SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
BROADVISION, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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[ ] 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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BROADVISION, INC.
585 Broadway
Redwood City, CA 94063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1998
TO THE STOCKHOLDERS OF BROADVISION, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
BROADVISION, INC., a Delaware corporation (the "Company"), will be held on
Monday, May 11, 1998 at 2:00 p.m. local time at the Company's offices at 585
Broadway, Redwood City, California 94063 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve the Company's Equity Incentive Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 975,000 shares.
3. To approve the Company's Employee Stock Purchase Plan, as amended,
to increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 200,000 shares.
4. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors of the Company for its fiscal year ending December 31, 1998.
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 31, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Pehong Chen
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Pehong Chen
Chairman of the Board, President and
Chief Executive Officer
Redwood City, California
April 15, 1998
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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BROADVISION, INC.
585 Broadway
Redwood City, CA 94063
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
BroadVision, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on May 11, 1998, at 2:00 p.m. local time (the
"Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at the Company's offices at 585 Broadway, Redwood
City, California 94063. The Company intends to mail this proxy statement and
accompanying proxy card on or about April 15, 1998, to all stockholders entitled
to vote at the Annual Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on March
31, 1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 31, 1998 the Company had outstanding and entitled to
vote 23,503,914 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 585
Broadway, Redwood City, California 94063, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
Stockholder Proposals
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than January 31, 1999 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
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PROPOSAL 1
ELECTION OF DIRECTORS
There are five nominees for the Board of Directors. Each director to be
elected will hold office until the next annual meeting of stockholders and until
his successor is elected and has qualified, or until such director's earlier
death, resignation or removal. Each nominee listed below is currently a director
of the Company. Mr. Pascarella was appointed by the Company's Board of
Directors, and each of the other directors was elected by the stockholders at
the 1997 Annual Stockholders Meeting.
Shares represented by executed proxies will be voted, if authority to do so
is not withhold, for the election of the four nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected and management has no reason to believe that any nominee
will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Nominees
The names of the nominees and certain information about them are set forth
below:
Principal Occupation/
Name Age Position Held With the Company
- --------------------------- ----- ---------------------------------------------
Pehong Chen ............... 40 Chairman of the Board of Directors, President
and Chief Executive Officer
David L. Anderson ......... 54 General Partner, Sutter Hill Ventures
Yogen K. Dalal ............ 47 General Partner, Mayfield Fund
Koh Boon Hwee ............. 47 Executive Chairman, Wuthelam Group of
Companies
Carl Pascarella ........... 45 President and Chief Executive Officer of Visa
USA
Pehong Chen has served as Chairman of the Board, Chief Executive Officer
and President of the Company since its incorporation in May 1993. From 1992 to
1993, Dr. Chen served as the Vice President of Multimedia Technology at Sybase,
a supplier of client-server software products. Dr. Chen founded and, from 1989
to 1992, served as President of Gain Technology, a provider of multimedia
applications development systems, which was acquired by Sybase. He received a
B.S. in Computer Science from National Taiwan University, an M.S. in Computer
Science from Indiana University, and a Ph.D. in Computer Science from the
University of California at Berkeley.
David L. Anderson has served as a director of the Company since November
1993. Since 1974, Mr. Anderson has been a general partner of Sutter Hill
Ventures, a California Limited Partnership, a venture capital firm. Mr. Anderson
currently serves on the Board of Directors of Cytel Corporation, Dionex
Corporation, Molecular Devices Corporation, and Neurex Corporation. He holds a
B.S. in Electrical Engineering from the Massachusetts Institute of Technology
and an M.B.A. from Harvard University.
Yogen K. Dalal has served as a director of the Company since November 1993.
He joined Mayfield Fund ("Mayfield"), a venture capital firm, in September 1991
and has been a general partner of several venture capital funds affiliated with
Mayfield since November 1992. Dr. Dalal holds a B.S. in Electrical Engineering
from the India Institute of Technology, Bombay, and an M.S. and a Ph.D. in
Electrical Engineering and Computer Science from Stanford University.
Koh Boon Hwee has served as a director of the Company since February 1996.
Since 1991, Mr. Koh has been Executive Chairman of the Wuthelam Group of
Companies, a diversified Singapore company with subsidiaries engaged in, among
other things, real estate development, hotel management, and high
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technology. Since 1992, he has also served as Chairman of the Board of Singapore
Telecommunications, Ltd. Mr. Koh currently serves on the Board of Directors of
Excel Machine Tools Ltd., Raffles Medical Group Ltd., and Qad Inc. Mr. Koh holds
a B.S. in Mechanical Engineering from the University of London and an M.B.A.
from Harvard University.
Carl Pascarella has served as a director of the Company since September
1997. Since August 1993, Mr. Pascarella has been President and Chief Executive
Officer of Visa USA. From January 1983 to August 1993, he was Assistant Chief
General Manager of the Asia-Pacific region of Visa USA. Before joining Visa USA,
Mr. Pascarella was Vice President of the International Division of Crocker
National Bank. He also served as Vice President of Metropolitan Bank at
BankersTrust Company. Mr. Pascarella holds a B.A. from the University of Buffalo
and an M.B.A. from Harvard University.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Board Committees and Meetings
During the fiscal year ended December 31, 1997 the Board of Directors held
four meetings. The Board has an Audit Committee, a Compensation Committee and a
Non-Officer Option Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is composed of two non-employee
directors: Messrs. Anderson and Dalal. The Audit Committee did not meet during
1997.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of three non-employee
directors: Messrs. Anderson, Dalal and Koh. The Compensation Committee acted by
written consent five times during 1997.
The Non-Officer Option Committee, established in May 1997, awards stock
options to non-officer employees or consultants, not to exceed 10,000 shares per
non-officer employee or consultant per fiscal year, at or after the hiring of
such employee or consultant. Generally, the Non-Officer Option Committee acted
by written consent at or after the hiring of each new employee or consultant to
grant options to such employee or consultant.
During the fiscal year ended December 31, 1997, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he served, held during the period for which he was a director or
committee member, respectively.
PROPOSAL 2
APPROVAL OF EQUITY INCENTIVE PLAN, AS AMENDED
In April 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's Equity Incentive Plan (the "Incentive
Plan"). There are 5,000,000 shares of the Company's Common Stock authorized for
issuance under the Incentive Plan.
At January 31, 1998, options (net of canceled or expired options) covering
an aggregate of 4,348,326 shares of the Company's Common Stock had been granted
under the Incentive Plan, and only 651,674 shares (plus any shares that might in
the future be returned to the Incentive Plan as a result of cancellations or
expiration of options) remained available for future grant under the Incentive
Plan. During the last fiscal year, under the Incentive Plan, the Company granted
to all current executive officers as a group
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options to purchase 109,900 shares at exercise prices of $5.50 to $7.00 per
share and to all employees (excluding executive officers) as a group options to
purchase 1,735,700 shares at exercise prices of $5.125 to $8.50 per share.
In March 1998, the Board approved an amendment to the Incentive Plan,
subject to stockholder approval, to enhance the flexibility of the Board, the
Compensation Committee and the Non-Officer Stock Option Committee in granting
stock options to the Company's employees. The amendment increases the number of
shares authorized for issuance under the Incentive Plan from a total of
5,000,000 shares to 5,975,000 shares of Common Stock. The Board adopted this
amendment to ensure that the Company can continue to grant stock options to
employees at levels determined appropriate by the Board, the Compensation
Committee and the Non-Officer Stock Option Committee.
Stockholders are requested in this Proposal 2 to approve the Incentive
Plan, as amended. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the Incentive Plan, as amended. Abstentions
will be counted toward the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as negative votes. Broker
non-votes are counted towards a quorum, but are not counted for any purpose in
determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Incentive Plan are outlined below:
General
The Incentive Plan provides for the grant of both incentive and
nonstatutory stock options. Incentive stock options granted under the Incentive
Plan are intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Nonstatutory stock options granted under the Incentive Plan are intended not to
qualify as incentive stock options under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of incentive and nonstatutory
stock options.
Purpose
The Incentive Plan was adopted to provide a means by which selected
employees and employee-directors of and consultants to the Company and its
affiliates could be given an opportunity to purchase stock in the Company, to
assist in retaining the services of employees holding key positions, to secure
and retain the services of persons capable of filling such positions and to
provide incentives for such persons to exert maximum efforts for the success of
the Company. Approximately 188 of the Company's approximately 200 employees and
consultants are eligible to participate in the Incentive Plan.
Administration
The Incentive Plan is administered by the Board of Directors of the
Company. The Board has the power to construe and interpret the Incentive Plan
and, subject to the provisions of the Incentive Plan, to determine the persons
to whom and the dates on which options will be granted, the number of shares to
be subject to each option, the time or times during the term of each option
within which all or a portion of such option may be exercised, the exercise
price, the type of consideration and other terms of the option. The Board of
Directors is authorized to delegate administration of the Incentive Plan to a
committee composed of not fewer than two members of the Board. The Board has
delegated administration of the Incentive Plan to the Compensation Committee of
the Board. As used herein with respect to the Incentive Plan, the "Board" refers
to the Compensation Committee as well as to the Board of Directors itself. In
addition, the Incentive Plan provides that, in the Board's discretion, directors
who grant options to employees covered under Section 162(m) of the Code
("Section 162(m)") generally will be "outside directors" as defined in Section
162(m). See "Federal Income Tax Information" below for a discussion of the
application of Section 162(m).
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Eligibility
Incentive stock options may be granted under the Incentive Plan only to
selected employees (including officers) of the Company and its affiliates.
Selected employees (including officers), employee-directors and consultants are
eligible to receive nonstatutory stock options under the Incentive Plan.
Directors who are not salaried employees of or consultants to the Company or to
any affiliate of the Company are not eligible to participate in the Incentive
Plan.
No incentive stock option may be granted under the Incentive Plan to any
person who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of the Company or
any affiliate of the Company, unless the option exercise price is at least 110%
of the fair market value of the stock subject to the option on the date of
grant, and the term of the option does not exceed five years from the date of
grant. In addition, for incentive stock options granted under the Incentive
Plan, the aggregate fair market value, determined at the time of grant, of the
shares of Common Stock with respect to which such options are exercisable for
the first time by an optionee during any calendar year (under all such plans of
the Company and its affiliates) may not exceed $100,000.
No person may be granted options under the Incentive Plan during any
calendar year to purchase in excess of 700,000 shares of Common Stock. This
limitation permits the Company under Section 162(m) to continue to be able to
deduct as a business expense certain compensation attributable to the exercise
of options granted under the Incentive Plan. See "Federal Income Tax
Information" below for a discussion of the application of Section 162(m).
Stock Subject to the Incentive Plan
The shares subject to the Incentive Plan may be unissued shares or
reacquired shares, bought on the market or otherwise. If options granted under
the Incentive Plan expire or otherwise terminate without being exercised, the
Common Stock not purchased pursuant to such options again becomes available for
issuance under the Incentive Plan.
Terms of Options
The following is a description of the permissible terms of options under
the Incentive Plan. Individual option grants may be more restrictive as to any
or all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the Incentive Plan may not be less than the fair market value of the
Common Stock subject to the option on the date of the option grant, and in some
cases (see "Eligibility" above), may not be less than 110% of such fair market
value. The exercise price of nonstatutory options under the Incentive Plan may
not be less than 85% of the fair market value of the Common Stock subject to the
option on the date of the option grant. However, if options were granted with
exercise prices below market value, deductions for compensation attributable to
the exercise of such options could be limited by Section 162(m). See "Federal
Income Tax Information." At March 31, 1998, the closing price of the Company's
Common Stock as reported on the Nasdaq National Market was $17.88 per share.
In the event of a decline in the value of the Company' s Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the Incentive Plan is deemed to be canceled and a new option
granted. Both the option deemed to be canceled and the new option deemed to be
granted will be counted against the 700,000 share per calendar year limitation.
The exercise price of options granted under the Incentive Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (i) pursuant to a deferred payment arrangement or (ii)
in any other form of legal consideration acceptable to the Board.
Option Exercise. Options granted under the Incentive Plan may become
exercisable in cumulative increments ("vest") as determined by the Board. Shares
covered by currently outstanding options under the Incentive Plan typically vest
at the rate of 1/60th per month (20% per year) with one-year cliff vesting,
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during the optionee's employment or services as a consultant. Shares covered by
options granted in the future under the Incentive Plan may be subject to
different vesting terms. The Board has the power to accelerate the time during
which an option may be exercised. In addition, options granted under the
Incentive Plan may permit exercise prior to vesting, but in such event the
optionee may be required to enter into an early exercise stock purchase
agreement that allows the Company to repurchase shares not yet vested at their
exercise price should the optionee leave the employ of the Company before
vesting. To the extent provided by the terms of an option, an optionee may
satisfy any federal, state or local tax withholding obligation relating to the
exercise of such option by a cash payment upon exercise, by authorizing the
Company to withhold a portion of the stock otherwise issuable to the optionee,
by delivering already-owned stock of the Company or by a combination of these
means.
Term. The maximum term of options under the Incentive Plan is ten years,
except that in certain cases (see "Eligibility") the maximum term is five years.
Options under the Incentive Plan terminate three months after termination of the
optionee's employment or relationship as a consultant to the Company or any
affiliate of the Company, unless (a) such termination is due to such person's
disability, in which case the option may, but need not, provide that it may be
exercised at any time within one year of such termination; (b) the optionee dies
while employed by or serving as a consultant to the Company or any affiliate of
the Company, or within a period specified in the option after termination of
such relationship, in which case the option may, but need not, provide that it
may be exercised (to the extent the option was exercisable at the time of the
optionee's death) within eighteen months of the optionee's death by the person
or persons to whom the rights to such option pass by will or by the laws of
descent and distribution; or (c) the option by its terms specifically provides
otherwise. Individual options by their terms may provide for exercise within a
longer period of time following termination of employment or the consulting
relationship. The option term may also be extended in the event that exercise of
the option within these periods is prohibited for specified reasons.
Adjustment Provisions
If there is any change in the stock subject to the Incentive Plan or
subject to any option granted under the Incentive Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Incentive Plan and options outstanding thereunder will be appropriately adjusted
as to the class and the maximum number of shares subject to such plan, the
maximum number of shares that may be granted to an employee during a calendar
year, and the class, number of shares and price per share of stock subject to
such outstanding options.
Effect of Certain Corporate Events
The Incentive Plan provides that, in the event of a dissolution or
liquidation of the Company, specified type of merger or other corporate
reorganization, to the extent permitted by law, any surviving corporation will
be required to either assume options outstanding under the Incentive Plan or
substitute similar options for those outstanding under such plan, or such
outstanding options will continue in full force and effect. In the event that
any surviving corporation declines to assume or continue options outstanding
under the Incentive Plan, or to substitute similar options, then the time during
which such options may be exercised will be accelerated and the options
terminated if not exercised during such time. The acceleration of an option in
the event of an acquisition or similar corporate event may be viewed as an
antitakeover provision, which may have the effect of discouraging a proposal to
acquire or otherwise obtain control of the Company.
Duration, Amendment and Termination
The Board may suspend or terminate the Incentive Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Incentive Plan will terminate on April 15, 2006.
The Board may also amend the Incentive Plan at any time or from time to
time. However, no amendment will be effective unless approved by the
stockholders of the Company within twelve months
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before or after its adoption by the Board if the amendment would: (a) increase
the number of shares reserved for issuance upon exercise of options; (b) modify
the requirements as to eligibility for participation (to the extent such
modification requires stockholder approval in order for the Incentive Plan to
satisfy Section 422 of the Code, if applicable, or Rule 16b-3 ("Rule 16b-3") of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")); or (c)
change any other provision of the Incentive Plan in any other way if such
modification requires stockholder approval in order to comply with Rule 16b-3 or
satisfy the requirements of Section 422 of the Code. The Board may submit any
other amendment to the Incentive Plan for stockholder approval, including, but
not limited to, amendments intended to satisfy the requirements of Section
162(m) regarding the exclusion of performance-based compensation from the
limitation on the deductibility of compensation paid to certain employees.
Restrictions on Transfer
Under the Incentive Plan, an incentive stock option may not be transferred
by the optionee otherwise than by will or by the laws of descent and
distribution and, during the lifetime of the optionee, may be exercised only by
the optionee. A nonstatutory stock option may not be transferred except by will
or by the laws of descent and distribution or pursuant to a domestic relations
order. In any case, the optionee may designate in writing a third party who may
exercise the option in the event of the optionee's death. In addition, shares
subject to repurchase by the Company under an early exercise stock purchase
agreement may be subject to restrictions on transfer which the Board deems
appropriate.
Federal Income Tax Information
Incentive Stock Options. Incentive stock options under the Incentive Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be capital gain or loss. Generally, if the optionee disposes of the
stock before the expiration of either of these holding periods (a "disqualifying
disposition"), at the time of disposition, the optionee will realize taxable
ordinary income equal to the lesser of (a) the excess of the stock's fair market
value on the date of exercise over the exercise price, or (b) the optionee's
actual gain, if any, on the purchase and sale. The optionee's additional gain,
or any loss, upon the disqualifying disposition will be a capital gain or loss,
which will be long-term, mid-term or short-term depending on how long the
optionee holds the stock. Long-term capital gains currently are generally
subject to lower tax rates than ordinary income. Slightly different rules may
apply to optionees who acquire stock subject to certain repurchase options or
who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) and the
satisfaction of a tax reporting obligation) to a corresponding business expense
deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
Incentive Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) and the satisfaction of a
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tax reporting obligation, the Company will generally be entitled to a business
expense deduction equal to the taxable ordinary income realized by the optionee.
Upon disposition of the stock, the optionee will recognize a capital gain or
loss equal to the difference between the selling price and the sum of the amount
paid for such stock plus any amount recognized as ordinary income upon exercise
of the option. Such gain or loss will be long-term, mid-term or short-term
depending on how long the optionee holds the stock. Slightly different rules may
apply to optionees who acquire stock subject to certain repurchase options or
who are subject to Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. Section 162(m) denies a
deduction to any publicly held corporation for compensation paid to certain
employees in a taxable year to the extent that compensation exceeds $1,000,000
for a covered employee. It is possible that compensation attributable to stock
options, when combined with all other types of compensation received by a
covered employee from the Company, may cause this limitation to be exceeded in
any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain, and the
option is approved by stockholders.
PROPOSAL 3
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In April 1996, the Board of Directors adopted the Employee Stock Purchase
Plan (the "Purchase Plan") authorizing the issuance of 600,000 shares of the
Company's Common Stock. The stockholders of the Company approved the adoption of
the Purchase Plan in June 1996. At January 31, 1998, an aggregate of 241,774
shares had been issued under the Purchase Plan and 358,226 share remained for
the grant of future rights under the Purchase Plan. In March 1998, the Board of
Directors of the Company adopted and amendment to the Purchase Plan to increase
the number of shares authorized for issuance under the Purchase Plan to 800,000
shares. This amendment is intended to afford the Company greater flexibility in
providing employees with stock incentives and ensures that the Company can
continue to provide such incentives at levels determined appropriate by the
Board. During the last fiscal year, shares were purchased in the amounts and at
the weighted average prices per share under the Purchase Plan as follows:
Randall Bolten 6,342 shares ($5.79), Perry W. Thorndyke 5,411 shares ($5.71),
all current executive officers as a group 11,753 shares ($5.75), and all
employees (excluding executive officers) as a group 230,021 shares ($5.84).
Stockholders are requested in this Proposal 3 to approve the Purchase Plan,
as amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting
will be required to approve the Purchase Plan, as amended. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
8
<PAGE>
The essential features of the Purchase Plan, as amended, are outlined
below:
Purpose
The purpose of the Purchase Plan is to provide a means by which key
employees of the Company (and any parent or subsidiary of the Company designated
by the Board of Directors to participate in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll deductions,
to assist the Company in retaining the services of its employees, to secure and
retain the services of new employees, and to provide incentives for such persons
to exert maximum efforts for the success of the Company. Approximately 185 of
the Company's approximately 188 employees are eligible to participate in the
Purchase Plan. The rights to purchase Common Stock granted under the Purchase
Plan are intended to qualify as options issued under an "employee stock purchase
plan" as that term is defined in Section 423(b) of the Code.
Administration
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power, which it has not
exercised, to delegate administration of the Purchase Plan to a committee of not
less than two Board members. The Board may abolish any such committee at any
time and revest in itself the administration of the Purchase Plan.
Offerings
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each such offering is one
year in duration.
Eligibility
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the Purchase
Plan.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company in any calendar
year.
Participation in the Purchase Plan
Eligible employees become participants in the Purchase Plan by delivering
to the Company, prior to the date selected by the Board as the offering date for
the offering, or as determined by the Board for new employees, an agreement
authorizing payroll deductions of up to 15% of such employees' total
compensation during the purchase period.
Purchase Price
The purchase price per share at which shares are sold in an offering under
the Purchase Plan is the lower of (a) 85% of the fair market value of a share of
Common Stock on the date of commencement of the offering, or (b) 85% of the fair
market value of a share of Common Stock on the last day of any purchase date.
9
<PAGE>
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll deductions over
the offering period. At any time during the purchase period, a participant may
reduce or terminate his or her payroll deductions. A participant may increase or
begin such payroll deductions after the beginning of any purchase period, but
only on specified dates. All payroll deductions made for a participant are
credited to his or her account under the Purchase Plan and deposited with the
general funds of the Company. A participant may not make any additional payments
into such account.
Purchase of Stock
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board specifies a maximum number of shares any
employee may be granted the right to purchase and the maximum aggregate number
of shares which may be purchased pursuant to such offering by all participants.
If the aggregate number of shares to be purchased upon exercise of rights
granted in the offering would exceed the maximum aggregate number, the Board
would make a pro rata allocation of shares available in a uniform and equitable
manner. Unless the employee's participation is discontinued, his right to
purchase shares is exercised automatically at the end of the purchase period at
the applicable price. See "Withdrawal" below.
Withdrawal
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time prior to the end of the applicable offering period.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan.
Termination of Employment
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
Restrictions on Transfer
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
Duration, Amendment and Termination
The Board may suspend, terminate or amend the Purchase Plan at any time.
The Board may amend the Purchase Plan at any time. Any amendment of the Purchase
Plan must be approved by the stockholders within 12 months of its adoption by
the Board if the amendment would (a) increase the number of shares of Common
Stock reserved for issuance under the Purchase Plan, (b) modify the requirements
relating to eligibility for participation in the Purchase Plan, or (c) modify
any other provision of the Purchase Plan in a manner that would materially
increase the benefits accruing to participants under the Purchase Plan, if such
approval is required in order to comply with the requirements of Rule 16b-3
under the Exchange Act.
10
<PAGE>
Rights granted before amendment or termination of the Purchase Plan will
not be altered or impaired by any amendment or termination of such plan without
consent of the person to whom such rights were granted.
Effect of Certain Corporate Events
In the event of a dissolution, liquidation or specified type of merger of
the Company, the surviving corporation either will assume the rights under the
Purchase Plan or substitute similar rights, or the exercise date of any ongoing
offering will be accelerated such that the outstanding rights may be exercised
immediately prior to any such event.
Stock Subject to Purchase Plan
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan.
Federal Income Tax Information
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as a capital gain or loss. Capital gains currently are generally subject to
lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness, the provisions of
Section 162(m) and the satisfaction of a tax reporting obligation).
11
<PAGE>
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. KPMG Peat Marwick
LLP was retained by the Company in December 1995 and has audited the Company's
financial statements since its inception in 1993. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of KPMG Peat Marwick LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of KPMG Peat Marwick
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the selection
is ratified, the Audit Committee and the Board in their discretion may direct
the appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of KPMG Peat Marwick LLP. For purposes of
this vote, abstentions and broker non-votes will not be counted for any purpose
in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
12
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of January 31, 1998 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock.
Beneficial Ownership(1)
-------------------------
Number of Percent of
Beneficial Owner Shares Total
---------------- --------- ----------
Pehong Chen(2) ...................... 5,875,000 28.2
c/o BroadVision, Inc.
585 Broadway
Redwood City, CA 94063
Mayfield VII(3) ..................... 2,500,000 12.3
2800 Sand Hill Road
Menlo Park, CA 94025
Itochu Corporation(4) ............... 1,325,000 6.5
5-1, Kita-Aoyama, 2-Chome
Minao-ku, Tokyo 107-77
Japan
Geo Capital Corp. ................... 1,082,500 5.3
767 Fifth Avenue, 45th Floor
New York, NY 10153
Yogen K. Dalal(3)(5) ................ 2,552,500 12.5
David L. Anderson(6) ................ 420,236 2.1
Clark W. Catelain(7) ................ 226,400 1.1
Koh Boon Hwee(8) .................... 193,541 *
Randall C. Bolten(9) ................ 193,142 *
Perry W. Thorndyke(10) .............. 180,411 *
Carl Pascarella(11) ................. 50,000 *
Robert A. Runge(12) ................. 17,976 *
All Directors and Executive Officers
as a group (9 persons)(13) ......... 9,709,506 45.6
- ------------
* Less than one percent
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
20,358,033 shares outstanding on January 31, 1998, adjusted as required by
rules promulgated by the SEC.
(2) Includes 500,000 shares of Common Stock issuable upon the exercise of a
stock option exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares. Excludes 300,000 shares of Common Stock held
in trust by independent trustees for the benefit of Dr. Chen's children.
(3) Includes 2,385,000 shares held by Mayfield VII and 115,000 shares held by
Mayfield Associates Fund II. Mr. Dalal, a director of the Company, is a
general partner of the general partner of Mayfield VII and Mayfield
Associates Fund II, and therefore may be deemed to beneficially own the
shares currently owned by such entities. Mr. Dalal disclaims beneficial
ownership of the shares held by such entities, except to the extent of his
pecuniary interest therein.
(4) Includes 725,000 shares of Common Stock held by Itochu Corporation, 500,000
shares of Common Stock held by Itochu International, Inc. and 100,000
shares of Common Stock held by Itochu Techno-Science Corporation.
13
<PAGE>
(5) Includes 50,000 shares of Common Stock issuable upon the exercise of a
stock option exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares.
(6) Includes 87,704 shares of Common Stock owned by Sutter Hill Ventures, a
California Limited Partnership ("Sutter Hill"), over which Mr. Anderson, a
director of the Company, exercises voting and investing powers as a
managing director of Sutter Hill Ventures LLC, the general partner of
Sutter Hill. Includes 73,406 shares of Common Stock owned by Anvest L.P.,
over which Mr. Anderson exercises voting and investing power. Mr. Anderson
disclaims beneficial ownership of the shares of Common Stock held by the
other persons and entities associated with Sutter Hill, except to the
extent of his pecuniary interest therein. Includes 50,000 shares of Common
Stock issuable upon the exercise of a stock option exercisable within 60
days of January 31, 1998, subject to repurchase of unvested shares.
(7) Includes 26,400 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares.
(8) Includes 64,433 shares of Common Stock held by Seven Seas Group Ltd., in
which Mr. Koh holds a controlling interest, and 50,000 shares of Common
Stock issuable upon the exercise of a stock option exercisable within 60
days of January 31, 1998, subject to repurchase of unvested shares.
(9) Includes 40,000 shares of Common Stock held in trust by Mr. Bolten and his
wife for their benefit and 26,800 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days of January 31, 1998,
subject to repurchase of unvested shares.
(10) Includes 175,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares.
(11) Includes 50,000 shares of Common Stock issuable upon the exercise of a
stock option exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares.
(12) Mr. Runge left the Company in September 1997.
(13) Includes the information contained in the notes above, as applicable.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with, except that an initial
report of ownership was filed late by each of Messrs. Pascarella and Thorndyke.
14
<PAGE>
EXECUTIVE COMPENSATION
Compensation of Directors
Directors currently do not receive any cash compensation from the Company
for their services as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings.
In September 1997, each of Messrs. Anderson, Dalal and Pascarella were
granted a stock option to purchase 50,000 shares of the Company's Common Stock
at an exercise price of $5.50 per share. The options vest 25% on the one (1)
year anniversary of the vesting commencement date and monthly thereafter over a
three (3) year period.
Compensation of Executive Officers
SUMMARY OF COMPENSATION
The following table shows, for the fiscal years ended December 31, 1995,
1996 and 1997, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and its four other most highly compensated executive
officers at December 31, 1997 whose salary and bonus for the year ended December
31, 1997 exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation
Compensation(1) Awards
--------------------- -----------
Securities
Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#)
--------------------------- ---- ---------- --------- -----------
Pehong Chen(2) 1997 $178,333 $ 16,000 --
Chairman of the Board, President 1996 161,115 8,000 500,000
and Chief Executive Officer 1995 120,000 -- --
Randall C. Bolten 1997 141,290 27,225 17,300
Vice President, Finance and 1996 128,129 19,225 --
Chief Financial Officer 1995 39,825 6,600 160,000
Clark W. Catelain 1997 155,025 25,450 13,800
Vice President, Engineering 1996 144,070 13,800 --
1995 76,442 5,980 200,000
Robert A. Runge(3) 1997 91,123 13,850 9,100
Vice President, Marketing 1996 119,350 24,400 60,000
1995 36,906 4,950 215,000
Perry Thorndyke(4) 1997 159,527 21,725 66,600
Vice President, Marketing 1996 41,171 16,033 100,000
- ------------
(1) Includes amounts earned but deferred at the election of the Named Executive
Officers under the Company's 401(k) plan.
(2) Represents amount earned but deferred at the election of Dr. Chen from May
1995 through December 1995. Prior to April 1995, Dr. Chen was not paid a
salary for his services to the Company.
(3) Mr. Runge left the Company in September 1997.
(4) Mr. Thorndyke started with the Company in September 1996.
15
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
<TABLE>
The Company grants options to its executive officers under the Incentive
Plan. The following tables show for the fiscal year ended December 31, 1996,
certain information regarding options granted to, exercised by, and held at year
end by, the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
------------------------------------------------------------
Potential Reliable Value
Percent of at
Number of Total Options Assumed Annual Rates of
Securities Granted to Exercise Stock Price Appreciation
Underlying Employees in Price Per for Option Term(3)
Options Fiscal Year Share Expiration --------------------------
Name Granted (#) (%)(1) ($/Sh)(2) Date 5% ($) 10% ($)
---- ------------ ------ --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Randall C. Bolten(4) ......... 9,000 0.7 $7.00 6/2/07 $ 39,690 $ 100,170
8,300 0.6 5.50 9/2/07 28,760 72,584
Clark A. Catelain(4) ......... 8,600 0.6 7.00 6/2/97 37,926 95,718
8,300 0.6 5.50 9/2/07 28,760 72,584
Robert A. Runge(5) ........... 9,100 0.7 7.00 6/2/07 40,131 101,283
Perry Thorndyke .............. 8,300 0.6 7.00 6/2/07 36,603 92,379
58,300 4.3 5.50 9/2/07 202,010 509,834
<FN>
- ------------
(1) Based on options to purchase 1,346,000 shares granted in 1997.
(2) The exercise price per share of each option was equal to the closing sales
price of the Common Stock as quoted on the Nasdaq Stock Market's National
System on the day prior to the date of grant.
(3) The potential realizable value is based on the term of the option at its
time of grant (10 years). It is calculated by assuming that the stock price
on the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is exercised
and sold on the last day of its term for the appreciated stock. The 5% and
10% columns represent assumed rates of appreciation only, in accordance
with the rules of the SEC, and do not reflect the Company's estimate or
projection of future stock price performance. Actual gains, if any, are
dependent on the actual future performance of the Company's Common Stock
and no gain to the optionee is possible unless the stock rice increases
over the option term, which will benefit all stockholders.
(4) The option, which was granted under the Incentive Plan has a term of 10
years, subject to earlier termination in certain events related to
termination of employment, is immediately exercisable and vests over a
60-month period, with 20% of the shares vesting after one year, and 1/60 of
the shares vesting each month thereafter.
(5) Mr. Runge left the Company in September 1997.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
FISCAL YEAR-END OPTION VALUES OF UNEXERCISED OPTIONS
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at FY-End In-the-Money
(#)(2) Options at FY-End ($)(3)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Pehong Chen .................. 500,000 0 $1,250,000 0
Randall C. Bolten(4) ......... 17,300 0 3,800 0
Clark W. Catelain ............ 16,900 0 4,000 0
Perry Thorndyke .............. 166,600 0 154,150 0
<FN>
- ------------
(1) Value realized is based on the per share deemed values of the Company's
Common Stock on the date of exercise, determined after the date of grant
solely for financial accounting purposes, minus the exercise price, without
taking into account any taxes that may be payable in connection the
transaction.
(2) Reflects vested and unvested shares at December 31, 1997. Options granted
under the Incentive Plan are immediately exercisable, but are subject to
the Company's right to repurchase unvested shares on termination of
employment.
(3) Fair market value of the Company's Common Stock at December 31, 1997
($6.50) minus the exercise price of the options.
(4) Reflects shares acquired upon the early exercise of stock options, some of
which are subject to a right of repurchase by the Company.
</FN>
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors (the "Committee") is
composed of the non-employee directors identified at the end of this report.
None of these non-employee directors has any interlocking or other type of
relationship that would call into question his independence as a committee
member. The Committee is responsible for setting and administering the policies
which govern annual performance, and determines the compensation of the Chief
Executive Officer ("CEO") and other executive officers of the Company.
Compensation Philosophy
The objectives of the Company's executive compensation policies are to
attract, retain and reward executive officers who contribute to the Company's
success, to align the financial interests of executive officers with the
performance of the Company, to ensure a direct relationship between executive
pay and stockholder value, to motivate executive officers to achieve the
Company's business objectives and to reward individual performance. During 1997,
the Company used base salary, annual incentives and long-term incentives under
the Incentive Plan to achieve these objectives. In carrying out these
objectives, the Committee considers the following:
o The level of compensation paid to executive officers in positions of
companies similarly situated in size and products. To ensure that pay
is competitive, the Committee, from time to time, compares the
Company's executive compensation packages with those offered by other
companies in the same or similar industries or with other similar
attributes. Compensation surveys used by the Company typically include
public and private companies comparable in size, products or industry
to the Company.
- ------------
(1) The material in this report and under the caption "Performance Measurement
Comparison" are not "soliciting material," are not deemed filed with the
SEC and are not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended, or the Exchange Act
whether made before or after the date of this Proxy Statement and
irrespective of any general incorporation language therein.
17
<PAGE>
o The individual performance of each executive officer. Individual
performance includes meeting individual performance objectives,
demonstration of job knowledge, skills, teamwork and acceptance of the
Company's core values.
o Corporate performance. Corporate performance is evaluated by factors
such as performance relative to competitors, performance relative to
business conditions and progress in meeting the Company's objectives
and goals as typically reflected in the annual operating plan.
o The responsibility and authority of each position relative to other
positions within the Company.
The Committee does not quantitatively weigh these factors but considers all of
these factors as a whole in establishing executive compensation. The application
given each of these factors in establishing the components of executive
compensation follows.
Base Salary
Base salaries are established for each executive officer at levels that are
intended to be competitive with salaries for comparable positions at other
software and computer industry companies of similar size and products. The
Company seeks to pay salaries to executive officers that are commensurate with
their qualifications, duties and responsibilities and that are competitive in
the marketplace. In conducting periodic compensation reviews, the Committee
considers each individual executive officer's achievements in meeting Company
financial and business objectives during the prior fiscal year, as well as the
executive officer's performance of individual responsibilities and the Company's
financial position and overall performance. The Committee periodically considers
the low, midpoint and upper ranges of base salaries published by compensation
surveys in establishing base salaries of each executive officer.
Annual Incentive
Annual bonus incentives for executives are intended to reflect the
Company's belief that management's contribution to stockholder returns comes
from achieving operating results that maximize the Company's earnings and cash
flow over a multi-year time horizon. The Company believes that the achievement
of its performance objectives depends on (i) its ability to deliver outstanding
products and services to its customers, (ii) its success in establishing and
maintaining a position of strength in its chosen markets and (iii) its short-
and long-term profitability, as well as the quality of that profitability. For
purposes of annual incentive compensation, progress toward these performance
objectives is measured against the results anticipated in the Company's annual
operating plan, which is approved by the Board of Directors.
The 1997 incentive compensation for executive officers other than the Chief
Executive Officer was based in part on the achievement of total Company results
consistent with the Company's 1997 operating plan, as well as achievement of
other objectives in the 1997 operating plan specific to such officers'
individual areas of management responsibility.
The Company believes that this incentive compensation structure closely
links the incentives paid to its executives with the results necessary to create
long-term value for stockholders.
Long-Term Incentive
The Committee also endorses the position that stock ownership by management
is beneficial in aligning management and stockholder interests in enhancing
stockholder value. In that regard, stock options also are used to retain
executives and motivate results to improve long-term stock market performance.
Stock options are granted at the prevailing market value and will have value
only if the Company's stock price increases. As part of its periodic review of
compensation, the Compensation Committee reviews the stock option holdings of
the Company's officers and senior executives, and recommends additional stock
option grants as appropriate.
The Committee determines the number of options to be granted to executive
management based on (i) competitive practice within the comparison group used in
determining base salary, (ii) historical
18
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performance of the executive and (iii) the amount of prior grants held by the
executives, as well as the number of vested versus unvested options. When using
comparative data, the Company targets its option grants in the mid to high range
of comparable companies.
Section 162(m) limits the Company to a deduction for federal income tax
purposes of no more than $1.0 million of compensation paid to certain Named
Executive Officers in a taxable year. Compensation above $1.0 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. Stock options granted under the Incentive Plan with an exercise price at
least equal to the fair market value of the Company's common stock on the date
of grant are considered to be "performance-based compensation."
CEO Compensation
During the fiscal year ended December 31, 1997, Dr. Chen served as
Chairman, President and Chief Executive Officer throughout the year, and he
continues to hold such offices.
Dr. Chen's base salary, annual incentives and long-term incentives were
determined in accordance with the criteria described in the "Base Salary,"
"Annual Incentive" and "Long-Term Incentive" sections of this report. Dr. Chen's
base salary in 1997 was $178,333. See "Summary Compensation Table." This amount,
together with a potential annual incentive tied to the achievement of 1997
revenue and net income targets, was estimated to provide an annual cash
compensation level which would be competitive with the mid to high range of
compensation paid by comparable software companies. Based on Dr. Chen's and the
Company's operating performance in 1997, Dr. Chen earned an incentive bonus of
$16,000.
Conclusion
Through the plans described above, a significant portion of the Company's
executive compensation programs and Dr. Chen's compensation are contingent on
Company performance and realization of benefits closely linked to increases in
long-term stockholder value. The Company remains committed to this philosophy of
pay for performance, recognizing that the competitive market for talented
executives and the volatility of the Company's business may result in highly
variable compensation for a particular time period.
COMPENSATION COMMITTEE
David L. Anderson
Yogen K. Dalal
Koh Boon Hwee
19
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PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return since the Company's
initial public offering on June 21, 1996 of an investment of $100 in cash on
December 31, 1997 for (i) the Company's Common Stock, (ii) Nasdaq Index and
(iii) the Hambrecht & Quist Internet Index (the "H&Q Internet Index"). All
values assume reinvestment of the full amount of all dividends and are
calculated as of December 31 of each year:
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Broadvision NASDAQ H&Q Internet Index
12/31/96 100.00 100.00 100.00
1/31/97 111.11 107.74 101.16
2/28/97 114.29 102.21 85.90
3/31/97 104.76 95.39 79.28
4/30/97 67.47 98.44 82.87
5/31/97 92.06 109.34 99.35
6/30/97 84.13 112.60 98.71
7/31/97 76.19 124.45 113.70
8/31/97 66.67 123.94 115.14
9/30/97 88.89 131.62 130.68
10/31/97 88.89 123.30 126.53
11/30/97 98.41 124.97 124.78
12/31/97 82.54 122.62 134.20
- ------------
(1) This section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the
Company under the Securities Act or the Exchange Act whether made before
or after the date hereof and irrespective of any general incorporation
language in any such filing.
20
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers and
directors of the Company which provide, among other things, that the Company
will indemnify such officer or director, under the circumstances and to the
extent provided for therein, for expenses, judgments, fines and settlements that
he may be required to pay in actions or proceedings which he is or may be made a
party by reason of his position as a director, officer or other agent of the
Company, and otherwise to the fullest extent permitted under Delaware law and
the Company's By-laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Pehong Chen
----------------------------------
Pehong Chen
Chairman of the Board, President and
Chief Executive Officer
April 15, 1998
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APPENDIX A
BROADVISION, INC.
EQUITY INCENTIVE PLAN
ADOPTED ON APRIL 16, 1996 AS AN AMENDMENT AND RESTATEMENT
OF THE STOCK OPTION PLAN
APPROVED BY STOCKHOLDERS ON JUNE 11, 1996
AMENDED BY THE BOARD OF DIRECTORS ON MARCH 11, 1998
APPROVED BY STOCKHOLDERS ON ___________, 1998
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company and its Affiliates may be given an
opportunity to benefit from increases in value of the stock of the Company
through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to purchase restricted stock all as
defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Consultants, to secure and retain the services
of new Employees and Consultants, and to provide incentives for such persons to
exert maximum efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
1.
<PAGE>
(e) "Company" means BroadVision, Inc., a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "Continuous Status as an Employee, Director or Consultant" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(h) "Covered Employee" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "Director" means a member of the Board.
(j) "Disinterested Person" means a Director who either: (i) was not
during the one year prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any Affiliate entitling the participants therein to acquire equity securities
of the Company or any Affiliate except as permitted by Rule 16b-3(c)(2)(i); or
(ii) is otherwise considered to be a "disinterested person" in accordance with
Rule 16b-3(c)(2)(i), or any other applicable rules, regulations or
interpretations of the Securities and Exchange Commission.
(k) "Employee" means any person, including an Officer or Director,
employed by the Company or any Affiliate of the Company. 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.
(m) "Fair Market Value" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of The Nasdaq Stock Market, the Fair Market Value of a share of Common
Stock shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in Common Stock) on the last market
2.
<PAGE>
trading day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Board deems reliable;
(2) If the Common Stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or 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 bid and 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 Board deems reliable;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.
(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) "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.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(s) "Optionee" means an Employee or Consultant who holds an outstanding
Option.
(t) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "Plan" means this BroadVision, Inc., 1996 Equity Incentive Plan.
(v) "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.
3.
<PAGE>
(w) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(x) "Stock Award Agreement" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock
or the provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive stock
pursuant to a Stock Award; and the number of shares with respect to which a
Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section
13.
(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding
anything in this Section 3 to the contrary, at any time the Board or the
Committee may delegate to a committee of one or more members
4.
<PAGE>
of the Board the authority to grant Stock Awards to eligible persons who (1) are
not then subject to Section 16 of the Exchange Act and/or (2) are either (i) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award, or (ii) not persons
with respect to whom the Company wishes to avoid the application of Section
162(m) of the Code.
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate five million nine hundred seventy-five million
(5,975,000) shares of the Company's Common Stock. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award shall
revert to and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options appurtenant thereto may be granted only to
Employees. Stock Awards other than Incentive Stock Options and appurtenant
thereto may be granted only to Employees or Consultants.
(b) A Director shall in no event be eligible for the benefits of the
Plan unless at the time of grant the Director is also an Employee or Consultant.
(c) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant, or in the case of a restricted stock purchase award, the
purchase price is at least one hundred percent (100%) of the Fair Market Value
of such stock at the date of grant.
(d) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, following the expiration of the reliance period set forth
in Treasury Regulations section 1.162-27(f)(2), no person shall be eligible to
be granted Options covering more than seven hundred thousand (700,000) shares of
the Company's Common Stock in any calendar year.
5.
<PAGE>
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of a Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may
be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common Stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will, by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and any administrative interpretations or pronouncements thereunder
(a "QDRO"), and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person or any transferee pursuant to a QDRO.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
6.
<PAGE>
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Termination of Employment or Relationship as a Director or
Consultant. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) Disability of Optionee. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the
7.
<PAGE>
Option Agreement. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under 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 and again become available for
issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(j) Re-Load Options. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(c)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
8.
<PAGE>
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order satisfying
the requirements of Rule 16b-3 and any administrative interpretations or
pronouncements thereunder, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
(c) Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
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(d) Vesting. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) Termination of Employment or Relationship as a Director or
Consultant. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of any adversely affected holders of
Options, the cancellation of any outstanding Options under the Plan and the
grant in substitution therefor of new Options under the Plan covering the same
or different numbers of shares of stock, but having an exercise price per share
not less than: eighty-five percent (85%) of the Fair Market Value for a
Nonstatutory Stock Option, one hundred percent (100%) of the Fair Market Value
in the case of an Incentive Stock Option or, in the case of an Incentive Stock
Option held by a 10% stockholder (as described in subsection 5(c)), not less
than one hundred ten percent (110%) of the Fair Market Value per share of stock
on the new grant date. Notwithstanding the foregoing, the Board or the Committee
may grant an Option with an exercise price lower than that set forth above if
such Option is granted as part of a transaction to which section 424(a) of the
Code applies.
(b) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(d) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(d) of the Plan. The provisions of this
subsection 8(b) shall be applicable only to the extent required by Section
162(m) of the Code.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such
10.
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regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e) or 7(d) notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, a Consultant nor any person to whom a Stock
Award is transferred in accordance with the Plan shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such person has exercised the Stock
Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate or to continue acting as a Consultant or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee with or
without notice and with or without cause, or the right to terminate the
relationship of any Consultant pursuant to the terms of such Consultant's
agreement with the Company or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred in accordance with
the Plan, as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company
11.
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stating that such person is acquiring the stock subject to the Stock Award for
such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (i) the issuance of
the shares upon the exercise or acquisition of stock under the Stock Award has
been registered under a then currently effective registration statement under
the Securities Act, or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the Common Stock
of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(d), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation or an Affiliate of such surviving corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar Stock
Awards for those outstanding under the Plan, or (ii) such
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Stock Awards shall continue in full force and effect. In the event any surviving
corporation and its Affiliates refuse to assume or continue such Stock Awards,
or to substitute similar options for those outstanding under the Plan, then,
with respect to Stock Awards held by persons then performing services as
Employees, Directors or Consultants, the time during which such Stock Awards may
be exercised shall be accelerated and the Stock Awards terminated if not
exercised prior to such event.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock Awards
under the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible Employees
or Consultants with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options
granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award
13.
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shall not be impaired by any such amendment unless (i) the Company requests the
consent of the person to whom the Stock Award was granted and (ii) such person
consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's
initial public offering of shares of Common Stock becomes effective, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.
14.
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APPENDIX B
BROADVISION, INC.
EMPLOYEE STOCK PURCHASE PLAN
Adopted April 16, 1996
Approved By Stockholders June 11, 1996
Amended March 11, 1998
Approved By Stockholders __________, 1998
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of BroadVision, Inc., a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
1.
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(iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company and its Affiliates and to carry out the intent that the Plan be
treated as an "employee stock purchase plan" within the meaning of Section 423
of the Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee")
constituted in accordance with the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934. If administration is delegated to a Committee,
the Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate eight hundred thousand
(800,000) shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation
2.
<PAGE>
of the provisions of this Plan by reference in the document comprising the
Offering or otherwise) the period during which the Offering shall be effective,
which period shall not exceed twenty-seven (27) months beginning with the
Offering Date, and the substance of the provisions contained in paragraphs 5
through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment equal or exceed two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
(iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any right under that
Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock
3.
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which such employee may purchase under all outstanding rights and options shall
be treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company: (i) purchasable with a
percentage designated by the Board or the Committee not exceeding fifteen
percent (15%) of such employee's Earnings (as defined by the Board or the
Committee in each Offering) during the period which begins on the Offering Date
(or such later date as the Board or the Committee determines for a particular
Offering) and ends on the date stated in the Offering, which date shall be no
later than the end of the Offering, or (ii) designated by the Board or the
Committee. The Board or the Committee shall establish one or more dates during
an Offering (the "Purchase Date(s)") on which rights granted under the Plan
shall be exercised and purchases of Common Stock carried out in accordance with
such Offering.
(b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
4.
<PAGE>
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering (as defined by the Board or Committee in each Offering). The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of the
Company. A participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Notwithstanding (a) and (b) above, an eligible employee may also
become a participant pursuant to an Offering without delivering a participation
agreement if the terms of the Offering so provide.
(d) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee) under the Offering, without
interest.
5.
<PAGE>
(e) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest. For an Offering in which
no payroll deductions are required, a participant's rights shall be exercised as
provided in the Offering.
(b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in such compliance,
no rights granted under the Plan or any Offering shall be exercised and all
payroll deductions accumulated during the Offering (reduced to the extent, if
any, such deductions have been used to acquire stock) shall be distributed to
the participants, without interest.
9. COVENANTS OF THE COMPANY.
6.
<PAGE>
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act or any comparable successor provisions (excluding any employee
benefit plan, or related trust,
7.
<PAGE>
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under
the Plan;
(ii) Modify the provisions as to eligibility for participation
in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan
treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act as
amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
8.
<PAGE>
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at
any time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
as expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's
initial public offering of shares of common stock becomes effective (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.
9.
<PAGE>
APPENDIX C
PROXY
BROADVISION, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1998
The undersigned hereby appoints Pehong Chen and Randall Bolten, and each of
them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of BroadVision, Inc. which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
BroadVision, Inc. to be held at the Company's offices at 585 Broadway, Redwood
City, California 94063 on Monday, May 11, 1998 at 2:00 p.m. local time, and at
any and all postponements, continuations and adjournments thereof, with all
powers that the undersigned would possess if personally present, upon and in
respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
Unless a contrary direction is indicated, this Proxy will be voted for all
nominees listed in Proposal 1 and for Proposals 2, 3 and 4, as more specifically
described in the Proxy Statement. If specific instructions are indicated, this
Proxy will be voted in accordance therewith.
The Board of Directors recommends a vote for the nominees for director
listed below.
1. To elect directors to hold office until the next Annual Meeting of
Stockholders and until their successors are elected.
[ ] FOR all the nominees listed below (except as indicated).
[ ] WITHHOLD authority to vote for all nominees listed below.
To withhold authority to vote for any nominee(s), strike a line through that
nominee's name in the list below:
Pehong Chen, David L. Anderson, Yogen Dalal, Koh Boon Hwee, Carl Pascarella
(Continued and to be signed on reverse side)
ATTENTION: PLEASE NOTE THAT THIS BOX WILL NOT BE PRINTED. IT IS TO SHOW THE TEXT
POSITION ON THE FRONT OF THIS PROXY CARD.
<PAGE>
(Continued from other side)
The Board of Directors recommends a vote for Proposals 2, 3, and 4.
2. To approve the Company's Equity Incentive Plan, as amended, to increase the
aggregate number of shares of Common Stock authorized for issuance
thereunder by 975,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the Company's Employee Stock Purchase Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance thereunder by 200,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify selection of KPMG Peat Marwick LLP as independent auditors of the
Company for its fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated _______________________ , 1998
Signature: _________________________
Signature: _________________________
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators, trustees,
guardians and attorneys-in-fact
should add their titles. If signer
is a corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If signer is a partnership,
please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
ATTENTION: PLEASE NOTE THAT THIS BOX WILL NOT BE PRINTED. IT IS TO SHOW THE TEXT
POSITION ON THE BACK OF THIS PROXY CARD.
