def14a
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant þ |
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Filed by a Party other than the Registrant ¨ |
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Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Check box if any part of the fee is offset as provided by Exchange Act
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statement number, or the Form or Schedule and the date of its filing. |
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Form, Schedule or Registration Statement No.: |
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Persons who are to respond to the collection of information contained in this form are not
required to respond unless the form displays a currently valid OMB control number. |
July 20, 2006
Dear Stockholder:
On behalf of BroadVision, Inc. (the Company), I
cordially invite you to attend the Annual Meeting of
Stockholders, which will begin at 10:00 a.m. local time on
Tuesday, August 8, 2006, at the Companys headquarters
located at 585 Broadway, Redwood City, California. At the
meeting, stockholders will be asked:
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1. To elect directors to serve for the ensuing year and
until their successors are elected. |
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2. To approve the BroadVision, Inc. 2006 Equity Incentive
Plan. |
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Note regarding proposals 3, 4 and 5: Each of
proposals 3, 4 and 5 relates to an amendment to the
Companys Amended and Restated Certificate of Incorporation
to reduce the total number of shares authorized. If more than
one of the following three proposals are approved, it is
anticipated that the Company would file no more than one of the
amendments that are approved. |
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3. To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
91,000,000 shares, (ii) the authorized number of
shares of common stock from 2,000,000,000 to
90,000,000 shares and (iii) the authorized number of
shares of preferred stock from 10,000,000 to
1,000,000 shares. |
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4. To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
141,000,000 shares, (ii) the authorized number of
shares of common stock from 2,000,000,000 to
140,000,000 shares and (iii) the authorized number of
shares of preferred stock from 10,000,000 to
1,000,000 shares. |
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5. To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
281,000,000 shares, (ii) the authorized number of
shares of common stock from 2,000,000,000 to
280,000,000 shares and (iii) the authorized number of
shares of preferred stock from 10,000,000 to
1,000,000 shares. |
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6. To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to remove the
provision that prevents the Companys stockholders from
taking actions by written consent. |
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7. To ratify the selection of Stonefield Josephson, Inc. as
independent auditors of the Company for its fiscal year ending
December 31, 2006. |
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8. To transact such other business as may properly come
before the meeting or any adjournment or postponement thereof. |
The accompanying Notice and Proxy Statement describes these
proposals in detail.
The directors and officers of the Company hope that as many
stockholders as possible will be present at the meeting. Because
the vote of each stockholder is important, we ask that you sign
and return the enclosed proxy card in the envelope provided
whether or not you plan to attend the meeting. This will not
limit your right to change your vote prior to or at the meeting.
We appreciate your interest in the Company. To assist us in
preparation for the meeting, please return your proxy card at
your earliest convenience.
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Very truly yours, |
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/s/ Pehong Chen |
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PEHONG CHEN |
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Chairman of the Board, President and |
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Chief Executive Officer |
TABLE OF CONTENTS
BROADVISION, INC.
585 Broadway
Redwood City, California 94063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 8, 2006
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, August 8,
2006, at 10:00 a.m. local time at the Companys
headquarters located at 585 Broadway, Redwood City, California
for the following purposes:
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1. To elect directors to serve for the ensuing year and
until their successors are elected. |
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2. To approve the BroadVision, Inc. 2006 Equity Incentive
Plan. |
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Note regarding proposals 3, 4 and 5: Each of
proposals 3, 4 and 5 relates to an amendment to the
Companys Amended and Restated Certificate of Incorporation
to reduce the total number of shares authorized. If more than
one of the following three proposals are approved, it is
anticipated that the Company would file no more than one of the
amendments that are approved. |
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3. To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
91,000,000 shares, (ii) the authorized number of
shares of common stock from 2,000,000,000 to
90,000,000 shares and (iii) the authorized number of
shares of preferred stock from 10,000,000 to
1,000,000 shares. |
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4. To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
141,000,000 shares, (ii) the authorized number of
shares of common stock from 2,000,000,000 to
140,000,000 shares and (iii) the authorized number of
shares of preferred stock from 10,000,000 to
1,000,000 shares. |
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5. To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
281,000,000 shares, (ii) the authorized number of
shares of common stock from 2,000,000,000 to
280,000,000 shares and (iii) the authorized number of
shares of preferred stock from 10,000,000 to
1,000,000 shares. |
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6. To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to remove the
provision that prevents the Companys stockholders from
taking actions by written consent. |
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7. To ratify the selection of Stonefield Josephson, Inc. as
independent auditors of the Company for its fiscal year ending
December 31, 2006. |
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
July 7, 2006 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.
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By Order of the Board of Directors |
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/s/ Sandra Adams |
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SANDRA ADAMS |
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Secretary |
Redwood City, California
July 20, 2006
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.
BROADVISION, INC.
585 Broadway
Redwood City, California 94063
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
July 20, 2006
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of
Directors of BroadVision, Inc., a Delaware corporation
(BroadVision or the Company), for use at
the Annual Meeting of Stockholders to be held on August 8, 2006,
at 10:00 a.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 Companys
headquarters located at 585 Broadway, Redwood City, California.
The Company intends to mail this proxy statement and
accompanying proxy card on or about July 20, 2006 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 card 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 July 7, 2006 will be entitled to notice of and to vote
at the Annual Meeting. At the close of business on July 7,
2006, the Company had outstanding and entitled to
vote 69,383,354 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.
A quorum of stockholders is necessary to hold a valid meeting. A
quorum will be present if a majority of the outstanding shares
are represented by stockholders present at the meeting in person
or by proxy. Votes will be counted by the inspector of election
appointed for the meeting, who will separately count
For and (with respect to proposals other than the
election of directors) Against votes, abstentions
and broker non-votes. (A broker non-vote occurs when
a nominee holding shares for a beneficial owner does not vote on
a particular proposal because the nominee does not have
discretionary voting power with respect to that proposal and has
not received instructions with respect to that proposal from the
beneficial owner despite voting on at least one other proposal
for which it does have discretionary authority or for which it
has received instructions.) Abstentions and broker non-votes
will be counted in determining whether a quorum is present.
Abstentions will be counted towards the vote total for
proposals 1, 3, 4, 5 and 6, and will have the
same effect
as Against votes. Broker non-votes have no effect
and will not be counted towards the vote total for any proposal,
except proposals 3, 4, 5 and 6. For proposals 3, 4 5
and 6, broker non-votes will have the same effect as
Against votes.
VOTING PROCEDURES
Stockholders may either vote For all the nominees to
the Board of Directors or may abstain from voting for any
nominee specified. For each of the other matters to be voted on,
stockholders may vote For or Against or
abstain from voting.
Stockholder of Record: Shares Registered in the
Stockholders Name
Stockholders of record may vote in person at the annual meeting
or vote by proxy using the enclosed proxy card. Whether or not
stockholders plan to attend the meeting, we urge stockholders to
vote by proxy to ensure each vote is counted. Stockholders may
still attend the meeting and vote in person if they have already
voted by proxy.
To vote in person, stockholders should attend the annual meeting
and will receive a ballot when they arrive.
To vote using the proxy card, stockholders should simply
complete, sign and date the enclosed proxy card and return it
promptly in the envelope provided. If stockholders return the
signed proxy card to us before the annual meeting, we will vote
their shares as the stockholders direct.
Beneficial Owner: Shares Registered in the Name of Broker
or Bank
If the stockholder is a beneficial owner of shares registered in
the name of a broker, bank or other agent, the stockholder
should have received a proxy card and voting instructions with
these proxy materials from that organization rather than from
BroadVision. To vote using the proxy card, the stockholder
should simply complete and mail the proxy card. To vote in
person at the Annual Meeting, the stockholder must obtain a
valid proxy from the broker, bank or other agent. The
stockholder should follow the instructions from the broker, bank
or other agent included with these proxy materials, or contact
the broker, bank or other agent to request a proxy form.
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
Companys principal executive office, 585 Broadway, Redwood
City, California 94063, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by
attending the meeting and voting in person. Attendance at the
meeting will not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion
in the Companys proxy statement and form of proxy for the
Companys 2007 annual meeting of stockholders pursuant to
Rule 14a-8 of the
Securities Exchange Act of 1934, as amended (the Exchange
Act), is March 21, 2007. Stockholders wishing to
submit proposals or director nominations that are not to be
included in such proxy statement and proxy must do so no 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 years Annual Meeting. Stockholders are
also advised to review the Companys Bylaws, which contain
additional requirements with respect to advance notice of
stockholder proposals and director nominations.
RESULTS OF VOTING
Preliminary voting results will be announced at the annual
meeting. Final voting results will be published in our quarterly
report on
Form 10-Q for the
third quarter of 2006.
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PROPOSAL 1
ELECTION OF DIRECTORS
There are four nominees for the eight Board positions presently
authorized pursuant to the Companys Bylaws. Dave Anderson,
Roderick McGeary and T. Michael Nevens, current independent
Board members, are not standing for re-election. Proxies will
not be voted for a greater number of persons than the four named
nominees. 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 directors earlier
death, resignation or removal. Other than Mr. Stieger, each
of the nominees listed below is currently a director of the
Company who was previously elected by the stockholders.
Mr. Stieger was recommended to the Board and the nominating
committee of the Board by the Companys management. It is
the Companys policy to invite nominees for directors to
attend the Annual Meeting. None of the current members of the
Board attended the 2005 Annual Meeting of Stockholders.
Directors are elected by a plurality of the votes properly cast
in person or by proxy. The four nominees receiving the highest
number of affirmative votes will be elected. Shares represented
by executed proxies will be voted, if authority to do so is not
withheld, for the election of the four nominees named below. If
any nominee becomes unavailable for election as a result of an
unexpected occurrence, shares will be voted for the election of
a substitute nominee proposed by the Companys management.
Each person nominated for election has agreed to serve if
elected. The Companys management has no reason to believe
that any nominee will be unable to serve. In advance of the 2007
Annual Meeting of Stockholders, the Company intends to identify
one or more additional candidates to fill vacancies on the
Board, which candidates would be appointed to fill such
vacancies by the Board, upon recommendation by the Nominating
Committee.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and a brief biography for each of them
are set forth below:
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Principal Occupation/ |
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Position Held with the Company |
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Pehong Chen
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48 |
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Chairman of the Board of Directors, President and Chief
Executive Officer |
James D. Dixon
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61 |
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Formerly an executive with bankofamerica.com |
Robert Lee
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56 |
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Formerly an executive with Pacific Bell |
François Stieger
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57 |
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CEO, Intentional Software International Sarl |
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,
Inc., a supplier of client-server software products.
Dr. Chen founded and, from 1989 to 1992, served as
President of, Gain Technology, Inc., a provider of multimedia
applications development systems, which was acquired by Sybase,
Inc. Dr. Chen currently serves on the board of directors of
SINA.com and Tumbleweed Communications Corp. 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.
James D. Dixon has served as a director of the Company
since January 2003. Prior to his retirement from Bank of America
in January 2002, Mr. Dixon served as an executive with
bankofamerica.com. From September 1998 to February 2000,
Mr. Dixon was Group Executive and Chief Information Officer
of Bank of America Technology & operations. From 1990
to 1998, before the merger of NationsBank Corporation and
BankAmerica Corporation, Mr. Dixon was President of
NationsBank Services, Inc. From 1986 to 1990, he also served as
Chief Financial Officer for Citizens and Southern Bank/ Sovran,
a predecessor company to NationsBank. Mr. Dixon holds a
B.A. from Florida State University, a J.D. from University of
Florida School
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of Law, and he is a graduate of the executive M.B.A. program at
Stanford University. Mr. Dixon also serves on the board of
directors of CheckFree Corporation, a provider of financial
electronic commerce services and products, 724 Solutions Inc., a
provider of mobile network technology and Rare Hospitality
International, Inc., a restaurant operator and franchisor.
Robert Lee has served as a director of the Company since
August 2004. Mr. Lee was a corporate Executive Vice
President and President of Business Communications Services at
Pacific Bell, where he established two new subsidiaries: Pacific
Bell Internet Services and Pacific Bell Network Integration.
During his 26 year career at Pacific Bell, Mr. Lee
managed groups in operations, sales and marketing. Mr. Lee
served as Executive Vice President of Marketing and Sales from
1987 to 1992. Mr. Lee serves on the board of directors of
Interland, which provides web hosting for the small and medium
business market, Netopia, which manufactures and sells DSL
internet routers for consumers and small businesses, and Blue
Shield of California, which provides health insurance to members
in California. Mr. Lee holds a B.S. in Electrical
Engineering from University of Southern California and an M.B.A.
from University of California at Berkeley.
François Stieger leads Intentional Softwares
international group as CEO of Intentional Software International
Sarl. Prior to joining Intentional Software International in
January 2006, since April 2003 Mr. Stieger was senior vice
president and general manager for Europe, Middle East and Africa
for Verisign, the leading provider of critical infrastructure
security services for the Internet and telecommunication
markets. Prior to joining Verisign Stieger was a partner of
Amadeus Capital, a leading European venture capital firm based
in London. In 1996, Stieger established BroadVisions
European operations. From 1987 to 1992, Mr. Stieger was a
Vice President of Oracle Corporation, and established and
managed Oracles operations for southern and central
Europe. Mr. Stieger graduated from the University of
Strasbourgs Institute of Technology.
INFORMATION ABOUT THE BOARD OF DIRECTORS
Although the Company voluntarily delisted from the Nasdaq
National Market (Nasdaq) as of March 8, 2006,
the Company continues to abide by the corporate governance
standards established by Nasdaq as a matter of sound business
practices. The Company intends to apply for relisting on the
Nasdaq National Market at such point in the future when the
Company meets Nasdaqs initial listing requirements.
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Independence of the Board of Directors |
As required under Nasdaq listing standards, a majority of the
members of a listed companys board of directors must
qualify as independent, as affirmatively determined
by the board of directors. The Board consults with the
Companys counsel to ensure that the Boards
determinations are consistent with all relevant securities and
other laws and regulations regarding the definition of
independent, including those set forth in pertinent
listing standards of Nasdaq, as in effect time to time.
Consistent with these considerations, after review of all
relevant transactions or relationships between each director, or
any of his family members, and the Company, its senior
management and its independent auditors, the Board affirmatively
has determined that five of the Companys current
directors, and three of the Companys four nominees to
serve as director, are independent directors within the meaning
of the applicable Nasdaq listing standards. Dr. Chen, the
Companys Chairman, Chief Executive Officer, President and
largest stockholder, is not independent within the
meaning of the applicable Nasdaq listing standards.
As required under applicable Nasdaq listing standards, the
Companys independent directors meet in regularly scheduled
executive sessions at which only independent directors are
present, in conjunction with regularly scheduled Board meetings
and otherwise as needed.
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Code of Business Ethics and Conduct |
The Company has adopted a Code of Business Ethics and Conduct
(the Code of Conduct) that applies to all of its
directors, officers and employees. The text of the Code of
Conduct is posted on the Companys website at
www.broadvision.com. If the Company makes any substantive
amendment to the Code of Conduct
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or grants any waiver from a provision of the Code of Conduct to
any executive officer or director, the Company will promptly
disclose the nature of the amendment or waiver on its website.
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Stockholder Communications with the Board of
Directors |
The Companys Board has adopted a formal process by which
stockholders may communicate directly with the members of the
Board, and stockholders are encouraged to do so. Stockholders
interested in communicating with the directors may do so by
addressing correspondence to a particular director, or to the
Board generally, in care of BroadVision at 585 Broadway, Redwood
City, California 94063. If no particular director is named,
letters will be forwarded, depending on the subject matter, to
the Chair of the Audit, Compensation or Nominating Committee.
Company personnel will not screen or edit such communications
and will forward them directly to the intended member of the
Board.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 2005, the Board
met six times and acted twice by unanimous written consent.
During the fiscal year ended December 31, 2005, each Board
member attended 75% or more of the aggregate of the meetings of
the Board and of the committees on which he served, held during
the period for which he was a director or committee member,
respectively.
The Board has an Audit Committee, a Compensation Committee and a
Nominating Committee. Copies of the charters of all three of the
Boards standing committees are available on the
Companys website at www.broadvision.com. Each committee
has authority to obtain advice and assistance from consultants
and advisors, as it deems appropriate, to carry out its
responsibilities. The Board has determined that each member of
its committees meets the applicable rules and regulations
regarding independence and that each member of its
committees is free of any relationship that would interfere with
his individual exercise of independent judgment with regard to
the Company.
Below is a description of each of these committees.
The Audit Committee of the Board of Directors oversees the
Companys corporate accounting and financial reporting
process. For this purpose, the Audit Committee performs several
functions. The Audit Committee evaluates the performance of and
assesses the qualifications of the independent auditors;
determines and approves the engagement of the independent
auditors; determines whether to retain or terminate the existing
independent auditors or to appoint and engage new independent
auditors; reviews and approves the retention of the independent
auditors to perform any proposed permissible non-audit services;
monitors the rotation of partners of the independent auditors on
the Companys audit engagement team as required by law;
confers with management and the independent auditors regarding
the effectiveness of internal control over financial reporting;
establishes procedures, as required under applicable law, for
the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls
or auditing matters and the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters; reviews the financial statements
to be included in the Companys Annual Report on
Form 10-K; and
discusses with management and the independent auditors the
results of the annual audit and the results of the
Companys quarterly financial statements.
The Audit Committee is presently composed of three non-employee
directors: Messrs. Dixon (Chairman), Nevens and McGeary.
The Board has determined that all members of the Companys
Audit Committee are independent (as independence is currently
defined in Rule 4350(d)(2)(A) of the Nasdaq listing
standards). The Board has determined that Mr. Dixon
qualifies as an audit committee financial expert, as
defined in applicable Securities and Exchange Commission
(SEC) rules. The Board made a qualitative assessment
of Mr. Dixons level of knowledge and experience based
on a number of factors, including his formal education and
experience as a chief financial officer for Citizens and
Southern Bank/ Sovran, a predecessor company to NationsBank.
Mr. Nevens and Mr. McGeary, who served on the Audit
Committee in fiscal year 2005, are not standing for re-election
to the Board of Directors at the Annual
5
Meeting. Pending their election to the Board, the Board has
appointed Mr. Lee and Mr. Stieger to replace
Mr. Nevens and Mr. McGeary on the Audit Committee
following the Annual Meeting.
The Audit Committee is also vested with oversight of corporate
governance matters and, in that regard, makes determinations as
to all aspects of the Companys corporate governance
functions on behalf of the Board and makes recommendations to
the Board regarding corporate governance issues. The Audit
Committee is responsible for periodically reviewing and
assessing the Companys governance principles to determine
their adherence to the Code of Conduct, and recommending any
changes deemed appropriate to the Board for its consideration.
In 2005, the Audit Committee met ten times. The Audit Committee
has adopted an amended Audit Committee Charter that is attached
as Appendix A to the Companys Proxy Statement for the
2005 Annual Stockholders Meeting. See Report of the
Audit Committee of the Board of Directors below.
|
|
|
The Compensation Committee |
The Compensation Committee of the Board of Directors reviews and
approves the overall compensation strategy and policies for the
Company. The Compensation Committee reviews and approves
corporate performance goals and objectives relevant to the
compensation of the Companys executive officers and other
senior management; reviews and approves the compensation and
other terms of employment of the Companys Chief Executive
Officer; reviews and approves the compensation and other terms
of employment of the other executive officers; and administers
the Companys stock option and purchase plans, pension and
profit sharing plans, stock bonus plans, deferred compensation
plans and other similar programs. The Company also has a
Non-Officer Option Committee, established in May 1997, which
awards stock options to non-officer employees and consultants,
not to exceed 10,000 shares per non-officer employee and
consultant per fiscal year, at or after the hiring of such
employee or consultant. The Compensation Committee is presently
composed of two non-employee directors: Messrs. Anderson
(Chairman) and Lee. Mr. Anderson, who served on the
Compensation Committee in fiscal year 2005, is not standing for
re-election to the Board of Directors at the Annual Meeting.
Pending his election to the Board, the Board has appointed
Mr. Stieger to replace Mr. Anderson on the Audit
Committee following the Annual Meeting. All members of the
Companys Compensation Committee are independent (as
independence is currently defined in Rule 4200(a)(15) of
the Nasdaq listing standards). The sole member of the
Non-Officer Option Committee is Dr. Chen. In 2005, the
Compensation Committee did not meet.
The Nominating Committee makes determinations as to the
individuals who are to be nominated for membership to the Board.
The Nominating Committee has a long standing practice of
considering any qualified director candidates that are
recommended by our stockholders. Stockholders who wish to
recommend a director candidate for consideration by the
Nominating Committee may do so in writing to the Chairman of the
Nominating Committee at the following address: BroadVision, 585
Broadway, Redwood City, California 94063.
If a stockholder wishes the Nominating Committee to consider a
director candidate for nomination at the Companys next
annual meeting, then the Companys Bylaws require that
stockholder to send written notice of the recommendation no
sooner than 120 days and no later than 90 days prior
to the first anniversary of the preceding years annual
meeting, which notice is otherwise in accordance with the
requirements for stockholder nominations described in the
Companys Bylaws. Submissions must include the
candidates name and sufficient biographical information
concerning the candidate, including age, five-year employment
history with employer names and a description of the
employers businesses, whether such candidate can read and
understand basic financial statements, and board memberships, if
any. The submission must be accompanied by a written consent of
the individual to stand for election if nominated by the Board
of Directors and to serve if elected by the stockholders. The
Nominating Committee is presently composed of two non-employee
directors: Messrs. Anderson (Chairman) and Lee.
Mr. Anderson, who served on the Nominating Committee in
fiscal year 2005, is not standing for re-election to the Board
of Directors at the Annual Meeting. Pending his election to the
Board, the Board has appointed Mr. Stieger to replace
Mr. Anderson on the Audit Committee
6
following the Annual Meeting. All members of the Companys
Nominating Committee are independent (as independence is
currently defined in Rule 4200(a)(15) of the Nasdaq listing
requirements). In 2005, the Nominating Committee acted once by
unanimous written consent.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS*
The following is the report of the Audit Committee with respect
to the Companys audited financial statements for the
fiscal year ended December 31, 2005, which include the
consolidated balance sheets of the Company as of
December 31, 2005 and 2004, and the related consolidated
statements of operations, stockholders equity and cash
flows for each of the three years in the period ended
December 31, 2005 and the notes thereto.
Review With Management. The Audit Committee has reviewed
and discussed the Companys audited financial statements
with management.
Review and Discussions With Independent Auditors. The
Audit Committee has discussed with Stonefield Josephson, Inc.,
the Companys independent auditors, the matters required to
be discussed by SAS 61 (Codification of Statements on
Accounting Standards) that include, among other items, matters
related to the conduct of the audit of the Companys
financial statements. The Audit Committee has also received
disclosures and the letter from Stonefield Josephson, Inc.
required by Independence Standards Board Standard No. 1
(that relates to the auditors independence from the
Company and its related entities) and has discussed with
Stonefield Josephson, Inc. its independence from the Company.
Conclusion. Based on the review and discussions referred
to above, the Audit Committee recommended to the Board of
Directors that the Companys audited financial statements
be included in the Companys Annual Report on
Form 10-K for the
fiscal year ended December 31, 2005.
AUDIT COMMITTEE
James D. Dixon, Chairman
Roderick McGeary
T. Michael Nevens
* The material in this report is not soliciting
material, is not deemed filed with the SEC,
and is not incorporated by reference into any filing of the
Company under the Securities Act of 1933, as amended (the
Securities Act), or the Exchange Act.
7
PROPOSAL 2
APPROVAL OF THE
BROADVISION, INC. 2006 EQUITY INCENTIVE PLAN
The BroadVision, Inc. 2006 Equity Incentive Plan (the 2006
Incentive Plan) was adopted by the Board of Directors in
March 2006, subject to stockholder approval at the Annual
Meeting. Pending approval of the 2006 Incentive Plan, there will
be 3,500,000 shares of Common Stock reserved for issuance
under the 2006 Incentive Plan.
The Board adopted the 2006 Incentive Plan as a single,
comprehensive equity incentive program to replace the
Companys 1996 Equity Incentive Plan (the 1996
Incentive Plan), which terminated according to its terms
on April 15, 2006. The approval of the 2006 Incentive Plan
will allow the Company to utilize a broad array of equity
incentives in order to secure and retain the services of
employees, directors, and consultants of the Company and its
affiliates, and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its
affiliates.
As of April 1, 2006, options (net of canceled or expired
options) covering an aggregate of 12,210,513 shares of
Common Stock had been granted under the 1996 Equity Incentive
Plan, and approximately 19,205 shares of Common Stock
remained available for future grants under the 1996 Equity
Incentive Plan. During the last fiscal year, under the 1996
Incentive Plan, the Company granted no options to current
executive officers and granted to all employees (excluding
executive officers) as a group options to
purchase 396,900 shares at exercise prices of $0.43 to
$2.36 per share.
In February 2000, the Board adopted the Companys 2000
Non-Officer Equity Incentive Plan (the Non-Officer
Plan), which provides for the grant of nonstatutory stock
options, stock bonus awards and stock purchase awards to
employees and consultants of the Company. The Non-Officer Plan
authorizes the issuance of 2,666,666 shares of the
Companys 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 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 April 1, 2006, options (net
of cancelled or expired options) covering an aggregate of
1,157,199 shares of the Companys Common Stock had
been granted under the Non-Officer Plan, and
1,509,467 shares (plus any shares that might in the future
be returned to the Non-Officer Plan as a result of cancellations
or expiration of options) remained available for future grant
under the Non-Officer Plan. During the last fiscal year, under
the Non-Officer Plan, the Company granted to all employees as a
group options to purchase 2,500 shares at an exercise
price of $2.10. As of April 1, 2006, options to purchase a
total of 1,066,655 shares of the Companys Common
Stock had been granted outside of the 1996 Incentive Plan and
the Non-Officer Plan, of which options covering
51,623 shares at exercise prices of $5.50 to
$381.94 per share were outstanding.
The following table provides certain information with respect to
all of the Companys equity compensation plans in effect as
of December 31, 2005.
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
Remaining Available | |
|
|
Number of Securities | |
|
|
|
for Issuance Under | |
|
|
to be Issued | |
|
Weighted-Average | |
|
Equity Compensation | |
|
|
Upon Exercise of | |
|
Exercise Price of | |
|
Plans (Excluding | |
|
|
Outstanding Options, | |
|
Outstanding Options, | |
|
Securities Reflected | |
|
|
Warrants and Rights | |
|
Warrants and Rights | |
|
in Column (a)) | |
Plan Category |
|
(a) | |
|
(b) | |
|
(c) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by security holders(1)
|
|
|
4,469,745 |
|
|
$ |
20.63 |
|
|
|
3,498,794 |
|
Equity compensation plans not approved by security holders(2)
|
|
|
587,838 |
|
|
$ |
16.70 |
|
|
|
2,741,744 |
|
Total
|
|
|
5,057,583 |
|
|
$ |
20.17 |
|
|
|
6,240,538 |
|
8
|
|
(1) |
Includes the following: Incentive Plan, Employee Stock Purchase
Plan, 1993 Interleaf Stock Option Plan and 1994 Interleaf
Employee Stock Option Plan. |
|
(2) |
Includes the following: the 2000 Non-Officer Equity Incentive
Plan (the 2000 Non-Officer Plan) and non-plan grants. |
In this Proposal 2, the stockholders are requested to
approve the adoption of the 2006 Incentive Plan. 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 approve the adoption of the
2006 Incentive Plan. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has
been approved.
THE BOARD OF DIRECTORS
RECOMMENDS
A VOTE IN FAVOR OF
PROPOSAL 2.
The full text of the 2006 Incentive Plan is set forth in
Appendix A to this Proxy Statement as filed electronically
with the SEC. The essential features of the 2006 Incentive Plan
are outlined below:
General
The 2006 Incentive Plan provides for the grant of incentive
stock options, nonstatutory stock options, restricted stock
awards, restricted stock unit awards, stock appreciation rights,
performance stock awards, performance cash awards and other
forms of equity compensation (collectively, awards).
Incentive stock options granted under the 2006 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 2006 Incentive Plan are not
intended to qualify as incentive stock options under the Code.
See Federal Income Tax Information for a discussion
of the tax treatment of awards.
Purpose
The Board adopted the 2006 Incentive Plan to provide a means to
secure and retain the services of employees, directors and
consultants of the Company and its affiliates, to provide
incentives for such individuals to exert maximum efforts for the
success of the Company and its affiliates, and to provide a
means by which such eligible individuals may be given an
opportunity to benefit from increases in the value of the
Companys Common Stock through the grant of awards.
Administration
The Board administers the 2006 Incentive Plan. Subject to the
provisions of the 2006 Incentive Plan, the Board has the power
to construe and interpret the 2006 Incentive Plan, to determine
the persons to whom and the dates on which awards will be
granted, the number of shares of Common Stock to be subject to
each award, the time or times during the term of each award
within which all or a portion of such award may be exercised,
the exercise price, or strike price of each award, the type of
consideration permitted to exercise or purchase each award and
other terms of the award.
The Board has the power to delegate some or all of the
administration of the 2006 Incentive Plan to a committee or
committees. The Board has delegated administration of the 2006
Incentive Plan to the Compensation Committee of the Board and to
the Non-Officer Option Committee. As used herein with respect to
the 2006 Incentive Plan, the Board refers to any
committee the Board appoints or, if applicable, any
subcommittee, as well as to the Board itself.
Stock Subject to the
Incentive Plan
Pending approval of the 2006 Incentive Plan, an aggregate of
3,500,000 shares of Common Stock are reserved for issuance
under the Incentive Plan. Shares may be issued in connection
with a merger or
9
acquisition as permitted by the rules of the applicable national
securities exchange, and such issuance shall not reduce the
number of shares available for issuance under the 2006 Incentive
Plan. If an award granted under the 2006 Incentive Plan expires
or otherwise terminates without being exercised in full, or if
any shares of Common Stock issued pursuant to an award are
forfeited to or repurchased by the Company, including, but not
limited to, any repurchase or forfeiture caused by the failure
to meet a contingency or condition required for the vesting of
such shares, then the shares of Common Stock not issued under
such award, or forfeited to or repurchased by the Company, shall
revert to and again become available for issuance under the 2006
Incentive Plan. If any shares subject to an award are not
delivered to a participant because such shares are withheld for
the payment of taxes or the award is exercised through a
reduction of shares subject to the stock award (i.e.,
net exercised), the number of shares that are not
delivered shall remain available for issuance under the 2006
Incentive Plan. If the exercise price of any stock award is
satisfied by tendering shares of Common Stock held by the
participant, then the number of shares so tendered shall remain
available for issuance under the 2006 Incentive Plan.
The aggregate maximum number of shares of Common Stock that may
be issued under the 2006 Incentive Plan pursuant to the exercise
of incentive stock options is 3,500,000 shares.
Eligibility
Incentive stock options may be granted under the 2006 Incentive
Plan only to employees (including officers) of the Company and
its affiliates. Employees (including officers) and consultants
of both the Company and its affiliates and directors of the
Company are eligible to receive all other types of awards under
the 2006 Incentive Plan. Non-employee directors of the
Companys affiliates are not eligible to receive awards
under the 2006 Incentive Plan. All of the Companys
employees and consultants of the Company and its affiliates and
non-employee directors of the Company are eligible to
participate in the 2006 Incentive Plan.
No incentive stock option may be granted under the 2006
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 exercise price is at least 110% of the
fair market value of the stock subject to the option on the date
of grant and the term of the option does not exceed five years
from the date of grant. In addition, the aggregate fair market
value, determined at the time of grant, of the shares of Common
Stock with respect to which incentive stock options are
exercisable for the first time by a participant during any
calendar year (under the 2006 Incentive Plan and all other such
plans of the Company and its affiliates) may not exceed $100,000.
Under the 2006 Incentive Plan, no employee may be granted
options and stock appreciation rights covering more than
700,000 shares of Common Stock during any calendar year
(Section 162(m) Limitation).
Terms of
Options
Options may be granted under the 2006 Incentive Plan pursuant to
stock option agreements. The following is a description of the
permissible terms of options under the 2006 Incentive Plan.
Individual option agreements may be more restrictive as to any
or all of the permissible terms described below.
Exercise Price. The exercise price of incentive stock
options may not be less than 100% of the fair market value of
the stock subject to the option on the date of the 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 may not be less than 100% of the fair
market value of the stock on the date of grant. As of
July 6, 2006, the closing price of the Companys
Common Stock as reported on the Pink
Sheets®
was $0.495 per share.
Consideration. The exercise price of options granted
under the 2006 Incentive Plan must be paid, to the extent
permitted by applicable law and at the discretion of the Board,
(i) by cash, check, bank draft or money order,
(ii) pursuant to a broker-assisted cashless exercise,
(iii) by delivery of other Common Stock of the Company,
(iv) pursuant to a net exercise arrangement, or
(iv) in any other form of legal consideration acceptable to
the Board.
10
Vesting. Options granted under the 2006 Incentive Plan
may become exercisable in cumulative increments, or
vest, as determined by the Board. Vesting typically
will occur during the optionholders continued service with
the Company or an affiliate, whether such service is performed
in the capacity of an employee, consultant or director
(collectively, service) and regardless of any change
in the capacity of the service performed. Shares covered by
different options granted under the 2006 Incentive Plan may be
subject to different vesting terms. The Board has the authority
to accelerate the time during which an option may vest or be
exercised. In addition, options granted under the 2006 Incentive
Plan may permit exercise prior to vesting, but in such event the
participant may be required to enter into an early exercise
stock purchase agreement that allows the Company to repurchase
unvested shares if the participants service terminate
before vesting.
Tax Withholding. To the extent provided by the terms of
an option, a participant 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 participant, by delivering already-owned Common Stock of the
Company or by a combination of these means.
Term. The maximum term of options granted under the 2006
Incentive Plan is 10 years, except that in certain cases
(see Eligibility) the maximum term is five years.
Termination of Service. Options granted under the 2006
Incentive Plan generally terminate three months after
termination of the participants service unless
(i) such termination is for cause (as defined in the 2006
Incentive Plan), in which case the option will terminate upon
the termination date; (ii) termination is due to the
participants disability, in which case the option may be
exercised (to the extent the option was exercisable at the time
of the termination of service) at any time within 12 months
following termination; (iii) the participant dies before
the participants service has terminated, or within
generally three months after termination of service, in which
case the option may be exercised (to the extent the option was
exercisable at the time of the participants death) within
18 months following the participants death by the
person or persons to whom the rights to such option have passed;
or (iv) the option by its terms specifically provides
otherwise. The option term may be extended in the event that
exercise of the option following termination of service is
prohibited by applicable securities laws. In no event, however,
may an option be exercised beyond the expiration of its term.
Restrictions on Transfer. Unless provided otherwise by
the Board, a participant in the 2006 Incentive Plan may not
transfer an option other than by will or by the laws of descent
and distribution or pursuant to a domestic relations order.
During the lifetime of the participant, only the participant (or
the transferee pursuant to a domestic relations order) may
exercise an option. A participant may also designate a
beneficiary who may exercise an option following the
participants death. Shares subject to repurchase by the
Company pursuant to an early exercise arrangement may be subject
to restrictions on transfer that the Board deems appropriate.
Terms of Restricted
Stock Awards
Restricted stock awards may be granted under the 2006 Incentive
Plan pursuant to restricted stock award agreements.
Consideration. A restricted stock award may be awarded in
consideration for past or future services actually rendered to
the Company or an affiliate, or any other form of legal
consideration that may be acceptable to the Board.
Vesting. Shares of stock acquired under a restricted
stock award may, but need not be, subject to forfeiture or a
repurchase option in favor of the Company in accordance with a
vesting schedule as determined by the Board. The Board has the
authority to accelerate the vesting of stock acquired pursuant
to a restricted stock award.
Termination of Service. Upon termination of a
participants service, the Company may repurchase or
otherwise reacquire any forfeited shares of stock that have not
vested as of such termination under the terms of the applicable
restricted stock award agreement.
11
Restrictions on Transfer. Rights to acquire shares under
a restricted stock award may be transferred only upon such terms
and conditions as determined by the Board.
Terms of Restricted
Stock Unit Awards
Restricted stock unit awards may be granted under the 2006
Incentive Plan pursuant to restricted stock unit award
agreements.
Consideration. The purchase price, if any, for restricted
stock unit awards may be paid in any form of legal consideration
acceptable to the Board.
Settlement of Awards. A restricted stock unit award may
be settled by the delivery of shares of the Companys
Common Stock, in cash, or by any combination of these means as
determined by the Board.
Vesting. Restricted stock unit awards vest at the rate
specified in the restricted stock unit award agreement as
determined by the Board. However, at the time of grant, the
Board may impose additional restrictions or conditions that
delay the delivery of stock or cash subject to the restricted
stock unit award after vesting.
Dividend Equivalents. Dividend equivalent rights may be
credited with respect to shares covered by a restricted stock
unit award. However, the Company does not anticipate paying cash
dividends on its Common Stock for the foreseeable future.
Termination of Service. Except as otherwise provided in
the applicable award agreement, restricted stock units that have
not vested will be forfeited upon the participants
termination of service.
Stock Appreciation
Rights
Stock appreciation rights may be granted under the 2006
Incentive Plan pursuant to stock appreciation rights agreements.
Exercise. Each stock appreciation right is denominated in
shares of Common Stock equivalents. Upon exercise of a stock
appreciation right, the Company will pay the participant an
amount equal to the excess of (i) the aggregate fair market
value of the Companys Common Stock on the date of
exercise, over (ii) the strike price determined by the
Board on the date of grant.
Settlement of Awards. The appreciation distribution upon
exercise of a stock appreciation right may be paid in cash,
shares of the Companys Common Stock, or any other form of
consideration determined by the Board.
Vesting. Stock appreciation rights vest and become
exercisable at the rate specified in the stock appreciation
right agreement as determined by the Board.
Termination of Service. Upon termination of a
participants service (other than for cause), the
participant generally may exercise any vested stock appreciation
right for three months (or such longer or shorter period
specified in the stock appreciation right agreement) after the
date such service relationship ends. However, in no event may a
stock appreciation right be exercised beyond the expiration of
its term.
Terms of Other Equity
Awards
The Board may grant other equity awards that are valued in whole
or in part by reference to the Companys Common Stock.
Subject to the provisions of the 2006 Incentive Plan, the Board
has the authority to determine the persons to whom and the dates
on which such other equity awards will be granted, the number of
shares of Common Stock (or cash equivalents) to be subject to
each award, and other terms and conditions of such awards.
12
Performance-Based
Awards
Under the 2006 Incentive Plan, an award may be granted, vest or
be exercised based upon the attainment during a certain period
of time of certain performance goals. All employees of the
Company and its affiliates and directors of the Company are
eligible to receive performance-based awards under the 2006
Incentive Plan. The length of any performance period, the
performance goals to be achieved during the performance period,
and the measure of whether and to what degree such performance
goals have been attained shall be determined by the Board. The
maximum amount to be received by any individual in any calendar
year attributable to performance-based stock awards may not
exceed 200,000 shares of the Companys Common Stock.
The maximum amount to be received by any individual in any
calendar year attributable to performance-based cash awards may
not exceed $200,000.
In granting a performance-based award, the Board will set a
period of time (a performance period) over which the
attainment of one or more goals (performance goals)
will be measured for the purpose of determining whether the
award recipient has a vested right in or to such award. Within
the time period prescribed by Section 162(m) of the Code
(typically before the 90th day of a performance period),
the Board will establish the performance goals, based upon one
or more pre-established criteria (performance
criteria) enumerated in the 2006 Incentive Plan and
described below. As soon as administratively practicable
following the end of the performance period, the Board will
certify (in writing) whether the performance goals have been
satisfied.
Performance goals under the 2006 Incentive Plan shall be
determined by the Board, based on one or more of the following
performance criteria: (i) earnings per share;
(ii) earnings before interest, taxes and depreciation;
(iii) earnings before interest, taxes, depreciation and
amortization; (iv) total stockholder return;
(v) return on equity; (vi) return on assets,
investment, or capital employed; (vii) operating margin;
(viii) gross margin; (ix) operating income;
(x) net income (before or after taxes); (xi) net
operating income; (xii) net operating income after tax;
(xiii) pre-tax profit; (xiv) operating cash flow;
(xv) sales or revenue targets; (xvi) increases in
revenue or product revenue; (xvii) expenses and cost
reduction goals; (xviii) improvement in or attainment of
working capital levels; (xix) economic value added (or an
equivalent metric); (xx) market share; (xxi) cash
flow; (xxii) cash flow per share; (xxiii) share price
performance; (xxiv) debt reduction;
(xxv) implementation or completion of projects or
processes; (xxvi) customer satisfaction; (xxvii);
stockholders equity; and (xxviii) to the extent that
an award is not intended to comply with Section 162(m) of
the Code, other measures of performance selected by the Board.
The Board is authorized to determine whether, when calculating
the attainment of performance goals for a performance period as
follows: (i) to exclude restructuring and/or other
nonrecurring charges; (ii) to exclude exchange rate
effects, as applicable, for
non-U.S. dollar
denominated net sales and operating earnings; (iii) to
exclude the effects of changes to generally accepted accounting
standards required by the Financial Accounting Standards Board;
(iv) to exclude the effects of any statutory adjustments to
corporate tax rates; and (v) to exclude the effects of any
extraordinary items as determined under generally
accepted accounting principles. In addition, the Board retains
the discretion to reduce or eliminate the compensation or
economic benefit due upon attainment of performance goals.
If this Proposal 2 is approved by the stockholders,
compensation attributable to performance-based awards under the
2006 Incentive Plan will qualify as performance-based
compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of outside
directors, (ii) the award is granted (or exercisable)
only upon the achievement of an objective performance goal
established in writing by the compensation committee while the
outcome is substantially uncertain, and (iii) the
compensation committee certifies in writing prior to the
granting (or exercisability) of the award that the performance
goal has been satisfied.
Adjustment
Provisions
If any change is made to the outstanding shares of the
Companys Common Stock without the Companys receipt
of consideration (whether through merger, consolidation,
reorganization, stock dividend, or stock split or other
specified change in the capital structure of the Company),
appropriate adjustments will be
13
made to: (i) the maximum number and/or class of securities
issuable under the 2006 Incentive Plan, (ii) the maximum
number and/or class of securities that may be issued pursuant to
incentive stock options, (ii) the maximum number and/or
class of securities for which any one person may be granted
options and/or stock appreciation rights or performance-based
awards per calendar year pursuant to the Section 162(m)
Limitation, and (iii) the number and/or class of securities
and the price per share in effect under each outstanding award
under the 2006 Incentive Plan.
Effect of Certain
Corporate Events
Under the 2006 Incentive Plan, unless otherwise provided in a
written agreement between the Company or any affiliate and the
holder of an award, in the event of a corporate transaction (as
defined in the 2006 Incentive Plan and described below), all
outstanding stock awards under the 2006 Incentive Plan may be
assumed, continued or substituted for by any surviving or
acquiring entity (or its parent company). If the surviving or
acquiring entity (or its parent company) elects not to assume,
continue or substitute for such stock awards, then (i) with
respect to any such stock awards that are held by individuals
whose continuous service with the Company or its affiliates has
not terminated prior to the effective date of the corporate
transaction, the vesting and exercisability provisions of such
stock awards will be accelerated in full and such awards will
terminate if not exercised prior to the effective date of the
corporate transaction, and (ii) with respect to any stock
awards that are held by other individuals, the vesting and
exercisability provisions of such stock awards will not be
accelerated and such awards will terminate if not exercised
prior to the effective date of the corporate transaction (except
that any reacquisition or repurchase rights held by the Company
with respect to such stock awards shall not terminate and may
continued to be exercised notwithstanding the corporate
transaction). In the event a stock award will terminate if not
exercised, the Board may provide, in its sole discretion, that
the holder of such stock award may not exercise such stock award
but will receive a payment equal to the excess of the value of
the property the holder would have received upon exercise over
any exercise price.
For purposes of the 2006 Incentive Plan, a corporate transaction
will be deemed to occur in the event of (i) a sale of all
or substantially all of the consolidated assets of the Company
and its subsidiaries, (ii) the sale of at least 90% of the
outstanding securities of Company, (iii) the consummation
of a merger or consolidation in which the Company is not the
surviving corporation, or (iv) the consummation of a merger
or consolidation in which the Company is the surviving
corporation but shares of the Companys outstanding Common
Stock are converted into other property by virtue of the
transaction.
A stock award may be subject to additional acceleration of
vesting and exercisability upon or after the occurrence of
certain specified change in control transactions (as defined in
the 2006 Incentive Plan), as may be provided in the agreement
for such award or as may be provided in any other written
agreement between the Company or an affiliate and the
participant, but in the absence of such provision, no such
acceleration shall occur.
The acceleration of vesting of an award in the event of a
corporate transaction or a change in control event under the
2006 Incentive Plan may be viewed as an anti-takeover 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 2006 Incentive Plan
without stockholder approval or ratification at any time. Unless
sooner terminated, the 2006 Incentive Plan will terminate on
July 6, 2016.
The Board may amend or modify the 2006 Incentive Plan at any
time. However, no amendment shall be effective unless approved
by the stockholders of the Company to the extent stockholder
approval is necessary to satisfy applicable law or applicable
exchange listing requirements.
The Board also may submit any other amendment to the 2006
Incentive Plan for stockholder approval, including, but not
limited to, amendments intended to satisfy the requirements of
Section 162(m) of the Code
14
regarding the exclusion of performance-based compensation from
the limitation on the deductibility of compensation paid to
certain employees.
Federal Income Tax
Information
The following is a summary of the principal United States
federal income tax consequences to employees and the Company
with respect to participation in the 2006 Incentive Plan. This
summary is not intended to be exhaustive, and does not discuss
the income tax laws of any city, state or foreign jurisdiction
in which a participant may reside.
Incentive Stock Options. Incentive stock options granted
under the 2006 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
participant 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 participants alternative
minimum tax liability, if any.
If a participant holds stock acquired through exercise of an
incentive stock option for more than two years from the date on
which the option was granted and more than one year after the
date the option was exercised for those shares, any gain or loss
on a disposition of those shares (a qualifying
disposition) will be a long-term capital gain or loss.
Upon such a qualifying disposition, the Company will not be
entitled to any income tax deduction.
Generally, if the participant disposes of the stock before the
expiration of either of these holding periods (a
disqualifying disposition), then at the time of
disposition the participant will realize taxable ordinary income
equal to the lesser of (i) the excess of the stocks
fair market value on the date of exercise over the exercise
price, or (ii) the participants actual gain, if any,
on the purchase and sale. The participants 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
whether the stock was held for more than one year.
To the extent the participant recognizes ordinary income by
reason of a disqualifying disposition, generally the Company
will be entitled (subject to the requirement of reasonableness,
the provisions of Section 162(m) of the Code, and the
satisfaction of a tax reporting obligation) to a corresponding
income tax deduction in the tax year in which the disqualifying
disposition occurs.
Nonstatutory Stock Options. No taxable income is
recognized by a participant upon the grant of a nonstatutory
stock option. Upon exercise of a nonstatutory stock option, the
participant will recognize ordinary income equal to the excess,
if any, of the fair market value of the purchased shares on the
exercise date over the exercise price paid for those shares.
Generally, the Company will be entitled (subject to the
requirement of reasonableness, the provisions of
Section 162(m) of the Code, and the satisfaction of a tax
reporting obligation) to a corresponding income tax deduction in
the tax year in which such ordinary income is recognized by the
participant.
Upon disposition of the stock, the participant will recognize a
capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any
amount recognized as ordinary income upon exercise of the
option. Such gain or loss will be long-term or short-term
depending on whether the stock was held for more than one year.
Restricted Stock Awards. Upon receipt of a restricted
stock award, the participant will recognize ordinary income
equal to the excess, if any, of the fair market value of the
shares on the date of issuance over the purchase price, if any,
paid for those shares. The Company will be entitled (subject to
the requirement of reasonableness, the provisions of
Section 162(m) of the Code, and the satisfaction of a tax
reporting obligation) to a corresponding income tax deduction in
the tax year in which such ordinary income is recognized by the
participant.
However, if the shares issued upon the grant of a restricted
stock award are unvested and subject to reacquisition or
repurchase by the Company in the event of the participants
termination of service prior to vesting in those shares, the
participant will not recognize any taxable income at the time of
issuance, but will
15
have to report as ordinary income, as and when the
Companys reacquisition or repurchase right lapses, an
amount equal to the excess of (i) the fair market value of
the shares on the date the reacquisition or repurchase right
lapses, over (ii) the purchase price, if any, paid for the
shares. The participant may, however, elect under
Section 83(b) of the Code to include as ordinary income in
the year of issuance an amount equal to the excess of
(x) the fair market value of the shares on the date of
issuance, over (y) the purchase price, if any, paid for
such shares. If the Section 83(b) election is made, the
participant will not recognize any additional income as and when
the reacquisition or repurchase right lapses.
Upon disposition of the stock acquired upon the receipt of a
restricted stock award, the participant will recognize a capital
gain or loss equal to the difference between the selling price
and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon issuance (or vesting) of the
stock. Such gain or loss will be long-term or short-term
depending on whether the stock was held for more than one year.
Restricted Stock Unit Awards. No taxable income is
recognized upon receipt of a restricted stock unit award. The
participant will recognize ordinary income in the year in which
the shares subject to that unit are actually issued to the
participant in an amount equal to the fair market value of the
shares on the date of issuance. The participant and the Company
will be required to satisfy certain tax withholding requirements
applicable to such income. Subject to the requirement of
reasonableness, Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will be
entitled to an income tax deduction equal to the amount of
ordinary income recognized by the participant at the time the
shares are issued. In general, the deduction will be allowed for
the taxable year in which such ordinary income is recognized by
the participant.
Stock Appreciation Rights. No taxable income is realized
upon the receipt of a stock appreciation right. Upon exercise of
the stock appreciation right, the fair market value of the
shares (or cash in lieu of shares) received is recognized as
ordinary income to the participant in the year of such exercise.
Generally, with respect to employees, the Company is required to
withhold from the payment made on exercise of the stock
appreciation right or from regular wages or supplemental wage
payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness,
Section 162(m) of the Code and the satisfaction of a
reporting obligation, the Company will be entitled to an income
tax deduction equal to the amount of ordinary income recognized
by the participant.
Potential Limitation on Company Deductions.
Section 162(m) of the Code denies a deduction to any
publicly held corporation for compensation paid to certain
covered employees in a taxable year to the extent
that compensation to such covered employee exceeds
$1 million. It is possible that compensation attributable
to awards, 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) of the
Code, compensation attributable to stock options and stock
appreciation rights will qualify as performance-based
compensation if such awards are approved by a compensation
committee comprised solely of outside directors and
the plan contains a per-employee limitation on the number of
shares for which such awards may be granted during a specified
period, the per-employee limitation is approved by the
stockholders, and the exercise or strike price of the award is
no less than the fair market value of the stock on the date of
grant.
Compensation attributable to restricted stock awards, restricted
stock unit awards and performance-based awards will qualify as
performance-based compensation, provided that: (i) the
award is approved by a compensation committee comprised solely
of outside directors, (ii) the award is granted
(or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation
committee while the outcome is substantially uncertain,
(iii) the Compensation Committee certifies in writing prior
to the granting (or exercisability) of the award that the
performance goal has been satisfied, and (iv) prior to the
granting (or exercisability) of the award, stockholders have
approved the material terms of the award (including the class of
employees eligible for such award, the business criteria on
which the performance goal is based, and the maximum amount, or
formula used to calculate the amount, payable upon attainment of
the performance goal).
16
PROPOSAL 3
APPROVAL OF REDUCTION IN NUMBER OF AUTHORIZED SHARES OF THE
COMPANY
The Board of Directors is requesting stockholder approval of an
amendment to the Companys Amended and Restated Certificate
of Incorporation to reduce the Companys (i) total
authorized number of shares from 2,010,000,000 to
91,000,000 shares, (ii) authorized number of shares of
common stock from 2,000,000,000 to 90,000,000 shares and
(iii) authorized number of shares of preferred stock from
10,000,000 to 1,000,000 shares. If the amendment is
adopted, it will become effective upon filing of a Certificate
of Amendment of the Companys Amended and Restated
Certificate of Incorporation with the Secretary of State of the
State of Delaware.
The amendment for which approval is being requested pursuant
to this Proposal is substantially similar to the amendments for
which approval is being requested pursuant to Proposals 4
and 5, other than with respect to the size of the reduction
in the number of authorized shares of common stock. Assuming
more than one of the charter amendments that are subject to
Proposals 3, 4 and 5 are approved, the Board of Directors
expects to file no more than one (if any) of such certificates
of amendment with the Secretary of State of the State of
Delaware.
The Board of Directors is requesting approval of the reduction
in the Companys authorized shares to reduce the amount of
annual franchise fees that the Company is required to pay as a
result of being incorporated in Delaware. The annual franchise
fee in Delaware is calculated based on the number of shares of
stock that a company has authorized for issuance. The Company is
requesting approval of multiple amendments to its Amended and
Restated Certificate of Incorporation that reflect share
reductions of different sizes in order to allow for the maximum
reduction in authorized shares following the issuance of a
currently indeterminable number of shares of common stock in
connection with the Companys proposed rights offering.
Even if the stockholders approve the amendment to the
Companys Amended and Restated Certificate of Incorporation
that is the subject of this Proposal, the filing of a
Certificate of Amendment to effect such amendment will be at the
sole discretion of the Board of Directors.
THIS PROPOSAL DOES NOT RELATE TO ANY PLANNED STOCK SPLIT
OR REVERSE STOCK SPLIT. IN NO EVENT WILL APPROVAL OF THIS
PROPOSAL RESULT IN ANY CHANGE IN THE NUMBER OF SHARES OF
COMPANY COMMON STOCK THAT ARE CURRENTLY ISSUED AND
OUTSTANDING.
A reduction in the number of shares authorized for issuance may
mean that the Company has insufficient shares available for
issuance in connection with a stock dividend, raising additional
capital, acquiring other businesses, establishing strategic
relationships with corporate partners or providing equity
incentives to employees and officers or for other corporate
purposes. If the Board of Directors determines that it is
necessary or appropriate to issue additional shares beyond those
authorized for issuance, a future amendment to the
Companys Amended and Restated Certificate of Incorporation
may be required, which would require stockholder approval.
The affirmative vote of the holders of a majority of the
outstanding shares of the Companys Common Stock will be
required to approve this amendment to the Companys Amended
and Restated Certificate of Incorporation. As a result,
abstentions and broker non-votes will have the same effect as
Against votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
17
PROPOSAL 4
APPROVAL OF REDUCTION IN NUMBER OF AUTHORIZED SHARES OF THE
COMPANY
The Board of Directors is requesting stockholder approval of an
amendment to the Companys Amended and Restated Certificate
of Incorporation to reduce the Companys (i) total
authorized number of shares from 2,010,000,000 to
141,000,000 shares, (ii) authorized number of shares
of common stock from 2,000,000,000 to 140,000,000 shares
and (iii) authorized number of shares of preferred stock
from 10,000,000 to 1,000,000 shares. If the amendment is
adopted, it will become effective upon filing of a Certificate
of Amendment of the Companys Amended and Restated
Certificate of Incorporation with the Secretary of State of the
State of Delaware.
The amendment for which approval is being requested pursuant
to this Proposal is substantially similar to the amendments for
which approval is being requested pursuant to Proposals 3
and 5, other than with respect to the size of the reduction
in the number of authorized shares of common stock. Assuming
more than one of the charter amendments that are subject to
Proposals 3, 4 and 5 are approved, the Board of Directors
expects to file no more than one (if any) of such certificates
of amendment with the Secretary of State of the State of
Delaware.
The Board of Directors is requesting approval of the reduction
in the Companys authorized shares to reduce the amount of
annual franchise fees that the Company is required to pay as a
result of being incorporated in Delaware. The annual franchise
fee in Delaware is calculated based on the number of shares of
stock that a company has authorized for issuance. The Company is
requesting approval of multiple amendments to its Amended and
Restated Certificate of Incorporation that reflect share
reductions of different sizes in order to allow for the maximum
reduction in authorized shares following the issuance of a
currently indeterminable number of shares of common stock in
connection with the Companys proposed rights offering.
Even if the stockholders approve the amendment to the
Companys Amended and Restated Certificate of Incorporation
that is the subject of this Proposal, the filing of a
Certificate of Amendment to effect such amendment will be at the
sole discretion of the Board of Directors.
THIS PROPOSAL DOES NOT RELATE TO ANY PLANNED STOCK SPLIT
OR REVERSE STOCK SPLIT. IN NO EVENT WILL APPROVAL OF THIS
PROPOSAL RESULT IN ANY CHANGE IN THE NUMBER OF SHARES OF
COMPANY COMMON STOCK THAT ARE CURRENTLY ISSUED AND
OUTSTANDING.
A reduction in the number of shares authorized for issuance may
mean that the Company has insufficient shares available for
issuance in connection with a stock dividend, raising additional
capital, acquiring other businesses, establishing strategic
relationships with corporate partners or providing equity
incentives to employees and officers or for other corporate
purposes. If the Board of Directors determines that it is
necessary or appropriate to issue additional shares beyond those
authorized for issuance, a future amendment to the
Companys Amended and Restated Certificate of Incorporation
may be required, which would require stockholder approval.
The affirmative vote of the holders of a majority of the
outstanding shares of the Companys Common Stock will be
required to approve this amendment to the Companys Amended
and Restated Certificate of Incorporation. As a result,
abstentions and broker non-votes will have the same effect as
Against votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
18
PROPOSAL 5
APPROVAL OF REDUCTION IN NUMBER OF AUTHORIZED SHARES OF THE
COMPANY
The Board of Directors is requesting stockholder approval of an
amendment to the Companys Amended and Restated Certificate
of Incorporation to reduce the Companys (i) total
authorized number of shares from 2,010,000,000 to
281,000,000 shares, (ii) authorized number of shares
of common stock from 2,000,000,000 to 280,000,000 shares
and (iii) authorized number of shares of preferred stock
from 10,000,000 to 1,000,000 shares. If the amendment is
adopted, it will become effective upon filing of a Certificate
of Amendment of the Companys Amended and Restated
Certificate of Incorporation with the Secretary of State of the
State of Delaware.
The amendment for which approval is being requested pursuant
to this Proposal is substantially similar to the amendments for
which approval is being requested pursuant to Proposals 3
and 4, other than with respect to the size of the reduction
in the number of authorized shares of common stock. Assuming
more than one of the charter amendments that are subject to
Proposals 3, 4 and 5 are approved, the Board of Directors
expects to file no more than one (if any) of such certificates
of amendment with the Secretary of State of the State of
Delaware.
The Board of Directors is requesting approval of the reduction
in the Companys authorized shares to reduce the amount of
annual franchise fees that the Company is required to pay as a
result of being incorporated in Delaware. The annual franchise
fee in Delaware is calculated based on the number of shares of
stock that a company has authorized for issuance. The Company is
requesting approval of multiple amendments to its Amended and
Restated Certificate of Incorporation that reflect share
reductions of different sizes in order to allow for the maximum
reduction in authorized shares following the issuance of a
currently indeterminable number of shares of common stock in
connection with the Companys proposed rights offering.
Even if the stockholders approve the amendment to the
Companys Amended and Restated Certificate of Incorporation
that is the subject of this Proposal, the filing of a
Certificate of Amendment to effect such amendment will be at the
sole discretion of the Board of Directors.
THIS PROPOSAL DOES NOT RELATE TO ANY PLANNED STOCK SPLIT
OR REVERSE STOCK SPLIT. IN NO EVENT WILL APPROVAL OF THIS
PROPOSAL RESULT IN ANY CHANGE IN THE NUMBER OF SHARES OF
COMPANY COMMON STOCK THAT ARE CURRENTLY ISSUED AND
OUTSTANDING.
A reduction in the number of shares authorized for issuance may
mean that the Company has insufficient shares available for
issuance in connection with a stock dividend, raising additional
capital, acquiring other businesses, establishing strategic
relationships with corporate partners or providing equity
incentives to employees and officers or for other corporate
purposes. If the Board of Directors determines that it is
necessary or appropriate to issue additional shares beyond those
authorized for issuance, a future amendment to the
Companys Amended and Restated Certificate of Incorporation
may be required, which would require stockholder approval.
The affirmative vote of the holders of a majority of the
outstanding shares of the Companys Common Stock will be
required to approve this amendment to the Companys Amended
and Restated Certificate of Incorporation. As a result,
abstentions and broker non-votes will have the same effect as
Against votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5.
19
PROPOSAL 6
APPROVAL OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE
OF
INCORPORATION TO REMOVE PROHIBITION AGAINST STOCKHOLDER
ACTIONS BY WRITTEN CONSENT
The Board of Directors is requesting stockholder approval of an
amendment to the Companys Amended and Restated Certificate
of Incorporation to remove a provision that prevents the
Companys stockholders from taking actions by written
consent. If the amendment is adopted, it will become effective
upon filing of a Certificate of Amendment of the Companys
Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
The Companys Board of Directors believes that
authorization of stockholder action by less than unanimous
written consent will allow the Company to take certain actions
in the future, if the necessity arises, without the delay and
expense associated with calling a special meeting of
stockholders. Delays in calling a meeting and distributing
meeting materials, including notice of a meeting, might deny the
Company the flexibility that the Companys Board views as
important in facilitating the operations of the Company. This
amendment would not relieve the Company from complying with
federal securities and state laws with respect to solicitation
of votes and, under both federal securities and state law, the
Company would remain obligated to notify all non-consenting
stockholders of the actions taken by written consent and other
information concerning such actions.
This amendment to the Companys Amended and Restated
Certificate of Incorporation would result in the Companys
Bylaws governing the taking of stockholder actions by written
consent. The Companys Bylaws permit the holders of the
minimum number of shares that would be necessary to authorize or
take action at a valid meeting of the Companys
stockholders to act without a meeting. Thus, the holders of a
majority of the Common Stock, acting by written consent and
without prior notification to the other holders of the Common
Stock, could bind the Company to any matter to the same extent
to which a majority vote at a stockholder meeting could bind the
Company. This would include amendments to the Companys
Bylaws and approval of matters requiring a simple majority vote,
such as approval of other amendments to the Companys
Amended and Restated Certificate of Incorporation and amendments
to the Companys equity incentive plans. In addition, the
holders of a majority of the Common Stock could bind the Company
to matters such as mergers, consolidations, dissolutions and
sales of all or substantially all of the Companys assets,
as a result of the enactment of this proposed amendment.
Dr. Pehong Chen, the Companys Chairman, Chief
Executive Officer and President, together with a trust and a
limited liability company controlled by Dr. Chen, owns
beneficially and of record a total of 42,079,429 shares, or
approximately 59.4%, of the Common Stock as of the record date,
July 7, 2006. Accordingly, Dr. Chen will have the
ability to take actions by written consent without a meeting
that are binding on the Company.
The affirmative vote of the holders of a majority of the
outstanding shares of the Common Stock will be required to
approve this amendment to the Companys Amended and
Restated Certificate of Incorporation. As a result, abstentions
and broker non-votes will have the same effect as
Against votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 6.
20
PROPOSAL 7
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has selected Stonefield Josephson, Inc.
(Stonefield) as the Companys independent
auditors for the fiscal year ending December 31, 2006. The
Board of Directors has directed that management submit the
selection of independent auditors for ratification by the
stockholders at the Annual Meeting. Stonefield has audited the
Companys financial statements beginning with the fiscal
year ended December 31, 2005 financial statements.
Representatives of Stonefield 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 Stonefield as the
Companys independent auditors is not required by the
Companys Bylaws or otherwise; however, the Board is
submitting the selection of Stonefield to the stockholders for
ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee
will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee in its discretion may
direct the appointment of different independent auditors at any
time during the year if it determines 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 Stonefield. 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.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following presents aggregate fees billed to the Company for
the fiscal year ended December 31, 2005 by Stonefield and
for the fiscal year ended December 31, 2004 by BDO Seidman,
LLP (BDO), the Companys principal accountant
for such fiscal year. All fees described were approved by the
Audit Committee.
Audit Fees. Audit fees billed were $891,000 and $890,000
for the years ended December 31, 2005 and December 31,
2004, respectively. The fees were for professional services
rendered for the audits of the Companys consolidated
financial statements, reviews of the financial statements
included in the Companys quarterly reports, consultations
on matters that arose during the Companys audit and
reviews of SEC registration statements.
Audit-Related Fees. No audit-related fees were billed in
the years ended December 31, 2005 and December 31,
2004.
Tax Fees. Tax fees billed were $181,000 and $174,000 for
the years ended December 31, 2005 and December 31,
2004, respectively. The tax fees were for professional services
related to tax compliance, tax advice and tax planning.
All Other Fees. There were no other fees billed in the
years ended December 31, 2005 and December 31, 2004.
The Audit Committee has determined that the rendering of the
services other than audit services by Stonefield is compatible
with maintaining the principal accountants independence.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted a policy and procedures for the
pre-approval of audit and non-audit services rendered by the
Companys independent auditor. The policy generally
pre-approves specified services in the defined categories of
audit services audit-related services, and tax services up to
specified amounts. Pre-approval may also be given as part of the
Audit Committees approval of the scope of the engagement
of the Companys independent auditor or on an individual
explicit case-by-case basis before the independent auditor is
engaged to provide each service. The pre-approval of services
may be delegated to one or more of the Audit Committees
members, but the decision must be reported to the full Audit
Committee at its next scheduled meeting.
21
CHANGE IN INDEPENDENT AUDITORS
On January 20, 2006, the Company engaged the independent
registered public accounting firm Stonefield as the
Companys new independent accountants. Prior to the
engagement of Stonefield, including the two most recent fiscal
years through January 20, 2006, neither the Company nor
anyone acting on the Companys behalf consulted with
Stonefield regarding (i) either the application of
accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might
be rendered on the Companys financial statements, and
neither a written report was provided to the Company or oral
advice was provided that Stonefield concluded was an important
factor considered by the Company in reaching a decision as to
the accounting, auditing or financial reporting issue or
(ii) any matter that was either the subject of a
disagreement, as that item is defined in Item 304(a)(1)(iv)
of Regulation S-K
of the Securities Act and the related instructions to
Item 304 of
Regulation S-K, or
a reportable event, as that term is defined in
Item 304(a)(1)(v) of
Regulation S-K.
The Audit Committee approved the engagement of Stonefield as the
Companys independent registered public accounting firm.
On November 29, 2005, BDO delivered to the Company a letter
dated November 28, 2005 stating that it had resigned as the
Companys independent registered public accounting firm.
The reports of BDO on the Companys consolidated financial
statements for the years ended December 31, 2004 and
December 31, 2003 did not contain any adverse opinion, or
disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
During the years ended December 31, 2004 and
December 31, 2003 and through November 29, 2005, there
were no disagreements with BDO on any matter of accounting
principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of BDO, would have caused it to
make reference thereto in its report on the financial statements
for such periods, except as follows. During the course of the
preparation of the Companys interim financial statements
for the third quarter of 2003, there was a disagreement between
BDO and the Companys management, which was resolved to
BDOs satisfaction prior to the issuance of the interim
financial statements, regarding the revenue recognition
methodology to be applied to a customer contract that was
entered into during the quarter. The Audit Committee
subsequently discussed this matter with BDO and the
Companys management and was satisfied with its resolution.
The Company has requested BDO to respond fully to any inquiries
it may receive from successor accountants concerning this matter.
During the years ended December 31, 2004 and
December 31, 2003 and through November 29, 2005, other
than as previously disclosed in the Companys
Form 10-K for the
year ended December 31, 2004, filed with the SEC on
March 15, 2005, and as described below, there were no
reportable events requiring disclosure pursuant to
Section 304(a)(1)(v) of
Regulation S-K of
the Securities Act, as the term reportable events is
therein defined.
During the audit of the financial statements for the Company for
the year ended December 31, 2004, BDO advised the Company
that internal controls necessary for the Company to develop
reliable financial statements did not exist at that point in
time due to the following three material weaknesses, which were
previously disclosed in the Companys
Form 10-K for the
year ended December 31, 2004: 1) two senior accounting
managers in the Companys finance department, with a
combined ten years of experience working for the Company,
resigned during the fourth quarter of 2004, and the Company
failed to either hire adequate replacements or adequately train
and supervise its existing accounting staff to ensure that the
absence of the senior accounting managers would not negatively
impact the Companys controls over financial reporting, and
further, in February 2005, the Companys Vice
President & Corporate Controller resigned and left the
Company; 2) management reviews of key account
reconciliations failed to detect inconsistencies between amounts
stated in the reconciliations of the respective accounts and the
general ledger, which failures were also attributed to
inadequate staffing and training; and 3) the Companys
procedures for reviewing the accuracy of maintenance contract
data were inadequate and could result in a failure to detect and
correct keypunch or other errors or omissions.
The Company provided BDO and Stonefield with a copy of the
disclosure set forth in this section entitled Change in
Independent Auditors prior to filing this proxy statement
with the SEC.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 7
22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Controlling Stockholder
As of March 15, 2006, Dr. Pehong Chen, directly and
through entities controlled by him, held a majority of the
voting power of the Companys outstanding stock. As a
result, Dr. Chen controls the election of all members of
the Board of Directors and all other matters submitted to a vote
of the Companys stockholders.
Beneficial Ownership of BroadVision Common Stock
The following table sets forth certain information regarding the
ownership of the Companys common stock as of
March 15, 2006 by: (a) each current director and each
nominee for director; (b) each of the executive officers
named in the Summary Compensation Table; (c) all current
executive officers and directors of the Company as a group; and
(d) all those known by the Company to be beneficial owners
of more than five percent of its common stock.
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership(1) | |
|
|
| |
|
|
Number of | |
|
Percent of | |
Beneficial Owner |
|
Shares (#) | |
|
Total (%) | |
|
|
| |
|
| |
Pehong Chen(2)
|
|
|
42,079,429 |
|
|
|
59.4 |
% |
William E. Meyer(3)
|
|
|
265,061 |
|
|
|
* |
|
Alex Kormushoff
|
|
|
0 |
|
|
|
* |
|
David L. Anderson(4)
|
|
|
101,437 |
|
|
|
* |
|
James D. Dixon(5)
|
|
|
96,000 |
|
|
|
* |
|
Robert Lee(6)
|
|
|
85,039 |
|
|
|
* |
|
Roderick C. McGeary(7)
|
|
|
84,000 |
|
|
|
* |
|
T. Michael Nevens(8)
|
|
|
108,000 |
|
|
|
* |
|
François Stieger
|
|
|
0 |
|
|
|
* |
|
Honu Holdings, LLC(2)
|
|
|
34,500,000 |
|
|
|
49.9 |
% |
585 Broadway Redwood City, CA 94063
|
|
|
|
|
|
|
|
|
All Current Directors and Executive Officers as a group (7
persons)(9)
|
|
|
42,818,966 |
|
|
|
60.4 |
% |
|
|
(1) |
This table is based upon information supplied by officers,
directors and principal stockholders and Schedules 13D and 13G
filed with 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 69,180,991 shares
outstanding on March 15, 2006, adjusted as required by
rules promulgated by the SEC. The Companys directors and
executive officers can be reached at BroadVision, Inc., 585
Broadway, Redwood City, California 94063. |
|
(2) |
Includes 5,874,985 shares held in trust by Dr. Chen
and his wife for their benefit and 1,704,444 shares of
common stock issuable upon the exercise of stock options
exercisable within 60 days of March 15, 2006. Also
includes 34,500,000 shares held by Honu Holdings, LLC, of
which Dr. Chen is the sole member. Excludes
300,000 shares of common stock held in trust by independent
trustees for the benefit of Dr. Chens children. |
|
(3) |
Includes 250,000 shares of common stock issuable upon the
exercise of stock options exercisable within 60 days of
March 15, 2006. |
|
(4) |
Includes 46,604 shares of common stock issuable upon the
exercise of a stock option exercisable within 60 days of
March 15, 2006 and 30,833 shares held by The Anderson
Living Trust, of which Mr. Anderson is Trustee. |
|
(5) |
Includes 60,000 shares of common stock issuable upon the
exercise of stock options exercisable within 60 days of
March 15, 2006. |
23
|
|
(6) |
Includes 60,000 shares of common stock issuable upon the
exercise of stock options exercisable within 60 days of
March 15, 2006. Also includes 1,039 shares held in
trust by Mr. Lee and his wife for their benefit. |
|
(7) |
Includes 60,000 shares of common stock issuable upon the
exercise of stock options exercisable within 60 days of
March 15, 2006. |
|
(8) |
Includes 60,000 shares of common stock issuable upon the
exercise of stock options exercisable within 60 days of
March 15, 2006. |
|
(9) |
Includes the information contained in the notes above, as
applicable, for directors and executive officers of the Company
as of March 15, 2006. |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys directors and executive officers, and persons who
own more than ten percent of a registered class of the
Companys 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.
Directors, officers and greater than ten percent stockholders
are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
To the Companys 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, 2005 and, all
Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial
owners were complied with.
Compensation of Directors
Directors currently do not receive any cash compensation from us
for their services as members of the Board of Directors,
although they are reimbursed for certain expenses incurred in
connection with attendance of Board and Committee meetings in
accordance with Company policy.
Each of our directors is eligible to receive stock option grants
under the Companys 1996 Equity Incentive Plan (the
Incentive Plan). As of December 31, 2005,
non-employee directors held options to purchase an aggregate of
286,604 shares of the Companys common stock.
During the last fiscal year, the Company did not grant options
to the non-employee directors of the Company.
24
Compensation of Executive Officers
The following table shows for the fiscal years December 31,
2003, 2004 and 2005, compensation awarded or paid to, or earned
by, the Companys Chief Executive Officer, its other most
highly compensated executive officer at December 31, 2005
and one individual who was an executive officer of the Company
until his departure during fiscal 2005 (the Named
Executive Officers):
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term | |
|
|
|
|
|
|
Compensation | |
|
|
|
|
Annual Compensation(1) | |
|
Awards | |
|
|
|
|
| |
|
| |
|
|
|
|
|
|
Other Annual | |
|
Securities | |
|
|
|
|
|
|
Annual | |
|
Compensation | |
|
Underlying | |
|
All Other Annual | |
Name and Principal Position |
|
Year | |
|
Salary ($) | |
|
Bonus ($) | |
|
($)(2) | |
|
Options (#) | |
|
Compensation ($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Pehong Chen
|
|
|
2005 |
|
|
$ |
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Board, |
|
|
2004 |
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief Executive |
|
|
2003 |
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William E. Meyer(3)
|
|
|
2005 |
|
|
$ |
224,000 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President and |
|
|
2004 |
|
|
|
224,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
2003 |
|
|
|
168,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
240,000 |
|
|
|
|
|
Alex Kormushoff(4)
|
|
|
2005 |
|
|
$ |
203,360 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
69,000 |
|
|
Senior Vice President, |
|
|
2004 |
|
|
|
205,000 |
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
|
|
56,250 |
|
|
Worldwide Field Operations |
|
|
2003 |
|
|
|
200,000 |
|
|
|
18,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes amounts earned but deferred at the election of the
Named Executive Officers under the Companys 401(k) plan. |
|
(2) |
As permitted by rules promulgated by the SEC no amounts are
shown with respect to certain perquisites where such
amounts do not exceed the lesser of 10% of the sum of the amount
in the salary and bonus columns or $50,000. |
|
(3) |
Mr. Meyer joined the Company as Executive Vice President
and Chief Financial Officer on April 1, 2003, a position he
held until his departure from the Company in June 2006. |
|
(4) |
Mr. Kormushoff joined the Company on September 23,
2002 and became Senior Vice President, Global Services on
July 1, 2003. Mr. Kornushoff was Senior Vice
President, Worldwide Field Operations from October 2004 until
his departure in December, 2005. Other compensation paid to
Mr. Kormushoff includes payment of commissions on sales. |
|
|
|
Stock Option Grants and Exercises |
The Company grants options to its executive officers under its
Incentive Plan. As of December 31, 2005, options to
purchase a total of 3,756,932 shares were outstanding under
the Incentive Plan and options to
purchase 3,378,775 shares remained available for grant
thereunder.
25
The following tables show for the fiscal year ended
December 31, 2005, certain information regarding options
granted to, exercised by, and held at year end by, the Named
Executive Officers.
Fiscal Year End Option Values of Unexercised Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
Value of Unexercised | |
|
|
|
|
|
|
Underlying Unexercised | |
|
In-the-Money | |
|
|
|
|
|
|
Options at | |
|
Options at | |
|
|
Shares | |
|
Value | |
|
December 31, 2005 (#)(2) | |
|
December 31, 2005 ($)(3) | |
|
|
Acquired on | |
|
Realized | |
|
| |
|
| |
Name |
|
Exercise (#) | |
|
($)(1) | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Pehong Chen
|
|
|
|
|
|
|
|
|
|
|
1,704,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
William E. Meyer
|
|
|
|
|
|
|
|
|
|
|
240,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Alex Kormushoff
|
|
|
|
|
|
|
|
|
|
|
243,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Value received is based on the per share deemed values of the
Companys common stock on the date of exercise, determined
after the date of grant solely for financial accounting
purposes, less the exercise price, without taking into account
any taxes that may be payable in connection the transaction. |
|
(2) |
Reflects vested and unvested shares at December 31, 2005.
Options granted are immediately exercisable, but are subject to
the Companys right to repurchase unvested shares on
termination of employment. |
|
(3) |
Fair market value of the Companys common stock at
December 31, 2005, which was $0.49 per share, less the
exercise price of the options. |
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
The Companys 2000 Non-Officer Plan, which was in effect as
of December 31, 2002, was adopted by the Board in 2000 and
provided for grants of (a) Nonstatutory Stock Options,
(b) stock bonuses and (c) rights to purchase
restricted stock, to employees (who are not officers or
directors of the Company) and consultants of the Company.
Stockholder approval of the 2000 Non-Officer Plan and amendments
thereto have not been required to date. An aggregate of 666,667
(as adjusted for subsequent stock splits) shares of common stock
were initially reserved for issuance under the plan. Certain
other provisions of the 2000 Non-Officer Plan are as follows:
|
|
|
|
|
Eligibility. Nonstatutory stock options, stock bonuses
and rights to purchase restricted stock may be granted under the
2000 Non-Officer Plan only to employees (who are not officers or
directors of the Company) and consultants of the Company and its
affiliates. |
|
|
|
Terms of Options. The exercise price for nonstatutory
stock options available for grant under the 2000 Non-Officer
Plan shall be determined by the Board and shall not be less than
85% of the fair market value of the stock subject to the option
on the date of grant. Payment of the exercise price may be in
the form of either (a) cash at the time the option is
exercised or (b) at the discretion of the Board or the
Non-Officer Option 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 or (c) in any other form of legal
consideration that may be acceptable to the Board. The term of a
nonstatutory stock option granted under the 2000 Non-Officer
Plan may not exceed ten years. Options under the 2000
Non-Officer Plan typically vest at the rate of 25% on the first
anniversary of the vesting commencement date and 25% annually
thereafter until fully vested or the optionholders service
to the Company has terminated. The Board has the power to
accelerate the time during which an option may vest or be
exercised and may also authorize the modification of any
outstanding option with the consent of the optionholder. |
|
|
|
Adjustment Provisions. The number of shares available for
future grant and for outstanding but unexercised options and the
exercise price of outstanding options are subject to adjustment
for any 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
similar transaction. |
26
|
|
|
|
|
Corporate Transactions. The 2000 Non-Officer Plan
provides that, in the event of a sale of substantially all of
the assets of the Company, specified types of merger or
consolidation with or into any other entity or person in which
the Company is not the continuing or surviving entity or in
which the Company is the surviving entity but the shares of
Common Stock outstanding immediately prior to the transaction
are converted by virtue of the transaction into other property,
then any surviving corporation shall either assume options
outstanding under the 2000 Non-Officer Plan or substitute
similar options for those outstanding under the 2000 Non-Officer
Plan (including an award to acquire the same consideration paid
to stockholders in the change in control). If any surviving
corporation does not either assume options outstanding under the
2000 Non-Officer Plan, or substitute similar options, 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.
With respect to any other stock awards outstanding under the
2000 Non-Officer Plan, such stock awards shall terminate if not
exercised prior to such event. The acceleration of options in
the event of an acquisition or similar corporate event may be
viewed as an anti-takeover provision, which may have the effect
of discouraging a proposal to acquire or otherwise obtain
control of the Company. |
Executive Severance Benefit Plan. The Companys
Executive Severance Benefit Plan (the Severance
Plan) was established effective on May 22, 2003. The
purpose of the Severance Plan is to provide for the payment of
severance benefits to certain eligible employees of the Company
whose employment with the Company is involuntarily terminated.
For purposes of the Severance Plan, an eligible employee is
defined as an employee of the Company (i) who
(a) reports directly to the CEO of the Company (Group
1) or (b) is a Senior Vice President or the Vice
President and Corporate Financial Controller of the Company and
does not report directly to the CEO (Group 2),
(ii) whose employment is terminated by the Company pursuant
to an involuntary termination without cause or a reduction in
force and (ii) who is notified by the Company in writing
that he or she is eligible for participation in the Plan. The
determination of whether an employee is an eligible employee is
made by the Company, in its sole discretion; severance payments
and benefits are made according to which Group an employee is in.
Pursuant to the Severance Plan, each eligible employee receives
a cash severance benefit in accordance with the Companys
then current payroll practices and continued premium payments of
their employee benefits plans as follows:
Group 1
|
|
|
Completed Months of |
|
Months of |
Continuous Employment |
|
Base Salary/Continued Benefits |
|
|
|
0 - 3 months
|
|
3 months |
4 - 12 months
|
|
6 months |
13 or more months
|
|
6 months
plus1/4
month per each completed month of continuous
employment after 12 months up to a maximum of 9 months |
Group 2
|
|
|
Completed Months of |
|
Months of |
Continuous Employment |
|
Base Salary/Continued Benefits |
|
|
|
0 - 3 months
|
|
2 months |
4 - 12 months
|
|
4 months |
13 or more months
|
|
4 months
plus1/6
month per each completed month of continuous
employment after 12 months up to a maximum of 6 months |
Dr. Chen and Mr. Meyer are in Group 1.
Mr. Meyers offer letter modifies his rights under the
Severance Plan by providing that, assuming Mr. Meyer does
not receive any benefits from the Change of Control Plan
27
(described below), he will be entitled to nine months severance
after 15 months of continuous employment and in the event
of a change in control, 50% of the unvested shares subject to
his outstanding stock options shall vest and become exercisable.
Change of Control Severance Benefit Plan. The
Companys Change of Control Severance Benefit Plan (the
Change of Control Plan) was established effective on
May 22, 2003, and the Board formally designated plan
participants in July 2005. The purpose of the Change of Control
Plan is to provide for the payment of severance benefits to
designated participants whose employment with the Company is
involuntarily terminated within one month before or
24 months following a change of control of the Company. The
plan participants were designated as being in one of four
Levels, with all participants in a certain Level
being eligible for severance benefits as follows:
|
|
|
|
|
Level | |
|
Benefits |
| |
|
|
Level 1 Eligible Employees |
|
Cash payment: lump-sum payment equal to 100% of the
greater of (i) sum of annual salary and target bonus on the
date of termination or (ii) sum of annual salary and target
bonus in effect immediately prior to the change of control
Benefits: continuation of benefits for 12 months
Outplacement services: for 12 months
Acceleration of unvested stock options: 25%, 37.5% or
60% of unvested stock options accelerate, based on completed
years of continuous employment of fewer than 3, three to
five or 5 or more, respectively |
Level II Eligible Employees |
|
Cash payment: lump-sum payment equal to 100% of the
greater of (i) sum of annual salary and target bonus on the
date of termination or (ii) sum of annual salary and target
bonus in effect immediately prior to the change of control
Benefits: continuation of benefits for 12 months
Outplacement services: for 12 months
Acceleration of unvested stock options: 12.5%, 25%,
37.5% or 60% of unvested stock options accelerate, based on
completed months of continuous employment of 12 or fewer, 13 to
35, 36-59 and 60 or more, respectively |
Level III Eligible Employees |
|
Cash payment: lump-sum payment equal to 50% of the
greater of (i) sum of annual salary and target bonus on the
date of termination or (ii) sum of annual salary and target
bonus in effect immediately prior to the change of control
Benefits: continuation of benefits for 6 months
Outplacement services: for 6 months
Acceleration of unvested stock options: 12.5%, 25%,
37.5% or 60% of unvested stock options accelerate, based on
completed months of continuous employment of 12 or fewer, 13 to
35, 36-59 and 60 or more, respectively |
Level IV Eligible Employees |
|
Cash payment: lump-sum payment equal to 25% of the
greater of (i) sum of annual salary and target bonus on the
date of termination or (ii) sum of annual salary and target
bonus in effect immediately prior to the change of control
Benefits: continuation of benefits for 3 months
Outplacement services: for 3 months
Acceleration of unvested stock options: 12.5%, 25%,
37.5% or 60% of unvested stock options accelerate, based on
completed months of continuous employment of 12 or fewer, 13 to
35, 36-59 and 60 or more, respectively |
Dr. Chen was designated by the Board as a Level I
Eligible Employee and Messrs. Meyer and Kormushoff were
designated as Level II Eligible Employees. Benefits payable
to individuals under the Change of Control Plan are offset by
any other benefits paid to such individual under other similar
plans or arrangements, including the Severance Plan.
28
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION*
As noted above, the Compensation Committee of the Board of
Directors (the Committee) is currently 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 Companys executive compensation
policies are to attract, retain and reward executive officers
who contribute to the Companys 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 Companys business objectives and
to reward individual performance. During 2005, 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:
|
|
|
|
|
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 Companys 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. |
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The individual performance of each executive officer. Individual
performance includes meeting individual performance objectives,
demonstration of job knowledge, skills, teamwork and acceptance
of the Companys core values. |
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Corporate performance, which is evaluated by factors such as
performance relative to competitors, performance relative to
business conditions and progress in meeting the Companys
objectives and goals as typically reflected in the annual
operating plan. |
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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
* The material in this report is not soliciting
material, is not deemed filed with the SEC,
and is not to be incorporated by reference into any filing of
the Company under the Securities Act or Exchange Act, whether
made before or after the date hereof and irrespective of any
general incorporation language contained in such filing in
meeting Company financial and business objectives during the
prior fiscal year, as well as the executive officers
performance of individual responsibilities and the
Companys 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.
29
qualifications, duties and responsibilities and that are
competitive in the marketplace. In conducting periodic
compensation reviews, the Committee considers each individual
executive officers achievements
ANNUAL INCENTIVE
Annual bonus incentives for executives are intended to reflect
the Companys belief that managements contribution to
stockholder returns comes from achieving operating results that
maximize the Companys earnings and cash flow over a
multi-year time horizon. The Company believes that the
achievement of its performance objectives depends on
(a) its ability to deliver outstanding products and
services to its customers, (b) its success in establishing
and maintaining a position of strength in its chosen markets and
(c) its short- and long-term profitability, as well as the
quality of that profitability. For purposes of annual incentive
compensation, progress towards these performance objectives is
measured against the results anticipated in the Companys
annual operating plan, which is approved by the Board of
Directors.
The 2005 incentive compensation for executive officers other
than the CEO was based in part on the achievement of total
Company results consistent with the Companys 2005
operating plan, as well as achievement of other objectives in
the 2005 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 Companys stock price increases. As part of its
periodic review of compensation, the Compensation Committee
reviews the stock option holdings of the Companys 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 (a) competitive practice
within the comparison group used in determining base salary,
(b) historical performance of the executive and
(c) the amount of prior grants held by such executive, 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 covered employees 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
Companys Common Stock on the date of grant are considered
to be performance-based compensation.
CEO COMPENSATION FOR THE FISCAL YEAR ENDED DECEMBER 31,
2005
Dr. Chen served as Chairman, President and Chief Executive
Officer throughout the year, and he continues to hold these
offices.
Dr. Chens 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 received $350,000 in base salary.
This amount, together with a potential annual incentive tied to
the achievement of 2005 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
30
comparable software companies. Dr. Chen did not receive a
bonus in 2005 because the Company did not meet the operating
plan targets for 2005. See Summary Compensation
Table.
CONCLUSION
Through the plans described above, a significant portion of the
Companys executive compensation programs and
Dr. Chens 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 Companys business may result in highly
variable compensation for a particular time period.
COMPENSATION COMMITTEE
David L. Anderson, Chairman
Robert Lee
31
PERFORMANCE MEASUREMENT COMPARISON*
The following graph shows the total stockholder return of an
investment of $100 in cash on December 31, 2000 for
(a) the Companys Common Stock, (b) the Nasdaq
Stock Market (U.S.) Index (the Nasdaq Index) and
(c) the JP Morgan H&Q Internet 100 Index. All values
assume reinvestment of the full amount of all dividends and are
calculated as of December 31 of each year:
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG BROADVISION, INC., THE NASDAQ STOCK MARKET (U.S.)
INDEX
AND THE RDG INTERNET COMPOSITE INDEX
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* |
$100 invested on 12/31/00 in stock or index-including
reinvestment of dividends. Fiscal year ending December 31. |
* This Section is not soliciting material, is
not deemed filed with the SEC and is not to be
incorporated by reference in any filing of the Company under the
Securities Act or the Exchange Act whether made before or after
the date hereof and irrespective of any general incorporation
language in any such filing.
32
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since January 1, 2001, there has not been, nor is there
currently proposed, any transaction or series of similar
transactions to which the Company was or is a party in which the
amount involved exceeds or exceeded $60,000 and in which any
director, executive officer or beneficial holder of more than 5%
of any class of the Companys voting securities or members
of such persons immediate family had or will have a direct
or indirect material interest other than as described under
Management and as described below. All future
transactions between the Company and any of its directors,
executive officers or related parties will be subject to the
review and approval of the Companys nominating and
corporate governance committee, compensation committee or other
committee comprised of independent, disinterested directors.
On November 18, 2005, the Companys Chief Executive
Officer and largest stockholder, Dr. Pehong Chen, acquired
all of the Companys outstanding Senior Subordinated
Convertible Notes. Including accrued interest, the Notes
represented approximately $15.5 million in debt obligations
as of December 20, 2005. In order to relieve the Company
from the liquidity challenges presented by the Notes,
Dr. Chen agreed to cancel all amounts owed under the Notes
in exchange for 34,500,000 shares of BroadVision common
stock at an effective price per share of $0.45, representing a
25% discount to the December 20, 2005 closing price of
BroadVision common stock of $0.60 per share. This is
referred to as the Note Conversion. On
March 8, 2006, the Company issued 34,500,000 new shares of
common stock to Dr. Chen that, as of March 15, 2006,
represents approximately 49.9% of the Companys total
outstanding common stock immediately following such issuance.
Director and Officer Indemnification
The Companys amended and restated certificate of
incorporation contains provisions limiting the liability of
directors. In addition, the Company has entered into agreements
to indemnify its directors and executive officers to the fullest
extent permitted under Delaware law.
We have entered into indemnity agreements with certain officers
and directors that provide, among other things, that the Company
will indemnify such officer or director, under the circumstances
and to the extent provided for in such agreement, for expenses,
damages, judgments, fines and settlements he or she may be
required to pay in actions or proceedings to which he or she is
or may be made a party be reason of his or her position as a
director, officer or other agent of the Company, and otherwise
to the full extent permitted under Delaware law and the
Companys Bylaws.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and
intermediaries (e.g., brokers) to satisfy the delivery
requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those
stockholders. This process, which is commonly referred to as
householding, potentially means extra convenience
for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are
BroadVision, Inc. stockholders will be householding
our proxy materials. A single proxy statement will be delivered
to multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders.
Once a stockholder has received a broker notice that it will be
householding communications to that
stockholders address, householding will
continue until the stockholder is notified otherwise or until
consent is revoked. If, at any time, the stockholder no longer
wishes to participate in householding and would
prefer to receive a separate proxy statement and annual report,
that stockholder should notify the broker or direct a written
request to: Corporate Secretary, BroadVision, Inc., 585
Broadway, Redwood City, California 94063 or contact Investor
Relations at (650) 261-5100. Stockholders who currently
receive multiple copies of the proxy statement at their address
and would like to request householding of their
communications should contact their broker.
33
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.
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By Order of the Board of Directors |
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/s/ Sandra Adams |
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Sandra Adams |
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Secretary |
July 17, 2006
A copy of the Companys Annual Report to the Securities and
Exchange Commission on
Form 10-K for the
fiscal year ended December 31, 2005 is available without
charge upon written request to: Corporate Secretary,
BroadVision, Inc., 585 Broadway, Redwood City, California 94063.
34
APPENDIX A
BroadVision, Inc.
2006 Equity Incentive Plan
Approved By Board: July 7, 2006
Approved By Stockholders: , 2006
Termination Date: July 6, 2016
1. General.
(a) Eligible Award Recipients. The persons eligible to receive Awards are Employees,
Directors and Consultants.
(b) Available Awards. The Plan provides for the grant of the following Awards: (i) Incentive
Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted
Stock Unit Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards, (vii) Performance
Cash Awards, and (viii) Other Stock Awards.
(c) General Purpose. The Company, by means of the Plan, seeks to secure and retain the
services of the group of persons eligible to receive Awards as set forth in Section 1(a), to
provide incentives for such persons to exert maximum efforts for the success of the Company and any
Affiliate and to provide a means by which such eligible recipients may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of Stock Awards.
2. Administration.
(a) Administration by Board. The Board shall administer the Plan unless and until the Board
delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).
(b) Powers of Board. The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine from time to time (A) which of the persons eligible under the Plan shall be
granted Awards; (B) when and how each Award shall be granted; (C) what type or combination of types
of Award shall be granted; (D) the provisions of each Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive cash or Common Stock
pursuant to a Stock Award; and (E) the number of shares of Common Stock with respect to which a
Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and 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
1.
Stock Award Agreement or in the written terms of a Performance Cash Award, in a manner and to
the extent it shall deem necessary or expedient to make the Plan or Award fully effective.
(iii) To settle all controversies regarding the Plan and Awards granted under it.
(iv) To accelerate the time at which a Stock Award may first be exercised or the time during
which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the
provisions in the Award stating the time at which it may first be exercised or the time during
which it will vest.
(v) To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan is in effect except
with the written consent of the affected Participant.
(vi) To amend the Plan, subject to the limitations, if any, of applicable law. However, except
as provided in Section 9(a) relating to Capitalization Adjustments, no amendment shall be effective
unless approved by the stockholders of the Company to the extent stockholder approval is necessary
to satisfy applicable law or applicable exchange listing requirements. Rights under any 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 affected Participant, and (ii) such Participant consents in
writing.
(vii) To submit any 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 thereunder regarding the exclusion of performance-based compensation from the limit
on corporate deductibility of compensation paid to Covered Employees.
(viii) To amend the Plan in any respect the Board deems necessary or advisable to provide
eligible Employees with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock Options or to bring the
Plan or Incentive Stock Options granted under it into compliance therewith.
(ix) To amend the terms of any one or more Awards, including, but not limited to, amendments
to provide terms more favorable than previously provided in the Award Agreement, subject to any
specified limits in the Plan that are not subject to Board discretion; provided, however, that the
rights under any Award shall not be impaired by any such amendment unless (i) the Company requests
the consent of the affected Participant, and (ii) such Participant consents in writing.
(x) Generally, to exercise such powers and perform such acts as the Board deems necessary or
expedient to promote the best interests of the Company and that are not in conflict with the
provisions of the Plan or Awards.
(xi) To adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees, Directors or Consultants who are foreign nationals or
employed outside the United States.
2.
(c) Delegation to Committee.
(i) General. The Board may delegate some or all of the administration of the Plan to a
Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers theretofore possessed by
the Board that have been delegated to the Committee, including the power to delegate to a
subcommittee of the Committee 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 retain the authority to
concurrently administer the Plan with the Committee and may, at any time, revest in the Board some
or all of the powers previously delegated.
(ii) Section 162(m) and Rule 16b-3 Compliance. In the sole discretion of the Board, the
Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of
the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. In
addition, the Board or the Committee, in its sole discretion, may (A) delegate to a Committee of
Directors who need not be Outside Directors the authority to grant Awards to eligible persons who
are either (I) not then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award, or (II) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code, or (B) delegate to a Committee of
Directors who need not be Non-Employee Directors the authority to grant Stock Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
(d) Delegation to an Officer. The Board may delegate to one or more Officers the authority to
do one or both of the following: (i) designate Officers and Employees to be recipients of Options
and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to
such Options granted to such Employees; provided, however, that the Board resolutions regarding
such delegation shall specify the total number of shares of Common Stock that may be subject to the
Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself
or herself. Notwithstanding anything to the contrary in this Section 2(d), the Board may not
delegate to an Officer authority to determine the Fair Market Value of the Common Stock pursuant to
Section 13(v)(ii).
(e) Effect of Boards Decision. All determinations, interpretations and constructions made by
the Board in good faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.
3. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 9(a) relating to Capitalization
Adjustments, the number of shares of Common Stock that may be issued pursuant to Stock Awards shall
not exceed, in the aggregate, three million five hundred thousand (3,500,000) shares of Common
Stock. Shares may be issued in connection with a merger or acquisition as permitted by NASD Rule
4350(i)(1)(A)(iii) or, if applicable, NYSE Listed
3.
Company Manual Section 303A.08, or AMEX Company Guide Section 711 and such issuance shall not
reduce the number of shares available for issuance under the Plan.
(b) Reversion of Shares to the Share Reserve.
(i) Shares Available For Subsequent Issuance. If any (i) Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii)
shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or
repurchased by the Company at their original exercise or purchase price pursuant to the Companys
reacquisition or repurchase rights under the Plan, including any forfeiture or repurchase caused by
the failure to meet a contingency or condition required for the vesting of such shares, or (iii)
Stock Award is settled in cash, then the shares of Common Stock not issued under such Stock Award,
or forfeited to or repurchased by the Company, shall revert to and again become available for
issuance under the Plan.
(ii) Other Shares Available for Subsequent Issuance. If any shares subject to a Stock Award
are not delivered to a Participant because the Stock Award is exercised through a reduction of
shares subject to the Stock Award (i.e., net exercised) or an appreciation distribution in
respect of a Stock Appreciation Right is paid in shares of Common Stock, the number of shares
subject to the Stock Award that are not delivered to the Participant shall remain available for
subsequent issuance under the Plan. If any shares subject to a Stock Award are not delivered to a
Participant because such shares are withheld in satisfaction of the withholding of taxes incurred
in connection with the exercise of an Option, Stock Appreciation Right, or the issuance of shares
under a Restricted Stock Award or Restricted Stock Unit Award, the number of shares that are not
delivered to the Participant shall remain available for subsequent issuance under the Plan. If the
exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the
Participant (either by actual delivery or attestation), then the number of shares so tendered shall
remain available for subsequent issuance under the Plan.
(c) Incentive Stock Option Limit. Notwithstanding anything to the contrary in Section 3(b),
subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate
maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive
Stock Options shall be three million five hundred thousand (3,500,000) shares of Common Stock.
(d) Section 162(m) Limitation on Annual Grants. Subject to the provisions of Section 9(a)
relating to Capitalization Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, no Employee shall be eligible to be granted
during any calendar year Stock Awards whose value is determined by reference to an increase over an
exercise or strike price of at least one hundred percent (100%) of the Fair Market Value of the
Common Stock on the date the Stock Award is granted covering more than seven hundred thousand
(700,000) shares of Common Stock.
(e) Source of Shares. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the Company.
4.
4. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to
employees of the Company or a parent corporation or subsidiary corporation (as such terms are
defined in Code Sections 424(e) and (f)). Stock Awards other than Incentive Stock Options may be
granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of
the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable
after the expiration of five (5) years from the date of grant.
(c) Consultants. 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 Companys securities to such Consultant
because of the nature of the services that the Consultant is providing to the Company, because the
Consultant is not a natural person, or because of any other rule governing the use of Form S-8.
5. Option Provisions.
Each Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant and, if certificates are issued, a separate
certificate or certificates shall be issued for shares of Common Stock purchased on exercise of
each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then
the Option shall be a Nonstatutory Stock Option. The provisions of separate Options need not be
identical; provided, however, that each Option Agreement shall include (through incorporation of
provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the
following provisions:
(a) Term. Subject to the provisions of Section 4(b), no Option shall be exercisable after the
expiration of ten (10) years from the date of its grant or such shorter period specified in the
Option Agreement.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 4(b)
regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option in a manner
consistent with the provisions of Section 424(a) of the Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of each Nonstatutory
Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise
5.
price lower than one hundred percent (100%) of the Fair Market Value of the Common Stock if
such Option is granted pursuant to an assumption or substitution for another option in a manner
consistent with the provisions of Section 424(a) of the Code.
(d) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an
Option shall be paid, to the extent permitted by applicable law and as determined by the Board in
its sole discretion, by any combination of the methods of payment set forth below. The Board shall
have the authority to grant Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options that require the
consent of the Company to utilize a particular method of payment. The methods of payment permitted
by this Section 5(d) are:
(i) by cash or check;
(ii) bank draft or money order payable to the Company;
(iii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds;
(iv) by delivery to the Company (either by actual delivery or attestation) of shares of Common
Stock;
(v) by a net exercise arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair
Market Value that does not exceed the aggregate exercise price; provided, however, that the Company
shall accept a cash or other payment from the Participant to the extent of any remaining balance of
the aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued; provided, further, that shares of Common Stock will no longer be outstanding under an
Option and will not be exercisable thereafter to the extent that (A) shares are used to pay the
exercise price pursuant to the net exercise, (B) shares are delivered to the Participant as a
result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or
(vi) in any other form of legal consideration that may be acceptable to the Board.
(e) Transferability of Options. The Board may, in its sole discretion, impose such
limitations on the transferability of Options as the Board shall determine. In the absence of such
a determination by the Board to the contrary, the following restrictions on the transferability of
Options shall apply:
(i) Restrictions on Transfer. An 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; provided, however, that the Board may, in its sole discretion, permit
transfer of the Option in a manner consistent with applicable tax and securities laws upon the
Optionholders request.
6.
(ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred
pursuant to a domestic relations order.
(iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form provided by or otherwise satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.
(f) Vesting Generally. The total number of shares of Common Stock subject to an Option may
vest and therefore become exercisable in periodic installments that may or may not be equal. The
Option may be subject to such other terms and conditions on the time or times when it may or may
not be exercised (that may be based on the satisfaction of Performance Goals or other criteria) as
the Board may deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this Section 5(f) are subject to any Option provisions governing the minimum number
of shares of Common Stock as to which an Option may be exercised.
(g) Termination of Continuous Service. In the event that an Optionholders Continuous Service
terminates (other than for Cause or upon the Optionholders death or Disability), the Optionholder
may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination of Continuous Service) but only within such period of time
ending on the earlier of (i) the date three (3) months following the termination of the
Optionholders 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 of Continuous Service, the Optionholder does not exercise his or her Option
within the time specified herein or in the Option Agreement (as applicable), the Option shall
terminate.
(h) Extension of Termination Date. An Optionholders Option Agreement may provide that if the
exercise of the Option following the termination of the Optionholders Continuous Service (other
than for Cause or upon the Optionholders death or Disability) would be prohibited at any time
solely because the issuance of shares of Common Stock would violate the registration requirements
under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a
period of three (3) months after the termination of the Optionholders Continuous Service during
which the exercise of the Option would not be in violation of such registration requirements, or
(ii) the expiration of the term of the Option as set forth in the Option Agreement.
(i) Disability of Optionholder. In the event that an Optionholders Continuous Service
terminates as a result of the Optionholders Disability, the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of
termination of Continuous Service), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination of 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 of Continuous Service, the
Optionholder does not exercise his or her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.
7.
(j) Death of Optionholder. In the event that (i) an Optionholders Continuous Service
terminates as a result of the Optionholders death, or (ii) the Optionholder dies within the period
(if any) specified in the Option Agreement after the termination of the Optionholders Continuous
Service for a reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by the Optionholders
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 Optionholders death, 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, after the Optionholders death, the Option
is not exercised within the time specified herein or in the Option Agreement (as applicable), the
Option shall terminate.
(k) Termination for Cause. Except as explicitly provided otherwise in an Optionholders
Option Agreement, in the event that an Optionholders Continuous Service is terminated for Cause,
the Option shall terminate upon the termination date of such Optionholders Continuous Service, and
the Optionholder shall be prohibited from exercising his or her Option from and after the time of
such termination of Continuous Service.
(l) Non-Exempt Employees. No Option granted to an Employee that is a non-exempt employee for
purposes of the Fair Labor Standards Act shall be first exercisable for any shares of Common Stock
until at least six (6) months following the date of grant of the Option. The foregoing provision
is intended to operate so that any income derived by a non-exempt employee in connection with the
exercise or vesting of an Option will be exempt from his or her regular rate of pay.
(m) Early Exercise. The Option may, but need not, include a provision whereby the
Optionholder may elect at any time before the Optionholders Continuous Service terminates to
exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior
to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject
to a repurchase option in favor of the Company or to any other restriction the Board determines to
be appropriate. The Company will not exercise its repurchase option until at least six (6) months
(or such longer or shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the Board otherwise
specifically provides in the Option.
6. Provisions of Stock Awards other than Options.
(a) Restricted Stock Awards. Each Restricted Stock Award Agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. To the extent
consistent with the Companys Bylaws, at the Boards election, shares of Common Stock may be (x)
held in book entry form subject to the Companys instructions until any restrictions relating to
the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be
held in such form and manner as determined by the Board. The terms and conditions of Restricted
Stock Award Agreements may change from time to time, and the terms and conditions of separate
Restricted Stock Award Agreements need not be identical, provided, however, that each Restricted
Stock Award Agreement shall include (through incorporation of
8.
provisions hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:
(i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) past or
future services actually rendered to the Company or an Affiliate, or (B) any other form of legal
consideration that may be acceptable to the Board in its sole discretion and permissible under
applicable law.
(ii) Vesting. Shares of Common Stock awarded under the Restricted Stock Award Agreement may
be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by
the Board.
(iii) Termination of Participants Continuous Service. In the event a Participants
Continuous Service terminates, the Company may receive via a forfeiture condition, any or all of
the shares of Common Stock held by the Participant that have not vested as of the date of
termination of Continuous Service under the terms of the Restricted Stock Award Agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock
Award Agreement shall be transferable by the Participant only upon such terms and conditions as are
set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole
discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains
subject to the terms of the Restricted Stock Award Agreement.
(b) Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem appropriate. The terms
and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical;
provided, however, that each Restricted Stock Unit Award Agreement shall include (through
incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of
each of the following provisions:
(i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will
determine the consideration, if any, to be paid by the Participant upon delivery of each share of
Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by
the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid
in any form of legal consideration that may be acceptable to the Board in its sole discretion and
permissible under applicable law.
(ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose
such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its
sole discretion, deems appropriate.
(iii) Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of
Common Stock, their cash equivalent, any combination thereof or in any other form of consideration,
as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
9.
(iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the
Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery
of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award
to a time after the vesting of such Restricted Stock Unit Award.
(v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common
Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the
Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock
Unit Award in such manner as determined by the Board. Any additional shares covered by the
Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all
the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they
relate.
(vi) Termination of Participants Continuous Service. Except as otherwise provided in the
applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award
that has not vested will be forfeited upon the Participants termination of Continuous Service.
(vii) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set
forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the
requirements of Section 409A of the Code shall contain such provisions so that such Restricted
Stock Unit Award will comply with the requirements of Section 409A of the Code. Such restrictions,
if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement
evidencing such Restricted Stock Unit Award. For example, such restrictions may include, without
limitation, a requirement that any Common Stock that is to be issued in a year following the year
in which the Restricted Stock Unit Award vests must be issued in accordance with a fixed
pre-determined schedule.
(c) Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate. Stock
Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other Stock
Awards. The terms and conditions of Stock Appreciation Right Agreements may change from time to
time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be
identical; provided, however, that each Stock Appreciation Right Agreement shall include (through
incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of
each of the following provisions:
(i) Term. No Stock Appreciation Right shall be exercisable after the expiration of ten (10)
years from the date of its grant or such shorter period specified in the Stock Appreciation Right
Agreement.
(ii) Strike Price. Each Stock Appreciation Right will be denominated in shares of Common Stock
equivalents. The strike price of each Stock Appreciation Right granted as a stand-alone or tandem
Stock Award shall not be less than one hundred percent (100%) of the Fair Market Value of the
Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.
10.
(iii) Calculation of Appreciation. The appreciation distribution payable on the exercise of a
Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a
number of shares of Common Stock equal to the number of shares of Common Stock equivalents in which
the Participant is vested under such Stock Appreciation Right, and with respect to which the
Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price that
will be determined by the Board at the time of grant of the Stock Appreciation Right.
(iv) Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose
such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole
discretion, deems appropriate.
(v) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must
provide written notice of exercise to the Company in compliance with the provisions of the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right.
(vi) Payment. The appreciation distribution in respect to a Stock Appreciation Right may be
paid in Common Stock, in cash, in any combination of the two or in any other form of consideration,
as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such
Stock Appreciation Right. An appreciation distribution in respect to a Stock Appreciation Right
that is paid in a form of consideration other than Common Stock shall not reduce the share reserve.
(vii) Termination of Continuous Service. In the event that a Participants Continuous Service
terminates (other than for Cause), the Participant may exercise his or her Stock Appreciation Right
(to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of
the date of termination) but only within such period of time ending on the earlier of (A) the date
three (3) months following the termination of the Participants Continuous Service (or such longer
or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of
the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.
If, after termination, the Participant does not exercise his or her Stock Appreciation Right within
the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock
Appreciation Right shall terminate.
(viii) Termination for Cause. Except as explicitly provided otherwise in an Participants
Stock Appreciation Right Agreement, in the event that a Participants Continuous Service is
terminated for Cause, the Stock Appreciation Right shall terminate upon the termination date of
such Participants Continuous Service, and the Participant shall be prohibited from exercising his
or her Stock Appreciation Right from and after the time of such termination of Continuous Service.
(ix) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set
forth herein, any Stock Appreciation Rights granted under the Plan that are not exempt from the
requirements of Section 409A of the Code shall contain such provisions so that such Stock
Appreciation Rights will comply with the requirements of Section 409A of the Code.
11.
Such restrictions, if any, shall be determined by the Board and contained in the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right. For example, such
restrictions may include, without limitation, a requirement that a Stock Appreciation Right that is
to be paid wholly or partly in cash must be exercised and paid in accordance with a fixed
pre-determined schedule.
(d) Performance Awards.
(i) Performance Stock Awards. A Performance Stock Award is a Stock Award that may be granted,
may vest or may be exercised based upon the attainment during a Performance Period of certain
Performance Goals. A Performance Stock Award may, but need not, require the completion of a
specified period of Continuous Service. The length of any Performance Period, the Performance Goals
to be achieved during the Performance Period, and the measure of whether and to what degree such
Performance Goals have been attained shall be conclusively determined by the Board in its sole
discretion. The maximum benefit to be received by any Participant in any calendar year
attributable to Stock Awards described in this Section 6(d) shall not exceed the value of two
hundred thousand (200,000) shares of Common Stock.
(ii) Performance Cash Awards. A Performance Cash Award is a cash award that may be granted
upon the attainment during a Performance Period of certain Performance Goals. A Performance Cash
Award may also require the completion of a specified period of Continuous Service. The length of
any Performance Period, the Performance Goals to be achieved during the Performance Period, and the
measure of whether and to what degree such Performance Goals have been attained shall be
conclusively determined by the Board in its sole discretion. The maximum benefit to be received by
any Participant in any calendar year attributable to cash awards described in this Section 6(d)
shall not exceed two hundred thousand dollars ($200,000). The Board may provide for or, subject to
such terms and conditions as the Board may specify, may permit a Participant to elect for, the
payment of any Performance Cash Award to be deferred to a specified date or event. The Board may
specify the form of payment of Performance Cash Awards, which may be cash or other property, or may
provide for a Participant to have the option for his or her Performance Cash Award, or such portion
thereof as the Board may specify, to be paid in whole or in part in cash or other property.
(e) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference
to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards
provided for under Section 5 and the preceding provisions of this Section 6. Subject to the
provisions of the Plan, the Board shall have sole and complete authority to determine the persons
to whom and the time or times at which such Other Stock Awards will be granted, the number of
shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock
Awards and all other terms and conditions of such Other Stock Awards.
7. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Stock Awards.
12.
(b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common 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 that counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and
until such authority is obtained.
8. Miscellaneous.
(a) Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common
Stock pursuant to Stock Awards shall constitute general funds of the Company.
(b) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting an
offer by the Company of Common Stock to any Participant under the terms of a Stock Award shall be
deemed completed as of the date of such corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter evidencing the Stock Award is actually
received or accepted by the Participant.
(c) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award
unless and until such Participant has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.
(d) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or
other instrument executed thereunder or in connection with any Award granted pursuant to the Plan
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 Consultants
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.
(e) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder during any calendar year (under all
plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof that exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of
the applicable Option Agreement(s).
13.
(f) Investment Assurances. The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances
satisfactory to the Company (A) as to the Participants 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 (B) 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 (ii) to give written assurances satisfactory to the Company stating
that the Participant is acquiring Common Stock subject to the Stock Award for the Participants own
account and not with any present intention of selling or otherwise distributing the Common Stock.
The foregoing requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently effective registration statement
under the Securities Act, or (y) 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 Common Stock.
(g) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement,
the Company may, in its sole discretion, satisfy any federal, state or local tax withholding
obligation relating to a Stock Award by any of the following means (in addition to the Companys
right to withhold from any compensation paid to the Participant by the Company) or by a combination
of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of
Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in
connection with the Stock Award; or (iii) by such other method as may be set forth in the Stock
Award Agreement.
(h) Electronic Delivery. Any reference herein to a written agreement or document shall
include any agreement or document delivered electronically or posted on the Companys intranet.
(i) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion,
may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting
or settlement of all or a portion of any Award may be deferred and may establish programs and
procedures for deferral elections to be made by Participants. Deferrals by Participants will be
made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the
Board may provide for distributions while a Participant is still an employee. The Board is
authorized to make deferrals of Stock Awards and determine when, and in what annual percentages,
Participants may receive payments, including lump sum payments, following the Participants
termination of employment or retirement, and implement such other terms and conditions consistent
with the provisions of the Plan and in accordance with applicable law.
(j) Compliance with 409A. To the extent that the Board determines that any Award granted
under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award
shall incorporate the terms and conditions required by Section 409A of the Code.
14.
To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance
with Section 409A of the Code and Department of Treasury regulations and other interpretive
guidance issued thereunder, including without limitation any such regulations or other guidance
that may be issued or amended after the Effective Date. Notwithstanding any provision of the Plan
to the contrary, in the event that following the Effective Date the Board determines that any Award
may be subject to Section 409A of the Code and related Department of Treasury guidance (including
such Department of Treasury guidance as may be issued after the Effective Date), the Board may
adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and
procedures (including amendments, policies and procedures with retroactive effect), or take any
other actions, that the Board determines are necessary or appropriate to (i) exempt the Award from
Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with
respect to the Award, or (ii) comply with the requirements of Section 409A of the Code and related
Department of Treasury guidance.
9. Adjustments upon Changes in Common Stock; Other Corporate Events.
(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall
appropriately adjust: (i) the class(es) and maximum number of securities subject to the Plan
pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that may be issued
pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c), (iii) the class(es)
and maximum number of securities that may be awarded to any person pursuant to Section 3(d) and
6(d)(i) , and (iv) the class(es) and number of securities and price per share of stock subject to
outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be
final, binding and conclusive.
(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company,
all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares
of Common Stock not subject to the Companys right of repurchase) shall terminate immediately prior
to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the
Companys repurchase option may be repurchased by the Company notwithstanding the fact that the
holder of such Stock Award is providing Continuous Service; provided, however, that the Board may,
in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or
no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously
expired or terminated) before the dissolution or liquidation is completed but contingent on its
completion.
(c) Corporate Transaction. The following provisions shall apply to Stock Awards in the event
of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award
or any other written agreement between the Company or any Affiliate and the holder of the Stock
Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award.
(i) Stock Awards May Be Assumed. In the event of a Corporate Transaction, any surviving
corporation or acquiring corporation (or the surviving or acquiring corporations parent company)
may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar
stock awards for Stock Awards outstanding under the Plan (including but not limited to, awards to
acquire the same consideration paid to the
15.
stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or
repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards
may be assigned by the Company to the successor of the Company (or the successors parent company,
if any), in connection with such Corporate Transaction. A surviving corporation or acquiring
corporation (or its parent) may choose to assume or continue only a portion of a Stock Award or
substitute a similar stock award for only a portion of a Stock Award. The terms of any assumption,
continuation or substitution shall be set by the Board in accordance with the provisions of Section
2.
(ii) Stock Awards Held by Current Participants. In the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent company) does not assume or
continue such outstanding Stock Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have not been assumed, continued or
substituted and that are held by Participants whose Continuous Service has not terminated prior to
the effective time of the Corporate Transaction (referred to as the Current Participants), the
vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be
exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in
full to a date prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is five (5) days
prior to the effective time of the Corporate Transaction), and such Stock Awards shall terminate if
not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and
any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall
lapse (contingent upon the effectiveness of the Corporate Transaction).
(iii) Stock Awards Held by Persons other than Current Participants. In the event of a
Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent
company) does not assume or continue such outstanding Stock Awards or substitute similar stock
awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by persons other than Current Participants, the
vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be
exercised) shall not be accelerated and such Stock Awards (other than a Stock Award consisting of
vested and outstanding shares of Common Stock not subject to the Companys right of repurchase)
shall terminate if not exercised (if applicable) prior to the effective time of the Corporate
Transaction; provided, however, that any reacquisition or repurchase rights held by the Company
with respect to such Stock Awards shall not terminate and may continue to be exercised
notwithstanding the Corporate Transaction.
(iv) Payment for Stock Awards in Lieu of Exercise. Notwithstanding the foregoing, in the
event a Stock Award will terminate if not exercised prior to the effective time of a Corporate
Transaction, the Board may provide, in its sole discretion, that the holder of such Stock Award may
not exercise such Stock Award but will receive a payment, in such form as may be determined by the
Board, equal in value to the excess, if any, of (A) the value of the property the holder of the
Stock Award would have received upon the exercise of the Stock Award, over (B) any exercise price
payable by such holder in connection with such exercise.
16.
(d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and
exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement
for such Stock Award or as may be provided in any other written agreement between the Company or
any Affiliate and the Participant, but in the absence of such provision, no such acceleration shall
occur.
10. Termination or Suspension of the Plan.
(a) Plan Term. Unless sooner terminated by the Board pursuant to Section 2, the Plan shall
automatically terminate on the day before the tenth (10th) anniversary of the date the Plan is
adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No
Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Termination of the Plan shall not impair rights and obligations
under any Award granted while the Plan is in effect except with the written consent of the affected
Participant.
11. Effective Date of Plan.
This Plan shall become effective on the Effective Date.
12. Choice of Law.
The law of the State of California shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such states conflict of laws rules.
13. Definitions. As used in the Plan, the definitions contained in this Section 13 shall
apply to the capitalized terms indicated below:
(a) Affiliate means, at the time of determination, any parent or subsidiary as such
terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to
determine the time or times at which parent or subsidiary status is determined within the
foregoing definition.
(b) Award means a Stock Award or a Performance Cash Award.
(c) Board means the Board of Directors of the Company.
(d) Capitalization Adjustment means any change that is made in, or other events that occur
with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the
Effective Date 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.
Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall
not be treated as a transaction without receipt of consideration by the Company.
17.
(e) Cause means with respect to a Participant, the occurrence of any of the following
events: (i) such Participants commission of any felony or any crime involving fraud, dishonesty
or moral turpitude under the laws of the United States or any state thereof; (ii) such
Participants attempted commission of, or participation in, a fraud or act of dishonesty against
the Company; (iii) such Participants intentional, material violation of any contract or agreement
between the Participant and the Company or of any statutory duty owed to the Company; (iv) such
Participants unauthorized use or disclosure of the Companys confidential information or trade
secrets; or (v) such Participants gross misconduct. The determination that a termination of the
Participants Continuous Service is either for Cause or without Cause shall be made by the Company
in its sole discretion. Any determination by the Company that the Continuous Service of a
Participant was terminated by reason of dismissal without Cause for the purposes of outstanding
Awards held by such Participant shall have no effect upon any determination of the rights or
obligations of the Company or such Participant for any other purpose.
(f) Change in Control means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Companys
then outstanding securities other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) upon the
acquisition of securities of the Company by an investor, any affiliate thereof or any other
Exchange Act Person from the Company in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through the issuance of equity securities
or (B) solely because the level of Ownership held by any
Exchange Act Person (the Subject
Person)
exceeds the designated percentage threshold of the outstanding voting securities as a result of a
repurchase or other acquisition of voting securities by the Company reducing the number of shares
outstanding, provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting securities that,
assuming the repurchase or other acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the designated percentage threshold,
then a Change in Control shall be deemed to occur;
(ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly
or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%)
of the combined outstanding voting power of the surviving Entity in such merger, consolidation or
similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power
of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each
case in substantially the same proportions as their Ownership of the outstanding voting securities
of the Company immediately prior to such transaction;
18.
(iii) the stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company
shall otherwise occur;
(iv) there is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries, other than a
sale, lease, license or other disposition of all or substantially all of the consolidated assets of
the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting
power of the voting securities of which are Owned by stockholders of the Company in substantially
the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such sale, lease, license or other disposition; or
(v) individuals who, on the date this Plan is adopted by the Board, are members of the Board
(the Incumbent Board) cease for any reason to constitute at least a majority of the members of
the Board (provided, however, that if the appointment or election (or nomination for election) of
any new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be considered as a
member of the Incumbent Board).
The term Change in Control shall not include a sale of assets, merger or other transaction
effected exclusively for the purpose of changing the domicile of the Company.
Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company or any
Affiliate and the Participant shall supersede the foregoing definition with respect to Awards
subject to such agreement; provided, however, that if no definition of Change in Control or any
analogous term is set forth in such an individual written agreement, the foregoing definition shall
apply.
In the event that a Change in Control affects any Award that is deferred on or after January
1, 2005, then Change in Control shall conform to the definition of Change of Control under
Section 409A of the Code, as amended, and the Treasury Department or Internal Revenue Service
Regulations or Guidance issued thereunder.
(g) Code means the Internal Revenue Code of 1986, as amended.
(h) Committee means a committee of one (1) or more Directors to whom authority has been
delegated by the Board in accordance with Section 2(c).
(i) Common Stock means the common stock of the Company.
(j) Company means Broadvision, Inc., a Delaware corporation.
(k) Consultant means any person, including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is compensated for such services, or
(ii) serving as a member of the board of directors of an Affiliate and is compensated for such
services. However, service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a Consultant for purposes of the Plan.
19.
(l) Continuous Service means that the Participants service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A
change in the capacity in which the Participant renders service to the Company or an Affiliate as
an Employee, Consultant or Director or a change in the entity for which the Participant renders
such service, provided that there is no interruption or termination of the Participants service
with the Company or an Affiliate, shall not terminate a Participants Continuous Service. For
example, a change in status from an employee of the Company to a consultant to an Affiliate or to a
Director shall not constitute an interruption of Continuous Service. To the extent permitted by
law, the Board or the chief executive officer of the Company, in that partys 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.
Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for
purposes of vesting in a Stock Award only to such extent as may be provided in the Companys leave
of absence policy, in the written terms of any leave of absence agreement or policy applicable to
the Participant, or as otherwise required by law.
(m) Corporate Transaction means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially all, as determined by the Board in its
sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;
(iii) the consummation of a merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or
(iv) the consummation of a merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of
the merger, consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.
(n) Covered Employee shall have the meaning provided in Section 162(m)(3) of the Code and
the regulations promulgated thereunder.
(o) Director means a member of the Board.
(p) Disability means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code and, for purposes of any deferred compensation under this Plan, has
the meaning set forth in Section 409A of the Code and Section 223(d) of the Social Security Act,
with respect to amounts subject to Section 409A of the Code.
(q) Effective Date means the effective date of this Plan document, which is the date that
this Plan is first approved by the Companys stockholders.
20.
(r) Employee means any person employed by the Company or an Affiliate. However, service
solely as a Director, or payment of a fee for such services, shall not cause a Director to be
considered an Employee for purposes of the Plan.
(s) Entity means a corporation, partnership, limited liability company or other entity.
(t) Exchange Act means the Securities Exchange Act of 1934, as amended.
(u) Exchange Act Person means any natural person, Entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that Exchange Act Person shall not include
(i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company; or (v) any natural person, Entity or group (within the
meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date of the Plan
as set forth in Section 11, is the Owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the Companys then
outstanding securities.
(v) Fair Market Value means, as of any date, the value of the Common Stock determined as
follows:
(i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap 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 exchange or market (or the exchange or market with the greatest volume of trading in
the Common Stock) on the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable. Unless otherwise
provided by the Board, if there is no closing sales price (or closing bid if no sales were
reported) for the Common Stock on the last market trading day prior to the date of determination,
then the Fair Market Value shall be the closing selling price (or closing bid if no sales were
reported) on the last preceding date for which such quotation exists.
(ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board in good faith.
(w) 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.
(x) Non-Employee Director means a Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive compensation, either directly or
indirectly, from the Company or an Affiliate 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
21.
(Regulation S-K)), does not possess an interest in any other transaction for which
disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a non-employee director for purposes of Rule 16b-3.
(y) Nonstatutory Stock Option means any Option other than an Incentive Stock Option.
(z) 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.
(aa) Option means an Incentive Stock Option or a Nonstatutory Stock Option to purchase
shares of Common Stock granted pursuant to the Plan.
(bb) Option Agreement means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to
the terms and conditions of the Plan.
(cc) Optionholder means a person to whom an Option is granted pursuant to the Plan or, if
permitted under the terms of this Plan, such other person who holds an outstanding Option.
(dd) Other Stock Award means an award based in whole or in part by reference to the Common
Stock that is granted pursuant to the terms and conditions of Section 6(e).
(ee) Other Stock Award Agreement means a written agreement between the Company and a holder
of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each
Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.
(ff) Outside Director means a Director who either (i) is not a current employee of the
Company or an affiliated corporation (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an affiliated
corporation who receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or
an affiliated corporation, and does not receive remuneration from the Company or an affiliated
corporation, either directly or indirectly, 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.
(gg) Own, Owned, Owner, Ownership A person or Entity shall be deemed to Own, to
have Owned, to be the Owner of, or to have acquired Ownership of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.
(hh) Participant means a person to whom an Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.
22.
(ii) Performance Cash Award means an award of cash granted pursuant to the terms and
conditions of Section 6(d)(ii).
(jj) Performance Criteria means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria
that shall be used to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation;
(iii) earnings before interest, taxes, depreciation and amortization; (iv) total stockholder
return; (v) return on equity; (vi) return on assets, investment, or capital employed; (vii)
operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after
taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre-tax profit;
(xiv) operating cash flow; (xv) sales or revenue targets; (xvi) increases in revenue or product
revenue; (xvii) expenses and cost reduction goals; (xviii) improvement in or attainment of working
capital levels; (xix) economic value added (or an equivalent metric); (xx) market share; (xxi) cash
flow; (xxii) cash flow per share; (xxiii) share price performance; (xxiv) debt reduction; (xxv)
implementation or completion of projects or processes; (xxvi) customer satisfaction; (xxvii);
stockholders equity; and (xxviii) to the extent that an Award is not intended to comply with
Section 162(m) of the Code, other measures of performance selected by the Board. Partial
achievement of the specified criteria may result in the payment or vesting corresponding to the
degree of achievement as specified in the Stock Award Agreement or the written terms of a
Performance Cash Award. The Board shall, in its sole discretion, define the manner of calculating
the Performance Criteria it selects to use for such Performance Period.
(kk) Performance Goals means, for a Performance Period, the one or more goals established by
the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be
set on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or
business segments, and in either absolute terms or relative to the performance of one or more
comparable companies or a relevant index. At the time of the grant of any Award, the Board is
authorized to determine whether, when calculating the attainment of Performance Goals for a
Performance Period: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude
exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating
earnings; (iii) to exclude the effects of changes to generally accepted accounting standards
required by the Financial Accounting Standards Board; (iv) to exclude the effects of any statutory
adjustments to corporate tax rates; and (v) to exclude the effects of any extraordinary items as
determined under generally accepted accounting principles. In addition, the Board retains the
discretion to reduce or eliminate the compensation or economic benefit due upon attainment of
Performance Goals.
(ll) Performance Period means the period of time selected by the Board over which the
attainment of one or more Performance Goals will be measured for the purpose of determining a
Participants right to and the payment of a Stock Award or a Performance Cash Award. Performance
Periods may be of varying and overlapping duration, at the sole discretion of the Board.
(mm) Performance Stock Award means a Stock Award granted under the terms and conditions of
Section 6(d)(i).
23.
(nn) Plan means this BroadVision, Inc. 2006 Equity Incentive Plan.
(oo) Restricted Stock Award means an award of shares of Common Stock that is granted
pursuant to the terms and conditions of Section 6(a).
(pp) Restricted Stock Award Agreement means a written agreement between the Company and a
holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award
grant. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the
Plan.
(qq) Restricted Stock Unit Award means a right to receive shares of Common Stock that is
granted pursuant to the terms and conditions of Section 6(b).
(rr) Restricted Stock Unit Award Agreement means a written agreement between the Company and
a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock
Unit Award grant. Each Restricted Stock Unit Award Agreement shall be subject to the terms and
conditions of the Plan.
(ss) Rule 16b-3 means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.
(tt) Securities Act means the Securities Act of 1933, as amended.
(uu) Stock Appreciation Right means a right to receive the appreciation on Common Stock that
is granted pursuant to the terms and conditions of Section 6(c).
(vv) Stock Appreciation Right Agreement means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation
Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.
(ww) Stock Award means any right granted under the Plan, including an Incentive Stock
Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a
Stock Appreciation Right, a Performance Stock Award or any Other Stock Award.
(xx) Stock Award Agreement means a written agreement between the Company and a Participant
evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.
(yy) Subsidiary means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(50%).
(zz) Ten Percent Stockholder means a person who 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 any Affiliate.
24.
PROXYBROADVISION, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON August 8, 2006
The undersigned hereby appoints Pehong Chen as attorney and proxy of the undersigned, with
full power of substitution, to vote all of the shares of stock of BroadVision, Inc., a Delaware
corporation (the Company), which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Companys headquarters located at 585 Broadway,
Redwood City, California on Tuesday, August 8, 2006, at 10:00 a.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, 4, 5, 6 AND 7, 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 IN PROPOSAL 1 AND A
VOTE FOR PROPOSALS 2, 3, 4, 5, 6 AND 7.
BROADVISION, INC.
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Mark this box with an X if you have made changes
to your name or address details above. |
ANNUAL MEETING PROXY CARD
A. |
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Election of Directors. |
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To elect directors to serve for the ensuing year and until their successors are
elected. The Board of Directors recommends a vote FOR the following nominees: |
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Withhold |
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Withhold |
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01-Pehong Chen
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03-Robert Lee
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02-James D. Dixon
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04-François Stieger
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B. |
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Proposals. |
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The Board of Directors recommends a vote FOR the following proposals: |
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2.
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To approve the BroadVision, Inc. 2006 Equity Incentive Plan.
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For
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Against
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Abstain
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3.
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To approve an amendment to the Companys Amended and
Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
91,000,000 shares, (ii) the authorized number of shares of
common stock from 2,000,000,000 to 90,000,000 shares and
(iii) the authorized number of shares of preferred stock
from 10,000,000 to 1,000,000 shares.
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Against
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Abstain
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4.
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To approve an amendment to the Companys Amended and
Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
141,000,000 shares, (ii) the authorized number of shares of
common stock from 2,000,000,000 to 140,000,000 shares and
(iii) the authorized number of shares of preferred stock
from 10,000,000 to 1,000,000 shares.
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For
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Against
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Abstain
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5.
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To approve an amendment to the Companys Amended and
Restated Certificate of Incorporation to reduce (i) the
total authorized number of shares from 2,010,000,000 to
281,000,000 shares, (ii) the authorized number of shares of
common stock from 2,000,000,000 to 280,000,000 shares and
(iii) the authorized number of shares of preferred stock
from 10,000,000 to 1,000,000 shares.
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Against
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Abstain
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6.
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To approve an amendment to the Companys Amended and
Restated Certificate of Incorporation to remove the
provision that prevents the Companys stockholders from
taking actions by written consent.
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For
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Against
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Abstain
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7.
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To ratify the selection by the Audit Committee of the Board
of Directors of Stonefield Josephson, Inc. as independent
auditors of the Company for its fiscal year ending December
31, 2006.
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For
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Against
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Abstain
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C. |
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Authorized Signatures-Sign Here-This section must be completed for your instructions to be
executed. |
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders
must sign. When signing as attorney, trustee, executor, administrator, guardian or corporate
officer, please provide your FULL title.
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Signature 1 Please keep signature |
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Signature 1 Please keep signature |
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within the box |
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within the box |
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Date (mm/dd/yyyy) |
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