<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PHOENIX TECHNOLOGIES, LTD.
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
December 18, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Phoenix Technologies Ltd. to be held on Wednesday, January 20, 1999, at your
Company's headquarters located at 411 East Plumeria Drive, San Jose, California,
commencing at 10:00 a.m., California Time. The Board of Directors looks forward
to greeting personally those stockholders able to attend.
The Board of Directors has given careful consideration to the proposals
described in the attached Notice and Proxy Statement and recommends a vote FOR
each of them. It is important that your shares be represented at the meeting
whether or not you plan to attend. Accordingly, please take a moment now to
sign, date and mail the enclosed proxy in the envelope provided.
Following the completion of the formal portion of the meeting, we will give
you a financial report and general comments on the Company's affairs. We shall
then be pleased to answer appropriate stockholders' questions with respect to
the Company and its operations.
On behalf of Phoenix's Board of Directors and its management team, I would
like to express our appreciation for your ongoing support of our efforts.
Cordially,
/s/ Jack Kay
--------------------------------------
JACK KAY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
PHOENIX TECHNOLOGIES LTD.
411 EAST PLUMERIA DRIVE
SAN JOSE, CALIFORNIA 95134
(408) 570-1000
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 20, 1999
------------------------
Notice is hereby given that the Annual Meeting of Stockholders of Phoenix
Technologies Ltd. (the "Company" or "Phoenix") will be held at the Company's
headquarters located at 411 East Plumeria Drive, San Jose, California 95134, on
January 20, 1999, at 10:00 a.m., California Time, to consider and act upon the
following matters:
1. To elect two Class 3 Directors to the Board of Directors of the Company;
2. To approve an amendment to the Company's 1999 Stock Plan to increase the
number of shares reserved for issuance thereunder by 1,100,000 shares;
3. To approve the Amended 1991 Employee Stock Purchase Plan, which includes
an increase to the number of shares reserved for issuance thereunder by
350,000 shares;
4. To ratify the selection by the Board of Directors of Ernst & Young as
the Company's independent public accountants for the current fiscal year;
and
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Stockholders of record at the close of business on December 10, 1998 will be
entitled to vote at the meeting or any adjournments thereof.
All stockholders are cordially invited to attend the meeting.
/s/ Stuart J. Nichols
---------------------------------------
Stuart J. Nichols
SECRETARY
December 18, 1998
<PAGE>
PROXY STATEMENT
PHOENIX TECHNOLOGIES LTD.
411 EAST PLUMERIA DRIVE
SAN JOSE, CALIFORNIA 95134
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 20, 1999
------------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Phoenix Technologies Ltd. (the "Company" or "Phoenix") of
proxies for use at the Annual Meeting of Stockholders of the Company (the
"Meeting") to be held on January 20, 1999, at the Company's headquarters located
at 411 E. Plumeria Drive, San Jose, California, commencing at 10:00 a.m.,
California time, and at any adjournments thereof. All proxies are solicited for
the purposes set forth herein and in the Notice of Annual Meeting of
Stockholders that accompanies this proxy statement. All proxies will be voted in
accordance with the instructions contained therein, and, if no choice is
specified, the proxies will be voted in favor of the nominees and the proposals
set forth in the accompanying Notice of Meeting and this Proxy Statement. The
date of this Proxy Statement is December 18, 1998, the approximate date on which
this Proxy Statement and the accompanying form of proxy were first sent or given
to stockholders.
GENERAL INFORMATION
CERTAIN FINANCIAL INFORMATION. The Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1998 is enclosed with this Proxy Statement.
VOTING SECURITIES. Only stockholders of record as of the close of business
on December 10, 1998 (the "Record Date") will be entitled to vote at the meeting
and any adjournment thereof. As of the Record Date, there were 26,020,518 shares
of the Company issued and outstanding. Stockholders may vote in person or by
proxy. Each holder of shares of Common Stock is entitled to one (1) vote on the
proposals presented in this Proxy Statement for each share of the stock held.
There is no cumulative voting in connection with the election of directors.
QUORUM. The required quorum for transacting business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "WITHHELD" from a matter are treated as being present at the Annual
Meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
ABSTENTIONS. While there is no definitive statutory or case law authority
in Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total number
of Votes Cast with respect to a proposal (other than the election of directors).
In the absence of controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal.
BROKER NON-VOTES. Broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for transacting business, but
will not be counted for purposes of determining the number of Votes Cast with
respect to the particular proposal on which the broker has expressly not voted.
Accordingly, broker non-votes will not affect the outcome of the voting on a
proposal that requires a majority of the Votes Cast (such as the approval of a
plan).
<PAGE>
SOLICITATION OF PROXIES. The cost of soliciting proxies will be borne by
the Company. In addition to soliciting stockholders by mail and through its
regular employees, the Company will request brokers, custodians, nominees and
other record holders to forward copies of the proxy and other soliciting
material to persons for whom they hold shares of Common Stock of the Company,
and to request authority for the exercise of proxies; in such cases, the
Company, upon request of the record holders, will reimburse such holders for
their reasonable expenses. The Company may use the services of its officers,
directors and others to solicit proxies personally or by telephone, facsimile or
electronic mail, without additional compensation. The Company has also retained
Morrow & Co., Inc. to assist in obtaining proxies for the Annual Meeting from
brokers, nominees of stockholders and institutional investors. The estimated fee
for such services, which is not contingent upon the outcome of the voting, is
$6,500 plus out-of-pocket expenses.
VOTING OF PROXIES. All valid proxies received prior to the meeting will be
voted. All shares presented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so made. If
no choice is indicated on the proxy, the shares will be vote FOR all nominees,
FOR all other proposals described herein and as the proxy holders may determine
in their discretion with respect to any other matters that properly come before
the meeting. See "Transaction of Other Business." A stockholder giving a proxy
has the power to revoke his or her proxy, at any time prior to the time it is
voted, by delivering to the Secretary of the Company a written instrument
revoking the proxy or a duly executed proxy with a later date, or by attending
the meeting and voting in person.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's nominees for election at the Annual Meeting of Stockholders to
Class 3 of the Board of Directors are Charles Federman and Jack Kay (the
"Nominees"). Messrs. Federman and Kay are presently Class 3 Directors of the
Company. The Company expects each of the Nominees to be available to serve as a
Director. If, however, either of the Nominees is unable or declines to serve for
any reason, proxies may be voted for such substitute nominee as the Board of
Directors may designate.
The Company's Bylaws provide for a classified Board of Directors consisting
of two Class 1 Directors (Messrs. Huang and Morris), two Class 2 Directors
(Messrs. Fisher and Sun) and two Class 3 Directors (Messrs. Federman and Kay).
The Class 1, 2 and 3 Directors serve staggered three-year terms. A stockholder
may not cast votes for more than two nominees. The two Class 3 directors to be
elected at the 1999 Annual Meeting of Stockholders will be elected to hold
office until the Annual Meeting of Stockholders in 2002 and until their
successors have been elected and qualified.
REQUIRED VOTE. If a quorum is present and voting at the Annual Meeting, the
two nominees receiving the highest number of affirmative votes will be elected
as Class 3 directors. Votes withheld from any director are counted for purposes
of determining the presence or absence of a quorum, but have no other legal
effect under Delaware law.
NOMINEES AND OTHER DIRECTORS. The following table sets forth the name and
age of each nominee and each director of the Company whose term of office
continues after the Annual Meeting, the principal occupation of each during the
past five years and the period during which each has served as a director of the
Company. Each nominee is currently serving as a director of the Company. The
Directors whose
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names are followed by an asterisk (*) are members of the Audit Committee or the
Compensation Committee, or both.
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR NAME AGE SINCE POSITION AND CURRENT OFFICES WITH THE COMPANY
- ------------------------------------------- --- ----------- -----------------------------------------------------
<S> <C> <C> <C>
Charles Federman*.......................... 42 1991 Director
Ronald D. Fisher*.......................... 51 1990 Director; Chairman
George Huang............................... 56 1998 Director; Vice Chairman
Jack Kay................................... 52 1995 Director; President and Chief Executive Officer
Anthony P. Morris*......................... 52 1993 Director
Anthony Sun*............................... 45 1998 Director
</TABLE>
Mr. Federman is a Managing Director of the BRM Group. From 1983 to 1997, Mr.
Federman held a number of positions, including Chairman of the Executive
Committee, with Broadview Associates, L.L.C., an investment banking firm. Prior
to joining Broadview, Mr. Federman co-founded Bird & Company. Mr. Federman
serves as a Director of Backweb Technologies, Inc., International Microcomputer
Software, Inc., MathSoft, Inc. and SQRibe Technologies, Inc.
Mr. Fisher has served as Chairman of the Board for the Company since June
1994. From January 1990, when he joined the Company, until October 1995, Mr.
Fisher held the additional title of Chief Executive Officer. Mr. Fisher
currently serves as the Vice Chairman of SOFTBANK Holdings, Inc. Mr. Fisher is
also a director of MicroTouch Systems, Inc., Segue Software, Inc., and SOFTBANK
Corporation, Japan.
Mr. Huang was appointed by the Board to serve as a director filling the
vacancy created by the resignation of Mr. Lance E. Hansche. Mr. Huang was
elected by the Board in November 1998 to serve as Vice Chairman. Mr. Huang
served as Chairman of the Board of Directors, President, Chief Executive Officer
and Director of Award Software International, Inc. from July 1993 until Award
merged with the Company. Mr. Huang is Chairman of the Board of Directors of GCH
Systems, Inc. ("GCH"), a company that develops and markets embedded controllers,
Application Specific Integrated Circuits and PC Systems, and from January 1984
until November 1994, he also served as Chief Executive Officer of GCH. From
February 1987 to the present, Mr. Huang has served as a Director of
GCH-SunSystems Company Ltd. ("GSS"), a subsidiary of GCH. From January 1990 to
May 1996, Mr. Huang served as a Director of Fidelity Venture Capital Corporation
("FVCC"), a shareholder of GCH and Award.
Mr. Kay has served as President and Chief Executive Officer of the Company
since October 1, 1995. He joined the Company as Vice President of Worldwide
Sales in May 1990. In January 1992, he was appointed Senior Vice President and
Chief Operating Officer. In June 1994, he was promoted to President and Chief
Operating Officer.
Mr. Morris has been a principal with Morris & Associates, a management
consulting and financial advisory firm he founded in 1987. He is also an
investor in a number of private technology companies.
Mr. Sun was appointed by the Board to serve as a director filling the
vacancy created by the resignation of Mr. Finch. From 1979 to the present, Mr.
Sun has been a general partner at Venrock Associates, a venture capital firm.
Previously, Mr. Sun was employed by Hewlett Packard, TRW and Caere Corporation.
Mr. Sun served as director of Award Software International, Inc. from October
1995 until Award merged with the Company. Mr. Sun is a director of Cognex
Corporation, 3Dfx Interactive, Inc., Komag, Inc., and Worldtalk Communications
Corporation.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended September 30, 1998 (the "Last Fiscal Year"),
the Board of Directors held a total of four regularly scheduled meetings, five
special meetings and took additional actions by written consent. During fiscal
1998, each Director attended at least eighty percent of the aggregate number of
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<PAGE>
meetings of the Board of Directors held during the year and the total number of
meetings held by all committees of the Board of Directors on which he served
during the fiscal year.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Company does not have a standing nominating committee of the Board of
Directors or a committee performing similar functions.
During the Last Fiscal Year, the Audit Committee, which consists of Messrs.
Federman, Fisher and Sun, met four times. The Audit Committee makes
recommendations to the Board regarding appointment of the Company's independent
public accountants, confers with the Company's independent public accountants
regarding the scope and the results of the audit of the Company's books and
accounts and reports the same to the Board of Directors, and establishes and
monitors policy relative to non-audit services provided by the independent
public accountants, approves services rendered by such accountants, reviews the
activities and recommendations of the Company's internal audit department, and
reviews and evaluates the Company's accounting systems, financial controls and
financial personnel.
During the Last Fiscal Year, the Compensation Committee, which consists of
Messrs. Federman, Fisher and Morris, met once and took additional actions by
written consent. The Compensation Committee reviews salaries and other
compensation arrangements for officers and other key employees of the Company,
reviews the administration of the Company's stock option and stock purchase
plans, and advises the Board on general aspects of the Company's compensation
and benefit policies. For additional information concerning the Compensation
Committee, see "EXECUTIVE COMPENSATION--Compensation Committee Interlocks and
Insider Participation" and "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION."
COMPENSATION OF DIRECTORS
Members of the Board who are not employees of the Company are paid a fee of
$1,500 for each meeting of the Board of Directors or Board committee they
attend, plus reimbursement of travel expenses for travel by members of the Board
who reside outside of the local area.
Outside Directors receive options to purchase Common Stock pursuant to the
Company's 1994, 1996 and 1998 Stock Plans and will be eligible to receive
options under the 1999 Stock Plan if the stockholders approve the plan. The
actual number of shares to be subject to the options granted for Board and
committee service is established by the administrator of the Plan. The Board's
practice has been to grant options of 10,000 shares for new non-employee
Directors and to grant options on 7,000 shares each subsequent anniversary for
that Director's tenure on the Board. Board member options vest quarterly over
four years from the date of grant and have a term of ten years. During fiscal
1998, the Company granted stock options for 7,000 shares to each of Messrs.
Federman and Morris, each grant having an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR MESSRS. FEDERMAN AND KAY
PROPOSAL NO. 2
APPROVAL OF THE 1999 STOCK PLAN
On December 11, 1998, the Board of Directors adopted the 1999 Stock Plan
(the "Plan") and reserved 1,100,000 shares of Common Stock for issuance
thereunder subject to stockholder approval. No options or rights to purchase
stock have been granted pursuant to the Plan. The Plan is summarized below.
The Board proposes the Plan principally to provide a continuing benefit
program for attracting and retaining employees, officers, directors, consultants
and independent contractors important to the future of
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the Company. The Board believes that stock incentive programs, such as the Plan,
are commonly employed by companies in the software industry and, in particular,
in Silicon Valley where Phoenix is headquartered, as an important element of a
total compensation program.
The Board is seeking stockholder approval for a number of reasons,
including: (a) the traditional right of stockholders to vote on employee benefit
programs which may have a significant dilutive impact; (b) requirements of the
Nasdaq Stock Market, Inc. applicable to companies with securities listed on the
Nasdaq National Market; (c) the ability to grant incentive stock options as
provided in the Internal Revenue Code of 1986, as amended (the "Code"); and (d)
the ability to ensure tax deductibility under Section 162(m) of the Code. At the
annual meeting, the stockholders are being asked to approve the Plan and the
reservation of shares thereunder.
SUMMARY OF THE 1999 STOCK PLAN
GENERAL. The purpose of the Plan is to attract and retain the best
available personnel, to provide additional incentive to the employees, directors
and consultants of the Company and to promote the success of the Company's
business. Options and stock purchase rights may be granted under the Plan.
Options granted under the Plan may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonstatutory stock options.
ADMINISTRATION. The Plan may generally be administered by the Board or a
Committee appointed by the Board (as applicable, the "Administrator").
ELIGIBILITY; LIMITATIONS. Nonstatutory stock options and stock purchase
rights may be granted under the Plan to employees, directors and consultants of
the Company and any parent or subsidiary of the Company. Incentive stock options
may be granted only to employees. The Administrator, in its discretion, selects
the employees, directors and consultants to whom options and stock purchase
rights may be granted, the time or times at which such options and stock
purchase rights shall be granted, and the number of shares subject to each such
grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options and stock purchase rights granted to such
persons, the Plan provides that no employee, director or consultant may be
granted, in any fiscal year of the Company, options and stock purchase rights to
purchase more than 125,000 shares of Common Stock. Notwithstanding this limit,
however, in connection with such individual's initial employment with the
Company, he or she may be granted options or stock purchase rights to purchase
up to an additional 125,000 shares of Common Stock.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value of
the Common Stock on the date such option is granted; provided, however, the
exercise price of an incentive stock option granted to a 10% stockholder may
not be less than 110% of the fair market value of the Common Stock on the
date such option is granted. The fair market value of the Common Stock is
generally determined with reference to the closing sale price for the Common
Stock (or the closing bid if no sales were reported) on the last market
trading day prior to the date the option is granted.
(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. Stock options granted
under the Plan generally vest and become exercisable over four years. The
means of
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<PAGE>
payment for shares issued upon exercise of an option is specified in each
option agreement. The Plan permits payment to be made by cash, check,
promissory note, other shares of Common Stock of the Company (with some
restrictions), cashless exercises, a reduction in the amount of any Company
liability to the optionee, any other form of consideration permitted by
applicable law, or any combination thereof.
(c) TERM OF OPTION. The term of an incentive stock option may be no
more than ten (10) years from the date of grant; provided that in the case
of an incentive stock option granted to a 10% stockholder, the term of the
option may be no more than five (5) years from the date of grant. No option
may be exercised after the expiration of its term.
(d) TERMINATION OF EMPLOYMENT. If an optionee's employment or
consulting relationship terminates for any reason other than death or
disability, then all options held by the optionee under the Plan expire on
the earlier of (i) the date set forth in his or her notice of grant
(normally ninety days past termination) or (ii) the expiration date of such
option. To the extent the option is exercisable at the time of such
expiration, the optionee may exercise all or part of his or her option at
any time before expiration.
(e) DEATH OR DISABILITY. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all options
held by such optionee under the Plan expire on the earlier of (i) the date
set forth in his or her notice of grant (normally 90 days after death or
disability) or (ii) the expiration date of such option. The optionee (or the
optionee's estate or the person who acquires the right to exercise the
option by bequest or inheritance), may exercise all or part of the option at
any time before such expiration to the extent that the option was
exercisable at the time of such termination.
(g) NONTRANSFERABILITY OF OPTIONS: Options granted under the Plan are
generally not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by
the optionee.
(h) OTHER PROVISIONS: The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
STOCK PURCHASE RIGHTS. In the case of SPRs, unless the Administrator
determines otherwise, the Restricted Stock Purchase Agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment with the Company for any reason
(including death or disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate determined
by the Administrator.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its discretion
provide that each optionee shall have the right to exercise all of the
optionee's options and stock purchase rights, including those not otherwise
exercisable, until the date ten (10) days prior to the consummation of the
liquidation or dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right shall be assumed or an equivalent option or
6
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right substituted by the successor corporation. If the successor corporation
refuses to assume the options and stock purchase rights or to substitute
substantially equivalent options and stock purchase rights, the optionee shall
have the right to exercise the option or stock purchase right as to all the
optioned stock, including shares not otherwise exercisable. In such event, the
Administrator shall notify the optionee that the option or stock purchase right
is fully exercisable for fifteen (15) days from the date of such notice and that
the option or stock purchase right terminates upon expiration of such period.
AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain stockholder approval for any amendment to the
Plan to the extent necessary to comply with Section 162(m) and Section 422 of
the Code, or any similar rule or statute. No such action by the Board or
stockholders may alter or impair any option or stock purchase right previously
granted under the Plan without the written consent of the optionee. Unless
terminated earlier, the Plan shall terminate ten years from the date of its
approval by the stockholders or the Board of the Company, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
10% stockholder of the Company. The Company is entitled to a deduction in the
same amount as the ordinary income recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.
STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when a stock ceases to be subject to
a substantial risk of forfeiture. The stock will generally cease to be subject
to a substantial risk of forfeiture when it is no longer subject to the
Company's right to repurchase the stock upon the purchaser's termination of
employment with the Company. At such times, the purchaser will recognize
ordinary income measured as the difference between the purchase price and the
fair market value of the stock on the date the stock is no longer subject to a
substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to
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Section 83(b) of the Code. In such event, the ordinary income recognized, if
any, is measured as the difference between the purchase price and the fair
market value of the stock on the date of purchase, and the capital gain holding
period commences on such date. The ordinary income recognized by a purchaser who
is an employee will be subject to tax withholding by the Company. Different
rules may apply if the purchaser is also an officer, director, or 10%
stockholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS, AND THE COMPANY WITH RESPECT
TO THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE PLAN.
IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF
THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT
MAY RESIDE.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares represented
and voting at the Annual Meeting is required to approve the adoption of the 1999
Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE APPROVAL OF THE 1999 STOCK PLAN
PROPOSAL NO. 3
APPROVAL OF AMENDED AND RESTATED 1991 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors adopted the 1991 Employee Stock Purchase Plan (the
"ESPP") in 1991 and stockholders approved the ESPP in February 1992. Under the
ESPP as originally adopted, 500,000 shares of the Company's Common Stock
(subject to adjustment for any dividend, stock split or other relevant changes
in the Company's capitalization) were reserved for issuance. In February 1996,
the stockholders approved an amended and restated ESPP pursuant to which
amendment 150,000 additional shares were authorized. In February 1998, the
stockholders approved an amended and restated ESPP pursuant to which amendment
150,000 additional shares were authorized. As of September 30, 1998, a total of
658,316 shares had been issued under the ESPP from its inception.
PROPOSAL
In December 1998, the Board of Directors amended the ESPP to increase the
shares reserved by 350,000 shares. At the annual meeting, the stockholders are
being asked to approve the amendment to increase the number of shares reserved
under the ESPP.
REQUIRED VOTE
If a quorum is present, the affirmative vote of the holders of a majority of
the shares of Common Stock present or represented at the Meeting and voting on
the matter is required for approval of Proposal No. 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE AMENDED AND RESTATED 1991 EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its Audit Committee, has
selected the firm of Ernst & Young LLP as the Company's independent auditors for
the fiscal year ending September 30, 1999
8
<PAGE>
and is asking stockholders to ratify this appointment. In the event the
ratification of the stockholders of the appointment of Ernst & Young as the
Company's independent auditors is not obtained, the Board will reconsider such
appointment.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they desire to do
so and are also expected to be available to respond to appropriate questions
from stockholders.
REQUIRED VOTE
If a quorum is present, the affirmative vote of a majority of the Votes Cast
is required for approval of Proposal No. 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING SEPTEMBER 30, 1999
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 31, 1998
with respect to the Common Stock owned beneficially by (i) any person who is
known to the Company to be the beneficial owner of more than five percent of its
Common Stock, (ii) each director and director-nominee of the Company, (iii) the
Chief Executive Officer and each other executive officer of the Company included
in the Summary Compensation Table (collectively, the "Named Executive
Officers"), and (iv) all current directors and executive officers of the Company
as a group. Except as otherwise indicated in the footnotes to the table, to the
Company's knowledge, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
- --------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
Kopp Investment Advisors, Inc.(1).................. 1,873,891 7.1%
6600 France Avenue South, Suite 672
Edina, MN 55435
Intel Corporation(2)............................... 1,539,350 5.9%
2200 Mission College Boulevard
Santa Clara, CA 95052-8119
George C. Huang(3)(8).............................. 809,901 3.1%
Anthony Sun(4)(8).................................. 572,173 2.2%
Jack Kay(8)........................................ 571,434 2.2%
Ronald D. Fisher(5)(8)............................. 465,300 1.8%
David Frodsham(8).................................. 107,828 *
Robert J. Riopel(8)................................ 60,962 *
Charles Federman(6)(8)............................. 60,500 *
Craig Slayter(8)................................... 52,084 *
Anthony P. Morris(7)(8)............................ 41,000 *
Stuart J. Nichols(8)............................... 14,607 *
All current directors and executive officers as a
group (10 persons)(8)............................ 2,755,789 10.5%
</TABLE>
- ------------------------
* Ownership is less than 1%
(1) Based on information provided pursuant to Schedule 13G/A filed with the
Securities & Exchange Commission on July 7, 1998 by Kopp Investment
Advisors, Inc. ("KIA") on behalf of itself, LeRoy C. Kopp ("Kopp") and
Caring and Sharing Foundation ("Foundation"). Of these shares, 1,798,891 are
held in a fiduciary or representative capacity. Accordingly, persons other
than KIA, Kopp and Foundation have the right to receive, or the power to
direct the receipt of, dividends from, or the proceeds from the sale of,
such shares. No such person individually has an interest that relates to
more than five percent of the Company's Common Stock.
(2) Based on information provided pursuant to Schedule 13D/A filed with the
Securities and Exchange Commission on October 19, 1998 by Intel Corporation
("Intel"). Includes 644,379 shares with respect to which Intel may acquire
beneficial ownership at or within 60 days after October 31, 1998.
(3) Includes (i) 17,862 shares held by Margaret Huang, and (ii) 18,040 shares
held by Dwight Huang, Mr. Huang's wife and son, respectively. Also includes
168,565 and 30,625 shares issuable pursuant to options exercisable within 60
days of October 31, 1998 by Mr. Huang and his wife, respectively. Mr. Huang
disclaims beneficial ownership of shares held by his wife and son.
10
<PAGE>
(4) Includes (i) 280,894 shares held by Venrock Associates, (ii) 127,437 shares
held by Venrock Associates II, L.P. and (iii) 70,223 and 31,859 shares
issuable pursuant to warrants exercisable within 60 days of October 31, 1998
by Venrock Associates and Venrock Associates II, L.P., respectively. Mr.
Sun, a director of Phoenix, is a general partner of Venrock Associates. Mr.
Sun disclaims beneficial ownership of shares held by such entities, except
to the extent of his pecuniary interest therein.
(5) Includes 28,000 shares owned by Mr. Fisher, 3,300 shares held in the name of
Mr. Fisher's spouse; 2,000 shares held in the name of Mr. Fisher's son; and
2,000 shares held in the name of Mr. Fisher's daughter. Mr. Fisher has no
voting or investment power and disclaims beneficial ownership with respect
to the shares owned by his wife, son and daughter.
(6) Includes 18,000 shares owned by Mr. Federman and 1,000 shares held in trust
for his son.
(7) Includes 5,000 shares owned by Mr. Morris and 5,000 shares held in a
custodial account for his minor daughters.
(8) Includes an aggregate of 1,545,723 shares as to which the named persons
could acquire beneficial ownership at or within 60 days after October 31,
1998. As to each named person, such amounts are as follows: Mr.
Fisher--430,000; Mr. Kay--555,625; Mr. Federman--41,500; Mr. Riopel--54,962;
Mr. Morris--31,000; Mr. Slayter--51,688; Mr. Frodsham--106,873; Mr.
Nichols--13,125; Mr. Sun--61,760; George & Margaret Huang--199,190.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
(i) the Chief Executive Officer of the Company, (ii) the four other most highly
compensated executive officers of the Company (based on salary plus bonus for
the Last Fiscal Year) who were serving as such at the end of the Last Fiscal
Year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------------------
----------------------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- ------------------------------------- ------ --------- -------- ---------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jack Kay............................. 1998 $ 275,000 $ 0 -- 0
President and 1997 251,700 159,813 -- 50,000
Chief Executive Officer 1996 225,000 112,500 -- 0
David Frodsham(1).................... 1998 200,000 16,250 -- 0
Chief Operating Officer 1997 134,860 92,044(4) -- 70,000
Stuart J. Nichols(2)................. 1998 150,000 2,324 -- 0
Vice President, 1997 53,826 15,275 35,000
General Counsel & Secretary
Robert J. Riopel..................... 1998 180,000 0 -- 0
Vice President, Finance, Chief 1997 166,700 68,250 -- 35,000
Financial Officer and Treasurer 1996 125,000 50,000 -- 5,000
Craig K. Slayter(3).................. 1998 200,000 13,750 -- 0
Senior Vice President 1997 183,300 51,275 85,000
and General Manager,
Platform Enabling Group
</TABLE>
- ------------------------
(1) Mr. Frodsham was promoted to Chief Operating Officer effective November 23,
1998.
11
<PAGE>
(2) Mr. Nichols joined the Company on May 13, 1997. His fiscal 1997 bonus was
guaranteed and paid on a prorated basis.
(3) Mr. Slayter was promoted to Senior Vice President and General Manager,
Platform Enabling Group, effective November 23, 1998.
(4) Includes commissions in the amount of $74,272.
STOCK OPTIONS
During the Last Fiscal Year, the Company did not grant stock options to any
Named Executive Officer.
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT FY END
SHARES VALUE OPTIONS AT FY END (#)(2) ($)(3)
ACQUIRED ON REALIZED -------------------------- ----------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------------- --------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Kay........................ 0 0 552,500 37,500 $ 434,641.26 0
David Frodsham.................. 0 0 106,561 9,687 $ 16,405.00 0
Stuart J. Nichols............... 0 0 10,937 24,063 0 0
Robert J. Riopel................ 0 0 51,544 73,456 0 0
Craig Slayter................... 0 0 47,313 69,687 $ 26,250.00 0
</TABLE>
- ------------------------
(1) These amounts represent the fair market value of the shares underlying the
stock options on the date of exercise less the stock option exercise price.
(2) These options were granted on various dates during fiscal years 1991 through
1998.
(3) These amounts represent the difference between the exercise price of the
stock options and the closing price of Phoenix Common Stock on September 30,
1998 for all options held by each Named Officer.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors administers the
Company's executive compensation program. The role of the Compensation Committee
is to set the salaries and other compensation of the executive officers and
certain other key employees of Phoenix, and to make grants under, and to
administer, the stock option and other employee equity and bonus plans. The
members of the Compensation Committee are Charles Federman, Ronald D. Fisher and
Anthony P. Morris. Each of these persons is a non-employee director within the
meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and an
"outside director" within the meaning of Section 162(m) of the Code.
GENERAL COMPENSATION PHILOSOPHY
The Compensation Committee of the Board of Directors establishes the overall
executive compensation strategies of the Company and approves compensation
elements for the Chief Executive Officer and other executive officers. The goals
of the Company's compensation policy are to attract, retain and reward executive
officers who contribute to the overall success of the Company by offering
compensation that is competitive in the industry, to motivate executive officers
to achieve the Company's business objectives and to align the interests of
executive officers with the long-term interests of stockholders.
12
<PAGE>
The compensation philosophy of the Compensation Committee is to provide a
compensation package for each executive officer designed to support
accomplishment of the Company's business strategies, objectives and initiatives.
Consistent with this philosophy, cash compensation for executive officers is
intended to vary with the performance of the Company, and any long-term
incentive should be closely aligned with the interest of the Company's
stockholders. For incentive-based compensation, the Compensation Committee
considers the desirability of structuring such compensation arrangements so as
to qualify for deductibility under Section 162(m) of the Code.
Cash compensation for the executive officers named in the Summary
Compensation Table above consists of the following components:
- Base salary
- An incentive bonus related to growth in revenue and in earnings per share
as well as satisfaction of individualized objectives.
Long term incentive-based compensation for executive officers is realized
through the granting of stock options. The stock option program directly links a
portion of compensation to the interests of stockholders by providing an
incentive to maximize stockholder value. Stock options generally have value for
the executive only if the price of the Company's stock increases above the fair
market value on the grant date and the executive remains in the Company's employ
for the period required for the shares to vest.
COMPENSATION OF EXECUTIVE OFFICERS DURING FISCAL 1998
Each executive officer's performance for the past fiscal year and objectives
for the current year are reviewed, together with the executive's responsibility
level and the Company's fiscal performance versus objectives and potential
performance targets. When establishing salaries, bonus levels and stock option
awards for executive officers, the Committee considers: (1) the Company's
financial performance during the past year, (2) the individual's performance
during the past year, and (3) the salaries of executive officers in similar
positions of companies of comparable size and other companies within the
computer software industry. The companies whose executive officer salaries were
considered in determining compensation for the Company's executive officers were
not intended to correlate with the companies included in the indices used by the
Company in preparing its stock performance graph. With respect to executive
officers other than the CEO, the Committee places considerable weight upon the
recommendations of the CEO. The terms of bonus compensation and the amount of
cash and bonus compensation is based in part on market information provided,
from time to time, by an independent consultant. In addition, consideration is
also given to the particular objectives or priorities that the CEO or the Board
wishes the executive to focus on in the coming year. The Compensation Committee
determines the incentive bonus and criteria for earning all or a portion of the
incentive bonus. In making this determination, the Compensation Committee
considers the recommendations of management.
SALARY: The salaries for the executive officers were reviewed effective as
of the beginning of the fiscal year, to ensure that executive salary levels
remained competitive in light of market conditions and Company financial
performance.
CASH INCENTIVE BONUSES: The Company has employed a cash-based incentive
bonus program intended to motivate and reward executives by making a portion of
cash compensation directly dependent upon corporate earnings per share. The
bonus targets for executive officers are based on individual compensation plans.
The Committee determines the amount targeted for the CEO, and the CEO recommends
to the Committee the bonus targets for the remainder of the executive officers.
The amount of bonus earned has historically been tied, at least in part, to the
Company's growth in revenue and earnings per share, before recurring charges.
13
<PAGE>
As a percent of total cash compensation (percentage determined by dividing
the target bonus by the sum of base salary and target bonus), fiscal 1998 target
bonuses for the Named Executive Officers ranged from 27% to 50%, with an average
of 32%. For fiscal 1998, Mr. Kay's bonus was targeted at $140,000 or 34% of his
total targeted base salary and target bonus.
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS IN FISCAL 1998
The Compensation Committee of the Board periodically reviews the number of
vested and unvested options held by each executive officer. During such reviews,
which generally occur annually, the Committee makes stock option grants to
executive officers to provide greater incentives to those officers to continue
their employment with the Company, to maintain competitive overall compensation
for each executive, and to provide a reward to the executives for increasing the
value of the Company's Common Stock. Stock options typically have been granted
to an executive officer when the executive first joins the Company, in
connection with a significant change in responsibilities and, occasionally, to
achieve equity within a peer group. When making stock option grants for
executive officers, the Board considers the Company's performance during the
past year, the responsibility level and performance of the executive officer,
prior option grants to the executive officer, the level of vested and unvested
options, and industry and competitive conditions. Stock option grants generally
become exercisable over a four year period. Options generally have exercise
prices equal to the fair market value of the Company's Common Stock on the date
of grant.
FISCAL 1998 CEO COMPENSATION
Compensation for the CEO is determined through a process similar to that
discussed above for executive officers in general. As indicated above, the
Company's compensation program is designed to achieve corporate financial goals
and other strategic objectives. This pay-for-performance program is most clearly
exemplified in the compensation of the Company's Chief Executive Officer.
In setting compensation levels for the Chief Executive Officer, the
Compensation Committee reviewed competitive information reflecting the relevant
compensation data for chief executive officers of companies of comparable size
within the software industry. As a result of this review, Mr. Kay's salary was
not increased in fiscal year 1999 nor was Mr. Kay paid a bonus for fiscal 1998.
The decision by the Compensation Committee to not increase Mr. Kay's base
compensation and to not pay a bonus was primarily based on the Company's overall
performance.
MEMBERS OF THE COMPENSATION COMMITTEE
CHARLES FEDERMAN
ANTHONY P. MORRIS
ANTHONY SUN
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and persons who own more than 10%
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission (the "SEC") reports of ownership and changes
of ownership of the Company's Common Stock and other equity securities.
Executive officers, directors and 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company during, and with respect to, its most recent
fiscal year and written representations that no other
14
<PAGE>
reports were required, the filing requirements of Section 16(a) applicable to
its executive officers, directors and 10% stockholders were satisfied.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors during fiscal 1998 were Charles Federman, Lawrence Finch (who resigned
from the Board during the fiscal year) and Anthony Morris, all of whom were
non-employee Directors.
COMPANY STOCK PRICE PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from September 30, 1993 to September 30, 1998 with
the cumulative total return on the Standard and Poor's 500 and the Standard and
Poor's Computer Software and Services market indices over the same period,
assuming the investment of $100 in the Company's Common Stock and in each of the
indices on September 30, 1993 and the reinvestment of all dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG PHOENIX TECHNOLOGIES LTD., THE STANDARD & POOR'S 500 INDEX
AND THE STANDARD & POOR'S COMPUTER SOFTWARE & SERVICES INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX TECHNOLOGIES LTD. S & P 500 S & P COMPUTERS (SOFTWARE & SERVICES)
<S> <C> <C> <C>
9/93 $100.00 $100.00 $100.00
9/94 $132.35 $103.69 $118.81
9/95 $297.06 $134.53 $173.21
9/96 $405.88 $161.89 $251.10
9/97 $350.00 $227.37 $413.46
9/98 $132.35 $247.93 $569.39
</TABLE>
15
<PAGE>
Management knows of no other matters to be submitted to the stockholders at
the Annual Meeting. However, if any other matters properly come before the
Meeting, the persons named in the accompanying proxy intend to vote the shares
they represent as the Board of Directors may recommend.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company at its principal office
in San Jose, California, not later than September 1, 1999 for inclusion in the
proxy statement for that meeting.
By Order of the Board of Directors
/s/ Stuart J. Nichols
--------------------------------------
Stuart J. Nichols
SECRETARY
December 18, 1998
------------------------
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED.
------------------------
16
<PAGE>
APPENDIX A
PHOENIX TECHNOLOGIES LTD.
1999 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions of
substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means Phoenix Technologies, Ltd., a Delaware corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services to such entity.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
17
<PAGE>
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system for the last market trading day prior to
the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and
low asked prices for the Common Stock on the last market trading day
prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(p) "NOTICE OF GRANT" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this 1999 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant to
a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
18
<PAGE>
(aa) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "SECTION 16(B)" means Section 16(b) of the Exchange Act.
(cc) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(dd) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 800,000 Shares. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered by
different Committees with respect to different groups of Service Providers.
(ii) SECTION 162(M). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16B-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered
by each Option and Stock Purchase Right granted hereunder;
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(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option or Stock Purchase Right granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(x) to modify or amend each Option or Stock Purchase Right (subject
to Section 15(c) of the Plan), including the discretionary authority to extend
the post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xii) to make all other determinations deemed necessary or advisable
for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. LIMITATIONS.
(a) Notwithstanding anything to the contrary in this Plan, no person who
is an Officer or Director will be eligible to receive a grant of Option or Stock
Purchase Right hereunder until such time as this Plan is approved by the
stockholders of the Company.
(b) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be deter-mined as of the
time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor
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shall they interfere in any way with the Optionee's right or the Company's right
to terminate such relationship at any time, with or without cause.
(d) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 125,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 125,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
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<PAGE>
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be suspended during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
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<PAGE>
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any
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<PAGE>
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option and Stock Purchase Right shall be assumed
or an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor
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<PAGE>
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. The Option or Stock Purchase
Right shall be considered assumed if, following the merger or sale of assets,
the Optionee has the right to purchase or receive the same consideration the
shareholders of the Company received in the merger or sale of assets. If the
shareholders of the Company received any consideration other than common stock
of the successor corporation, the Administrator may, with the consent of the
successor corporation, provide that the consideration received upon exercise of
the Option or Stock Purchase Right will be solely the common stock of the
successor corporation, with the exercise price of the Option and the number of
shares subject to the Option adjusted for the exchange rate used in the merger
or sale of assets. If the shareholders of the Company received any consideration
other than common stock of the successor corporation, the exchange rate will
reflect the fair market value of any such consideration received.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) STOCKHOLDER APPROVAL. The Company shall obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in
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respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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PROXY
PHOENIX TECHNOLOGIES LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Robert J.
Riopel and Stuart J. Nichols, and each of them, with power of substitution,
as proxies to represent and vote as designated herein all shares of stock of
Phoenix Technologies Ltd. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company to be held on January 20, 1999 at the Company's principal
executive office located at 411 East Plumeria Drive, San Jose, California, at
10:00 a.m., California time, and at any and all adjournments of that meeting.
THE PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR ELECTIONS OF MESSRS. FEDERMAN AND KAY AND
FOR PROPOSALS 2, 3 AND 4. IN THEIR DISCRETION, THE PROXIES ARE ALSO
AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT OF THAT MEETING.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
1. TO ELECT CHARLES FEDERMAN AND JACK KAY TO THE BOARD OF DIRECTORS
AS CLASS 2 DIRECTORS.
FOR WITHHOLD
[ ]
---------------------------------------
[ ] [ ] For both nominees except as noted above
2. TO APPROVE THE 1999 STOCK PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. TO APPROVE THE AMENDMENT TO THE 1991 EMPLOYEE STOCK PURCHASE PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR
THE CURRENT FISCAL YEAR.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please sign exactly as your name or names appear hereon. If the
stock is registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians, attorneys and corporate
officers should add their titles. PLEASE FILL IN, DATE, SIGN AND MAIL THIS
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Signature:__________________________ Date:_____________
Signature:__________________________ Date:_____________
26
