<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Avant! Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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[LOGO]
AVANT! CORPORATION
46871 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
April 9, 1998
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 46871 Bayside Parkway, Fremont, California 94538,
on Friday, May 15, 1998, at 2:00 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,
/s/ Gerald C. Hsu
Gerald C. Hsu
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF
THE BOARD OF DIRECTORS
<PAGE>
AVANT! CORPORATION
46871 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1998
---------------------
The Annual Meeting of Stockholders (the "Annual Meeting") of Avant!
Corporation (the "Company") will be held at the Company's principal executive
offices at 46871 Bayside Parkway, Fremont, California 94538, on Friday, May 15,
1998, at 2:00 p.m. for the following purposes:
1. To elect five members of the Board of Directors of the Company. If
the proposed amendment to the Company's Restated Certificate of
Incorporation and Amended and Restated Bylaws providing for a classified
Board of Directors (Proposal No. 2 below) is adopted, the five directors
will be elected to a classified Board of Directors, with two directors being
elected for a one-year term, two directors being elected for a two-year term
and one director being elected for a three-year term. If Proposal No. 2 is
not adopted, all five directors will be elected for a one-year term;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation and Amended and Restated Bylaws providing for the
classification of the Board of Directors into three classes, with members of
each class serving for staggered terms;
3. 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 provide for
automatic increases in future years;
4. To approve an amendment to the Company's Employee Stock Purchase
Plan to increase the number of shares of the Company's Common Stock
available for issuance thereunder by 250,000 shares and to provide for
automatic increases in future years;
5. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for the year ending December 31, 1998; and
6. 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 3, 1998 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 46871 Bayside
Parkway, Fremont, California, during ordinary business hours for the ten-day
period prior to the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Eric A. Brill
---------------------------------------------
Eric A. Brill
SECRETARY
Fremont, California
April 9, 1998
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.
<PAGE>
AVANT! CORPORATION
46871 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1998
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 46871 Bayside
Parkway, Fremont, California 94538, on Friday, May 15, 1998, at 2:00 p.m., and
at any adjournment or postponement of the Annual Meeting. These proxy materials
were first mailed to stockholders on or about April 9, 1998.
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 3, 1998, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 32,485,773
shares of Common Stock outstanding. Each stockholder of record on April 3, 1998
is entitled to one vote for each share of Common Stock held by such stockholder
on April 3, 1998. 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. A properly executed proxy marked "WITHHOLD
AUTHORITY" with respect to the election of one or more directors will not be
voted with respect to the director or directors indicated, although it will be
counted for purposes of determining whether there is a quorum. 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 adoption of the amendment to the Company's
Restated Certificate of Incorporation and Amended and Restated Bylaws 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 3. 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
<PAGE>
same effect as votes against the proposal. Broker non-votes will not be treated
as entitled to vote on the proposal and thus will have no effect on the outcome
of the vote on the proposal.
PROPOSAL 4. Approval of the amendment to the Company's Employee Stock
Purchase 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 be treated as
not entitled to vote on this matter and thus will have no effect on the outcome
of the vote on the proposal.
PROPOSAL 5. Ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent public accountants for the year ending December 31, 1998
requires the affirmative vote of a majority of those shares present in person,
or represented by proxy, and voted 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. Abstentions and broker non-votes
will not be counted as having been voted 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, No. 4 and No. 5 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, you must 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 and such notice of
revocation or proxy must be received by the Secretary of the Company 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 Morrow & Co., Inc. ("Morrow")
to assist in the solicitation of proxies. Morrow will receive a fee for such
services of approximately $10,000 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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MATTERS TO BE CONSIDERED AT ANNUAL MEETING
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, 1998, 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,
except that, as discussed below, if Proposal No. 2 for the classification of the
Board of Directors is adopted, each such director will serve for the term
corresponding to the class into which such director was elected.
If the proposed amendment to the Company's Restated Certificate of
Incorporation and Amended and Restated Bylaws described below in Proposal No. 2
providing for the classification of the Board of Directors into three classes is
approved at the Annual Meeting by the Company's stockholders, the five nominees
listed below will be divided into three classes as follows: two Class I
Directors (Messrs. Brill and Andrews) will be elected for a one-year term
expiring at the 1999 Annual Meeting of Stockholders, two Class II Directors
(Messrs. Chimura and St. Clair) will be elected for a two-year term expiring at
the 2000 Annual Meeting of Stockholders and one Class III Director (Mr. Hsu)
will be elected for a three-year term expiring at the 2001 Annual Meeting of
Stockholders, in all cases subject to the election and qualification of their
successors and to their earlier death, resignation or removal. If the proposed
amendment to the Company's Restated Certificate of Incorporation and Amended and
Restated Bylaws is not adopted, all five directors will be elected for a
one-year term expiring at the 1999 Annual Meeting of Stockholders, subject to
the election and qualification of their successors and to their earlier death,
resignation or removal. See "Proposal No. 2--Approval of Amendment of the Avant!
Restated Certificate of Incorporation and the Avant! Amended and Restated Bylaws
Providing for a Classified Board of Directors."
<TABLE>
<CAPTION>
NOMINEES AGE POSITIONS AND OFFICES HELD WITH THE COMPANY
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Gerald C. Hsu...................... 51 President, Chief Executive Officer and Chairman of the Board of
Directors
Eric A. Brill (1).................. 47 Director and Secretary
Charles L. St. Clair............... 67 Director
Moriyuki Chimura................... 50 Director
James Andrews...................... 63 Director
</TABLE>
- ------------------------
(1) Member of Audit 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., 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 M.S. in Oceanic 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. On
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<PAGE>
April 11, 1997, the Santa Clara District Attorney filed a criminal complaint
alleging felony level offenses against, among others, Mr. Hsu, the Company and
certain other of the Company's employees for allegedly violating various
California Penal Code sections relating to the theft of trade secrets. Mr. Hsu
has pleaded not guilty to such complaint and is awaiting further proceedings.
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 maintained his own practice since 1993, and previously practiced with the
San Francisco law firm of Farella, Braun & Martel, LLP. Mr. Brill holds a B.S.
in History from Cleveland State University and a J.D. from the Harvard Law
School.
MR. ST. CLAIR served the Company as Director of Administration from June
1996 to April 1997 and has served the Company as a consultant since April 1997.
He has been a director of the Company since September 1997. From February 1995
to March 1996, Mr. St. Clair was employed by Interkiln Corporation of America as
Director, Southern Africa Operations. From January 1993 to January 1995, he was
employed by Deloitte & Touche as an Industrial Advisor to the Botswana
Development Corporation Ltd. Mr. St. Clair holds a B.S. in Economics and
Management from Arizona State University and a B.F.T., Latin America from the
American Graduate School for International Management.
MR. CHIMURA has served as General Manager of Galax!, Inc., a subsidiary of
the Company ("Galax!"), since April 1998 and has served as a director of the
Company since March 17, 1998. Prior to joining Galax!, Mr. Chimura served as
President of Panasonic Semiconductor Development Company, a division of
Matsushita Semiconductor Corporation of America and a developer of
microcontroller systems and ASIC products, since April 1997. From April 1992 to
March 1997, Mr. Chimura served as General Manager of the Semiconductor Group of
Matsushita Electronics Corporation. From April 1987 to March 1992, he served as
Manager of the Semiconductor Group Development Promotion Center of Matsushita
Electronics Corporation. Mr. Chimura holds an M.S. in Electrical Engineering
from Gifu University.
MR. ANDREWS has served for over 25 years as a professor of mechanical
engineering and exercise science at the University of Iowa, Iowa City, Iowa. He
has served as a director of the Company since April 1, 1998. Professor Andrews
holds his B.A. and M.S. in Mechanical Engineering from the University of Iowa,
Iowa City.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the year ended December 31, 1997, the Board of Directors held seven
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 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.
On March 17, 1998, the Board of Directors approved an Action by Written Consent
increasing the authorized number of members of the Board of Directors from five
to seven members and electing Moriyuki Chimura to the Board of Directors. On
March 31, 1998, Y. Eric Cho resigned from the Board of Directors. On April 1,
1998 the Board of Directors approved an Action by Written Consent electing James
Andrews to the Board of Directors.
During the year ended December 31, 1997, the Audit Committee of the Board of
Directors held two meetings. 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 were Messrs. Brill and Coxe. As Mr. Coxe will not stand for
reelection to the Board of Directors at the Annual Meeting, it is anticipated
that Mr. Andrews, if elected as a member of the Board of Directors at the Annual
Meeting, will be appointed to the Audit Committee.
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During the year ended December 31, 1997, the Compensation Committee of the
Board of Directors met seven times. The Compensation Committee is authorized to
administer the 1995 Stock Option/Stock Issuance Plan, reviews the performance
and sets the compensation of the Chief Executive Officer of the Company,
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 were Mr. Coxe and Dr. Tatsuo Kawasaki. Dr. Kawasaki
served as a member of the Compensation Committee from July 10, 1997, the date of
his election as a member of the Board of Directors, to December 20, 1997, the
date of his resignation from the Board of Directors.
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 Board members 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. Under the Automatic Option Grant Program, each
individual who first becomes a non-employee Board member 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, provided such individual has
not been in the prior employ of the Company. On July 10, 1997, Dr. Kawasaki was
granted an option to purchase 20,000 shares of Common Stock at an exercise price
of $31.75 per share under the Automatic Option Grant Program. In addition, at
each Annual Stockholders Meeting subsequent to the 1996 Annual Stockholders
Meeting, each individual who continues to serve and has served as a non-employee
Board member 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
15, 1997, Mr. Coxe received an additional option grant to purchase 5,000 shares
of Common Stock at an exercise price of $21.25 per share. 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. 3--Amendment of the 1995 Stock Option/Stock Issuance Plan."
Non-employee Board members 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
APPROVAL OF AMENDMENT OF THE AVANT!
RESTATED CERTIFICATE OF INCORPORATION AND THE
AVANT! AMENDED AND RESTATED BYLAWS
PROVIDING FOR A CLASSIFIED BOARD OF DIRECTORS
On February 27, 1998, the Board of Directors unanimously approved a proposal
to amend the Company's Restated Certificate of Incorporation and the Company's
Amended and Restated Bylaws to provide for the institution of a classified Board
of Directors. The full texts of the proposed amendment to the Company's Restated
Certificate of Incorporation and the proposed amendment to the Company's
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Amended and Restated Bylaws are set forth in Appendix A and Appendix B,
respectively, to this Proxy Statement and the following description is qualified
in its entirety by reference thereto. If the proposed amendment is approved, the
five directors elected to the Board of Directors will be divided into three
classes as provided under "Proposal No. 1--Election of Directors."
Delaware law authorizes provisions in a corporation's certificate of
incorporation that provide for a classified board of directors. The Board of
Directors believes that the proposed amendment instituting a classified Board of
Directors is in the best interest of the Company and its stockholders and
therefore recommends a vote for this proposal.
The proposed amendment to the Company's Restated Certificate of
Incorporation and conforming amendment to the Amended and Restated Bylaws
provide that the Company's Board of Directors will be divided into three
classes, as nearly equal in number as possible. One class would hold office
initially for a term expiring at the Annual Meeting of Stockholders to be held
in 1999; another class would hold office initially for a term expiring at the
Annual Meeting of Stockholders to be held in 2000; and another class would hold
office initially for a term expiring at the Annual Meeting of Stockholders to be
held in 2001. At each Annual Meeting of Stockholders following this initial
classification and election, the successors to the class of directors whose
terms expire at that meeting would be elected for a term of office to expire at
the third succeeding Annual Meeting of Stockholders after their election and
until their successors have been duly elected and qualified. Vacancies which
occur during the term may be filled by the Board of Directors to serve for the
remainder of the full term. Moreover, the proposed amendment provides that the
directors of the classified Board may be removed only for cause, which, unless
otherwise provided for in a corporation's certificate of incorporation, is
required under Delaware law, and that the affirmative vote of the holders of at
least 80% of the voting power of all of the shares of the Company entitled to
vote for the election of directors shall be required to alter, amend or adopt
any provisions inconsistent with the classified Board of Directors. See
"Proposal No. 1--Election of Directors" for the initial composition of each
class of directors and each director's initial term, if this Proposal No. 2 is
adopted.
The Board believes that classification of the Board of Directors of the
Company will help lend continuity and stability to the management of the
Company. Following adoption of the classified board structure, at any given time
at least approximately two-thirds of the members of the Board will generally
have had experience as directors of the Company. The Board of Directors believes
that this will facilitate long-range business planning, strategic planning and
policy making and will have a positive impact on customer and employee loyalty.
In particular, the Company believes that a classified Board of Directors will
permit the Company to more effectively represent the interests of all of its
stockholders in a variety of situations, including responding to circumstances
which might be created by demands or actions of a single stockholder or
stockholder group, than might be the case if the Board of Directors were not
classified and a measure of continuity from year to year were not thereby
assured. In order to ensure that a classified Board of Directors, if adopted,
cannot be easily removed and a non-classified Board of Directors reinstated, the
proposed amendment to the Company's Restated Certificate of Incorporation and
Amended and Restated Bylaws also includes a provision whereby an 80% affirmative
vote of the outstanding voting shares of the Company is required in order to
amend, alter or adopt any provisions inconsistent with the classified Board of
Directors. Additionally, as provided for under Delaware law, the proposed
amendment requires that directors may be removed by stockholders only for cause,
which affords protection for directors who were intended, as members of the
classified Board of Directors, to serve for three-year terms in order to help
lend continuity and stability to the management of the Company. The proposed
amendment is not a response to any specific effort of which the Company is aware
to accumulate the Company's stock or to obtain control of the Company.
This proposed amendment to the Company's Restated Certificate of
Incorporation and Amended and Restated Bylaws will make difficult and may
discourage a merger, tender offer or proxy fight, even if such transaction or
occurrence may be favorable to the interests of the stockholders and may delay
or frustrate the assumption of control of the Company by a holder of a large
block of the stock of the Company, and
6
<PAGE>
thus make more difficult the removal of incumbent management. Furthermore, the
classification of directors will have the effect of making it more difficult for
stockholders to change the composition of the Board in a relatively short period
of time since at least two Annual Meetings will be required to be held in order
to effect a change in a majority of the members of the Board of Directors.
Currently, a change in a majority of the members of the Board of Directors can
be made by stockholders at each Annual Meeting. Additionally, the requirement of
an 80% affirmative vote to remove the classified Board of Directors will have
the effect of making it more difficult for stockholders to replace the
classified Board of Directors with a non-classified Board of Directors, and the
requirement of the removal of directors only for cause will have the effect of
making it more difficult for stockholders to remove individual directors. While
the delay afforded by the proposed amendment will help ensure that the Board of
Directors, if confronted with a hostile tender offer, a proxy contest or other
similar proposal, will have sufficient time to review and consider the proposal
and appropriate alternatives to the proposal and to act in what it believes to
be the best interests of the stockholders, it will also affect stockholders'
attempts to change the composition of the Board for other reasons, including the
performance of directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
AVANT! RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED BYLAWS
PROVIDING FOR A CLASSIFIED BOARD OF DIRECTORS.
PROPOSAL NO. 3
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 to a total of 5,584,017 shares and to change the number of shares to be
added automatically each year from 1% of the outstanding shares to 500,000
shares. The Board adopted the amendment on February 27, 1998 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 (the
"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 Corporate Secretary at the executive offices in Fremont,
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 Board of Directors or
its Compensation Committee (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 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
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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 Board of Directors or 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. The Option Plan may
also be administered, with respect to optionees who are not executive officers
subject to the short-swing profit rules of the federal securities laws, by a
secondary committee comprised of one or more Board members.
The Committee (or the 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 individuals who 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, 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), non-employee members of the
Board of Directors, 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.
As of February 28, 1998, approximately 630 persons 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, as amended, is
5,584,017 shares. Under the amendment subject to this proposal, the number of
shares of Common Stock available for issuance under the Option Plan
automatically increases by 500,000 shares on the first day of each calendar year
during the term of the Option Plan, beginning with the 1999 calendar year.
In no event, however, may any one person participating in the Option Plan
receive options and direct stock issuances for more than 1,000,000 shares of
Common Stock in a single 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 100% of the fair market value of the
Common Stock on the grant date and, in the case of a non-statutory option, 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 Board of Directors or 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 Board of Directors
or Committee may also assist any optionee (including an officer or director) in
the exercise of his or her outstanding options by (i) authorizing a Company loan
to the optionee, or (ii) 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 Board of Directors or
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 Board of Directors or 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 Board of Directors or 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 may 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 Board of Directors or 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 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 Board of Directors or 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 (i)
the fair market value of the vested shares of Common Stock subject to the
surrendered option on the option surrender date over (ii) the aggregate exercise
price payable for such shares. Such appreciation distribution may, at the
discretion of the Board of Directors or Committee, be made in cash or in shares
of Common Stock.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, non-employee Board members will
receive option grants at specified intervals over their period of Board service.
These special grants may be summarized as follows:
- Each individual who was a non-employee Board member on the date of the
initial public offering and each individual who becomes a non-employee Board
member after such date, whether through
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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, provided such individual has not been in the prior employ of
the Company.
- On the date of each Annual Stockholders Meeting beginning with the 1996
Annual Meeting, each individual who continues to serve as a non-employee Board
member 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 service
should cease prior to full vesting. With respect to each initial grant, the
repurchase right will lapse and the optionee will vest in four equal annual
installments from the grant date. Each annual grant will vest upon the
optionee's completion of one year of service from the option grant date.
3. The option will remain exercisable for a 12-month period following the
optionee's termination of service for any reason and may be exercised following
the Board member'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 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 service by reason of death or permanent disability.
5. Upon the occurrence of a hostile tender offer, the optionee will have a
30-day period in which to surrender to the Company each automatic option which
has been in effect for at least six 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 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 Board of Directors or 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.
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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 such rights will fully vest) if the optionee's service is
subsequently terminated by reason of an involuntary termination within 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
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 exercisable 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 Board of Directors or
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 will automatically accelerate (and any
of the Company's outstanding repurchase rights which do not otherwise terminate
at the time of the Corporate Transaction will automatically terminate and the
shares of Common Stock subject to those terminated rights will immediately vest
in full) in the event the optionee's service should subsequently terminate by
reason of an involuntary termination within 18 months following the effective
date of such Corporate Transaction. Any options so accelerated will remain
exercisable for fully-vested shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one-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 50%
of the Company's outstanding voting stock without the Board's recommendation; or
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(ii) there is a change in the composition of the Board over a period of 36
consecutive months or less such that a majority of the Board members ceases, by
reason of a proxy contest, to be comprised of individuals who (a) have been
Board members continuously since the beginning of such period or (b) have been
elected or nominated for election as Board members 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 Board of Directors or Committee has the discretion to accelerate outstanding
options and terminate the Company's outstanding repurchase rights. The Board of
Directors or 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.
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 March 31, 1998 was $20.875 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 number and/or
class of securities by 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, the maximum number of options
that may be granted to one individual per year or the number of options granted
to non-employee directors under the Automatic Option Grant Program (except in
connection with certain changes in capitalization) or (ii) materially modify the
eligibility requirements for option grants.
Unless sooner terminated by the Board, the Option Plan will in all events
terminate on March 31, 2005. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.
As of March 20, 1998, options covering approximately 4,200,000 shares were
outstanding under the Option Plan, 1,600,000 shares remained available for
future option grant, and 10,000,000 shares have been issued under the Option
Plan. The expiration dates for all such options range from August 31, 1998 to
January 12, 2008. In addition, in connection with the acquisition of Anagram,
Inc. ("Anagram"), Meta-
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Software, Inc. ("Meta"), FrontLine Design Automation, Inc. ("FrontLine"), NexSyn
Design Technology, Inc. ("NexSyn"), Integrated Silicon Systems, Inc. ("ISS") and
Technology Modeling Associates, Inc. ("TMA"), the Company assumed the
outstanding options of each company. Accordingly, under the Anagram, Meta,
FrontLine, NexSyn, ISS and TMA option plans as of February 28, 1998, options
covering approximately 90,064, 166,563, 149,342, 22,563, 697,049 and 988,873
shares, respectively, were outstanding.
NEW PLAN BENEFITS
Awards under the Option Plan are discretionary, except for the Automatic
Option Grant Program described above. Therefore, it is not possible to determine
the benefits that will be received in the future by participants in the Option
Plan or the benefits that would have been received by such participants if the
Option Plan, as amended, had been in effect in 1997. No grants have been made
with respect to the additional 1,000,000 shares for which approval is requested
at the Annual Meeting.
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 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 years
after the grant date of the option and more than one 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, 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.
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Special provisions of the 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 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 APPROVAL OF THE AMENDMENT OF
THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN.
PROPOSAL NO. 4
AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "Purchase Plan") was adopted by the
Board on April 11, 1995, and approved by the stockholders on May 4, 1995. The
Purchase Plan was amended by the Board on February 27, 1998, to increase the
number of shares of the Company's Common Stock available for issuance thereunder
by 250,000 shares to a total of 500,000 shares and to add a provision whereby
the number of available shares will automatically increase by 250,000 shares
each year, starting in the year 1999. The stockholders are being asked to
approve the amendment to the Purchase Plan. The Purchase Plan, and the right of
participants to make purchases thereunder, is intended to meet the requirements
of an "employee stock purchase plan" as defined in Section 423 of the Code.
SUMMARY OF PURCHASE PLAN
The following summary of certain Purchase Plan provisions is qualified, in
its entirety, by reference to the Purchase Plan. Copies of the Purchase Plan
document may be obtained by a stockholder upon written request to the Secretary
of the Company at the executive offices in Fremont, California.
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PURPOSE. The purpose of the Purchase Plan is to provide employees of the
Company and designated parent or subsidiary corporations (collectively, the
"Participating Companies") an opportunity to participate in the ownership of the
Company by purchasing Common Stock of the Company through payroll deductions.
The Purchase Plan is intended to benefit the Company as well as its
stockholders and employees. The Purchase Plan gives employees an opportunity to
purchase shares of Common Stock at a favorable price. The Company believes that
the stockholders will correspondingly benefit from the increased interest on the
part of participating employees in the profitability of the Company. Finally,
the Company will benefit from the periodic investments of equity capital
provided by participants in the Purchase Plan.
ADMINISTRATION. The Purchase Plan is administered by the Board of Directors
or the Committee. All costs and expenses incurred in plan administration will be
paid by the Company without charge to participants. All cash proceeds received
by the Company from payroll deductions under the Purchase Plan will be credited
to a non-interest bearing book account.
SHARES AND TERMS. The stock issuable under the Purchase Plan is the
Company's authorized but unissued or reacquired Common Stock. The maximum number
of shares of Common Stock that may be issued under the Purchase Plan is 500,000
(including the shares subject to this proposal), adjusted as described in the
"Adjustment" section of this description. Under the amendment subject to this
proposal, the number of available shares will automatically increase by 250,000
shares on January 1 of each year, commencing with 1999. Common Stock subject to
a terminated purchase right will be available for purchase pursuant to purchase
rights subsequently granted.
ADJUSTMENTS. If any change in the Common Stock occurs (through
recapitalization, stock dividend, stock split, 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 by the Company to the class and maximum number of shares subject to the
Purchase Plan, the number of shares automatically added to the Purchase Plan
each year, the class and maximum number of shares purchasable by each
participant on any one purchase date and the class and number of shares and
purchase price per share subject to outstanding purchase rights in order to
prevent the dilution or enlargement of benefits thereunder.
ELIGIBILITY. Generally, any individual who is customarily employed by a
Participating Company more than 20 hours per week and for more than five months
per calendar year is eligible to participate in the Purchase Plan. Approximately
640 employees were eligible to participate in the Purchase Plan as of December
31, 1997.
OFFERING PERIODS. The Purchase Plan is implemented by offering periods that
have a duration of not more than 24 months. The Board of Directors or Committee
in its discretion may vary the beginning date and ending date of the offering
periods, provided that no offering period may exceed 24 months in length. Each
offering period is comprised of four successive purchase periods with a duration
of six months, beginning on June 1 and December 1 of every year. The participant
will have a separate purchase right for each offering period in which he or she
participates. The purchase right will be granted on the participant's entry date
into an offering period and will be automatically exercised in successive
installments on the last day of each purchase period within the offering period.
PURCHASE PRICE. The purchase price per share under the Purchase Plan is 85%
of the lower of (i) the fair market value of a share of Common Stock on the
first day of the applicable offering period or, if later, the participant's
entry date into the offering period, or (ii) the fair market value of a share of
Common Stock on the purchase date. If a participant's entry date is on a day
other than the first day of an offering period, the clause (i) amount will in no
event be less than the fair market value of the shares on the first day of such
offering period. Generally, the fair market value of the Common Stock on a given
date is the
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closing price of the Common Stock on The Nasdaq National Market. The market
value of the Common Stock on March 31, 1998 was $20.875 per share.
LIMITATIONS. The plan imposes certain limitations upon a participant's
rights to acquire Common Stock, including the following:
1. No purchase right will be granted to any person who immediately
thereafter would own, directly or indirectly, stock or hold outstanding
options or rights to purchase stock possessing five percent or more of
the total combined voting power or value of all classes of stock of the
Company or any of its parent or subsidiary corporations.
2. In no event will a participant be permitted to purchase more than 750
shares on any one purchase date.
3. The right to purchase Common Stock under the Purchase Plan (or any other
employee stock purchase plan that the Company or any of its subsidiaries
may establish) in an offering intended to qualify under Section 423 of
the Code may not accrue at a rate that exceeds $25,000 in fair market
value of such Common Stock (determined at the time such purchase right is
granted) for each calendar year in which such purchase right is
outstanding.
The purchase right will be exercisable only by the participant during the
participant's lifetime and will not be assignable or transferable by the
participant.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS. Payment for shares by
participants will be by accumulation of after-tax payroll deductions during the
purchase period. The deductions may not exceed 15% of a participant's base
salary paid during a purchase period. This includes regular base pay, any pre-
tax contributions made by a participant to any Code section 401(k) plan or
section 125 cafeteria benefit program but excludes overtime payments, bonuses,
commissions (unless they function as base salary equivalents), profit-sharing
distributions and other incentive-type payments. Base salary also does not
include any contributions made on a participant's behalf by a Participating
Company to any deferred compensation plan or welfare benefit program (other than
a section 401(k) or 125 plan) now or hereafter maintained by the Company.
A participant will receive a purchase right for each offering period in
which he or she participates to purchase up to the number of shares of Common
Stock determined by dividing such participant's payroll deductions accumulated
prior to the purchase date by the applicable purchase price (subject to the
"Limitations" section). No fractional shares may be purchased. Any payroll
deductions accumulated in a participant's account that are not sufficient to
purchase a full share will be retained in the participant's account for the
subsequent purchase period.
TERMINATION AND CHANGE TO PAYROLL DEDUCTIONS. A purchase right will
terminate at the end of the offering period or earlier if (i) the participant
terminates employment, and then any payroll deductions which the participant may
have made with respect to a terminated purchase right will be refunded, or (ii)
the participant elects to withdraw from the Purchase Plan. Any payroll
deductions which the participant may have made with respect to a terminated
purchase right under clause (ii) will be refunded, unless the participant elects
to have the funds applied to the purchase of shares on the next purchase date. A
participant may decrease his or her deductions once during a purchase period. A
participant may also increase his or her deductions, but only at the beginning
of a purchase period.
AMENDMENT AND TERMINATION. The Purchase Plan will continue in effect until
the earliest of (i) the last business day in May 2005, (ii) the date on which
all shares available for issuance under the Purchase Plan have been issued or
(iii) a Corporate Transaction, unless the Purchase Plan is earlier terminated by
the Board in its discretion.
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The Board may at any time alter, amend, suspend or discontinue the Purchase
Plan, provided that, without the approval of the stockholders, no such action
may (i) materially increase the number of shares issuable under the Purchase
Plan or (ii) materially modify the eligibility requirements.
CORPORATE TRANSACTION. In the event of (i) 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 or (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company (a "Corporate Transaction"), each purchase right
under the Purchase Plan will automatically be exercised immediately before
consummation of the Corporate Transaction as if such date were the last purchase
date of the offering period. The purchase price per share will be equal to 85%
of the lower of the (i) fair market value per share of Common Stock on the start
date of the offering period (or on the participant's entry date, if later) or
(ii) the fair market value per share of Common Stock immediately prior to the
effective date of such Corporate Transaction. If a participant's entry date is
not the first day of the offering period, the clause (i) amount will in no event
be less than the fair market value of such shares on the first day of the
offering period. Any payroll deductions not applied to such purchase will be
promptly refunded to the participant.
PRORATION OF PURCHASE RIGHTS. If the total number of shares of Common Stock
for which purchase rights are to be granted on any date exceeds the number of
shares then remaining available under the Purchase Plan, the Committee will make
a pro rata allocation of the shares remaining.
FEDERAL INCOME TAX CONSEQUENCES. The following is a general description of
certain federal income tax consequences of the Purchase Plan. This description
does not purport to be complete.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. No income is recognized by a participant at
the time a right to purchase shares is granted. Likewise, no taxable income is
recognized at the time of the purchase, even though the purchase price reflects
a discount from the market value of the shares at that time.
A participant must recognize taxable income upon a disposition of shares
acquired under the Purchase Plan. The tax treatment may be more favorable if the
disposition occurs after the holding-period requirements of Section 423 have
been satisfied (a "qualifying disposition"). To satisfy the holding-period
requirements of Section 423, shares acquired under the Purchase Plan cannot be
disposed of within two years after the first day of the offering period during
which the shares were purchased (or within two years after the participant's
entry date, if that date is later than the beginning of the offering period) nor
within one year after the shares were purchased. The U.S. income tax
consequences of a qualifying disposition are as follows:
- The participant recognizes ordinary income equal to the lower of (i) the
excess of the fair market value of the shares on the date of the
disposition over the purchase price or (ii) 15% of the fair market value
of the shares on the first day of the applicable offering period (or on
the participant's entry date, if that date is later than the first day of
the offering period and if the market value is higher on that date). The
Company will not be entitled to any deduction under these circumstances.
- The excess, if any, of the fair market value of the shares on the date of
the disposition over the sum of the purchase price plus the amount of
ordinary income recognized (as described above) will be taxed as a
long-term capital gain. If a taxable disposition produces a loss (i.e.,
the fair market value of the shares on the date of the disposition is less
than the purchase price) and the disposition involves certain unrelated
parties, then the loss will be a long-term capital loss.
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A participant who disposes of shares acquired under the Purchase Plan
without meeting the holding-period requirements makes a disqualifying
disposition of such shares. The U.S. income tax consequences of a disqualifying
disposition are as follows:
- The entire difference between the purchase price and the market value of
the shares on the date of purchase will be taxed to the participant as
ordinary income in the year of disposition. The Company will be entitled
to a deduction for the same amount, subject to certain conditions.
- The excess, if any, of the market value of the shares on the date of
disposition over their market value on the date of purchase will be taxed
as a capital gain (long-term or short term, depending on how long the
shares have been held). If the value of the shares on the date of
disposition is less than their value on the date of purchase, then the
difference will result in a capital loss (long-term or short-term,
depending on the holding period), provided the disposition involves
certain unrelated parties. Any such loss will not affect the ordinary
income recognized upon the disposition.
NEW PURCHASE PLAN BENEFITS. Since purchase rights are subject to
discretion, including an employee's decision not to participate in the Purchase
Plan, awards under the Purchase Plan for the current fiscal year are not
determinable. As of February 28, 1998, 8,000 shares have been issued with
respect to the additional 250,000 shares for which approval is requested at the
Annual Meeting, and additional purchase rights have been granted with respect to
such 250,000 shares and will be exercised on various future dates, commencing
with May 31, 1998. The number of such additional purchase rights that will be
exercised cannot be determined, since it depends in part on the price of the
Company's Common Stock on the date of exercise and on elections by the
participants.
RECOMMENDATION OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE EMPLOYEE STOCK PURCHASE PLAN.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 28, 1998 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 executive officers named in the Summary Compensation Table and (iii) all
current directors and executive 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 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 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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1) (2)
----------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OF CLASS
- --------------------------------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
Amerindo Investment Advisors Inc. (3)...................................... 6,123,103 18.9%
FMR Corp. (4).............................................................. 3,464,700 10.7
Van Wagoner Capital Management, Inc. (5)................................... 1,932,468 6.0
Gerald C. Hsu (6).......................................................... 956,994 2.9
Y. Eric Cho................................................................ 384,900 1.2
John P. Huyett (7)......................................................... 92,528 *
Tench Coxe (8)............................................................. 53,523 *
Charles L. St. Clair (9)................................................... 11,261 *
Eric A. Brill (10)......................................................... 5,000 *
All directors and executive officers as a group
(9 persons including those listed above) (11)............................ 1,988,013 6.1%
</TABLE>
- ------------------------
* 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) Percentage ownership is based on 32,445,460 shares outstanding as of
February 28, 1998. The number of shares of Common Stock deemed outstanding
for each person includes shares issuable pursuant to stock options that may
be exercised within 60 days after February 28, 1997.
(3) Based on Schedule 13D/A filed with the Securities and Exchange Commission on
February 9, 1998 and other information obtained by the Company, Amerindo
Investment Advisors Inc. held sole voting power as to 4,500 such shares,
shared voting power as to 6,118,603 such shares, sole dispositive power as
to 4,500 such shares and shared dispositive power as to 6,118,603 such
shares. Amerindo Investment Advisors Inc.'s address is One Embarcadero
Center, Suite 2300, San Francisco, California 94111.
(4) Based on Schedule 13G/A filed with the Securities and Exchange Commission on
February 9, 1998 and other information obtained by the Company, FMR Corp.
held sole voting power as to 106,000 such shares and sole dispositive power
as to all of such shares. FMR Corp.'s address is 82 Devonshire Street,
Boston, Massachusetts 02109.
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(5) Based on Schedule 13G/A filed with the Securities and Exchange Commission on
February 17, 1998 and other information obtained by the Company, Van Wagoner
Capital Management, Inc. held sole dispositive power as to all of such
shares and Van Wagoner Funds, Inc. held sole voting power as to 1,665,986
such shares. Van Wagoner Capital Management, Inc.'s address is 207 East
Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202.
(6) Includes options exercisable into 247,693 shares of Common Stock under the
Option Plan.
(7) Includes options exercisable into 90,417 shares of Common Stock under the
Option Plan.
(8) Includes options exercisable into 19,167 shares of Common Stock under the
Option Plan.
(9) Includes options exercisable into 8,749 shares of Common Stock under the
Option Plan.
(10) Includes options exercisable into 5,000 shares of Common Stock under the
Option Plan.
(11) Includes options exercisable into 371,026 shares of Common Stock under the
Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Before starting his own practice in 1993, Eric A. Brill, a member of the
Board of Directors, was an attorney with the law firm of Farella Braun & Martel,
LLP. Farella Braun & Martel has represented, and continues to represent, the
Company in certain litigation matters. In addition, Farella Braun & Martel
represents Gerald C. Hsu, individually, in the litigation matter against Cadence
Design Systems, Inc. In 1997, Mr. Brill received approximately $166,391.85 in
connection with legal services rendered by Mr. Brill to the Company and in
connection with a contract between Mr. Brill and Farella Braun & Martel pursuant
to which Mr. Brill received a portion of the legal fees paid by the Company to
Farella Braun & Martel.
The Company has paid directly the legal fees of Gerald C. Hsu, the Company's
President and Chief Executive Officer, and Y. Eric Cho, a former executive
officer and a member of the Company's Board of Directors, in connection with
various litigation matters involving the Company, including the litigation
matter against Cadence Design Systems, Inc., in the amounts of $445,271 and
$78,888, respectively.
In 1997 and 1996, the Company consolidated its Japanese and Korean sales
channels by forming two joint ventures, MainGate Electronics, KK ("MainGate")
and DavanTech Co., Ltd. ("DavanTech"), respectively. The joint ventures were
formed for the purpose of consolidating distribution of the Company's products
in Japan and Korea. The Company owns 35% and 39.5% of MainGate and DavanTech,
respectively, and accounts for the joint ventures using the equity method.
Gerald C. Hsu, the Company's President and Chief Executive Officer owns
approximately 40% and 3% of MainGate and DavanTech, respectively. Other than
possible appreciation of his investments in MainGate and DavanTech, Mr. Hsu has
not derived, directly or indirectly, any remuneration as a result of the
agreements between the Company and MainGate and DavanTech, respectively. The
distributorship agreements that the Company entered into with MainGate and
DavanTech are comparable, from a financial point of view, with the agreements
the Company had with its previous distributors in the region and contain no
better terms, from a financial point of view, than the Company could have
negotiated with other potential distributors. The Company has also provided
MainGate with a working capital advance of approximately $1.6 million and has
made an equity investment of approximately $294,000 in MainGate. The working
capital advance is evidenced by a promissory note in favor of the Company
payable upon demand and bearing an interest rate of 5% compounded annually.
During 1997, Charles L. St. Clair, a member of the Company's Board of
Directors, received aggregate payments of $173,800 from the Company and its
affiliates for his service as an employee from January to April 1997 and as a
consultant from April to December 1997.
In April 1997, the Company loaned Gerald C. Hsu, the Company's President and
Chief Executive Officer and Chairman of the Board of Directors, an aggregate of
$700,000. Mr. Hsu repaid this loan in
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December 1997. In December 1997, the Company's Compensation Committee awarded
Mr. Hsu a bonus, payable by the Company's cancellation of the principal amount
and accrued interest outstanding on an $800,000 loan that had been made by the
Company to Mr. Hsu in July 1997. See "Report on Executive Compensation--CEO
Compensation." The largest aggregate amount that Mr. Hsu was indebted to the
Company at any one point during 1997 was $1,700,000. As of February 27, 1998,
Gerald C. Hsu was indebted to the Company in the aggregate amount of $556,000.
In connection with his relocation to California in January 1996, the Company
loaned John P. Huyett, the Company's former CEO Staff--Finance and Treasurer,
$325,000. The loan was interest free and was collateralized by a deed of trust
on real property. The entire balance of this loan remained outstanding during
all of 1997. Mr. Huyett has repaid all of such indebtedness.
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 of Directors, with the exception of Gerald C.
Hsu, who has entered into an employment agreement under which he may only be
terminated upon at least 30 days' notice.
The Board of Directors or the Committee has the authority under the 1995
Stock Option/Stock Issuance 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 that 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
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.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") has the 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 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 1997, 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
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compensation package consists of: (i) base salary, (ii) cash bonus awards and
(iii) long-term stock-based incentive awards.
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 1997, 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 1997, the Committee, in its
discretion, made option grants to Gerald C. Hsu, 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 Committee deems
appropriate 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.
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. Unless otherwise defined, the capitalized terms used in
this "CEO Compensation" section have the meanings assigned to them in the Option
Plan.
1997 SALARY. The 1997 annual base salary for Mr. Hsu, the Company's
President and CEO, was established by the Committee in January 1997 at $350,000.
The Committee's decision was made primarily on the basis of Mr. Hsu's personal
performance of his duties.
JANUARY 1997 OPTION. On January 8, 1997, the Committee granted to the CEO
an option (the "January 1997 Option") to purchase up to 300,000 shares of the
Common Stock of the Company, in recognition of the CEO's performance with
respect to the 1996 fiscal year and to provide an incentive for his continued
strong performance during the 1997 fiscal year. The exercise price of the
January 1997 Option is $31.00 per share, the closing price for the Company's
Common Stock on The Nasdaq National Market on the grant date. This Option is
intended to be an Incentive Option to the maximum extent permissible under the
tax laws. It is subject to vesting on a four-year schedule according to the
standard Notice of Grant in use under the Option Plan. The Option has a maximum
term of ten years from the grant date, subject to earlier termination following
Mr. Hsu's cessation of service with the Company.
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<PAGE>
DECEMBER 1997 CASH BONUS AND OPTION. On December 18, 1997, the Committee
awarded the CEO a cash bonus and a stock option, subject in each instance to the
attainment of the CEO's performance standard established for the 1997 fiscal
year (the "1997 Target"): 1997 Company earnings per share equal to or exceeding
the consensus estimate published as of January 1, 1997 by the major securities
analysts who published estimates of the Company's 1997 earnings per share as of
such date. That consensus estimate was $1.13. For this purpose, the Company's
1997 earnings per share were to be based on the consolidated financial
statements audited by the Company's outside accounting firm and attached as
Exhibit 11 to the Company's 1997 Form 10-K, subject to such adjustments as the
Committee might make in good faith (a) to reflect certain possible changes in
the Company's accounting policies (none of which changes occurred); and (b) to
exclude the following items in whole or in part:
1. Charges for in-process research and development incurred in connection
with a business combination;
2. Transaction expenses, and restructuring costs or other write-offs,
incurred in connection with a business combination or acquisition involving the
Company;
3. Other technology acquisition costs, whether or not incurred in
connection with a business combination; and
4. Damages, restitution payments, fines and/or amounts paid in settlement
of the following litigation, including any such amounts paid by the Company on
behalf of other defendants therein pursuant to any indemnification obligations
of the Company (but not any legal fees or similar expenses incurred by the
Company or such indemnitees in connection therewith): the pending civil action
filed by Cadence Design Systems, Inc. in December, 1995 against the Company and
others, the criminal action presently pending against the Company and certain of
the Company's officers, directors and employees, and the shareholder derivative
actions presently pending against the Company and any other shareholder
derivative action which may hereafter be filed against the Company based
substantially on allegations relating to such Cadence litigation or such
criminal action; provided, however, that such a payment shall be excluded to the
extent it is made on account of liabilities that the Committee determines, in
its sole discretion, arose solely from misconduct of Mr. Hsu.
The Committee subsequently excluded certain items listed in the first three
of these four categories in calculating the Company's 1997 earnings per share
for the purpose of determining the CEO's attainment of the 1997 Target. The
Committee determined that no adjustment should be made on the basis of any item
listed in the fourth category above. On these bases, the Committee determined
that the Company's 1997 earnings per share were $1.20 for the purpose of
determining the CEO's attainment of the 1997 Target, which exceeded the 1997
Target.
In its December 18, 1997 action, the Committee declared that, if the CEO
attained the 1997 Target, he would be entitled to a cash bonus, payable by the
Company's cancellation of the principal amount and accrued interest (at an 8%
annual rate) outstanding on an $800,000 loan that had been made by the Company
to the CEO in July, 1997 (the "CEO Loan"). The Committee further declared that,
if the CEO instead failed to attain the 1997 Target, then the CEO Loan, together
with interest accrued thereon, would be payable in full 60 days after the
Committee had determined that the 1997 Target had not been attained. The
Committee was required to make such determination not later than March 15, 1998.
The Board, acting in lieu of the Committee, made such determination prior to
March 15, 1998. The Committee further declared in its December 18, 1997 action
that, if the CEO's service should cease (other than as a result of an
Involuntary Termination) before the earlier of (i) March 15, 1998, or (ii) the
date on which the Committee had determined whether the 1997 Target had been
attained, the CEO Loan (together with all accrued interest thereon) would become
payable in full 60 days after such cessation of Service, in which event Mr. Hsu
would be entitled to no cash bonus for 1997.
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In its December 18, 1997 action, the Committee also granted an option to
purchase 500,000 shares of the Company's Common Stock to the CEO (the "December
1997 Option") at an exercise price of $15.50 per share, which the Committee
determined was the Fair Market Value of the Company's Common Stock as of that
date. The December 1997 Option is intended to be "performance-based
compensation" within the meaning of Code Section 162(m). The December 1997
Option grant provided that one-fourth of the shares subject to the December 1997
Option would vest one year after the December 1997 Option grant date and the
remaining three-fourths of such shares would vest monthly in equal amounts over
the ensuing 36 months. The grant provided further, however, that if the
Committee should determine that the 1997 Target had not been attained, no part
of the December 1997 Option would vest until the sixth anniversary of the
December 1997 Option grant date, at which time the December 1997 Option would
vest in full. Notwithstanding the preceding two sentences, the Committee
declared that, if the CEO's service should cease before the December 1997 Option
had become fully vested, the December 1997 Option would thereupon (i) vest in
full, if the cessation of service had resulted from an "Involuntary
Termination," or (ii) thereafter cease vesting as to any additional shares, if
the cessation of service had not resulted from an "Involuntary Termination." The
Committee further declared that the December 1997 Option would remain
exercisable with respect to any or all vested shares until the tenth anniversary
of its grant date, except that it would cease to be exercisable, in whole or in
part, upon a cessation of the CEO's service prior to such tenth anniversary as a
result of misconduct. Upon any exercise of the December 1997 Option, the
exercise price will be payable, in the CEO's discretion, in any one or more of
the forms of payment authorized under the Option Plan, which provides for
payment in cash, by cancellation of other Company shares, or pursuant to a
cashless exercise procedure.
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. 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
stock options. Accordingly, any compensation deemed paid to an executive officer
when he exercises an outstanding option granted by the Compensation Committee
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 1998 fiscal year will exceed the $1
million limit per officer, the Board 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. The Board of Directors currently does not have a
Compensation Committee meeting the requirements of Section 162(m), but such a
committee held office in the year 1997.
BOARD OF DIRECTORS
James Andrews
Eric A. Brill
Moriyuki Chimura
Tench Coxe
Gerald C. Hsu
Charles L. St. Clair
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Board of Directors who served on the Compensation Committee
during 1997 was 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 of Directors or Compensation Committee.
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, 1997 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
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN*
AMONG AVANT! CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NASDAQ STOCK NASDAQ COMPUTER &
<S> <C> <C> <C>
AVANT! CORPORATION MARKET (U.S.) DATA PROCESSING
6/7/95 $100 $100 $100
6/95 $128 $108 $111
9/95 $156 $121 $121
12/95 $73 $123 $127
3/96 $91 $128 $133
6/96 $88 $139 $148
9/96 $113 $144 $151
12/96 $120 $151 $157
3/97 $102 $143 $145
6/97 $122 $169 $186
9/97 $110 $197 $204
12/97 $73 $185 $192
</TABLE>
* $100 INVESTED ON 6/07/95 IN STOCK OR ON 5/31/95 IN INDEX--INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
25
<PAGE>
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 Report
on Executive Compensation 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.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following Summary Compensation Table sets forth the compensation earned
by the Company's Chief Executive Officer and the two other most highly
compensated officers who were serving as such during 1997 (collectively, the
"Named Officers"), each of whose salary and bonus for 1997 exceeded $100,000 for
services rendered in all capacities to the Company and its subsidiaries for that
fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
-------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) OPTIONS(#)(2) COMPENSATION($)
- --------------------------------------------- ---- ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Gerald C. Hsu................................ 1997 $350,000 $800,000 800,000 --
President, Chief Executive Officer and 1996 250,000 350,000 175,000 --
Chairman of the Board of Directors
Y. Eric Cho (3).............................. 1997 166,666.60 290,501.88 90,000 --
Senior Vice President of Corporate 1996 120,000 237,491 20,000 --
Operations and Director
John P. Huyett (4)........................... 1997 170,000 90,000 8,000 4,750(5)
CEO Staff-Finance, Treasurer and 1996 200,000 30,000 20,000 4,770(5)
Principal Accounting Officer
</TABLE>
- ------------------------
(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) Mr. Cho resigned from his position as the Company's Senior Vice President of
Corporate Operations on October 31, 1997. Accordingly, the options granted
to Mr. Cho in 1997 were canceled and are no longer outstanding.
(4) Mr. Huyett resigned from his position as the Company's CEO Staff-Finance,
Treasurer and Principal Accounting Officer on February 28, 1998.
Accordingly, the options granted to Mr. Huyett in 1997 were canceled and are
no longer outstanding. On January 12, 1998, the Board of Directors appointed
Linda Chinn to serve as the Company's Vice President, Finance and
Administration.
(5) Represents matching contributions by the Company to the 401(k) Plan in 1996
and 1997.
26
<PAGE>
The following table contains information concerning the stock option grants
made to each of the Named Officers in 1997. No stock appreciation rights were
granted to these individuals during such year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(5)
OPTIONS TO EMPLOYEES IN EXERCISE ---------------------
NAME GRANTED(#) 1997 PRICE($/SH)(4) EXPIRATION DATE 5%($) 10%($)
- -------------------------------- ----------- --------------- --------------- ----------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gerald C. Hsu (1)............... 6,450 0.03% $ 31.00 January 7, 2007 $ 125,748 $ 318,669
Gerald C. Hsu (1)............... 293,550 12.51 31.00 January 7, 2007 5,722,973 14,503,136
Gerald C. Hsu (1)............... 500,000 21.32 15.50 December 17, 2007 4,873,933 12,351,504
Y. Eric Cho (1) (2)............. 80,000 3.41 35.00 January 14, 2007 1,760,905 4,462,479
Y. Eric Cho (1) (2)............. 10,000 0.04 9.81 April 16, 2007 61,695 156,346
John P. Huyett (1) (3).......... 8,000 0.03 9.81 April 16, 2007 49,356 125,077
</TABLE>
- ------------------------
(1) Twenty-five percent (25%) of the option shares shall vest after the first
twelve (12) months of service to the Company measured from the Vesting
Commencement Date, and the remaining seventy-five percent (75%) of the
option shares shall vest in a series of successive equal monthly
installments upon the optionee's completion of each of the following
thirty-six months of service to the Company.
(2) Mr. Cho resigned from his position as the Company's Senior Vice President of
Corporate Operations on October 31, 1997, and the options granted to him in
1997 were canceled and are no longer outstanding.
(3) Mr. Huyett resigned from his position as the Company's CEO Staff-Finance,
Treasurer and Principal Accounting Officer on February 28, 1998, and the
options granted to him in 1997 were canceled and are no longer outstanding.
(4) 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
Company's repurchase right with respect to the unvested option shares is
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.
(5) 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
27
<PAGE>
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.
The following table sets forth information concerning option exercises in
1997 and option holdings as of the end of 1997 with respect to each of the Named
Officers. No stock appreciation rights were outstanding at the end of that year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE REALIZED NUMBER OF SECURITIES VALUE OF UNEXERCISED
(MARKET PRICE AT UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES EXERCISE LESS OPTIONS AT FY-END(#) FY-END($)(1)(3)
ACQUIRED ON EXERCISE -------------------------- -------------------------
NAME EXERCISE(#) PRICE($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ------------- ------------------ ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald C. Hsu (2)................... 392,411 $6,651,063.26 247,693 784,896 $793,120.30 $ 8,225,000
Y. Eric Cho......................... 0 0 0 0 0 0
John P. Huyett (2).................. 9,000 $ 186,030 90,417 20,083 $ 117,375 $ 55,520
</TABLE>
- ------------------------
(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) The options are immediately exercisable for all the option shares, but any
shares purchased thereunder will be subject to repurchase by the Company at
the original exercise price paid per share upon the optionee's cessation of
service to the Company prior to vesting in such shares. As of December 31,
1997, the repurchase right had lapsed as to approximately 247,693 option
shares for Mr. Hsu and approximately 90,417 option shares for Mr. Huyett.
(3) Based on the closing price of the Common Stock of the Company at December
31, 1997, as reported on the Nasdaq National Market, of $16.75 per share,
less the exercise price payable for such shares.
PROPOSAL NO. 5
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, 1998. The affirmative vote of the holders of a majority of
shares present or represented by proxy and voting at the Annual Meeting will be
required to ratify the appointment of KPMG Peat Marwick LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the appointment is ratified,
the Board of Directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors 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, 1998.
28
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the Board of Directors, 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 which require them to file reports with respect to their
ownership of the Company's 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 1997 fiscal year transactions in the Common
Stock and their Common Stock holdings and (ii) the written representations
received from one or more of such persons that no annual Form 5 reports were
required to be filed by them for the 1997 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 Gerald Hsu reported one transaction late,
Charles St. Clair failed to report one transaction on the Form 3 he filed with
the Securities and Exchange Commission and Tatsuo Kawasaki filed his Form 3 with
the Securities and Exchange Commission late.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S FORM 10-K REPORT FOR 1997, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO AVANT! CORPORATION,
46871 BAYSIDE PARKWAY, FREMONT, CALIFORNIA 94538, ATTN: DAVID H. STANLEY,
GENERAL COUNSEL.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1999 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 10, 1998 in order to be included. Such stockholder proposals
should be addressed to Avant! Corporation, 46871 Bayside Parkway, Fremont,
California 94538, Attn: David H. Stanley, General Counsel.
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,
/s/ Eric A. Brill
---------------------------------------------
Eric A. Brill
SECRETARY
Fremont, California
April 9, 1998
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.
29
<PAGE>
APPENDIX A
FORM OF AMENDMENT TO AVANT! RESTATED CERTIFICATE OF INCORPORATION
ARTICLE VII
Election of directors need not be by written ballot unless the Bylaws of
this corporation shall so provide. The directors shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible as determined by the Board of Directors, with
(i) the term of office of the first class to expire at the 1999 annual meeting
of stockholders, (ii) the term of office of the second class to expire at the
2000 annual meeting of stockholders and (iii) the term of office of the third
class to expire at the 2001 annual meeting of stockholders, with each class to
hold office until its successor is elected and qualified. At each annual meeting
of stockholders, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election. Additional directorships resulting
from an increase in the number of directors shall be apportioned among the
classes as equally as possible as determined by the Board of Directors. Newly
created directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by affirmative vote of
a majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any directors elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director. Any director may be
removed from office, but only for cause. Notwithstanding anything contained in
this Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 80% of the voting power of all the shares of the corporation
entitled to vote generally in the election of directors shall be required to
alter, amend or adopt any provision inconsistent with or repeal this Article
VII.
30
<PAGE>
APPENDIX B
FORM OF AMENDMENT TO AVANT! AMENDED AND RESTATED BYLAWS
ARTICLE III
DIRECTORS
SECTION 1. The number of directors that shall constitute the whole board
shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
The directors shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as possible
as determined by the Board of Directors, with (i) the term of office of the
first class to expire at the 1999 annual meeting of stockholders, (ii) the term
of office of the second class to expire at the 2000 annual meeting of
stockholders and (iii) the term of office of the third class to expire at the
2001 annual meeting of stockholders, with each class to hold office until its
successor is elected and qualified. At each annual meeting of stockholders,
directors elected to succeed those directors whose terms expire shall be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders after their election. Additional directorships resulting from an
increase in the number of directors shall be apportioned among the classes as
equally as possible as determined by the Board of Directors. Newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by affirmative vote of
a majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any directors elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director. Any director may be
removed from office, but only for cause.
31
<PAGE>
AVANT! CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
(AMENDED AND RESTATED AS OF FEBRUARY 27, 1998)
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to promote the
interests of Avant! Corporation, 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.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. The Board and the Primary Committee shall have the authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders.
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 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 as a result of his or her continued service as a
non-employee Board member following one or more Annual Stockholders Meetings.
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 number of shares of Common Stock that may be
issued over the term of the Plan shall not exceed 5,584,017 shares.(1) No
Incentive Options may be granted on the basis of
- -------------------
(1) Such authorized share reserve includes (i) 2,315,575 shares available at
the inception of the Plan, (ii) an 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, (iii) an automatic annual increase of 249,520
shares effective January 1, 1997, (iv) an increase of
3
<PAGE>
518,442 of such shares, which resulted from two automatic annual increases equal
to one percent (1%) of the shares of Common Stock outstanding on December 31,
1996, and December 31, 1997, respectively.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase by 500,000 shares on the first day of each
calendar year during the term of the Plan, beginning with the 1999 calendar
year.
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 per 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,
Section IV. 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 number and/or class of securities for which the 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
- -------------------
1,000,000 shares authorized by the Board under the Plan on April 11, 1997, and
approved by the stockholders at the 1997 Annual Stockholders Meeting, (v) an
automatic annual increase of 268,922 shares effective January 1, 1998, and
(vi) an increase of 1,000,000 shares authorized by the Board under the Plan
on February 27, 1998, and submitted to the stockholders for approval at the
1998 Annual Stockholders Meeting.
4
<PAGE>
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 options granted to any Employee under the Plan (or any other
option plan of the Corporation or
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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
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Corporate Transaction. Appropriate adjustments shall also be made to (i) the
number and class of securities 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
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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.
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)
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to surrender each such option to the Corporation, to the extent the
option is at the time 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
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connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the Stock Issuance
Agreement.
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 termination of the
Optionee's 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, with the first such installment to vest upon the Optionee's
completion of one (1) year of Service measured from the option grant date. Each
annual grant shall vest, and the Corporation's repurchase right shall lapse,
upon the Optionee's completion of one (1) year of Service measured from the
option grant date.
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E. EFFECT OF TERMINATION OF SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the
Optionee's Service terminates:
(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 the termination of the Optionee's 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 termination of the Optionee's Service.
(iii) Should the Optionee's Service terminate 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 the termination
of the Optionee's 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
termination of the Optionee's Service, terminate and cease to be
outstanding to the extent it is not exercisable for vested shares on
the date of the termination of the Optionee's 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).
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
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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. 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. 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) 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, 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. 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.
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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.
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.
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APPENDIX
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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
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(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.
G. CORPORATION shall mean Avant! Corporation, 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
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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.
(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
A-3
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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 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 1993 Stock
Option/Stock Issuance Plan.
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BB. PRIMARY COMMITTEE shall mean a 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.
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.
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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.
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.
A-6
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AVANT! CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
(AMENDED AND RESTATED EFFECTIVE NOVEMBER 30, 1997)
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of Avant! Corporation by providing eligible employees with the
opportunity to acquire a proprietary interest in the Corporation through
participation in a payroll-deduction based employee stock purchase plan
designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations
for administering the Plan as it may deem necessary in order to comply with
the requirements of Code Section 423. Decisions of the Plan Administrator
shall be final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of
Common Stock purchased on the open market. The number of shares of Common
Stock that may be issued over the term of the Plan shall not exceed five
hundred thousand (500,000) shares.(1) The number of shares of Common Stock
available for issuance under the Plan shall automatically increase by two
hundred fifty thousand (250,000) shares on the first day of each calendar
year during the term of the Plan, beginning with the 1999 calendar year.
B. 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 class of securities
issuable under the Plan, (ii) the number and class of securities for which
the share reserve is to increase automatically each year, (iii) the maximum
number and class of securities purchasable per Participant on any one
Purchase Date and (iv) the number and class of securities
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(1) Such authorized share reserve includes (i) 250,000 shares available at the
inception of the Plan and (ii) an increase of 250,000 shares authorized by the
Board under the Plan on February 27, 1998, and submitted to the stockholders for
approval at the 1998 Annual Stockholders Meeting.
<PAGE>
and the price per share in effect under each outstanding purchase
right in order to prevent the dilution or enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i)
the maximum number of shares of Common Stock available for issuance under the
Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated.
B. Each offering period (other than the initial offering period)
shall be of such duration (not to exceed twenty-four (24) months) as
determined by the Plan Administrator prior to the start date. The initial
offering period shall commence at the Effective Time and terminate on the
last business day in May 1997. The next offering period shall commence on the
first business day in June 1997, and subsequent offering periods shall
commence as designated by the Plan Administrator.
C. Each offering period shall be comprised of a series of
successive Purchase Periods. Except as otherwise determined by the Plan
Administrator prior to the start date, Purchase Periods shall begin on the
first business day in June and December each year and terminate on the last
business day in November and May, respectively, each year. However, the
first Purchase Period under the initial offering period shall commence at the
Effective Time and terminate on the last business day in November 1995.
V. ELIGIBILITY
A. Each Eligible Employee shall be eligible to enter an offering
period under the Plan on the start date of any Purchase Period within that
offering period, provided he or she remains an Eligible Employee on such
start date. The date such individual enters the offering period shall be
designated his or her Entry Date for purposes of that offering period.
B. To participate in the Plan for a particular offering period,
the Eligible Employee must complete the enrollment forms prescribed by the
Plan Administrator (including a stock purchase agreement and a payroll
deduction authorization form) and file such forms with the Plan Administrator
(or its designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any
multiple of one percent (1%) of the Base Salary paid to the Participant
during each Purchase Period within that offering period, up to a maximum of
fifteen percent (15%). The deduction rate so authorized shall continue in
effect for the remainder of the offering period, except to the extent such
rate is changed in accordance with the following guidelines:
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<PAGE>
(i) The Participant may, at any time during the offering
period, reduce his or her rate of payroll deduction to become effective as
soon as possible after filing the appropriate form with the Plan
Administrator. The Participant may not, however, effect more than one (1)
such reduction per Purchase Period.
(ii) The Participant may, prior to the commencement of any new
Purchase Period within the offering period, increase the rate of his or her
payroll deduction by filing the appropriate form with the Plan Administrator.
The new rate (which may not exceed the fifteen percent (15%) maximum) shall
become effective as of the start date of the Purchase Period following the
filing of such form.
B. Payroll deductions shall begin on the first pay day following
the Participant's Entry Date into the offering period and shall (unless
sooner terminated by the Participant) continue through the pay day ending
with or immediately prior to the last day of that offering period. The
amounts so collected shall be credited to the Participant's book account
under the Plan, but no interest shall be paid on the balance from time to
time outstanding in such account. The amounts collected from the Participant
shall not be held in any segregated account or trust fund and may be
commingled with the general assets of the Corporation and used for general
corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan
on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date, whether within
the same or a different offering period.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the
right to purchase shares of Common Stock, in a series of successive
installments over the remainder of such offering period, upon the terms set
forth below. The Participant shall execute a stock purchase agreement
embodying such terms and such other provisions (not inconsistent with the
Plan) as the Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of
the Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date
within the offering period, and shares
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<PAGE>
of Common Stock shall accordingly be purchased on behalf of each Participant
(other than any Participant whose payroll deductions have previously been
refunded in accordance with the Termination of Purchase Right provisions
below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Period ending
on such Purchase Date (together with any carryover deductions from the
preceding Purchase Period) to the purchase of whole shares of Common Stock
(subject to the limitation on the maximum number of shares purchasable per
Participant on any one Purchase Date) at the purchase price in effect for the
Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date
within the offering period shall be equal to eighty-five percent (85%) of the
LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market
Value per share of Common Stock on that Purchase Date. However, for each
Participant whose Entry Date is other than the start date of the offering
period, the clause (i) amount shall in no event be less than the Fair Market
Value per share of Common Stock on the start date of that offering period.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Period ending with that Purchase Date (together with any carryover deductions
from the preceding Purchase Period) by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed seven hundred fifty (750) shares, subject to periodic adjustments in
the event of certain changes in the Corporation's capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied
to the purchase of shares of Common Stock on any Purchase Date because they
are not sufficient to purchase a whole share of Common Stock shall be held
for the purchase of Common Stock on the next Purchase Date. However, any
payroll deductions not applied to the purchase of Common Stock by reason of
the limitation on the maximum number of shares purchasable by the Participant
on the Purchase Date shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next
Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan Administrator (or
its designate), and no further payroll deductions shall be collected from the
Participant with respect to the terminated purchase right. Any payroll
deductions collected during the Purchase Period in which such termination
occurs shall, at the Participant's election, be immediately refunded or held
for the purchase of shares on the next Purchase Date. If no such election is
made at the time such purchase right is terminated, then the
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<PAGE>
payroll deductions collected with respect to the terminated right shall be
refunded as soon as possible.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the offering
period for which the terminated purchase right was granted. In order to
resume participation in any subsequent offering period, such individual must
re-enroll in the Plan (by making a timely filing of the prescribed enrollment
forms) on or before his or her scheduled Entry Date into that offering period.
(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in status)
while his or her purchase right remains outstanding, then that purchase right
shall immediately terminate, and all of the Participant's payroll deductions
for the Purchase Period in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to remain in
active service by reason of an approved leave of absence, then the
Participant shall have the election, exercisable up until the last business
day of the Purchase Period in which such leave commences, to (a) withdraw all
the funds in the Participant's payroll account at the time of the
commencement of such leave or (b) have such funds held for the purchase of
shares at the end of such Purchase Period. In no event, however, shall any
further payroll deductions be added to the Participant's account during such
leave. Upon the Participant's return to active service following the
approved leave, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave began,
provided such return to service occurs prior to the expiration date of the
offering period in which such leave began.
G. CORPORATE TRANSACTION. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Period in which such Corporate Transaction occurs to the
purchase of whole shares of Common Stock at a purchase price per share equal
to eighty-five percent (85%) of the LOWER of (i) the Fair Market Value per
share of Common Stock on the Participant's Entry Date into the offering
period in which such Corporate Transaction occurs or (ii) the Fair Market
Value per share of Common Stock immediately prior to the effective date of
such Corporate Transaction. However, the applicable share limitations per
Participant shall continue to apply to any such purchase, and the clause (i)
amount above shall not, for any Participant whose Entry Date for the offering
period is other than the start date of that offering period, be less than the
Fair Market Value per share of Common Stock on such start date.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Corporate
Transaction, and Participants shall, following the receipt of such notice,
have the right to terminate their outstanding purchase rights prior to the
effective date of the Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of
shares of Common Stock which are to be purchased pursuant to outstanding
purchase rights on any particular date exceed the number of shares then
available for issuance under the Plan, the Plan
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<PAGE>
Administrator shall make a pro-rata allocation of the available shares on a
uniform and nondiscriminatory basis, and the payroll deductions of each
Participant, to the extent in excess of the aggregate purchase price payable
for the Common Stock pro-rated to such individual, shall be refunded.
I. ASSIGNABILITY. During the Participant's lifetime, the
purchase right shall be exercisable only by the Participant and shall not be
assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in
accordance with the provisions of the Plan and the Participant has become a
holder of record of the purchased shares.
K. STOCK CERTIFICATES. The stock certificates for the shares of
Common Stock purchased on the Participant's behalf shall be deposited
directly in a brokerage account established by the Corporation on the
Participant's behalf.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if
and to the extent such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right granted under this Plan
and (ii) similar rights accrued under other employee stock purchase plans
(within the meaning of Code Section 423) of the Corporation or any Corporate
Affiliate, would otherwise permit such Participant to purchase more than
Twenty-Five Thousand Dollars ($25,000) worth of stock of the Corporation or
any Corporate Affiliate (determined on the basis of the Fair Market Value of
such stock on the date or dates such rights are granted) for each calendar
year such rights are at any time outstanding.
B. For purposes of applying such accrual limitations, the
following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each successive
Purchase Date during the offering period on which such right remains
outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already accrued
in the same calendar year the right to acquire Common Stock under one (1) or
more other purchase rights at a rate equal to Twenty-Five Thousand Dollars
($25,000) worth of Common Stock (determined on the basis of the Fair Market
Value of such stock on the date or dates of grant) for each calendar year
such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase right
of a Participant does not accrue for a particular Purchase Period, then the
payroll deductions which the
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Participant made during that Purchase Period with respect to such purchase
right shall be promptly refunded.
D. In the event there is any conflict between the provisions of
this article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. TERM OF THE PLAN
Unless sooner terminated by the Board, the Plan shall terminate
upon the EARLIEST of (i) the last business day in May 2005, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on
which all purchase rights are exercised in connection with a Corporate
Transaction. No further purchase rights shall be granted or exercised, and
no further payroll deductions shall be collected, under the Plan following
its termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at any
time to become effective immediately following the close of any Purchase
Period. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan, except for permissible adjustments in the event of
certain changes in the Corporation's capitalization or (ii) materially modify
the requirements for eligibility to participate in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any
right to continue in the employ of the Corporation or any Corporate Affiliate
for any period of specific duration or interfere with or otherwise restrict
in any way the rights of the Corporation (or any Corporate Affiliate
employing such person) or of the Participant, which rights are hereby
expressly reserved by each, to terminate such person's employment at any
time for any reason, with or without cause.
C. The provisions of the Plan shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
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SCHEDULE A
Corporations Participating in
Employee Stock Purchase Plan
Avant! Corporation
Avant! (Europe) Ltd.
Anagram, Inc.
Meta-Software, Inc.
Technology Modeling Associates, Inc.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in the Plan, plus any pre-tax contributions made by
the Participant to any Code Section 401(k) salary deferral plan or any Code
Section 125 cafeteria benefit program now or hereafter established by the
Corporation or any Corporate Affiliate. The following items of compensation
shall NOT be included in Base Salary: (i) all overtime payments, bonuses,
commissions (other than those functioning as base salary equivalents),
profit-sharing distributions and other incentive-type payments and (ii) any
and all contributions (other than Code Section 401(k) or Code Section 125
contributions) made on the Participant's behalf by the Corporation or any
Corporate Affiliate under any employee benefit or welfare plan now or
hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
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 securities immediately prior
to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean Avant! Corporation, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Avant! Corporation which shall by appropriate
action adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and finally priced. Any Corporate Affiliate which
becomes a Participating Corporation after such Effective Time shall designate
a subsequent Effective Time with respect to its employee-Participants.
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I. ELIGIBLE EMPLOYEE shall mean any person who is engaged, on a
regularly-scheduled basis of more than twenty (20) hours per week for more
than five (5) months per calendar year, in the rendition of personal services
to any Participating Corporation as an employee for earnings considered wages
under Code Section 3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan.
The earliest Entry Date under the Plan shall be the Effective Time.
K. 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
selling 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
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.
(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.
(iii) For purposes of the initial offering period which
begins at the Effective Time, the Fair Market Value shall be deemed to be
equal to the price per share at which the Common Stock is sold in the initial
public offering pursuant to the Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by
the Board to extend the benefits of the Plan to their Eligible Employees.
The Participating Corporations in the Plan as of the Effective Time are
listed in attached Schedule A.
O. PLAN shall mean the Corporation's Employee Stock Purchase
Plan, as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the Board or a committee of one
(1) or more Board members appointed by the Board to administer the Plan.
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Q. PURCHASE DATE shall mean the last business day of each
Purchase Period. The initial Purchase Date shall be November 30, 1995.
R. PURCHASE PERIOD shall mean each successive period within the
offering period at the end of which there shall be purchased shares of Common
Stock on behalf of each Participant.
S. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
T. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
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PROXY AVANT! CORPORATION PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 15, 1998
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, 1998
and the Proxy Statement and appoints Gerald C. Hsu and David H. Stanley, 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 46871 Bayside
Parkway, Fremont, California on Friday, May 15, 1998, at 2:00 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
<PAGE>
PLEASE MARK VOTES AS IN THIS EXAMPLE /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES 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.
1. To elect the following directors to serve WITHHOLD
for a term ending upon the 1999 Annual Meeting FOR AUTHORITY
of Stockholders or until their successors are ALL TO VOTE FOR FOR ALL
elected and qualified; except that if Proposal NOMINEES ALL NOMINEES EXCEPT
No. 2 is adopted each director will serve for / / / / / /
the term of the class into which such director
is elected:
NOMINEES: Gerald C. Hsu, Eric A. Brill, Charles / / _______________________
L. St. Clair, Moriyuki Chimura and James Andrews. For all nominees, except for
any nominee(s) whose name is
written in the space
provided above.
2. To approve an amendment to the Company's
Restated Certificate of Incorporation and FOR AGAINST ABSTAIN
Amended and Restated Bylaws providing for the / / / / / /
classification of the Board of Directors into
three classes, with members of each class
serving for staggered terms.
3. To approve an amendment to the Company's FOR AGAINST ABSTAIN
1995 Stock Option/Stock Issuance Plan to increase / / / / / /
the total number of shares of the Company's Common
Stock reserved for issuance thereunder by
1,000,000 shares and to provide for automatic
increases in future years.
4. To approve an amendment to the Company's FOR AGAINST ABSTAIN
Employee Stock Purchase Plan to increase the / / / / / /
number of shares of the Company's Common Stock
available for issuance thereunder by 250,000
shares and to provide for automatic increases
in future years.
5. To ratify the appointment of KPMG Peat FOR AGAINST ABSTAIN
Marwick LLP as the Company's independent / / / / / /
auditors for the fiscal year ending December
31, 1998.
6. 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: __________
