<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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 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:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
AVANT! CORPORATION
46871 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
April 7, 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
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-tear 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
(the "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 7, 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 7, 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 _________ 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.
<PAGE>
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 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: one Class I Director
(Mr. Brill) 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 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 Providing for 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. . . . . __ 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 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.
3
<PAGE>
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. 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 been employed by 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 [TO COME]
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 elected Moriyuki Chimura to the Board
of Directors. On March 31, 1998, the Board of Directors approved an Action by
Written Consent accepting the resignations of Tench Coxe and Y. Eric Cho from
the Board of Directors, and reducing the authorized number of members of the
Board of Directors to five members.
During the year ended December 31, 1997, the Audit Committee of the Board
of Directors met one time. 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 has resigned as a
member of the Board of Directors, it is anticipated that Mr. ________, if
elected as a member of the Board of Directors at the Annual Meeting, will be
appointed to the Audit Committee.
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
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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 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 "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 amendments 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 year may be filled by the Board of Directors to serve for the
remainder of the full term. Moreover, the proposed amendment provides that
directors may be removed with cause only by the affirmative vote of holders of
at least 80% of the voting power of the shares entitled to vote for the election
of directors. See "Proposal No. 1 -- Election
5
<PAGE>
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. 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 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. 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 5,574,497 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 ("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
6
<PAGE>
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 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 (including four officers
and four non-employee directors) were eligible to participate in the Option
Plan.
SECURITIES SUBJECT TO OPTION PLAN. The maximum number of shares of Common
Stock which may be issued over the term of the Option Plan, as amended, is
5,574,497 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-
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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.
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
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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 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 Board
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 Board service from the option grant date.
3. The option will remain exercisable for a 12-month period following the
optionee's termination of service as a Board member 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 Board service.
4. The option shares will become fully vested in the event of a Corporate
Transaction (as defined below) or a Change in Control (as defined below). The
option shares will also become fully vested in the event of the optionee's
cessation of Board service by reason of death or permanent disability.
5. Upon the occurrence of a hostile tender offer, the optionee will have
a 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.
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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.
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
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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
(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 February 27, 1998 was $14.00 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.
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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-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
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the excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
Special provisions of the 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.
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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.
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 (including four executive officers) 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)
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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 closing price of the Common Stock on The
Nasdaq National Market. The market value of the Common Stock on February 27,
1998 was $14.00 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.
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.
15
<PAGE>
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.
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.
16
<PAGE>
-- 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.
17
<PAGE>
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) The number of shares of Common Stock deemed outstanding 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.
(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
18
<PAGE>
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 joining the Board of Directors of the Company in November 1996,
Mr. Brill 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 and Y. Eric
Cho 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 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 St. Clair, a member of the Company's Board of
Directors, received aggregate payments of $173,800 from the Company and its
subsidiaries 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,
Chief Executive Officer and Chairman of the Board of Directors, an aggregate of
$700,000. Mr. Hsu repaid this loan in 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.
19
<PAGE>
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 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 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.
20
<PAGE>
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.
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:
21
<PAGE>
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 not 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, and did, make such determination not later than 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.
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
22
<PAGE>
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 Committee will defer any decision on
whether to limit the dollar amount of all other compensation payable to the
Company's executive officers to the $1 million cap. The Board of Directors
currently does not have a Compensation Committee meeting the requirements of
Section 162(m), but such a committee held office throughout the year 1997.
Board Of Directors
Gerald C. Hsu
Eric A. Brill
Charles L. St. Clair
Moriyuki Chimura
23
<PAGE>
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
<TABLE>
<CAPTION>
AVNT CUMULATIVE TOTAL RETURN
--------------------------------------------------------------------------------------
6/07/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVANT! CORPORATION 100 128 156 73 91 88 113 120 102 122 110 63
NASDAQ STOCK MARKET (U.S.) 100 108 121 123 128 139 144 151 143 169 197 185
NASDAQ COMPUTER & DATA PROCESSING 100 111 121 127 133 148 151 157 145 186 204 192
</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.
24
<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
Compensation Committee Report and Stock Performance Graph are not deemed filed
with the Securities and Exchange Commission and shall not be deemed incorporated
by reference into any of those prior filings or into any future filings made by
the Company under those statutes.
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 $100,000 for
services rendered in all capacities to the Company and its subsidiaries for that
fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------
NUMBER OF
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS ($)(1) OPTIONS (#) (2) COMPENSATION ($)
- --------------------------- ---- ------------ ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Gerald C. Hsu. . . . . . . . . . . . . . . . . . . . . .1997 $350,000 $800,000 800,000 --
President, Chief Executive Officer and . . . . . . . .1996 250,000 350,000 175,000 --
Chairman of the Board of Directors
Y. Eric Cho (3). . . . . . . . . . . . . . . . . . . . .1997 166,666.60 290,501.88 -- --
Senior Vice President of Corporate . . . . . . . . . .1996 120,000 237,491 20,000 --
Operations and Director
John P. Huyett (4) . . . . . . . . . . . . . . . . . . .1997 170,000 90,000 8,000 4,750 (5)
CEO Staff-Finance, Treasurer and.. . . . . . . . . . .1996 200,000 30,000 20,000 4,770 (5)
Principal Accounting Officer
</TABLE>
(1) Amounts in this column include amounts earned in the stated year but not
yet paid or paid in the subsequent year. Also includes amounts deferred
under the 401(k) plan.
(2) The Company did not grant any stock appreciation rights or make any long-
term incentive payments during the years covered by the table.
(3) Mr. Cho resigned from his position as the Company's Senior Vice President
of Corporate Operations on October 31, 1997.
(4) Mr. Huyett resigned from his position as the Company's CEO Staff-Finance,
Treasurer and Principal Accounting Officer on February 28, 1998. On
January 12, 1998, the Board of Directors appointed Linda Chinn to serve as
the Company's Vice President, Finance and Administration.
(5) Represents matching contributions by the Company to the 401(k) Plan in 1996
and 1997.
25
<PAGE>
The following table contains information concerning the stock option grants
made to each of the Named Officers in 1997. No stock appreciation rights were
granted to these individuals during such year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM (5)
OPTIONS EMPLOYEES IN EXERCISE PRICE ------------------------------
NAME GRANTED (#) 1997 ($/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 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.
26
<PAGE>
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 UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
SHARES (MARKET PRICE AT UNEXERCISED OPTIONS AT FY-END (#) OPTIONS AT FY-END ($) (1) (3)
ACQUIRED ON EXERCISE LESS --------------------------------- ---------------------------------
NAME EXERCISE (#) 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.
27
<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
S-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 L. 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 L. 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 7, 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.
28
<PAGE>
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 and only by 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. 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 and only by 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.
31
<PAGE>
PROXY AVANT! CORPORATION
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 L. 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 / SEE REVERSE /
/ SIDE /
<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
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 for a term ending upon the 1999
Annual Meeting of Stockholders or until their successors are elected and
qualified; except that if Proposal 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 and Moriyuki
Chimura.
FOR ALL NOMINEES / / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES / /
/ / _______________________________________________
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 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.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve an amendment to the Company's 1995 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.
FOR AGAINST ABSTAIN
/ / / / / /
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.
FOR AGAINST ABSTAIN
/ / / / / /
5. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
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: __________
