<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the Commission
Only (as Permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERWOVEN, INC.
____________________________________
(Name of Registrant as Specified In Its Charter)
____________________________________
(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:
___________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
___________________________________________________________________
(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):
___________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
___________________________________________________________________
(5) Total fee paid:
___________________________________________________________________
[_] 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:
______________________________________________________________
(2) Form, Schedule or Registration Statement No.:
______________________________________________________________
(3) Filing Party:
______________________________________________________________
(4) Date Filed:
______________________________________________________________
<PAGE>
[INTERWOVEN LOGO]
November , 2000
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Interwoven, Inc., to be held at 1195 West Fremont Avenue, Sunnyvale,
California, on Tuesday, December 12, 2000 at 10:00 a.m., Pacific time.
The only matters that we expect to be acted upon at the meeting are
described in the following Notice of Special Meeting of Stockholders and Proxy
Statement.
It is important that you use this opportunity to take part in the affairs of
Interwoven by voting on the business to come before this meeting. Whether or
not you expect to attend the meeting, please complete, date, sign and promptly
return the accompanying proxy in the enclosed postage-paid envelope 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
By: _________________________________
Martin W. Brauns
President and Chief Executive
Officer
<PAGE>
INTERWOVEN, INC.
1195 West Fremont Avenue
Sunnyvale, California 94087
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
----------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Interwoven,
Inc. will be held at 1195 Fremont Avenue, Sunnyvale, California, on Tuesday,
December 12, 2000, at 10:00 a.m., Pacific time, for the following purposes:
1. To approve an amendment to Interwoven's Third Amended and Restated
Certificate of Incorporation to increase the authorized number of shares of
common stock issuable by the Company from 100,000,000 to 500,000,000
shares.
2. To approve an amendment to Interwoven's 1999 Equity Incentive Plan
increasing the number of shares of common stock reserved for issuance
thereunder by 4,000,000 shares.
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 October 18, 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/ Martin W. Brauns
By: _________________________________
Martin W. Brauns
President and Chief Executive
Officer
Sunnyvale, California
November [ ], 2000
Whether or not you expect to attend the meeting, please complete, date,
sign and promptly return the accompanying proxy in the enclosed postage-
paid envelope so that your shares will be represented at the meeting.
<PAGE>
INTERWOVEN, INC.
1195 West Fremont Avenue
Sunnyvale, California 94087
----------------
PROXY STATEMENT
----------------
November [ ], 2000
The accompanying proxy is solicited on behalf of the Board of Directors of
Interwoven, Inc., a Delaware corporation (the "Company" or "Interwoven"), for
use at a Special Meeting of Stockholders of the Company to be held at 1195 West
Fremont Avenue, Sunnyvale, California, on Tuesday, December 12, 2000 at
10:00 a.m., Pacific time (the "Meeting"). This Proxy Statement and the
accompanying form of proxy were first mailed to stockholders on or about
November [ ], 2000.
Record Date; Quorum
Only holders of record of our common stock at the close of business on
October 18, 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 close of business on the Record Date, we had 49,506,001 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. 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. 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.
Approval of Proposal No. 1 below requires the affirmative vote of the
majority of all outstanding shares of common stock entitled to vote.
Abstentions and broker non-votes will be counted towards a quorum and have the
same effect as negative votes with regard to this proposal.
Approval of Proposal No. 2 below requires 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 with regard to
this 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. Please
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.
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 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.
1
<PAGE>
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.
Skinner & Co. will assist the Company in obtaining the return of proxies at an
estimated cost to the Company of $7,500.
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 have been adjusted to reflect the effects of the Company's two-
for-three reverse stock split in October 1999, the conversion of preferred
stock into common stock in October 1999 and the two-for-one stock split in July
2000.
PROPOSAL NO. 1
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
On October 17, 2000, the Board of Directors approved an amendment to the
Company's Third Amended and Restated Certificate of Incorporation, subject to
stockholder approval, to increase the authorized number of shares of common
stock of the Company from 100,000,000 shares, $0.001 par value per share, to
500,000,000 shares, $0.001 par value per share. The number of authorized shares
of preferred stock will remain unchanged at 5,000,000 shares.
At October 18, 2000, 49,506,001 shares of Interwoven common stock were
issued and outstanding, approximately 13,022,328 shares were reserved for
issuance upon exercise of outstanding options and approximately 60,554 shares
were reserved for issuance upon exercise of outstanding warrants. Thus, as of
that date, the Company had fewer than 50,000,000 shares of common stock
available for issuance. In addition, as of that date approximately 5,750,553
shares of Interwoven common stock were available for purchase or grant under
the Company's existing stock and stock option plans. In connection with the
Company's acquisition of Neonyoyo, Inc. the Company issued approximately
1,087,204 shares of common stock and assumed options to purchase approximately
16,929 shares of common stock. The impact on outstanding shares and options of
the Neonyoyo acquisition is reflected in the numbers above. In connection with
the Company's expected acquisition of Metacode Technologies, Inc., the Company
expects to issue shares or assume or grant options to purchase shares up to
approximately 1,500,000 shares. Finally, in connection with the Company's
expected acquisition of Ajuba Solutions, Inc., the Company expects to issue
shares or assume or grant options to purchase shares up to approximately
300,000 shares. The impact on outstanding shares and options of the Ajuba
Solutions and Metacode Technologies acquisitions is not reflected in the
numbers above.
The proposed increase in the number of authorized shares of common stock
from 100,000,000 to 500,000,000 would result in additional shares being
available for, among other things, issuance in a two-for-one stock split to be
effected in the form of a stock dividend, to the Company's stockholders of
record on December 13, 2000 that has been approved by the Board subject to
stockholder approval of this Proposal. No additional stockholder approval is
required for the stock split.
2
<PAGE>
These additional shares of common stock would also be available for issuance
from time to time for other corporate purposes, such as acquisitions of
companies or assets, sales of stock or securities convertible into stock and
issuances pursuant to stock options or other employee benefit plans. The
Company currently has no specific plans, arrangements or understandings with
respect to the issuance of these additional shares, except for the acquisitions
noted above and the proposed stock dividend, and no other change in the rights
of stockholders is proposed. The Company believes that the availability of the
additional shares will provide it with the flexibility to meet business needs
as they arise, to take advantage of favorable opportunities and to respond to a
changing corporate environment.
If the stockholders approve the amendment, the Company will file a
Certificate of Amendment of its Third Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware reflecting
the increase in authorized shares. Shortly thereafter, without further
stockholder action, the Company intends to effect the two-for-one stock split
on its common stock in the form of a stock dividend (record date expected to be
December 13, 2000), although the Board, in its sole discretion, may postpone or
terminate the proposed stock dividend. The stock split will not be effected if
the proposed increase in the authorized common stock is not approved.
The Board of Directors recommends a vote FOR the amendment to the
Company's Third Amended and Restated Certificate of Incorporation to increase
the number of
shares of common stock authorized to be issued by the Company.
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 4,000,000 shares, from
approximately 9,800,000 shares to approximately 13,800,000 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 October 17, 2000, subject to
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 5,800,000 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
the 1998 Stock Option 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. In April 2000, the Board and
stockholders approved an amendment to the Incentive Plan
3
<PAGE>
whereby the number of shares of common stock reserved for issuance thereunder
were increased by 4,000,000 shares from 5,800,000 to 9,800,000. 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 September 30, 2000, options
to purchase an aggregate of 9,638,806 shares of common stock were granted under
the Incentive Plan. Officers identified in the Summary Compensation Table below
were granted no options under the Incentive Plan. Our executive officers as of
September 30, 2000 as a group (8 persons) were granted options to purchase a
total of 208,000 shares under the Incentive Plan and the current directors who
are not executive officers as a group (5 persons) were granted options to
purchase a total of 80,000 shares under the Incentive Plan. 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.
In May 2000, the Board adopted Interwoven's 2000 Stock Incentive Plan, as
amended September 2000 (the "2000 Plan"), pursuant to which options to purchase
up to 6,000,000 shares may be granted on terms substantially the same as those
under the Incentive Plan. Through September 30, 2000, options to purchase an
aggregate of 1,960,000 shares of common stock were granted under the 2000 Plan.
Officers identified in the Summary Compensation Table below were granted no
options under the 2000 Plan. Our executive officers as a group as of September
20, 2000 (8 persons) were granted options to purchase a total of 40,000 shares
under the 2000 Plan and the current directors who are not executive officers as
a group (5 persons) were granted no options under the 2000 Plan. 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
13,800,000 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 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 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 September 30, 2000,
approximately 630 persons were eligible to participate in the Incentive Plan,
24,100 shares had been issued upon exercise of options and 9,225,706 shares
were subject to outstanding options. As of that date, 937,083 shares were
4
<PAGE>
available for future grant pursuant to the Incentive Plan, after taking into
account 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 $107.00 per share
on October 17, 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).
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.
5
<PAGE>
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 and the nine months ended September 30, 2000, 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 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.
6
<PAGE>
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 later of the date of vesting or 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 vested 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.
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.
7
<PAGE>
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 to increase the number of shares of common stock reserved for issuance
thereunder.
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. Anthony
Zingale was appointed to the Board in April 2000 and received an Initial Grant
at that time. Future awards to executive officers and employees of Interwoven
under the Incentive Plan are discretionary and cannot be determined at this
time. Therefore we have not included a table that reflects such awards.
<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>
8
<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 October 18, 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 49,506,001 shares of
common stock outstanding as of October 18, 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 October 18, 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
Amount of Subject to Shares Issuable Under
Beneficial Repurchase Options Exercisable
Name of Beneficial Owner Ownership Right Within 60 days Percent
------------------------ ---------- ---------- --------------------- -------
<S> <C> <C> <C> <C>
Peng T. Ong(1)............ 3,560,000 -- -- 7.19%
Martin W. Brauns(2)....... 2,373,385 555,555 -- 4.79%
Jozef Ruck................ 393,332 298,055 --
Jack S. Jia(3)............ 348,666 128,746 -- *
Michael A. Backlund(4).... 343,334 189,718 53,332 *
Kathryn C. Gould(5)....... 227,919 -- 40,000 %
Anthony Zingale........... 50,112 -- 40,000 *
Ronald E.F. Codd.......... 41,054 -- 36,000 *
Mark C. Thompson.......... 36,000 -- -- *
All 12 directors and
executive officers as a
group(6)................. 7,635,796 1,328,737 169,332 15.37%
</TABLE>
--------
* Less than 1%
(1) Represents 1,746,028 shares of common stock held of record by Peng Tsin
Ong, 1,780,000 shares of common stock held of record by Wai Ping-Leong, his
spouse and 33,972 shares of common stock held of record by Goldman Sachs &
Co. as nominee for the Goldman Sachs 2000 Exchange Place Fund, L.P., of
which Mr. Ong is a limited partner. Mr. Ong's address is c/o Interwoven,
Inc., 1195 W. Fremont Avenue, Suite 2000, Sunnyvale, CA 94087.
(2) Represents 2,373,385 shares of common stock held of record by Martin W.
Brauns and Margaret R. Brauns, trustees of the Brauns Trust U/D/T 1/9/95.
Mr. Brauns' address is c/o Interwoven, Inc., 1195 W. Fremont Avenue, Suite
2000, Sunnyvale, CA 94087.
(3) Includes 2,000 shares of common stock held by family members, as to which
Mr. Jia disclaims beneficial ownership.
(4) Includes 103,332 shares of common stock held of record by the Backlund
Family Trust.
(5) Includes 207,919 shares of common stock held of record by The Gould Living
Trust 12/30/99, for which Ms. Gould is trustee.
(6) Includes 1,000 shares held by a relative of one executive officer, as to
which the officer disclaims beneficial ownership.
9
<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 $0.09 per share for Mr. Brauns and a purchase price of $0.195 per
share for Mr. Ruck, and assuming an estimated fair market value on the date of
grant was equal to $8.50 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 2,666,666 shares of common stock and Mr. Ruck held 493,332 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 106,666 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 $60.815 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
Awards Underlying
Name and Principal Position Year Salary Bonus Stock Options
--------------------------- ---- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Martin W. Brauns.................
President and Chief Executive 1999 $250,000 $300,000 $ -- 172,206
Officer 1998 206,119 100,000 22,426,661 --
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 -- 186,664
Senior Vice President of 1998 80,826 65,450 -- 313,332
Worldwide Sales and Field
Operations
Jack S. Jia...................... 1999 115,000 92,000 -- 73,332
Vice President of Engineering 1998 104,988 55,000 -- 193,332
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 information regarding option grants during
1998 to each of the Named Executive Officers. These grants were made pursuant
to the Incentive Plan and a predecessor plan of the Company known as the 1998
Stock Option Plan (the "1998 Plan").
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
10
<PAGE>
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
5,044,786 shares of common stock.
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 $8.50 per share,
which was the initial public offering price.
Option Grants in 1999
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual
Number of Percentage of Rates of Stock
Securities Total Options 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........ 172,206 3.4% $0.195 03/18/09 $ 2,350,716 $ 3,763,013
Peng T. Ong............. -- -- -- -- -- --
Michael A. Backlund..... 133,332 2.7 0.195 01/28/09 1,820,062 2,913,546
26,666 0.5 3.82 07/22/09 267,343 486,036
26,666 0.5 7.00 10/06/09 182,545 401,238
Jack S. Jia............. 33,332 0.7 0.195 01/28/99 455,002 728,365
40,000 0.8 3.82 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 $60.815. 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 $8.50 per
share, net of the exercise price.
11
<PAGE>
Aggregate Option Exercises in 1999 and Year-End Values
<TABLE>
<CAPTION>
Value of Unexercised
In-the-Money
Shares Number of Securities Options at Year-End(1)
Acquired on Value ------------------------- -------------------------
Name Exercise(1) Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin W. Brauns........ 172,206 $1,430,171 -- 1,444,442 $-- $87,840,129
Peng T. Ong............. -- -- -- -- -- --
Michael A. Backlund..... 133,332 1,107,322 -- 375,968 -- 22,863,554
Jack S. Jia............. 193,332 1,471,422 -- 232,634 -- 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.
12
<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."
13
<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.
14
<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 172,206 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 43,050 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.
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
15
<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>
Chase H&Q
Nasdaq Stock Internet 100
Interwoven, Inc. Market--U.S. Index Index
------------------ ------------------- -----------------
Market Investment Investment Investment
Price Value Index Value Index Value
------- ---------- -------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
10/08/99.............. $ 8.50 $100.00 968.21 $100.00 516.87 $100.00
12/31/99.............. $60.813 $715.44 1,359.43 $140.41 912.76 $176.59
</TABLE>
16
<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 2,666,666 shares of
common stock at an exercise price of $0.09 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 313,332 shares of our common stock at an exercise price of $0.105 per
share under the 1996 Stock Option Plan of which options to purchase 78,332
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 133,332 shares of our common stock at an exercise price
of $0.195 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.
17
<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 120,000 shares of our common stock at an exercise price of $0.045
per share under the 1996 Stock Option Plan, of which options to purchase 30,000
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
426,666 shares of our common stock at an exercise price of $0.195 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 106,666 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 66,666
shares of our common stock at an exercise price of $0.195 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 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 $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 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.
18
<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.
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 expect to attend the Meeting, please complete, date, sign
and promptly return the accompanying proxy in the enclosed postage paid
envelope so that your shares will be represented at the Meeting.
19
<PAGE>
INTERWOVEN, INC.
1999 EQUITY INCENTIVE PLAN
As Adopted July 22, 1999
As Amended April 13, 2000 and June 1, 2000 (effective as of June 22, 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 9,800,000/1/ 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.
____________________
/1/ Adjusted to reflect (i) the authorization of 2,000,000 additional shares of
Common Stock for issuance under the Plan approved by the Company's
stockholders on June 1, 2000; and (ii) the 2-for-1 split of the Company's
capital stock effected in June 2000.
<PAGE>
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.
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
<PAGE>
(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.
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.
<PAGE>
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.
<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
<PAGE>
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.
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.
<PAGE>
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.
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:
<PAGE>
(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").
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.
<PAGE>
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..
------------------------------------------------------
<PAGE>
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
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
<PAGE>
with the promissory note may be released from the pledge on a pro rata basis as
the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
-----------------------------
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
----------------------------------------------
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
-----------------------
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent 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
<PAGE>
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 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
<PAGE>
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.
"Committee" means the Compensation Committee of the Board.
"Company" means Interwoven, Inc. or any successor corporation.
<PAGE>
"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
<PAGE>
(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.
"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.
<PAGE>
"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 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.
<PAGE>
DETACH HERE
PROXY
INTERWOVEN, INC.
Special Meeting of Stockholders - December 12, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Martin Brauns and David Allen, and each of
them, as proxies of the undersigned, each with full power to appoint his
substitute, and hereby authorizes them to represent and to vote all the shares
of stock of Interwoven, Inc. which the undersigned is entitled to vote, as
specified on the reverse side of this card, at the Special Meeting of
Stockholders of Interwoven, Inc. (the "Meeting") to be held on December 12, 2000
at 10:00 a.m., Pacific time, at 1195 West Fremont Avenue, Sunnyvale, 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 the proposal, 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 side] (Continued and to be signed on reverse side)
1
<PAGE>
DETACH HERE
[X] Please mark votes as in this example
The Board of Directors recommends a vote FOR Proposals 1 and 2:
<TABLE>
<S> <C> <C> <C>
For Against Abstain
1. To amend the Company's Third Amended and [ ] [ ] [ ]
Restated Certificate of Incorporation to
increase the authorized number of shares of
common stock issuable by the Company from
100,000,000 to 500,000,000 shares.
----------------------------------------------------------------------------------------------------
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 4,000,000 shares.
----------------------------------------------------------------------------------------------------
3. To transact such other business as may
properly come before the meeting and any
adjournment or postponement thereof.
----------------------------------------------------------------------------------------------------
</TABLE>
Please sign exactly as your 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.
[_] Mark here for address change and note below
Signature:____________________________________ Date: _________________
Whether or not you plan to attend the Meeting in person, you are urged to
complete, date, sign and promptly mail this Proxy in the enclosed return
envelope so that your shares may be represented at the Meeting.
2
