DEFINITIVE PROXY STATEMENT
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.
)
Filed
by
the Registrant ý
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
¨ Preliminary
Proxy Statement
¨ Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
ý Definitive
Proxy Statement
¨ Definitive
Additional Materials
¨ Soliciting
Material Pursuant to §240.14a-12
BROADVISION,
INC.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
ý No
fee
required.
¨ Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title
of
each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
(3)
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed
maximum aggregate value of transaction:
¨Fee
paid
previously with preliminary materials.
¨
Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or
Schedule and the date of its filing.
(1) Amount
Previously Paid:
(2) Form,
Schedule or Registration Statement No.:
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.
April
27,
2007
Dear
Stockholder:
On
behalf
of BroadVision, Inc., I cordially invite you to attend the Annual Meeting of
Stockholders, which will begin at 10:00 a.m. local time on Tuesday,
June 5,
2007, at our headquarters located at 1600 Seaport Boulevard, 5th
Floor,
North Building, Redwood City, California. At the meeting, stockholders will
be
asked:
|
1.
|
To
elect directors to serve for the ensuing year and until their successors
are elected.
|
|
2.
|
To
approve an amendment to the BroadVision, Inc. Employee Stock Purchase
Plan
to increase the total number of shares authorized for issuance under
the
plan.
|
|
3.
|
To
ratify the selection of Odenberg, Ullakko, Muranishi & Co. LLP as our
independent auditors for the fiscal year ending December 31,
2007.
|
|
4.
|
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.
Our
directors and officers 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 BroadVision. To assist us in preparation for the
meeting, please return your proxy card at your earliest
convenience.
Very
truly yours,
/s/
Pehong Chen
Dr.
PEHONG CHEN
Chairman
of the Board, President, Chief Executive Officer and Interim Chief Financial
Officer
BROADVISION,
INC.
1600
Seaport Boulevard
5th
Floor,
North Building
Redwood
City, California 94063
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 5, 2007
TO
THE STOCKHOLDERS OF BROADVISION, INC.:
NOTICE
IS HEREBY GIVEN
that the
Annual Meeting of Stockholders of BROADVISION,
INC.,
a
Delaware corporation, will be held on Tuesday, June 5, 2007, at 10:00 a.m.
local
time at our headquarters located at 1600 Seaport Boulevard, 5th
Floor,
North Building, Redwood City, California for the following
purposes:
|
1.
|
To
elect directors to serve for the ensuing year and until their successors
are elected.
|
|
2.
|
To
approve an amendment to the BroadVision, Inc. Employee Stock Purchase
Plan
to increase the total number of shares authorized for issuance under
the
plan.
|
|
3.
|
To
ratify the selection of Odenberg, Ullakko, Muranishi & Co. LLP as our
independent auditors for the fiscal year ending December 31,
2007.
|
|
4.
|
To
transact such other business as may properly come before the meeting
or
any adjournment or postponement
thereof.
|
The
foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Our
Board
of Directors has fixed the close of business on April 19, 2007 as the record
date for the determination of stockholders entitled to notice of and to vote
at
this Annual Meeting and at any adjournment or postponement thereof.
By
Order
of the Board of Directors
/s/
Sandra Adams
SANDRA
ADAMS
Secretary
and General Counsel
Redwood
City, California
April
27,
2007
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.
1600
Seaport Boulevard
5th
Floor,
North Building
Redwood
City, California 94063
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
April
25,
2007
INFORMATION
CONCERNING SOLICITATION AND VOTING
GENERAL
The
enclosed proxy is solicited on behalf of the Board of Directors of BroadVision,
Inc., a Delaware corporation, for use at the Annual Meeting of Stockholders
to
be held on June 5, 2007, 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
our headquarters located at 1600 Seaport Boulevard, 5th
Floor,
North Building, Redwood City, California. We intend to mail this proxy statement
and accompanying proxy card on or about April 27, 2007 to all stockholders
entitled to vote at the Annual Meeting.
SOLICITATION
We
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. We 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 our directors, officers or other regular employees. No
additional compensation will be paid to our 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 April 19, 2007
will be entitled to notice of and to vote at the Annual Meeting. At the close
of
business on April 19, 2007, we had outstanding and entitled to vote 107,376,887
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 totals
for all proposals and will have the same effect as "Against" votes. Broker
non-votes have no effect and will not be counted towards the vote totals for
any
proposal.
If
cumulative voting were applicable, stockholders would be entitled to cast a
number of votes equal to the number of shares of stock held by the stockholder
and to cast all those votes for a single nominee or to distribute them among
two
or more nominees. Under Delaware law, cumulative voting in the election of
directors is not mandatory but is a permitted option if so provided in a
corporation's certificate of incorporation. Our current certificate of
incorporation does not provide for cumulative voting rights.
Nevertheless,
Section 708 of the California Corporations Code, currently applicable to us
by
virtue of Section 2115 of the California Corporations Code, may require that
we
permit cumulative voting. Under Section 2115, certain foreign corporations
(i.e., corporations such as BroadVision that are not organized under California
law) that are not listed on a recognized national securities exchange are placed
in a special category if they have characteristics of ownership and operations
that indicate significant contacts with California. The Delaware Supreme Court
has held that Section 2115 does not apply to Delaware corporations. If followed
by California courts, this would mean that the cumulative voting requirements
and other sections of the California Corporations Code do not apply to us.
For
purposes of the annual meeting, we intend to permit cumulative voting if a
stockholder properly requests to cumulate votes. No stockholder, however, will
be entitled to cumulate votes unless the name(s) of the candidate(s) has (have)
been placed in nomination prior to the commencement of the voting in accordance
with our bylaws and a stockholder has given at least two days' written notice
to
the Secretary of BroadVision of an intention to cumulate votes prior to the
voting. If any stockholder has given such notice, all stockholders may cumulate
their votes for candidates in nomination, in which event votes represented
by
proxies delivered pursuant to this proxy statement may be cumulated, in the
discretion of the proxy holders, in accordance with the recommendation of the
Board of Directors. Discretionary authority to cumulate votes in such event
is,
therefore, solicited in this proxy statement.
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 Stockholder's 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 our Secretary
at our principal executive office, 1600 Seaport Boulevard, 5th
Floor,
North Building, 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 our proxy
statement and form of proxy for our 2008 annual meeting of stockholders pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is December 29, 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 year's Annual Meeting. Stockholders are also advised to review our 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 second quarter
of
2007.
PROPOSAL
1
ELECTION
OF DIRECTORS
There
are
four nominees for the eight Board of Director positions presently authorized
pursuant to our Bylaws. 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 director's earlier death, resignation
or removal. Each of the nominees listed below is currently one of our directors
and was previously elected by the stockholders. It is our policy to invite
nominees for directors to attend the Annual Meeting. None of the current members
of the Board of Directors attended the 2006 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 our
management. Each person nominated for election has agreed to serve if elected.
Our management has no reason to believe that any nominee will be unable to
serve.
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:
Name
|
|
Age
|
|
Principal
Occupation/
Position
Held With The Company
|
Pehong
Chen
|
|
49
|
|
Chairman,
President, Chief Executive Officer and Interim Chief Financial
Officer
|
James
D. Dixon
|
|
63
|
|
Formerly
an executive with bankofamerica.com
|
Robert
Lee
|
|
58
|
|
Formerly
an executive with Pacific Bell
|
François
Stieger
|
|
57
|
|
Chief
Executive Officer, Intentional Software International
Sarl
|
Pehong
Chen
has
served as our Chairman of the Board, Chief Executive Officer and President
since
our incorporation in May 1993. Dr. Chen has served as Interim Chief Financial
Officer since William Meyer's departure in June 2006. 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.
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 one of our directors 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
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,
and Rare Hospitality International, Inc., a restaurant operator and
franchisor.
Robert
Lee
has
served as one of our directors 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 web.com (formerly Interland), which
provides web hosting for the small and medium business market, Blue Shield
of
California, which provides health insurance to members in California, and
Corinthian Colleges, which operates as a post-secondary education company in
North America. 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.
Francois
Stieger
has
served as one of our directors since August 2006. Mr. Stieger leads Intentional
Software's international group as CEO of Intentional Software International
Sarl. He is also the President and a board member of Security
Tech SA. Immediately prior to joining Intentional Software International, 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. He held this
post since April 2003, and was responsible for Verisign's business throughout
that region. Prior to joining Verisign, Mr. Stieger was a partner of Amadeus
Capital, a leading European venture capital firm based in London. In 1996,
Mr.
Stieger established BroadVision's European operations. Under his management
through mid 2001, these operations grew to more than 400 employees and US$104
million annual revenues. He was also personally involved in BroadVision's very
successful initial public offering on NASDAQ in June 1996, and its public
offering on the Neuer Markt in Frankfurt in November 1999. On a larger scale
from 1987-1992, as vice president Mr. Stieger established and managed operations
of Oracle Corporation for southern and central Europe. Mr. Stieger is a graduate
of the University of Strasbourg's Institute of Technology.
INFORMATION
ABOUT THE BOARD OF DIRECTORS
Although
we voluntarily delisted from the Nasdaq Global Market ("Nasdaq"), formerly
the
Nasdaq National Market, as of March 8, 2006, we continue to abide by the
corporate governance standards established by Nasdaq as a matter of sound
business practices. We intend to apply for relisting on the Nasdaq National
Market at such point in the future when we meet Nasdaq's initial listing
requirements.
Independence
of the Board of Directors
As
required under Nasdaq listing standards, a majority of the members of a listed
company's board of directors must qualify as "independent," as affirmatively
determined by the board of directors. The Board consults with our company
counsel to ensure that the Board's 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, in effect from 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 us,
our
senior management and our independent auditors, the Board affirmatively has
determined that three of our current directors are independent directors within
the meaning of the applicable Nasdaq listing standards. Dr. Chen, our Chairman,
Chief Executive Officer, President, Interim Chief Financial Officer and largest
stockholder, is not "independent" within the meaning of the applicable Nasdaq
listing standards.
As
required under applicable Nasdaq listing standards, our 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.
Code
of Business Ethics and Conduct
We
have
adopted a Code of Business Ethics and Conduct (the "Code of Conduct") that
applies to all of our directors, officers and employees. The text of the Code
of
Conduct is posted on our website at www.broadvision.com. If we make any
substantive amendment to the Code of Conduct or grant any waiver from a
provision of the Code of Conduct to any executive officer or director, we will
promptly disclose the nature of the amendment or waiver on our
website.
Stockholder
Communications with the Board of Directors
Our
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 our
care
at 1600 Seaport Boulevard, 5th
Floor,
North Building, 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. Our 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, 2006, the Board met three times. During
the
fiscal year ended December 31, 2006, 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 Board's standing committees are
available on our 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 us.
Below
is
a description of each of these committees.
The
Audit Committee
The
Audit
Committee of the Board of Directors oversees our 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 our 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 us 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 our Annual Report on Form
10-K; and discusses with management and the independent auditors the results
of
the annual audit and the results of our quarterly financial
statements.
The
Audit
Committee is presently composed of three non-employee directors: Messrs. Dixon
(Chairman), Lee and Stieger. The Board has determined that all members of our
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. Dixon's 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.
The
Audit
Committee is also vested with oversight of corporate governance matters and,
in
that regard, makes determinations as to all aspects of our 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 our governance principles to determine
their adherence to the Code of Conduct, and recommending any changes deemed
appropriate to the Board for its consideration.
In
2006,
the Audit Committee met ten times. 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 our
overall compensation strategy and policies. The Compensation Committee reviews
and approves corporate performance goals and objectives relevant to the
compensation of our executive officers and other senior management; reviews
and
approves the compensation and other terms of employment of our Chief Executive
Officer; reviews and approves the compensation and other terms of employment
of
the other executive officers; and administers our stock option and purchase
plans, pension and profit sharing plans, stock bonus plans, deferred
compensation plans and other similar programs. We also have a Non-Officer Option
Committee, established in May 1997, which awards stock options to non-officer
employees and consultants, not to exceed 100,000 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. Dixon and Lee (Chairman). All members of our 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 2006, the Compensation Committee met three
times and acted once by unanimous written consent.
The
Nominating Committee
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,
Inc., 1600 Seaport Boulevard, 5th
Floor,
North Building, Redwood City, California 94063.
If
a
stockholder wishes the Nominating Committee to consider a director candidate
for
nomination at our next annual meeting, then our 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 year's annual
meeting, which notice is otherwise in accordance with the requirements for
stockholder nominations described in our Bylaws. Submissions must include the
candidate's 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. Lee (Chairman) and Steiger. All members of
our
Nominating Committee are independent (as independence is currently defined
in
Rule 4200(a)(15) of the Nasdaq listing requirements). In 2006, the Nominating
Committee acted once by unanimous written consent.
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS*
The
Audit
Committee has reviewed and discussed with management the audited consolidated
financial statements of the Company for the year ended December 31, 2006
(the "Audited Financial Statements") and management's assessment of the
effectiveness of the Company's internal control over financial reporting.
Management
has the primary responsibility for the financial statements and the internal
control over financial reporting.
In
this
context, the Audit Committee has reviewed and discussed with management and
Odenberg, Ullakko, Muranishi & Co. LLP ("OUM"), the independent auditors,
the Audited Financial Statements and the internal control over financial
reporting. The Audit Committee has discussed with OUM the matters required
to be
discussed by Statement on Auditing Standards Nos. 114 (The Auditors
Communication with those Charged with Governance) and 90 (Communication with
Audit Committees). In addition, the Audit Committee has received from OUM the
written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and
discussed with them their independence from the Company and its management.
The
Audit
Committee considered whether the rendering of non-audit services by OUM to
the
Company is compatible with maintaining the independence of OUM from the
Company.
Following
the foregoing review and discussions, the Audit Committee recommended to the
Board of Directors that the Audited Financial Statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31,
2006 for filing with the SEC.
AUDIT
COMMITTEE
James
D.
Dixon, Chairman
Robert
Lee
François
Stieger
* 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.
PROPOSAL
2
APPROVAL
OF THE AMENDMENT TO THE
BROADVISION,
INC. EMPLOYEE STOCK PURCHASE PLAN
Stockholders
are hereby requested to approve an amendment to our Employee Stock Purchase
Plan
(the "Purchase Plan"), as amended, to add an additional 2,000,000 shares to
the
number of shares of Common Stock issuable under the Purchase Plan.
The
purpose of the amendment is to ensure that we will have a sufficient reserve
of
Common Stock available under the Purchase Plan to provide our eligible employees
(and the employees of any of our subsidiaries as designated by the Board to
participate in the Purchase Plan) with the opportunity to purchase shares of
Common Stock at periodic purchase dates through their accumulated payroll
deductions.
The
Board
believes that the number of shares currently available for issuance under the
Purchase Plan is insufficient to continue providing our employees with the
opportunity to acquire a proprietary interest in us and thereby attract,
motivate, and retain the best available talent suitable for our success.
The
affirmative vote of the holders of a majority of the shares present in person
or
represented by proxy and entitled to vote at the meeting will be required to
approve the amendment to the Purchase 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
essential features of the Purchase Plan are outlined below:
PURPOSE
The
purpose of the Purchase Plan is to provide a means by which our employees (and
any of our parent or subsidiary designated by the Board to participate in the
Purchase Plan) may be given an opportunity to purchase our Common Stock through
payroll deductions, to assist us in retaining the services of its employees,
to
secure and retain the services of new employees, and to provide incentives
for
such persons to exert maximum efforts for our success. All of our and our
subsidiaries' approximately 169 employees, except Dr. Chen and the employees
of
our mainland Chinese subsidiary are eligible to participate in the Purchase
Plan.
The
rights to purchase Common Stock granted under the Purchase Plan are intended
to
qualify as options issued under an "employee stock purchase plan" as that term
is defined in Section 423(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
ADMINISTRATION
The
Board
administers the Purchase Plan and has the final power to construe and interpret
the Purchase Plan and the rights granted under it. The Board has the power,
subject to the provisions of the Purchase Plan, to determine when and how rights
to purchase our Common Stock will be granted and the provisions of each offering
of such rights (which need not be identical). The Board has the power to
delegate administration of the Purchase Plan to a committee of not less than
two
Board members. The Board may abolish any such committee at any time and revest
in itself the administration of the Purchase Plan.
STOCK
SUBJECT TO PURCHASE PLAN
Prior
to
applying the increase that is the subject of this proposal, an aggregate of
615,789 shares of Common Stock is reserved for future issuance under the
Purchase Plan, including shares resulting from an "evergreen" provision whereby,
on the first day of our fiscal year, commencing on January 1, 2004 and
ending on January 1, 2014, the aggregate number of shares of the Common
Stock available for issuance under the Purchase Plan will be automatically
increased by a number equal to the lesser of (a) 1.5% of the shares of
Common Stock outstanding (rounded down to the nearest whole share) or
(b) 800,000 shares of Common Stock. Notwithstanding the forgoing, the Board
may act prior to the beginning of any fiscal year to increase the share reserve
by a smaller number of shares of Common Stock than is otherwise provided for
in
the evergreen provision. If rights granted under the Purchase Plan expire,
lapse
or otherwise terminate without being exercised, the Common Stock not purchased
under such rights again becomes available for issuance under the Purchase
Plan.
OFFERINGS
The
Purchase Plan is implemented by offerings of rights to all eligible employees
from time to time by the Board. The maximum duration for an offering under
the
Purchase Plan is 27 months. Currently, under the Purchase Plan, each
offering is 12 months in duration.
ELIGIBILITY
Any
person who is customarily employed at least 20 hours per week and five
months per calendar year by us, or any designated one of our subsidiaries,
on
the first day of an offering is eligible to participate in that
offering.
However,
no employee is eligible for the grant of any rights under the Purchase Plan
if,
immediately after such grant, the employee would own, directly or indirectly,
stock possessing 5% or more of the total combined voting power or value of
all
our or any of our subsidaries' classes of stock, including any stock which
such
employee may purchase under all outstanding rights and options. In addition,
no
employee may purchase more than $25,000 worth of stock, determined at the fair
market value of the shares at the time such rights are granted, under all our
employee stock purchase plans in any calendar year.
PARTICIPATION
IN THE PLAN
Eligible
employees become participants in the Purchase Plan by delivering to us, within
the time specified in the offering, a participation agreement authorizing
payroll deductions of up to the maximum percentage specified by the Board of
such employee's earnings during the offering.
PURCHASE
PRICE
The
purchase price per share at which shares of Common Stock are sold in an offering
under the Purchase Plan is the lower of (a) 85% of the fair market value of
a share of Common Stock on the date of commencement of the offering or
(b) 85% of the fair market value of a share of Common Stock on the purchase
date.
PAYMENT
OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The
purchase price of the shares is accumulated by payroll deductions during an
offering. A participant may reduce or increase his or her payroll deductions
on
the first day of any calendar quarter purchase period. A participant may also
terminate his or her payroll deductions at any time during an offering. A
participant may begin such payroll deductions after the beginning of any
purchase period as provided for in an offering. All payroll deductions made
for
a participant are credited to his or her account under the Purchase Plan and
deposited with our general funds.
PURCHASE
OF STOCK
Upon
execution of an agreement to participate in the Purchase Plan by an employee,
shares of Common Stock are purchased on the employee's behalf under the Purchase
Plan on each purchase date. In connection with offerings made under the Purchase
Plan, the Board may specify a maximum number of shares any employee may be
granted the right to purchase and the maximum aggregate number of shares which
may be purchased pursuant to such offering by all participants. If the aggregate
number of shares to be purchased upon exercise of rights granted in the offering
would exceed the maximum aggregate number specified in the Purchase Plan, the
Board will make a pro rata allocation of available shares. Unless the employee's
participation is discontinued, his or her right to purchase shares is exercised
automatically on each purchase date at the applicable price.
WITHDRAWAL
A
participant may withdraw from a given offering by terminating his or her payroll
deductions and delivering to us a notice of withdrawal from the Purchase Plan.
Such withdrawal may be elected at any time prior to the end of the applicable
offering except as provided by the Board in the offering.
Upon
any
employee withdrawal, we will distribute to the employee his or her accumulated
payroll deductions without interest, less any accumulated deductions previously
applied to the purchase of stock on the employee's behalf during such offering,
and such employee's interest in the offering will be automatically terminated.
The employee is not entitled to again participate in that particular offering.
An employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
TERMINATION
OF EMPLOYMENT
Rights
granted pursuant to any offering under the Purchase Plan terminate immediately
upon cessation of an employee's employment for any reason, and we will
distribute to such employee all of his or her accumulated payroll deductions,
without interest, less any accumulated deductions previously applied to the
purchase of stock.
RESTRICTIONS
ON TRANSFER
Rights
granted under the Purchase Plan are not transferable and may be exercised only
by the person to whom such rights are granted.
ADJUSTMENT
PROVISIONS
If
there
is any change in the stock subject to the Purchase Plan or subject to any rights
granted under the Purchase Plan (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by us), the Purchase Plan and outstanding rights
thereunder will be appropriately adjusted as to the class and maximum number
of
shares subject to the Purchase Plan, and the class, number of shares and price
per share of stock subject to such outstanding rights.
EFFECT
OF CERTAIN CORPORATE TRANSACTIONS
In
the
event of a dissolution, liquidation, specified type of merger or stock
acquisition of us, the surviving or acquiring corporation will assume the rights
under the Purchase Plan or substitute similar rights, the rights will continue
in full force and effect, or the participants' accumulated payroll deductions
may be used to purchase Common Stock immediately prior to the corporate event
and the participants' rights under the ongoing offering terminated.
DURATION,
AMENDMENT AND TERMINATION
The
Board
may suspend, terminate or amend the Purchase Plan at any time. Any amendment
of
the Purchase Plan must be approved by the stockholders within 12 months of
its adoption by the Board if the amendment would (a) increase the number of
shares of Common Stock reserved for issuance under the Purchase Plan,
(b) modify the requirements relating to eligibility for participation in
the Purchase Plan, or (c) modify any other provision of the Purchase Plan
in a manner that would materially increase the benefits accruing to participants
under the Purchase Plan, if such approval is required in order to comply with
the requirements of Rule 16b-3 under the Exchange Act or Section 423
of the Code.
Rights
granted before amendment or termination of the Purchase Plan will not be altered
or impaired by any amendment or termination without consent of the person to
whom such rights were granted.
FEDERAL
INCOME TAX INFORMATION
Rights
granted under the Purchase Plan are intended to qualify for favorable federal
income tax treatment associated with rights granted under an employee stock
purchase plan which qualifies under provisions of Section 423 of the
Code.
A
participant will be taxed on amounts withheld for the purchase of shares of
Common Stock as if such amounts were actually received. Other than this, no
income will be taxable to a participant until disposition of the acquired
shares, and the method of taxation will depend upon the holding period of the
acquired shares.
If
the
stock is disposed of more than two years after the beginning of the offering
period and more than one year after the stock is transferred to the participant,
then the lesser of (i) the excess of the fair market value of the stock at
the
time of such disposition over the exercise price or (ii) the excess of the
fair
market value of the stock as of the beginning of the offering period over the
exercise price (determined as of the beginning of the offering period) will
be
treated as ordinary income. Any further gain or any loss will be taxed as a
long-term capital gain or loss. At present, such capital gains generally are
subject to lower tax rates than ordinary income.
If
the
stock is sold or disposed of before the expiration of either of the holding
periods described above, then the excess of the fair market value of the stock
on the exercise date over the exercise price will be treated as ordinary income
at the time of such disposition. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be short-term or long-term,
depending on how long the stock has been held.
There
are
no federal income tax consequences to us by reason of the grant or exercise
of
rights under the Purchase Plan. We are entitled to a deduction to the extent
amounts are taxed as ordinary income to a participant (subject to the
requirement of reasonableness and the satisfaction of tax reporting
obligations).
The
following table provides certain information with respect to all of our equity
compensation plans in effect as of December 31, 2006.
Equity
Compensation Plan Information
Plan
Category
|
|
Number
of Securities
To
be Issued Upon
Exercise
of
Outstanding
Options
(a)
|
|
Weighted-Average
Exercise
Price of
Outstanding
Options
(b)
|
|
Number
of Securities
Remaining
Available
for
Issuance Under
Equity
Compensation
Plans
(Excluding Securities
Reflected
in Column (a))
(c)
|
Equity
compensation plans approved by security holders(1)
|
|
6,944,144
|
|
12.66
|
|
3,327,093
|
Equity
compensation plans not approved by security holders(2)
|
|
764,560
|
|
9.70
|
|
1,497,239
|
Total
|
|
7,708,704
|
|
12.36
|
|
4,824,332
|
|
|
|
|
|
|
|
(1)
|
Includes
the following: Incentive Plan, Employee Stock Purchase Plan, 1993
Interleaf Stock Option Plan, 1994 Interleaf Employee Stock Option
Plan and
2006 Equity Incentive Plan.
|
(2)
|
Includes
the following: the 2000 Non-Officer Equity Incentive Plan (the "2000
Non-Officer Plan") and non-plan grants. For more information - see
Notes 1
and 9 to the Consolidated Financial Statements contained in our Annual
Report on Form 10-K for the fiscal year ended December 31,
2006.
|
PROPOSAL
3
RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
The
Audit
Committee has selected Odenberg, Ullakko, Muranishi & Co. LLP ("OUM") as our
independent auditors for the fiscal year ending December 31, 2007. The Board
of
Directors has directed that management submit the selection of independent
auditors for ratification by the stockholders at the Annual Meeting. OUM has
audited our financial statements beginning with the fiscal year ended December
31, 2006. Representatives of OUM 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 OUM as our independent auditors is not required
by our Bylaws or otherwise; however, the Board is submitting the selection
of
OUM 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 our best interests and those of our 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 OUM. 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 us by OUM, our principal accountant
for the year ended December 31, 2006, Stonefield Josephson, Inc., our principal
accountant for the year ended December 31, 2005, and by BDO Seidman, LLP, our
principal accountant for the year ended December 31, 2004. All fees described
were approved by the Audit Committee.
Audit
Fees. Audit
fees billed were $1,304,000 and $801,000 for the years ended December 31, 2006
and 2005, respectively. The fees were for professional services rendered for
the
audits of our consolidated financial statements, reviews of the financial
statements included in our quarterly reports, consultations on matters that
arose during our audit and reviews of SEC registration statements.
Audit-Related
Fees. No
audit-related fees were billed in the years ended December 31, 2006 and December
31, 2005.
Tax
Fees. Tax
fees
billed were $113,000 and $181,000 for the years ended December 31, 2006 and
2005, 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, 2006 and 2005,
respectively.
The
Audit
Committee has determined that the rendering of certain services other than
audit
services by OUM is compatible with maintaining the principal accountant's
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 our 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 Committee's approval of the scope of
the
engagement of our 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
Committee's members, but the decision must be reported to the full Audit
Committee at its next scheduled meeting.
CHANGE
IN INDEPENDENT AUDITORS
On
October 13, 2006, the Audit Committee of the Board approved the appointment
of OUM as
our
independent auditors to audit our financial statements for the fiscal year
ending December 31, 2006 in place of Stonefield Josephson, Inc. ("Stonefield").
The decision to change independent auditors was authorized by our Board of
Directors.
We
advised Stonefield of its dismissal on October 14, 2006. The report of
Stonefield on our consolidated financial statements for the year ended December
31, 2005 did not contain any adverse opinion or a disclaimer of opinion, nor
was
it qualified or modified as to uncertainty, audit scope or accounting
principles.
During
the year ended December 31, 2005 and through October 14, 2006, there were no
disagreements with Stonefield 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 Stonefield, 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
our
financial statements for the year ended December 31, 2005, there were two
disagreements between Stonefield and our management, both of which were resolved
to Stonefield's satisfaction prior to the issuance of the financial statements.
These two matters concerned the appropriate accounting for (i) the embedded
derivatives related to the convertible debt arrangements we entered into in
November 2004 and (ii) the transactions we effected pursuant to the Debt
Conversion Agreement we entered into in December 2005. The Audit Committee
subsequently discussed these matters with Stonefield and our management and
was
satisfied with the resolution of the matters.
On
October 16, 2006, we engaged OUM as our new independent accountants. Prior
to
the engagement of OUM, including the two most recent fiscal years through
October 16, 2006, neither we nor anyone acting on our behalf consulted with
OUM
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 our financial statements, and neither a written report
was
provided to us or oral advice was provided that OUM concluded was an important
factor considered by us 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 term is defined in Item 304(a)(1)(iv) of Regulation S-K
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
BOARD OF DIRECTORS RECOMMENDS
A
VOTE IN FAVOR OF PROPOSAL 3.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Controlling
Stockholder
From
March 8, 2006 through November 28, 2006, Dr. Pehong Chen, directly and through
entities controlled by him, held a majority of the voting power of our
outstanding stock. As of March 23, 2007, Dr. Chen beneficially owned
approximately 39% of our common stock. As a result, Dr. Chen has the ability
to
exert significant control over the election of members of the Board of Directors
and all other matters submitted to a vote of our stockholders.
Beneficial
Ownership of BroadVision Common Stock
The
following table sets forth certain information regarding the ownership of our
common stock as of February 28, 2007 by: (a) each current director and each
nominee for director; (b) each of the executive officers named in the
Summary Compensation Table; (c) all of our current executive officers and
directors as a group; and (d) all those known by us to be beneficial owners
of more than five percent of its common stock.
|
|
Beneficial
Ownership(1)
|
|
Beneficial
Owner
|
|
Number
of
Shares(#)
|
|
Percent
of
Total(%)
|
|
Pehong
Chen (2)
|
|
42,079,389
|
|
39.49
|
%
|
James
D. Dixon (3)
|
|
96,000
|
|
*
|
|
Robert
Lee (4)
|
|
85,039
|
|
*
|
|
Francois
Stieger (5)
|
|
20,000
|
|
*
|
|
Honu
Holdings, LLC (2)
1600
Seaport Blvd., North Bldg., 5th Floor,
Redwood
City, CA 94063
|
|
34,500,000
|
|
32.37
|
%
|
Palo
Alto Investors LLC (6)
470
University Avenue
Palo
Alto, CA 94301
|
|
14,154,759
|
|
13.28
|
%
|
Palo
Alto Investors (6)
470
University Avenue
Palo
Alto, CA 94301
|
|
14,154,759
|
|
13.28
|
%
|
William
Leland Edwards (6)
470
University Avenue
Palo
Alto, CA 94301
|
|
14,154,870
|
|
13.28
|
%
|
Palo
Alto Fund II, L.P. (6)
470
University Avenue
Palo
Alto, CA 94301
|
|
6,834,659
|
|
6.41
|
%
|
Micro
Cap Partners, L.P. (6)
470
University Avenue
Palo
Alto, CA 94301
|
|
6,355,600
|
|
5.96
|
%
|
William
Meyer (7)
|
|
15,061
|
|
*
|
|
All
Current Directors and Executive Officers as a group (4
persons)(8)
|
|
42,280,428
|
|
39.69
|
%
|
|
|
|
|
|
|
|
|
*Less
than
one percent
(1)
|
This
table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the SEC.
Unless otherwise indicated in the footnotes to this table and subject
to
community property laws where applicable, we believe 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 106,566,567 shares outstanding on February
28,
2007, adjusted as required by rules promulgated by the SEC. Our directors
and executive officers can be reached at BroadVision, Inc., 1600
Seaport
Blvd., 5th
Floor, North Bldg., 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 February 28, 2007. Also includes
34,500,000 shares held by Honu Holdings, LLC, of which Dr. Chen is
the
sole member. Excludes 1,145,387 shares of common stock held in trust
by
independent trustees for the benefit of Dr. Chen's children.
|
(3)
|
Includes
60,000 shares of common stock issuable upon the exercise of stock
options
exercisable within 60 days of February 28, 2007.
|
(4)
|
Includes
60,000 shares of common stock issuable upon the exercise of stock
options
exercisable within 60 days of February 28, 2007. Also includes 1,039
shares held in trust by Mr. Lee and his wife for their benefit.
|
(5)
|
Includes
20,000 shares of common stock issuable upon the exercise of stock
options
exercisable within 60 days of February 28, 2007.
|
(6)
|
Based
on Amendment No. 1 to Schedule 13G filed with the SEC on February
14,
2007, Palo Alto Investors, LLC, Palo Alto Investors and William Leland
Edwards have shared voting and disposition power with respect to
14,159,759 shares of common stock (the "PAI Shares"), and Mr. Edwards
has
sole voting and disposition power with respect to an additional 111
shares
of common stock. Palo Alto Fund II, L.P. has shared voting and disposition
power with respect to 6,834,659 of the PAI Shares and Micro Cap Partners,
L.P. shared voting and disposition power with respect to 6,355,600
of the
PAI Shares.
|
(7)
|
Mr.
Meyer was our Chief Financial Officer until his resignation on June
6,
2006.
|
(8)
|
Includes
the information contained in the notes above, as applicable, for
our
directors and executive officers as of February 28,
2007.
|
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our directors and executive officers, and
persons who own more than ten percent of a registered class of our equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of our Common Stock and other equity securities. Directors,
officers and greater than ten percent stockholders are required by SEC
regulations to furnish us with copies of all Section 16(a) forms they
file.
To
our
knowledge, based solely on a review of the copies of such reports furnished
to
us and written representations that no other reports were required, during
the
fiscal year ended December 31, 2006 all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with, other than the late filing of one Form 4 for each
of
Messrs. Dixon, Lee and Nevens and a Form 3 and a Form 4 for Mr. Stieger, each
covering one transaction.
EXECUTIVE
COMPENSATION
Compensation
Discussion And Analysis
Philosophy
Our
compensation policies are designed to attract and retain key employees,
motivating them to achieve and rewarding them for superior performance. In
allocating total compensation between cash compensation and equity compensation,
the compensation committee focuses on creating incentives geared to both short
and longer-term performance with the goal of increasing stockholder value over
the long term. Executive compensation programs impact all employees by setting
general levels of compensation and helping to create an environment of goals,
rewards and expectations. Because we believe the performance of every employee
is important to our success, we are mindful of the effect of executive
compensation and incentive programs on all of our employees.
We
believe that the compensation of our officers should reflect their success
as
individual and as a management team, in attaining key operating objectives,
such
as growth of revenues, growth of operating earnings and earnings per share
and
growth or maintenance of market share and long-term competitive advantage,
and
ultimately, in attaining an increased market price for our stock. We believe
that the performance of the officers in managing our company, considered in
light of general economic and specific company, industry and competitive
conditions, should be the basis for determining their overall compensation.
We
also believe that their compensation should not be based on the short-term
performance of our stock, whether favorable or unfavorable, but rather that
the
price of our stock will, in the long-term, reflect our operating performance,
and ultimately, the management of the company by our executives. We seek to
have
the long-term performance of our stock reflected in executive compensation
through our stock option and other equity incentive programs. In setting our
officers' compensation, we intend to be competitive with other similarly
situated companies in our industry.
Overview
of Compensation and Process
Elements
of compensation for our executives include: salary, incentive bonus, stock
option awards, health, disability and life insurance, and perquisites. Base
salaries are set for our officers annually by our compensation committee. At
the
same time, our compensation committee also approves and adopts an incentive
bonus plan for the new year and typically grants stock option awards to our
officers and certain other eligible employees.
As
part
of its annual review of officer compensation, our compensation committee takes
into account each officer's total compensation package from prior years, as
well
as information contained in market surveys. Typically, the chief executive
officer makes compensation recommendations to the compensation committee with
respect to the executive officers who report to him. Such executive officers
are
not present at the time of these deliberations. The chairman of the compensation
committee then makes compensation recommendations to the compensation committee
with respect to the chief executive officer, who is absent from that meeting.
The compensation committee may accept or adjust such recommendations and also
makes the sole determination of the chief executive officer's compensation.
We
choose
to pay each element of compensation in order to attract and retain the necessary
executive talent, reward annual performance and provide incentive for their
balanced focus on long-term strategic goals as well as short-term performance.
The amount of each element of compensation is determined by or under the
direction of our compensation committee. The following are factors that the
compensation committee may take into account in determining the various
components of our officers' total compensation package:
l |
Performance
against corporate and individual objectives for the previous
year;
|
l |
Difficulty
of achieving desired results in the coming
year;
|
l |
Value
of their unique skills and capabilities to support the long-term
performance of the company;
|
l |
Performance
of their management
responsibilities;
|
l |
Responsibility
and authority of each position relative to other positions within
the
company; and
|
l |
Contributions
as a member of the senior management
team.
|
These
elements fit into our overall compensation objectives by helping to secure
the
future potential of our operations, facilitating our entry into new markets,
providing proper compliance and regulatory guidance, and helping to create
a
cohesive team.
Our
policy for allocating between long-term and currently paid compensation is
to
ensure adequate base compensation to attract and retain the right personnel,
while providing incentives to maximize long-term value for our company and
our
stockholders. Likewise, we provide cash compensation in the form of base salary
to meet competitive salary norms and reward good performance on an annual basis
and in the form of profit-sharing compensation to reward superior performance
against specific short-term goals. We provide non-cash compensation to reward
superior performance against specific objectives and long-term strategic goals.
As we continue to focus on executing our turnaround plan in 2007 and introduce
new products and services to the marketplace, we want our executives that are
leading these initiatives to have strong incentives to see that these
initiatives succeed. At the same time, we want our executives to be
appropriately rewarded if these initiatives do succeed. As a result, we believe
that equity compensation will be a significant component of total compensation
for our key employees.
Compensation
Consultant
In
2006
we utilized the services of a compensation consulting company during the year.
We had a contract with the Radford Group of AON Consulting Inc. for the first
six months of 2006. The Radford Group provided us with their Radford Benchmark
Survey, the Radford Executive Survey, the Radford Sales Survey and the Radford
International Survey. All these surveys were used to ascertain the
reasonableness of amounts and types of compensation paid to our employees and
executives. The Radford Group was paid $14,700 for their services.
SUMMARY
COMPENSATION TABLE
Name
and Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)(2)
|
|
Non-Equity
Incentive Plan Compensation
($)(3)
|
|
Change
in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
|
All
Other Compensation
($)(4)
|
|
Total
|
|
Pehong
Chen, CEO and CFO
|
|
2006
|
|
$
|
350,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
37,092
|
|
$
|
10,904
|
|
$
|
16,852
|
|
$
|
414,848
|
|
William
E. Meyer, CFO (1)
|
|
2006
|
|
$
|
108,441
|
|
$
|
22,500
|
|
$
|
-
|
|
$
|
38,496
|
|
$
|
-
|
|
$
|
4,773
|
|
$
|
2,823
|
|
$
|
177,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Mr.
Meyer
was our Chief Financial Officer until his resignation on June 6, 2006. Upon
Mr.
Meyer's resignation, Dr. Chen assumed the duties of the Chief Financial
Officer effective June 2, 2006. Total in Salary column includes $15,826 that
we
paid to Mr. Meyer for accrued vacation time upon his termination.
(2) Stock
option values calculated using the Black-Scholes model under the rules of SFAS
123R, as discussed in the Stock Compensation section of this
report.
(3) Consists
of payment under our Employee Profit Sharing Plan (EPSP). See table below for
details.
(4) Consists
of company contribution for health insurance coverage. See table below for
details.
Employee
Profit Sharing Plan (EPSP) - NON-EQUITY INCENTIVE PLAN
COMPENSATION
|
|
Year
|
|
Paid
in 2006
|
|
Deferred
|
|
TOTAL
|
|
Pehong
Chen, CEO and CFO
|
|
2006
|
|
$
|
37,092
|
|
$
|
26,976
|
|
$
|
64,068
|
|
William
E. Meyer, CFO
|
|
|
|
Not
with the company at time of payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
37,092
|
|
$
|
26,976
|
|
$
|
64,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
Contributions for Health Coverage - ALL OTHER COMPENSATION
|
|
Year
|
|
Health
|
|
Dental
|
|
Vision
|
|
STD
|
|
LTD
|
|
Life
Ins
|
|
EE
Assist
|
|
TOTAL
|
|
Pehong
Chen, CEO and CFO
|
|
2006
|
|
$
|
13,352
|
|
$
|
1,831
|
|
$
|
302
|
|
$
|
359
|
|
$
|
450
|
|
$
|
540
|
|
$
|
19
|
|
$
|
16,852
|
|
William
E. Meyer, CFO
|
|
2006
|
|
$
|
1,863
|
|
$
|
248
|
|
$
|
57
|
|
$
|
180
|
|
$
|
225
|
|
$
|
242
|
|
$
|
9
|
|
$
|
2,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
It
is the
goal of our compensation committee to establish salary compensation for our
executive officers based on our operating performance relative to comparable
software and computer peer companies over a three to five year period. In
setting base salaries for fiscal 2006, we reviewed the Radford studies and
recommendations with respect to the salary compensation of officers with
comparable qualifications, experience and responsibilities at companies in
their
recommended peer group. It is not our policy to pay our CEO at the highest
level
relative to his peers but rather to set his compensation on a basis relative
to
the other members of our senior management team and CEO's of other similar
technology companies. We believe that this gives us the opportunity to attract
and retain talented managerial employees both at the senior executive level
and
below. Our compensation committee does not presently intend to increase the
salaries of any of our officers in 2007.
Employee
Profit Sharing Plan
Our
2006
Employee Profit Sharing Plan (EPSP) is designed to reward both executives and
employees alike for the achievement of shorter-term financial goals, principally
achievement of certain levels of Earnings Before Interest Taxes Depreciation
and
Amortization, also known as EBITDA. It is our general philosophy that employees
be rewarded for their performance as a team in the attainment of these goals.
We
believe that this is important to aligning our executive and employees toward
promoting and rewarding teamwork among them. Although each executive officer
is
eligible to receive an award under the EPSP, the granting of the awards to
any
individual or the officers as a group is entirely at the discretion of our
compensation committee. The compensation committee may choose to award the
bonus
or not, and decide on the actual level of the award in light of all relevant
factors after completion of the year.
At
the
beginning of 2006, our compensation committee adopted the 2006 EPSP. Under
the
terms of the 2006 EPSP:
l |
Payouts
are made quarterly, on the first regularly scheduled pay date after
the
announcement of quarterly earnings, or on such other date as deemed
appropriate by management;
|
l |
Eligible
persons are active, full-time, or more than 50% part-time employees
who
maintain a satisfactory standing during the entirety of each quarter
and
who remain an employee at the time of each quarterly
payout;
|
l |
Commission-based
employees (those with a sales commission plan) have a portion of
their
variable compensation tied to company performance, funded under this
EPSP
award pool, with payouts ahead of non-commissioned
employees;
|
l |
Payouts
to non-commissioned employees are targeted at a certain percentage
of each
individual's base salary, set and/or adjusted with management
discretion;
|
l |
All
amounts earned but not paid under the plan (reductions from any "merit
factor", resignations with positive profit-sharing accruals, etc.)
are
eliminated, going back into company
earnings;
|
l |
The
award pool is allocated as follows:
|
EBITDA
< 10% = No payouts are made (0%)
EBITDA
of
11-20% = Payouts are 11-20% (percent for percent)
EBITDA
> 20% = 20% maximum
In
March
2007, our Board approved the 2007 EPSP, which has terms that are similar to
the
2006 EPSP. Under the 2007 EPSP, allocation of the award pool will be determined
as a percentage of profits. After the close of each quarter, our management,
in
its sole discretion, will set the percentage for the corresponding quarter.
Payouts will be subject to adjustment by our management and our Chief Executive
Officer will have the ability to make the final determination of all
profitability payments.
Profit-Sharing
Awards
In
its
discretion our compensation committee decided to award bonuses for fiscal 2006
based upon our achievement of EBITDA performance goals and management
discretion, because the actual 2006 results considerably exceeded expectations.
Stock
Option and Equity Incentive Programs
We
intend
for our stock option award program to be the primary vehicle for offering
long-term incentives and rewarding our officers and other key employees. We
regard this as a key retention tool. Because of the relationship between the
value of an option and the market price of our common stock, we have always
believed that granting stock options is the best method of motivating our
executive officers to manage our company in a manner that is consistent with
the
interests of our stockholders.
Stock
Options Granted
We
grant
stock options under our 2006 Equity Incentive Plan to our officers and other
key
employees based upon prior performance, the importance of retaining their
services and the potential for their performance to help us attain our long-term
goals. However, there is no set formula for the granting of awards to individual
executives or employees. In 2006 we granted stock options to purchase 3,880,000
shares of stock representing approximately 11.3% of the outstanding shares
of
our common stock on December 31, 2005 on a fully diluted basis. Of this amount,
options to acquire an aggregate of 120,000 shares were issued to our named
executive officers. During year 2006, a total of 64 employees and 7 officers
received stock option awards.
Timing
of Grants
Stock
option awards to our executive officers and other key employees are typically
granted annually in conjunction with the review of the individual performance
of
our executive officers. The exercise price of all stock options is set at the
last reported sale price of our common stock on the grant date.
Perquisites
We
limit
the perquisites that we make available to our executive officers, particularly
in light of recent developments with respect to corporate crime and abuse
involving perquisites. Our executives are entitled to few benefits that are
not
otherwise available to all of our employees. In this regard it should be noted
that we do not provide pension arrangements, post-retirement health coverage
other than COBRA, or similar benefits for our executives or employees.
The
perquisites we provided in fiscal 2006 are as follows: All employees are
eligible to participate in the 401(k) retirement plan if they so choose. We
do
not match any funds contributed by employees. Our health and insurance plans
are
the same for all employees. In general, and depending upon the employee's
choice, our employees pay 20% of the health premium due. We do not provide
other
perquisites such as country club memberships, jet aircraft, limousine service,
estate or financial planning services, etc.
GRANTS
OF PLAN BASED AWARDS
|
|
|
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
|
|
Estimated
Future Payouts Under Equity Incentive Plan Awards
|
|
All
Other Stock Awards:
|
|
All
Other Options Awards:
|
|
Exercise
or Base
|
|
Name
and Principal Position
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Number
of Shares of Stock
|
|
Number
of Securities Underlying Options
|
|
Price
of Option Awards ($/Sh)
|
|
Pehong
Chen - Note 1
|
|
|
|
$
|
-
|
|
$
|
26,976
|
|
$
|
26,976
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
-
|
|
|
-
|
|
$
|
-
|
|
William
E. Meyer
|
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Future firm payouts under the 2006 Employee Profit Sharing Plan
(EPSP).
The
compensation committee granted stock options to the officers on the same date
on
which they granted stock awards to our other employees. In keeping with our
standard policy and practice, the exercise price of the stock options that
were
awarded was $0.57 per share, the last sale price of our common stock on the
date
of grant, as quoted on the Pink Sheets. The terms of the options provide for
vesting in three equal annual installments commencing one year from the date
of
grant and prorated thereafter until fully vested. The options have a life of
10
years.
OUTSTANDING
EQUITY AWARDS AT YEAR-END
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
and Principal Position
|
|
Number
of Securities Underlying Unexercised Options (#) Exercisable
|
|
Number
of Securities Underlying Unexercised Options (#) Unexercisable
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#) (1)
|
|
Option
Exercise Price ($)
|
|
Option
Expiration Date
|
|
Number
of Shares or Units of Stock That Have Not Vested (#)
|
|
Market
Value of Shares or Units of Stock That Have Not Vested ($)
|
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested (#)
|
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested ($)
|
|
Pehong
Chen
|
|
|
493,108
|
|
|
-
|
|
|
-
|
|
$
|
60.00
|
|
|
6/23/2009
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
6,892
|
|
|
-
|
|
|
-
|
|
$
|
60.00
|
|
|
6/23/2009
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
500,000
|
|
|
-
|
|
|
-
|
|
$
|
66.51
|
|
|
5/25/2011
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
4,444
|
|
|
-
|
|
|
-
|
|
$
|
35.01
|
|
|
11/27/2011
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
55,555
|
|
|
-
|
|
|
-
|
|
$
|
18.63
|
|
|
2/19/2012
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
644,445
|
|
|
-
|
|
|
-
|
|
$
|
2.16
|
|
|
10/30/2012
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
William
E. Meyer
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
-
|
|
|
NA
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
We do
not issue stock options in any direct formulaic performance based
plan.
OPTION
EXERCISES AND STOCK VESTED
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
and Principal Position
|
|
Number
of Shares Acquired on Exercise (#)
|
|
Value
Realized on Exercise ($)
|
|
Number
of Shares Acquired on Vesting (#)
|
|
Value
Realized on Vesting ($)
|
|
Pehong
Chen
|
|
-
|
|
$
|
-
|
|
-
|
|
$
|
-
|
|
William
E. Meyer
|
|
10,000
|
|
$
|
1,030
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Employment
Compensation
Pension
Benefits
We
do not
provide pension arrangements or post-retirement health coverage for our
executives or employees. All employees, including our executives, are eligible
to participate in our 401(k) contributory defined contribution plan. We do
not
make any contribution to or make any matching contribution to the 401(k).
PENSION
BENEFITS
|
|
Name
and Principal Position
|
|
Plan
Name
|
|
Number
of Years Credited Service (#)
|
|
|
Present
Value of Accumulated Benefits ($)
|
|
|
Payment
During Last Year ($)
|
|
Pehong
Chen
|
|
N/A
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
William
E. Meyer
|
|
N/A
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
Deferred Compensation
We
provide a 401(k) nonqualified defined contribution plan for all employees.
We do
not match any employee contributions. Amounts shown below are totally from
the
named executives. Our Plan is administered by Fidelity Investments and brokered
by the NWK Group.
NONQUALIFIED
DEFERRED COMPENSATION
|
|
Name
and Principal Position
|
|
Executive
Contributions in Last Year ($)
|
|
Registrant
Contributions in Last Year ($)
|
|
Aggregate
Earnings in Last Year ($)
|
|
Aggregate
Withdrawls / Distributions ($)
|
|
Aggregate
Balance at Last Year-End ($)
|
|
Pehong
Chen
|
|
$
|
-
|
|
$
|
-
|
|
$
|
10,904
|
|
$
|
-
|
|
$
|
88,791
|
|
William
E. Meyer
|
|
$
|
9,407
|
|
$
|
-
|
|
$
|
4,773
|
|
$
|
-
|
|
$
|
56,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Post-Employment Payments
All
of
our employees, including our officers, are employees-at-will and as such do
not
have employment contracts with us, except in the case of one officer of our
EMEA
foreign subsidiaries. We also do not provide post-employment health coverage
or
other benefits, except in connection with the severance plan which is described
below under "Retention Agreements".
Retention
Agreements
We
do not
have individual retention agreements with any employee. However we do have
a
Change of Control Severance Benefit Plan for Involuntary Severance from the
Company. The Severance Benefit Plan generally provides that the named executive
officers will receive severance benefits if their employment is involuntarily
terminated within one month before or 24 months following a change of control
of
the Company. There are four "Levels" with all participants in a certain Level
being eligible for severance benefits. Our CEO, Pehong Chen, is the only member
in Level 1, while two of the named officers are in Level 2, and one is in Level
3. Generally the Levels provide for cash payments of 50-100% of Base Pay, plus
continuation of benefits for 6-12 months, outplacement services for 6-12 months,
and acceleration of unvested stock options depending upon the length of service
with the company ranging from 12.5% to 100% vesting. None of these benefits
apply if the named officer retires or voluntarily resigns.
POTENTIAL
PAYMENTS UNDER RETENTION AGREEMENTS
The
table
below describes the amounts of current and future compensation benefits that
the
named executive officers would receive under various change of control or
termination scenarios as of December 31, 2006. Under our 2006 benefit plan
the
benefits are the same for a voluntary termination, early retirement, or normal
retirement on December 31, 2006. Our Change of Control Plan, in the context
of
an Involuntary For Good Reason Termination, only provides for benefits intended
to compensate management for lost wages and longer term health and displacement
benefits. There are certain graduated levels of benefits for the executives
depending upon their responsibility levels and seniority with the company.
Under
the Involuntary Not For Cause Termination scenario the benefits are reduced,
while a For Cause Termination would result in little or no benefits beyond
those
earned up to the termination date, assumed for purposes of this table to be
midnight December 31, 2006. This means the For Cause terminated employee would
be entitled to only shares and stock options vested, profit sharing and accrued
vacation earned through December 31, 2006 and no further compensation. In the
case of disability on December 31, 2006, the employee would be entitled to
the
additional benefits of long-term disability insurance payouts for up to one
year. In the case of death on December 31, 2006, the benefit additional to
the
employee would include the present value of all life insurance proceeds until
normal retirement age of 65.
TERMINATION
OR CHANGE OF CONTROL
|
|
Executive
Benefits and Payments Upon Separation
|
|
|
Voluntary
Termination on 12/31/06 ($)
|
|
|
Early
Retirement on 12/31/06 ($)
|
|
|
Normal
Retirement on 12/31/06 ($)
|
|
|
Involuntary
Not For Cause Termination on 12/31/06 ($)
|
|
|
For
Cause Termination on 12/31/06 ($)
|
|
|
Involuntary
For Good Reason Termination (Change in Control) on 12/31/06 ($)
|
|
|
Disability
on 12/31/06 ($)
|
|
|
Death
on 12/31/06 ($)
|
|
Pehong
Chen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term
Incentive Compensation
|
|
|
$
|
37,092
|
|
|
$
|
37,092
|
|
|
$
|
37,092
|
|
|
$
|
37,092
|
|
|
$
|
37,092
|
|
|
$
|
37,092
|
|
|
$
|
37,092
|
|
|
$
|
37,092
|
|
|
Stock
Options
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
& Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Compensation Program
|
|
|
$
|
88,791
|
|
|
$
|
88,791
|
|
|
$
|
88,791
|
|
|
$
|
88,791
|
|
|
$
|
88,791
|
|
|
$
|
88,791
|
|
|
$
|
88,791
|
|
|
$
|
88,791
|
|
|
Health
& Welfare Benefits
|
|
|
$
|
1,404
|
|
|
$
|
1,404
|
|
|
$
|
1,404
|
|
|
$
|
1,404
|
|
|
$
|
1,404
|
|
|
$
|
1,404
|
|
|
$
|
1,404
|
|
|
$
|
1,404
|
|
|
Disablilty
Income
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,198,244
|
|
|
$
|
-
|
|
|
Life
Insurance Benefits
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
500,000
|
|
|
Cash
Severance
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
343,419
|
|
|
$
|
-
|
|
|
$
|
415,943
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Accrued
Vacation Pay
|
|
|
$
|
2,692
|
|
|
$
|
2,692
|
|
|
$
|
2,692
|
|
|
$
|
2,692
|
|
|
$
|
2,692
|
|
|
$
|
2,692
|
|
|
$
|
2,692
|
|
|
$
|
2,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Meyer
had departed prior to December 31, 2006, and as a result was not entitled to
any
compensation upon his termination or a change of control effective as of
December 31, 2006.
Disability
Income:
Assumes
Present Value of all Future Benefits Until Normal Retirement
Age
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
to Age
|
|
Discount
Rate
|
|
|
Present
Value
|
|
Name
|
|
Age
on 12/31/06
|
|
65
|
|
6.5%
|
|
|
of
the Annuity
|
|
|
|
|
|
|
|
|
|
|
|
|
Pehong
Chen
|
|
49
|
|
16
|
|
6.5%
|
|
$
|
1,198,244
|
|
William
E. Meyer
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
Benefit Plan
On
March
26, 2007, our Board approved the Severance Benefit Plan (the "Plan") for certain
of our eligible employees. The Plan provides for the payment of certain benefits
to employees if (i) the employee has been continuously employed for a period
of
one year or more; (ii) if we terminate the employee's employment pursuant to
(a)
an Involuntary Termination Without Cause or (b) Constructive Termination within
one month prior to or 24 months following a Change of Control; and (iii) we
notify the employee in writing that he or she is eligible for participation
in
the Plan. Such notification will include details of the level(s) of
participation applicable to the Eligible Employee. We in our sole discretion,
will make determinations as to whether employees are "Eligible Employees."
We
have made no such determinations to date. Undefined capitalized terms in this
description are defined in the Plan. The Plan is meant to replace all prior
arrangements and plans we previously have maintained, other than local plans
for
specific subsidiaries or countries.
The
Plan
provides for the following benefits:
No
change of control
Designated
Eligible Employees involuntarily terminated without cause shall receive a
cash severance benefit (in addition to certain other benefits as detailed in
the
Plan) in accordance with our then-current payroll practices as
follows:
EMPLOYEE
DESIGNATION
|
|
BASE
|
|
ACCRUAL/YR
|
|
MAXIMUM
|
|
|
6.00
Mo.
|
|
|
|
|
EVP
|
|
3.00
Mo.
|
|
|
|
6.00
Mo.
|
SVP
|
|
2.00
Mo.
|
|
|
|
5.00
Mo.
|
VP
|
|
1.00
Mo.
|
|
|
|
4.00
Mo.
|
Director
|
|
0.50
Mo.
|
|
|
|
3.00
Mo.
|
Manager
|
|
|
|
0.25
Mo./Yr.
|
|
2.00
Mo.
|
Employee
|
|
|
|
0.08
Mo./Yr.
|
|
1.00
Mo.
|
Change
of control
There
are
three categories of Eligible Employees covered in a Change of Control situation:
Level I, Level II and Level III as hereinafter defined. Level I Eligible
Employees are defined as those Company Executive Officers designated by the
Compensation Committee as Level I Eligible Employees. Level II Eligible
Employees are defined as those Non-Executive Company Officers who report
directly to the CEO and who are designated by the CEO as Level II Eligible
Employees. Level III Eligible Employees are defined as those Non-Executive
Company Officers and Department Managers who report either directly to the
CEO
or to Level II Eligible Employees and who are designated by the CEO as Level
III
Eligible Employees.
Designated
Eligible Employees terminated shall receive a cash severance benefit (in
addition to certain other benefits as detailed in the Plan) in accordance with
our then-current payroll practices as follows:
|
|
BASE
(NUMBER OF MO. BASE SALARY AFTER 1 YEAR TENURE)
|
|
ACCELERATOR
(NUMBER OF MO. BASE SALARY ACCRUED PER EACH YR. OF ADDITIONAL
TENURE)
|
|
MAXIMUM
YEARS TENURE
ACCELERATOR
APPLIED
|
|
MAXIMUM
MONTHS BASE SALARY ACCRUAL ALLOWED
|
|
|
9
|
|
|
|
|
|
24
|
|
|
6
|
|
|
|
9
|
|
15
|
|
|
3
|
|
|
|
8
|
|
9
|
The
vesting and exercisability of unvested stock options held by an Eligible
Employee that are outstanding as of the Eligible Employee's termination date,
beginning with the earliest unvested installments, shall be accelerated
according to the following chart:
|
|
BASE
(PERCENTAGE OF UNVESTED STOCK OPTIONS ACCELERATED AFTER
1
YEAR TENURE)
|
|
ACCELERATOR
(PERCENTAGE
OF UNVESTED STOCK OPTIONS ACCELERATED PER EACH YR.
OF
ADDITIONAL TENURE)
|
|
MAXIMUM
(TOTAL
%
OF
UNVESTED STOCK OPTIONS ALLOWED TO BE ACCELERATED)
|
|
|
30%
|
|
|
|
|
|
|
25%
|
|
|
|
80%
|
|
|
20%
|
|
|
|
60%
|
DIRECTOR
COMPENSATION
|
Name
and Principal Position
|
|
Fees
Earned or Paid in Cash ($)
|
|
Stock
Awards ($)
|
|
Option
Awards ($)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Change
in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
|
All
Other Compensation ($)
|
|
Total
($)
|
|
Pehong
Chen, CEO and CFO
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Robert
Lee, Director and Chairman of Compensation Committee
|
|
$
|
-
|
|
$
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
13,680.00
|
|
James
Dixon, Director and Chairman of Audit Committee
|
|
$
|
-
|
|
$
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
13,680.00
|
|
David
Anderson, Director (1)
|
|
$
|
-
|
|
$
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
13,680.00
|
|
Roderick
McGeary, Director (1)
|
|
$
|
-
|
|
$
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
13,680.00
|
|
Michael
Thomas Nevens, Director (1)
|
|
$
|
-
|
|
$
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
27,360.00
|
|
Francios
Stieger, Director (2)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
12,200.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) David
Anderson, Roderick McGeary, Michael Thomas Nevens ceased serving on our Board
of
Directors as of August 8, 2006.
(2) Francois
Stieger joined our Board of Directors as of August 8, 2006.
Overview
of Director Compensation and Procedures
We
review
the level of compensation of our non-employee directors on an annual basis.
To
determine how appropriate the current level of compensation for our non-employee
directors is, we have historically obtained data from a number of different
sources including the Radford Surveys. Other data sources used in our analysis
included:
l |
Publicly
available data describing director compensation in peer
companies;
|
l |
Survey
data collected by our human resources department;
and
|
l |
Information
obtained directly from other
companies.
|
We
compensate non-employee members of the board through stock options. We do not
pay our non-employee directors any cash remuneration other than reimbursement
of
travel expenses and deminimus items.
One
new
director, Mr. Stieger, joined our board in 2006 and was awarded an option
exercisable for 20,000 shares, which vests quarterly in four equal installments.
At December 31, 2006, 10,000 shares had vested. The exercise price of the option
is equal to the fair market value of our common stock on the date of grant.
Our
CEO,
Dr. Chen, is the only employee director, and he does not receive cash or equity
compensation for service on the board in addition to compensation payable for
his service as our employee.
Compensation
Committee Interlocks and Insider Participation
No
member
of the Compensation Committee has served as one of our officers or employees
at
any time. None of our executive officers serve as a member of the compensation
committee of any other company that has an executive officer serving as a member
of our board. None of our executive officers serve as a member of the board
of
directors of any other company that has an executive officer serving as a member
of our Compensation Committee.
Compensation
Committee Report
The
Compensation Committee has reviewed the Compensation Discussion and Analysis
and
discussed that Analysis with management. Based on its review and discussions
with management, the committee recommended to our Board of Directors that the
Compensation Discussion and Analysis be included in the company's Annual Report
on Form 10-K for 2006. This report is provided by the following independent
directors, who comprise the committee:
James
Dixon, Compensation Committee Chair
Robert
Lee, Compensation Committee Member
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 we were or are a party
in
which the amount involved exceeds or exceeded $120,000 and in which any
director, executive officer or beneficial holder of more than 5% of any class
of
our voting securities or members of such person's immediate family had or will
have a direct or indirect material interest other than as described below.
It is
our policy that future transactions between us and any of our directors,
executive officers or related parties will be subject to the review and approval
of our Audit Committee or other committee comprised of independent,
disinterested directors.
On
November 18, 2005, Honu Holdings LLC, a company controlled by our Chief
Executive Officer and largest stockholder, Dr. Pehong Chen, acquired all of
our
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 BroadVision 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. On March
8, 2006, we issued 34,500,000 new shares of common stock to Honu Holdings that,
as of January 31, 2007, represents approximately 32% of our total outstanding
common stock.
Dr.
Chen
committed to provide, upon our request at any time through December 31, 2006,
up
to $5 million of working capital support through cash, debt guarantees or a
combination thereof on mutually satisfactory terms.
In
2006,
we executed a consulting agreement with Professional Poker League Inc. in which
Dr. Chen is a passive owner and convertible note holder. The total contract
value is $365,000. We received payment for the entire contract in the third
quarter of 2006. The contract was completed in the fourth quarter of 2006.
We
incurred $99,000 in costs and expenses relating to this contract.
Director
and Officer Indemnification
Our
revised and restated certificate of incorporation contains provisions limiting
the liability of directors. In addition, we have entered into agreements to
indemnify our 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 we 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
BroadVision, and otherwise to the full extent permitted under Delaware law
and
our 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 our 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
stockholder's 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.,
1600 Seaport Boulevard, 5th
Floor,
North Building, Redwood City, California 94063 or contact Investor Relations
at
(650) 331-1000. 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.
OTHER
MATTERS
The
Board
of Directors knows of no other matters that will be presented for consideration
at the Annual Meeting. If any other matters are properly brought before the
meeting, it is the intention of the persons named in the accompanying proxy
to
vote on such matters in accordance with their best judgment.
By
Order
of the Board of Directors
Sandra
Adams
Secretary
and General Counsel
April
25,
2007
A
copy of
our Annual Report to the Securities and Exchange Commission on Form 10-K for
the
fiscal year ended December 31, 2006 is available without charge upon written
request to: Corporate Secretary, BroadVision, Inc., 1600 Seaport Boulevard,
5th
Floor,
North Building, Redwood City, California 94063.
BROADVISION,
INC.
ྑ Mark
this
box with an X if you have made changes to your name or address details
above.
ANNUAL
MEETING PROXY CARD
A. Election
of Directors.
1.
|
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:
|
For Withhold For Withhold
01-Pehong
Chen ¨ ¨ 03-Robert
Lee ¨ ¨
02-
James
D. Dixon ¨ ¨ 04-Francois
Stieger ¨ ¨
B. Proposals.
The
Board
of Directors recommends a vote FOR the following proposals:
2.
|
To
approve the amendment to the BroadVision, Inc. Employee Stock Purchase
Plan.
|
For
¨
|
Against
¨
|
Abstain
¨
|
3.
|
To
ratify the selection by the Audit Committee of the Board of Directors
of
Odenberg, Ullakko, Muranishi & Co. LLP as our independent auditors for
our fiscal year ending December 31, 2007.
|
For
¨
|
Against
¨
|
Abstain
¨
|
|
|
|
|
|
C. 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.
Signature
1--Please keep signature within the box
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Date
(mm/dd/yyyy)
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PROXY--BROADVISION,
INC.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 5, 2007
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 Company's headquarters located at 1600 Seaport
Boulevard, 5th
Floor,
North Building, Redwood City, California on Tuesday, June 5, 2007, 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 AND 3, 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 AND 3.