually. The principal sum of
each note will become due and payable in eighteen equal monthly installments
beginning in October 2000. If Mr. Ruck breaches his obligations under the notes
we may enforce our right to payment of 25% of the principal and any accrued
interest out of any of Mr. Ruck's assets, but may enforce our right to payment
of the balance due under the notes only out of the stock subject to the stock
pledge agreement. As of December 31, 1999, $100,208 remained outstanding under
the notes.
24
<PAGE>
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in our proxy statement and form of proxy
relating to the Company's annual meeting of stockholders to be held in 2001
must be received by December 29, 2000. Stockholders wishing to bring a proposal
before the annual meeting for 2001 (but not include it in our proxy materials)
must provide written notice of such proposal to our Secretary at our principal
executive offices no later than March 14, 2001.
COMPLIANCE UNDER SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Exchange Act requires our directors and officers, and
persons who own more than 10% of a registered class of the our equity
securities, to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission. Such persons are
required by Securities and Exchange Commission regulation to furnish us with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms furnished to us and written representations from our
executive officers and directors, we believe that all Section 16(a) filing
requirements were met during 1999, except that John Van Siclen filed one late
Form 3 and one late Form 4, Michael Backlund filed one late Form 3 and Mark
Saul filed one late Form 3 and one late Form 4.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended
that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
25
<PAGE>
INTERWOVEN, INC.
1999 EQUITY INCENTIVE PLAN
As Adopted July 22, 1999
As Amended June , 2000
1. Purpose. The purpose of this Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future
performance through awards of Options, Restricted Stock and Stock Bonuses.
Capitalized terms not defined in the text are defined in Section 23.
2. Shares Subject to the Plan.
2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the total
number of Shares reserved and available for grant and issuance pursuant to
this Plan will be 4,900,000./1/ Shares plus Shares that are subject to: (a)
issuance upon exercise of an Option but cease to be subject to such Option
for any reason other than exercise of such Option; (b) an Award granted
hereunder but are forfeited or are repurchased by the Company at the
original issue price; and (c) an Award that otherwise terminates without
Shares being issued. In addition, any authorized shares not issued or
subject to outstanding grants under the 1996 Stock Option Plan and the 1998
Stock Option Plan (the "Prior Plans") on the Effective Date (as defined
below) and any shares issued under the Prior Plans that are forfeited or
repurchased by the Company or that are issuable upon exercise of options
granted pursuant to the Prior Plans that expire or become unexercisable for
any reason without having been exercised in full, will no longer be
available for grant and issuance under the Prior Plans, but will be
available for grant and issuance under this Plan. At all times the Company
shall reserve and keep available a sufficient number of Shares as shall be
required to satisfy the requirements of all outstanding Options granted
under this Plan and all other outstanding but unvested Awards granted under
this Plan.
2.2 Adjustment of Shares. In the event that the number of outstanding
shares is changed by a stock dividend, recapitalization, stock split,
reverse stock split, subdivision, combination, reclassification or similar
change in the capital structure of the Company without consideration, then
(a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and
(c) the number of Shares subject to other outstanding Awards will be
proportionately adjusted, subject to any required action by the Board or
the stockholders of the Company and compliance with applicable securities
laws; provided, however, that fractions of a Share will not be issued but
will either be replaced by a cash payment equal to the Fair Market Value of
such fraction of a Share or will be rounded up to the nearest whole Share,
as determined by the Committee.
3. Eligibility. ISOs (as defined in Section 5 below) may be granted only to
employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company or any Parent or Subsidiary of the
Company; provided such consultants, contractors and advisors render bona fide
services not in connection with the offer and sale of securities in a capital-
raising transaction. No person will be eligible to receive more than 1,000,000
Shares in any calendar year under this Plan pursuant to the grant of Awards
hereunder, other than new employees of the Company or of a Parent or
Subsidiary of the Company (including new employees who are also officers and
directors of the Company or any Parent or Subsidiary of the Company), who are
eligible to receive up to a maximum of 1,500,000 Shares in the calendar year
in which they commence their employment. A person may be granted more than one
Award under this Plan.
- --------
/1/ Adjusted to reflect the authorization of 2,000,000 additional shares of
Common Stock for issuance under the Plan approved by the Company's
stockholders on June , 2000.
1
<PAGE>
4. Administration.
4.1 Committee Authority. This Plan will be administered by the Committee
or by the Board acting as the Committee. Except for automatic grants to
Outside Directors pursuant to Section 9 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the
Board, the Committee will have full power to implement and carry out this
Plan. Except for automatic grants to Outside Directors pursuant to Section
9 hereof, the Committee will have the authority to:
(a)construe and interpret this Plan, any Award Agreement and any other
agreement or document executed pursuant to this Plan;
(b)prescribe, amend and rescind rules and regulations relating to this
Plan or any Award;
(c)select persons to receive Awards;
(d)determine the form and terms of Awards;
(e)determine the number of Shares or other consideration subject to
Awards;
(f)determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to, other
Awards under this Plan or any other incentive or compensation plan of
the Company or any Parent or Subsidiary of the Company;
(g)grant waivers of Plan or Award conditions;
(h)determine the vesting, exercisability and payment of Awards;
(i)correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j)determine whether an Award has been earned; and
(k)make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Except for automatic grants to Outside
Directors pursuant to Section 9 hereof, any determination made by the
Committee with respect to any Award will be made in its sole discretion at
the time of grant of the Award or, unless in contravention of any express
term of this Plan or Award, at any later time, and such determination will
be final and binding on the Company and on all persons having an interest
in any Award under this Plan. The Committee may delegate to one or more
officers of the Company the authority to grant an Award under this Plan to
Participants who are not Insiders of the Company.
5. Options. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as
an ISO or an NQSO ("Stock Option Agreement"), and, except as otherwise
required by the terms of Section 9 hereof, will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy
of this Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.
2
<PAGE>
5.3 Exercise Period. Options may be exercisable within the times or upon
the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any
Parent or Subsidiary of the Company ("Ten Percent Stockholder") will be
exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable
at one time or from time to time, periodically or otherwise, in such number
of Shares or percentage of Shares as the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be determined by
the Committee when the Option is granted and may be not less than 85% of
the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair
Market Value of the Shares on the date of grant; and (ii) the Exercise
Price of any ISO granted to a Ten Percent Stockholder will not be less than
110% of the Fair Market Value of the Shares on the date of grant. Payment
for the Shares purchased may be made in accordance with Section 8 of this
Plan.
5.5 Method of Exercise. Options may be exercised only by delivery to the
Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same
for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement,
if any, and such representations and agreements regarding Participant's
investment intent and access to information and other matters, if any, as
may be required or desirable by the Company to comply with applicable
securities laws, together with payment in full of the Exercise Price for
the number of Shares being purchased.
5.6 Termination. Notwithstanding the exercise periods set forth in the
Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a)If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3) months
after the Termination Date (or such shorter or longer time period not
exceeding five (5) years as may be determined by the Committee, with
any exercise beyond three (3) months after the Termination Date deemed
to be an NQSO), but in any event, no later than the expiration date of
the Options.
(b)If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after a
Termination other than for Cause or because of Participant's
Disability), then Participant's Options may be exercised only to the
extent that such Options would have been exercisable by Participant on
the Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee) no later
than twelve (12) months after the Termination Date (or such shorter or
longer time period not exceeding five (5) years as may be determined by
the Committee, with any such exercise beyond (a) three (3) months after
the Termination Date when the Termination is for any reason other than
the Participant's death or Disability, or (b) twelve (12) months after
the Termination Date when the Termination is for Participant's death or
Disability, deemed to be an NQSO), but in any event no later than the
expiration date of the Options.
(c)Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the Option
shall be entitled to exercise any Option with respect to any Shares
whatsoever, after termination of service, whether or not after
termination of service the Participant may receive payment from the
Company or Subsidiary for vacation pay, for services rendered prior to
termination, for services rendered for the day on which termination
occurs, for salary in lieu of notice, or for any other benefits. In
making such determination, the Board shall give the Participant an
opportunity to present to the Board evidence on his behalf. For the
purpose of this paragraph, termination of service shall be deemed to
occur on the date when the Company dispatches notice or advice to the
Participant that his service is terminated.
3
<PAGE>
5.7 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value (determined as of
the date of grant) of Shares with respect to which ISO are exercisable for
the first time by a Participant during any calendar year (under this Plan
or under any other incentive stock option plan of the Company, Parent or
Subsidiary of the Company) will not exceed $100,000. If the Fair Market
Value of Shares on the date of grant with respect to which ISO are
exercisable for the first time by a Participant during any calendar year
exceeds $100,000, then the Options for the first $100,000 worth of Shares
to become exercisable in such calendar year will be ISO and the Options for
the amount in excess of $100,000 that become exercisable in that calendar
year will be NQSOs. In the event that the Code or the regulations
promulgated thereunder are amended after the Effective Date of this Plan to
provide for a different limit on the Fair Market Value of Shares permitted
to be subject to ISO, such different limit will be automatically
incorporated herein and will apply to any Options granted after the
effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify, extend
or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a
written notice to them; provided, however, that the Exercise Price may not
be reduced below the minimum Exercise Price that would be permitted under
Section 5.4 of this Plan for Options granted on the date the action is
taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO
under Section 422 of the Code.
6. Restricted Stock. A Restricted Stock Award is an offer by the Company to
sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that will be in such form
(which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms
and conditions of this Plan. The offer of Restricted Stock will be accepted
by the Participant's execution and delivery of the Restricted Stock
Purchase Agreement and full payment for the Shares to the Company within
thirty (30) days from the date the Restricted Stock Purchase Agreement is
delivered to the person. If such person does not execute and deliver the
Restricted Stock Purchase Agreement along with full payment for the Shares
to the Company within thirty (30) days, then the offer will terminate,
unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten
Percent Stockholder, in which case the Purchase Price will be 100% of the
Fair Market Value. Payment of the Purchase Price may be made in accordance
with Section 8 of this Plan.
4
<PAGE>
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall be
subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set
out in advance in the Participant's individual Restricted Stock Purchase
Agreement. Restricted Stock Awards may vary from Participant to Participant
and between groups of Participants. Prior to the grant of a Restricted
Stock Award, the Committee shall: (a) determine the nature, length and
starting date of any Performance Period for the Restricted Stock Award; (b)
select from among the Performance Factors to be used to measure performance
goals, if any; and (c) determine the number of Shares that may be awarded
to the Participant. Prior to the payment of any Restricted Stock Award, the
Committee shall determine the extent to which such Restricted Stock Award
has been earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Restricted Stock Awards that are
subject to different Performance Periods and having different performance
goals and other criteria.
6.4 Termination During Performance Period. If a Participant is Terminated
during a Performance Period for any reason, then such Participant will be
entitled to payment (whether in Shares, cash or otherwise) with respect to
the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement,
unless the Committee will determine otherwise.
7. Stock Bonuses.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares (which
may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for
past services already rendered to the Company, or any Parent or Subsidiary
of the Company pursuant to an Award Agreement (the "Stock Bonus Agreement")
that will be in such form (which need not be the same for each Participant)
as the Committee will from time to time approve, and will comply with and
be subject to the terms and conditions of this Plan. A Stock Bonus may be
awarded upon satisfaction of such performance goals as are set out in
advance in the Participant's individual Award Agreement (the "Performance
Stock Bonus Agreement") that will be in such form (which need not be the
same for each Participant) as the Committee will from time to time approve,
and will comply with and be subject to the terms and conditions of this
Plan. Stock Bonuses may vary from Participant to Participant and between
groups of Participants, and may be based upon the achievement of the
Company, Parent or Subsidiary and/or individual performance factors or upon
such other criteria as the Committee may determine.
7.2 Terms of Stock Bonuses. The Committee will determine the number of
Shares to be awarded to the Participant. If the Stock Bonus is being earned
upon the satisfaction of performance goals pursuant to a Performance Stock
Bonus Agreement, then the Committee will: (a) determine the nature, length
and starting date of any Performance Period for each Stock Bonus; (b)
select from among the Performance Factors to be used to measure the
performance, if any; and (c) determine the number of Shares that may be
awarded to the Participant. Prior to the payment of any Stock Bonus, the
Committee shall determine the extent to which such Stock Bonuses have been
earned. Performance Periods may overlap and Participants may participate
simultaneously with respect to Stock Bonuses that are subject to different
Performance Periods and different performance goals and other criteria. The
number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses
to take into account changes in law and accounting or tax rules and to make
such adjustments as the Committee deems necessary or appropriate to reflect
the impact of extraordinary or unusual items, events or circumstances to
avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be paid
currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of
cash or whole Shares or a combination thereof, either in a lump sum payment
or in installments, all as the Committee will determine.
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8. Payment for Share Purchases.
8.1 Payment. Payment for Shares purchased pursuant to this Plan may be
made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a)by cancellation of indebtedness of the Company to the Participant;
(b)by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for within
the meaning of SEC Rule 144 (and, if such shares were purchased from
the Company by use of a promissory note, such note has been fully paid
with respect to such shares); or (2) were obtained by Participant in
the public market;
(c)by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and 1274 of
the Code; provided, however, that Participants who are not employees or
directors of the Company will not be entitled to purchase Shares with a
promissory note unless the note is adequately secured by collateral
other than the Shares;
(d)by waiver of compensation due or accrued to the Participant for
services rendered;
(e)with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1)through a "same day sale" commitment from the Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of
the Shares so purchased to pay for the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(2)through a "margin" commitment from the Participant and a NASD
Dealer whereby the Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer in a
margin account as security for a loan from the NASD Dealer in the
amount of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(f)by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay for
Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
9. Automatic Grants to Outside Directors.
9.1 Types of Options and Shares. Options granted under this Plan and
subject to this Section 9 shall be NQSOs.
9.2 Eligibility. Options subject to this Section 9 shall be granted only
to Outside Directors.
9.3 Annual Grants. Each Outside Director who was a member of the Board
before the Effective Date will automatically be granted an Option for
10,000 Shares on the Effective Date, unless such Outside Director received
a grant of Options before the Effective Date. Each Outside Director who
first becomes a member of the Board on or after the Effective Date will
automatically be granted an Option for 20,000 Shares on the date such
Outside Director first becomes a member of the Board. Immediately following
each annual meeting of stockholders, all Outside Directors will
automatically be granted an Option for 10,000 Shares, provided the Outside
Director is a member of the Board on such date and has served continuously
as a member of the Board for a period of at least one year since the date
when such Outside Director first became a member of the Board (the "Annual
Grant").
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9.4 Vesting. Each Annual Grant shall be 100% vested and immediately
exercisable as of the date of grant.
9.5 Exercise Price. The exercise price of an Annual Grant shall be the
Fair Market Value of the Shares, at the time that the Option is granted.
10. Withholding Taxes.
10.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery
of any certificate or certificates for such Shares. Whenever, under this
Plan, payments in satisfaction of Awards are to be made in cash, such
payment will be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements.
10.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any
Award that is subject to tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may in
its sole discretion allow the Participant to satisfy the minimum
withholding tax obligation by electing to have the Company withhold from
the Shares to be issued that number of Shares having a Fair Market Value
equal to the minimum amount required to be withheld, determined on the date
that the amount of tax to be withheld is to be determined. All elections by
a Participant to have Shares withheld for this purpose will be made in
accordance with the requirements established by the Committee and be in
writing in a form acceptable to the Committee
11. Transferability.
11.1 Except as otherwise provided in this Section 11, Awards granted
under this Plan, and any interest therein, will not be transferable or
assignable by Participant, and may not be made subject to execution,
attachment or similar process, otherwise than by will or by the laws of
descent and distribution or as determined by the Committee and set forth in
the Award Agreement with respect to Awards that are not ISOs.
11.2 All Awards other than NQSO's. All Awards other than NQSO's shall be
exercisable: (i) during the Participant's lifetime, only by (A) the
Participant, or (B) the Participant's guardian or legal representative; and
(ii) after Participant's death, by the legal representative of the
Participant's heirs or legatees.
11.3 NQSOs. Unless otherwise restricted by the Committee, an NQSO shall
be exercisable: (i) during the Participant's lifetime only by (A) the
Participant, (B) the Participant's guardian or legal representative, (C) a
Family Member of the Participant who has acquired the NQSO by "permitted
transfer;" and (ii) after Participant's death, by the legal representative
of the Participant's heirs or legatees. "Permitted transfer" means, as
authorized by this Plan and the Committee in an NQSO, any transfer effected
by the Participant during the Participant's lifetime of an interest in such
NQSO but only such transfers which are by gift or domestic relations order.
A permitted transfer does not include any transfer for value and neither of
the following are transfers for value: (a) a transfer of under a domestic
relations order in settlement of marital property rights or (b) a transfer
to an entity in which more than fifty percent of the voting interests are
owned by Family Members or the Participant in exchange for an interest in
that entity.
12. Privileges of Stock Ownership; Restrictions on Shares..
12.1 Voting and Dividends. No Participant will have any of the rights of
a stockholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the
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Participant will be a stockholder and have all the rights of a stockholder
with respect to such Shares, including the right to vote and receive all
dividends or other distributions made or paid with respect to such Shares;
provided, that if such Shares are Restricted Stock, then any new,
additional or different securities the Participant may become entitled to
receive with respect to such Shares by virtue of a stock dividend, stock
split or any other change in the corporate or capital structure of the
Company will be subject to the same restrictions as the Restricted Stock;
provided, further, that the Participant will have no right to retain such
stock dividends or stock distributions with respect to Shares that are
repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
12.2 Financial Statements. The Company will provide financial statements
to each Participant prior to such Participant's purchase of Shares under
this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not
be required to provide such financial statements to Participants whose
services in connection with the Company assure them access to equivalent
information.
12.3 Restrictions on Shares. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase a portion of or all Unvested Shares held by a
Participant following such Participant's Termination at any time within
ninety (90) days after the later of Participant's Termination Date and the
date Participant purchases Shares under this Plan, for cash and/or
cancellation of purchase money indebtedness, at the Participant's Exercise
Price or Purchase Price, as the case may be.
13. Certificates. All certificates for Shares or other securities delivered
under this Plan will be subject to such stock transfer orders, legends and
other restrictions as the Committee may deem necessary or advisable, including
restrictions under any applicable federal, state or foreign securities law, or
any rules, regulations and other requirements of the SEC or any stock exchange
or automated quotation system upon which the Shares may be listed or quoted.
14. Escrow; Pledge of Shares. To enforce any restrictions on a Participant's
Shares, the Committee may require the Participant to deposit all certificates
representing Shares, together with stock powers or other instruments of
transfer approved by the Committee, appropriately endorsed in blank, with the
Company or an agent designated by the Company to hold in escrow until such
restrictions have lapsed or terminated, and the Committee may cause a legend
or legends referencing such restrictions to be placed on the certificates. Any
Participant who is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under this Plan will be required to
pledge and deposit with the Company all or part of the Shares so purchased as
collateral to secure the payment of Participant's obligation to the Company
under the promissory note; provided, however, that the Committee may require
or accept other or additional forms of collateral to secure the payment of
such obligation and, in any event, the Company will have full recourse against
the Participant under the promissory note notwithstanding any pledge of the
Participant's Shares or other collateral. In connection with any pledge of the
Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. Exchange and Buyout of Awards. The Committee may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and
cancellation of any or all outstanding Awards. The Committee may at any time
buy from a Participant an Award previously granted with payment in cash,
Shares (including Restricted Stock) or other consideration, based on such
terms and conditions as the Committee and the Participant may agree.
16. Securities Law and Other Regulatory Compliance. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which
the Shares may then be listed or quoted, as they are in effect on the date of
grant of the Award and also on the date of exercise
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or other issuance. Notwithstanding any other provision in this Plan, the
Company will have no obligation to issue or deliver certificates for Shares
under this Plan prior to: (a) obtaining any approvals from governmental
agencies that the Company determines are necessary or advisable; and/or (b)
completion of any registration or other qualification of such Shares under any
state or federal law or ruling of any governmental body that the Company
determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the SEC or to effect compliance with
the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
17. No Obligation to Employ. Nothing in this Plan or any Award granted under
this Plan will confer or be deemed to confer on any Participant any right to
continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the
right of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. Corporate Transactions.
18.1 Assumption or Replacement of Awards by Successor. In the event of
(a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other
than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other
transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the Awards granted under
this Plan are assumed, converted or replaced by the successor corporation,
which assumption will be binding on all Participants), (c) a merger in
which the Company is the surviving corporation but after which the
stockholders of the Company immediately prior to such merger (other than
any stockholder that merges, or which owns or controls another corporation
that merges, with the Company in such merger) cease to own their shares or
other equity interest in the Company, (d) the sale of substantially all of
the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed,
converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all Participants.
In the alternative, the successor corporation may substitute equivalent
Awards or provide substantially similar consideration to Participants as
was provided to stockholders (after taking into account the existing
provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participants,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such
successor corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Subsection
18.1, such Awards will expire on such transaction at such time and on such
conditions as the Committee will determine. Notwithstanding anything in
this Plan to the contrary, the Committee may, in its sole discretion,
provide that the vesting of any or all Awards granted pursuant to this Plan
will accelerate upon a transaction described in this Section 18. If the
Committee exercises such discretion with respect to Options, such Options
will become exercisable in full prior to the consummation of such event at
such time and on such conditions as the Committee determines, and if such
Options are not exercised prior to the consummation of the corporate
transaction, they shall terminate at such time as determined by the
Committee.
18.2 Other Treatment of Awards. Subject to any greater rights granted to
Participants under the foregoing provisions of this Section 18, in the
event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, or sale of
assets.
18.3 Assumption of Awards by the Company. The Company, from time to time,
also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution
of such
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other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an
Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have
been eligible to be granted an Award under this Plan if the other company
had applied the rules of this Plan to such grant. In the event the Company
assumes an award granted by another company, the terms and conditions of
such award will remain unchanged (except that the exercise price and the
number and nature of Shares issuable upon exercise of any such option will
be adjusted appropriately pursuant to Section 424(a) of the Code). In the
event the Company elects to grant a new Option rather than assuming an
existing option, such new Option may be granted with a similarly adjusted
Exercise Price.
19. Adoption and Stockholder Approval. This Plan will become effective on
the date on which the registration statement filed by the Company with the SEC
under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "Effective
Date"). This Plan shall be approved by the stockholders of the Company
(excluding Shares issued pursuant to this Plan), consistent with applicable
laws, within twelve (12) months before or after the date this Plan is adopted
by the Board. Upon the Effective Date, the Committee may grant Awards pursuant
to this Plan; provided, however, that: (a) no Option may be exercised prior to
initial stockholder approval of this Plan; (b) no Option granted pursuant to
an increase in the number of Shares subject to this Plan approved by the Board
will be exercised prior to the time such increase has been approved by the
stockholders of the Company; (c) in the event that initial stockholder
approval is not obtained within the time period provided herein, all Awards
granted hereunder shall be cancelled, any Shares issued pursuant to any Awards
shall be cancelled and any purchase of Shares issued hereunder shall be
rescinded; and (d) in the event that stockholder approval of such increase is
not obtained within the time period provided herein, all Awards granted
pursuant to such increase will be cancelled, any Shares issued pursuant to any
Award granted pursuant to such increase will be cancelled, and any purchase of
Shares pursuant to such increase will be rescinded.
20. Term of Plan/Governing Law. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.
21. Amendment or Termination of Plan. The Board may at any time terminate or
amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to this Plan;
provided, however, that the Board will not, without the approval of the
stockholders of the Company, amend this Plan in any manner that requires such
stockholder approval.
22. Nonexclusivity of the Plan. Neither the adoption of this Plan by the
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. Definitions. As used in this Plan, the following terms will have the
following meanings:
"Award" means any award under this Plan, including any Option, Restricted
Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms
and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause" means the commission of an act of theft, embezzlement, fraud,
dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Committee" means the Compensation Committee of the Board.
"Company" means Interwoven, Inc. or any successor corporation.
"Disability" means a disability, whether temporary or permanent, partial
or total, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
(a)if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
(b)if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on which
the Common Stock is listed or admitted to trading as reported in The
Wall Street Journal;
(c)if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on
the date of determination as reported in The Wall Street Journal;
(d)in the case of an Award made on the Effective Date, the price per
share at which shares of the Company's Common Stock are initially
offered for sale to the public by the Company's underwriters in the
initial public offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the Securities Act; or
(e)if none of the foregoing is applicable, by the Committee in good
faith.
"Family Member" includes any of the following:
(a)child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-
in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law
of the Participant, including any such person with such relationship to
the Participant by adoption;
(b)any person (other than a tenant or employee) sharing the
Participant's household;
(c)a trust in which the persons in (a) and (b) have more than fifty
percent of the beneficial interest;
(d)a foundation in which the persons in (a) and (b) or the Participant
control the management of assets; or
(e)any other entity in which the persons in (a) and (b) or the
Participant own more than fifty percent of the voting interest.
"Insider" means an officer or director of the Company or any other person
whose transactions in the Company's Common Stock are subject to Section 16
of the Exchange Act.
"Option" means an award of an option to purchase Shares pursuant to
Section 5.
"Outside Director" means a member of the Board who is not an employee of
the Company or any Parent, Subsidiary or Affiliate of the Company.
"Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations
other than the Company owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
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"Participant" means a person who receives an Award under this Plan.
"Performance Factors" means the factors selected by the Committee from
among the following measures to determine whether the performance goals
established by the Committee and applicable to Awards have been satisfied:
(a)Net revenue and/or net revenue growth;
(b)Earnings before income taxes and amortization and/or earnings before
income taxes and amortization growth;
(c)Operating income and/or operating income growth;
(d)Net income and/or net income growth;
(e)Earnings per share and/or earnings per share growth;
(f)Total stockholder return and/or total stockholder return growth;
(g)Return on equity;
(h)Operating cash flow return on income;
(i)Adjusted operating cash flow return on income;
(j)Economic value added; and
(k)Individual confidential business objectives.
"Performance Period" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"Plan" means this Interwoven, Inc. 1999 Equity Incentive Plan, as amended
from time to time.
"Restricted Stock Award" means an award of Shares pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for issuance
under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the
Company. An employee will not be deemed to have ceased to provide services
in the case of (i) sick leave, (ii) military leave, or (iii) any other
leave of absence approved by the Committee, provided, that such leave is
for a period of not more than 90 days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute or unless
provided otherwise pursuant to formal policy adopted from time to time by
the Company and issued and promulgated to employees in writing. In the case
of any employee on an approved leave of
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absence, the Committee may make such provisions respecting suspension of
vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an
Option be exercised after the expiration of the term set forth in the
Option agreement. The Committee will have sole discretion to determine
whether a Participant has ceased to provide services and the effective date
on which the Participant ceased to provide services (the "Termination
Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award Agreement.
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DETACH HERE
PROXY
INTERWOVEN, INC.
Annual Meeting of Stockholders - June 1, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Martin W. Brauns and David M. Allen, and
each of them, as proxies of the undersigned, with full power to appoint
substitutes, and hereby authorizes each of them to represent and to vote all
shares of stock of Interwoven, Inc. which the undersigned is entitled to vote,
as specified on the reverse side of this card at the Annual Meeting of
Stockholders of Interwoven, Inc. (the "Meeting") to be held on June 1, 2000 at
1:30 p.m. P.T., at the Hyatt San Jose-Airport located at 1740 North First
Street, San Jose, California and at any adjournment or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY
RELATES WILL BE VOTED AS SPECIFIED AND, IF NO SPECIFICATION IS MADE, WILL BE
VOTED FOR ALL NOMINEES FOR DIRECTORS IN PROPOSAL 1 AND FOR PROPOSALS 2 and 3,
AND THIS PROXY AUTHORIZES THE ABOVE DESIGNATED PROXIES TO VOTE IN THEIR
DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF TO THE EXTENT AUTHORIZED BY RULE 14a-4(c)
PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
SEE REVERSE (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) SEE REVERSE
SIDE SIDE
<PAGE>
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE
The Board of Directors recommends a vote FOR proposals 1, 2 and 3.
1. ELECTION OF DIRECTORS
Nominees: Martin W. Brauns and Anthony Zingale
FOR WITHHELD
[_] ALL [_] FROM ALL
NOMINEES NOMINEES
MARK HERE
FOR
ADDRESS
CHANGE AND
[_]________________________________ NOTE BELOW [_]
(Instruction: to withhold authority to vote for any individual
nominee write that nominee's name on the space provided above)
Signature_______________________________ Date_____________________
For Against Abstain
2. To approve the amendment to [_] [_] [_]
Interwoven's 1999 Equity Incentive
Plan to increase the number of
shares of Common Stock reserved
for issuance thereunder by
2,000,000 shares.
For Against Abstain
3. To ratify the selection of [_] [_] [_]
PricewaterhouseCoopers LLP as
Interwoven's independent accountants
for the fiscal year ending December
31, 2000.
4. To transact such other business as
may property come before the Meeting
and any adjournment or postponement
thereof.
Please sign exactly as name(s) appear(s) on this Proxy. If shares of stock
stand of record in the names of two or more persons or in the name of husband
and wife, whether as joint tenants or otherwise, both or all of such persons
should sign this Proxy. If shares of stock are held of record by a corporation,
this Proxy should be executed by the president or vice president and the
secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute this Proxy for a deceased stockholder should give their
full title. Please date this Proxy.
Signature_______________________________ Date_____________________
