On2 Technologies has filed an update with the SEC on its proposed merger with Google, hoping to put to rest some key questions.
On2, which makes video compression software, announced Monday that the update includes certain key highlights about the merger and some frequently asked questions.
On2 agreed on August 5 to be acquired by Google for $106.5 million, a deal already approved by its board of directors. The terms call for each share of On2 to be exchanged for 60 cents worth of Google common stock.
With its board anxious for investors to approve the deal, On2 outlined some of the risks to itself and to shareholders if the acquisition is prevented. On2's merger-related expenses have already exceeded $2 million, an amount it would be responsible for if the deal is stopped, it said. With cash reserves of only $2.2 million, such a debt could certainly hurt the company.
Without Google's acquisition, On2 said it might have to grab additional financing to run its business, which could include the sale of certain assets, the issuing of debt, or the release of even more shares.
On2 also admitted that it's had trouble hiring and retaining skilled, qualified employees, a challenge that might be resolved if employees knew they'd be working for a Google instead. Otherwise, if the merger does not move forward, On2 believes its revenues would be impacted by its failure to attract or keep good employees.
To address any conflicts of interest, On2 said none of the members of its board would serve as directors, officers, or employees of Google or receive any money from Google in connection with the merger.
On2 also released an FAQ, hoping to address any concerns on the part of shareholders. Since the Google offer, the board has received no other offers or inquiries from other firms about an acquisition, the company said. The FAQ also goes into great detail about On2's board and key executives and their involvement in the merger.
On2's board has set a special meeting for December 18 for shareholders to vote on the deal, and is urging them to approve it. Proxy cards have also been sent out. If the majority of stockholders okay the merger and all other conditions are met, then it should become effective within two days after the meeting, said On2. Google has said it plans to make On2's technology part of its own Web platform.
The merger initially triggered some On2 shareholders to file lawsuits against the company in August, alleging that the deal undervalued On2 and that certain provisions prevented On2's board from considering other offers. But those suits were settled on October 26, though are currently awaiting final approval by the court.
Under terms of a memorandum of understanding in the settlement, On2 agreed to provide additional disclosures in its final proxy statement and prospectus. However, On2 said the settlement implied no wrongdoing on its part, there was no monetary damage, and the company would have released the same information in its proxy statement regardless of the lawsuits.
Update at 7:34 a.m. PDT on August 14: Frank Biondi Jr.'s decline comment has been added.
Yahoo is close to appointing John Chapple and Frank Biondi Jr. as its two additional board members, as it nears its Friday deadline to expand its board as part of a settlement agreement with activist investor Carl Icahn, according to sources.
The Internet company had agreed to select two candidates from a pool that included Icahn's former slate of dissident directors. Icahn was also appointed to Yahoo's board as part of the proxy battle-ending agreement.
"We know who we want," one source over the weekend said, though declining to elaborate the why the announcement has been delayed.
The Wall Street Journal, which first reported Chapple's position as a lead contender, noted that the company is in the final review stages of naming Chapple and Biondi as directors.
Such a cautious approach is understandable. Jonathan Miller, former head of Time Warner's AOL, was initially part of the pool from which the two potential candidates would be selected, but when Yahoo asked Time Warner the day before its August 1 annual shareholder meeting whether Miller could serve on its board, the search pioneer learned that the media giant would object to his appointment, citing a noncompete clause in his separation agreement, a source familiar with the situation noted.
With Biondi and Chapple, Yahoo would not only be appointing two seasoned executives to its boards, but also one with strong ties to Icahn and another to Microsoft, which several months ago made a $33-per-share buyout offer for Yahoo, before withdrawing the bid when Yahoo returned a counterproposal of $37 a share.
Microsoft and Icahn later teamed up with a subsequent proposal to buy just its search assets, which Yahoo rejected as undervaluing the company.
Biondi is a senior managing director of investment adviser WaterView Advisors, former chairman and chief executive of Universal Studios, and former head of Viacom. Two years ago, Icahn tagged Biondi as his Time Warner CEO replacement, if he was successful in gaining control of the media company via a proxy fight, which ultimately was not successful.
Chapple, president of Hawkeye Investments in Redmond, Wash., and former CEO of Nextel Partners, was also tagged to be on Microsoft's proxy slate of dissident directors, when the software giant was entertaining making a run against Yahoo's board to push its unsolicited buyout bid for Yahoo forward, according to a source familiar with Microsoft's slate.
Yahoo and Biondi declined comment for this story, and Chapple was at a retreat and unavailable for comment.
Edward Meyer, who was also on Microsoft's slate and previously believed to be a lead candidate, fell out of favor, according a source over the weekend.
Apparently, while some of Yahoo's directors liked Meyer, there were concerns regarding his age, the source noted. Meyer is 81 years old.
Although Yahoo will be drawing its new directors from Icahn's former proxy slate, it's no guarantee that the new board members will agree to all of Icahn's proposals or that their placement will entice Microsoft to come back with an offer. Icahn and the two directors will together hold just three seats on an 11-member board.
Update at 3:08 p.m. PDT, with Carl Icahn's appointment to the board and closing stock price.
The results are in on the re-election of Yahoo's directors, and the . No one received more than a 22.1 percent withhold vote, compared with a substantially higher 34 percent last year, according to the company.
Shareholders withhold votes to re-elect directors as a means to send a message of investor dissatisfaction to a company and its board.
Here's how each director stacked up on their re-election:
Roy Bostock, chairman, a 20.5 percent withhold vote
Ronald Burkle, a 18.8 percent withhold vote
Eric Hippeau, a 9.3 percent withhold vote
Vyomesh Joshi, a 7.1 percent withhold vote
Arthur Kern, a 22.1 percent withhold vote
Robert Kotick, a 7.6 percent withhold vote
Mary Agnes Wilderotter, a 7.8 percent withhold vote
Gary Wilson, an 18.2 percent withhold vote
And, drumroll please...Jerry Yang, a 14.6 percent withhold vote
These less-disapproving-than-last-year's results come as two advisory services to institutional investors issued recommendations to its clients, i.e. pension funds, mutual funds, and asset managers, to withhold votes for members of Yahoo's compensation committee and also longtime director Gary Wilson. Bostock, Burkle, and Kern sit on the compensation committee.
One investor said he was a little surprised that there weren't more shares withheld.
"I thought it would it have been around 40 percent withheld. I thought it would be more than last year," said Dan Strickfaden, a Yahoo investor for more than five years. "I have no problem with Yahoo as a company. I have a problem with the board."
He added that he withheld votes for all nine Yahoo directors.
Yahoo also announced that Kotick, as called for in the proxy fight settlement with investor activist Carl Icahn, resigned his board seat immediately after the meeting. Icahn was appointed by the board to fill Kotick's seat.
Yahoo's board expects to expand by two additional seats by August 15 with appointees from a pool of candidates Icahn has selected.
In releasing the election results, Yang said in a statement:
We are at a unique point in our history, where we have the eyes of the world focused on our company and tracking our performance. We are redoubling our commitment to driving sustained, profitable growth for our stockholders. The value inherent in Yahoo's unique collection of assets is truly extraordinary, and the progress we've made on our initiatives this year signals our ability to capitalize on the underlying potential of these assets.Yahoo closed down 0.45 percent on Friday at $19.80 a share.
Click here for full coverage of Yahoo's shareholders meeting.
Update 7:59 a.m. PDT: Added link to Carl Icahn's blog about his thoughts on the Yahoo shareholder meeting.
Believe in deja vu? Yahoo shareholders may when they file into the company's annual shareholders meeting on Friday.
Last year, an angry mob of investors took Yahoo CEO Terry Semel to task at the annual shareholders meeting, citing the company's lackluster performance and lucrative compensation awards. A week later, Semel resigned from his executive post, passing the baton to company co-founder Jerry Yang.
Fast-forward a year later and the situation is expected to be markedly similar. When Yang takes the stage at the annual shareholders meeting, he'll likely face not only a sea of angry investors but one that will include some shareholders who are making a repeat appearance at the microphone to voice dismay.
But the tenor of this upcoming meeting is expected to be even more pitched, given that Yang and Yahoo's board rejected a $33 a share buyout bid from Microsoft in May and the stock has now roughly come full circle to where it was trading before Microsoft's initial bid of $31 a share in February.
Yahoo closed at $20.03 a share on Wednesday.
But besides the fury that is expected at the meeting, what else might investors, employees, and Yahoo customers look forward to at this significant event for the Internet's search pioneer?
For starters, Yang will not be alone to fend off a potentially hostile crowd. Some, but not all, of Yahoo's current board members are expected to be in attendance, such as longtime director Eric Hippeau and newcomer Maggie Wilderotter.
Carl Icahn, the activist investor who launched a proxy fight to push Yahoo and Microsoft back to the table, will not make an appearance at the meeting, after having reached a settlement with Yahoo last week, as Icahn notes in his blog Thursday morning.
Under that arrangement, Yahoo's current board of nine directors will be up for re-election to another one-year term. Based on the settlement agreement, it is anticipated that sometime between the shareholders meeting on Friday and the end of business Monday, Yahoo's director Robert Kotick will resign from the board and Icahn will be appointed to his seat. The board will also vote to expand its size to 11 members from nine.
While the settlement agreement also calls for the Yahoo board, which would then include Icahn, to fill the two newly added seats with two folks from Icahn's pool of candidates, don't expect those two new faces to be named at the shareholders meeting, said a source familiar with the company. Yahoo has until August 15 to fill those two positions.
During the meeting, Yang & Co. are expected to provide a presentation on the state of the company, in which a question-and-answer session will follow from the floor.
Investor activist Eric Jackson said he plans to make a return visit to the meeting and will once again make a case for his recommendation that investors withhold votes to re-elect certain Yahoo directors. Jackson is asking investors this year to withhold votes for compensation committee members Roy Bostock, Yahoo chairman, Arthur Kern and Ron Burkle, as well as Hippeau, because of the length of time he has served on the board.
And while Jackson, along with advisory service to institutional investors Glass Lewis & Co. and Proxy Governance, have come out with recommendations to withhold votes or vote against several Yahoo directors, the effect will basically serve as a symbolic gesture to Yahoo's board on the level of investor dissatisfaction.
That's because the top vote-getters are the ones who will be elected to the available board seats, which means everyone will be re-elected in an uncontested race.
Nonetheless, the higher the percentage of votes cast that are marked with either "against" or "withhold," serves as barometer of investor discontent. Last year, Yahoo's board was re-elected with only 66 percent approval, whereas boards typically receive 80 percent to 90 percent of the votes cast.
And should any one director receive less than a simple majority of the votes cast, under Yahoo's bylaws they are required to automatically tender their resignation. But that too will unlikely lead to any director's ouster, given the board can vote to reject the resignation.
Yahoo, at the shareholders meeting, is expected to provide a 10,000-foot view on whether the directors received enough votes to be re-elected as a group, with the per director vote results to be released later, said one person familiar with the plans.
While the shareholders meeting is expected to bring a lot of one-day drama, keep an eye out for the ensuing two weeks as Yahoo's board undergoes a likely change in voice as Icahn and two members picked from his pool of candidates are added to Yahoo's board.
Click here for full coverage of Yahoo's shareholders meeting.
The jump to Juniper Networks as CEO seems almost a no-brainer for Microsoft executive Kevin Johnson.
Johnson will not only be top dog at the networking company when he arrives September 8, but he's landing a $5 million signing bonus that'll be doled out over three years and an annual base salary of $800,000, according to Juniper's filing with the Securities and Exchange Commission on Monday.
Johnson, who's leaving his post as Microsoft's online and Windows chief, will also land two stock option grants that total 1.6 million shares vesting over four years, once he starts his new gig.
Juniper's stock is currently trading around $25 a share, giving his stock options grant a value of $40 million. The exercise price of Johnson's stock options, however, will be based on the closing price of the day he receives the grant.
For Johnson, he will not only be embarking on a new adventure but also leaving roughly six months of Yahoo-Microsoft drama behind, in which he has played a key role.
Back on February 1, Microsoft made an unsolicited buyout bid of $31 a share for Yahoo, followed by a sweetened bid of $33 a share in May, only to be withdrawn after Yahoo countered with a $37 a share bid. A couple of attempts at striking a search-only acquisition deal were proposed by Microsoft, only to be rejected and, in the background, Icahn briefly waged a proxy fight with Yahoo with Microsoft playing a supporting role.
And as Yahoo investors endured a roller coaster ride with the stock during the past six months, they were dealt a strong blow Wednesday, when news of Johnson's impending departure from Microsoft began to circulate. Yahoo's shares closed that day down 4.7 percent to $20.39 a share.
News of Johnson's departure came out several days after Yahoo and Carl Icahn announced they had reached a settlement and the investor activist was withdrawing his proxy fight.
One source familiar with Juniper's CEO search said the timing of Johnson's appointment as CEO and the Yahoo-Microsoft saga are just coincidental.
"Juniper has been searching for a CEO for some time now...it just happened to overlap with what was going on at Yahoo. Yahoo was not a trigger for Kevin's departure and his candidacy wasn't linked to what would or would not go on at Yahoo," the source added.
Yahoo dipped below $20 a share Tuesday morning, following a report in the San Francisco Chronicle that T. Boone Pickens dumped his entire stake of 10 million shares.
Shares of the Internet pioneer fell as low as $19.71 in morning trading, coming within a breath of the $19.18 that the stock closed at on the day before Microsoft announced its unsolicited buyout bid of $31 a share. Microsoft later bumped it up to $33 a share, which was rejected.
Pickens jumped into the stock in May, following an announcement by investor activist Carl Icahn that he would wage a proxy contest to pressure Yahoo into accepting a deal with Microsoft. Icahn, however, reached a .
"I think that Yahoo management was pathetic," Pickens reportedly said during the Chronicle editorial board meeting he was addressing.
Pickens told the Chronicle that he sold his shares at a loss, as his patience for a deal between the two companies grew thin. The billionaire investor declined to reveal the size of his loss, according to the report.
Yahoo's annual shareholders meeting is scheduled for Friday.
The third of the big three proxy advisory services has issued its recommendation on how investors should vote during Yahoo's upcoming election. The advice: send a message about Yahoo's overpaid top brass.
With investor Carl Icahn and Yahoo coming to terms, there no longer is an opposing slate running against Yahoo's board of directors. But there's still going to be a vote, and Proxy Governance thinks it's a good time to take a stand.
"The average three-year compensation paid to the named executives is 480 percent above the median paid to executives at peer companies," Proxy Governance said in a statement about its advice on Friday. "In light of Yahoo's relatively weak financial performance, we therefore recommend that shareholders withhold votes from the members of the compensation committee."
"Given the exorbitant pay levels awarded to the company's executives in the face of its weaker performance relative to peers, we believe that a stronger emphasis on conditioning certain compensation awards on performance relative to the company's peers is warranted," the firm added.
The two other firms, Glass Lewis and RiskMetrics, issued opinions already. Glass Lewis also recommended voting against the compensation committee members: Chairman Roy Bostock, and directors Ron Burkle and Arthur Kern. However, for practical purposes, it's unlikely the directors actually will be ousted.
The firms issue recommendations to their clients on how to vote on proxy matters. These clients include mutual funds, pension funds, and asset management companies, which often hold large blocks of companies' stock.
Yahoo's current board of directors received an endorsement Thursday, when influential advisory service RiskMetrics Group recommended to its institutional investor clients to vote for all of Yahoo's directors at the upcoming annual shareholders meeting.
That recommendation runs counter to one issued the day before by Glass Lewis & Co., another institutional investor advisory service that makes recommendations to pension funds, mutual funds and asset management companies on how to vote on issues contained within companies' proxies. Glass Lewis, as well as investor activist Eric Jackson, is calling on Yahoo investors to vote against or withhold votes for several of the Internet search pioneer's directors.
RiskMetrics advised its clients to vote "for" all nine current directors, although Robert Kotick has indicated he will not run for re-election at the company's August 1 shareholders meeting. That decision came as part of a settlement agreement with Yahoo and investor activist Carl Icahn, who dropped his proxy fight with the company and, in turn, will have two members from his designated list of potential candidates and himself appointed to the company's expanded 11-member board.
Although RiskMetrics endorses the re-election of Yahoo's current board, it's not without concerns over Yahoo's handling of its merger talks with Microsoft.
According to RiskMetrics report to its institutional investors, it drew this conclusion regarding Yahoo:
We believe that Yahoo!'s compensation practices, in particular the newly-adopted severance plans, as well as the way the board handled the negotiations with Microsoft at the initial stage, are concerning. Many investors believe these issues would warrant changes at the board level. However, given Mr. Icahn's lack of a plan for a standalone Yahoo! and a replacement candidate for CEO Yang, a complete overhaul of the board with full a slate from Mr. Icahn was widely regarded as unlikely. On July 18, 2008, Legg Mason CIO Bill Miller, a major Yahoo! shareholder, stated the following: "In general, we believe it is appropriate for large shareholders to have representation on corporate boards if they so desire. Mr. Icahn's slate includes people experienced in technology, advertising, capital markets and governance." We believe the settlement appointing Mr. Icahn as a significant shareholder representative as well as two of his selected nominees with relevant industry experience have achieved what most shareholders called for. We also believe the newly-formed board will be able to address the issues highlighted above. Therefore, we recommend that shareholders support the incumbent directors that are standing for re-election.
Although RiskMetrics is calling for the re-election of Yahoo's current board, Glass Lewis on Wednesday advised its clients to issue "against" votes for Yahoo chairman Roy Bostock, Ron Burkle, and Arthur Kern.
And dissident Yahoo shareholder Jackson is asking investors to not only withhold votes for those three directors, but also for Eric Hippeau.
Jackson noted that he holds Bostock and Burkle the most responsible for the failed talks with Microsoft, as well as holding the two directors and Kern responsible for an above market compensation plan for Yahoo executives.
Despite the Glass Lewis and Jackson recommendations for withholding votes or voting against the named Yahoo investors, one proxy solicitor noted its unlikely any one of those directors will be subject to the 50 percent threshold that would trigger an automatic tendering of their resignation to the other board members who are re-elected.
"They won't get to a 50 percent "withhold," in part because Icahn has decided to go with the board," the proxy solicitor said.
And even if that were to happen, under Yahoo's policy, which is similar to those used by a majority of S&P 500 companies, the remaining board could refuse to accept the tendered resignation, thereby keeping the director in question on board.
Among the S&P 500 companies, 72 percent have adopted policies that would require directors to automatically tender their resignation if they fail to be re-elected by at least 50 percent of the votes cast.
But despite this policy among a number of large corporations, only a handful of cases have come up over the last few years where that threshold was crossed, said Patrick McGurn, with RiskMetrics Group's ISS Governance Services unit. And of those cases, McGurn does not recall a board accepting a tendered resignation from a director who had triggered that automatic resignation.
"Investors think long and hard if their (withhold or against) vote could potentially unseat a director," McGurn observed.
And in looking at the Yahoo case specifically, McGurn said he would be surprised if the withhold votes for the current directors reaches into the double digits.
"Withhold votes are usually used to communicate something to the board. But in this case, investors had lots of opportunities to voice their concerns," McGurn observed.
Yahoo President Sue Decker has taken the high road. In a CNBC interview that aired Wednesday, she said she looks forward to meeting investor activist Carl Icahn when he joins the company's board and would "love to get his advice."
Yahoo President Sue Decker
(Credit: Yahoo)Icahn, who reached a settlement with Yahoo earlier in the week, agreed to halt his proxy fight in exchange for being appointed to the board after the company's August 1 shareholders meeting. Yahoo also agreed to expand its board to 11 members and select two directors from a list that Icahn provided.
In the past two months, Yahoo and Icahn have been exchanging barbs, as the proxy fight gained steam.
Nonetheless, Decker, who has never met Icahn, said in the interview recorded Tuesday:
I'm totally looking forward to meeting him and would love to get his advice.
And in defense of turning down the $33-a-share buyout offer Microsoft had floated to the Internet search pioneer, which it later withdrew after Yahoo countered with a bid of $37 a share, Decker had this to say:
Pre- and post-Microsoft's offer, our stock is pretty much in the same place as when we evaluated its $31-a-share bid.
She noted that the stock has held its ground, despite a tough economic environment. And that she tries to avoid getting consumed by the swirl of distractions that have been under way since Microsoft announced its unsolicited buyout bid in early February.
I try to focus on things I can control.
Is it frustrating, sure, when people talk about the departure of employees, but I would like to get the distractions behind us.
As Yahoo heads toward its annual shareholders meeting and institutional investor advisory services weigh in on which Yahoo directors to re-elect, the background noise may still be a bit distracting for the next week and a half.
An advisory service to institutional investors issued a recommendation Wednesday that its clients vote against the re-election of three Yahoo directors.
Yahoo Chairman Roy Bostock and directors Ron Burkle and Arthur Kern, all of whom sit on the compensation committee, received a thumbs down from influential institutional investor Glass Lewis & Co.
Glass Lewis, as well as RiskMetrics and Proxy Governance, issue recommendations to their clients on how to vote on proxy matters. These clients include mutual funds, pension funds, and asset management companies, which often hold large blocks of stock in various companies.
Glass Lewis is advising its clients to vote against Bostock, Burkle, and Kern because of the level of compensation awarded to Yahoo executives and also because of the controversial employee severance plans Yahoo put in place should there be a change of control at the company.
On the issue of dinging the three compensation committee members, Glass Lewis wrote in its report:
Nominees BOSTOCK, BURKLE and KERN all served as members of the compensation committee in fiscal year 2007, during which time the Company paid more compensation to its top executives but performed worse than its peers. The members of the compensation committee have the responsibility of reviewing all aspects of the compensation program for the Company's executive officers. It appears to us that members of this committee have not effectively served shareholders in this regard. Further, we are concerned that the committee approved the adoption of the Change in Control Severance Plans with potential brobdingnagian payouts, potentially discouraging a takeover.
Additionally, Mr. Bostock serves as chairman of the nominating and corporate governance committee. At last year's annual meeting, Messrs. Bostock, Burkle and Kern each received over a 31 percent vote against their re-election. In our 2007 Proxy Paper, we recommended voting against each of these directors due to the Company's excessive compensation practices. We believe this raises concerns about whether the nominating and corporate governance committee is fulfilling its duty to shareholders considering that all three directors remain on the board. Moreover, we find it disconcerting that Messrs. Bostock and Kern continue to serve on the committee charged with overseeing governance issues for the Company.
Despite issuing a recommendation for investors to vote against the re-election of Bostock, Burkle, and Kern, in practical terms the three will likely retain their board seats no matter how the vote turns out.
Yahoo, under its bylaws, requires any director who receives more than a 50 percent "against" or "withhold" vote to automatically submit their resignation to the board for consideration. The board can either accept the resignation, or reject it.
Yahoo's current board would likely reject a resignation by these three directors, should they get more than a 50 percent "against" or "withhold" vote. That's because Yahoo's board and investor activist Carl Icahn recently reached a settlement, ending Icahn's proxy fight before the company's August 1 shareholders meeting, where board members will be elected.
Yahoo, under the settlement, is giving Icahn a seat on the board after the shareholders meeting, and it will then appoint two additional directors to its expanded board of 11 members, pulling from Icahn's former slate of dissident directors and Jonathan Miller. So, the lineup would essentially be eight members of Yahoo's current board and three in the Icahn camp.
So, the applecart could potentially take a tumble if Bostock, Burkle, and Kern each fail to get a majority of the votes cast and the board accepts their automatic resignations. That would leave five members on Yahoo's current board and three in the Icahn camp--potentially narrowing the margin Icahn would need to swing votes his way on company issues. As a result, Yahoo's current board would likely reject any resignations should they arise.
Glass Lewis, however, was not without concerns involving Icahn. In its report, the advisory service noted:
Carl Icahn, chairman of Icahn Enterprises G.P. and CEO of Icahn Capital LP, currently serves on a total of seven public company boards. His total number of directorships will expand to eight once he is appointed to Yahoo's board. We believe that the time commitment required by this number of board memberships may preclude Mr. Icahn from fulfilling his responsibilities to this Company's shareholders. We believe shareholders should monitor Mr. Icahn's ability to devote sufficient time and attention to the Company.
Meanwhile, RiskMetrics is expected to issue its recommendation to its clients either later Wednesday or Thursday, a company spokeswoman said. And Proxy Governance is expected to issue its recommendation by Friday, a spokesman said.
