SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
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Filed by a Party other than the Registrant |_|
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|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-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.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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BROADVISION, INC.
585 Broadway
Redwood City, CA 94063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 2000
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
Tuesday, June 20, 2000 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 an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the authorized number of
shares of Common Stock to 2,000,000,000 shares.
3. 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 13,125,000 shares.
4. To ratify the selection of Arthur Andersen LLP as independent
public accountants of the Company for its fiscal year ending
December 31, 2000.
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 May 1, 2000
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
Pehong Chen
Chairman of the Board,
President and Chief Executive Officer
Redwood City, California
May 17, 2000
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 June 20, 2000, 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 May 17, 2000 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 May
1, 2000 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on May 1, 2000 the Company had outstanding and entitled to
vote 263,000,000 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. Except for Proposal 2, broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether a matter has been approved. With respect to Proposal 2, abstentions and
broker non-votes will have the same effect as negative votes.
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.
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Stockholder Proposals
Proposals of stockholders that are intended to be presented at the
Company's 2001 Annual Meeting of Stockholders must be received by the Company
not later than January 17, 2001 in order to be considered for inclusion in the
proxy statement and proxy relating to that Annual Meeting. Such stockholder
proposals should be addressed to BroadVision, Inc., 585 Broadway, Redwood City,
California 94063, Attn: Corporate Secretary. The deadline for submitting a
stockholder proposal or a nomination for director that is not included in such
proxy statement and proxy is not later than the close of business on the 60th
day nor earlier than the close of business on the 90th day prior to the first
anniversary of this year's Annual Meeting. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
There are seven 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. Klaus Luft was appointed by the Company's Board of
Directors, and each of the other directors was elected by the stockholders at
the 1999 Annual Stockholders Meeting.
Shares represented by executed proxies will be voted, if authority to
do so is not withheld, for the election of the seven 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............... 42 Chairman of the Board of Directors,
President and Chief Executive Officer
David L. Anderson......... 56 General Partner, Sutter Hill Ventures
Yogen K. Dalal............ 49 General Partner, Mayfield Fund
Todd A. Garrett........... 58 Private Consultant and retired Senior Vice
President and Chief Information Officer,
Proctor & Gamble Co.
Koh Boon Hwee............. 49 Executive Chairman, Wuthelam Group of
Companies
Klaus Luft 58 President, Market Access for Technology
Services GmbH
Carl Pascarella........... 47 President and Chief Executive Officer of
Visa USA
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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 managing director of Sutter
Hill Ventures, a venture capital investment firm. Mr. Anderson currently serves
on the Board of Directors of Cytel Corporation, Dionex Corporation, and
Molecular Devices 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.
Todd A. Garrett has served as director of the Company since January
1999. Mr. Garrett is currently a private consultant. In 1999, Mr. Garrett
retired from Proctor & Gamble Company where he held various key executive
positions within the company since joining the company in 1985. These positions
included: Vice President, Asia/Pacific; Vice President, US Beauty Care; Group
President, President of Worldwide Strategic Planning, Beauty Care Products and
Senior Vice President. In October 1996, he was appointed to the post of Chief
Information Officer. Mr. Garrett holds a B.A. from the University of Rochester
and an M.B.A. from Xavier 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 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.
Klaus Luft has served as a director of the Company since February 2000.
Mr. Luft is the founder, owner and President of MATCH (Market Access for
Technology Services GmbH), a private company in Munich, Germany, that provides
sales and marketing services to high technology companies. He is also the
founder and Chairman of the supervisory board of Artedona AG, a privately held
company e-commerce established in 1999 and headquartered in Munich. Since August
1990, Mr. Luft as served as Vice Chairman and international Advisor to Goldman
Sachs Europe Limited. He also serves on the board of directors of Dell Computer
Corporation and Sagent Technology Inc. Mr. Luft is also a member of the
International Advisory Board of the Business School of International University
of Germany.
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.
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Board Committees and Meetings
During the fiscal year ended December 31, 1999, 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 presently composed of two
non-employee directors: Messrs. Dalal and Luft. The Audit Committee held three
meetings during 1999. The Audit Committee held three meetings during 1999.
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 presently composed of three non-employee
directors: Messrs. Anderson, Koh and Pascarella. The Compensation Committee
acted by written consent nine times during 1999.
The Non-Officer Option Committee, established in May 1997, awards stock
options to non-officer employees or consultants, not to exceed 90,000 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. The sole member of the Non-Officer
Option Committee is Dr. Chen.
During the fiscal year ended December 31, 1999, each Board member,
other than Mr. Dalal, 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 INCREASE IN NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK
The Board has adopted, subject to stockholder approval, an amendment to
the Company's Amended and Restated Certificate of Incorporation to increase the
Company's authorized number of shares of Common Stock from 500,000,000 to
2,000,000,000. Originally, the Company's authorized number of shares of Common
Stock was 50,000,000. In September 1999, the Board approved, and the
stockholders subsequently approved, an amendment to the Company's Amended and
Restated Certificate of Incorporation to increase the Company's authorized
number of shares of Common Stock from 50,000,000 to 500,000,000.
The additional Common Stock to be authorized by adoption of the
amendment would have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number of
shares of the Company's Common Stock outstanding, such as dilution of the
earnings per share and voting rights of current holders of Common Stock. If the
amendment is adopted, it will become effective upon filing of a Certificate of
Amendment of the Company's Amended and Restated Certificate of Incorporation
with the Secretary of State of the State of Delaware.
In addition to the 248,950,255 shares of Common Stock outstanding at
March 31, 2000, the Board has reserved 66,923,992 shares for issuance upon
exercise of options, and rights granted under the Company's stock option and
stock purchase plans and pursuant to warrants granted by the Company.
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The Board desires to have such shares available to provide additional
flexibility to use its capital stock for business and financial purposes in the
future. The additional shares may be used without further stockholder approval
for various purposes including, without limitation, raising additional capital,
providing equity incentives to employees, officers or directors, establishing
strategic relationships with other companies and expanding the Company's
business or product lines through the acquisition of other businesses or
products.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could be used by the Company to oppose a
hostile takeover attempt or delay or prevent changes in the control or
management of the Company. For example, without further stockholder approval,
the Board could adopt a "poison pill" that would, under certain circumstances
related to an acquisition of shares not approved by the Board of Directors, give
certain holders the right to acquire additional shares of Common Stock at a low
price, or the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although this proposal to increase the authorized Common Stock has been
prompted by business and financial considerations and not by the threat of any
hostile takeover attempt (nor is the Board currently aware of any such attempts
directed at the Company), nevertheless, stockholders should be aware that
approval of this proposal could facilitate future efforts by the Company to
deter or prevent changes in control of the Company, including transactions in
which the stockholders might otherwise receive a premium for their shares over
then current market prices.
The affirmative vote of the holders of a majority of the shares of
Common Stock will be required to approve this amendment to the Company's Amended
and Restated Certificate of Incorporation. As a result, abstentions and broker
non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2
PROPOSAL 3
APPROVAL OF AMENDMENT TO EQUITY INCENTIVE PLAN
In April 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's Equity Incentive Plan (the "Incentive
Plan"). Originally, there were 45,000,000 shares of the Company's Common Stock
authorized for issuance under the Incentive Plan. In March 1998, the Board
approved, and the stockholders subsequently approved, an amendment to the
Incentive Plan to increase the number of shares authorized for issuance under
the Incentive Plan from a total of 45,000,000 shares to 53,775,000 shares of
Common Stock. In February 1999, the Board approved, and the stockholders
subsequently approved, an amendment to the Incentive Plan to increase the number
of shares authorized for issuance under the Incentive Plan from a total of
53,775,000 shares to 61,875,000 shares of Common Stock. In September 1999, the
Board approved, and the stockholders subsequently approved, an amendment to the
Incentive Plan to increase the number of shares authorized for issuance under
the Incentive Plan from a total of 61,875,000 shares to 70,875,000 shares of
Common Stock.
In February 2000, 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 awards to the Company's employees, directors and consultants. The
amendment increases the number of shares authorized for issuance under the
Incentive Plan from a total of 70,875,000 shares to 84,000,000 shares of Common
Stock. The Board adopted this amendment to ensure that the Company can continue
to grant stock awards to employees, directors and consultants, at levels
determined appropriate by the Board, the Compensation Committee and the
Non-Officer Stock Option Committee.
At March 31, 2000, options (net of canceled or expired options)
covering an aggregate of 69,604,938 shares of the Company's Common Stock had
been granted under the Incentive Plan, and only 1,270,062 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 options to
purchase 4,892,472 shares at exercise prices of $4.75 to $37.958 per share and
to all employees (excluding executive officers) as a group options to purchase
15,674,250 shares at exercise prices of $3.333 to $52.833 share.
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Stockholders are requested in this Proposal 3 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 3.
The essential features of the Incentive Plan, as awarded to date (a
copy of which is included as Appendix A to this Proxy Statement), are outlined
below:
General
The Incentive Plan provides for the grant of both incentive and
nonstatutory stock options, stock bonuses and restricted stock purchase awards
(collectively, "awards"). 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. To date, the Company has granted only stock options under the
Incentive Plan.
Purpose
The Incentive Plan was adopted to provide a means by which selected
employees and 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. At March 31, 2000, approximately 843 of the Company's approximately 863
employees and consultants were 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 one or more 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).
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), directors and consultants are eligible
to receive all other types of awards under 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
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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 6,300,000 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.
Term 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, 2000, the closing price of the Company's
Common Stock as reported on the Nasdaq National Market was $44.875 per share.
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) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement or (iii) 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,
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
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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.
Terms of Stock Bonuses and Purchases of Restricted Stock
Payment. The Board determines the purchase price under a restricted
stock purchase agreement but the purchase price may not be less than 85% of the
fair market value of the Company's Common Stock on the date of grant. The Board
may award stock bonuses in consideration of past services without a purchase
payment.
The purchase price of stock acquired pursuant to a restricted stock
purchase agreement under the Incentive Plan must be paid either in cash at the
time the option is exercised or 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.
Vesting. Shares of stock sold or awarded under the Incentive Plan may,
but need not be, subject to a repurchase option in favor of the Company in
accordance with a vesting schedule as determined by the Board. The Board has the
power to accelerate the vesting of stock acquired pursuant to a restricted stock
purchase agreement under the Incentive Plan.
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 awards outstanding under the Incentive Plan or
substitute similar awards for those outstanding under such plan, or such
outstanding awards will continue in full force and effect. In the event that any
surviving corporation declines to assume or continue awards outstanding under
the Incentive Plan, or to substitute similar awards, then the time during which
such awards may be exercised will be accelerated and the awards terminated if
not exercised during such time. The acceleration of awards 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 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 (c) change any other provision of the Incentive Plan in any
other way if such modification requires stockholder approval
9
<PAGE>
in order to comply with Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") or to satisfy the requirements of
Section 422 of the Code or any Nasdaq or securities exchange listing
requirements. 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 as
provided in the nonstatutory stock options grant form, or if such form does not
provide for transferability, then by will or by the laws of descent and
distribution. 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. Rights under a stock bonus or restricted stock bonus
agreement may be transferred only as provided in the terms of the applicable
agreement.
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 more than two years from the date on which the option is
granted and more than 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 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 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
10
<PAGE>
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 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 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending December 31,
2000 and has further directed that management submit the selection of
independent auditors for ratification by the stockholders at the Annual Meeting.
Arthur Anderson LLP was retained by the Company in December 1999 and audited the
Company's annual financial statements for 1999. Representatives of Arthur
Anderson 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 Arthur Andersen LLP as the
Company's independent public accountants is not required by the Company's
By-laws or otherwise. However, the Board is submitting the selection of Arthur
Andersen 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 Arthur Andersen LLP. 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 4.
11
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of March 31, 2000 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 5% of its Common Stock.
<CAPTION>
Beneficial Ownership (1)
-----------------------------
Number of Percent of
Beneficial Owner Shares Total
---------------- ------ -----
<S> <C> <C>
Pehong Chen (2)................................................................ 57,375,000 22.2%
David L. Anderson (3).......................................................... 2,021,415 *
Koh Boon Hwee (4).............................................................. 1,701,972 *
Randall C. Bolten (5).......................................................... 1,671,825 *
Clark W. Catelain (6).......................................................... 1,476,600 *
Sandra Vaughan (7)............................................................. 889,101 *
Todd A. Garrett (8)............................................................ 540,000 *
Yogen K. Dalal (9)............................................................. 529,701 *
Carl Pascarella (10)........................................................... 450,000 *
Klaus Luft (11)................................................................ 240,000 *
All Directors and Executive Officers as a group (10 persons)(12)............... 66,518,109 25.40%
<FN>
- ------------------
* 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
261,890,074 shares outstanding on March 31, 2000, adjusted as required by
rules promulgated by the SEC.
(2) Includes 9,000,000 shares of Common Stock issuable upon the exercise of
stock options exercisable within 60 days of March 31, 2000, subject to
repurchase of unvested shares. Excludes 2,700,000 shares of Common Stock
held in trust by independent trustees for the benefit of Dr. Chen's
children.
(3) Includes 1,138,014 shares of Common Stock held in a retirement trust over
which Mr. Anderson exercises voting and investing power. Includes 327,771
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 178,125 shares of Common Stock issuable upon the
exercise of a stock option exercisable within 60 days of March 31, 2000,
subject to repurchase of unvested shares.
(4) Includes 540,000 shares of Common Stock held by Seven Seas Group Ltd., in
which Mr. Koh holds a controlling interest, and 450,000 shares of Common
Stock issuable upon the exercise of a stock option exercisable within 60
days of March 31, 2000, subject to repurchase of unvested shares.
(5) Includes 976,728 shares of Common Stock held in trust by Mr. Bolten and his
wife for their benefit and 251,757 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days of March 31, 2000,
subject to repurchase of unvested shares.
(6) Includes 863,700 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of March 31, 2000, subject to repurchase
of unvested shares.
(7) Includes 516,237 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of March 31, 2000, subject to repurchase
of unvested shares.
12
<PAGE>
(8) Includes 540,000 shares of Common Stock issuable upon the exercise of a
stock option exercisable within 60 days of March 31, 2000, subject to
repurchase of unvested shares.
(9) Includes 57,201 shares of Common Stock held in a family trust over which
Mr. Dalal exercises voting and investing power. Includes 22,500 shares of
Common Stock held in a retirement trust over which Mr. Dalal exercises
voting and investing power, and 450,000 shares of Common Stock issuable
upon the exercise of a stock option exercisable within 60 days of March 31,
2000, subject to repurchase of unvested shares.
(10) Includes 450,000 shares of Common Stock issuable upon the exercise of a
stock option exercisable within 60 days of March 31, 2000, subject to
repurchase of unvested shares.
(11) Includes 240,000 shares of Common Stock issuable upon the exercise of a
stock option exercisable within 60 days of March 31, 2000, subject to
repurchase of unvested shares.
(12) Includes the information contained in the notes above, as applicable.
</FN>
</TABLE>
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, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with, except: one Form 4
(reporting one transaction) was filed late by Mr. Bolten and two Forms 4
(reporting two transactions) were filed late by Sandra Vaughan, Vice President,
Corporate Marketing and formerly an executive officer of the Company.
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 January 1999, Mr. Garrett was granted a stock option to purchase
720,000 shares of the Company's Common Stock at an exercise price of $3.389 per
share. In February 2000, Mr. Luft was granted a stock option to purchase 240,000
shares of the Company's Common Stock at an exercise price of $49.75 per share.
The options vest 25% on the one-year anniversary of the vesting commencement
date and monthly thereafter over a three-year period.
Compensation of Executive Officers
13
<PAGE>
SUMMARY OF COMPENSATION
The following table shows, for the fiscal years ended December 31,
1999, 1998, and 1997, compensation awarded or paid to, or earned by, the
Company's Chief Executive Officer and its three other persons who were executive
officers at December 31, 1999 and whose salary and bonus for the year ended
December 31, 1999 exceeded $100,000 (the "Named Executive Officers"):
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Compensation
Compensation(1) Awards
------------------------ -----------
Securities
Annual Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#)
--------------------------- ---- ---------- --------- -----------
<S> <C> <C> <C> <C>
Pehong Chen.......................................... 1999 $ 246,034 $106,250 4,500,000
Chairman of the Board, President.................... 1998 200,000 75,000 --
And Chief Executive Officer......................... 1997 178,333 16,000
Randall C. Bolten.................................... 1999 170,456 37,500 180,000
Vice President, Finance and......................... 1998 154,008 36,000 351,000
Chief Financial Officer............................. 1997 141,190 27,225 155,700
Clark W. Catelain.................................... 1999 188,308 40,000 180,000
Vice President, Engineering......................... 1998 170,000 36,000 531,000
1997 155,025 25,450 124,200
Sandra Vaughan(2).................................... 1999 157,942 33,000 94,500
Vice President, Marketing........................... 1998 144,000 22,000 540,000
1997 135,017 14,700 180,000
<FN>
- ----------
(1) Includes amounts earned but deferred at the election of the Named Executive
Officers under the Company's 401(k) plan.
(2) Ms. Vaughan was elected Vice President of Marketing in 1998.
</FN>
</TABLE>
STOCK OPTION GRANTS AND EXERCISES
In addition to the Incentive Plan, the Company may also grant stock
options to non-officer employees under its 2000 Non-Officer Equity Incentive
Plan (the "Non-Officer Plan"). The Non-Officer Plan authorized the issuance of
6,000,000 shares of the Company's Common Stock. Only employees of the Company
who are not officers or directors are eligible to receive options under the
Non-Officer Plan, unless the option is an inducement essential to an officer's
entering into an employment contract with the Company. Options granted under the
Non-Officer Plan are not intended by the Company to qualify as incentive stock
options under the Code. As of March 31, 2000, there were no outstanding options
to purchase shares under the Non-Officer Plan and options to purchase 6,000,000
shares remained available for future grant under the Non-Officer Plan. As of
March 31, 2000, options to purchase a total of 17,604,270 shares had been
granted outside of the Incentive Plan and the Non-Officer Plan and were
outstanding.
14
<PAGE>
The following tables show for the fiscal year ended December 31, 1999,
certain information regarding options granted to, exercised by, and held at year
end by, the Named Executive Officers:
<TABLE>
Option Grants In Last Fiscal Year
<CAPTION>
Individual Grants
----------------------------------------------------
Percent of
Total Potential Realizable Value at
Number of Options Assumed Annual Rates of Stock
Securities Granted to Exercise Price Appreciation for
Underlying Employees Price Per Option Term (3)
Options in Fiscal Share Expiration -------------------------
Name Granted (#) Year %(1) ($/Sh)(2) Date 5% ($) 10% ($)
---- ----------- --------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Pehong Chen (4) 4,500,000 15.0 $ 6.667 6/24/09 $18,866,933 $47,812,513
Randall C. Bolten (4) 180,000 0.6 4.750 5/26/09 537,704 1,362,650
Clark A. Catelain (4) 180,000 0.6 4.750 5/26/09 537,704 1,362,650
Sandra Vaughan (4) 90,000 0.3 4.750 5/26/09 268,852 981,328
4,500 0.0 34.958 12/10/09 98,933 250,715
<FN>
- ----------
(1) Based on options to purchase 29,970,300 shares granted in 1999.
(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 price increases
over the option term, which will benefit all stockholders.
(4) The options have 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. The options will fully vest in the event of dissolution or
liquidation or other corporate reorganization, unless the acquiring company
assumes the options or substitutes similar options.
</FN>
</TABLE>
<TABLE>
Fiscal Year-End Option Values Of Unexercised Options
<CAPTION>
Number of Securities Underlying
Unexercised Options at Value of Unexercised
December 31, 1999 In-the-Money Options at
Shares (2)(#) December 31, 1999 (3)
Acquired On Value --------------------------- ----------------------------
Name Exercise(#) Received(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Pehong Chen............... -- -- 9,000,000 $0 $510,187,500 $0
Randall C. Bolten (4)..... 235,863 $1,362,650 320,157 0 18,148,899 0
Clark W. Catelain (4)..... -- -- 864,300 0 48,995,006 0
Sandra Vaughan (4)........ 457,866 7,140,595 515,637 0 29,230,172 0
<FN>
- -----------------
(1) Value received 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.
15
<PAGE>
(2) Reflects vested and unvested shares at December 31, 1999. Options granted
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, 1999
($56.6875) 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
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 1999,
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.
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.
16
<PAGE>
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 1999 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 1999 operating plan, as well as
achievement of other objectives in the 1999 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 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, 1999. 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 1999 was $249,034. See "Summary Compensation Table." This amount,
together with a potential annual incentive tied to the achievement of 1999
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 1999, Dr. Chen earned an incentive bonus of
$106,250. In June 1999, Dr. Chen received a stock option grant for 4,500,000
shares of Common Stock.
17
<PAGE>
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
Koh Boon Hwee
Carl Pascarella
PERFORMANCE MEASUREMENT COMPARISON
The following graph shows the total stockholder return from the
Company's initial public offering on December 31, 1996 through December 31, 1999
of an investment of $100 in cash on December 31, 1996 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]
H&Q
BVSN NASDAQ Internet
---- ------ --------
Dec-96 100.0000 100.0000 100.0000
Mar-97 107.9314 94.6299 79.2784
Jun-97 84.1257 111.6992 98.7064
Sep-97 87.3029 130.5694 130.6789
Dec-97 82.5371 121.6354 134.2037
Mar-98 226.9829 142.1872 179.2428
Jun-98 303.1771 146.7619 225.1365
Sep-98 134.1257 131.2007 180.8806
Dec-98 406.3543 169.8404 312.4258
Mar-99 758.7314 190.6540 528.5782
Jun-99 936.5029 208.0602 544.3983
Sep-99 1689.6800 212.7108 559.6012
Dec-99 6478.5714 315.1987 1083.2661
Mar-00 5128.5714 354.2001 1131.4740
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
Scott C. Neely
Secretary of the Company
May 17, 2000
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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 May 11, 1998
Amended by the Board of Directors on February 3, 1999
Approved by the Stockholders on May 12, 1999
Amended by the Board of Directors on August 31, 1999
Approved by the Stockholders on September 29, 1999
Amended by the Board of Directors on February 8, 2000
Submitted for Stockholder Approval at 2000 Annual Stockholders' Meeting
Reflects the two-for-one stock dividends effected in each of November
1999 and February 2000.
Termination Date: April 15, 2006
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors 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, Directors or Consultants, to secure and retain
the services of new Employees, Directors 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.
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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.
(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 Service" (formerly "Continuous Status as an Employee,
Director or Consultant") means that the Participant's service with the Company
or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Director or Consultant or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(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) "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.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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(l) "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 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.
(m) "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.
(n) "Non-Employee Director" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(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.
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(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, Director or Consultant who holds an
outstanding Option.
(t) "Outside Director" means a Director of the Company 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.
(w) "Securities Act" means the Securities Act of 1933, as amended.
(x) "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.
(y) "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 Board shall administer the Plan 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.
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(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 12.
(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 or
Committees of one or more members of the Board, and the term "Committee" shall
apply to any person or persons to whom such authority has been delegated. 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, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
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.
In the discretion of the Board, a Committee may consist solely of two
or more Outside Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
Within the scope of such authority, the Board or the Committee may (i) delegate
to a committee of one or more members of the Board who are not Outside
Directors, the authority to grant Stock Awards to eligible persons who are
either (a) 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 (b) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (ii) delegate to a committee of one or more
members of the Board who are not Non-Employee Directors the authority to grant
Stock Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate eighty-four million (84,000,000) 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.
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5. ELIGIBILITY.
(a) Incentive Stock Options appurtenant thereto may be granted only to
Employees. Stock Awards other than Incentive Stock Options may be granted to
Employees, Directors or Consultants.
(b) 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.
(c) Subject to the provisions of Section 11 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 six million three hundred thousand
(6,300,000) shares of the Company's Common Stock in any calendar year.
(d) A Consultant shall not be eligible for the grant of a Stock Award if,
at the time of grant, a Form S-8 Registration Statement under the Securities Act
("Form S-8") is not available to register either the offer or the sale of the
Company's securities to such Consultant because of the nature of the services
that the Consultant is providing to the Company, or because the Consultant is
not a natural person, or as otherwise provided by the rules governing the use of
Form S-8, unless the Company determines both (i) that such grant (A) shall be
registered in another manner under the Securities Act (e.g., on a Form S-3
Registration Statement) or (B) does not require registration under the
Securities Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities laws of all
other relevant jurisdictions.
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 Incentive Stock 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
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date the Option is granted. Notwithstanding the foregoing, an 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; provided, however, that at
any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded 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 be
transferable to the extent provided in the Option Agreement. If the Nonstatutory
Stock Option does not provide for transferability, then the Nonstatutory 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 Optionholder
only by the Optionholder. 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.
(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 Continuous Service. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may
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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 Service (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 Service (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 Securities 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 Service 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 Service
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 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 Service, 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.
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(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(b)), 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.
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 10(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
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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. Rights to acquire shares under the stock bonus or
restricted stock purchase agreement shall be transferable only upon such terms
and conditions as are set forth in the agreement, as the Board shall determine
in its discretion, so long as stock awarded under the 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; provided, however, that at any time that the
Company is incorporated in Delaware, payment of the Common Stock's "par value,"
as defined in the Delaware General Corporation Law, shall not be made by
deferred payment.. 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.
(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 Continuous Service. In the event a Participant's
Continuous Service 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. 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 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 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.
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9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. 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) No Employee, Director, Consultant or other 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 Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an Affiliate
to terminate (i) the employment of an Employee with or without notice and with
or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
(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, (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 (to give written assurances
satisfactory to the Company 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
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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. Notwithstanding the foregoing, the Company shall not be
authorized to withhold shares of Common Stock at rates in excess of the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes.
11. 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(c), 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 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
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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.
12. 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 11 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 any Nasdaq or securities exchange listing
requirements, 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,
Directors 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 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.
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13. 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.
14. 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.
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Appendix B
PROXY
BROADVISION, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 20, 2000 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 Tuesday, June 20, 2000 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, Todd A. Garrett,
Klaus Luft, 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.
(Continued from other side)
The Board of Directors recommends a vote for Proposals 2, 3, and 4.
2. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the authorized number of shares of
Common Stock to 2,000,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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 13,150,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the selection of Arthur Andersen LLP as independent public
accountants of the Company for its fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
Dated:
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.
