SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
AVANT!
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(Name of Registrant as Specified in Its Charter)
AVANT!
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 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:
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AVANT! CORPORATION
1208 East Arques Avenue
Sunnyvale, California 94086
April 17, 1997
TO THE STOCKHOLDERS OF AVANT! CORPORATION
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Avant! Corporation (the "Company"), which will be held at the Company's
principal executive offices at 1208 East Arques Avenue, Sunnyvale, California
94086, on Thursday, May 15, 1997, at 4:00 p.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Proxy Statement and Notice of Annual Meeting of Stockholders.
It is important that your shares be represented and voted at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. Returning the proxy does NOT deprive you of your right to attend the
Annual Meeting. If you decide to attend the Annual Meeting and wish to change
your proxy vote, you may do so automatically by voting in person at the meeting.
On behalf of the Board of Directors, I would like to express our appreciation
for your continued interest in the affairs of the Company. We look forward to
seeing you at the Annual Meeting.
Sincerely,
Gerald C. Hsu
President, Chief Executive
Officer and Chairman of the
Board of Directors
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AVANT! CORPORATION
1208 East Arques Avenue
Sunnyvale, California 94086
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1997
The Annual Meeting of Stockholders (the "Annual Meeting") of Avant!
Corporation (the "Company") will be held at the Company's principal executive
offices at 1208 East Arques Avenue, Sunnyvale, California 94086, on Thursday,
May 15, 1997, at 4:00 p.m. for the following purposes:
1. To elect five directors of the Board of Directors to serve until the
next Annual Meeting or until their successors have been duly elected and
qualified;
2. To approve an amendment to the Company's 1995 Stock Option/Stock
Issuance Plan to increase the total number of shares of Common Stock
reserved for issuance thereunder by 1,000,000 shares and to modify the limit
on the number of shares that may be granted thereunder to any individual;
3. To approve an amendment to the Company's Certificate of Incorporation
increasing the number of shares of the Company's Common Stock reserved for
issuance thereunder by 25,000,000 shares;
4. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for the year ending December 31, 1997; and
5. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the attached
Proxy Statement.
Only stockholders of record at the close of business on April 1, 1997 are
entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments or postponements thereof. A list of such stockholders will be
available for inspection at the Company's headquarters located at 1208 East
Arques Avenue, Sunnyvale, California, during ordinary business hours for the
ten-day period prior to the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Eric A. Brill
Secretary
Sunnyvale, California
April 17, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
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AVANT! CORPORATION
1208 East Arques Avenue
Sunnyvale, California 94086
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1997
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of Avant! Corporation, a Delaware corporation
(the "Company"), for the Annual Meeting of Stockholders (the "Annual Meeting")
to be held at the Company's principal executive offices at 1208 East Arques
Avenue, Sunnyvale, California 94086, on Thursday, May 15, 1997, at 4:00 p.m.,
and at any adjournment or postponement of the Annual Meeting. These proxy
materials were first mailed to stockholders on or about April 17, 1997.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice of Annual Meeting of Stockholders.
Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The Company's Common Stock is the only type of security entitled to vote at
the Annual Meeting. On April 1, 1997, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 25,349,423
shares of Common Stock outstanding. Each stockholder of record on April 1, 1997
is entitled to one vote for each share of Common Stock held by such stockholder
on April 1, 1997. Shares of Common Stock may not be voted cumulatively. All
votes will be tabulated by the inspector of election appointed for the meeting,
who will separately tabulate affirmative and negative votes, abstentions, and
broker non-votes.
QUORUM REQUIRED
The Company's bylaws provide that the holders of a majority of the Company's
Common Stock issued and outstanding and entitled to vote at the Annual Meeting,
present in person or represented by proxy, shall constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker non-votes
will be counted as present for the purpose of determining the presence of a
quorum.
VOTES REQUIRED
PROPOSAL 1. Directors are elected by a plurality of the affirmative votes
cast by those shares present in person or represented by proxy and entitled to
vote at the Annual Meeting. The five nominees for director receiving the highest
number of affirmative votes will be elected. Abstentions and broker non- votes
are not counted toward a nominee's total. Stockholders may not cumulate votes in
the election of directors.
PROPOSAL 2. Approval of the amendment to the Company's 1995 Stock
Option/Stock Issuance Plan requires the affirmative vote of a majority of those
shares present in person or represented by proxy and entitled to vote at the
Annual Meeting. Abstentions are not affirmative votes, and, therefore, will have
the same effect as votes against the proposal. Broker non-votes will not be
treated as entitled to vote on the proposal and thus will not effect the outcome
of the vote on the proposal.
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PROPOSAL 3. Approval of the amendment to the Company's Certificate of
Incorporation requires the affirmative vote of a majority of the outstanding
shares of the Company's Common Stock. Abstentions and broker non-votes are not
affirmative votes, and, therefore, will have the same effect as votes against
the proposal.
PROPOSAL 4. Ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent public accountants for the year ending December 31, 1997
requires the affirmative vote of a majority of those shares present in person or
represented by proxy and cast either affirmatively or negatively at the Annual
Meeting. Abstentions are not affirmative votes, and, therefore, will have the
same effect as votes against the proposal. Broker non-votes will not be treated
as entitled to vote on the proposal and thus will not effect the outcome of the
vote on the proposal.
PROXIES
Whether or not you are able to attend the Company's Annual Meeting, you are
urged to complete and return the enclosed proxy, which is solicited by the
Company's Board of Directors and which will be voted as you direct on your proxy
when properly completed. In the event no directions are specified, such proxies
will be voted FOR the Nominees of the Board of Directors (as set forth in
Proposal No. 1), FOR Proposals No. 2, No. 3 and No. 4 and in the discretion of
the proxy holders as to other matters that may properly come before the Annual
Meeting. You may also revoke or change your proxy at any time before the Annual
Meeting. To do this, send a written notice of revocation or another signed proxy
with a later date to the Secretary of the Company at the Company's principal
executive offices before the beginning of the Annual Meeting. You may also
automatically revoke your proxy by attending the Annual Meeting and voting in
person. All shares represented by a valid proxy received prior to the Annual
Meeting will be voted.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this Proxy Statement, the proxy,
and any additional soliciting material furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation material to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by directors, officers, employees, or agents
of the Company. No additional compensation will be paid to these individuals for
any such services. The Company also has retained Corporate Investor
Communications ("CIC") to assist in the solicitation of proxies. CIC will
receive a fee for such services of approximately $4,000 plus out-of-pocket
expenses, which will be paid by the Company. Except as described above, the
Company does not presently intend to solicit proxies other than by mail.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The directors who are being nominated for election to the Board of Directors
(the "Nominees"), their ages as of February 28, 1997, their positions and
offices held with the Company and certain biographical information are set forth
below. The proxy holders intend to vote all proxies received by them in the
accompanying form FOR the Nominees listed below unless otherwise instructed. In
the event 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 may be
designated by the present Board of Directors to fill the vacancy. As of the date
of this Proxy Statement, the Board of Directors is not aware of any Nominee who
is unable or will decline to serve as a director. The five Nominees receiving
the highest number of affirmative votes of the shares entitled to vote at the
Annual Meeting will be elected directors of the Company to serve until the next
Annual Meeting or until their successors have been duly elected and qualified.
NOMINEES AGE POSITIONS AND OFFICES HELD WITH THE COMPANY
- ------------------- ----- -------------------------------------------
Gerald C. Hsu ......50 President, Chief Executive Officer and
Chairman of the Board of Directors
Y. Eric Cho ........49 Senior Vice President of Corporate
Operations and Director
Eric A. Brill(1) ..46 Director and Secretary
Tench Coxe(1)(2) ..38 Director
Tatsuya Enomoto(2) 55 Director
- ----------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Mr. Hsu joined the Company in March 1994 as President, Chief Executive
Officer and a director, and has been Chairman of the Board of Directors since
November 1995. From July 1991 to March 1994, Mr. Hsu was employed by Cadence
Design Systems, Inc. ("Cadence"), an electronic design automation company, where
his last position was President and General Manager of the IC Design Group. From
June 1988 to July 1991, Mr. Hsu was employed by Sun Microsystems, Inc., an
engineering workstation company, where his last position was Director of
Strategic Business Development. Mr. Hsu holds an S.M. in Ocean Engineering from
the Massachusetts Institute of Technology, an M.S. in Mechanics and Hydraulics
from the University of Iowa and a B.S. in Applied Mathematics from the National
Chung-Hsing University, Taiwan.
Dr. Cho co-founded the Company in February 1991 and has been a director of
the Company since such date. From January 1996 to the present, Dr. Cho has
served as the Senior Vice President of Corporate Operations. From October 1993
until January 1996, Dr. Cho served as the Vice President of Asian Operations.
From the inception of the Company until October 1993, Dr. Cho served as Vice
President of Sales and Marketing. From September 1986 to February 1991, Dr. Cho
was employed by Cadence where his last position was a Marketing Director of the
IC Division. Dr. Cho holds an M.B.A. from New York University, an M.S. and a
Ph.D. in Electrical Engineering and Computer Science from the University of
California, Berkeley and a B.S. in Electrical Engineering from the National
Chiao-Tung University, Taiwan.
Mr. Brill has been a director and the Secretary of the Company since
November 1996. Mr. Brill is a corporate and securities attorney whose practice
focuses principally on technology companies and private investment partnerships.
He has been in private practice since 1993, and previously practiced with the
San Francisco law firm of Farella, Braun & Martel. Mr. Brill holds a B.S. in
History from Cleveland State University and a J.D. from the Harvard Law School.
Mr. Coxe has been a director of the Company since February 1992. Mr. Coxe is
a general partner of the general partner of Sutter Hill Ventures, a venture
capital investment firm, and has been associated with Sutter Hill Ventures since
1987. Mr. Coxe holds a B.A. in Economics from Dartmouth College and an M.B.A.
from the Harvard Business School.
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Dr. Enomoto has been the President of Mitsubishi Electric Semiconductor
Software Corporation, a semiconductor engineering company and a subsidiary of
Mitsubishi Electric Corporation ("MELCO"), since June 1993. From 1962 to June
1993, Dr. Enomoto was employed by MELCO where his last position was General
Manager of the ASIC Design Engineering Center. Dr. Enomoto holds a Ph.D. in
Engineering from the University of Tokyo.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the year ended December 31, 1996, the Board of Directors held 11
meetings and acted by written consent on one occasion. For the year, each of the
current directors during the term of their tenure attended or participated in at
least 75% of the aggregate of (i) the total number of meetings or actions by
written consent of the Board of Directors and (ii) the total number of meetings
held by all Committees of the Board of Directors on which each such director
served. The Board of Directors has two standing committees: the Audit Committee
and the Compensation Committee.
During the year ended December 31, 1996, the Audit Committee of the Board of
Directors met two times. The Audit Committee reviews, acts on and reports to the
Board of Directors with respect to various auditing and accounting matters,
including the selection of the Company's auditors, the scope of the annual
audits, fees to be paid to the Company's auditors, the performance of the
Company's auditors and the accounting practices of the Company. The members of
the Audit Committee are Messrs. Brill and Coxe. Robert C. Kagle, a former member
of the Board of Directors, resigned from the Board of Directors and the Audit
Committee in October 1996, due to personal reasons unrelated to the Company. Mr.
Brill was appointed to the Audit Committee in November 1996.
During the year ended December 31, 1996, the Compensation Committee of the
Board of Directors met three times and acted by written consent on two
occasions. The Compensation Committee administers the 1995 Stock Option/Stock
Issuance Plan, reviews the performance and sets the compensation of the Chief
Executive Officer of the Company, and approves the compensation of the executive
officers of the Company and reviews the compensation programs for other key
employees, including salary and cash bonus levels, as set by the Chief Executive
Officer. The members of the Compensation Committee are Messrs. Coxe and Enomoto.
Mr. Kagle resigned from the Compensation Committee in October 1996, and Mr.
Enomoto was appointed to the Compensation Committee in October 1996.
DIRECTOR COMPENSATION
Except for grants of stock options, directors of the Company generally do
not receive compensation for services provided as a director. The Company also
does not pay compensation for committee participation or special assignments of
the Board of Directors.
Non-employee directors are eligible for option grants pursuant to the
provisions of the Automatic Option Grant Program under the Company's 1995 Stock
Option/Stock Issuance Plan. On May 30, 1996 and November 22, 1996, Messrs.
Enomoto and Brill, respectively, were each granted an option to purchase 20,000
shares of Common Stock at an exercise price of $18.50 and $26.00 per share,
respectively, under the Automatic Option Grant Program. Under the Automatic
Option Grant Program, each individual who first becomes a non-employee director
after the date of the Company's initial public offering will be granted an
option to purchase 20,000 shares on the date such individual joins the Board of
Directors, provided such individual has not been in the prior employ of the
Company. In addition, at the 1996 Annual Stockholders Meeting and each Annual
Stockholders Meeting thereafter, each individual who continues to serve and has
served as a non-employee director for at least six months prior to such Annual
Meeting will receive an additional option grant to purchase 5,000 shares of
Common Stock, whether or not such individual has been in the prior employ of the
Company. Thus, on May 30, 1996, Messrs. Coxe and Kagle received an additional
option grant to purchase 5,000 shares of Common Stock. For further information
concerning the terms of these automatic grants, please see the summary of the
Automatic Option Grant Program below under the heading, "Proposal No. 2:
Amendment of the 1995 Stock Option/Stock Issuance Plan."
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Non-employee directors not serving on the Compensation Committee and
directors who are also employees of the Company are eligible to receive options
and be issued shares of Common Stock directly under the 1995 Stock Option/Stock
Issuance Plan. Employee-directors are also eligible to participate in the
Company's Employee Stock Purchase Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED HEREIN.
PROPOSAL NO. 2
AMENDMENT OF THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's 1995 Stock Option/Stock Issuance Plan (the "Option Plan") was
adopted by the Board of Directors (the "Board") in April 1995 and approved by
the stockholders in May 1995. The stockholders are being asked to vote on a
proposal to approve an amendment to the Option Plan to increase the number of
shares of Common Stock available for issuance under the Option Plan by 1,000,000
shares and to modify the limit on the number of shares that may be granted under
the Option Plan to any participant. The Board adopted the amendment on April 11,
1997 subject to stockholder approval at the Annual Meeting. The Company
established the Option Plan as a successor to the 1993 Stock Option/Stock
Issuance Plan ("Predecessor Plan") to provide a means whereby employees,
officers, directors, consultants, and independent advisers of the Company or
parent or subsidiary corporations may be given an opportunity to purchase shares
of Common Stock. The Board believes the amendment is necessary in order to
provide the Company with a sufficient reserve of Common Stock for future option
grants needed to attract, employ, and retain employees, directors, and
consultants of outstanding ability.
The principal terms and provisions of the Option Plan as modified by the
recent amendment are summarized below. The summary, however, is not intended to
be a complete description of all the terms of the Option Plan. A copy of the
Option Plan will be furnished by the Company to any stockholder upon written
request to the Secretary at the executive offices in Sunnyvale, California.
DESCRIPTION OF THE OPTION PLAN
STRUCTURE. The Option Plan is divided into three separate components: (i)
the Discretionary Option Grant Program under which employees, non-employee
directors and consultants may, at the discretion of the Compensation Committee
of the Board (the "Committee"), be granted options to purchase shares of Common
Stock at an exercise price not less than eighty-five percent (85%) of their fair
market value on the grant date, (ii) the Stock Issuance Program under which such
persons may, in the Committee's discretion, be issued shares of Common Stock
directly through the purchase of such shares at a price not less than
eighty-five percent (85%) of their fair market value at the time of their
issuance or as a bonus tied to the performance of services, and (iii) the
Automatic Option Grant Program under which option grants will automatically be
made at periodic intervals to eligible non-employee Board members to purchase
shares of Common Stock at an exercise price equal to their fair market value on
the grant date.
ADMINISTRATION. The Committee, which is comprised of two (2) or more Board
members, administers the Option Plan. Committee members serve for such period of
time as the Board may determine. No Board member may serve on the Committee if
he or she has received an option grant or stock award under the Option Plan or
under any other stock plan of the Company or its parent or subsidiary
corporations within the twelve (12) month period preceding his or her
appointment to the Committee, other than grants under the Automatic Option Grant
Program. The Option Plan may also be administered with respect to optionees who
are not executive officers subject to the short-swing profit rules of federal
securities laws by the Board or a secondary committee comprised of one or more
Board members.
The Committee (or Board or secondary committee to the extent acting as plan
administrator) has full authority (subject to the express provisions of the
Option Plan) to determine the eligible individuals who
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are to receive grants under the Option Plan, the number of shares to be covered
by each granted option, the date or dates on which the option is to become
exercisable, the maximum term for which the option is to remain outstanding, and
whether the granted option will be an incentive stock option ("Incentive
Option") which satisfies the requirements of section 422 of the Internal Revenue
Code (the "Code") or a non-statutory option not intended to meet such
requirements and the remaining provisions of the option grant.
ELIGIBILITY. Employees (including officers), consultants and independent
contractors who render services to the Company or its subsidiary corporations
(whether now existing or subsequently established) are eligible to receive
option grants under the Discretionary Option Grant Program. A non-employee
director of the Company or any parent or subsidiary corporation is also eligible
for option grants under the Discretionary Option Grant Program, provided he or
she is not a member of the Committee.
As of February 28, 1997, approximately 446 persons (including three
executive officers and two non-employee directors) were eligible to participate
in the Option Plan.
SECURITIES SUBJECT TO OPTION PLAN. The maximum number of shares of Common
Stock which may be issued over the term of the Option Plan is 4,305,575 shares.
Such authorized share reserve is comprised of (i) the number of shares which
remained available for issuance, as of the Option Plan effective date, under the
Predecessor Plan as last approved by the Company's stockholders prior to such
date, including the shares subject to the outstanding options incorporated into
the Option Plan and any other shares which would have been available for future
option grants under the Predecessor Plan, plus 1,750,000 shares plus (ii) an
increase of 240,000 shares representing the automatic yearly increase under the
Option Plan plus (iii) an additional increase of 1,000,000 shares, which is the
subject of this Proposal No. 2. The number of shares of Common Stock available
for issuance under the Option Plan shall automatically increase on the first
trading day of each calendar year during the term of the Option Plan by an
amount equal to one percent (1%) of the shares of Common Stock outstanding on
December 31 of the immediately preceding calendar year. No Incentive Options may
be granted under the Option Plan on the basis of such annual increases.
Prior to the amendment, no one person participating in the Option Plan could
receive options and direct stock issuances for more than 1,000,000 shares of
Common Stock in the aggregate over the term of the Option Plan. If Proposal No.
2 is approved, no one person may receive options and direct stock issuances for
more than 1,000,000 shares per calendar year.
Should an option expire or terminate for any reason prior to exercise in
full, including options incorporated from the Predecessor Plan, the shares
subject to the portion of the option not so exercised will be available for
subsequent option grants under the Option Plan.
DISCRETIONARY OPTION GRANT PROGRAM
PRICE AND EXERCISABILITY. The option exercise price per share in the case of
an Incentive Option may not be less than one hundred percent (100%) of the fair
market value of the Common Stock on the grant date and, in the case of a
non-statutory option, eighty-five percent (85%) of the fair market value of the
Common Stock on the grant date. Options granted under the Discretionary Option
Grant Program become exercisable at such time or times and during such period as
the Committee may determine and set forth in the instrument evidencing the
option grant.
The exercise price may be paid in cash or in shares of Common Stock. Options
may also be exercised through a same-day sale program, pursuant to which a
designated brokerage firm is to effect the immediate sale of the shares
purchased under the option and pay over to the Company, out of the sale proceeds
on the settlement date, sufficient funds to cover the exercise price for the
purchased shares plus all applicable withholding taxes. The Committee may also
assist any optionee (including an officer or director) in the exercise of his or
her outstanding options by (a) authorizing a Company loan to the optionee, or
(b) permitting the optionee to pay the exercise price in installments over a
period of years. The terms and conditions of any such loan or installment
payment will be established by the Committee in its sole discretion.
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No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option, paid the exercise price and
become a holder of record of the shares. Options are not assignable or
transferable other than by will or the laws of descent and distribution, and
during the optionee's lifetime, the option may be exercised only by the
optionee.
TERMINATION OF SERVICE. Any option held by the optionee at the time of
cessation of service will not remain exercisable beyond the designated
post-service exercise period. Under no circumstances, however, may any option be
exercised after the specified expiration date of the option term. Each such
option will normally, during such limited period, be exercisable only to the
extent of the number of shares of Common Stock in which the optionee is vested
at the time of cessation of service. The Committee has complete discretion to
extend the period following the optionee's cessation of service during which his
or her outstanding options may be exercised and/or to accelerate the
exercisability of such options in whole or in part. Such discretion may be
exercised at any time while the options remain outstanding, whether before or
after the optionee's actual cessation of service.
The shares of Common Stock acquired upon the exercise of one or more options
may be subject to repurchase by the Company at the original exercise price paid
per share upon the optionee's cessation of service prior to vesting in such
shares. The Committee has complete discretion in establishing the vesting
schedule to be in effect for any such unvested shares and may cancel the
Company's outstanding repurchase rights with respect to those shares at any
time, thereby accelerating the vesting of the shares subject to the canceled
rights.
INCENTIVE OPTIONS. Incentive Options may only be granted to individuals who
are employees of the Company or its parent or subsidiary corporation. During any
calendar year, the aggregate fair market value (determined as of the grant
date(s)) of the Common Stock for which one or more options granted to any
employee under the Option Plan (or any other option plan of the Company or its
parent or subsidiary corporations) may for the first time become exercisable as
incentive stock options under section 422 of the Code shall not exceed $100,000.
LIMITED STOCK APPRECIATION RIGHTS. One or more officers of the Company
subject to the short- swing profit restrictions of the federal securities laws
may, at the discretion of the Committee, be granted limited stock appreciation
rights in connection with their option grants under the Option Plan. Any option
with such a limited stock appreciation right in effect for at least six (6)
months will automatically be canceled, to the extent exercisable for one or more
vested option shares, upon the successful completion of a hostile tender offer
for more than 50% of the Company's outstanding voting stock. In return, the
officer will be entitled to a cash distribution from the Company in an amount
per canceled option share equal to the excess of (i) the highest price per share
of Common Stock paid in the tender offer over (ii) the option exercise price.
TANDEM STOCK APPRECIATION RIGHTS. The Committee is authorized to issue
tandem stock appreciation rights in connection with option grants under the
Discretionary Option Grant Program. Tandem stock appreciation rights provide the
holders with the right to surrender their options for an appreciation
distribution from the Company equal in amount to the excess of (a) the fair
market value of the vested shares of Common Stock subject to the surrendered
option on the option surrender date over (b) the aggregate exercise price
payable for such shares. Such appreciation distribution may, at the discretion
of the Committee, be made in cash or in shares of Common Stock.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, non-employee directors will
receive option grants at specified intervals over their period of Board service.
These special grants may be summarized as follows:
o Each individual who was a non-employee director on the date of the
initial public offering and each individual who becomes a non-employee
director after such date, whether through election by the stockholders or
appointment by the Board, will automatically be granted, at the time of
the offering or (if later) at the time of such initial election or
appointment, a non-statutory stock option to purchase 20,000 shares of
Common Stock.
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<PAGE>
o On the date of each Annual Stockholders Meeting, each individual who
continues to serve as a non-employee director will receive an additional
grant of a non-statutory stock option under the Option Plan to purchase
5,000 shares of Common Stock, provided such individual has been a member
of the Board for at least six months.
Each option grant under the Automatic Option Grant Program will be subject
to the following terms and conditions:
1. The option price per share will be equal to the fair market value per
share of Common Stock on the automatic grant date, and each option is to
have a maximum term of ten years from the grant date
2. Each automatic option grant will be immediately exercisable for all of
the option shares; the shares purchasable under the option will be subject
to repurchase at the original exercise price in the event the optionee's
Board service should cease prior to full vesting. With respect to each
initial grant, the repurchase right shall lapse and the optionee vest in
four (4) equal annual installments from the grant date. Each annual grant
shall vest upon the optionee's completion of one (1) year of Board service
from the option grant date.
3. The option will remain exercisable for a 12-month period following the
optionee's termination of service as a director for any reason and may be
exercised following the director's death by the personal representatives of
the optionee's estate or the person to whom the grant is transferred by the
optionee's will or the laws of inheritance. In no event, however, may the
option be exercised after the expiration date of the option term. During the
applicable exercise period, the option may not be exercised for more than
the number of shares (if any) for which it is exercisable at the time of the
optionee's cessation of Board service.
4. The option shares will become fully vested in the event of a Corporate
Transaction (as defined below) or a Change in Control (as defined below).
The option shares will also become fully vested in the event of the
optionee's cessation of Board service by reason of death or permanent
disability.
5. Upon the occurrence of a hostile tender offer, the optionee will have
a thirty (30) day period in which to surrender to the Company each automatic
option which has been in effect for at least six (6) months and the optionee
will in return be entitled to a cash distribution from the Company in an
amount per canceled option share (whether or not the optionee is otherwise
vested in those shares) equal to the excess of (i) the highest reported
price per share of Common Stock paid in the tender offer over (ii) the
option exercise price payable per share.
6. Option grants under the Automatic Option Grant Program will be made in
strict compliance with the express provisions of that program. The remaining
terms and conditions of the option will in general conform to the terms
described below for option grants under the Discretionary Option Grant
Program and will be incorporated into the option agreement evidencing the
automatic grant.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per share not
less than eighty-five percent (85%) of fair market value, payable in cash or
through a promissory note payable to the Company. Shares may also be issued
solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Committee will, however, have the discretionary authority
at any time to accelerate the vesting of any and all unvested shares outstanding
under the Option Plan.
In the event of a Corporate Transaction (as defined below), all of the
Company's outstanding repurchase rights under the Stock Issuance Program will
terminate automatically (and all the shares subject to such terminated rights
will fully vest), unless such repurchase rights are assigned to the successor
corporation. Any repurchase rights assigned will automatically terminate (and
shares subject to
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<PAGE>
such rights will fully vest) if the optionee's service is subsequently
terminated by reason of an involuntary termination within eighteen (18) months
following the Corporate Transaction.
GENERAL PROVISIONS
ACCELERATION OF OPTIONS/TERMINATION OF REPURCHASE RIGHTS. Upon the
occurrence of either of the following transactions (a "Corporate Transaction"):
(i) the sale, transfer, or other disposition of all or substantially all
of the Company's assets in complete liquidation or dissolution of the
Company, or
(ii) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons different from
the persons holding those securities immediately prior to such transaction,
each outstanding option under the Option Plan will, immediately prior to the
effective date of the Corporate Transaction, become fully vested for all of
the shares at the time subject to such option. However, an outstanding
option will not accelerate if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation (or parent) or to be replaced with a comparable option
to purchase shares of the capital stock of the successor corporation (or
parent), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and provides
for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such option is
subject to other limitations imposed by the Committee at the time of the
option grant. Immediately following the consummation of the Corporate
Transaction, all outstanding options will terminate and cease to be
exercisable, except to the extent assumed by the successor corporation. See
also "Employment Contracts and Change in Control Arrangements" for a
discussion of the acceleration of vesting of options held by certain
officers of the Company in the event of a hostile take-over of the Company.
Also upon a Corporate Transaction, the Company's outstanding repurchase
rights applicable to options granted under the Discretionary Option Grant
Program will terminate automatically unless assigned to the successor
corporation.
Any options which are assumed or replaced in the Corporate Transaction and
do not otherwise accelerate at that time shall automatically accelerate (and any
of the Company's outstanding repurchase rights which do not otherwise terminate
at the time of the Corporate Transaction shall automatically terminate and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full) in the event the optionee's service should subsequently terminate by
reason of an involuntary termination within eighteen (18) months following the
effective date of such Corporate Transaction. Any options so accelerated shall
remain exercisable for fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the involuntary termination.
Upon the occurrence of the following transactions ("Change in Control"):
(i) any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) acquires beneficial ownership of more than
fifty percent (50%) of the Company's outstanding voting stock without the
Board's recommendation, or
(ii) there is a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
directors ceases, by reason of a proxy contest, to be comprised of
individuals who (a) have been directors continuously since the beginning of
such period or (b) have been elected or nominated for election as directors
by a majority of the Board in (a) who were still in office at the time such
election or nomination was approved by the Board, the Committee has the
discretion to accelerate outstanding options and terminate the Company's
outstanding repurchase rights. The Committee also has the discretion to
terminate the Company's outstanding repurchase rights upon the subsequent
termination of the optionee's service within a specified period following
the Change in Control.
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<PAGE>
The acceleration of options in the event of a Corporate Transaction or
Change in Control may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt, or other efforts
to gain control of the Company.
VALUATION. For purposes of establishing the option price and for all other
valuation purposes under the Option Plan, the fair market value of a share of
Common Stock on any relevant date will be the closing price per share of Common
Stock on that date, as such price is reported on the Nasdaq National Market. The
closing price of the Common Stock on February 28, 1997 was $30.50 per share.
CHANGES IN CAPITALIZATION. In the event any change is made to the Common
Stock issuable under the Option Plan by reason of any stock split, stock
dividend, combination of shares, exchange of shares, or other change affecting
the outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Option Plan, (ii) the maximum
number and/or class of securities for which any one person may be granted
options and direct stock issuances per calendar year, (iii) the maximum number
and/or class of securities for which the share reserve is to increase
automatically each year, (iv) the number and/or class of securities for which
automatic option grants are to be subsequently made per director under the
Automatic Option Grant Program and (v) the number and/or class of securities and
the exercise price per share in effect under each outstanding option (including
any option incorporated from the Predecessor Plan) in order to prevent the
dilution or enlargement of benefits thereunder.
Each outstanding option which is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities which would otherwise have been issued, in consummation
of such Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the option price payable per share and to the
class and number of securities available for future issuance under the Option
Plan on both an aggregate and a per-participant basis.
OPTION PLAN AMENDMENTS. The Board may amend or modify the Option Plan in any
and all respects whatsoever. However, the Board may not, without the approval of
the Company's stockholders, (i) materially increase the maximum number of shares
issuable under the Option Plan (except in connection with certain changes in
capitalization), or (ii) materially modify the eligibility requirements for
option grants. Prior to the amendment of the Option Plan which is the subject of
this Proposal No. 2, the Board could not, without stockholder approval, amend
the Option Plan to materially increase the benefits accruing to participants
under the Option Plan.
Unless sooner terminated by the Board, the Option Plan will in all events
terminate on March 31, 2007. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants. Prior to the amendment of the Option Plan
which is the subject of this Proposal No. 2, the Board could not, without
stockholder approval, amend the Option Plan to materially increase the benefits
accruing to participates under the Option Plan.
As of February 28, 1997 options covering approximately 2,357,000 shares were
outstanding under the Option Plan, 439,000 shares remained available for future
option grant, and 643,000 shares have been issued under the Option Plan. The
expiration dates for all such options range from February 12, 2000 to January
14, 2007. In addition, in connection with the acquisition of Integrated Silicon
Systems, Inc. ("ISS"), Anagram, Inc. ("Anagram"), Meta-Software, Inc. ("Meta"),
FrontLine Design Automation, Inc. ("FrontLine"), and NexSyn Design Technology,
Inc. ("NexSyn"), the Company assumed the outstanding options of each company.
Accordingly, under the ISS, Anagram, Meta, FrontLine and NexSyn option plans as
of February 28, 1997, options covering approximately 1,080,000 , 237,450,
566,847, 341,821 and 22,564 shares, respectively, were outstanding.
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<TABLE>
NEW PLAN BENEFITS AND OPTION GRANT TABLE
Because the Option Plan is discretionary, benefits to be received by
individual optionees are not determinable. However, each of Messrs. Coxe and
Enomoto (Mr. Brill will not have completed six months of service on the Board)
will receive an option grant to purchase 5,000 shares under the Automatic Option
Grant Program on the date of the Annual Meeting with an exercise price per share
equal to the closing price per share of Common Stock on the date of that Annual
Meeting. The table below shows, as to each of the Named Officers named in the
Summary Compensation Table and the various indicated groups, (i) the number of
shares of Common Stock for which options have been granted under the Option Plan
for the one (1)-year period ending December 31, 1996, plus the period through
February 28, 1997 and (ii) the weighted average exercise price per share. No
direct stock issuances have been made under the Option Plan to date.
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
NUMBER OF PRICE OF
NAME AND POSITION OPTION SHARES GRANTED OPTIONS
- ---------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
Gerald C. Hsu ................................................... 475,000 $26.58
President, Chief Executive Officer and Chairman of the
Board of Directors
Y. Eric Cho ..................................................... 100,000 32.35
Senior Vice President of Corporate Operations and Director
John P. Huyett .................................................. 20,000 21.75
Chief Financial Officer and Treasurer
Vic Kulkarni .................................................... 21,917 37.22
Vice President of Marketing
Shawn M. Hailey ................................................. -- --
Senior Vice President of the Silicon Tool Division and Director
All current executive officers as a group
(3 persons) .................................................... 595,000 27.39
All current directors (other than executive officers) as a group
(3 persons) .................................................... 45,000 21.83
All employees, including current officers who are not executive
officers, as a group (259 persons) ............................. 1,603,000 $24.88
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER THE OPTION PLAN
Options granted under the Option Plan may be either incentive stock options
that satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options that are not intended to meet such requirements. The
federal income tax treatment for the two types of options differs as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of disposition.
For federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying disposition
of the shares,
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<PAGE>
then generally the excess of (i) the fair market value of those shares on the
date the option was exercised over (ii) the exercise price paid for the shares
will be taxable as ordinary income. Any additional gain recognized upon the
disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will generally be entitled to an income tax deduction for the
taxable year in which such disposition occurs equal to the amount of ordinary
income recognized by the optionee. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the excess
of the fair market value of the purchased shares on the exercise date over the
exercise price paid for the shares, and the optionee will be required to satisfy
the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Common Stock under a non-statutory option if the purchased shares are subject to
repurchase by the Company. These special provisions may be summarized as
follows:
(i) If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company at the original exercise price in the
event of the optionee's termination of service prior to vesting in such
shares, the optionee will not recognize any taxable income at the time of
exercise but will have to report as ordinary income, as and when the
Company's repurchase right lapses, an amount equal to the excess of (a) the
fair market value of the shares on the date such repurchase right lapses
with respect to such shares over (b) the exercise price paid for the shares.
(ii) The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of the
non-statutory option an amount equal to the excess of (a) the fair market
value of the purchased shares on the exercise date (determined as if the
shares were not subject to the Company's repurchase right) over (b) the
exercise price paid for such shares. If the Section 83(b) election is made,
the optionee will not recognize any additional income as and when the
repurchase right lapses.
The Company will in general be entitled to a business expense deduction
equal to the amount of ordinary income recognized by the optionee with respect
to the exercised non-statutory option. The deduction will be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
STOCK APPRECIATION RIGHTS. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the amount
of the appreciation distribution. The Company will ordinarily be entitled to a
business expense deduction equal to the appreciation distribution for the
taxable year of the Company in which the ordinary income is recognized by the
optionee.
STOCK ISSUANCES. The tax principles applicable to direct stock issuances
under the Option Plan will be substantially the same as those summarized above
for the exercise of non-statutory option grants.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1995 STOCK
OPTION/STOCK ISSUANCE PLAN.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 28, 1997 certain information
with respect to shares beneficially owned by (i) each person who is known by the
Company to be the beneficial owner of more than five percent of the Company's
outstanding shares of Common Stock, (ii) each of the Company's directors, and
the Named Officers named in the Summary Compensation Table and (iii) all current
directors and Named Officers as a group. Beneficial ownership has been
determined in accordance with Rule 13d-3 under the Exchange Act. Under this
rule, certain shares may be deemed to be beneficially
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<PAGE>
owned by more than one person (if, for example, persons share the power to vote
or the power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire shares
(for example, upon exercise of an option or warrant) within sixty (60) days of
the date as of which the information is provided; in computing the percentage
ownership of any person, the amount of shares is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason of
such acquisition rights. As a result, the percentage of outstanding shares of
any person as shown in the following table does not necessarily reflect the
person's actual voting power at any particular date.
SHARES BENEFICIALLY
OWNED(1)(2)
----------------------
NUMBER OF PERCENTAGE
BENEFICIAL OWNER SHARES OF CLASS
- --------------------------------------------------------- ----------- ----------
Amerindo Investment Advisors Inc.(3) .................... 5,778,503 22.9%
Van Wagoner Capital Management, Inc.(4) ................. 1,317,646 5.2
Gerald C. Hsu(5) ........................................ 611,979 2.4
Y. Eric Cho ............................................. 464,200 1.8
John P. Huyett(6) ....................................... 70,060 *
Shawn M. Hailey ......................................... 1,955,727 7.8
Kim L. Hailey ........................................... 1,264,764 5.0
Vic Kulkarni(7) ......................................... 6,057 *
Eric A. Brill(8) ........................................ 20,000 *
Tench Coxe(9) ........................................... 55,356 *
Tatsuya Enomoto(10) ..................................... 20,000 *
All directors and executive officers as a group (7
persons including those listed above)(11) .............. 3,197,322 12.4%
- ----------
* Less than 1% of the outstanding shares of Common Stock.
(1)Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock. To
the Company's knowledge, the entities named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2)The number of shares of Common Stock deemed outstanding includes shares
issuable pursuant to stock options that may be exercised within sixty (60)
days after February 28, 1997.
(3)Based on Schedule 13D/A filed with the Securities and Exchange Commission as
of February 28, 1997 and other information obtained by the Company,
stockholder held sole voting power and sole dispositive power as to all of
such shares. Amerindo Investment Advisors Inc.'s address is One Embarcadero
Center, Suite 2300, San Francisco, California 94111.
(4)Based on Schedule 13G filed with the Securities and Exchange Commission as
of February 12, 1997 and other information obtained by the Company,
stockholder held sole voting power and sole dispositive power as to all of
such shares. Van Wagoner Capital Management, Inc.'s address is One Bush
Street, Suite 1150, San Francisco, California 94104.
(5)Includes options exercisable into 511,979 shares of Common Stock under the
Option Plan.
(6)Includes options exercisable into 69,000 shares of Common Stock under the
Option Plan.
(7)Includes options exercisable into 5,937 shares of Common Stock under the
Option Plan.
(8)Includes options exercisable into 20,000 shares of Common Stock under the
Option Plan.
(9)Includes options exercisable into 25,000 shares of Common Stock under the
Option Plan.
(10)Includes options exercisable into 20,000 shares of Common Stock under the
Option Plan.
(11) Also includes options exercisable into 645,979 shares of Common Stock
under the Option Plan.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Brill represented the Company in certain legal matters before joining
the Board in November 11, 1996, and he continues to do so. He represented Gerald
C. Hsu, the Company's President and CEO, in certain Company-related matters
before joining the Board, and he continues to represent Mr. Hsu in other
matters. The law firm of Farella, Braun & Martel ("Farella"), with which Mr.
Brill practiced prior to 1993, has represented, and continues to represent, the
Company in certain matters. Farella has also represented, and continues to
represent, Mr. Hsu in connection with certain litigation, including the pending
lawsuit brought by Cadence Design Systems, Inc. against the Company, Mr. Hsu and
others. Pursuant to indemnification provisions in the Company's Bylaws and in
certain indemnification agreements between the Company and Mr. Hsu, the Company
is obligated to pay Mr. Hsu's legal fees and expenses incurred in such
litigation. During 1996, Mr. Brill received approximately $160,000 from the
Company for legal services performed by Mr. Brill and Farella on behalf of the
Company and Mr. Hsu, which amount includes a portion of the legal fees paid by
the Company to Farella to which Mr. Brill is entitled under a contract between
him and Farella.
In May 1996, the Company loaned to Gerald C. Hsu, the Company's President,
Chief Executive Officer and Chairman of the Board of Directors, $500,000. The
loan is due in full on demand by the Company. The loan is interest free and is
collateralized by the Common Stock of the Company held by Mr. Hsu.
In January 1996, the Company loaned to John P. Huyett, the Company's Chief
Financial Officer and Treasurer, $325,000. The loan is due in full on demand by
the Company. The loan is interest free and is collateralized by a deed of trust
on real property.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
None of the Company's executive officers has an employment or severance
agreement with the Company, and their employment may be terminated at any time
at the discretion of the Board.
The Committee has the authority under the Option Plan to provide for the
acceleration of vesting of the shares of Common Stock subject to the outstanding
options held by the Chief Executive Officer and the Company's other executive
officers under the Option Plan, in the event their employment were to be
terminated (whether involuntarily or through a forced resignation) following a
hostile take-over of the Company effected through a successful tender offer for
more than 50% of the Company's outstanding Common Stock or through a change in
the majority of the Board as a result of one or more contested elections for
Board membership. See also "General Provisions" under the heading "Description
of the Option Plan" for a discussion of the acceleration of vesting of all
outstanding options under the Option Plan in the event of a sale or other
disposition of the Company's assets or a merger or consolidation in which 50% or
greater of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction.
COMPENSATION COMMITTEE REPORT
The Committee has the exclusive authority to establish the level of base
salary payable to the Chief Executive Officer ("CEO"), to administer the Option
Plan with respect to executive officers, and to supervise the administration of
the Employee Stock Purchase Plan. In addition, the Committee has the
responsibility for approving the individual bonus program to be in effect for
the CEO. The CEO has the exclusive authority to establish the level of base
salary payable to all other employees of the Company, including all executive
officers, subject to the approval of the Committee. In addition, the CEO has the
responsibility for approving the bonus programs to be in effect for all other
executive officers and other key employees each fiscal year, subject to the
approval of the Committee.
For 1996, the process utilized by the CEO in determining executive officer
compensation levels took into account both qualitative and quantitative factors.
Among the factors considered by the CEO were informal surveys conducted by
Company personnel among local companies. However, the CEO made the final
compensation decisions concerning such officers.
GENERAL COMPENSATION POLICY. The CEO's fundamental policy is to offer the
Company's executive officers competitive compensation opportunities based upon
overall Company performance, their individual contribution to the financial
success of the Company and their personal performance. It is the CEO's objective
to have a substantial portion of each officer's compensation contingent upon the
Company's performance, as well as upon his or her own level of performance.
Accordingly, each executive officer's compensation package consists of: (i) base
salary, (ii) cash bonus awards and (iii) long-term stock-based incentive awards.
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<PAGE>
In preparing the performance graph for this Proxy Statement, the Company has
selected The Nasdaq Stock Market U.S. Total Return Index and the Nasdaq Computer
& Data Processing Stocks Total Return Index for The Nasdaq Stock Market. The
companies included in the Company's informal survey are not necessarily those
included in the Indices, because they were determined not to be competitive with
the Company for executive talent or because compensation information was not
available to the Company.
BASE SALARY. The base salary for each executive officer is set on the basis
of personal performance and the salary level in effect for comparable positions
at companies that compete for executive talent on the basis of informal surveys
conducted by the Company.
ANNUAL CASH BONUSES. Each executive officer has an established bonus target
each fiscal year. The annual pool of bonuses for executive officers is
determined on the basis of the Company's achievement of the financial
performance targets established at the start of the fiscal year, a range for the
executive's contribution and a measure of customer satisfaction. For 1996, the
Company exceeded its performance targets. Actual bonuses paid reflect an
individual's accomplishment of both corporate and functional objectives, with
greater weight being given to achievement of corporate rather than functional
objectives.
LONG-TERM INCENTIVE COMPENSATION. During 1996, the Committee, in its
discretion, made option grants to Gerald C. Hsu, and the CEO made option grants,
with the approval of the Committee, to Y. Eric Cho and John P. Hyuett under the
Option Plan. Generally, a significant grant is made in the year that an officer
commences employment and no grant is made in the second year. Generally, the
size of each grant is set at a level that the CEO deems appropriate, subject to
the approval of the Committee, to create a meaningful opportunity for stock
ownership based upon the individual's position with the Company, the
individual's potential for future responsibility and promotion, the individual's
performance in the recent period and the number of unvested options held by the
individual at the time of the new grant. The relative weight given to each of
these factors will vary from individual to individual at the CEO's discretion.
Each grant allows the officer to acquire shares of the Company's Common
Stock at a fixed price per share (the market price on the grant date) over a
specified period of time. The option vests in periodic installments over a
four-year period, contingent upon the executive officer's continued employment
with the Company, and the vesting schedule is adjusted to reflect existing
grants to ensure a meaningful incentive in each year following the year of
grant. Accordingly, the option will provide a return to the executive officer
only if he remains in the Company's employ, and then only if the market price of
the Company's Common Stock appreciates over the option term.
CEO COMPENSATION. The annual base salary for Mr. Hsu, the Company's
President and CEO, was established by the Committee in January 1996. The
Committee's decision was made primarily on the basis of Mr. Hsu's personal
performance of his duties.
The CEO's 1996 incentive compensation was entirely dependent upon the
Company's financial performance and provided no dollar guarantees. The bonus
paid to the CEO for 1996 was based on the same incentive plan as for all other
officers. Specifically, a target incentive was established at the beginning of
the year using an agreed-upon formula based on Company revenue and profit before
interest. Each year, the annual incentive plan is reevaluated with a new
achievement threshold and new targets for revenue and profit before interest.
The option grant made to the CEO during 1996 was intended: (i) to reflect his
prior service with the Company and (ii) to place a significant portion of his
total compensation at risk, because the options will have no value unless there
is appreciation in the value of the Company's Common Stock over the option term.
15
<PAGE>
TAX LIMITATION. As a result of federal tax legislation enacted in 1993, a
publicly-held company such as the Company will not be allowed a federal income
tax deduction for compensation paid to certain executive officers to the extent
that compensation exceeds $1 million per officer in any year. This limitation
will be in effect for all fiscal years of the Company beginning after the
Company's initial public offering. The stockholders approved the Option Plan,
which includes a provision that limits the maximum number of shares of Common
Stock for which any one participant may be granted. Accordingly, any
compensation deemed paid to an executive officer when he exercises an
outstanding option under the Option Plan with an exercise price equal to the
fair market value of the option shares on the grant date will not be subject to
the $1 million limitation. Since it is not expected that the cash compensation
to be paid to the Company's executive officers for the 1997 fiscal year will
exceed the $1 million limit per officer, the Committee will defer any decision
on whether to limit the dollar amount of all other compensation payable to the
Company's executive officers to the $1 million cap.
Compensation Committee
Tench Coxe
Tatsoya Enomoto
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Committee are Messrs. Coxe and Enomoto. Mr. Kagle was a
member of the Committee until his resignation in October 1996. Mr. Enomoto was
appointed to the Committee upon the resignation of Mr. Kagle. Mssrs. Coxe, Kagle
and Enomoto were not at any time during 1996, or at any other time, an officer
or employee of the Company. No executive officer of the Company serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board or
the Committee.
16
<PAGE>
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between June 7, 1995 (the date the Company's
Common Stock commenced public trading) and December 31, 1996 with the cumulative
total return of (i) The Nasdaq Stock Market Total Return Index (U.S. Companies)
("The Nasdaq Stock Market-U.S. Index") and (ii) the Nasdaq Computer & Data
Processing Stocks Total Return Index for The Nasdaq Stock Market ("Nasdaq CDP
Index"), over the same period. This graph assumes the investment of $100 on June
7, 1995 in the Company's Common Stock, The Nasdaq Stock Market-U.S. Index and
the Nasdaq CDP Index, and assumes the reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical data, and
the Company cautions that the stock price performance shown in the graph below
is not indicative of, nor intended to forecast, the potential future performance
of the Company's Common Stock. Information used in the graph was obtained from
The Nasdaq Stock Market, a source believed to be reliable, but the Company is
not responsible for any errors or omissions in such information.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG AVANT! CORPORATION,
THE NASDAQ STOCK MARKET-U.S. INDEX AND THE NASDAQ CDP INDEX
COMPARATIVE TOTAL RETURNS
JUNE 7, 1995 THROUGH DECEMBER 31, 1996 FOR AVANT! CORPORATION
Avant!
Performance Graph Differentials
Quarterly
Nasdaq
Nasdaq Computer
Stock & Data
Market Processing
Avant! (US) Stocks
- -------------------------------------------------------------------
6/7/95 $100.00 $100.00 $100.00
6/30/95 $128.30 $108.10 $111.13
9/30/95 $155.66 $117.58 $121.40
12/31/95 $72.64 $122.60 $126.85
3/31/96 $90.57 $128.33 $132.81
6/30/96 $87.74 $138.80 $147.62
9/30/96 $113.21 $143.75 $150.56
12/31/96 $119.81 $150.81 $156.60
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate this Proxy
Statement or future filings made by the Company under those statutes, the
Compensation Committee Report and Stock Performance Graph are not deemed filed
with the Securities and Exchange Commission and shall not be deemed incorporated
by reference into any of those prior filings or into any future filings made by
the Company under those statutes.
17
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following Summary Compensation Table sets forth the compensation earned
by the Company's Chief Executive Officer and the four other most highly
compensated officers who were serving as such at the end of 1996 (collectively,
the "Named Officers"), each of whose salary and bonus for 1996 exceeded $100,000
for services rendered in all capacities to the Company and its subsidiaries for
that fiscal year.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
NUMBER OF
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
--------------------- -------------- --------------
BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) ($)(1) OPTIONS (#)(2) ($)
- ------------------------------------- ------ ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Gerald C. Hsu ..........................1996 250,000 350,000 175,000 --
President, Chief Executive Officer 1995 150,000 250,000 50,000 --
and Chairman of the Board of
Directors
Y. Eric Cho(3) .........................1996 120,000 237,491 20,000 --
Senior Vice President of Corporate 1995 90,000 206,536 -- --
Operations and Director
John P. Huyett .........................1996 200,000 30,000 20,000 4,770(4)
Chief Financial Officer and 1995 150,000 95,000 67,500 16,500(4)
Treasurer
Vic Kulkarni ...........................1996 150,231 97,471 -- 388,708(5)
Vice President of Marketing 1995 110,237 -- -- --
Shawn M. Hailey ........................1996 185,966 -- -- --
Senior Vice President of Silicon Tool 1995 180,000 98,010 -- 1,648(6)
Division
- ----------
<FN>
(1) Amounts in this column include amounts earned in the stated year but not yet
paid or paid in the subsequent year. Also, includes amounts deferred under
the 401(k) plan.
(2) The Company did not grant any stock appreciation rights or make any
long-term incentive payments during the years covered by the table.
(3) Bonus amounts include commissions earned in the year listed.
(4) Includes reimbursed moving expenses of $13,500 in 1995, and includes
matching contributions by the Company to the 401(k) Plan in 1995 and 1996.
(5) Represents the difference between the fair market value of nonqualified
stock options, which were exercised in 1996, and the exercise price.
(6) Consists of matching contributions of $1,000 under a predecessor 401(k)
Profit Sharing Plan and $648 paid in premiums for Life and Accidental Death,
Disability and Dismemberment Insurance.
</FN>
</TABLE>
18
<PAGE>
The following table contains information concerning the stock option grants
made to each of the Named Officers in 1996. No stock appreciation rights were
granted to these individuals during such year.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED (#) IN 1996 ($/SH)(3) DATE 5%($) 10%($)
- ------------------ ------------ ------------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gerald C. Hsu(1) .175,000 10.92 19.00 5/28/06 2,091,075 5,299,194
Y. Eric Cho(2) ... 20,000 1.25 21.75 7/16/06 273,569 693,278
John P. Huyett(2) 20,000 1.25 21.75 7/16/06 273,569 693,278
Vic Kulkarni ...... 21,917 1.37 37.22 5/30/06 513,021 1,300,095
Shawn M. Hailey .. 0 -- -- -- -- --
<FN>
- ----------
(1) The option becomes exercisable as to 25% of the option shares one year from
the vesting commencement date and as to the balance ratably upon the
optionee's completion of the next thirty-six (36) months of service.
(2) The option becomes exercisable as to 33% of the option shares on the third
anniversary of the vesting commencement date, and as to the balance of the
option shares in equal monthly installments ending on the ninth anniversary
of the vesting commencement date.
(3) The exercise price for the options may be paid in cash, in shares of Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise. The plan administrator has the
discretionary authority to reprice the options through the cancellation of
those options and the grant of replacement options with an exercise price
based on the fair market value of the option shares on the regrant date. The
options have a maximum term of 10 years measured from the option grant date,
subject to earlier termination in the event of the optionee's cessation of
service with the Company. Under each of the options, the option shares will
vest upon an acquisition of the Company by merger or asset sale, unless the
unvested option shares are transferred to the acquiring entity. See "General
Provisions" under the heading "Description of the Option Plan" for a
discussion of the vesting of options in connection with such a transaction.
(4) The potential realizable value of the options reported above was calculated
by assuming that the market price of the Common Stock of the Company
appreciates 5% and 10% from the date of grant of the options until the
expiration of the options. These assumed annual rates of appreciation were
used in compliance with the rules of the Securities and Exchange Commission
and are not intended to forecast future price appreciation of the Common
Stock of the Company. The actual value realized from the options could be
substantially higher or lower than the values reported above, depending upon
the future appreciation or depreciation of the Common Stock during the
option period and the timing of exercise of the options. Unless the
executive officer remains employed until he vests in the option shares and
the market price of the Common Stock appreciates over the option term, no
value will be realized from the option grants made to the executive
officers.
</FN>
</TABLE>
19
<PAGE>
The following table sets forth information concerning option exercises in
1996 and option holdings as of the end of 1996 with respect to each of the Named
Officers. No stock appreciation rights were outstanding at the end of that year.
<TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF
VALUE REALIZED SECURITIES UNDERLYING VALUE OF UNEXERCISED
(MARKET PRICE AT UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES EXERCISE LESS AT FY-END (#) AT FY-END ($)(1)(2)
ACQUIRED ON EXERCISE ----------------------------- -----------------------------
NAME EXERCISE (#) PRICE($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- ------------- ---------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gerald C. Hsu......70,000 1,615,600 497,396 127,604 14,756,797 1,626,953
Y. Eric Cho........ 0 0 0 20,000 0 200,000
John P. Huyett..... 9,000 177,030 31,500 80,000 541,080 1,214,900
Vic Kulkarni.......10,958 388,708 5,937 60,274 43,587 1,014,159
Shawn M. Hailey.... 0 0 0 0 0 0
<FN>
(1) The amounts reported above under the column "Value Realized" merely reflect
the amount by which the fair market value of the Common Stock of the Company
on the date the option was exercised exceeded the exercise price of the
option. The option holder does not realize any cash until the shares of
Common Stock issued upon exercise of the options are sold.
(2) Based on the closing price of the Common Stock of the Company at December
31, 1996, as reported on the Nasdaq National Market, of $31.75 per share,
less the exercise price payable for such shares.
</FN>
</TABLE>
PROPOSAL NO. 3
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
On April 11, 1997, the Board authorized an amendment of the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock, par value $.0001 per share ("Common Stock"), from 50,000,000 to
75,000,000. The stockholders are being asked to approve this proposed amendment.
As of February 28, 1997, 25,184,497 shares of Common Stock were issued and
outstanding and approximately 847,000 shares were reserved for issuance under
the Company's Option Plan and Employee Stock Purchase Plan, the ISS option plan,
the Anagram option plan, the Meta option plan, the FrontLine option plan, and
the NexSyn option plan.
The Board believes that the proposed increase is desirable so that, as the
need may arise, the Company will have more flexibility to issue shares of Common
Stock without the expense and delay of a special stockholders' meeting, in
connection with possible future stock dividends or stock splits, equity
financings, future opportunities for expanding the business through investments
or acquisitions, management incentive and employee benefit plans and for other
general corporate purposes.
Authorized but unissued shares of the Company's Common Stock may be issued
at such times, for such purposes and for such consideration as the Board may
determine to be appropriate without further authority from the Company's
stockholders, except as otherwise required by applicable law or stock exchange
policies.
The increase in authorized Common Stock will not have any immediate effect
on the rights of existing stockholders. However, the Board will have the
authority to issue authorized Common Stock without requiring future stockholder
approval of such issuances, except as may be required by applicable law or
exchange regulations. To the extent that the additional authorized shares are
issued in the future, they will decrease the existing stockholders' percentage
equity ownership and, depending upon the price at which they are issued, could
be dilutive to the existing stockholders. The holders of Common Stock have no
preemptive rights.
20
<PAGE>
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could have the effect of delaying or
preventing a change in control of the Company without further action by the
stockholders. Shares of authorized and unissued Common Stock could (within the
limits imposed by applicable law) be issued in one or more transactions which
would make a change in control of the Company more difficult, and therefore less
likely. Any such issuance of additional stock could have the effect of diluting
the earnings per share and book value per share of outstanding shares of Common
Stock, and such additional shares could be used to dilute the stock ownership or
voting rights of a person seeking to obtain control of the Company. The Company
has previously adopted certain measures that may have the effect of helping to
resist an unsolicited takeover attempt.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION.
PROPOSAL NO. 4
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company is asking the stockholders to ratify the appointment of KPMG
Peat Marwick LLP as the Company's independent public accountants for the year
ending December 31, 1997. In the event the stockholders fail to ratify the
appointment, the Board will reconsider its selection. Even if the appointment is
ratified, the Board, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
feels that such a change would be in the Company's and its stockholders' best
interests.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF KPMG PEAT MARWICK LLP TO SERVE AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1997.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The members of the Board, the executive officers of the Company and persons
who hold more than 10% of the Company's outstanding Common Stock are subject to
the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, as amended, which require them to file reports with respect to their
ownership of the Common Stock and their transactions in such Common Stock. Based
upon (i) the copies of Section 16(a) reports which the Company received from
such persons for their 1996 fiscal year transactions in the Common Stock and
their Common Stock holdings and (ii) the written representations received from
one ore more of such persons that no annual Form 5 reports were required to be
filed by them for the 1996 fiscal year, the Company believes that all reporting
requirements under Section 16(a) for such fiscal year were met in a timely
manner by its executive officers, Board members and greater than ten-percent
shareholders, except that the following individuals filed the Form 3 late:
Tatsuya Enomoto and Eric A. Brill. The following individual filed the Form 5
late, on which one transaction was reported late: Daniel Page. The following
individual filed the Form 5 late, on which ten transactions were reported late:
Bruce Eastman. The following transactions were not timely reported: Y. Eric Cho
reported one transaction late; Chi-Ping Hsu reported four transactions late;
John P. Huyett reported two transactions late; Robert C. Kagle reported one
transaction late; Yuh-Zen Liao reported one transaction late; and Stephen Wuu
reported one transaction late.
21
<PAGE>
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S FORM 10-K REPORT FOR 1996, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO AVANT! CORPORATION,
1208 EAST ARQUES AVENUE, SUNNYVALE, CALIFORNIA 94086, ATTN: JOHN P. HUYETT,
CHIEF FINANCIAL OFFICER.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1998 Annual
Meeting that are eligible for inclusion in the Company's proxy statement and
related proxy materials for that meeting under the applicable rules of the
Securities and Exchange Commission must be received by the Company not later
than December 17, 1997 in order to be included. Such stockholder proposals
should be addressed to Avant! Corporation, 1208 East Arques Avenue, Sunnyvale,
California 94086, Attn: John P. Huyett, Chief Financial Officer.
OTHER MATTERS
The Board knows of no other matters to be presented for stockholder action
at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
Eric A. Brill
Secretary
Sunnyvale, California
April 17, 1997
22
<PAGE>
AVANT!, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to
promote the interests of Avant!, Inc., a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity
programs:
(i) the Discretionary Option Grant Program
under which eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of
Common Stock,
(ii) the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan
Administrator, be issued shares of Common Stock directly,
either through the immediate purchase of such shares or as a
bonus for services rendered to the Corporation (or any Parent
or Subsidiary), and
(iii) the Automatic Option Grant Program
under which Eligible Directors shall automatically receive
option grants at periodic intervals to purchase shares of
Common Stock.
B. The provisions of Articles One and Five shall apply to all
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to Section 16 Insiders. No non-employee Board member shall
be eligible to serve on the Primary Committee if such individual has, during the
twelve (12)-month period immediately preceding the date of his or her
appointment to the Committee or (if shorter) the period commencing with the
Section 12(g)
<PAGE>
Registration Date and ending with the date of his or her appointment to the
Primary Committee, received an option grant or direct stock issuance under the
Plan or any stock option, stock appreciation, stock bonus or other stock plan of
the Corporation (or any Parent or Subsidiary), other than pursuant to the
Automatic Option Grant Program.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
these programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer these programs with respect to all such persons. The members of the
Secondary Committee may be individuals who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and shall be
subject to removal by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
D. The Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant Program shall
be self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
2
<PAGE>
(ii) non-employee members of the Board (other
than those serving as members of the Primary Committee) or the
board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any
Parent or Subsidiary).
B. The Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
to be paid by the Participant for such shares.
C. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant
Program or to effect stock issuances in accordance with the Stock Issuance
Program.
D. The individuals eligible to receive option grants under the
Automatic Option Grant Program shall be (i) those individuals who are serving as
non-employee Board members on the Effective Date or who are first elected or
appointed as non-employee Board members after such date, whether through
appointment by the Board or election by the Corporation's stockholders, and (ii)
those individuals who continue to serve as non-employee Board members after one
or more Annual Stockholders Meetings held after the Effective Date. A
non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an
option grant under the Automatic Option Grant Program on the Effective Date or
at the time he or she first becomes a non-employee Board member, but such
individual shall be eligible to receive periodic option grants under the
Automatic Option Grant Program upon his or her continued service as a
non-employee Board member following one or more Annual Stockholders Meetings.
3
<PAGE>
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 4,292,333
shares.1
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of each
calendar year during the term of the Plan, beginning with the 1997 calendar
year, by an amount equal to one percent (1%) of the shares of Common Stock
outstanding on December 31 of the immediately preceding calendar year. No
Incentive Options may be granted on the basis of the additional shares of Common
Stock resulting from such annual increases.
C. No one person participating in the Plan may receive options
and direct stock issuances for more than 1,000,000 shares of Common Stock in the
aggregate each calendar year over the term of the Plan.
D. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
canceled in accordance with the cancellation-regrant provisions of Article Two.
All shares issued under the Plan (including shares issued upon exercise of
options incorporated from the Predecessor Plan), whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise price of an option under the Plan (including any option
incorporated from the Predecessor Plan) be paid with shares of Common Stock or
should shares of Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option or the vesting of a stock issuance under the
Plan, then the number of shares of Common Stock available for issuance under the
Plan shall be reduced by the gross number of shares for which the option is
exercised or which vest under the stock issuance, and not by the net number of
shares of Common Stock issued to the holder of such option or stock issuance.
E. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the maximum number and/or class of securities for
which the
- ---------------------
1 Such authorized share reserve includes (i) an additional increase of 750,000
shares authorized by the Board under the Plan on April 10, 1996 and approved by
the stockholders at the 1996 Annual Stockholders Meeting, (ii) 226,758 shares
added on January 1, 1997 pursuant to Article One, Section V.B, and (iii) an
additional increase of 1,000,000 shares authorized by the Board under the Plan
on April 11, 1997, subject to stockholder approval at the 1997 Annual
Stockholders Meeting.
4
<PAGE>
share reserve is to increase automatically each year, (iii) the number and/or
class of securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances over the term
of the Plan, (iv) the number and/or class of securities for which automatic
option grants are to be subsequently made per Eligible Director under the
Automatic Option Grant Program and (v) the number and/or class of securities and
the exercise price per share in effect under each outstanding option (including
any option incorporated from the Predecessor Plan) in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive.
5
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the
Plan Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised
for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently
provide irrevocable written instructions to (a) a
Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state
and local income and employment taxes required to be withheld
by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale transaction.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
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C. Effect of Termination of Service.
1. The following provisions shall govern the exercise
of any options held by the Optionee at the time of cessation of Service or
death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the
documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in
part by the Optionee at the time of death may be subsequently
exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.
(iii) During the applicable post-Service
exercise period, the option may not be exercised in the
aggregate for more than the number of vested shares for which
the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon
the Optionee's cessation of Service, terminate and cease to be
outstanding to the extent it is not exercisable for vested
shares on the date of such cessation of Service.
(iv) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held
by the Optionee shall terminate immediately and cease to be
outstanding.
(v) In the event of a Corporate Transaction,
the provisions of Section III of this Article Two shall govern
the period for which the outstanding options are to remain
exercisable following the Optionee's cessation of Service and
shall supersede any provisions to the contrary in this
section.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the
option is to remain exercisable following the Optionee's
cessation of Service from the period otherwise in effect for
that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or
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(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only
with respect to the number of vested shares of Common Stock
for which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one
or more additional installments in which the Optionee would
have vested under the option had the Optionee continued in
Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of
the Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in accordance with the terms of a Qualified Domestic Relations
Order. The assigned option may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned option (or portion
thereof) shall be the same as those in effect for the option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more
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options granted to any Employee under the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities
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available for issuance under the Plan on both an aggregate and per Optionee
basis following the consummation of such Corporate Transaction and (ii) the
exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same.
E. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.
F. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of one
or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of Common
Stock subject to those rights) upon the occurrence of a Change in Control or
(ii) condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent Involuntary Termination of
the Optionee's Service within a specified period following the effective date of
such Change in Control. Any options accelerated in connection with a Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
G. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar limitation is not exceeded. To the extent such dollar limitation
is exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.
H. The grant of options under the Discretionary Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program (including outstanding options incorporated from the
Predecessor Plan) and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new option grant
date.
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V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority
to grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the
right, exercisable upon such terms as the Plan Administrator
may establish, to elect between the exercise of the underlying
option for shares of Common Stock and the surrender of that
option in exchange for a distribution from the Corporation in
an amount equal to the excess of (A) the Fair Market Value (on
the option surrender date) of the number of shares in which
the Optionee is at the time vested under the surrendered
option (or surrendered portion thereof) over (B) the aggregate
exercise price payable for such shares.
(ii) No such option surrender shall be
effective unless it is approved by the Plan Administrator. If
the surrender is so approved, then the distribution to which
the Optionee shall be entitled may be made in shares of Common
Stock valued at Fair Market Value on the option surrender
date, in cash, or partly in shares and partly in cash, as the
Plan Administrator shall in its sole discretion deem
appropriate.
(iii) If the surrender of an option is
rejected by the Plan Administrator, then the Optionee shall
retain whatever rights the Optionee had under the surrendered
option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior
to the later of (A) five (5) business days after the receipt
of the rejection notice or (B) the last day on which the
option is otherwise exercisable in accordance with the terms
of the documents evidencing such option, but in no event may
such rights be exercised more than ten (10) years after the
option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be
granted limited stock appreciation rights with respect to
their outstanding options.
(ii) Upon the occurrence of a Hostile
Take-Over, each such individual holding one or more options
with such a limited stock appreciation right in effect for at
least six (6) months shall have the unconditional right
(exercisable for a thirty (30)-day period following such
Hostile Take-Over) to surrender each such option to the
Corporation, to the extent the option is at the time
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<PAGE>
exercisable for vested shares of Common Stock. In return for
the surrendered option, the Optionee shall receive a cash
distribution from the Corporation in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common
Stock which are at the time vested under each surrendered
option (or surrendered portion thereof) over (B) the aggregate
exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the option
surrender date.
(iii) Neither the approval of the Plan
Administrator nor the consent of the Board shall be required
in connection with such option surrender and cash
distribution.
(iv) The balance of the option (if any) shall
continue in full force and effect in accordance with the
documents evidencing such option.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price.
1. The purchase price per share shall be fixed by the
Plan Administrator, but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the stock issuance date.
2. Subject to the provisions of Section I of Article
Five, shares of Common Stock may be issued under the Stock Issuance Program for
one or both of the following items of consideration which the Plan Administrator
may deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the
Corporation (or any Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the
shares are to vest,
(iii) the interval or intervals (if any)
which are to lapse between installments, and
(iv) the effect which death, Permanent
Disability or other event designated by the Plan Administrator
is to have upon the vesting schedule,
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shall be determined by the Plan Administrator and incorporated
into the Stock Issuance Agreement.
2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder rights
with respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non-completion of the vesting
schedule applicable to such shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction, except to the extent (i) those repurchase
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed in the Stock Issuance Agreement.
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B. Any repurchase rights that are assigned in the Corporate
Transaction shall automatically terminate, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
the Participant's Service should subsequently terminate by reason of an
Involuntary Termination within eighteen (18) months following the effective date
of such Corporate Transaction.
C. The Plan Administrator shall have the discretion,
exercisable either at the time the unvested shares are issued or at any time
while the Corporation's repurchase right remains outstanding, to (i) provide for
the automatic termination of one or more outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those rights upon the
occurrence of a Change in Control or (ii) condition any such accelerated vesting
upon the subsequent Involuntary Termination of the Participant's Service within
a specified period following the effective date of such Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
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ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates
specified below:
1. Each Eligible Director who is a non-employee Board
member on the Effective Date and each Eligible Director who is first elected or
appointed as a non-employee Board member after such date shall automatically be
granted, on the Effective Date or on the date of such initial election or
appointment (as the case may be), a Non-Statutory Option to purchase 20,000
shares of Common Stock.
2. On the date of each Annual Stockholders Meeting,
beginning with the 1996 Annual Meeting, each individual who is to continue to
serve as an Eligible Director after such meeting, shall automatically be
granted, whether or not such individual is standing for re-election as a Board
member at that Annual Meeting, a Non-Statutory Option to purchase an additional
5,000 shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six (6) months prior to the date of such
Annual Meeting. There shall be no limit on the number of such 5,000-share option
grants any one Eligible Director may receive over his or her period of Board
service.
B. Exercise Price.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more
of the alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.
C. Option Term. Each option shall have a term of ten (10)
years measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each initial grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of four (4) equal and
successive annual installments over the Optionee's period of continued service
as a Board member, with the first such installment to vest upon the Optionee's
completion of one (1) year of Board service measured from the option grant date.
Each annual grant shall vest, and the Corporation's
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repurchase right shall lapse, upon the Optionee's completion of one (1) year of
Board service measured from the option grant date.
E. Effect of Termination of Board Service. The following
provisions shall govern the exercise of any options held by the Optionee at the
time the Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of
Optionee's death, the personal representative of the
Optionee's estate or the person or persons to whom the option
is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution) shall
have a twelve (12)-month period following the date of such
cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise
period, the option may not be exercised in the aggregate for
more than the number of vested shares of Common Stock for
which the option is exercisable at the time of the Optionee's
cessation of Board service.
(iii) Should the Optionee cease to serve as a
Board member by reason of death or Permanent Disability, then
all shares at the time subject to the option shall immediately
vest so that such option may, during the twelve (12)-month
exercise period following such cessation of Board service, be
exercised for all or any portion of such shares as
fully-vested shares of Common Stock.
(iv) In no event shall the option remain
exercisable after the expiration of the option term. Upon the
expiration of the twelve (12)-month exercise period or (if
earlier) upon the expiration of the option term, the option
shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of
Board service, terminate and cease to be outstanding to the
extent it is not exercisable for vested shares on the date of
such cessation of Board service.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
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B. In connection with any Change in Control, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Each such option shall remain exercisable
for such fully-vested option shares until the expiration or sooner termination
of the option term or the surrender of the option in connection with a Hostile
Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each automatic option held by him or her for a period of at least six (6)
months. The Optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
shares of Common Stock at the time subject to the surrendered option (whether or
not the Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board shall be required in connection
with such option surrender and cash distribution.
D. The grant of options under the Automatic Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program,
together with the option grants outstanding thereunder, may not be amended at
intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations.
IV. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
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ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant Program or the purchase price for shares issued under the Stock Issuance
Program by delivering a promissory note payable in one or more installments. The
terms of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
B. The Plan Administrator may, in its discretion, determine
that one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or stock appreciation rights or upon the
issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan (other than the options granted or the shares issued under the
Automatic Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
(i) Stock Withholding: The election to have
the Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such Non-Statutory
Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver
to the Corporation, at the time the Non-Statutory Option is
exercised or the shares vest, one or more shares of Common
Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting
triggering the Taxes)
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with an aggregate Fair Market Value equal to the percentage of
the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan became effective on the Effective Date and the
initial options under the Automatic Option Grant Program were made to the
Eligible Directors at that time. The Plan serves as the successor to the
Predecessor Plan, and no further option grants shall be made under the
Predecessor Plan after the Effective Date. All options outstanding under the
Predecessor Plan as of such date were incorporated into the Plan and treated as
outstanding options under the Plan, upon approval of the Plan by the
Corporation's stockholders. However, each outstanding option so incorporated
shall continue to be governed solely by the terms of the documents evidencing
such option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.
B. One or more provisions of the Plan including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
C. On April 10, 1996, the Board approved an increase in the
number of shares issuable under the Plan by 750,000 shares to 3,065,575 shares
and the Corporation's stockholders approved the amendment at the 1996 Annual
Stockholders Meeting. On April 11, 1997, the Board amended the Plan to increase
the number of shares issuable under the Plan by 1,000,000 shares to 4,292,333
shares, to change the per person limit to a calendar year limit in lieu of a
limit over the term of the Plan, and to effect certain other changes, subject to
approval by the Corporation's stockholders at the 1997 Annual Stockholders
Meeting. No option granted on the basis of the 1,000,000-share increase may be
exercised and no stock may be issued on the basis of such increase until such
stockholder approval has been obtained. Should stockholder approval not be
obtained at the 1997 Annual Meeting, then any option granted on the basis of
such increase shall immediately expire and no further options may be granted on
the basis of such increase. Subject to the foregoing restrictions, options may
be granted and stock may be awarded on the basis of such increase at any time
after the Board's approval of such increase. The provisions in the 1997
restatement of the Plan shall apply only to options and stock awards granted
under the Plan from and after the date of Board approval of such restatement.
All options and stock awards granted under the Plan immediately prior to the
1997 restatement shall continue to be governed by the terms and conditions of
the Plan (and the instrument evidencing each such option or stock award) as in
effect on the date each such option or stock award was previously granted, and
nothing in the 1997 amendment shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such options or stock awards with
respect to the acquisition of shares of Common Stock thereunder.
B. The Plan shall terminate upon the earliest of (i) March 31,
2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the issuance
of shares (whether vested or unvested) under the Plan or (iii)
20
<PAGE>
the termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all options and unvested stock
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the documents evidencing such
options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, (i) no
such amendment or modification shall adversely affect the rights and obligations
with respect to options, stock appreciation rights or unvested stock issuances
at the time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification, and (ii) any amendment made to the
Automatic Option Grant Program (or any options outstanding thereunder) shall be
in compliance with the limitations of that program. In addition, the Board shall
not, without the approval of the Corporation's stockholders, (i) materially
increase the maximum number of shares issuable under the Plan, the number of
shares for which options may be granted under the Automatic Option Grant Program
or the maximum number of shares for which any one person may be granted options,
separately exercisable stock appreciation rights and direct stock issuances in
the aggregate over the term of the Plan, except for permissible adjustments in
the event of certain changes in the Corporation's capitalization or (ii)
materially modify the eligibility requirements for Plan participation.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and shares of Common Stock may be
issued under the Stock Issuance Program that are in each instance in excess of
the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under those programs are held in escrow until
there is obtained stockholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such stockholder approval is not obtained within twelve (12) months after the
date the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically canceled and cease to
be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
21
<PAGE>
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
or stock appreciation right under the Plan and the issuance of any shares of
Common Stock (i) upon the exercise of any option or stock appreciation right or
(ii) under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
22
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic
option grant program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:
(i) the acquisition, directly or indirectly,
by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to
accept, or
(ii) a change in the composition of the Board
over a period of thirty-six (36) consecutive months or less
such that a majority of the Board members ceases, by reason of
one or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members
during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time
the Board approved such election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as
amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which
securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different
from the persons holding those immediately prior to such
transaction; or
(ii) the sale, transfer or other disposition
of all or substantially all of the Corporation's assets in
complete liquidation or dissolution of the Corporation.
<PAGE>
G. Corporation shall mean Avant!, Inc., a Delaware
corporation.
H. Discretionary Option Grant Program shall mean the
discretionary option grant program in effect under the Plan.
I. Domestic Relations Order shall mean any judgment, decree or
order (including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
J. Effective Date shall mean the date on which the
Underwriting Agreement is executed and the initial public offering price of the
Common Stock is established.
K. Eligible Director shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Article One.
L. Employee shall mean an individual who is in the employ of
the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
M. Exercise Date shall mean the date on which the Corporation
shall have received written notice of the option exercise.
N. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded
on the Nasdaq National Market, then the Fair Market Value
shall be the closing price per share of Common Stock on the
date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing price
for the Common Stock on the date in question, then the Fair
Market Value shall be the closing price on the last preceding
date for which such quotation exists.
(ii) If the Common Stock is at the time
listed on any Stock Exchange, then the Fair Market Value shall
be the closing selling price per share of Common Stock on the
date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock,
as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
<PAGE>
(iii) For purposes of option grants made on
the Effective Date, the Fair Market Value shall be deemed to
be equal to the initial public offering price per share of
Common Stock established at the time the Underwriting
Agreement is executed.
O. Hostile Take-Over shall mean a change in ownership of the
Corporation effected through the following transaction:
(i) the acquisition, directly or indirectly,
by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to
accept, and
(ii) more than fifty percent (50%) of the
securities so acquired are accepted from persons other than
Section 16 Insiders.
P. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
Q. Involuntary Termination shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal
or discharge by the Corporation for reasons other than
Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the
Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any
non-discretionary and objective-standard incentive payment or
bonus award) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without
the individual's consent.
R. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or
<PAGE>
Subsidiary) may consider as grounds for the dismissal or discharge of any
Optionee, Participant or other person in the Service of the Corporation (or any
Parent or Subsidiary).
S. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
T. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
U. Optionee shall mean any person to whom an option is granted
under the Discretionary Option Grant or Automatic Option Grant Program.
V. Parent shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
W. Participant shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
X. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for the purposes of the Automatic Option
Grant Program, Permanent Disability or Permanently Disabled shall mean the
inability of the non-employee Board member to perform his or her usual duties as
a Board member by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.
Y. Plan shall mean the Corporation's 1995 Stock Option/Stock
Issuance Plan, as set forth in this document.
Z. Plan Administrator shall mean the particular entity,
whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to one or more classes of eligible persons, to the extent
such entity is carrying out its administrative functions under those programs
with respect to the persons under its jurisdiction.
AA. Predecessor Plan shall mean the Corporation's existing
1993 Stock Option/Stock Issuance Plan.
BB. Primary Committee shall mean the committee of two (2) or
more non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
<PAGE>
CC. Qualified Domestic Relations Order shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.
DD. Secondary Committee shall mean a committee of one (1) or
more Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
EE. Section 16 Insider shall mean an officer or director of
the Corporation subject to the short-swing profit liabilities of Section 16 of
the 1934 Act.
FF. Section 12(g) Registration Date shall mean the first date
on which the Common Stock is registered under Section 12(g) of the 1934 Act.
GG. Service shall mean the provision of services to the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
HH. Stock Exchange shall mean either the American Stock
Exchange or the New York Stock Exchange.
II. Stock Issuance Agreement shall mean the agreement entered
into by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
JJ. Stock Issuance Program shall mean the stock issuance
program in effect under the Plan.
KK. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
LL. Take-Over Price shall mean the greater of (i) the Fair
Market Value per share of Common Stock on the date the option is surrendered to
the Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Take-Over. However, if the surrendered option is an Incentive
Option, the Take-Over Price shall not exceed the clause (i) price per share.
MM. Taxes shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of such holder's
options or the vesting of his or her shares.
<PAGE>
NN. 10% Stockholder shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).
OO. Underwriting Agreement shall mean the agreement between
the Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
<PAGE>
APPENDIX A
P AVANT! CORPORATION
R
O ANNUAL MEETING OF STOCKHOLDERS, MAY 15, 1997
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AVANT! CORPORATION
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held on May 15, 1997 and the
Proxy Statement and appoints Gerald C. Hsu and John P. Huyett, and each of them,
the Proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock of Avant! Corporation (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders to be held at the
Company's principal executive offices at 1208 East Arques Avenue, Sunnyvale,
California on Thursday, May 15, 1997, at 4:00 p.m. local time and at any
adjournment or postponement thereof (the "Annual Meeting"), with the same force
and effect as the undersigned might or could do if personally present thereat.
The shares represented by this Proxy shall be voted in the manner set forth on
the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE>
[X] Please mark votes
as in example
<TABLE>
The Board of Directors recommends a vote FOR each of the nominess listed below
and a vote FOR the other proposals. This Proxy, when properly executed, will be
voted as specified below. This Proxy will be voted FOR the election of the
nominees listed below and FOR the other proposals if no specification is made.
<CAPTION>
<S> <C> <C> <C> <C>
1. To elect the following directors to serve for a term 2. To approve an amendment to the FOR AGAINST ABSTAIN
ending upon the 1998 Annual Meeting of Stockholders Company's 1995 Stock Option/Stock
or until their successors are elected and qualified: Issuance Plan to increase the [ ] [ ] [ ]
number of shares Common Stock
authorized for issuance thereunder
by 1,000,000 shares.
Nominees: Gerald C. Hsu, Y. Eric Cho, Eric A. Brill
Tench Coxe and Tatsuya Enomoto
For 3. To approve an amendment to the FOR AGAINST ABSTAIN
All [ ] [ ] Withhold Company's Certificate of Incorporation [ ] [ ] [ ]
Nominees Authority increasing the number of shares of the
To Vote For Company's Common Stock reserve for
All Nominees issuance thereunder by 25,000,000 shares.
[ ]
---------------------------------------- 4. To ratify the appointment of KPMG Peat FOR AGAINST ABSTAIN
For all nominees, except for any nominee(s) Marwick LLP as the Company's independent [ ] [ ] [ ]
whose name is written in the space provided auditors for the fiscal year ending
above. December 31, 1997.
5. To transact such other business as may properly come before the
Annual Meeting and at any adjournment or postponement thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT.
Please sign your name.
Signature: Date:
--------------------- -------
Signature: Date:
--------------------- -------
</TABLE>
