Autodesk DEF 14A 2006
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Securities Exchange Act of 1934
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April 28, 2006
Dear Autodesk Stockholder:
You are cordially invited to attend Autodesks 2006 Annual Meeting of Stockholders to be held on Thursday, June 8, 2006 at 2:00 p.m., Pacific time, at our principal executive offices, 111 McInnis Parkway, San Rafael, California 94903.
At the Annual Meeting, you will be asked to:
The accompanying Notice of 2006 Annual Meeting and Proxy Statement describe these proposals in greater detail. We encourage you to read this information carefully.
We hope you will be able to attend this years Annual Meeting. We will report to the stockholders on fiscal 2006 and describe our future strategies for products and markets. There will be an opportunity for all stockholders to ask questions. Whether or not you plan to attend the meeting, please sign and return the enclosed proxy card to ensure your representation at the meeting. Your vote is important.
On behalf of the Board of Directors, I would like to express our appreciation for your continued support of Autodesk.
Very truly yours,
Chairman, Chief Executive Officer and President
NOTICE OF 2006 ANNUAL MEETING OF STOCKHOLDERS
By Order of the Board of Directors,
Pascal W. Di Fronzo
Vice President, General Counsel and Secretary
This notice of annual meeting, proxy statement and accompanying form of proxy card are being distributed on or about April 28, 2006.
TABLE OF CONTENTS
PROXY STATEMENT FOR 2006 ANNUAL MEETING OF STOCKHOLDERS
Questions and Answers About the 2006 Annual Meeting and Procedural Matters
ELECTION OF DIRECTORS
A board of ten directors is to be elected at the Annual Meeting, all of whom have been recommended for nomination by the Corporate Governance and Nominating Committee of the Board of Directors and all of whom are presently directors of Autodesk. All nominees were elected by the stockholders at last years annual meeting with the exception of Carl Bass, who became a director in January 2006. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the ten nominees named below.
In the event that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the Board of Directors to fill the vacancy. The term of office of each person elected as a director will continue until the next annual meeting of stockholders or until a successor has been duly elected and qualified.
The name, age and principal occupation of each nominee as of April 17, 2006, are set forth in the table below. Except as described below, each of the nominees has been engaged in his or her principal occupation during the past five years. There are no family relationships among any of our directors or executive officers.
Carol A. Bartz joined Autodesk in April 1992 and currently serves as Chairman of the Board, Chief Executive Officer and President. Effective April 30, 2006, Ms. Bartz will step down from her position as Chief Executive Officer and President and as of May 1, 2006 will be Executive Chairman. Ms. Bartz is a director of Cisco Systems, Inc. and Network Appliance, Inc. Prior to joining Autodesk, Ms. Bartz held various positions at Sun Microsystems, Inc., including Vice President, Worldwide Field Operations from July 1990 to April 1992.
Carl Bass joined Autodesk in September 1993 and has served as Chief Operating Officer since June 2004. As of May 1, 2006, Mr. Bass will become President and Chief Executive Officer. From February 2002 to June 2004, Mr. Bass served as Senior Executive Vice President, Design Solutions Group. From August 2001 to February 2002, Mr. Bass served as Executive Vice President, Emerging Business and Chief Strategy Officer. From August 1999 to July 2001, he served as President and Chief Executive Officer of Buzzsaw.com, Inc., a spin-off from Autodesk. He has also held other executive positions within Autodesk. Mr. Bass was a director of Serena Software, Inc. through February 2006.
Mark A. Bertelsen joined the law firm of Wilson Sonsini Goodrich & Rosati in 1972, was the firms managing partner from 1991 to 1996 and is currently a member of the firms Policy Committee of Senior Partners. Mr. Bertelsen is a director of Informatica Corporation and Taleo Corporation.
Crawford W. Beveridge serves as Executive Vice President and Chief Human Resources Officer of Sun Microsystems, Inc. Mr. Beveridge served as Chief Executive Officer of Scottish Enterprise, an economic development company, from January 1991 until March 2000. From March 1985 to December 1990, Mr. Beveridge
was the Vice President of Corporate Resources at Sun Microsystems, Inc. Mr. Beveridge is a director of Scottish Equity Partners Ltd. and Memec, Inc.
J. Hallam Dawson has served as Chairman of IDI Associates, a private investment bank specializing in Latin America, since September 1986. Mr. Dawson is a director China Trust Bank (USA) and was a director of Serena Software, Inc. through February 2006.
Michael J. Fister has served as the Chief Executive Officer and President of Cadence Design Systems, Inc. since May 2004. Previously, Mr. Fister served as Senior Vice President and General Manager of the Enterprise Platforms Group of Intel Corporation from 2002 to May 2004. Mr. Fister joined Intel in 1987 as the Chandler, Arizona operations manager for the 8-bit focus group. From 1988 through 2000, Mr. Fister was promoted to a series of engineering positions, and elected corporate Vice President in 2000.
Per-Kristian Halvorsen has served as the Chief Technology Innovation Officer of Intuit, Inc. since February 2006. Previously, he was Vice President and Director of the Solutions and Services Research Center at HPLabs from 2000 to 2005. Previously, Dr. Halvorsen served as Director and Principal Scientist of the Information Sciences and Technologies Laboratory at the Xerox Palo Alto Research Center from June 1992 until June 2000. Dr. Halvorsen is a member of the Board of Directors of FinnTech and Finn.
Steven L. Scheid has served as Chairman of Janus Capital Group, Inc. since January 2004. He served as Chief Executive Officer of Janus Capital Group Inc. from April 2004 to December 2005. Previously, Mr. Scheid served as an independent business consultant from February 2002 to April 2004, Vice Chairman of Charles Schwab & Co., Inc. from July 1999 to February 2002, as President of the Schwab Retail Group from October 2000 to February 2002 and as the Chief Financial Officer of Charles Schwab & Co., Inc. from June 1996 to July 1999. Mr. Scheid is a director of PMI Group, Inc.
Mary Alice Taylor is an independent business consultant. Previously, Ms. Taylor served as Chief Executive Officer and Chairman of the Board of HomeGrocer.com from September 1999 to September 2000. Ms. Taylor served as Executive Vice President of Global Operations and Technology of CitiCorp from January 1997 until September 1999 and served as Senior Vice President of Federal Express Corporation from September 1991 until December 1996. Ms. Taylor is a director of The Allstate Corporation, Sabre Holdings Corporation and Blue Nile, Inc.
Larry W. Wangberg served as Chief Executive Officer and Chairman of the Board of TechTV, previously ZDTV, Inc., from August 1997 until his retirement in June 2002. Previously, Mr. Wangberg was Chief Executive Officer and Chairman of the Board of StarSight Telecast, Inc., an interactive program guide company, from February 1995 to August 1997. Mr. Wangberg is a director of Charter Communications, Inc. and ADC Telecommunications, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE NOMINEES LISTED ABOVE.
Board Meetings and Committees
The Board of Directors held a total of 5 meetings (including regularly scheduled and special meetings) during fiscal 2006. No director attended fewer than 75% of the total number of meetings of the Board of Directors and committees of which he or she is a member, if any. The Companys Board of Directors currently has three standing committees: an Audit Committee, a Compensation and Human Resources Committee, and a Corporate Governance and Nominating Committee.
The Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act, currently consists of directors Mary Alice Taylor, Chairman, Steven L. Scheid and Larry W. Wangberg, each of whom is independent as such term is defined for audit committee members by the listing standards of The Nasdaq Stock Market. The Board of Directors has determined that Mr. Scheid and Ms. Taylor are each an audit committee financial expert as defined in rules of the Securities and Exchange Commission (the SEC).
The principal functions of the Audit Committee and its activities during fiscal 2006 are described in Report of the Audit Committee of the Board of Directors below.
The Audit Committee held 10 meetings during fiscal 2006. The Audit Committee has adopted a written charter approved by the Board of Directors, which is included as Appendix A to this proxy statement. The Audit Committee Charter is also available on the Companys website at www.autodesk.com under About Us Investors Corporate Governance.
Compensation and Human Resources Committee
The Compensation and Human Resources Committee currently consists of Crawford W. Beveridge, Chairman, J. Hallam Dawson and Michael J. Fister, each of whom qualifies as an independent director under the listing standards of The Nasdaq Stock Market.
The Compensation and Human Resources Committee reviews compensation and benefits for our executives and has sole and exclusive authority to grant stock options to executive officers under our stock plans. The Board of Directors delegated to our Chief Executive Officer authority to grant options to employees who are not executive officers. Because options are granted automatically to non-employee directors under the non-discretionary 2000 Directors Option Plan, the Compensation and Human Resources Committee consists solely of non-employee directors ineligible to participate in the Companys discretionary employee stock programs.
The Compensation and Human Resources Committee held 5 meetings during fiscal 2006. The Compensation and Human Resources Committee has adopted a written charter approved by the Board of Directors, which is available on the Companys website at www.autodesk.com under About Us Investors Corporate Governance.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee currently consists of J. Hallam Dawson, Chairman, Per-Kristian Halvorsen and Larry W. Wangberg, each of whom qualifies as an independent director under the listing standards of The Nasdaq Stock Market.
The Corporate Governance and Nominating Committee is responsible for the development of general criteria regarding the qualifications and selection of board members and recommending candidates for election to the Board. The Corporate Governance and Nominating Committee is also responsible for developing overall governance guidelines, overseeing the performance of the Board and reviewing and making recommendations regarding the composition and mandate of Board committees. The Corporate Governance and Nominating Committee will consider recommendations of candidates for the Board of Directors submitted by stockholders of the Company; for more information, see Corporate Governance Principles.
The Corporate Governance and Nominating Committee held 3 meetings during fiscal 2006. The Corporate Governance and Nominating Committee has adopted a written charter approved by the Board of Directors, which is available on the Companys website at www.autodesk.com under About Us Investors Corporate Governance.
J. Hallam Dawson serves as Lead Director and liaison between management and the other non-employee directors. The Lead Director schedules and chairs meetings of the independent directors. The independent directors (including the Lead Director) hold a closed session at each regularly scheduled Board meeting.
Compensation of Directors
During fiscal 2006, we paid an annual fee of $40,000 to each director who was not an Autodesk employee (currently eight persons). Each director may elect to receive up to fifty percent of the fee in cash, with the balance paid in the form of restricted stock issued at a rate of $1.20 worth of stock for each $1.00 of cash compensation foregone. Such restricted stock was issued on June 23, 2005 (the date of last years annual meeting of stockholders) and will vest at this years Annual Meeting, provided that the recipient is a director on such date. Directors received an additional $10,000 for serving as Lead Director or chairman of a board committee. Directors do not receive fees for attending Board or board committee meetings.
Additionally, the Companys 2000 Directors Option Plan provides for the automatic grant of nonstatutory stock options to our non-employee directors. Upon being elected or appointed to our Board of Directors, each non-employee director is granted an option to purchase 50,000 shares of our Common Stock, with subsequent annual option grants of 20,000 shares of our Common Stock. The exercise price of options granted under the 2000 Directors Option Plan is equal to the fair value of our Common Stock on the date of grant. Options granted under the 2000 Directors Option Plan upon election or appointment vest over a three-year period; subsequent annual option grants vest over a one-year period.
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Ernst & Young LLP as the independent registered public accounting firm to audit the consolidated financial statements of Autodesk for the fiscal year ending January 31, 2007, and recommends that the stockholders vote for ratification of such appointment. In the event of a negative vote on such ratification, the Audit Committee will reconsider its selection.
Ernst & Young LLP has audited our financial statements annually since the fiscal year ended January 31, 1983.
We expect representatives of Ernst & Young LLP to be present at the meeting. They will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
Principal Accounting Fees and Services
The following table presents fees billed for professional audit services and other services rendered to the Company by Ernst & Young LLP for the fiscal years ended January 31, 2005 and January 31, 2006.
Pre-Approval of Audit and Non-Audit Services
All audit and non-audit services provided by Ernst & Young LLP to the Company must be pre-approved by the Audit Committee. The Audit Committee utilizes the following procedures in pre-approving all audit and non-audit services provided by Ernst & Young LLP. At or before the first meeting of the Audit Committee each year, the Audit Committee is presented with a detailed listing of the individual audit and non-audit services and fees (separately describing audit-related services, tax services and other services) expected to be provided by Ernst & Young LLP during the year. Quarterly, the Audit Committee is presented with an update of all pre-approved audit and non-audit services conducted and any new audit and non-audit services to be provided by Ernst & Young LLP are updated, if necessary. The Audit Committee reviews the Companys update and approves the services outlined therein if such services are acceptable to the Audit Committee.
To ensure prompt handling of unexpected matters, the Audit Committee delegates to the Chairman of the Audit Committee the authority to amend or modify the list of audit and non-audit services and fees; provided, however, that such additional or amended services may not affect Ernst & Young LLPs independence under
applicable SEC rules. The Chairman reports any such action taken to the Audit Committee at the next Audit Committee meeting.
Autodesk is committed to the highest standards of corporate ethics and diligent compliance with financial accounting and reporting rules. Our Board of Directors provides independent leadership in the exercise of its responsibilities. Our management oversees a strong system of internal controls and compliance with corporate policies and applicable laws and regulations, and our employees operate in a climate of responsibility, candor and integrity.
Corporate Governance Guidelines and Code of Business Conduct
We believe the highest standards of corporate governance and business conduct are essential to running our business efficiently, serving our stockholders well and maintaining our integrity in the marketplace. For a number of years, we have devoted substantial attention to the subject of corporate governance. Over ten years ago, before corporate governance was a watchword, the Board of Directors began work on developing Corporate Governance Guidelines. The Board of Directors first adopted these Guidelines in December 1995 and has refined them from time to time since then. The Corporate Governance Guidelines set forth the principles that guide the Board of Directors exercise of its responsibility to oversee corporate governance, maintain its independence, evaluate its own performance and the performance of Autodesks executive officers and set corporate strategy. The Corporate Governance Guidelines are available on our website at www.autodesk.com under About Us Investors Corporate Governance.
In addition, we have adopted a Code of Business Conduct for directors and employees, and a Code of Ethics for Senior Executive and Financial Officers, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions, to ensure that our business is conducted in a consistently legal and ethical manner. The Code of Business Conduct and Code of Ethics for Senior Executive and Financial Officers are available on our website at www.autodesk.com under About Us Investors Corporate Governance. We will post on this section of our website any amendment to the Code of Business Conduct or Code of Ethics for Senior Executive and Financial Officers, as well as any waivers of the Code of Business Conduct or Code of Ethics for Senior Executive and Financial Officers that are required to be disclosed by the rules of the SEC or The Nasdaq Stock Market.
Stock Ownership Guidelines
Directors and officers are encouraged to be Autodesk stockholders through their participation in our stock option plans. The Board of Directors has established stock ownership guidelines for our directors and executive officers designed to encourage long-term stock ownership in Autodesk and more closely link their interests with those of our other stockholders. These guidelines provide that, within a four-year period, executive officers should attain an investment position in Autodesk stock equal to a multiple of their base salary depending on the individuals scope of responsibilities, and directors should attain an investment position in Autodesk stock of at least 5,000 shares. The Board of Directors reviews progress against these guidelines annually and updates the stock ownership guidelines as appropriate.
Independence of the Board of Directors
The Board of Directors has determined that, with the exception of Carol A. Bartz, our Chairman of the Board, Chief Executive Officer and President, and Carl Bass, our Chief Operating Officer, all of its members are independent directors as that term is defined in the listing standards of The Nasdaq Stock Market. Such independence definition includes a series of objective tests, including that the director is not an employee of the company and has not engaged in various types of business dealings with the company. In addition, as further required by the Nasdaq listing standards, the Board of Directors has made a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The independent directors meet regularly in executive session, without members of management present, as part of the quarterly meeting procedure.
Contacting the Board of Directors
Communications from stockholders to the non-employee directors should be addressed to the Lead Director as follows: J. Hallam Dawson, Autodesk Inc., c/o General Counsel, 111 McInnis Parkway, San Rafael, California 94903.
Attendance at Annual Stockholders Meetings by the Board of Directors
The Company does not have a formal policy regarding attendance by members of the Board of Directors at the Companys annual meeting of stockholders. The Company encourages, but does not require, directors to attend. All of our directors attended the Companys 2005 annual meeting of stockholders.
Nominating Process for Recommending Candidates for Election to the Board of Directors
The Corporate Governance and Nominating Committee is responsible for, among other things, determining the criteria for membership on the Board of Directors and recommending candidates for election to the Board of Directors. It is the policy of the Corporate Governance and Nominating Committee to consider recommendations for candidates to the Board of Directors from stockholders. Stockholder recommendations for candidates to the Board of Directors must be directed in writing to Autodesk Inc., c/o General Counsel, 111 McInnis Parkway, San Rafael, California 94903, and must include the candidates name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and the Company within the last three years and evidence of the nominating persons ownership of Company stock.
The Corporate Governance and Nominating Committees criteria and process for evaluating and identifying the candidates that it selects, or recommends to the full Board for selection, as director nominees, are as follows:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial ownership of Autodesks Common Stock as of March 31, 2006, for each person or entity who is known by the Company to own beneficially more than 5% of the outstanding shares of our Common Stock, each of the Companys directors, each of the executive officers named in the Summary Compensation Table on page 15 and all directors and executive officers of the Company as a group.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Companys directors and executive officers, and persons who own more than 10% of a registered class of the Companys equity securities (10% Stockholders), to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC and The Nasdaq Stock Market. Such executive officers, directors and 10% Stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such reports furnished to the Company and written representations that no other reports were required to be filed during fiscal 2006, the Company is not aware of any late Section 16(a) filings.
Summary Compensation Table
The following table presents information concerning the total compensation of Autodesks Chief Executive Officer and each of the four most highly compensated officers during the last fiscal year (the Named Executive Officers) for services rendered to Autodesk in all capacities for the three fiscal years ended January 31, 2006.
Executive Incentive Plan
The Executive Incentive Plan sets forth the plan for payment of cash bonuses to those of our executive officers who are designated for participation. The Executive Incentive Plan is intended to increase stockholder value and the success of Autodesk by motivating executives to perform to the best of their abilities and to achieve goals relating to the performance of Autodesk or one of our business units or other objectively determinable goals, and to reward them when those objectives are satisfied. The Executive Incentive Plan was approved by the stockholders in June 2005 and is intended to permit the payment of bonuses that may qualify as performance-based compensation under Internal Revenue Code Section 162(m).
The Compensation and Human Resources Committee of the Board of Directors (the Committee) has chosen the participants, target awards and payout formulas for fiscal year 2007 under the Executive Incentive Plan. For fiscal year 2007, the Committee determined that Carol A. Bartz, Carl Bass, George M. Bado, Jan Becker,
and Alfred J. Castino, would be participants in the Plan. For each participant, the Committee established a target award equal to a specified percentage of such participants base salary. The Committee also determined a payout formula for each participant related to achievement of certain growth in revenues as compared to fiscal 2006 as well as certain operating margin levels. The Committee determined that attainment of each such performance goal would be measured by adjusting the evaluation of performance goal performance to exclude (i) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in managements discussion and analysis of financial conditions and results of operations appearing in our annual report to stockholders for the applicable year, or (ii) the effect of any changes in accounting principles affecting the Companys or a business units reported results.
The actual bonuses payable for fiscal year 2007 (if any) will vary depending on the extent to which actual performance meets, exceeds or falls short of the goals approved by the Committee. In addition, the Committee retains discretion to reduce or eliminate (but not increase) the bonus that otherwise would be payable based on actual performance. Moreover, each of the individuals named above must remain an employee for all of fiscal year 2007 in order to be eligible for any bonus.
Employment Agreements and Change In Control Arrangements
Employment Agreement with Carol A. Bartz. In April 1992, Autodesk entered into an agreement with Carol A. Bartz that provides, among other things, for a severance payment equal to two years base salary and incentive compensation in the event Ms. Bartzs employment is terminated without cause within two years after commencement of employment or one year after a change in control of Autodesk not approved by the Board of Directors or two years base compensation in the event Ms. Bartzs employment is terminated without cause under any other circumstances.
Executive Change in Control Program. In March 2006, the Board of Directors approved an amended and restated Executive Change in Control Program (the Change in Control Program), in an effort to ensure the continued service of Autodesks key executives in the event of a future change in control event. Each of Autodesks current executive officers, among other employees, participates in the Change in Control Program. Under the terms of the Change in Control Program, if, within 12 months of a Change in Control (as defined below), an executive officer who participates in the Program is terminated without cause, or voluntarily terminates his or her employment on account of good reason, he or she will receive:
If the executive officer is terminated for any other reason, he or she will receive severance or other benefits only to the extent he or she would be entitled to receive those benefits under Autodesks then-existing benefit plans and policies.
If the benefits provided under the Change in Control Program constitute parachute payments under Section 280G of the Internal Revenue Code and are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, then such benefits will be (1) delivered in full, or (2) delivered to such lesser extent that would result in no portion of the benefits being subject to the excise tax, whichever amount results in the receipt of the greatest amount of benefits.
As defined in the Change in Control Program, a Change in Control means:
Rule 10b5-1 Trading Plans. During fiscal 2005 and fiscal 2006, Carol A. Bartz, Carl Bass, George M. Bado, Jan Becker, Alfred J. Castino and Marcia K. Sterling adopted pre-arranged stock trading plans to, over time, exercise certain options to purchase our Common Stock and automatically sell the shares issued on exercise of such options in accordance with each plans specifications. These plans were established as part of the officers individual long-term strategies for asset diversification and liquidity and must be in effect at least 90 days before trading commences. Each such plan was adopted in accordance with guidelines specified under Rule 10b5-1 of the Exchange Act, as well as guidelines adopted by our Board of Directors for individuals who elect to enter into 10b5-1 trading plans.
Related Party Transactions
During fiscal 2006, the law firm of Wilson Sonsini Goodrich & Rosati, Professional Corporation, acted as principal outside counsel to Autodesk. Mark A. Bertelsen, a director of Autodesk, is a member of Wilson Sonsini Goodrich & Rosati, Professional Corporation. Payments by Autodesk to Wilson Sonsini Goodrich & Rosati were less than one percent of such firms revenues in the last fiscal year. We believe that the services performed by Wilson Sonsini Goodrich & Rosati were provided on terms no more or less favorable than those with unrelated parties.
William Marr, Jr., Carol A. Bartzs stepson, is employed by Autodesk Software (China) Co., Ltd., a wholly-owned subsidiary of Autodesk. In fiscal 2006, Mr. Marr received approximately $70,946 in compensation representing annual salary and certain expatriate allowances.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation and Human Resources Committee is or was formerly an officer or employee of Autodesk or any of its subsidiaries. No interlocking relationship exists between any member of our Compensation and Human Resources Committee and the compensation committee of any other company, nor has any such interlocking relationship existed in the past.
EMPLOYEE AND DIRECTOR STOCK OPTIONS
Option Program Description
Autodesk maintains two active stock option plans for the purpose of granting stock options to employees and members of Autodesks Board of Directors: the 2006 Employee Stock Plan (available only to employees) and the 2000 Directors Option Plan (available only to non-employee directors). The 2006 Employee Stock Plan was approved by the stockholders in November 2005 and became effective in March 2006. Additionally, there are eight expired plans or terminated plans with options outstanding, including the 1996 Stock Plan (available only to employees), which expired in March 2006, and the Nonstatutory Stock Option Plan (available only to non-executive employees and consultants), which was terminated by the Board of Directors in December 2004. In addition to its stock option plans, the Companys employees are also eligible to participate in Autodesks 1998 Employee Qualified Stock Purchase Plan.
Our stock option program is broad-based and designed to promote long-term retention. Essentially all of our employees are eligible to participate. Approximately 85% of the options we granted during fiscal 2006 were awarded to employees other than Named Executive Officers as detailed below. Options granted under our equity plans generally vest over periods ranging from one to five years and expire within six to ten years of the date of grant. The exercise price of the stock options is equal to the closing price of our Common Stock on The Nasdaq Stock Market on the grant date.
All stock option grants to executive officers are made by the Compensation and Human Resources Committee of the Board of Directors. All members of the Compensation and Human Resources Committee are independent directors, as defined by the listing standards of The Nasdaq Stock Market. See Report of the Compensation and Human Resources Committee of the Board of Directors for further information concerning Autodesks policies and procedures regarding the use of stock options. Grants to our non-employee directors are non-discretionary and are pre-determined by the terms of the 2000 Directors Option Plan.
In 2005, our Board of Directors established a policy limiting the aggregate number of shares of our Common Stock underlying awards that could be granted under our 1996 Stock Plan and our 2006 Employee Stock Plan in any fiscal year to 3% of our outstanding Common Stock on the first day of our fiscal year (the 3% Limitation). Certain awards granted under such plans are not used in calculating the 3% Limitation (i.e., awards granted in connection with a business combination or awards granted in connection with the hiring of a senior executive officer). In fiscal 2006, we granted awards under our 1996 Stock Plan and our 2006 Employee Stock Plan that constituted 2.92% of our outstanding Common Stock on the first day of fiscal 2006, excluding awards granted in connection with a business combination or awards granted in connection with the hiring of a senior executive officer.
The following tables provide information about our stock option programs, including distribution and dilutive effect, option plan balances and in-the-money and out-of-the-money options.
Distribution and Dilutive Effect of Options
The following table provides information about the distribution and dilutive effect of our stock options for the three fiscal years ended January 31, 2004, January 31, 2005 and January 31, 2006.
General Option Information
Our stock option activity for the fiscal years ended January 31, 2005 and January 31, 2006, is summarized as follows.
In-the-Money and Out-of-the-Money Option Information
The following table compares the number of shares subject to option grants with exercise prices at or below the closing price of our Common Stock at January 31, 2006 (in-the-money) with the number of shares subject to option grants with exercise prices greater than the closing price of our Common Stock at the same date (out-of-the-money). The closing price of our Common Stock on January 31, 2006 was $40.59 per share.
Option Grants in Last Fiscal Year
The following table sets forth, as to the Named Executive Officers, information concerning stock options granted during the fiscal year ended January 31, 2006.
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth, as to the Named Executive Officers, certain information concerning stock options exercised during the fiscal year ended January 31, 2006, and the number of shares of our Common Stock subject to both exercisable and unexercisable stock options as of January 31, 2006. Also reported are values for in-the-money options that represent the positive spread between the respective exercise prices of outstanding stock options and the fair market value of our Common Stock as of January 31, 2006. The market value of the underlying securities is based on $40.59, the closing price per share of our Common Stock on January 31, 2006.
Equity Compensation Plan Information
The following table summarizes the number of outstanding options granted to employees and directors, as well as the number of securities remaining available for future issuance, under the Companys equity compensation plans as of January 31, 2006.
The 1996 Stock Plan was adopted by the stockholders in 1996. Employees, including executive officers and the members of the Board of Directors, are eligible to participate in the 1996 Stock Plan. The 1996 Stock Plan is intended to help the Company attract and retain outstanding individuals in order to promote the Companys success. Incentive stock options (that is, options that entitle the optionee to special U.S. income tax treatment) and nonstatutory stock options may be granted under the 1996 Stock Plan. Options granted under the 1996 Stock Plan generally vest over periods ranging from one to five years and expire within ten years of date of grant. The exercise price of the stock options granted under the 1996 Stock Plan is equal to the closing price of our Common Stock on The Nasdaq Stock Market on the grant date. The 1996 Stock Plan expired in March 2006.
Our Nonstatutory Stock Option Plan, which is not subject to stockholder approval, was adopted in 1996 and terminated by the Board of Directors in December 2004. The Nonstatutory Stock Option Plan permitted the grant to eligible employees of options to purchase up to 16.9 million shares, all of which have been previously granted. Executive officers and members of the Board of Directors were not eligible to participate in this plan. The Nonstatutory Stock Option Plan was intended to help the Company attract and retain outstanding individuals in order to promote the Companys success. Only nonstatutory stock options were granted under the Nonstatutory Stock Option Plan.
Our 1998 Employee Qualified Stock Purchase Plan was adopted by the stockholders in 1998. The 1998 Employee Qualified Stock Purchase Plan is intended to help the Company attract and retain outstanding individuals in order to promote the Companys success. The 1998 Employee Qualified Stock Purchase Plan provides employees of the Company with an opportunity to purchase Common Stock through accumulated payroll deductions. Under the 1998 Employee Qualified Stock Purchase Plan, eligible employees may purchase shares of Common Stock at their discretion using up to 15% of their compensation subject to certain limitations, at not less than 85% of fair market value as defined in the plan agreement.
Our 2000 Directors Option Plan was adopted by the stockholders in 2000. The 2000 Directors Option Plan provides for the automatic grant of nonstatutory options to non-employee directors of the Company. The 2000 Directors Option Plan is intended to help the Company attract and retain highly skilled individuals as directors of the Company, to provide additional incentive to the non-employee directors of the Company to serve as directors and encourage their continued service on the Board of Directors, and to encourage equity ownership by directors in order to align their interests with those of the stockholders. The exercise price of the stock options granted under the 2000 Directors Option Plan is equal to the closing price of our Common Stock on The Nasdaq Stock Market on the grant date.
The 2006 Employee Stock Plan was adopted by the stockholders in November 2005 and became effective in March 2006. Employees, including executive officers, are eligible to participate in the 2006 Employee Stock Plan. The 2006 Employee Stock Plan is intended to help the Company attract and retain outstanding individuals in order to promote the Companys success. Incentive stock options and nonstatutory stock options may be granted under the 2006 Employee Stock Plan. Options granted under the 2006 Employee Stock Plan generally vest over periods ranging from one to four years and expire within six years of date of grant. The exercise price of the stock options granted under the 2006 Employee Stock Plan is equal to the closing price of our Common Stock on The Nasdaq Stock Market on the grant date.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee is a committee of the Board of Directors comprised solely of independent directors as required by the listing standards of The Nasdaq Stock Market and rules of the SEC. The Audit Committee operates under a written charter adopted by the Board of Directors, a copy of which is attached to this Proxy Statement as Appendix A. The composition of the Audit Committee, the attributes of its members and the responsibilities of the Audit Committee, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter on an annual basis.
As described more fully in its charter, the purpose of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial reporting, the systems of internal control and the audit process; and by monitoring compliance with applicable laws, regulations and policies.
The Audit Committee reviewed and discussed the audited financial statements for fiscal year 2006 with management and Ernst & Young LLP, Autodesks independent auditors. Management is responsible for the quarterly and annual financial statements and the reporting process, including the systems of internal controls. Ernst & Young LLP is responsible for expressing an opinion on the conformity of our audited financial statements with generally accepted accounting principles. In addition, we received from and discussed with Ernst & Young LLP the written disclosures and the letter required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, discussed Ernst & Young LLPs independence with them, and discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing Standards No. 61, Communications with Audit Committees, each as currently in effect. We also discussed with management and with Ernst & Young LLP the evaluation of Autodesks internal controls and the effectiveness of Autodesks internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.
The Audit Committee discussed with Autodesks internal and independent auditors the overall scope and plans for their respective audits. In addition, the Audit Committee met with the internal and the independent auditors, with and without management present, and discussed the results of their examinations and the overall quality of Autodesks financial reporting.
On the basis of these reviews and discussions, the Audit Committee recommended to the Board of Directors (and the Board of Directors has approved) that Autodesks audited financial statements be included in Autodesks Annual Report on Form 10-K for the fiscal year ended January 31, 2006 for filing with the SEC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Mary Alice Taylor, Chairman
Steven L. Scheid
Larry W. Wangberg
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation and Human Resources Committee of the Board of Directors is comprised of three non-employee directors. Members of this Committee are required to meet the independent director requirements of the listing standards of The Nasdaq Stock Market, the non-employee director requirements of Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934 and the outside director requirements of Section 162(m) of the Internal Revenue Code of 1986. The Compensation and Human Resources Committee consists of Crawford W. Beveridge, Chairman, J. Hallam Dawson and Michael J. Fister.
The purpose of the Compensation and Human Resources Committee is to protect stockholder interests and promote stockholder value by ensuring the Company has programs in place to attract, retain and develop a highly effective management team and to discharge the Boards responsibilities relating to certain compensation matters of the Company.
Specifically, the Compensation and Human Resources Committee is responsible for approving the philosophy and structure of the policies and programs that determine the compensation of our executive officers. The Compensation and Human Resources Committee sets base cash compensation and bonus compensation on an annual basis for the Chief Executive Officer and other executive officers of Autodesk and, in addition, has exclusive authority to grant stock options to executive officers. The Compensation and Human Resources Committee considers both internal data, including financial and non-financial corporate goals and individual performance, as well as data from outside compensation consultants and independent executive compensation data from comparable high technology companies, in determining executive officers compensation.
The Compensation and Human Resources Committee also reviews Autodesks executive and leadership development policies, practices and plans to ensure that they support the Companys ability to retain and develop the superior executive and leadership talent required to deliver against the Companys short term and long term business strategies.
Autodesk operates in an extremely competitive and rapidly changing high technology industry. When creating policies and making decisions concerning executive compensation, the Compensation and Human Resources Committee strives to:
The Compensation and Human Resources Committees actions for the fiscal year ended January 31, 2006, were influenced by improving general economic conditions, as well as Autodesks improved performance during the year.
Autodesks executive compensation program has three major components, all of which are intended to attract, retain and motivate highly effective executives:
1. Base salary for executive officers is set annually by reviewing the competitive pay practices of comparable high technology companies. Local, national and, for international executives, foreign compensation data are examined and taken into account, along with the skills and performance of the individual and the needs of Autodesk.
2. Cash incentive compensation is designed to motivate executives to attain short-term and longer-term corporate, business unit and individual management goals. The actual annual cash bonuses received by an executive depend upon attainment of these specified business goals, together with discretionary analysis of individual contribution, within the limits of the stockholder approved Executive Incentive Plan. Incentive bonuses for fiscal year 2006 were based upon our financial results, which exceeded the established targets, as well as the achievement of other corporate and individual goals and related contributions to our success. In setting goals and measuring performance against those goals, the Compensation and Human Resources Committee considers compensation practices among companies competing for a common employee pool, as well as general economic and market conditions. It is the intention of the Compensation and Human Resources Committee in fiscal year 2007 to continue a strong correlation between the achievement of specific financial targets and corporate goals and the payment of incentive cash compensation to our officers and other executives.
3. Equity-based incentive compensation has been provided to employees and management through our stock incentive plans. Under these plans, officers and employees are eligible to be granted stock options based on competitive market data, as well as their responsibilities and position at Autodesk. These options allow participants to purchase shares of our Common Stock at the market price on the date of the grant, subject to vesting during the participants employment with Autodesk. Employees are also permitted to purchase shares of our Common Stock, subject to certain limitations, at 85% of fair market value under the Employee Stock Purchase Plan. The purpose of these stock plans is to instill the economic incentives of ownership and to create management incentives to improve stockholder value. Our stock option plans utilize vesting periods to encourage employees and executives to remain with Autodesk and to focus on longer-term results. Further, in December 2004, the Compensation and Human Resources Committee and the full Board of Directors established stock ownership guidelines for executive officers that are designed to encourage long term stock ownership in the Company and more closely link executive officer interests with those of our stockholders.
In making compensation determinations, the Compensation and Human Resources Committee utilizes independent third-party executive compensation surveys as well as analysis of proxy statements for comparably-sized software companies to assess an appropriate level of pay for performance. The Compensation and Human Resources Committee believes that Autodesks executive compensation program falls within the typical range of compensation programs offered by comparable high technology companies.
Chief Executive Officer Compensation
In determining Ms. Bartzs compensation for the fiscal year ended January 31, 2006, the Compensation and Human Resources Committee reviewed industry proxy statements and surveys of compensation paid to chief executive officers of comparable companies, with a focus on those companies located in the San Francisco Bay Area, and evaluated achievement of corporate and individual objectives for the fiscal year.
In addition, like other executive officers, Ms. Bartz was eligible to receive an incentive bonus determined on the basis of achievement of financial and non-financial individual and corporate goals and contribution to our success, within the limits of the stockholder approved Executive Incentive Plan. Based on the Companys achievement against the financial targets set at the beginning of the fiscal year, Ms. Bartz received a bonus of $1,700,000 for fiscal year 2006. In recognition of her contribution to Autodesks performance, Ms. Bartz was granted options to buy an aggregate of 500,000 shares of Autodesk stock during fiscal year 2006. Ms. Bartz is one of the executive officers of the Company covered by the stock ownership guidelines established in December 2004. We believe it is critical to the Companys long-term success to continue to tie our Chief Executive Officers financial incentives to our performance and to align individual financial interests with those of stockholders.
In accordance with our Corporate Governance Guidelines, which were adopted by the Board of Directors in December 1995, the Compensation and Human Resources Committee consults with the full Board of Directors in executive session prior to finalizing Ms. Bartzs base salary, incentive compensation payout for the prior year, incentive compensation targets for the current year and stock option grants.
Other Executive Compensation
Autodesk provides certain compensation programs to executives that are also available to our other employees, including pre-tax savings plans and medical/dental/vision benefits. There are no pension programs except where prescribed by law in countries other than the United States. We generally do not provide executive perquisites such as club memberships. In fiscal year 1998, we introduced a Deferred Compensation Program for executives, which Autodesk subsequently extended to other key employees. In 2004, the Board of Directors approved a new 2005 Deferred Compensation Plan intended to comply with the requirements of Section 409A of the Code, recently enacted under the American Jobs Creation Act of 2004. Section 409A imposes a number of requirements on non-qualified deferred compensation plans, primarily relating to the timing of elections and distributions. Beginning in calendar year 2005, all participants in the Deferred Compensation Program defer compensation under the 2005 Deferred Compensation Plan.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the federal income tax deductibility of compensation paid to our chief executive and to each of the other four most highly compensated executive officers. We generally may deduct compensation with respect to any of these individuals only to the extent that during any fiscal year such compensation does not exceed $1.0 million or meets certain other conditions enabling it to be characterized as performance-based. Our 2006 Employee Stock Plan has been designed to permit this Committee to grant options and other equity compensation awards that are performance-based and thus fully tax-deductible. Similarly, our Executive Incentive Plan has been designed to permit us to pay cash incentives that qualify as performance based and thus are fully tax-deductible. However, we may from time to time pay compensation to our executives that is not deductible if we believe circumstances warrant for the good of Autodesk.
COMPENSATION AND HUMAN RESOURCES
COMMITTEE OF THE BOARD OF DIRECTORS
Crawford W. Beveridge, Chairman
J. Hallam Dawson
Michael J. Fister
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total return (equal to dividends plus stock appreciation) for our Common Stock, the Standard & Poors 500 Stock Index and the Dow Jones U.S. Software Index.
Comparison of Five Year Cumulative Total Stockholder Return (1)
The Board of Directors does not know of any other matters to be presented at the Annual Meeting. If any other matters are properly presented at the Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote the shares they represent as the Board of Directors may recommend.
It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. Therefore, you are urged to execute and return the accompanying proxy in the enclosed envelope at your earliest convenience.
THE BOARD OF DIRECTORS
April 28, 2006
San Rafael, California
Audit Committee Charter
Autodesks Audit Committee is a committee of the Board of Directors. Committee members are appointed by and serve at the discretion of the Board of Directors. The Audit Committee is established to assist the Board in fulfilling its oversight responsibilities by reviewing the financial reporting, the systems of internal controls, and the audit process; and by monitoring compliance with applicable laws, regulations and policies. In discharging its responsibilities, the Committee shall have full access to all of Autodesks books, records, facilities and personnel, and shall have full authority to engage counsel and such other advisors as it deems necessary.
The Committees responsibility is one of oversight. The members of the Audit Committee are not employees of the Company, and they do not perform, or represent that they perform, the functions of management or the independent auditors. The Committee relies on the expertise and knowledge of management, the internal auditor and the independent registered accounting firm in carrying out its oversight responsibilities. The management of the Company is responsible for preparing accurate and complete financial statements in accordance with generally accepted accounting principles and for establishing and maintaining appropriate accounting principles and financial reporting policies and satisfactory internal control over financial reporting. The independent registered accounting firm is responsible for auditing the Companys annual consolidated financial statements and the effectiveness of the Companys internal control over financial reporting and reviewing the Companys quarterly financial statements. It is not the responsibility of the Committee to prepare or certify the Companys financial statements or guarantee the audits or reports of the independent auditors, nor is it the duty of the Audit Committee to certify that the independent auditor is independent under applicable rules. These are the fundamental responsibilities of management and the independent auditors.
The Audit Committee will consist of not less than three members of the Board of Directors. All members must be independent and financially literate, and at least one financially sophisticated, as such terms are defined for the purposes of service on an audit committee by the NASDAQ Marketplace Rules and the rules of the SEC. At least one member will be an audit committee financial expert as defined in the rules of the SEC. The Board of Directors will designate one member as Chairperson. Members of the Audit Committee will serve until a replacement member is appointed by the Board of Directors.
The Audit Committee will generally meet eight times each year coincident with the timing of Board of Directors meetings and prior to the release of the Companys quarterly and annual fiscal year earnings. Each meeting will include an executive session, which will allow the Audit Committee to maintain free and open communications with the Companys independent auditors and internal audit department.
The Audit Committee will keep minutes summarizing each meeting and report to the Board of Directors on its activities. If requested by the Board of Directors, the Audit Committee may invite the independent auditors to attend the full Board meeting to assist in reporting the results of their annual audit and answer questions from other directors. Alternatively, the other directors, particularly the other independent directors, may be invited to attend the Audit Committee meeting during which the results of the annual audit are reviewed or other Audit Committee meetings, as appropriate.
The Audit Committee will:
Annual Meeting Proxy Card 123456 C0123456789 12345
1. The Board of Directors recommends a vote FOR the listed nominees.
The Board of Directors recommends a vote FOR Item 2.
Please read the proposal in full in the accompanying proxy materials.
C Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed.
This proxy card should be marked, dated, and signed by the stockholder(s) exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, all should sign.
0 0 8 7 3 3 1 1 U P X COY
Proxy - Autodesk, Inc.
2006 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AUTODESK, INC.
The undersigned stockholder of AUTODESK, INC. (Autodesk), a Delaware corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated April 28, 2006, and hereby appoints Carl Bass and Pascal W. DiFronzo, or either of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2006 Annual Meeting of Stockholders of Autodesk to be held on June 8, 2006, at 2:00 p.m. Pacific Time, at Autodesks principal executive office, located at 111 McInnis Parkway, San Rafael, California and at any adjournment or postponement thereof, and to vote all shares of common stock that the undersigned would be entitled to vote if there personally present upon such business as may properly come before the meeting, including the items on the reverse side of this form.
This proxy, when properly executed, will be voted as directed, or, if no contrary direction is indicated, will be voted FOR the election of the nominees named in the Proxy Statement to Autodesks Board of Directors and FOR the ratification of the appointment of Ernst & Young LLP as Autodesks independent registered public accounting firm for the fiscal year ending January 31, 2007.
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.
(Continued and to be voted on reverse side.)
Telephone and Internet Voting Instructions
You can vote by telephone OR Internet! Available 24 hours a day 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be received by 1:00 a.m., Central Time, on June 8, 2006.