SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Check the appropriate box:
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(as permitted by Rule 14a-6(e)(2)
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[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Computer Access Technology 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)
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COMPUTER ACCESS TECHNOLOGY CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 25, 2001
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of COMPUTER ACCESS TECHNOLOGY CORPORATION, a Delaware corporation
(the "Company"), will be held on Thursday, October 25, 2001 at 9:00 AM, local
time, at the Company's principal executive offices located at 2403 Walsh
Avenue, Santa Clara, California 95051 for the following purposes:
1. To elect one Class I director to serve until the third annual meeting
following election or until a successor has been duly elected and
qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
public accountants of the Company for the fiscal year ending December
31, 2001.
3. To approve the Company's Special 2000 Stock Plan.
4. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on August 31, 2001 are
entitled to notice of and to vote at the Meeting. Our Form 10-K Annual Report
to Stockholders, including our audited financial statements for the year ended
December 31, 2000, is being mailed herewith to all stockholders of record on
August 31, 2001 and is incorporated herein by this reference.
To assure your representation at the Meeting, you are urged to mark, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Meeting may vote in person even if he or she has returned a proxy.
By order of the Board of Directors,
/s/ Dennis W. Evans
Dennis W. Evans
Secretary
Santa Clara, California
September 21, 2001
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YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
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COMPUTER ACCESS TECHNOLOGY CORPORATION
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PROXY STATEMENT
FOR 2001 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the board of directors of
COMPUTER ACCESS TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders (the "Meeting") to be held
Thursday, October 25, 2001 at 9:00 AM, local time, or at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Meeting will be held at our principal
executive offices located at 2403 Walsh Avenue, Santa Clara, California 95051.
The telephone number at that location is (408) 727-6600.
These proxy solicitation materials were first mailed on or about September
21, 2001 to all stockholders entitled to vote at the meeting.
Record Date and Voting Securities
Stockholders of record at the close of business on August 31, 2001 are
entitled to notice of and to vote at the meeting. At the record date,
18,794,422 shares of our authorized common stock were issued and outstanding
and held of record by 53 stockholders. No shares of our authorized preferred
stock were outstanding.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to our Secretary a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person.
Voting and Solicitation
Each stockholder is entitled to one vote for each share of common stock on
all matters presented at the Annual Meeting.
This solicitation of proxies is made by the Company, and all related costs
will be borne by us. In addition, we may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Proxies may also
be solicited by certain of our directors, officers and regular employees,
without additional compensation, personally or by telephone or facsimile.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting is
a majority of the votes eligible to be cast by holders of shares of common
stock issued and outstanding on the record date. Shares that are voted "FOR,"
"AGAINST" or "WITHHELD" with respect to a matter will be treated as being
present at the meeting for purposes of establishing a quorum. The Company
believes that under Delaware law abstentions (i.e. votes of "WITHHELD") and
broker non-votes (i.e. the votes of shares held of record by brokers as to
which the underlying beneficial owners have given no voting instructions and
such brokers have no discretionary voting authority) should be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Thus, abstentions and broker non-votes will make a quorum more
readily obtainable, but they will not otherwise affect the outcome of voting on
a proposal.
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Deadline for Receipt of Stockholder Proposals
We intend to hold our 2002 Annual Meeting of Stockholders on May 20, 2002.
Proposals of our stockholders that are intended to be presented by such
stockholders at our 2002 Annual Meeting of Stockholders must be received by us
no later than January 19, 2002 in order that they may be considered at that
meeting.
The date by which stockholder proposals must be received by our company for
inclusion in our proxy statement and form of proxy for its 2002 Annual Meeting
of Stockholders is January 19, 2002. Such stockholder proposals should be
submitted to Computer Access Technology Corporation, 2403 Walsh Avenue, Santa
Clara, California 95051, Attention: Secretary.
Executive Officers and Directors
The following table sets forth, as of August 31, 2001, certain information
regarding our executive officers and directors.
Name Age Position
---- --- --------
Dan Wilnai........................ 59 President, Chief Executive Officer and Chairman of the
Board of Directors
Peretz Tzarnotzky................. 53 Vice President, Chief Technology Officer and Director
Dennis Evans...................... 49 Vice President, Chief Financial Officer and Secretary
Albert Lee........................ 58 Vice President, Operations
Srikumar Chandran................. 52 Vice President, Engineering
Craig Lynar....................... 46 Vice President, Marketing
Philip Pollok..................... 47 Director
Jean-Louis Gassee................. 57 Director
Roger W. Johnson.................. 67 Director
Dan Wilnai, one of our co-founders, has served as our President, Chief
Executive Officer and Chairman of the board of directors since our
incorporation in February 1992 as well as our Secretary from our incorporation
in February 1992 until August 2000. Prior to founding our company, from
February 1985 to February 1992, Mr. Wilnai served as President of Summit
Microsystems, a company that focused on the FDDI fiber optic local area network
standard. From September 1974 to February 1985, Mr. Wilnai served as a program
manager for Fairchild Camera & Instrument Corporation, a developer of high
performance microprocessors and board-level products for military and
commercial real-time applications. Mr. Wilnai holds a B.S. in Electrical
Engineering from the Technion-Israel Institute of Technology.
Peretz Tzarnotzky, one of our co-founders, has served as a member of our
board of directors since our incorporation in February 1992 and our Vice
President, Chief Technology Officer since July 2000. Mr. Tzarnotzky also served
as our Vice President, Engineering from our incorporation in February 1992 to
June 2000. Prior to founding our company, from November 1989 to July 1991, Mr.
Tzarnotzky served as a systems engineering group manager at Cadence Design
Systems, a developer of design automation products. Mr. Tzarnotzky holds a
B.S.C. in Electrical Engineering from Ben-Gurion University of the Negev in
Israel.
Dennis Evans has served as our Vice President, Chief Financial Officer since
May 2000 and our Secretary since August 2000. Prior to joining our company,
from March 1997 to May 2000, Mr. Evans served as Vice President, Chief
Financial Officer and Secretary of Whisper Communications, Inc., a designer and
manufacturer of wireless telemetry systems. From February 1996 to March 1997,
Mr. Evans served as the corporate controller of Sherpa Corporation, a developer
and distributor of product data management software systems. From September
1993 to December 1995, Mr. Evans was assistant division manager at Space
Applications Corporation. Mr. Evans holds a B.S. in Business Administration
from California State University, Long Beach.
2
Albert Lee has served as our Vice President, Operations since December 1997.
Prior to joining our company, from July 1995 to June 1997, Mr. Lee served as
Vice President of Operations with Hine Design, Inc., a designer and
manufacturer of robotics systems for the semiconductor equipment industry. From
February 1991 to July 1995, Mr. Lee served as the Vice President of Operations
at Advanced Molecular Systems, a designer and manufacturer of automated
capillary electrophoresis systems. Mr. Lee holds a B.S. in Business
Administration from the University of San Francisco.
Srikumar Chandran has served as our Vice President, Engineering since June
2000. From February 1998 to June 2000, Mr. Chandran served as our Director of
Engineering. Prior to joining our company, from July 1997 to February 1998, Mr.
Chandran served as Director of Storage Systems Architecture with Storage
Dimensions, a designer, manufacturer and distributor of high performance, high
capacity data storage and back-up systems. From 1981 to July 1997, Mr. Chandran
served in several capacities at Tandem Computers, a designer, manufacturer and
distributor of enterprise servers, including, most recently, as section head of
ServerNet Adapters and related firmware. Mr. Chandran holds a B.E. in
Electrical Engineering from the University of Madras in India, a M.Tech in
Control Systems from the Indian Institute of Technology in India and a M.S. in
Computer Engineering from Oregon State University.
Craig Lynar has served as our Vice President, Marketing since July 2001.
Prior to joining our company, from May 2000 to May 2001, Mr. Lynar served as
Vice President, Marketing and Business Development with Chuckwalla, Inc., a
provider of enterprise class software that accelerates and manages rich media
through the enterprise to Web, Print, and Wireless applications. From December
1996 to February 2000, Mr. Lynar served as Vice President, Marketing with Etak,
Inc., a digital mapping, software application tools, consumer software, and
Damage Prevention enterprise software. From April 1990 to December 1996, Mr.
Lynar served as Senior Director, Marketing with Seiko Instruments USA, a
manufacturer of color printers, color monitors, color scanners and digitizing
tablets. Mr. Lynar holds a B.A. in Business Management from Saint Mary's
College in Moraga.
Philip Pollok has served as one of our directors since February 1999. Since
January 1999, Mr. Pollok has served as the Senior Vice President and General
Manager of Business Line Networking of Philips Semiconductors, a division of
Philips Electronics North American Corporation. From February 1998 to October
1998, Mr. Pollok served as the Business Unit Director of Wireless
Communications at Mitel Semiconductor, a manufacturer of cellular, GPS, set top
box, paging and wireless LAN products. From May 1994 to February 1998, Mr.
Pollok served as the Communications Business Unit Director at GEC Plessey
Semiconductors, a manufacturer of cellular, paging, wireless LAN and
telecommunications products. Mr. Pollok holds a B.S. in Electronic Engineering
from the University of Aston in Birmingham in the United Kingdom.
Jean-Louis Gassee has served as one of our directors since September 2000.
Since October 1990, Mr. Gassee has served as Chief Executive Officer and a
director of Be Incorporated, a manufacturer of personal computer operating
systems and Internet appliances. From February 1981 to October 1990, Mr. Gassee
served in various capacities at Apple Computer, Inc., a manufacturer of
personal computers, related products and communication solutions, most recently
as the President of the Apple Products Division. Mr. Gassee serves on the
boards of directors of 3Com Corporation, EFI Electronics Corporation and
Logitech, International SA. Mr. Gassee holds a B.S. in Mathematics and Physics
from Orsay University in France.
Roger W. Johnson has served as one of our directors since September 2000.
Since March 1996, Mr. Johnson has served as the President of R.W. Johnson and
Associates, a private consulting firm. From June 1993 to March 1996, Mr.
Johnson served as the Administrator of the United States General Services
Administration. Mr. Johnson serves on the boards of directors of Collector's
Universe, Inc., Maxtor Corporation and Sypris Solutions, Inc. Mr. Johnson holds
a B.B.A. in Business Administration from Clarkson University and a M.B.A. in
Industrial Management from the University of Massachusetts.
3
Board of Directors
We currently have five members on our board of directors. Each director
holds office until his term expires or until his successor is duly elected and
qualified. Our certificate of incorporation and bylaws provide for a classified
board of directors. In accordance with the terms of our certificate of
incorporation, our board of directors is divided into three classes whose terms
expire at different times. The three classes are comprised of the following
directors:
. Class I consists of Philip Pollok, who will serve until his successor is
elected at the Meeting, unless he is elected at the Meeting to serve for
another term;
. Class II consists of Jean-Louis Gassee and Roger Johnson, who will serve
until the annual meeting of stockholders to be held in 2002; and
. Class III consists of Peretz Tzarnotzky and Dan Wilnai, who will serve
until the annual meeting of stockholders to be held in 2003.
At each annual meeting of stockholders, beginning with the Meeting, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election or until their successors have been duly elected and
qualified. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of an equal number of directors.
Committees of the Board of Directors
The board of directors has a compensation committee and an audit committee.
Our board of directors established its compensation committee in August 2000
and completed the appointment of its members in September 2000. Prior to
establishing the compensation committee, our board of directors, as a whole,
performed the functions delegated to the compensation committee. The
compensation committee of our board of directors reviews and makes
recommendations to the board of directors regarding all forms of compensation
and benefits provided to our officers. In addition, the compensation committee
establishes and reviews general policies relating to the compensation and
benefits of all our employees. The current members of the compensation
committee are Philip Pollok, Jean-Louis Gassee and Roger Johnson.
Our board of directors established its audit committee and approved its
charter in August 2000 and completed the appointment of its members in
September 2000. The audit committee of our board of directors reviews and
monitors our internal accounting procedures, corporate financial reporting,
external and internal audits, fees, results and scope of the annual audit and
other services provided by our independent accountants and our compliance with
legal matters that have a significant impact on our financial reports. The
current members of the audit committee are Philip Pollok, Jean-Louis Gassee and
Roger Johnson.
Director Compensation
Non-employee directors are currently eligible to receive stock options under
the Automatic Option Grant Program in effect under the 2000 Stock Incentive
Plan, under which option grants are automatically made at periodic intervals to
eligible non-employee board members to purchase shares of common stock at an
exercise price equal to 100% of the fair market value of the option shares on
the grant date. Each individual who first became a non-employee board member at
any time after our initial public offering will automatically receive an option
grant for 25,000 shares of common stock on the date such individual joins our
board of directors, provided such individual has not been in the our prior
employ. In addition, on the date of each annual stockholders' meeting, each
non-employee board member who is to continue to serve as a non-employee board
member, including the current non-employee board members, will automatically be
granted an option to purchase 6,250 shares of common stock, provided such
individual has served on our board of directors for at least six
4
months. Directors who are also employees currently do not receive additional
compensation for serving as directors. Other than reimbursement of expenses in
connection with attendance at meetings, we currently do not provide any other
compensation to any non-employee member of our board of directors and we also
do not pay compensation for committee participation or special assignments of
our board of directors.
In September 2000, we granted an option to purchase 25,000 shares of common
stock to each of Jean-Louis Gassee and Roger Johnson pursuant to our 2000 Stock
Option/Stock Incentive Plan.
Board Meetings and Committees
The board of directors of the Company held a total of four meetings during
the fiscal year ended December 31, 2000. Each director attended all of the
meetings of the board of directors and committees thereof, if any, upon which
such director served. The board of directors has no nominating committee or any
committee performing such functions.
The audit committee did not meet during the fiscal year; however the
committee met on February 1, 2001 to review the results of the audit of the
fiscal year ended December 31, 2000.
The compensation committee met one time during the fiscal year.
Section 16(a) Beneficial Ownership Reporting Compliance
The members of our board of directors, our executive officers and persons
who hold more than 10% of our 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 with the Securities and Exchange Commission reports
with respect to their ownership of our common stock and their transactions in
our common stock. Based upon the copies of Section 16(a) reports that we
received from such persons or the written representations received from one or
more of such persons concerning reports required to be filed by them for the
fiscal year ended December 31, 2000, we believe that all reporting requirements
under Section 16(a) for such fiscal year were met in a timely manner by the
persons subject to the Section 16(a) reporting requirements.
5
Executive Compensation
The following table sets forth information concerning compensation paid by
us for the years ended December 31, 2000 and December 31, 1999 to our Chief
Executive Officer and each of our four other most highly compensated executive
officers during that period, referred to collectively in this document as the
"named executive officers."
Summary Compensation Table
Long-term
Compensation
------------
Awards
------------
Annual Compensation Securities
------------------- Underlying All Other
Name and Principal Position Year Salary Bonus Option (#) Compensation(1)
--------------------------- ---- -------- ------- ------------ ---------------
Dan Wilnai............................... 2000 $215,990 $70,000 -- $ 5,250
President and Chief Executive Officer... 1999 194,441 60,000 -- 10,612
Albert Lee............................... 2000 157,746 30,000 25,000 5,250
Vice President, Operations.............. 1999 144,250 15,000 25,000 5,579
Peretz Tzarnotzky........................ 2000 201,340 60,000 -- 5,250
Vice President, Chief Technology Officer 1999 181,121 54,000 -- 10,612
Srikumar Chandran........................ 2000 155,400 42,000 31,250 5,250
Vice President, Engineering............. 1999 142,066 14,000 25,000 10,411
Joseph Mendolia.......................... 2000 182,677 30,000 25,000 5,250
Vice President, Sales and Marketing(2).. 1999 116,885 15,000 187,500 3,910
--------
(1)Consists solely of contributions made to each executive officer's account
under our 401(k) profit sharing plan.
(2)On July 31, 2001, Mr. Mendolia left the employ of the Company. See
"Employment Contracts and Change of Control Arrangements."
Employment Contracts and Change of Control Arrangements
We have entered into employment agreements with Albert Lee, Srikumar
Chandran, and Joseph Mendolia, each of whom were executive officers of our
company as of December 31, 2000.
On December 5, 1997, Albert Lee, our Vice President, Operations, entered
into an employment agreement with us. The agreement provides for a starting
annual salary of $125,000. The agreement also provides for periodic achievement
bonuses based on our company's financial performance and on Mr. Lee meeting
certain objectives as defined by company management. In connection with his
employment, Mr. Lee was granted options to purchase up to 150,000 shares of
common stock pursuant to our 1994 Stock Option plan at a per share exercise
price of $0.35. In the event Mr. Lee is involuntarily terminated without cause
within twelve months of a change of control, he will be entitled to a lump sum
severance payment equal to six months of his base salary.
On January 8, 1998, Srikumar Chandran, our Vice President, Engineering,
entered into an employment agreement with us. The agreement provides for a
starting annual salary of $130,000. The agreement also provides for periodic
achievement bonuses based on our company's financial performance and on Mr.
Chandran meeting certain objectives as defined by our company's management. In
connection with his employment, Mr. Chandran was granted options to purchase up
to 125,000 shares of common stock pursuant to our 1994 Stock Option plan at a
per share exercise price of $0.35.
On March 3, 1999, Joseph Mendolia, our Vice President, Sales and Marketing,
entered into an employment agreement with us. The agreement provides for a
starting annual salary of $100,000. The agreement also provides
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for periodic achievement bonuses based on our company's financial performance
and on Mr. Mendolia meeting certain objectives as defined by our company's
management. In connection with his employment, Mr. Mendolia was granted options
to purchase up to 187,500 shares of common stock pursuant to our 1994 Stock
Option plan at a per share exercise price of $0.60. In the event Mr. Mendolia
is involuntarily terminated without cause within twelve months of a change of
control, he will be entitled to a lump sum severance payment equal to six
months of his base salary. On July 31, 2001, Mr. Mendolia left our employ. On
August 1, 2001, we entered into a consulting agreement with Mr. Mendolia
whereby he will provide consulting services in the area of sales and marketing.
The agreement provides for a bi-monthly retainer of $7,300 to be paid to Mr.
Mendolia. Stock options granted during our employment of Mr. Mendolia will
continue to vest pursuant to the 2000 Stock Incentive Plan and if the agreement
has not been terminated prior to February 1, 2002, an acceleration of an
additional six months of vesting of those options will occur. The agreement
terminates at the earlier of February 1, 2002 or Mr. Mendolia's employment by a
third party in any capacity or form.
We granted each of the named executives listed above stock options pursuant
to our 2000 Stock Option/Stock Issuance Plan as described below under the
heading "Option Grants in Last Year." These options will immediately vest if we
are acquired by a merger or sale of substantially all of our of assets, unless
those options are assumed by the acquiring entity or our repurchase rights with
respect to any unvested shares subject to those options are assigned to that
entity.
Option Grants in Last Year
The following table sets forth information regarding stock options granted
to the named executive officers during the year ended December 31, 2000.
Potential Realizable
Individual Grants Value at Assumed
------------------------------------------------------ Annual Rates of Stock
Number of Percentage of Price Appreciation for
Securities Total Options Exercise Option Term(4)
Underlying Granted in Price Expiration ----------------------
Name Options Granted(1) Fiscal 2000(2) ($/sh)(3) Date 5% 10%
---- ------------------ -------------- --------- ---------- -------- --------
Dan Wilnai........ -- -- -- -- $ -- $ --
Albert Lee........ 25,000 1.97% 2.00 8/5/10 407,224 648,436
Peretz Tzarnotzky. -- -- -- -- -- --
Srikumar Chandran. 31,250 2.46% 2.00 8/5/10 509,030 810,545
Joseph Mendolia(5) 25,000 1.97% 2.00 8/5/10 407,224 648,436
--------
(1)All options were granted as immediately exercisable, but shares acquired
upon exercise remain subject to a repurchase right held by the company that
lapses over time as the shares vest. Except in the event of a change of
control of our company, options granted become vested and the repurchase
right lapses at the rate of 25% of the shares subject thereto one year from
the grant date on August 5, 2001 and as to approximately 2.08% of the shares
subject to the option at the end of each month thereafter so that the shares
are fully vested and no longer subject to the repurchase right four years
from the grant date.
(2)Based on a total of 1,272,000 options granted to our employees in fiscal
2000, including the named executive officers.
(3)The exercise price per share of options granted represented the fair market
value of the underlying shares of common stock on the date the options were
granted.
(4)In accordance with the rules of the SEC, the above table sets forth the
potential realizable value over the ten-year period from the grant date to
the expiration date, assuming rates of stock appreciation of 5% and 10%,
compounded annually and calculated based on an initial public offering price
of $12.00 per share. These amounts do not represent our estimate of future
stock price performance. Actual realizable values, if any, of stock options
will depend on the future performance of our common stock.
(5)On July 31, 2001, Mr. Mendolia left the employ of the Company. See
"Employment Contracts and Change of Control Arrangements."
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Aggregate Option Exercises in 2000 and Year-End Option Values
The following table sets forth information for our named executive officers
relating to the shares acquired and dollar value realized from stock option
exercises during the year, and the number and value of shares of common stock
underlying exercisable and unexercisable options held at December 31, 2000. No
stock appreciation rights were outstanding as of December 31, 2000.
Number of
Number of Securities Underlying Value of Unexercised
Securities Dollar Value Unexercised Options as In-the-Money Option as of
Acquired from Realized on of December 31, 2000(#) December 31, 2000($)(2)
Stock Option Stock Option ------------------------- -------------------------
Name Exercises(#) Exercises(1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------- ------------ ----------- ------------- ----------- -------------
Dan Wilnai............ -- $ -- -- -- $ -- $ --
Albert Lee(4)......... 87,500 949,200 82,812 67,188 773,198 659,427
Peretz Tzarnotzky..... -- -- -- -- -- --
Srikumar Chandran(5).. 50,000 632,400 84,374 46,876 780,745 460,817
Joseph Mendolia(3),(4) 33,750 418,500 69,375 109,375 634,469 1,055,469
--------
(1)The value realized upon the exercise of stock options represents the
positive spread between the exercise price of stock options and the fair
market value of the shares subject to such options on the exercise date.
(2)The value of "in-the-money" stock options represents the positive spread
between the exercise price of options and the fair market value of the
underlying shares on December 31, 2000, which was $10.25.
(3)On July 31, 2001, Mr. Mendolia left the employ of the Company. See
"Employment Contracts and Change of Control Arrangements."
(4)Includes 25,000 options which were granted as immediately exercisable, but
shares acquired upon exercise remain subject to a repurchase right held by
the company that lapses over time as the shares vest. Except in the event of
a change of control of our company, options granted become vested and the
repurchase right lapses at the rate of 25% of the shares subject thereto one
year from the grant date and as to approximately 2.08% of the shares subject
to the option at the end of each month thereafter so that the shares are
fully vested and no longer subject to the repurchase right four years from
the grant date.
(5)Includes 31,250 options which were granted as immediately exercisable, but
shares acquired upon exercise remain subject to a repurchase right held by
the company that lapses over time as the shares vest. Except in the event of
a change of control of our company, options granted become vested and the
repurchase right lapses at the rate of 25% of the shares subject thereto one
year from the grant date and as to approximately 2.08% of the shares subject
to the option at the end of each month thereafter so that the shares are
fully vested and no longer subject to the repurchase right four years from
the grant date.
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth information regarding the beneficial ownership of
our common stock as of August 31, 2001, by:
. each person, group of affiliated persons, or entity who is known by us
to own beneficially more than 5% of our outstanding stock;
. each of the named executive officers and directors; and
. all of our directors and executive officers as a group.
Each stockholder's percentage ownership before the offering in the following
table is based on 18,794,422 shares of common stock outstanding as of August
31, 2001 and treats as outstanding all options exercisable within 60 days of
August 31, 2001 held by the particular stockholder and that are included in the
first column.
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o Computer Access Technology Corporation, 2403 Walsh
Avenue, Santa Clara, California 95051. Except as otherwise indicated and
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subject to applicable community property laws, to the best of our knowledge,
the persons named in the table have sole voting and investment power for all of
the shares of common stock held by them.
Shares
Beneficially Owned
------------------
Percent
Beneficial Owner Number of Class
---------------- ---------- --------
5% Stockholders:
Philips Semiconductors(1)................................... 4,158,795 22.1%
Dan Wilnai(2)............................................... 5,390,482 28.7
Peretz Tzarnotzky(3)........................................ 3,881,562 20.7
Directors and Executive Officers:
Dan Wilnai(2)............................................... 5,390,482 28.7
Peretz Tzarnotzky(3)........................................ 3,881,562 20.7
Albert Lee(4)............................................... 188,280 *
Srikumar Chandran(5)........................................ 162,499 *
Joseph Mendolia(6).......................................... 129,138 *
Philip Pollok(7)............................................ 4,158,795 22.1
Jean-Louis Gassee(8)........................................ 25,000 *
Roger Johnson(9)............................................ 25,000 *
All directors and executive officers as a group (10 persons) 14,152,364 75.3%
--------
* Less than 1% of the outstanding shares of common stock
(1)Philips Semiconductors is a wholly-owned subsidiary of Philips Holdings USA.
The business address for Philips Semiconductors is 1109 McKay Dr. M/S 48 San
Jose, CA 95131.
(2)Mr. Wilnai's shares are held by family trusts of which Mr. Wilnai is a
trustee.
(3)Mr. Tzarnotzky's shares are held by family trusts of which Mr. Tzarnotzky is
a trustee.
(4)Mr. Lee's shares include 100,780 shares subject to options exercisable
within 60 days of August 31, 2001.
(5)Mr. Chandran's shares include 18,750 shares held by family trusts of which
Mr. Chandran and his wife are the trustees and 102,499 shares subject to
options exercisable within 60 days of August 31, 2001.
(6)Mr. Mendolia's shares include 61,249 shares of common stock subject to
options exercisable within 60 days of August 31, 2001. On July 31, 2001, Mr.
Mendolia left the employ of the company. See "Employment Contracts and
Change of Control Arrangements."
(7)Mr. Pollok's shares represent 4,158,795 shares of common stock held by
Philips Semiconductors. Mr. Pollok is a Senior Vice President and General
Manager of Business Line Networking of Philips Semiconductors and disclaims
beneficial ownership of these shares, if any.
(8)Mr. Gassee's shares include 25,000 shares subject to options exercisable
within 60 days of August 31, 2001.
(9)Mr. Johnson's shares include 25,000 shares subject to options exercisable
within 60 days of August 31, 2001.
Certain Relationships and Related Transactions
In May 2000, Albert Lee, our Vice President, Operations, exercised options
to purchase 87,500 shares of our common stock and paid an aggregate purchase
price of $30,800 for these shares. In May 2000, we loaned $125,000 to Mr. Lee
pursuant to a promissory note. The loan is full-recourse and secured by 87,500
shares of our common stock held by Mr. Lee. The note accrues interest at a rate
of eight percent and is due on May 11, 2002 or upon termination of Mr. Lee's
employment with our company. As of August 31, 2001, $138,000 remained
outstanding on Mr. Lee's loan.
In September 2000, some of our stockholders entered into an agreement to
sell certain of their shares of our common stock to Agilent Technologies for $3
million and Toyo Corporation for $2 million at a price per share equal to
$12.00 per share. These sales closed in conjunction with our initial public
offering in November 2000. The selling stockholders included family trusts of
Dan Wilnai, our President and Chief Executive Officer and the
9
Chairman of our board of directors, of which Mr.Wilnai is a trustee; several
members of Mr.Wilnai's family; a family trust of Peretz Tzarnotzky, our Vice
President, Chief Technology Officer and a member of our board of directors, of
which Mr. Tzarnotzky is a trustee; Mr. Tzarnotzky; and Philips Semiconductors.
We agreed to indemnify Agilent in the event of the shares sold by the selling
stockholders were delivered to Agilent with any restrictions on title, and
subsequently, the selling stockholders have agreed to assume these obligations
to Agilent. In addition, each of Agilent and Toyo are entitled to certain
registration rights provided under the terms of agreements between Agilent,
Toyo and us. If we propose to register any of our securities under the
Securities Act, Agilent and Toyo are entitled to notice of the registration and
are entitled to include shares of our common stock held by them in the
registration. The rights of Agilent and Toyo are subject to conditions and
limitations, among them the right of the underwriters of an offering subject to
the registration to limit the number of shares included in the registration.
In September 2000, we entered into an agreement with Agilent Technologies
Deutschland GmbH, an affiliate of Agilent Technologies, in which both we and
Agilent agreed to license intellectual property to each other to allow each of
us to jointly develop an InfiniBand analyzer that can be utilized to provide
probing and analysis of a single InfiniBand link. Pursuant to the agreement, we
and Agilent each developed one module for a prototype of analyzer, and each of
us independently developed, and are now manufacturing and selling our
respective versions of the analyzer. Both versions include our proprietary
graphical user interface, the CATC Trace, and our CATC trademarks. Pursuant to
the agreement, Agilent provided us a royalty-free license with respect to its
intellectual property, and will pay us for the license of our intellectual
property a royalty for each unit of the analyzer that it sells. The initial
term of the agreement is two years, with automatic renewals for one-year terms,
unless either party gives written notice to the contrary. The agreement
includes incentives for the parties to renew for at least one additional year
by imposing a fee, not to exceed $1,000,000, if either party elects not to
renew after the initial term. The agreement provides that if Agilent develops,
manufactures or sells another single (2.5 Gb/s) InfiniBand link analyzer that
is not based on or does not incorporate our technology or intellectual property
licensed under the agreement, the licenses and rights granted to Agilent will
be revoked and an additional payment, of up to $1,000,000, will be due to us.
Similarly, the agreement further provides that if we license the rights granted
to Agilent to another OEM, the licenses and rights granted to us will be
revoked.
REPORT OF THE COMPENSATION COMMITTEE
Overview and Philosophy
The compensation committee of our board of directors (the "committee")
reviews, approves and makes recommendations for executive officer compensation,
including recommendations for stock option grants, to our board of directors
for its approval. Executive compensation includes the following elements: base
salaries, annual bonuses, stock options and various benefit plans.
The committee is composed of three independent directors who are not our
employees. It is the committee's objective that executive compensation be tied
to a significant extent directly to the achievement of the Company's
performance objectives. Specifically, our executive compensation program is
designed to reward executive performance that results in enhanced corporate and
stockholder values.
Published industry pay survey data is reviewed and relied upon in the
committee's assessment of appropriate compensation levels, including the
Radford Management Survey and data from companies in the computer industry of
comparable size, performance and growth rates.
The committee recognizes that the industry sector in which we operate is
highly competitive, with the result that there is substantial demand for
qualified, experienced executive personnel. The committee considers it crucial
that we be assured of attracting and rewarding our top caliber executives who
are essential to the attainment of our ambitious long-term strategic goals.
10
For these reasons, the committee believes our executive compensation
arrangements must remain competitive with those offered by other companies of
similar size, scope, performance levels and complexity of operations.
Annual Cash Compensation and Benefits
The committee believes that the annual cash compensation paid to executives
should be commensurate with both the executive officers and our performance.
For this reason, our executive officers' cash compensation consists of base
compensation (salary) and variable incentive compensation (annual bonus).
Base salaries for executive officers are established considering a number of
factors, including our financial performance; the executive's individual
performance and measurable contribution to our success; and pay levels of
similar positions with comparable companies in the industry. We have a
compensation philosophy of moderation for elements such as base salary and
benefits, which is supported by the committee. Base salary decisions are made
as part of our formal annual review process.
An executive officer's annual bonus generally depends on our overall
financial performance and the executive officer's individual performance. No
bonus payments are made unless minimum revenue and profit targets are achieved.
These targets are reviewed at least annually to meet the changing nature of our
business. The incentive portion is set at a higher percentage for more senior
officers, with the result that such officers have a higher percentage of their
potential total cash compensation at risk.
CEO Compensation
It was our board of director's intention to set the base salary payable to
Mr. Wilnai, our Chief Executive Officer, during fiscal year 2000 at a level
which would be competitive with the base salary levels in effect for other
chief executive officers at similarly-sized private companies within the
industry. Based upon the board's evaluation of Mr. Wilnai's individual
performance, the payment of a $70,000 bonus to Mr. Wilnai for the 2000 fiscal
year was approved. Based on our review of the data in the 2000 Radford Total
Compensation Survey--Executive Compensation Report, the amount of base salary
and bonus paid to Mr. Wilnai is approximately at the 40 percentile for
similarly-sized companies surveyed.
Compliance With Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly-held companies for compensation paid to certain executive
officers to the extent that compensation exceeds $1 million per officer in any
year. The compensation paid to our executive officers for the 2000 fiscal year
did not exceed the $1 million limit per officer, and it is not expected the
compensation to be paid to our executive officers for the 2001 fiscal year will
exceed that limit. In addition, the 2000 stock incentive plan is structured so
that any compensation deemed paid to an executive officer in connection with
the exercise of his or her outstanding options under each such plan will
qualify as performance-based compensation which will not be subject to the $1
million limitation. Because it is very unlikely that the cash compensation
payable to any of our executive officers in the foreseeable future will
approach the $1 million limit, the committee has decided at this time not to
take any other action to limit or restructure the elements of cash compensation
payable to the company's executive officers. The committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.
Stock Options
During fiscal 2000, the compensation committee or our entire board of
directors prior to establishing the committee, approved all stock option grants
made to executive officers under our 2000 Stock Option/Stock Issuance Plan and
our 2000 Stock Incentive Plan. The plans are designed to attract, retain and
motivate our executive officers by providing them with a meaningful stake in
our long-term success.
11
In making its determinations, the compensation committee, or our board of
directors, as applicable, takes into consideration: (i) grants made to
individuals in similar positions in comparable high technology companies, (ii)
participants' contributions to our performance, both short- and long-term,
(iii) prior stock option grants, especially as they relate to the number of
options vested and unvested, and (iv) the impact that total option grants made
to all participants have on dilution of current stockholder ownership and the
Company's earnings.
Stock option grants made to the named executive officers are set forth in
the table of option grants during the last fiscal year set forth above. See
"Executive Compensation--Option Grants in Last Year".
Compensation Committee Interlocks and Insider Participation
The compensation committee is composed of Philip Pollock, Jean-Louis Gassee
and Roger Johnson who are nonemployee directors with no interlocking
relationships as defined by the Securities and Exchange Commission. Prior to
establishing the compensation committee in August 2000, our entire board of
directors, which included Dan Wilnai, Peretz Tzarnotzky and Philip Pollok,
performed the duties of the committee.
The undersigned members of the compensation committee and the other members
of our board of directors have submitted this Report to the compensation
committee:
Philip Pollok
Jean-Louis Gassee
Roger Johnson
Dan Wilnai
Peretz Tzarnotzky
REPORT OF THE AUDIT COMMITTEE
Report of the Audit Committee of the Board of Directors
The audit committee of our board of directors serves as the representative
of our board for general oversight of our company's financial accounting and
reporting process, system of internal control, audit process, and process for
monitoring compliance with laws and regulations.
The audit committee's responsibilities also include recommending to the
board of directors the retention of independent public accountants, subject to
stockholder approval, reviewing and approving the planned scope, proposed fee
arrangements and results of our annual audit, reviewing and evaluating our
accounting principles and its system of internal accounting controls, and
reviewing the independence of the Company's independent accountants.
Our management has primary responsibility for preparing our financial
statements and our financial reporting process. Our independent accountants,
PricewaterhouseCoopers LLP, are responsible for expressing an opinion on the
conformity of our audited financial statements to generally accepted accounting
principles. In this context, the audit committee hereby reports as follows:
1. The audit committee has reviewed and discussed the audited financial
statements with CATC's management.
2. The audit committee has discussed with the independent accountants the
matters required to be discussed by SAS 61 (Codification of Statements
on Auditing Standard, AU 380).
3. The audit committee has received the written disclosures and the letter
from the independent accountants required by Independence Standards
Board Standard No. 1 (Independence Standards Board
12
Standards No. 1, Independence Discussions with audit committees) and has
discussed with the independent accountants the independent accountants'
independence.
4. Based on the review and discussion referred to in paragraphs (1) through
(3) above, the audit committee recommended to our board of directors,
and the board has approved, that the audited financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, which was filed with the Securities and Exchange
Commission on March 12, 2001.
Each of the members of the audit committee is independent as defined under
the listing standards of the Nasdaq.
The undersigned members of the audit committee have submitted this Report to
the audit committee:
Philip Pollok
Jean-Louis Gassee
Roger Johnson
Remuneration of independent accountants.
PricewaterhouseCoopers LLP, the Company's independent accountants, billed
the following fees for services rendered to CATC for the year ended December
31, 2000:
a. Audit Fees
Fees for the calendar year 2000 audit were $103,000, none of which had
been billed to the Company through December 31, 2000.
b. Financial Information Systems Design and Implementation Fees
None.
c. All Other Fees
Aggregate fees billed for all other services rendered by
PricewaterhouseCoopers LLP for the most recent fiscal year amounted to
$478,000.
The audit committee of the board of directors considered the compatibility
of the non-audit services described in b. and c. above with maintaining the
auditor's independence.
Notwithstanding anything to the contrary set forth in any of our previous or
future filings under the Securities Act of 1933, as amended, or the Exchange
Act, as amended, that might incorporate this Proxy Statement or future filings
made by us under those statutes, the compensation committee report, the audit
committee report, audit committee charter, reference to the independence of the
audit committee members 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 us
under those statutes.
-----------------
PROPOSAL ONE
ELECTION OF DIRECTORS
We have a classified board of directors consisting of one Class I director
(Philip Pollok), two Class II directors (Jean-Louis Gassee and Roger Johnson),
and two Class III directors (Peretz Tzarnotzky and Dan
13
Wilnai) who will serve until the annual meetings of stockholders for 2001, 2002
and 2003, respectively, and until their respective successors are duly elected
and qualified. At each annual meeting of stockholders, directors are elected
for a term of three years to succeed those directors whose terms expire at the
annual meeting dates.
The term of the Class I director will expire on the date of the Meeting.
Accordingly, one person is to be elected to serve as Class I director of the
board of directors at the Meeting. Management's nominee for election by the
stockholders to that position is the current Class I member of the board of
directors, Philip Pollok. Please see " Executive Officers and Directors " above
for information concerning the nominee. If elected, the nominee will serve as
director until our Annual Meeting of Stockholders for 2004 and until a
successor is elected and qualified. If the nominee declines to serve or becomes
unavailable for any reason, or if a vacancy occurs before the election
(although we know of no reason to anticipate that this will occur), the proxies
may be voted for such substitute nominee as we may designate.
If a quorum is present and voting, the nominee for Class I director
receiving the highest number of votes will be elected as a Class I director.
Abstentions and broker non-votes have no effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEE
LISTED ABOVE.
-----------------
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has selected PricewaterhouseCoopers LLP, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending December 31, 2001, and recommends that
stockholders vote for ratification of such appointment.
In the event the stockholders fail to ratify the appointment of
PricewaterhouseCoopers LLP, the audit committee of our board of directors will
consider it as a direction to select other auditors for the subsequent year.
Even if the selection is ratified, our board of directors in its discretion may
direct the appointment of a different independent accounting firm at any time
during the year if our board of directors determines that such a change would
be in our best interest.
PricewaterhouseCoopers LLP has audited the Company's financial statements
annually since 1996. Representatives of PricewaterhouseCoopers LLP will be
available at the Meeting to respond to any appropriate questions, and such
representatives will have an opportunity to make a statement at the Meeting if
they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
-----------------
PROPOSAL THREE
APPROVAL OF THE SPECIAL 2000 STOCK OPTION PLAN
General
The stockholders are being asked to approve our Special 2000 Stock Option
Plan (the "Special Plan"). The Special Plan was adopted by our board of
directors on November 8, 2000, subject to approval by our stockholders.
Currently, there have been 86,876 options granted under the Special Plan (the
"Special Options").
14
Subsequent to its adoption by our board of directors, the Special Plan was
terminated, so that no further options can be granted thereunder. The Special
Options are to be assumed by our 2000 Stock Incentive Plan (the "2000 Plan")
and will count against the 2000 Plan's current share reserve, so that there
will be no net increase in the 2000 Plan share reserve.
The Special Options will continue in accordance with their terms unless
amended in accordance with the terms of the 2000 Plan. If the Special Options
terminate, the number of shares applicable to the terminated portion of the
Special Options will be available for future grants under the 2000 Plan.
For this reason, we have provided a brief summary of the Special Plan and
the differences between the Special Plan and the 2000 Plan (collectively, the
"Plan"), as most recently amended. This summary, however, does not purport to
be a complete description of all the provisions of the Special Plan or the 2000
Plan. Except as otherwise noted below, the 2000 Plan has substantially the same
terms as the Special Plan. Any stockholder who wishes to obtain a copy of
either of the actual plan documents may do so by written request to the
Corporate Secretary at our principal offices in Santa Clara, California.
The Plans were designed to provide us with the continuing ability to use
equity incentives to attract and retain the services of individuals essential
to our financial success. The 2000 Plan was adopted by our board of directors
on August 4, 2000 and was approved by the stockholders on August 15, 2000.
Structure of the Special Plan
The Special Plan consists of an Option Grant Program, whereby employees of
the company may, at the discretion of the Plan Administrator, be granted
options to purchase shares of our common stock at an exercise price not less
than the fair market value of those shares on the grant date.
Administration
The compensation committee of our board of directors administer the Special
Plan, as well as the 2000 Plan. This committee (the "Plan Administrator") has
complete discretion (subject to the provisions of the 2000 Plan) to authorize
option grants. Our board of directors may also appoint a secondary committee of
two or more members of our board of directors to administer this program with
respect to individuals other than our executive officers.
Securities Subject to the Plans
Two hundred thousand (200,000) shares of our common stock were initially
authorized for issuance over the 10-year term of the Special Plan. The Special
Options, all of which were outstanding as of August 31, 2001, were the only
options granted under the Special Plan and they will be assumed by the 2000
Plan. The 86,875 shares subject to the Special Options will count against the
2000 Plan share reserve. The 113,125 shares reserved and remaining available
for future option grants under the Special Plan will lapse. The shares will be
made available from our authorized share reserve of the 2000 Plan. As a result,
the assumption of the Special Options will not increase the number of shares
authorized for issuance under the 2000 Plan. Four million eight hundred twelve
thousand five hundred (4,812,500) shares of our common stock were initially
authorized for issuance over the 10-year term of the 2000 Plan. As of August
31, 2001, options for 2,989,000 shares were outstanding (including the Special
Options), and 1,666,000 shares remained available for future option grants
under the 2000 Plan.
In the event any change is made to the common stock issuable under the Plans
by reason of any stock split, stock dividend, combination of shares, merger,
reorganization, consolidation, recapitalization, exchange of shares, or other
change in our capitalization affecting the common stock as a class without our
receipt of consideration, appropriate adjustments will be made to (a) the
maximum number and/or class of securities issuable under the Plans, (b) the
maximum number and/or class of securities for which any one individual may be
granted stock options under the Plans per calendar year, (c) the class and/or
number of securities and option
15
exercise price per share in effect under each outstanding option and (d) for
the 2000 Plan the class and/or number of securities for which automatic option
grants are to be subsequently made to both new and continuing non-employee
members of our board of directors under the Automatic Option Grant Program. The
adjustments to the outstanding options will prevent the dilution or enlargement
of benefits thereunder.
Eligibility
Our employees (including officers) and consultants and other independent
advisors in our service (or our parent or subsidiary companies) who contribute
to our management, growth and financial success (or our parent or subsidiary
companies) were eligible to participate in the Special Plan. Only non-employee
members of our board of directors are eligible to participate in the Automatic
Grant Program.
As of August 31, 2001, 86 employees (including 6 executive officers) were
eligible to participate in the Special Plan and the Discretionary Option Grant
Program and the Stock Issuance Program of the 2000 Plan, and the 3 non-employee
members of our board of directors were eligible to receive grants under the
Automatic Option Grant Program of the 2000 Plan.
Valuation
The fair market value per share of common stock on any relevant date will be
the closing selling price on the date in question, as reported on the NASDAQ
National Market and published in The Wall Street Journal. On August 31, 2001,
the fair market value per share of the common stock determined on such basis
was $4.85 per share.
Stockholder Rights and Option Transferability
No optionee will have any stockholder rights with respect to the option
shares until such optionee has exercised the option and paid the exercise price
for the purchased shares. Options are generally not assignable or transferable
other than by will or the laws of inheritance and, during the optionee's
lifetime, the option may be exercised only by such optionee. However, the Plan
Administrator may allow non-statutory options to be transferred or assigned
during the optionee's lifetime to one or more members of the optionee's
immediate family or to a trust established exclusively for one or more such
family members, to the extent such transfer or assignment is in furtherance of
the optionee's estate plan.
Plan Features
The exercise price for any options may be paid in cash or in shares of
common stock valued at fair market value on the exercise date. The option may
also be exercised through a same-day sale program without any cash outlay by
the optionee. In addition, the Plan Administrator may provide financial
assistance to one or more optionees in the exercise of their outstanding
options or the purchase of their unvested shares by allowing such individuals
to deliver a full-recourse, interest-bearing promissory note in payment of the
exercise price and any associated withholding taxes incurred in connection with
such exercise or purchase.
Change in Control
Special Options which are unvested, unless exercised, will immediately
terminate if we are acquired by a merger or sale of substantially all of our
assets, unless those options are assumed by the acquiring entity or the
repurchase rights with respect to any unvested shares subject to those options
are assigned to such entity.
16
Differences between the Plans
Following is a brief summary of the key differences of the 2000 Plan from
the Special Plan:
. The 2000 Plan has the four following additional programs: (a) the Stock
Issuance Program, under which employees of the company may be issued
shares of common stock directly, through the purchase of such shares at
a price not less than their fair market value at the time of issuance or
as a bonus tied to the attainment of performance milestones or the
completion of a specified period of service; (b) the Salary Investment
Option Grant Program, under which executive officers and other highly
compensated employees may be given the opportunity to apply a portion of
their base salary to the acquisition of special below-market stock
option grants; (c) the Automatic Option Grant Program, as described in
the "Director Compensation" section on page 4, under which option grants
will automatically be made at periodic intervals to non-employee board
members to purchase shares of common stock at an exercise price equal to
the fair market value of those shares on the grant date; and (d) the
Director Fee Option Grant Program, as described in the "Director
Compensation" section on page 4, under which non-employee board members
may be given the opportunity to apply a portion of their annual retainer
fee otherwise payable to them in cash each year to the acquisition of
special below-market option grants.
. In no event may any one individual participating in the 2000 Plan be
granted stock options for more than 625,000 shares of common stock in
the aggregate per calendar year.
. The Plan Administrator has the authority to effect the cancellation of
any or all outstanding options and to grant in substitution therefore
new options covering the same or different numbers of shares of common
stock but with an exercise price per share of not less than 100% of the
fair market value of the common stock on the new grant date. However,
such option cancellation/regrant program will be subject to the two
following limitations: (a) only options held by employees who are
neither executive officers nor members of our board of directors may be
so cancelled and regranted and (b) the total number of shares subject to
options which are so cancelled and regranted from time to time will not
in the aggregate exceed ten percent (10%) of the total number of shares
of common stock authorized for issuance under the 2000 Plan.
. The 2000 Plan will include the change in control provisions that may
result in the accelerated vesting of outstanding option grants and stock
issuances. If we are acquired by merger or asset sale, each outstanding
option under the Discretionary Option Grant Program which is not assumed
by the successor corporation will become immediately exercisable for all
the option shares, and all unvested shares under the Discretionary
Option Program and Stock Issuance Program will immediately vest, except
to the extent the repurchase rights with respect to those shares are to
be assigned to the successor corporation. Additionally, the Plan
Administrator has the discretion to grant options which immediately vest
upon an acquisition, whether or not the options are assumed or to grant
options which vest on an accelerated basis in the event of an optionee's
service being terminated following an acquisition or in the event of a
hostile tender offer.
Special Plan Benefits
Option grants in the aggregate amount of 86,875 shares were made under the
Special Plan. If the Proposal is approved by the stockholders at the Meeting,
then each individual who received an option grant under the Special Plan will
be eligible to exercise their Special Option. The Special Options will vest
with respect to 25% of the shares after one (1) year of service and the balance
will vest in thirty-six (36) successive equal monthly installments thereafter.
The table below shows, as to each of the named executive officers and the
various indicated groups, the following information with respect to the Special
Options which were the only stock options granted under the Special Plan during
the period from November 8, 2000, the effective date of the Special Plan, to
August 31,
17
2001: (i) the number of shares of common stock subject to options granted under
the Special Plan during that period and (ii) the weighted average exercise
price payable per share under such options.
Number of Weighted Average
Name and Position Options Granted Exercise Price
----------------- --------------- ----------------
Dan Wilnai............................................................... -- $ --
Albert Lee............................................................... -- --
Peretz Tzarnotzky........................................................ -- --
Srikumar Chandran........................................................ -- --
Joseph Mendolia.......................................................... -- --
All directors who are not officers (3 of persons)........................ -- --
All employees, including current officers who are not executive officers,
as a group.............................................................. 86,875 $11.00
Amendment and Termination of the Plans
Our board of directors may amend or modify the Plans in any or all respects
whatsoever subject to any stockholder approval required under applicable law or
regulation. Our board of directors may terminate the 2000 Plan at any time, but
in no event will the 2000 Plan continue beyond November 8, 2010.
Federal Tax Consequences
Option Grants
Options granted under the Plans may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to satisfy 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 income tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. A qualifying disposition of
the purchased shares will occur if the sale or disposition is made more than
two years after the date the option for the shares was granted and more than
one year after the date that the option was exercised for the particular shares
involved in the sale or disposition. Unless both of those requirements are
satisfied, a disqualifying disposition of the purchased shares will result.
If the optionee makes a disqualifying disposition of the purchased shares,
then we will be entitled to an income tax deduction for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the date the option was exercised over (ii) the exercise
price paid for such shares. In no other instance will we be allowed a deduction
with respect to the optionee's disposition of the purchased shares. We
anticipate that any compensation deemed paid by us upon one or more
disqualifying dispositions of incentive stock option shares will not have to be
taken into account for purposes of the $1 million limitation per covered
individual on the deductibility of the compensation paid to certain of our
executive officers.
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, and the optionee will be required to satisfy the tax withholding
requirements applicable to such income.
18
If the shares acquired upon exercise of a non-statutory option are subject
to a substantial risk of forfeiture (such as our right to repurchase unvested
shares at the original exercise price paid per share upon the optionee's
cessation of service prior to vesting in those shares), then the optionee will
not recognize any taxable income at the time the option is exercised for such
unvested shares but will have to report as ordinary income, as the shares vest,
an amount equal to the excess of (a) the fair market value of the shares on the
vesting date over (b) the exercise price paid for the shares. The optionee may,
however, elect under Section 83(b) of the Internal Revenue Code to include as
ordinary income in the year of exercise an amount equal to the amount by which
the fair market value of the purchased shares on the date of exercise
(determined as if the unvested shares were not subject to our repurchase right)
exceeds the exercise price paid for those shares. If the Section 83(b) election
is made, the optionee will not recognize any additional income as and when the
shares vest.
We will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee in connection with the exercise of
the non-statutory option. The deduction will in general be allowed for our
taxable year in which such ordinary income is recognized by the optionee. We
anticipate that the compensation deemed paid by us the exercise of
non-statutory options would not have to be taken into account for purposes of
the $1 million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers.
Accounting Treatment
Under current accounting rules, option grants to employees and directors
under the Plans, with an exercise price equal to the fair market value of the
shares on the grant date will not result in a direct compensation expense to
our earnings. However, the fair value of those options is required to be
disclosed in the notes to our financial statements, and we must also disclose,
in pro-forma statements to our financial statements, the impact those options
would have upon our reported earnings were the fair value of those options at
the time of grant treated as compensation expense. In addition, the number of
outstanding options may be a factor in determining our earnings per share on a
fully-diluted basis.
Option grants made to independent consultants (but not non-employee members
of our board of directors) after December 15, 1998 would have resulted in a
direct charge to our reported earnings based upon the fair value of the option
measured initially as of the grant date of that option (or, if later, July 1,
2000, effective date of the Interpretation) and then subsequently on the
vesting date of each installment of the underlying option shares. Such charge
will accordingly include the appreciation in the value of the option shares
over the period between the grant date of the option (or, if later, the July 1,
2000, effective date of the Interpretation) and the vesting date of each
installment of the option shares. In addition, any options which are repriced
after December 15, 1998 will also trigger a direct charge to our reported
earnings measured by the appreciation in value of the underlying shares between
the grant date of the option (or, if later, the July 1, 2000 effective date of
the Interpretation) and the date the option is exercised for those shares.
Stockholder Approval
The affirmative vote of a majority of the shares present or represented and
voting at the Annual Meeting, together with the affirmative vote of a majority
of the required quorum for such meeting, is required for approval of the
Special Plan. If such stockholder approval is not obtained, then the Special
Options made under the Special Plan will terminate without ever becoming
exercisable for any of the option shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE SPECIAL
PLAN
19
COMPANY'S STOCK PERFORMANCE
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of our common stock with the
cumulative return of the Nasdaq composite index and the Nasdaq Electronic
Components index for the period commencing on the first day our common stock
was traded on the Nasdaq Stock Market, November 10, 2000, and ending on
December 31, 2000. The information contained in the performance graph shall not
be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall
such information be incorporated by reference into any future filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that we specifically incorporate it by reference into such filing.
The graph assumes that $100 was invested on November 10, 2000, at the
offering price on the date of our initial public offering, in our common stock
and in each indices, and that all dividends were reinvested. No cash dividends
have been declared or paid on our common stock. Stockholder returns over the
indicated period should not be considered indicative of future stockholder
returns. We operate on a fiscal year which ends on December 31. Under the
assumptions stated above, over the period from November 10, 2000 to December
31, 2000 the total loss on an investment in the company would have been
(14.6)%, as compared to (18.8)% for the Nasdaq Stock Market index and (23.5)%
for the Nasdaq Electronic Components index shown below.
20
Provided by Research Data Group. Produced on August 16, 2001, including data
through December 31, 2000.
COMPARISON OF 1 MONTH CUMULATIVE TOTAL RETURN*
AMONG COMPUTER ACCESS TECHNOLOGY CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
[PERFORMANCE GRAPH]
* $100 INVESTED ON 11/10/00 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
Cumulative Total
Return
---------------------
11/10/2000 12/31/2000
---------- ----------
COMPUTER ACCESS TECHNOLOGY CORPORATION 100.00 85.42
NASDAQ STOCK MARKET (U.S.)............ 100.00 81.16
NASDAQ ELECTRONIC COMPONENTS.......... 100.00 76.46
21
OTHER MATTERS
The Company knows of no other matters to be submitted at the Meeting. If any
other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent
as the board of directors may recommend.
For the Board of Directors
/s/ Dennis W. Evans
Dennis W. Evans
Secretary
Dated: September 21, 2001
22
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
COMPUTER ACCESS TECHNOLOGY CORPORATION
I. Purpose.
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to the shareholders and others,
the systems of internal controls which management and the Board of Directors
have established, and the Corporation's audit and financial reporting process.
The independent accountants' ultimate responsibility is to the Board of
Directors and the Audit Committee, as representatives of the shareholders.
These representatives have the ultimate authority to select, evaluate, and,
where appropriate, replace the independent accountants.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section V of this Charter.
II. Membership.
The Committee shall consist of at least three (3) members of the Board. The
members and the chair shall be appointed by a majority of the full board.
All of the members will be directors independent of management and free
from any relationship that, in the opinion of the Board of Directors, would
interfere with the exercise of independent judgment as a Committee member.
A majority of the Committee will constitute a quorum for the transaction of
business.
At least one director must have past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background, including a current or past position as a
chief executive or financial officer or other senior officer with financial
oversight responsibilities.
III. Meetings.
The Committee shall meet on a regular basis and shall hold special meetings
as circumstances require.
IV. Minutes of Meetings.
Minutes shall be kept of each meeting of the Committee and will be provided
to each member of the Board. Any action of the Committee shall be subject to
revision, modification or rescission by the Board, provided that no rights of
third parties shall be affected by any such revision, modification or
rescission.
V. Functions and Responsibilities.
A. On an annual basis, the Committee shall take the following actions:
1. Recommend independent auditors to the Board of Directors.
2. Review the intended scope of the annual audit by the independent
auditors and the fees charged by the independent auditors.
A-1
3. Review and discuss the results of the annual audit with both the
independent auditors and management.
4. Review the Company's policy regarding and usage of financial
derivative products.
5. Review a report of the Company's legal counsel on legal issues.
6. Review the trends in accounting policy changes proposed or adopted by
organizations such as the American Institute of Certified Public
Accountants, the Securities and Exchange Commission and the Financial
Accounting Standards Board or by comparable bodies outside the United
States.
7. Review the adequacy of the Company's system of internal accounting
controls and other factors affecting the integrity of published
financial reports by consulting as appropriate with the internal
audit staff, the independent public accountants (both of which shall
have direct access to the Committee) and others concerning, among
other things, the internal accounting controls in effect, any major
weaknesses discovered and related corrective actions taken or in
progress.
8. Review with both management and the independent auditors the status
of the Company's tax reserves and any tax audits.
9. Review with both management and the independent auditors the annual
financial statements before their submission to the Board of
Directors for approval.
10. Review with both management and the independent auditors Company
procedures and their execution established to:
a. Prevent and uncover unlawful political contributions, bribes,
unexplained and unaccounted for payments to intermediaries
(foreign or domestic).
b. Ascertain whether there are any unaccounted or off-book
transactions.
c. Identify payments in violation of applicable laws and standards
of business which are intended to influence employees of
potential customers to purchase their products (commercial
bribes, kickbacks, etc.).
11. Evaluate overall performance of professional services provided by the
independent auditors, including audit and nonaudit services, and
consider the possible effect on the performance of such services on
the independence of the auditors.
12. Review internal and external audits of employee benefit plans of the
Company (including subsidiaries) and Company procedures regarding
plan compliance with relevant laws and regulations.
13. Review Company policies, and compliance with policies, relating to
conflicts of interest.
14. Review the annual management letter from the independent auditors.
B. Quarterly, the Committee shall review with both management and the
independent auditors the quarterly earnings before their public release.
C. Periodically, as and when deemed necessary or advisable by the
Committee, the Committee shall:
1. Review with both management and the independent auditors the
Company's significant accounting principles, policies and practices.
2. Review adequacy of the Company's management information systems.
3. Consider any information brought to the attention of the Committee
by, or at the request of, the Company's independent public
accountants, pursuant to Statement on Auditing Standards No. 61 or
otherwise, or by the internal audit staff, and advise the Board as
appropriate.
A-2
4. Request the internal audit staff or the independent auditors to make
a study of any particular area of interest or concern that the
Committee deems appropriate.
5. Meet separately with management and the independent auditors to
monitor compliance with recommendations made in the annual management
letter.
A-3
Dear Stockholder:
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the operation of the Company that require your
immediate attention.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Computer Access Technology Corporation
ZCAT1B DETACH HERE
PROXY
COMPUTER ACCESS TECHNOLOGY CORPORATION
2403 Walsh Avenue
Santa Clara, California 95051
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Dan Wilnai, with the power to appoint
his substitute, and hereby authorizes him to represent and to vote, as
designated on the reverse side, all shares of common stock of Computer Access
Technology Corporation (the "Company") held of record by the undersigned on
August 31, 2001 at the Annual Meeting of Stockholders to be held on October 25,
2001 and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO PROPOSAL 1, PROPOSAL 2, PROPOSAL 3 OR
PROPOSAL 4 SPECIFIED IN THIS PROXY, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
----------- -----------
ZCAT1A DETACH HERE
Please mark
[X] votes as in
this example.
FOR AGAINST ABSTAIN
1. Election of Class I Directors. 2. Ratify the appointment of [ ] [ ] [ ]
Nominee: Philip Pollok PricewaterhouseCoopers LLP
as independent public
accountants.
FOR WITHHELD 3. To approve the Company's [ ] [ ] [ ]
Special 2000 Stock Option Plan.
[ ] [ ]
4. In their discretion, the proxy holder is authorized to vote
the shares represented by this proxy upon any other business
that may properly come before the meeting. In each such
case, the proxy holder shall vote the shares according to
the recommendation of management.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please sign exactly as name appears hereon. Joint owners
should each sign. Executors, administrators, trustees,
guardians or other fiduciaries should give full title as
such. If signing for a corporation, please sign in full
corporate name by a duly authorized officer.
Signature: Date: Signature: Date:
--------------------------- ------------------ ---------------------------- ------------------