UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
VIALTA, INC.
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(Name of Registrant as Specified In Its Charter)
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[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 20, 2002
TO THE STOCKHOLDERS OF VIALTA, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Vialta,
Inc. (the "Company") will be held on Thursday, June 20, 2002 at 2:00 p.m. local
time at the Fremont Marriott, 46100 Landing Parkway, Fremont, CA 94538 for the
following purposes:
1. To elect five directors of the Company, each to serve until the next
Annual Meeting of Stockholders and until his or her successor has been elected
and qualified or until his or her earlier resignation or removal.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for the Company for the fiscal year ending December 31, 2002.
3. To transact such other business as may properly come before the meeting
or any postponement or adjournment(s) 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 April 23, 2002 are
entitled to notice of and to vote at the meeting and any adjournment(s) thereof.
All stockholders are cordially invited to attend the meeting in person.
However, 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 such stockholder returned a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
James Allison
Controller
Fremont, California
April 30, 2002
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IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY MAY HAVE THE
ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND
SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON. THANK YOU FOR ACTING
PROMPTLY.
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[LOGO]
VIALTA, INC.
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 20, 2002
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Vialta, Inc. (the "Company"), a Delaware corporation, for use at the Annual
Meeting of Stockholders to be held on Thursday, June 20, 2002 at 2:00 p.m.,
local time, or at any postponement or adjournment(s) thereof, for the purposes
set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders (the "Annual Meeting"). The Annual Meeting will be held at the
Fremont Marriott, 46100 Landing Road, Fremont, CA 94538. The telephone number at
that location is (510) 413-3700.
The Company's principal executive offices are located at 48461 Fremont Blvd.,
Fremont, CA 94538.
SOLICITATION
These proxy solicitation materials, including an annual report for the
fiscal year ended December 31, 2001 will be mailed on or about May 30, 2002 to
all stockholders entitled to vote at the Annual Meeting. The costs of soliciting
these proxies will be borne by the Company. These costs will include the
expenses of preparing and mailing proxy materials for the Annual Meeting and
reimbursement paid to brokerage firms and other custodians, nominees and
fiduciaries for their expenses incurred in forwarding solicitation material
regarding the Annual Meeting to beneficial owners of the Company's Common Stock.
Officers, directors and regular employees of the Company may conduct further
solicitation personally, telephonically or by facsimile, without receiving
additional compensation for assisting with the solicitation.
The Company will provide a copy of the Company's Annual Report on Form 10-K
for the year ended December 31, 2001, including financial statements and
financial statement schedules (but not exhibits), without charge to each
stockholder upon written request. The request should be sent to Deborah Yeung,
Director of Finance, Vialta, Inc., 48461 Fremont Blvd., Fremont, CA 94538
(telephone number: (510) 870-3068). Exhibits to the Annual Report may be
obtained on written request to Ms Yeung and payment of the Company's reasonable
expenses in furnishing such exhibits.
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 James Allison, Controller,
a written notice of revocation or a duly executed proxy bearing a later date or
by attending the Annual Meeting and voting in person. Please note, however, that
if a stockholder's shares are held of record by a broker, bank or other nominee
and the stockholder wishes to vote at the Annual Meeting, the stockholder must
bring to the Annual Meeting a letter from the broker, bank or other nominee
confirming the stockholder's beneficial ownership of the shares.
VOTING RIGHTS AND SOLICITATION OF PROXIES
VOTING
Vialta currently has two classes of common stock: Class A Common Stock and
Class B Common Stock (collectively, the "Common Stock"). Holders of Class A
Common Stock are entitled to 3.8 votes per share on all matters and holders of
Class B Common Stock are entitled to one vote per share on all matters. In
accordance with the provisions of California law, until the Company is a "listed
corporation", stockholders have the right to cumulate votes in connection with
the election of directors. A "listed corporation" is one whose shares have been
approved for trading on the New York or American Stock Exchange or the Nasdaq
National Market. Each stockholder complying with certain conditions set forth
below may cumulate votes and give one candidate a number of votes equal to the
number of votes to which such stockholder's shares are entitled multiplied by
the number of directors to be elected. The stockholder may cast these votes all
for a single candidate or distribute the votes among any or all of the
candidates. Under California law, no stockholder will be entitled to cumulate
votes for a candidate unless that candidate's name has been placed in nomination
prior to the voting and the stockholder, or any other stockholder, has given
notice at the Annual Meeting prior to the voting of an intention to cumulate
votes. In such an event, the proxy holder may allocate among the Board of
Directors' nominees the votes represented by proxies in the proxy holder's sole
discretion. With respect to the election of directors, the five directors
receiving the highest number of votes of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting and voting on the election
of directors will be elected.
The Inspector of Elections will tabulate the votes cast in person or by
proxy at the Annual Meeting. The Inspector of Elections will also determine
whether or not a quorum is present. The affirmative vote of a majority of the
votes cast at a duly held meeting at which a quorum is present and voting is
required for approval of proposals presented to stockholders other than the
election of directors. The holders of a majority of the shares entitled to vote,
represented either in person or by proxy shall constitute a quorum for purposes
of the Annual Meeting. The Inspector of Elections will treat abstentions and
broker non-votes as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as not voting for purposes of
determining the approval of any matter submitted to the stockholders for a vote.
Any proxy which is returned using the form of proxy enclosed and which is not
marked as to a particular item will be voted for the election of the Board's
nominees for directors, for the ratification of the appointment of the
designated independent accountants, and as the proxy holders deem advisable on
other matters that may come before the meeting, as the case may be, with respect
to the item not marked. If a broker indicates on the enclosed proxy or its
substitute that it does not have discretionary authority as to certain shares to
vote on a particular matter ("broker non-votes"), those shares will be
considered as present for the purpose of determining the presence of a quorum
but will not be considered as voting with respect to that matter.
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on April 23, 2002 are
entitled to notice of and to vote at the Annual Meeting. As of the record date,
43,010,959 shares of the Company's Class A Common Stock and 40,580,375 shares of
the Company's Class B Common Stock were issued and outstanding, and there were
218 stockholders of record.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals by stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2003 Annual Meeting of Stockholders must
be received by the Company no later than January 31, 2003, in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
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In addition, proxies solicited by the Board of Directors for the 2003
Annual Meeting of Stockholders will confer discretionary voting authority to
vote on any proposal properly raised at the meeting, if the Company is not
provided with written notice of the stockholder proposal on or before April 15,
2003.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's bylaws currently provide that the number of directors shall
be fixed from time to time by the Board of Directors. The size of the Board of
Directors is currently set at five members. The Company's Amended and Restated
Bylaws divides the Board into three classes with staggered, three-year terms.
Herbert Chang and Masaharu Shinya are Class I directors, with initial terms set
to expire in 2002, Matthew K. Fong and Didier Pietri are Class II directors,
with initial terms set to expire in 2003, and Fred S.L. Chan was elected a Class
III director, with an initial term set to expire in 2004. However, pursuant to
the requirements of California law, this provision will become effective only
when the Company becomes a "listed corporation". As a result, five directors
will be elected at the Annual Meeting to serve as the same class of director
which they previously served or which was served by the director.
The Board has nominated the five people named below to serve as directors
in their same classes to hold office until the expiration of their term and
until their respective successors have been elected and qualified or until such
directors' earlier resignation or removal. All of the nominees are currently
directors of the Company. If any nominee for any reason is unable to, or will
not, serve as a director, the proxies may be voted for such substitute nominee
as the proxy holder may determine. The Company is not aware of any nominee who
will be unable to, or will not, serve as a director.
DIRECTOR
The names of the nominees, and certain information about them as of April
5, 2002, are set forth below:
FRED CHAN, age 55, served as the Company's Chairman of the Board of
Directors since the Company's inception in 1999. He also served as the Company's
President from its inception through April 2001 and as Chief Executive Officer
from its inception through August 28, 2001. Prior to joining the Company, Mr.
Chan held various executive positions at ESS Technology, Inc. since 1986, as
well as being Chairman of the Board, in which capacity he still serves. Mr. Chan
holds B.S.E.E. and M.S.C. degrees from the University of Hawaii.
DIDIER PIETRI, age 39, has been a member of Vialta's board of directors
since September 2001. Mr. Pietri joined the Company in April 2001 as its
President and on August 29, 2001 became the Chief Executive Officer. Prior to
joining Vialta, Mr. Pietri served as President and Chief Executive Officer of
TVA/Motion International, a global entertainment production and distribution
company from August 1999 to March 2001. From June 1995 to July 1999, Mr. Pietri
was Senior Vice President of the ABC Television Network Group, as well as
President of ABC Pictures, a division of The Walt Disney Company. Mr. Pietri
holds a Bachelor's of Science degree in computer science from ESSEC, Paris,
France and a Masters in Business Administration from Harvard Business School.
MATTHEW K. FONG, age 48, has been a member of Vialta's board of directors
since April 1999. Mr. Fong is employed by the Company as an Advisor to the
Chairman of the Board. In addition, since February 1999, Mr. Fong has been an
attorney with the law firm of Sheppard, Mullin, Richter &
3
Hampton, LLP and the Chief Executive Officer of Strategic Advisory Group, a
financial and high technology consulting group that he founded. Prior to that,
Mr. Fong served as California State Treasurer from January 1995 to January 1999.
He has also served on the National Commission of Economic Growth and Taxation
Reform in Washington, D.C. Mr. Fong was Vice Chairman of the California State
Board of Equalization from 1991 to 1994.
HERBERT CHANG, age 40, has been a member of Vialta's board of directors
since November 1999. Mr. Chang is the President of InveStar Capital, Inc., a
venture capital firm. He has held that position since August 1996. In addition,
Mr. Chang is the managing member of Forefront Associates, LLC which is the
general partner of Forefront Venture Partners, L.P., a position he has held
since February, 1998. Mr. Fong currently serves as a director of Marvell
Technology Group Ltd. and Oplink Communications, Inc. Mr. Chang holds a Bachelor
of Science degree in Geology from National Taiwan University and a Masters in
Business Administration from National Chiao-Tung University.
MASAHARU SHINYA, age 58, has been a member of Vialta's board of directors
since April 1999. Mr. Shinya is the Chairman and Chief Executive Officer of
Global Alliance Inc., a technology consulting firm that he founded in March
1999. Since April 1999, he has served as the Chairman and Chief Executive
Officer of Universe Electron Corporation, a company that distributes
semiconductor products. From September 1990 to March 1999, Mr. Shinya was the
President of another distributor of semiconductor products, Kanematsu
Semiconductor Corporation. Mr. Shinya currently serves as a director of Impala
Linear Corporation, Capella Microsystems, Inc., and Altigen Communications, Inc.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors met 3 times during fiscal year 2001. The Board of
Directors has an Audit Committee and a Compensation Committee. The Board does
not have a Nominating Committee or any other standing committees.
The Audit Committee reviews the adequacy of the Company's internal control
systems, financial reporting procedures, the general scope of the Company's
annual audit, the fees charged by the independent accountants, the performance
of non-audit services by the Company's auditors and the fairness of any proposed
transaction between any officer, director or other affiliate of the Company and
the Company. After such review, the Audit Committee makes recommendations to the
full Board and performs such further functions as may be required or delegated
to the Committee by the Board of Directors. The Board of Directors has adopted a
written charter for the Audit Committee, a copy of which is attached to this
Proxy Statement as Appendix A. During fiscal year 2001, the Audit Committee of
the Board held no meetings independent of the entire Board of Directors. The
Audit Committee is currently comprised of three members: Matthew Fong, Masaharu
Shinya and Herbert Chang. Mr. Chang was nominated to the Audit Committee on
April 23, 2002. Mr. Shinya and Mr. Chang are both independent as defined by the
listing standards of the New York Stock Exchange. Mr. Fong is not independent,
because he is an employee of the Company.
The Compensation Committee reviews and approves compensation and benefits
for the Company's key executive officers, administers the Company's stock
purchase and equity incentive plans and makes recommendations to the Board of
Directors regarding such matters. During fiscal year 2001, the Compensation
Committee held no meetings independent of the entire Board of Directors. The
Compensation Committee is comprised of two members: Matthew Fong and Masaharu
Shinya.
With the exception of Matthew Fong who attended 67% of the aggregate number
of meetings of the Board, no incumbent director attended fewer than 75% of the
aggregate number of meetings of the Board and meetings of the Committees of the
Board on which he serves held during the fiscal year 2001.
4
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash compensation for their
services, except that non-employee directors are reimbursed for their reasonable
expenses in attending meeting of the Board of Directors or any meeting of a
Committee of the Board of Directors. Mr. Fong serves as an advisor to the
Chairman of the Board and receives $64,200 annually for four hours per week with
additional compensation of $250 per hour plus $2,500 per day of additional
compensation for each day of travel overseas. On October 19, 2001, Mr. Fong was
also granted an option to purchase 78,000 shares of the Company's Class A Common
Stock at an exercise price of $0.40 per share, vesting in equal installments of
25% on each of the one and two year anniversary of the date of grant and 1/48 on
each one month anniversary thereafter.
Non-employee directors of the Company are automatically granted options to
purchase shares of the Company's Class A Common Stock pursuant to the terms of
the Company's 2000 Directors' Stock Option Plan (the "Directors Plan"). Each
non-employee director who becomes a member of the Board on or after February 17,
2000, the effective date of the Directors Plan, will be automatically granted an
option to purchase 32,000 shares of Class A Common Stock under the Directors
Plan (the "Initial Grant"). On each anniversary of his or her Initial Grant,
each non-employee director will be automatically granted an additional option to
purchase 8,000 shares of Class A Common Stock under the Directors Plan, so long
as he or she has continuously served as a director of the Company (the
"Subsequent Grant"). Any non-employee director who does not receive an Initial
Grant shall nevertheless automatically receive a Subsequent Grant on the
anniversary of the most recent grant of an option to such director. Options
granted under the Directors Plan have an exercise price equal to the fair market
value (as determined under the Directors Plan) of the Company's Common Stock on
the date of grant with a term of ten years. Non-employee director options vest
and are exercisable in four equal installments, starting on the one-year
anniversary date of the grant.
Directors who are also employees are eligible to receive options to
purchase shares of Vialta Common Stock under Vialta's 1999 Stock Incentive Plan.
REQUIRED VOTE
The five nominees receiving the highest number of affirmative votes of
shares of the Company's Common Stock present at the Annual Meeting in person or
by proxy and voting on the election of directors shall be elected as directors
to serve as the same class of directors which they previously served on which
was served by the director who they replaced.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Company has selected PricewaterhouseCoopers LLP ("PwC") as its
independent accountants to perform the audit of the Company's financial
statements for fiscal year 2002 and recommends that the stockholders vote for
ratification of such selection. In the event the stockholders do not ratify such
appointment, the Board will reconsider its selection. Representatives of PwC are
expected to be present at
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the Annual Meeting, will have the opportunity to make a statement at the Annual
Meeting if they desire to do so and are expected to be available to respond to
appropriate questions.
FEES PAID TO THE INDEPENDENT ACCOUNTANTS
Audit Fees
PwC billed the Company aggregate fees of $159,750 for professional services
rendered for the audit of the Company's annual financial statements for fiscal
year 2001 and for reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q for the second and third quarters of fiscal 2001.
All Other Fees
PwC billed the Company aggregate fees of $280,000 for other professional
services rendered in fiscal 2001, including professional services in connection
with the spin-off of the Company from its parent, consulting services, tax
preparation and tax consultation.
The Audit Committee of the Board has considered the provision by PwC of the
non-audit services listed above and concluded, based on information provided by
PwC, that providing such services is compatible with maintaining PwC's
independence.
REQUIRED VOTE
The ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants requires the affirmative vote of the holders
of a majority of the shares of the Company's Common Stock present at the Annual
Meeting in person or by proxy and entitled to vote.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION
OF
PRICEWATERHOUSECOOPERS LLP FOR FISCAL YEAR 2002.
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 31, 2002,
known to the Company regarding the beneficial ownership of the Company's Common
Stock by (i) each person known by the Company to be the beneficial owner of more
than 5% of the Company's Common Stock, (ii) each of the Company's directors,
(iii) each executive officer named in the Summary Compensation Table below (the
"Named Executive Officers") and (iv) all directors and executive officers as a
group. Unless otherwise indicated in the footnotes hereto, each director and
executive officer has (or could have upon exercise of an option vested or
vesting within 60 days of March 31, 2002) sole vesting and investment power,
subject to community property laws where applicable.
In accordance with the Company's Amended and Restated Certificate of
Incorporation, not later than June 30, 2002 each share of Class A Common Stock
and each share of Class B Common Stock will automatically convert into one share
of non-classified Common Stock if certain events have not occurred. The Company
does not anticipate these events will have occurred. The holders of
non-classified Common Stock will thereafter be entitled to one vote per share
held.
Class A Shares Class B Shares Common Shares(2)
Beneficially Owned Beneficially Owned Beneficially Owned
----------------------- ---------------------- ----------------------
Name and Address of Beneficial Owners (1) Number Percent Number Percent Number Percent
----------------------------------------------- ----------- ------- ----------- ------- ----------- -------
State of Wisconsin Investment Board (3) 8,000,000 18% 0 * 8,000,000 9%
P.O. Box 7842
Madison, WI 53707
Trusts for the benefit of the children of Fred
S.L. Chan (4) 2,256,622 5% 8,800,000 22% 11,056,622 13%
Fred S.L. Chan (5) 16,772,180 38% 4,400,000 11% 21,172,180 25%
Didier Pietri (5) 276,419 1% 0 * 276,419 *
Matthew Fong 67,606 * 0 * 67,606 *
c/o Strategic Advisory Group
13191 Crossroad Parkway North
City of Industry, CA 91746
Masaharu Shinya (5) 8,000 * 0 * 8,000 *
c/o Global Alliance Co.
4-5 Tsukiji 1-chrome, Chuo-ku Tokyo,
104-0045, Japan
Herbert Chang (5) 8,000 * 0 * 8,000 *
c/o Investar Capital, Inc.
1737 N. First Street # 650
San Jose, CA 95112
All executive officers and directors as a group
(5 persons) (5)(6) 17,132,205 38% 4,400,000 11% 21,532,205 25%
* Less than 1% of the outstanding shares of the applicable class of Common Stock
7
(1) Unless otherwise indicated, the address for each beneficial owner is c/o
Vialta, Inc., 48461 Fremont Boulevard, Fremont, CA 94538.
(2) Reflects ownership assuming conversion, prior to March 31, 2002, of the
Class A Common Stock and the Class B Common Stock into non-classified Common
Stock at a one-to-one ratio.
(3) Based on a filing with the Securities Exchange Commission on February 13,
2002 indicating beneficial ownership as of December 31, 2001. The State of
Wisconsin Investment Board (SWIB) is a state agency that invests the assets of
the Wisconsin Retirement System, the State Investment Fund, and several smaller
trust funds established by the state.
(4) Includes Class A shares held by trusts for the benefit of the children of
Mr. and Mrs. Chan. Includes 8,800,000 Class B shares are held by Evershine XVI,
L.P., an entity controlled by a trust for the benefit of Mr. Chan's children.
(5) Includes Class A shares subject to stock options that are or will become
exercisable within 60 days of March 31, 2002 as follows: Mr. Chan, 412,778
shares (388,090 shares directly and 24,688 shares through Annie S.H. Chan, the
spouse of Mr. Chan, whose options are stapled to options granted by ESS
Technology, Inc. when it was the parent company of Vialta); Mr. Pietri, 250,000
shares; Mr. Shinya, 8,000 shares; and Mr. Chang, 8,000 shares.
(6) Does not include shares held by trusts for the benefit of the children of
Mr. and Mrs. Chan.
8
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Named
Executive Officers: (1) the Company's Chief Executive Officer and (2) the
Company's four other most highly compensated executive officers whose salary and
bonus for the fiscal year 2001 were in excess of $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION
AWARDS
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
------------------------------- ------ --------- ----- --------------- ------------ ---------------
Fred S.L. Chan (3) 2001 $ 248,000 $ -- $ -- -- $ 966
Chairman of the Board of 2000 $ 248,000 $ -- $ -- -- $ 966
Directors of the Company 1999 $ 51,667 $ -- $ -- 1,000,000 $ --
Didier Pietri (4) 2001 $ 188,636 $ -- $ -- 2,000,000 $ 252
President and Chief Executive 2000 $ -- $ -- $ -- -- $ --
Officer 1999 $ -- $ -- $ -- -- $ --
(1) In accordance with SEC rules, perquisites and personal benefits are omitted
unless they exceed the required reporting thresholds.
(2) Includes dollar value of premiums paid by the Company under the Company's
group term life insurance policy and accidental death and dismemberment policy
on behalf of the Named Executive Officers.
(3) Mr. Chan was President of the Company from its inception through April 2001
and was its Chief Executive Officer from its inception through August 28, 2001.
(4) Mr. Pietri joined the Company as President on April 30, 2001 and became
Chief Executive Officer on August 29, 2001.
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OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------- --------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ---------- ------------- -------- ---------- ---------- ----------
Fred S.L. Chan 0 0% -- -- -- --
Didier Pietri (1) 1,000,000 14% $ 1.18 7/19/11 $1,922,096 $3,060,616
1,000,000 14% $ 0.42 8/28/11 $ 697,167 $1,089,372
(1) Options vest at a rate of 25% on each of the one and two year anniversary of
grant and 1/48 on each one month anniversary thereafter.
AGGREGATE OPTIONS EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END VALUES
The following table sets forth certain information concerning the exercise
of options by each of the Named Executive Officers during fiscal year 2001,
including the aggregate amount of gains on the date of exercise. In addition,
the table includes the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 2001.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT
SHARES YEAR END FISCAL YEAR-END (1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- ----------- -------- ----------- ------------- ----------- -------------
Fred S. L. Chan 0 $ -- 284,665 1,412,715 $ 352,985 $ 1,476,767
Didier Pietri 0 $ -- 0 2,000,000 $ 0 $ 880,000
(1) Valuation of these options is based on the closing bid price of $1.24 per
share, as quoted on the over the counter bulletin board on December 31, 2001.
EMPLOYMENT AGREEMENTS
Didier Pietri has an employment agreement with the Company pursuant to which
he is entitled to receive an annual salary of $300,000. In addition to basic
compensation, Mr. Pietri is entitled to participation in employee benefit plans,
stock option grants and a guaranteed bonus of $100,000 after the
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first full year of employment is completed. Mr. Pietri is guaranteed employment
for one year after which the Company can terminate his employment, with or
without cause, at any time.
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from the first day of trading of the Company's
Common Stock after the Company's spin-off from ESS Technology, Inc. August 23,
2001 to December 31, 2001 with the cumulative total return on the NASDAQ Stock
Market Index and the Dow Jones Consumer Electronics Industry Index (assuming the
investment of $100 in the Company's Common Stock and in each of the indexes on
the date of the Company's initial public offering, and reinvestment of all
dividends). The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
[GRAPH APPEARS HERE]
The following description data are supplied in accordance with Rule 304(d)
of Regulation S-T:
VIALTA, INC. NASDAQ COMPOSITE DOW JONES CONSUMER ELECTRONICS INDEX
----------------------------------- ----------------------------------- --------------------------------------
DATE CLOSING PRICE INVESTMENT VALUE CLOSING PRICE INVESTMENT VALUE CLOSING PRICE INVESTMENT VALUE
------------ --------------- ------------------ --------------- ------------------ --------------- ------------------
08/23/2001 $ 0.47 $ 100.000 1842.97 $ 100.000 149.65 $ 100.000
12/31/2001 $ 1.24 $ 263.830 1950.40 $ 105.950 167.68 $ 112.050
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following and the
Performance Graph in this proxy shall not be incorporated by reference into any
such filing.
11
REPORT OF THE AUDIT COMMITTEE
The Company's management has the primary responsibility for the integrity of
the Company's financial information. The Company's independent auditors are
responsible for conducting independent audits of the Company's financial
statements in accordance with generally accepted auditing standards and
expressing an opinion on the financial statements based on those audits. The
Audit Committee nominates the independent auditors for approval by the Board and
is responsible for overseeing the conduct of the above activities by management
and such auditors.
As part of its responsibility, the Audit Committee has met with the
Company's independent accountants to review and discuss the adequacy of the
Company's internal control system, financial reporting procedures and other
matters required to be discussed by the Statement of Auditor Standards 61 such
as the independent accountant's judgments as to the quality of the financial
statements, changes in the accounting policies and sensitive accounting
estimates. The Audit Committee has reviewed and discussed the audited financial
statements with management and the Company's independent accountant. The Audit
Committee reviewed the general scope of the Company's annual audit and fees
charged by the independent accountants and reviewed and monitored the
performance of non-audit services by the Company's auditors. The Audit Committee
has received the written disclosures and the letter from the independent
accountants required by ISB No. 1 and has discussed with the independent
accountant that firm's independence.
Based upon these reviews and discussions, the Audit Committee recommended
to the Board that the audited financial statement be included in the Company's
annual report on Form 10-K for the year ended December 31, 2001.
AUDIT COMMITTEE
/s/ Matt Fong
----------------------------
/s/ Masaharu Shinya
----------------------------
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL
The Committee acts on behalf of the Board to examine and implement the
general compensation policy of the Company for all executive officers and such
other employees of the Company as the Board of Directors may deem appropriate.
The Committee reviews the general compensation policy applicable to the Chief
Executive Officer ("CEO") and other executive officers on an annual basis. The
Committee administers the Company's incentive and equity plans, including the
1999 Stock Incentive Plan, the 2000 Directors Stock Option Plan and the 2001
Nonstatutory Stock Option Plan.
The Company's policy in compensating its executive officers is intended to
attract, motivate and retain these executives. Consistent with this policy, key
executives are eligible to receive, in addition to their base salaries, stock
option grants under the 1999 Stock Incentive Plan in amounts determined by the
Board of Directors based on recommendations by the Compensation Committee. Stock
options have value for these executives only if the price of the Company's stock
increases above the fair market value on the grant date and the executive
remains in the Company's employ for the period required for the
12
shares to vest. Additional incentive compensation is also considered by the
Committee based on individual performance and the achievement of short term
goals.
The base salary, incentive compensation and stock option grants of the
executive officers are determined in part by the Committee reviewing data on
prevailing compensation practices in technology companies with whom the Company
competes for executive talent and by their evaluating such information in
connection with the Company's corporate goals. To this end, the Committee
attempts to compare the compensation of the Company's CEO and other executive
officers with the compensation practices of comparable companies to determine
base salary, target bonuses and target total cash compensation.
COMPENSATION OF EXECUTIVE OFFICERS
During the fiscal year that ended on December 31, 2001, the Company's
executive compensation program was comprised of the following key components:
base salary, annual bonus, and equity-based incentives.
Base Salary. The Company sets the base salaries of its executives at levels
believed to be consistent with comparably sized companies engaged in similar
industries.
Equity-Based Incentive Compensation. Stock options are an important
component of the total compensation of executives. The Company believes that
stock options align the interests of each executive with those of the
stockholders. They also provide executives a significant, long-term interest in
the Company's success and help retain key executives in a competitive market for
executive talent. The Company's 1999 Equity Incentive Plan authorizes the
Committee to grant stock options to executives. The number of shares owned by,
or subject to options held by, each executive officer is periodically reviewed
and additional awards are considered based upon past performance of the
executive and the relative holdings of other executives in the Company. The
option grants generally utilize four-year vesting periods to encourage
executives to continue contributing to the Company, and they expire not later
than ten years from the date of grant.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Company's CEO's compensation plan includes the same elements and
performance measures as the plans of the Company's other executive officers. The
Compensation Committee evaluates the performance of the Company's CEO, sets his
base compensation and determines bonuses and awards stock or option grants, if
any.
Mr. Chan's base salary for fiscal year 2001 was set at the same salary
granted for the prior year. In determining his total compensation, the
Compensation Committee considered his length of service with the Company, the
Company's accomplishments during the prior year, future objectives and
challenges for the Company, and Mr. Chan's individual performance and
contributions to the Company. In making its compensation decisions with respect
to Mr. Chan, the Compensation Committee exercised its discretion and judgment
based on the above factors, and no specific formula was applied to determine the
weight of each factor. The Compensation Committee believes that Mr. Chan has
provided important leadership in the creation and development of the Company
from its inception.
Mr. Pietri joined the Company in April of 2001 and the Company entered into
a one year employment agreement with him. In determining the terms of his
agreement, the Compensation Committee considered a number of factors and
criteria including, Mr. Pietri's depth of experience, his past accomplishments
with other companies, his vision and leadership abilities, and the future needs
of the Company. In
13
making its compensation decisions with Mr. Pietri, the Compensation Committee
also considered the need to retain Mr. Pietri and decided to award him a bonus
at the end of one full year's service. Based on his successes to date, the
Company decided to advance this bonus in January 2002. The Compensation
Committee exercised its discretion and judgment based on the above factors, and
no specific formula was applied to determine the weight of any factor.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Compensation Committee has considered the impact of Section 162(m) of
the Code, which disallows a deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable year for the CEO and
four other most highly compensated executive officers, unless such compensation
meets the requirements for the "performance-based" exception to the general
rule. Since the cash compensation paid by the Company to each of its executive
officers is expected to be below $1 million, the Compensation Committee believes
that this section will not affect the tax deductions available to the Company.
It will be the Compensation Committee's policy to qualify, to the extent
reasonable, the executive officers' compensation for deductibility under
applicable tax law.
COMPENSATION COMMITTEE
/s/ Matt Fong
----------------------------
/s/ Masaharu Shinya
----------------------------
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Fred Chan, who was an officer of the Company during the fiscal year,
participated in deliberations of the Company's Board of Directors concerning
executive officer compensation.
CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS
Since April 20, 1999, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company was or is
to be a party in which the amount involved exceeds $60,000 and in which any
director, nominee for election as a director, executive officer, holder of more
than 5% of the Company's Common Stock or any member of the immediate family of
any of the foregoing persons had or will have a direct or indirect material
interest other than compensation arrangements, which are described under
"Compensation of Directors" and "Executive Compensation" above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and officers, and persons who own more than 10% of the
Company's Common Stock to file initial reports of ownership and reports of
changes in ownership. Such persons are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms that they file. Based solely on
its review of the copies of such forms furnished to the Company and written
representations from the executive officers
14
and directors, the Company believes that all transactions required to be
reported pursuant to Section 16(a) for the year ended December 31, 2001 were
reported on a timely basis except that Mr. Fong was late in filing one report on
Form 4 reflecting one transaction for the exercise of options to acquire shares
of Class A Common Stock.
HOUSEHOLDING INFORMATION
Some banks, brokers and other nominees are participating in the practice of
"householding" proxy statements and annual reports. This means that only one
Proxy Statement and set of accompanying materials is being delivered to multiple
security holders sharing an address. However, if we receive contrary
instructions from one or more of the security holders, we will deliver, promptly
upon written or oral request, a separate copy of the Proxy Statement and
accompanying materials to a security holder at a shared address to which a
single copy of the documents was delivered. A security holder who wishes to
receive a separate copy of the Proxy Statement and accompanying materials now or
in the future, or security holders sharing an address who are receiving multiple
copies of proxy materials and wish to receive a single copy of such materials,
should submit a written request to Director of Finance, Vialta, Inc., 48461
Fremont Boulevard, Fremont, CA 94538 or call 510-870-3068.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Annual Meeting, and, so far as is known to the Board, no matters are to be
brought before the Annual Meeting except as specified in the Notice of the
Annual Meeting. As to any business that may properly come before the Annual
Meeting, however, it is intended that proxies, in the form enclosed, will be
voted in respect thereof in accordance with the judgment of the persons voting
such proxies.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
James Allison
Controller
Dated: April 30, 2002
15
APPENDIX A
VIALTA.COM
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSE
The purpose of the Audit Committee established pursuant to this charter will
be to make such examinations as are necessary to monitor the corporate financial
reporting and the internal and external audits of the Company, to provide to the
Board of Directors the results of its examinations and recommendations derived
therefrom, to outline to the Board improvements made, or to be made, in internal
accounting controls, to nominate independent auditors, and to provide the Board
such additional information and materials as it may deem necessary to make the
Board aware of significant financial matters which require Board attention.
In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
from time to time prescribe.
MEMBERSHIP
The Audit Committee will be comprised of two members of the Board. Such
members will be elected and serve at the pleasure of the Board. The members of
the Audit Committee will not be employees of the Company and each shall be an
independent director, and free from any relationship that, in the opinion of the
Board, would interfere with the exercise of his or her independent judgment as a
member of the Audit Committee.
MEETINGS
The Audit Committee will meet with the President and the Chief Financial
Officer of the Company at least quarterly to review the financial affairs of the
Company. The Audit Committee will meet with the independent auditors of the
Company upon the completion of the annual audit, and at such other times as it
deems appropriate, to review the independent auditors' examination and
management report.
RESPONSIBILITIES
The responsibilities of the Audit Committee shall include:
1. Nominating the independent auditors;
2. Reviewing the plan for the audit and related services;
3. Reviewing audit results and financial statements;
4. Overseeing the adequacy of the Company's system of internal accounting
controls, including obtaining from the independent auditors management
letters or summaries on such internal accounting controls;
5. Overseeing the effectiveness of the internal audit function;
16
6. Overseeing compliance with the Foreign Corrupt Practices Act;
7. Overseeing compliance with SEC requirements for disclosure of auditor's
services and audit committee members and activities; and
8. Overseeing the Company's finance function, which may include the
adoption from time to time of a policy with regard to the investment of
the Company's assets.
In addition to the above responsibilities, the Audit Committee will undertake
such other duties as the Board of Directors delegates to it.
REPORTS
The Audit Committee will to the extent deemed appropriate record its
summaries of recommendations to the Board in written form that will be
incorporated as a part of the minutes of the Board of Directors.
17
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF VIALTA, INC.
2002 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Vialta, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 30, 2002, and hereby appoints Didier Pietri
and James Allison, and each of them, with full power to each of substitution, as
proxies and attorneys-in-fact, on behalf and in the name of the undersigned, to
represent the undersigned at the Annual Meeting of Stockholders of Vialta, Inc.
to be held on June 20, 2002 at 2:00 p.m. local time, at the Fremont Marriott,
46100 Landing Parkway, Fremont, CA 94538, and at any adjournment or postponement
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
on the reverse side.
The Proxy will be voted as directed or, if no contrary direction is
indicated, will be voted as follows: (1) FOR the Election of Directors in the
manner described in the Proxy Statement, (2) FOR the proposal to ratify the
selection of PricewaterhouseCoopers LLP as the Company's independent accountants
for the fiscal year ending December 31, 2002.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
------------------------------------------------------
FOLD AND DETACH HERE
Please mark votes as in
this example [X]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES FOR
DIRECTORS AND PROPOSALS 2 AND 3.
1. Election of the five directors nominated by the Board of Directors.
Fred S.L. Chan (Class III) [ ] For [ ] Withhold Authority
Didier Pietri (Class II) [ ] For [ ] Withhold Authority
Matthew K. Fong (Class II) [ ] For [ ] Withhold Authority
Herbert Chang (Class I) [ ] For [ ] Withhold Authority
Masaharu Shinya (Class I) [ ] For [ ] Withhold Authority
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending December 31, 2002.
[ ] For [ ] Against [ ] Abstain
and, in their discretion, the proxies are
authorized to vote on such other business as
may properly come before the meeting or any
adjournment thereof.
SIGNATURE(S)
-------------------------
DATE
---------------------
Please sign exactly as name appears hereon.
Where shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee, or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
USING THE ENCLOSED ENVELOPE.
-----------------------------------------------------
-- FOLD AND DETACH HERE --