<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material under Rule 240.14a-12
AVANT! CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/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:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[AVANT! LOGO]
AVANT! CORPORATION
46871 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
May 17, 2000
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 Tuesday, June 13, 2000, at 9:00 a.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 JUNE 13, 2000
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 Tuesday,
June 13, 2000, at 9:00 a.m. for the following purposes:
1. To elect five members of the Board of Directors of the Company.
2. To approve an amendment to the Company's 1995 Stock Option/Stock
Issuance Plan to increase the total number of shares of Common Stock
reserved for issuance thereunder by 2,000,000 shares;
3. To ratify the appointment of KPMG LLP as the Company's independent
public accountants for the year ending December 31, 2000; and
4. 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 May 5, 2000 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,
Charles St. Clair
SECRETARY
Fremont, California
May 17, 2000
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 JUNE 13, 2000
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 Tuesday, June 13, 2000, at 9:00 a.m., and
at any adjournment or postponement of the Annual Meeting. These proxy materials
were first mailed to stockholders on or about May 19, 2000.
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 May 5, 2000, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 38,901,923
shares of Common Stock outstanding. Each stockholder of record on May 5, 2000 is
entitled to one vote for each share of Common Stock held by such stockholder on
that date. 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 amendment to the Company's 1995 Stock
Option/Stock Issuance Plan (the "Option 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 3. Ratification of the appointment of KPMG LLP as the Company's
independent public accountants for the year ending December 31, 2000 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
<PAGE>
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.
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 (the "Board") and which will be voted as you direct
on your proxy when properly completed. In the event no directions are specified,
all shares represented by duly signed and timely submitted proxies will be voted
for the Nominees of the Board (as set forth in Proposal No. 1), for Proposal
No. 2, for Proposal No. 3 and in the discretion of the proxy holders as to other
matters that may properly come before the Annual Meeting. You also may revoke or
change your proxy at any time before the Annual Meeting by sending 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, which notice must
be received by the Secretary of the Company before the beginning of the Annual
Meeting. You also may automatically revoke your proxy by attending the Annual
Meeting and voting in person.
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 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 (the
"Nominees"), their ages as of April 1, 2000, 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 to fill the vacancy. As of the date of this Proxy Statement, the
Company 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.
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<CAPTION>
POSITIONS AND OFFICES HELD
NOMINEES AGE WITH THE COMPANY
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<S> <C> <C>
Gerald C. Hsu......................... 54 President, Chief Executive Officer and
Chairman of the Board of Directors
Charles L. St. Clair(1)(2)............ 69 Director and Secretary
Moriyuki Chimura...................... 51 Director and CEO Staff
Dan Taylor(2)......................... 61 Director
Kenneth Tai(1)........................ 49 Director
</TABLE>
- ------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
MR. HSU joined the Company in March 1994 as President, Chief Executive
Officer and a director, and has been Chairman of the Board of Directors since
November 1995. From July 1991 to March 1994, Mr. Hsu was employed by Cadence
Design Systems, Inc., an electronic design automation company, where his last
position was President and General Manager of the IC Design Group. 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. In April 1997, the
Santa Clara County District Attorney filed a criminal complaint alleging felony
level offenses against Mr. Hsu, the Company and certain other of the Company's
current and former employees for allegedly violating various California Penal
Code sections relating to the theft of trade secrets. In December 1998, the
District Attorney voluntarily dismissed the criminal complaint and obtained a
grand jury indictment for the same violations alleged in the April 1997 criminal
complaint, as well as for violations of certain state securities laws. Mr. Hsu
pleaded not guilty. In April 2000, the judge presiding over the criminal action
dismissed the case against all criminal defendants based on the court's finding
that the defendants had been denied due process because the District Attorney
had failed to record and produce a record of all communications and testimony
during the grand jury proceedings. The District Attorney's office has announced
its intention to appeal the court's decision.
MR. ST. CLAIR served the Company as Director of Administration at its RTP
Facility in Durham, North Carolina, 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 and has served as Secretary of the Company
since September 1998. 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. St. Clair is a member of the Audit Committee and
the Compensation Committee.
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<PAGE>
MR. CHIMURA has served as CEO Staff since May 2000. Prior to that he served
as Executive Operating Officer, Engineering, as well as Executive Staff,
Customers. Previously, he was General Manager of Galax!, Inc., a subsidiary of
the Company ("Galax!"), from April 1998 and has served as a director of the
Company since March 17, 1998. Prior to joining Galax!, Mr. Chimura served as
President of Panasonic Semiconductor Development Company, a division of
Matsushita Semiconductor Corporation of America and a developer of
microcontroller systems and ASIC products, since April 1997. From April 1992 to
March 1997, Mr. Chimura served as General Manager of the Semiconductor Group of
Matsushita Electronics Corporation. Mr. Chimura holds an M.S. in Electrical
Engineering from Gifu University.
MR. TAYLOR has been a director of the Company since January 1999.
Mr. Taylor, a retired Federal employee, served as a natural and cultural
resource manager for the U.S. National Park Service from 1968 to 1995.
Mr. Taylor lectured in Geography at the University of Hawaii prior to joining
Avant! as a director. Mr. Taylor holds an M.A. degree in Geography from San
Francisco State University. He became a member of the Compensation Committee on
April 1, 1999. He also served as a member of the Audit Committee from April 1,
1999 to November 29, 1999.
MR. TAI has been a director of the Company since December 1999. Mr. Tai has
been the Chairman of InveStar Capital, Inc., a venture capital management firm
based in Taiwan, since March 1996. Since April 1998, he also has served as the
Chairman of DigiTimes Publication, Inc., a daily newspaper addressing technology
issues in Taiwan. Mr. Tai is also a member of Forefront Venture Partners L.P., a
limited partnership that invests primarily in technology start-up companies.
From January 1995 to February 1998, Mr. Tai served as the Chairman of interNex
Information Services, Inc., a California-based Internet service provider.
Mr. Tai is currently a director of AltiGen Communications, Inc. and over ten
private companies in the semiconductor, software and telecommunication fields
both in the United States and in Taiwan. Mr. Tai was a co-founder of the Acer
Group, and held various positions with the Acer Group, including Vice President
of Worldwide Sales and Marketing, and President of the Acer Group USA from 1990
to March 1993. Mr. Tai holds a B.S. degree in Electrical Engineering from the
National Chiau Tung University in Taiwan and an MBA from Tam-kang University in
Taiwan. Mr. Tai has served as a member of the Audit Committee since
December 15, 1999.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the year ended December 31, 1999, the Board held six meetings and
acted by written consent on fourteen occasions. 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 and
(ii) the total number of meetings held by all Committees of the Board on which
each such director served. The Board has two standing committees: the Audit
Committee and the Compensation Committee.
During the year ended December 31, 1999, the Audit Committee of the Board
met one time. The Audit Committee reviews, acts on and reports to the Board 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. Currently, the members of the Audit Committee are
Mr. St. Clair and Mr. Tai, both of whom are independent.
During the year ended December 31, 1999, the Compensation Committee of the
Board met four times. The Compensation Committee is authorized to administer the
1995 Stock Option/Stock Issuance Plan, review the performance and set the
compensation of the Chief Executive Officer of the Company, approve the
compensation of the executive officers of the Company and review the
compensation programs for other key employees, including salary and cash bonus
levels, as set by the Chief Executive Officer. Currently, the members of the
Compensation Committee are Mr. St. Clair and Mr. Taylor.
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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. Mr. St. Clair receives compensation for consulting services to the
Company in the amount of $6,000 per year.
Non-employee Board members are eligible for option grants under the
Automatic Option Grant Program included in the Option Plan. Under this program,
each individual who first becomes a non-employee Board member after the date of
the Company's initial public offering receives an option grant for the purchase
of 20,000 shares on the date such individual joins the Board, if the individual
has not been previously employed by the Company. In addition, at each annual
meeting, every individual who continues to serve and has served as a
non-employee Board member for at least six months prior to the annual meeting is
entitled to an additional option grant to purchase 5,000 shares of Common Stock.
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 Option Plan. Employee-directors also are eligible to
participate in the Company's Employee Stock Purchase Plan. See "Description of
the Option Plan."
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED HEREIN.
PROPOSAL NO. 2
AMENDMENT OF THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN.
The Option Plan was adopted by 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 that may be issued under the Option Plan by two million shares to a
total of 7,459,017 shares.
The Company established the Option Plan as a successor to the 1993 Stock
Option/Stock Issuance 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 proposed amendment to the Option Plan is necessary
to provide the Company with a sufficient reserve of Common Stock for future
option grants needed to attract and retain employees, directors and consultants
of outstanding ability.
The principal terms and provisions of the Option Plan as modified by the
recent amendment are summarized below. The summary, however, is not intended to
be a complete description of all the terms of the Option Plan. A copy of the
Option Plan will be furnished by the Company to any stockholder upon written
request to the Corporate Secretary at the Company's executive offices in
Fremont, California.
DESCRIPTION OF THE OPTION PLAN
STRUCTURE. The Option Plan is divided into three separate components:
- the Discretionary Option Grant Program under which employees, non-employee
directors and consultants may, at the discretion of the Board 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;
- 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
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<PAGE>
- the Automatic Option Grant Program, under which option grants will be made
automatically 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 currently
consists of two 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. Option grants may be
made by the Committee, or by the Board or secondary committee to the extent
acting as plan administrator.
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. Incentive stock options that which satisfy
the requirements of section 422 of the Internal Revenue Code (the "Code") 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.
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
7,459,017 shares. Under the Option Plan, 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, the shares subject to the portion of the option not so exercised will be
available for subsequent option grants under the Option Plan.
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: (a) 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); (b) 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 (c) 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 executive officers of the Company in the event of a hostile take-over of
the Company.
6
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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 that are assumed or replaced in the Corporate Transaction and do
not otherwise accelerate at that time will automatically accelerate (and any of
the Company's outstanding repurchase rights which do not otherwise terminate at
the time of the Corporate Transaction will automatically terminate and the
shares of Common Stock subject to those terminated rights will immediately vest
in full) in the event the optionee's service should subsequently terminate by
reason of an involuntary termination within 18 months following the effective
date of such Corporate Transaction. Any options so accelerated will remain
exercisable for fully-vested shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one-year period measured from the
effective date of the involuntary termination.
Upon the occurrence of either 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 or the Committee has the discretion to accelerate outstanding options
and terminate the Company's outstanding repurchase rights. The Board or the
Committee also has the discretion to terminate the Company's outstanding
repurchase rights upon the subsequent termination of the optionee's service
within a specified period following the Change in Control. 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 May 1, 2000 was $14.44 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.
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Each outstanding option assumed in connection with a Corporate Transaction
will be appropriately adjusted to apply and pertain to the number and class of
securities which would otherwise have been issued, in consummation of such
Corporate Transaction, to the option holder had the option been exercised
immediately prior to the Corporate Transaction. Appropriate adjustments will
also be made to the option price payable per share and to the class and number
of securities available for future issuance under the Option Plan on both an
aggregate and a per-participant basis.
OPTION PLAN AMENDMENTS. The Board may amend or modify the Option Plan in
any and all respects whatsoever. However, the Board may not, without the
approval of the Company's stockholders, (i) materially increase the maximum
number of shares issuable under the Option Plan, the maximum number of options
that may be granted to one individual per year or the number of options granted
to non-employee directors under the Automatic Option Grant Program (except in
connection with certain changes in capitalization) or (ii) materially modify the
eligibility requirements for option grants. Unless sooner terminated by the
Board, the Option Plan will in all events terminate on March 31, 2005. Any
options outstanding at the time of such termination will remain in force in
accordance with the provisions of the instruments evidencing such grants.
DISCRETIONARY OPTION GRANT PROGRAM
EXERCISE OF THE OPTION. 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 authorizing a Company loan to the optionee, or 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.
EXERCISE PRICE. The option exercise price per share in the case of an
Incentive Option may not be less than 100% of the fair market value of the
Common Stock on the grant date and, in the case of a non-statutory option, 85%
of the fair market value of the Common Stock on the grant date.
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
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with respect to those shares at any time, thereby accelerating the vesting of
the shares subject to the canceled rights.
LIMITED STOCK APPRECIATION RIGHTS. One or more officers of the Company
subject to the short-swing profit restrictions of the federal securities laws
may, at the discretion of the Board of Directors or Committee, be granted
limited stock appreciation rights in connection with their option grants under
the Option Plan. Any option with such a limited stock appreciation right in
effect for at least six months will automatically be canceled, to the extent
exercisable for one or more vested option shares, upon the successful completion
of a hostile tender offer for more than 50% of the Company's outstanding voting
stock. In return, the officer will be entitled to a cash distribution from the
Company in an amount per canceled option share equal to the excess of (i) the
highest price per share of Common Stock paid in the tender offer over (ii) the
option exercise price.
TANDEM STOCK APPRECIATION RIGHTS. The Board of Directors or Committee is
authorized to issue tandem stock appreciation rights in connection with option
grants under the Discretionary Option Grant Program. Tandem stock appreciation
rights provide the holders with the right to surrender their options for an
appreciation distribution from the Company equal in amount to the excess of
(i) the fair market value of the vested shares of Common Stock subject to the
surrendered option on the option surrender date over (ii) the aggregate exercise
price payable for such shares. Such appreciation distribution may, at the
discretion of the Board of Directors or Committee, be made in cash or in shares
of Common Stock.
AUTOMATIC OPTION GRANT PROGRAM.
Under the Automatic Option Grant Program, non-employee Board members will
receive option grants at specified intervals over their period of Board service.
- Each individual who becomes a non-employee Board member, whether through
election by the stockholders or appointment by the Board, automatically
receives, at the time of the initial election or appointment, an option to
purchase 20,000 shares of Common Stock, provided such individual has not
been previously employed by the Company.
- On the date of each annual stockholders 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 is subject to the
following terms and conditions:
(i) The option price per share must be equal to the fair market value per
share of Common Stock on the automatic grant date.
(ii) Each option is to have a maximum term of ten years from the grant date.
(iii) Each automatic option grant is immediately exercisable for all of the
option shares; the shares purchased under the option are subject to repurchase
at the original exercise price in the event the optionee's service should cease
prior to full vesting. With respect to each initial grant, the repurchase right
lapses and the options vest in four equal annual installments from the grant
date. Each annual grant vests upon the optionee's completion of one year of
service from the option grant date.
(iv) The option remains exercisable for a 12-month period following the
optionee's termination of service for any reason and may be exercised following
the Board member's death by the personal representatives of the optionee's
estate or the person to whom the grant is transferred by the optionee's will or
the laws of inheritance. In no event, however, may the option be exercised after
the expiration date of the option term. During the applicable exercise period,
the option may not be exercised for more than the number of shares (if any) for
which it was exercisable at the time of the optionee's cessation of service.
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(v) The option shares become fully vested in the event of a Corporate
Transaction or a Change in Control. The option shares also fully vest in the
event of the optionee's cessation of service by reason of death or permanent
disability.
(vi) 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 (a) the highest reported price per share of Common Stock
paid in the tender offer over (b) the option exercise price payable per share.
(vii) The remaining terms and conditions of the option generally conform to
the terms applicable to Discretionary Option Grants.
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 or the Committee has 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.
OPTIONS OUTSTANDING AND SHARES REMAINING SUBJECT TO THE OPTION PLAN.
As of April 30, 2000, options totaling 4,515,364 shares were outstanding
under the Option Plan, 640,470 shares remained available for future option
grants, and 303,213 shares had been issued upon exercise of options granted
under the Option Plan. The expiration dates for all such options range from May
2000 to March 2010. In addition, in connection with numerous corporate
acquisitions, the Company assumed the outstanding option plans and options of
the acquired corporations. Options covering approximately 1,417,341 shares of
Common Stock were outstanding under such plans as of April 30, 2000.
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 1999. No grants have been made
with respect to the additional 2,000,000 shares for which approval is requested
at the Annual Meeting.
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FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
GRANTED UNDER THE OPTION PLAN.
Options granted under the Option Plan may be either incentive stock options
that satisfy the requirements of Section 422 of the Code or non-statutory
options that are not intended to meet such requirements. The federal income tax
treatment for the two types of options differs as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of disposition. For federal tax purposes, dispositions are divided into
two categories: (i) qualifying and (ii) disqualifying. The optionee will make a
qualifying disposition of the purchased shares if the sale or other disposition
of such shares is made after the optionee has held the shares for more than two
years after the grant date of the option and more than one year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result. Upon a qualifying disposition of the
shares, the optionee will recognize long-term capital gain in an amount equal to
the excess of (i) the amount realized upon the sale or other disposition of the
purchased shares over (ii) the exercise price paid for such shares. If there is
a disqualifying disposition of the shares, then generally the excess of (i) the
fair market value of those shares on the date the option was exercised over
(ii) the exercise price paid for the shares will be taxable as ordinary income.
Any additional gain recognized upon the disposition will be a capital gain. If
the optionee makes a disqualifying disposition of the purchased shares, then the
Company will generally be entitled to an income tax deduction for the taxable
year in which such disposition occurs equal to the amount of ordinary income
recognized by the optionee. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the excess
of the fair market value of the purchased shares on the exercise date over the
exercise price paid for the shares, and the optionee will be required to satisfy
the tax withholding requirements applicable to such income. 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.
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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. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company is asking the stockholders to ratify the appointment of KPMG LLP
as the Company's independent public accountants for the year ending
December 31, 2000. KPMG has served as the Company's independent public
accountants since June 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 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 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 LLP TO SERVE AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE YEAR ENDING DECEMBER 31, 2000.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock as of April 1, 2000 for (a) each person who
beneficially owns more than 5% of our outstanding Common Stock, (b) each of our
directors, (c) each of the named executive officers, and (d) all executive
officers and directors as a group. Beneficial ownership is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and includes
all shares over which the beneficial owner exercises voting or investment power.
Options to purchase Common Stock that are presently exercisable or exercisable
within 60 days of April 1, 2000 are considered outstanding for the purpose of
calculating percentage ownership and are included in the total number of shares
beneficially owned for the person holding those options. Except as otherwise
indicated, and subject to community property laws where applicable, the Company
believes, based on information provided by these persons, that the persons named
in the table below have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them:
<TABLE>
<CAPTION>
BENEFICIAL OWNER(1) NUMBER OF SHARES % OF CLASS(2)
- ------------------- ---------------- -------------
<S> <C> <C>
T. Rowe Price and Associates(3)............................. 3,784,100 9.7%
Wellington Management Co., LLP(4)........................... 2,938,400 7.5
Credit Suisse Asset Management(5)........................... 2,496,936 6.4
Gerald C. Hsu(6)............................................ 1,239,285 3.1
Moriyuki Chimura(7)......................................... 43,025 *
Charles St. Clair(8)........................................ 38,741 *
Dan Taylor.................................................. -- --
Kenneth Tai................................................. -- --
Noriko Ando(9).............................................. 199,332 *
Sam Chang(10)............................................... 22,667 *
Stephen Wuu(11)............................................. 479,994 1.2
All directors and executive officers as a group
(8 persons)(12)........................................... 2,023,044 5.0
</TABLE>
- ------------------------
* Less than 1.0% 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.
(2) Based on 38,991,164 shares of Common Stock outstanding as of April 1,
2000.
(3) Based on Schedule 13G/A filed with the Securities and Exchange
Commission on February 4, 2000, and other information obtained by the Company,
T. Rowe Price Associates, Inc. held sole voting power as to 303,200 such shares
and sole dispositive power as to 3,784,100 shares. T. Rowe Price
Associates, Inc.'s address is 100 East Pratt Street, Baltimore, Maryland 21202.
(4) Based on Schedule 13G/A filed with the Securities and Exchange
Commission on February 11, 2000, and other information obtained by the Company,
Wellington Management Co., LLP, held shared voting power as to 2,905,400 shares
and shared dispositive power as to 2,938,400 shares. Wellington Management Co.,
LLP's address is 75 State Street, Boston, Massachusetts 02109.
(5) Based on Schedule 13G/A filed with the Securities and Exchange
Commission on December 31, 1999, and other information obtained by the Company,
Credit Suisse Asset Management, LLC, held sole voting power as to 2,496,936 and
sole dispositive power as to 2,496,936 shares. Credit Suisse Asset Management
LLC's address is 153 East 53rd Street, New York, New York 10022.
(6) Includes options exercisable into 852,082 shares of Common Stock under
the Option Plan as of May 31, 2000.
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(7) Includes options exercisable into 41,666 shares of Common Stock under
the Option Plan as of May 31, 2000.
(8) Includes options exercisable into 36,836 shares of Common Stock under
the Option Plan as of May 31, 2000.
(9) Includes options exercisable into 78,332 shares of Common Stock under
the Option Plan as of May 31, 2000.
(10) Includes options exercisable into 21,667 shares of Common Stock under
the Option Plan as of May 31, 2000.
(11) Includes options exercisable into 63,074 shares of Common Stock under
the Option Plan as of May 31, 2000. Also includes 31,250 shares indirectly owned
by Mr. Wuu's spouse.
(12) Includes options exercisable into 1,093,657 shares of Common Stock under
the Option Plan as of May 31, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1999, the Company paid directly the legal fees of Gerald C. Hsu in the
amount of $275,480 and Stephen Tzyh-Lih Wuu in the amount of $604,596 in
connection with various criminal matters involving the executives and certain
litigation matters involving the Company, including the litigation matter
against Cadence Design Systems, Inc.
During 1997 and 1996, respectively, the Company entered into joint ventures
with Maingate Electronics, KK ("Maingate") of Japan and DavanTech Co., Ltd,
("DavanTech") of Korea. The joint ventures were formed for the purpose of
consolidating distribution in their respective countries. The Company has
ownership of 35% and 39.6% of Maingate and DavanTech, respectively, and accounts
for them by the equity method. These investments are included in other assets,
and the Company's share of equity earnings are included in the Statement of
Earnings as equity income (losses) from unconsolidated subsidiaries. Gerald C.
Hsu, the Company's Chairman of the Board, President and Chief Executive Officer,
owns 40% of Maingate and 2.6% of DavanTech. Noriko Ando, the Company's Executive
Operating Officer, Operations, owns 2% of Maingate. Other than possible
appreciation of their investments in Maingate and DavanTech, neither Ms. Ando
nor Mr. Hsu has derived, directly or indirectly, any remuneration as a result of
the agreements between the Company and either Maingate or DavanTech. 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 recognizes software license revenue sold to these joint ventures
when cash is collected by the joint ventures from the end users or by the
Company. Revenues from sales to Maingate and DavanTech during 1999 were
$16.8 million and $2.1 million, respectively, up from $14.3 million and
$0.9 million, respectively, in 1998. At December 31, 1999, due from affiliates
included trade receivables of $2.7 million from Maingate and $1.9 million from
DavanTech, of which a $1.0 million was a loan to DavanTech made during 1998. At
December 31, 1998, due from affiliates included trade receivables of
$7.9 million from Maingate and a $1.0 million loan to DavanTech.
During 1998, the Company invested $10.0 million in Forefront Venture
Partners L.P. ("Forefront"), a limited partnership that invests primarily in
technology start-up companies. This investment represented 53.9% ownership of
the partnership. The partnership is controlled and managed by a General
Partnership; Kenneth Tai, a director of the Company, is a member of this
partnership. The Company accounts for this investment by the equity method
because the Company does not control Forefront. During 1999, the Company
recorded $5.7 million equity income related to Forefront, which consisted
primarily of
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unrealized appreciation of the venture capital investments which occurred in the
fourth quarter. The Company believes that, due to the nature of venture capital
investing, its investment in Forefront will be subject to significant
fluctuation which could result in the Company recording significant income and
losses in the future.
EMPLOYMENT CONTRACTS AND ADDITIONAL CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into an employment agreement with Mr. Hsu. Under the
terms of the agreement, the Company will pay Mr. Hsu an annual salary of no less
than $600,000. The Company may terminate Mr. Hsu's employment at any time and
for any reason upon 30 days' advance notice. In the event of an involuntary
termination, Mr. Hsu is entitled to a cash payment equal to three times the
amount of his annual base salary in effect on the date of the termination. In
addition, in the event of an involuntary termination, any outstanding options
held by Mr. Hsu will automatically vest in full, and any repurchase rights of
the Company in connection with any Common Stock previously issued to Mr. Hsu
will terminate.
"Involuntary termination," as defined in Mr. Hsu's employment agreement,
means a termination of employment by reason of (i) Mr. Hsu's involuntary
dismissal for reasons other than misconduct, (ii) Mr. Hsu's voluntary
resignation within six months after a "change in control" or "a corporate
transaction" (as defined in the Company's 1995 Stock Option/Stock Issuance Plan)
or (iii) Mr. Hsu's voluntary resignation within six months after a change in his
position or title with the Company which materially reduces his level of
responsibility, a reduction by more than 15% in Mr. Hsu's level of compensation
or a relocation of Mr. Hsu's place of employment by more than 50 miles.
In addition, the Board of Directors or the Compensation Committee has the
authority under the Option Plan to accelerate the vesting of shares of Common
Stock subject to outstanding options held by the Chief Executive Officer and the
Company's other executive officers under that Plan. See "Description of the
Option Plan."
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REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") has the authority to establish
the level of base salary payable to the Chief Executive Officer ("CEO"), to
administer the Option Plan with respect to executive officers, and to supervise
the administration of the Company's Employee Stock Purchase Plan. In addition,
the Committee has the responsibility for approving the individual bonus program
to be in effect for the CEO. The CEO has the exclusive authority to establish
the level of base salary payable to all other employees of the Company,
including all executive officers, subject to the approval of the Committee. In
addition, the CEO has the responsibility for approving the bonus programs to be
in effect for all other executive officers and other key employees each fiscal
year, subject to the approval of the Committee.
For 1999, 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.
GENERAL COMPENSATION POLICY. The Company's compensation 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. The CEO's objective is 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.
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, based on 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 1999, the
Company exceeded its performance targets. Actual bonuses paid reflect an
individual's accomplishment of both corporate and individual objectives, with
greater weight being given to achievement of corporate rather than individual
objectives.
LONG-TERM INCENTIVE COMPENSATION. During 1999, the Company granted options
to Moriyuki Chimura and Sam Chang under the Option Plan. Generally, a
significant grant is made in the year that an officer commences employment, and
no grant is made in the second year. Generally, the size of each grant is set at
a level that the CEO and the Committee deem 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 employed by the Company, and then only if the market price of
the Company's Common Stock appreciates over the option term.
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<PAGE>
CEO COMPENSATION.
1999 SALARY. The 1999 annual base salary for Mr. Hsu, the Company's CEO,
was established by the Committee in March 1999 at $800,000, compared to $600,000
in 1998. The Committee awarded this salary increase based on the attainment by
the Company and Mr. Hsu of performance goals set by the Compensation Committee
on April 8, 1999. These goals included significant increases in the Company's
revenues, net income and diluted earnings per share from 1997 to 1998, and
Mr. Hsu's efforts in 1999 toward new product development, strategic business
combinations and procedures to reduce costs and improve productivity.
1999 CASH BONUS. In February 1999, the Committee awarded the CEO a cash
bonus of $1.6 million for his services in 1998. The Committee awarded this bonus
based on the attainment by the Company and Mr. Hsu of the performance goals
described above.
1999 STOCK OPTIONS. In February 2000, the Committee granted the CEO options
to purchase 300,000 shares of the Company's Common Stock. The Committee made
this grant pursuant to a written consent of the Committee in April 1999, which
authorized the award upon the attainment by the Company and Mr. Hsu of the
performance goals described above. The exercise price of these stock options is
the closing price of the Company's Common Stock on April 8, 1999.
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 Option Plan
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 Common Stock on the
grant date will not be subject to the $1 million limitation, provided that the
Compensation Committee meets certain requirements. The Board of Directors
currently does not have a Compensation Committee meeting the requirements of
Section 162(m). The cash compensation to be paid to the Company's Chief
Executive Officer for the 1999 fiscal year exceeds the $1 million limit, and the
Committee has decided not to limit the dollar amount of cash compensation
payable to the Company's Chief Executive Officer or other executive officers to
$1 million.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Mr. Charles St. Clair and Mr. Dan Taylor served on the
Compensation Committee. Mr. St. Clair was an officer of the Company but was not
an employee during 1999. 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.
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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, 1999 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
or 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 55 MONTH CUMULATIVE TOTAL RETURN AMONG AVANT! CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE NASDAQ COMPUTER AND DATA PROCESSING
INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVANT! CORPORATION NASDAQ STOCK MARKET (U.S.) NASDAQ COMPUTER & DATA PROCESSING
<S> <C> <C> <C>
6/95 100 100 100
12/95 73 123 127
12/96 120 151 157
12/97 63 185 192
12/98 60 260 344
12/99 44 436 692
</TABLE>
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.
18
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following Summary Compensation Table sets forth the compensation earned
by the Company's Chief Executive Officer and the three other most highly
compensated executive officers who were serving as such during 1999
(collectively, the "Named Officers"), each of whose salary and bonus for 1999
exceeded $100,000 for services rendered in all capacities to the Company and its
subsidiaries for that fiscal year. Salary and bonus figures include amounts
deferred under the 401(k) plan as well as amounts earned in the stated year but
not yet paid or paid in the subsequent year. The Company did not grant any stock
appreciation rights or make any long-term incentive payments during the years
covered by the table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- -------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gerald C. Hsu.......................... 1999 $800,000 $1,600,000 300,000 $5,000(1)
President, Chief 1998 600,000 1,200,000 250,000 5,000(1)
Executive Officer and 1997 350,000 800,000 800,000 --
Chairman
Moriyuki Chimura(2).................... 1999 250,000 400,000 80,000 --
1998 150,000 50,000 80,000 --
Stephen Tzyh-Lih Wuu................... 1999 250,000 400,000 -- 5,000(1)
1998 197,917 -- 10,000 4,531(1)
1997 150,000 180,000 30,000 4,750(1)
Noriko Ando............................ 1999 250,000 500,000 -- --
1998 158,993(3) 16,800(4) 68,000 --
1997 122,303(5) 23,100(6) 30,000 --
Sam Chang(7)........................... 1999 166,667 100,000 80,000 5,000(1)
</TABLE>
- ------------------------
(1) Represents amounts contributed to the executive's 401k plan account.
(2) Mr. Chimura's employment with the Company began April 1, 1998.
(3) Represents $9,595 paid to Ms. Ando by Avant! Japan and $149,398 paid to
Ms. Ando by Maingate Electronics, KK, a joint venture affiliated with the
Company of which the Company owns approximately 35% and Gerald C. Hsu owns
approximately 40%.
(4) All of this amount was paid to Ms. Ando by Maingate.
(5) Represents $6,807 paid to Ms. Ando by Avant! Japan and $115,496 paid to
Ms. Ando by Maingate.
(6) All of this amount was paid to Ms. Ando by Avant! Japan.
(7) Mr. Chang's employment with the Company began April 26, 1999.
19
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED APPRECIATION FOR OPTION
UNDERLYING TO TERM(5)
OPTIONS EMPLOYEES EXERCISE ---------------------------
NAME GRANTED(2) IN 1999(3) PRICE(4) EXPIRATION DATE 5% 10%
- ---- ---------- ---------- -------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gerald C. Hsu(1).......... 300,000 25.4% $15.1875 March 15, 2010 $2,865,399 $7,261,488
Moriyuki Chimura.......... 80,000 6.8 15.125 December 14, 2009 760,962 1,928,428
Sam Chang................. 80,000 6.8 14.375 April 26, 2009 723,228 1,832,803
</TABLE>
- ------------------------
(1) The options were granted to Mr. Hsu on February 8, 2000 pursuant to the
attainment of performance goals established by the Company's Compensation
Committee on April 8, 1999. The exercise price is the closing price of the
Company's Common Stock on April 8, 1999.
(2) 25% of the option shares vest after the first 12 months of service to the
Company measured from the Vesting Commencement Date, and the remaining 75%
of the option shares 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.
(3) Based on options to purchase 1,182,456 shares of Common Stock granted in
1999.
(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.
(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.
20
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE NUMBER OF SECURITIES
REALIZED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES (MARKET OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED PRICE AT YEAR-END FISCAL YEAR-END(2)
ON EXERCISE --------------------------- ---------------------------
NAME EXERCISE PRICE)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald C. Hsu...................... 105,208 $488,229 716,667 425,000 $145,834 $187,500
Moriyuki Chimura................... -- -- 33,333 126,667 -- --
Stephen Tzyh-Lih Wuu............... -- -- 52,794 45,198 87,555 66,867
Noriko Ando........................ -- -- 66,724 54,273 168,670 103,303
Sam Chang.......................... -- -- -- 80,000 -- 50,000
</TABLE>
- ------------------------
(1) The amounts reported in this column 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 amounts reported in these columns reflect the amount by which the fair
market value of the Common Stock of the Company on December 31, 1999 ($15.00
per share, which was the closing price on such date as reported on the
Nasdaq National Market), exceeded the exercise price of the option.
------------------------
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 1999 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 1998 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 inadvertently reported one
transaction on his Form 5 for fiscal year 1998 that should have been reported on
a Form 4 for September 1998, Sam Chang filed one Form 3 approximately three
weeks late, and Moriyuki Chimura and Kenneth Tai filed their Forms 5 for fiscal
year 1999 one day late. Mr. Chimura's Form 5 and Mr. Tai's Form 5 reported two
stock option grants and one stock option grant, respectively.
FORM 10-K
The Company will mail without charge, upon written request, a copy of the
Company's Form 10-K report for 1998, including the financial statements,
schedules and list of exhibits. Requests should be sent to Avant! Corporation,
46871 Bayside Parkway, Fremont, California 94538, Attn.: Charles St. Clair,
Secretary.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 2001 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
21
<PAGE>
than February 13, 2001 in order to be included. Such stockholder proposals
should be addressed to Avant! Corporation, 46871 Bayside Parkway, Fremont,
California 94538, Attn.: Charles St. Clair, Secretary.
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/ Gerald C. Hsu
Gerald C. Hsu
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
Fremont, California
May 17, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
22
<PAGE>
AVANT! CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
The Board of Directors recommends a vote FOR each of the nominees listed
below and a vote FOR the other proposals. This Proxy, when properly executed,
will be voted as specified below. This Proxy will be voted FOR the election
of the nominees listed below and FOR the other proposals if no specification
is made.
<TABLE>
<CAPTION>
<S><C>
1. To elect the following directors to serve for a term ending upon For Withhold For All
the 2001 Annual Meeting of Stockholders or until their successors All All Except
are elected and qualified:
/ / / / / /
NOMINEES: 01 Gerald C. Hsu, 02 Charles L. St. Clair,
03 Moriyuki Chimura, 04 Dan Taylor and
05 Kenneth Tai.
___________________________________________________
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 1995 Stock Option/Stock For Against Abstain
Issuance Plan to increase the total number of shares of the
Company's Common Stock reserved for issuance thereunder by / / / / / /
2,000,000 shares.
3. To ratify the appointment of KPMG LLP as the Company's For Against Abstain
independent auditors for the fiscal year ending December 31, 2000.
/ / / / / /
</TABLE>
Dated: ______________________________________, 2000
Signature(s): ____________________________________
___________________________________________________
Please sign exactly as your name(s) appear
on your stock certificate.
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT
IN THE ENCLOSED ENVELOPE.
<PAGE>
PROXY PROXY
AVANT! CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, JUNE 13, 2000
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 June 13, 2000 and
the Proxy Statement and appoints Gerald C. Hsu and Sam Chang, 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 Tuesday, June 13, 2000, at 9:00 a.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)
