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
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)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 Section240.14a-12
INNOVEDA, INC.
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(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
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INNOVEDA, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JULY 13, 2000JUNE 15, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Innoveda, Inc., a Delaware corporation (the "Company"), will be held on
Thursday, July 13,
2000,June 15, 2001, at 10:00 a.m., local time, at the Company's executive offices,
of Hale and Dorr LLP, 60 State
Street,293 Boston Post Road West, Marlboro, Massachusetts (the "Meeting") for the
purposes of considering and voting uponon the following matters:
1. To elect onetwo Class III DirectorI Directors for the ensuing three years and until
his
successor istheir successors are duly elected and qualified;
2. To approve an amendment to the Company's Amended and Restated Certificate of
Incorporation, as amended, to increase the authorized number of shares of
Common Stock of the Company from 50,000,000 to 100,000,000;
3. To approve the Company's Amended and Restated 2000 Stock Incentive Plan and
the authorization of an initial 4,500,000 shares of the Company's Common
Stock for issuance under such plan, plus an additional 2,000,000 shares of
the Company's Common Stock each year of the plan term;
4. To approve the Company's 2000 Employee Stock Purchase Plan and the
authorization of 700,000 shares of the Company's Common Stock for issuance
under such plan; and
5. To transact such other business as may properly come before the Meeting
and any adjournment or adjournments thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on Friday, May 26,
2000April 23, 2001 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Meeting and at any adjournment or adjournments thereof. The
stock transfer books of the Company remain open.
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1999,30, 2000, which contains consolidated financial statements and other
information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.
All stockholders are cordially invited to attend the Meeting.
BY ORDER OFBy Order of the Board of Directors,
[LOGO]
Peter T. Johnson, SECRETARY
Marlboro, Massachusetts
May 4, 2001
THE BOARD OF DIRECTORS
Peter T. Johnson,
SECRETARY
Marlboro, Massachusetts
June 9, 2000HOPES YOU WILL ATTEND THE MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE IN ORDER TO ENSURE
REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS
MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON
EVEN IF YOU HAVE RETURNED A PROXY. YOUR VOTE IS IMPORTANT REGARDLESS OF THE
NUMBER OF SHARES YOU OWN.
INNOVEDA, INC.
293 BOSTON POST ROAD WEST
MARLBORO, MASSACHUSETTS 01752
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, JULY 13, 2000FRIDAY, JUNE 15, 2001
This Proxy Statement is furnished in connection with the solicitation of
proxies of the Board of Directors (the "Board of Directors" or the "Board") of
Innoveda, Inc., a Delaware corporation, (the "Company"), for use at the Annual
Meeting of Stockholders to be held on Thursday, July 13, 2000Friday, June 15, 2001 at 10:00 a.m., local
time, at the Company's executive offices, of
Hale and Dorr LLP, 60 State Street,293 Boston Post Road West, Marlboro,
Massachusetts and at any adjournment or adjournments thereof (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the Notice of Meeting accompanying this Proxy
Statement. Any proxy may be revoked by a stockholder at any time before its
exercise by delivery of a written revocation or a subsequently dated proxy to
the Secretary of the Company or by voting in person at the Meeting. Attendance
at the Meeting will not itself be deemed to revoke a proxy unless the
stockholder gives affirmative notice at the Meeting that the stockholder intends
to revoke the proxy and vote in person.
On May 26, 2000,April 23, 2001, the record date for determination of stockholders
entitled to vote at the Meeting (the "Record Date"), there were outstanding and
entitled to vote an aggregate of 32,528,32139,312,502 shares of common stock, $0.01 par
value per share, of the Company ("Common Stock"). Each share entitles the record
holder to one vote on each of the matters to be voted upon at the Meeting.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 199930,
2000 ARE FIRST BEING SENT OR GIVEN TO STOCKHOLDERS ON OR ABOUT JUNE 9, 2000. INCLUDED INMAY 4, 2001. THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS ISCOMPANY WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999,30,
2000, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUTINCLUDING FINANCIAL
STATEMENTS AND SCHEDULES BUT EXCLUDING EXHIBITS. THE COMPANY WILL, UPON WRITTEN REQUEST OF
ANY STOCKHOLDER, FURNISH UPON PAYMENT OF AN APPROPRIATE PROCESSING FEE COPIES OF
THE EXHIBITS TO ITS ANNUAL REPORT ON FORM 10-K. PLEASE ADDRESS ALL SUCH
REQUESTS TO INNOVEDA, INC., 293 BOSTON POST ROAD WEST, MARLBORO, MASSACHUSETTS
01752, ATTENTION: PETER T. JOHNSON. EXHIBITS WILL BE PROVIDED UPON WRITTEN
REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 199930, 2000 with
respect to the beneficial ownership of the Common Stock by (i) each person or
entity known to the Company to beneficially own more than 5% of the outstanding
shares of the Common Stock, (ii) each director of the Company, (iii) the
Company's Chief Executive Officer as of December 31, 1999,30, 2000, (iv) the Company's
former Chief Executive Officer who was not serving in such capacity as of
December 31, 1999, (v) the Company's
other four most highly compensated executive officers who were serving as
executive officers of the Company as of December 31, 199930, 2000 and (vi)(v) all directors
and executive officers of the Company, as a group.
NUMBER OF SHARES
BENEFICIALLY OWNED(1) PERCENT OF TOTAL(2)TOTAL
--------------------- -----------------------------------
Keith B. Geeslin(3)....................................... 9,509,920 29.6%Geeslin(2) ........................................ 9,524,500 24.40%
C/o The Sprout Group
3003000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
The Sprout Group(4)....................................... 9,509,920 29.6%
300Group(3) ........................................ 9,509,916 24.37%
3000 Sand Hill Road
Building 4,3, Suite 270170
Menlo Park, CA 94025
Wells Fargo & Company(4) ................................... 8,967,714 22.98%
420 Montgomery Street
San Francisco, CA 94104
Kyoden Company(5) .......................................... 4,741,491 12.15%
30-13 Motoyoyogi
Shibuya-Ku
Tokyo, Japan
Hiroshi Hashimoto(6) ....................................... 4,746,700 12.16%
Kyoden Company Limited
30-13 Motoyoyogi
Shibuya -- Ku
Tokyo, Japan
Synopsys, Inc(5)..........................................Inc(7) ........................................... 2,694,514 8.4%6.90%
700 East Middlefield Road
Mountain View, CA 93404
William J. Herman......................................... 860,046 2.7%
Richard G. Lucier......................................... 679,280 2.1%
Richard Davenport......................................... 376,082 1.2%
Gary L. Kiaski(6)Herman........................................... 889,590 2.28%
William V. Botts(8)......................................... 180,83983,958 *
KevinLorne J. Cooper(9).......................................... 14,584 *
Steven P. O'Brien.......................................... 180,839Erwin(10)......................................... 46,458 *
Peter T. Johnson..........................................Johnson............................................ 142,648 *
Gary L. Kiaski(11).......................................... 180,839 *
Richard G. Lucier........................................... 679,280 1.74%
Guy Moshe(7).............................................. 81,075Moshe(12)............................................... 208,432 *
William Botts(8).......................................... 62,500 *
Eric Benhayoun(9)......................................... 52,445 *
C. Albert Koob(10)........................................ 48,852 *
Paula J. Cassidy.......................................... 45,210 *
Steven P. Erwin(11)....................................... 25,000 *
Lorne J. Cooper........................................... 0 0.0%
Larry J. Gerhard(12)...................................... 0 0.0%
All directors and executive officers as a group 11,767,357 36.3%
(11(12 persons) 16,743,042 42.33%
(13).............................................................................................
- ------------------------
* Less than 1%.
(1) Unless otherwise noted, reflects beneficial ownership as of December 31,
1999. Includes shares of the capital stock of Viewlogic Systems, Inc.,
beneficially owned as of December 31, 1999, based upon a conversion ratio of
0.67928 shares of the Common Stock for each share of Viewlogic's capital
stock. On March 23, 2000, all outstanding shares of Viewlogic capital stock
were converted into shares of Common Stock at such conversion ratio in
connection with the merger of Viewlogic with a wholly owned subsidiary of
the Company.30,
2000. The inclusion herein of any shares of Common Stock deemed beneficially
owned does not constitute an admission of beneficial ownership of those
shares. Unless otherwise indicated, each person listed above has sole voting
and investment power with respect to the shares listed. For purposes of this
table, each person is deemed to beneficially own any shares subject to stock
options, warrants or other securities convertible into Common Stock, held by
such person whichthat are currently exercisable (or convertible) or exercisable
(or convertible) within 60 days after December 31, 1999.
(2) Number of shares deemed outstanding includes 32,095,470 shares issued and
outstanding as30, 2000. As of December 31, 1999 (including 16,280,983 shares
representing30,
2000, the outstanding shares of capital stock of Viewlogic Systems,
Inc. on an as converted basis, based upon a conversion ratio of 0.67928Company had 39,026,252 shares of Common Stock for each shareoutstanding.
2
(2) Includes 14,584 shares issuable upon the exercise of Viewlogic's capital stock) plus any
shares subject to stock options warrants or other securities convertible
into Common Stock, held by
Mr. Geeslin that are exercisable within the referenced beneficial owner(s).
2
(3) Consists of 9,509,92060-day period following
December 30, 2000. Also includes 9,509,916 shares beneficially owned by The
Sprout Group, as more fully described in note (4)(3) below. Mr. Geeslin is a
general partnerDivisional Managing Director of TheDLJ Capital Corporation and a Managing
General Partner of the Sprout Group.Group, which is a division of DLJ Capital
Corporation. Mr. Geeslin disclaims beneficial ownership of all shares owned
by The Sprout Group.
(4)(3) Consists of 771,715 shares owned by DLJ ESC II, L.P., 6,440,804 shares owned
by Sprout Capital VIII, L.P., 1,755,195 shares owned by Sprout Growth II,
L.P., 29,273 shares owned by Sprout CEO Fund, L.P., 185,918126,481 shares owned by
DLJ Capital Corp., and 386,448 shares owned by Sprout Venture Capital, L.P.
The 771,715 shares owned by DLJ ESC II. L.P., 6,440,804 shares owned by
Sprout Capital VIII, L.P. and 1,755,195 shares owned by Sprout Growth II,
L.P., are subject to a Voting Trust Agreement, dated as of November 18,
1999, by and among DLJ ESC II, L.P., Sprout Capital VIII, L.P., Sprout
Growth II, L.P., Sprout CEO Fund, L.P., DLJ Capital Corp., Sprout Venture
Capital, L.P., Donaldson, Lufkin & Jenrette, Inc. and Wells Fargo Bank
Indiana, N.A. (f/k/a Norwest Bank Indiana, N.A.), as trustee. Pursuant to
the Voting Trust Agreement, Wells Fargo Bank Indiana, N.A. has the power to
vote the 8,967,714 shares in its sole discretion, subject to certain
limitations on who it may communicate or consult with regarding the voting
of the shares subject to the Voting Trust Agreement. The Voting Trust
Agreement terminates on the earliest of (1) November 18, 2009, (2) the
transfer of all the shares subject to the Voting Trust Agreement in
accordance with the Voting Trust Agreement, (3) the effective date of a
liquidation or dissolution of Innoveda and (4) the written election of
Donaldson, Lufkin & Jenrette, Inc. or the holders of at least 50% of the
shares subject to the Voting Trust Agreement. Wells Fargo Bank Indiana, N.A.
is a subsidiary of Wells Fargo & Company and its address is P.O. Box 960,
Fort Wayne, Indiana 46801.
(4) On February 14, 2001, Wells Fargo & Company and Wells Fargo Bank Indiana,
N.A. filed a Schedule 13G and on March 29, 2001 filed Amendment No. 1 to the
Schedule 13G with the Securities and Exchange Commission reporting
beneficial ownership and sole voting power and no investment power with
respect to 8,967,714 shares of Common Stock. Such information is reported
herein in reliance upon such filing. See note (3) above.
(5) Includes 5,209 shares issuable upon the exercise of stock options held by
Mr. Hashimoto that are exercisable within the 60-day period following
December 30, 2000. Includes 4,741,491 shares owned by Kyoden Holding
Company, a wholly owned subsidiary of Kyoden Company Limited. Mr. Hashimoto
is President, Chairman, a director and 58% shareholder of Kyoden Company
Limited and is President of Kyoden Holding Company. Mr. Hashimoto disclaims
beneficial ownership of all shares owned by Kyoden Holding Company.
(6) Consists of 4,741,491 shares owned by Kyoden Holding Company, a wholly owned
subsidiary of Kyoden Company Limited.
(7) On March 31, 2000, Synopsys, Inc. filed a Schedule 13G with the Securities
and Exchange Commission reporting beneficial ownership of 2,694,514 shares
of Common Stock. Such information is reported herein in reliance upon such
filing.
(6)(8) Includes 61,458 shares issuable upon the exercise of stock options held by
Mr. Botts that are exercisable within the 60-day period following
December 30, 2000.
(9) Consists of 14,584 shares issuable upon the exercise of stock options held
by Mr. Cooper that are exercisable within the 60-day period following
December 30, 2000.
(10) Includes 41,458 shares issuable upon the exercise of stock options held by
Mr. Erwin that are exercisable within the 60-day period following
December 30, 2000.
(11) Consists of 180,839 shares issuable upon the exercise of stock options held
by Mr. Kiaski whichthat are exercisable within the 60 day60-day period following
December 31, 1999.
(7) Includes 81,07530, 2000.
(12) Consists of 208,432 shares issuable upon the exercise of stock options held
by Mr. Moshe whichthat are exercisable within the 60 day60-day period following
December 31, 1999.
(8) Includes 40,000 shares issuable upon the exercise of stock options held by
Mr. Botts which are exercisable within the 60 day period following December
31, 1999.
(9) Includes 49,936 shares issuable upon the exercise of stock options held by
Mr. Benhayoun which are exercisable within the 60 day period following
December 31, 1999.
(10) Consists of 48,852 shares issuable upon the exercise of stock options held
by Mr. Koob which are exercisable within the 60 day period following
December 31, 1999.
(11) Includes 20,000 shares issuable upon the exercise of stock options held by
Mr. Erwin which are exercisable within the 60 day period following December
31, 1999.
(12) As of November 1999.30, 2000.
3
(13) Includes 321,914526,564 shares issuable upon the exercise of stock options held by
such officers and directors whichthat are exercisable within the 60 day60-day period
following December 31, 1999.30, 2000.
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Meeting is required for the election of
directors.
The affirmative vote of the holders of a majority of the shares of
Common Stock outstanding on the Record Date is required to approve the amendment
to the Company's Amended and Restated Certificate of Incorporation, as amended.
The affirmative vote of the holders of a majority of the shares of Common Stock
present or represented by proxy and voting on the matter is required to approve
the 2000 Stock Incentive Plan and the 2000 Employee Stock Purchase Plan.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting offor the
election of directors, which requires the affirmative vote of a plurality of the
votes cast or shares voting on a matter. However, because shares which abstain
and shares represented by "broker non-votes" are nonetheless outstanding shares,
abstentions and "broker non-votes" will have the same effect as a vote against
the proposed amendment to the
3
Company's Amended and Restated Certificate of Incorporation, as amended.
Abstentions and "broker non-votes" will have no effect on the voting on the
approval of the 2000 Stock Incentive Plan and the 2000 Employee Stock Purchase
Plan, each of which requires the affirmative vote of a majority of the votes
cast or shares voting on the matter.
PROPOSAL 1--ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class I
directors, two Class II directors and onetwo Class III director.directors. The Class I,
Class II and Class III directors will serve until the annual meeting of
stockholders to be held in 2001, 2002 and 2000,2003, respectively, and until their
respective successors are duly elected and qualified. At each annual meeting of
stockholders, directors are elected for a full term of three years to succeed
those whose terms are expiring. The persons named in the enclosed proxy will
vote to elect, Williamas Class I directors, Lorne J. Herman as a Class IIICooper and Steven P. Erwin, the
director to serve for the
ensuing three years and until his successor is duly elected and qualified,nominees named below, unless the proxy is marked otherwise. Mr. Cooper
and Mr. Erwin are currently directors of the Company.
Mr. Cooper, Mr. Geeslin and Mr. Herman is currentlywere elected to the Board of
Directors pursuant to the terms of the agreement under which the Company
acquired Viewlogic Systems, Inc., a Delaware corporation ("Viewlogic"), in
March 2000. Mr. Cooper, Mr. Geeslin and Mr. Herman were directors of Viewlogic
prior to its acquisition by the Company. Also pursuant to the terms of that
agreement, Mr. Botts and Mr. Erwin remained directors of the Company.
Mr. Herman was re-elected to the Board of Directors by the Company's
stockholders at the Company's 2000 Annual Meeting of Stockholders.
Mr. Hashimoto was elected to the Board of Directors pursuant to the terms of the
agreement under which the Company acquired PADS Software, Inc., a Delaware
corporation ("PADS"), in September 2000. Mr. Hashimoto was a director of PADS
prior to its acquisition by the Company.
The Class III directorI directors will be elected to hold office until the 20032004 annual
meeting of stockholders and until his successor istheir successors are duly elected and
qualified. Mr. Herman hasCooper and Mr. Erwin have indicated histheir willingness to serve,
if elected; however, if Mr. HermanCooper or Mr. Erwin should be unable to serve, the
person acting under the proxy may vote the proxy for a substitute nominee designated by the Board of Directors.or
nominees. The Board of Directors has no reason to believe that either
Mr. HermanCooper or Mr. Erwin will be unable to serve if elected.
For each member of the Board of Directors, including the nomineenominees for
election as the Class III director,I directors, there follows information given by each
concerning his principal occupation and business experience for at least the
past five years, the names of other public reporting companies of which he
serves as a director and his age and length of service as a director of the
Company. There are no family relationships among any of the directors, the
nomineenominees for Class III directorI directors and the executive officers of the Company.
NOMINEE4
NOMINEES FOR CLASS IIII DIRECTOR
WILLIAM J. HERMAN, 40, has served as the Company's President and Chief
Executive Officer and a director since March 2000. From October 1998 to March
2000, Mr. Herman served as, Director, President and Chief Executive Officer and
a director of Viewlogic Systems, Inc., an electronic design automation company.
From December 1997 to September 1998, Mr. Herman served as President of the
Viewlogic Systems Group of Synopsys, Inc., an electronic design automation
company. From March 1995 to November 1997, Mr. Herman served in various senior
management capacities, most recently as President and Chief Executive Officer,
at the former Viewlogic Systems, Inc., a larger electronic design automation
company which Mr. Herman co-founded in 1984. From 1994 to February 1995, Mr.
Herman served as President of Silerity, Inc., a computer-aided engineering
software company.
THE BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF WILLIAM J. HERMAN AS A
CLASS III DIRECTOR TO HOLD OFFICE UNTIL THE 2003 ANNUAL MEETING OF STOCKHOLDERS
AND UNTIL HIS SUCCESSOR IS ELECTED AND QUALIFIED, IS IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR MR. HERMAN AS A
DIRECTOR.
CLASS I DIRECTORS (TERMS EXPIRE AT 2001 ANNUAL MEETING)
LORNE J. COOPER, 42,44, has served as a director of the Company since
March 2000. From December 1999 to March 2000, Mr. Cooper was a director of
Viewlogic, from December 1999an electronic design automation company. From 1994 to March 2000.
Since November 1994,June 2000,
Mr. Cooper has served as the President of Sente, Inc., a software company that
develops and markets tools for electronic design automation. Since June 2000,
Mr. Cooper has served as the Vice Chairman and a director of Sequence Design, a
software company. Since February 2001, Mr. Cooper has also served as the
President of NuSphere Corporation, which develops software for building
database-driven web sites.
STEVEN P. ERWIN, 56,57, has served as a director of the Company since
May 1997. Mr. Erwin has served as Executive Vice President and Chief Financial
Officer of Health Net, Inc. (formerly Foundation Health Systems, Inc.), a
managed health care company, since March 1998. From 1994 to July 1997,
Mr. Erwin was Executive Vice President and Chief Financial Officer of U.S.
Bancorp, Portland, Oregon.
4
THE BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF LORNE J. COOPER AND
STEVEN P. ERWIN AS CLASS I DIRECTORS TO HOLD OFFICE UNTIL THE 2004 ANNUAL
MEETING OF STOCKHOLDERS AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE
FOR MR. COOPER AND MR. ERWIN AS DIRECTORS.
CLASS II DIRECTORS (TERMS EXPIRE AT 2002 ANNUAL MEETING)
WILLIAM V. BOTTS, 64,65, has served as a director of the Company since
May 1997. Since March 2000, Mr. Botts has served as an independent management
consultant. Mr. Botts served as Interim Chief Executive Officer and Chairman of
the Board of the Company from July 1999 to March 2000. From August 1997 to
July 1999, Mr. Botts was the Interim Chief Executive Officer of California
Lifestyles, Inc., a footwear company. From March 1996 to March 1997, Mr. Botts
served as Chief Executive Officer of Hard Candy, Inc., a cosmetics company. From
1993 to March 1996, Mr. Botts was the owner and President of WV Associates, a
consulting firm for business combinations, acquisitions, business turnarounds
and strategic planning.
KEITH B. GEESLIN, 47,48, has served as a director of the Company since
March 2000. Mr. Geeslin was a director of Viewlogic from October 1998 to
March 2000. Since July 1984, Mr. Geeslin has served in various capacities, most
recently as a general partner,Managing General Partner, of The Sprout Group, a venture capital
firm. In addition, Mr. Geeslin is a general or limited partner in a series of
investment funds associated with The Sprout Group, a division of DLJ Capital
Corporation, which is a wholly owned subsidiary of Donaldson, Lufkin & Jenrette.Credit Suisse First Boston
(USA), Inc. Mr. Geeslin is also a director of GlobeSpan, Inc., Paradyne
Corp.,Networks, Inc. and Rhythms NetConnections, Inc.
CLASS III DIRECTORS (TERMS EXPIRE AT 2003 ANNUAL MEETING)
WILLIAM J. HERMAN, 41, has served as the Company's President and Chief
Executive Officer and a director since March 2000. From October 1998 to
March 2000, Mr. Herman served as President and Chief Executive Officer and a
director of Viewlogic, an electronic design automation company. From
December 1997 to September 1998, Mr. Herman served as President of the Viewlogic
Systems Group of Synopsys, Inc., an electronic design automation company. From
1995 to November 1997, Mr. Herman served in various senior management
capacities, most recently as President and SDL,Chief Executive Officer, at Viewlogic
Systems, Inc., an electronic design automation company distinct from Viewlogic,
which Mr. Herman co-founded in 1984.
HIROSHI HASHIMOTO, 49, has served as a director of the Company since
September 2000. From 1992 to September 2000, Mr. Hashimoto was a director of
PADS Software, Inc., an electronic design automation company that was acquired
by the Company in September 2000. Since 1983, Mr. Hashimoto has served as the
President and Chairman of Kyoden Company, Ltd., a manufacturer of
5
printed circuit boards. Mr. Hashimoto is also a director of Kyoden
Company, Ltd. and Sotec Company, Ltd.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
TheDuring 2000, the Board of Directors met 25six times during 1999.and took action by
unanimous written consent thirteen times. All directors attended at least 75% of
the meetings of the Board of Directors and of the committees on which they
served while serving as a director of the Company.Company, except that Mr. Hashimoto,
who became a director in September 2000, did not attend the two meetings of the
Board of Directors held in 2000 while he was a director.
The Board of Directors has an Audit Committee, which is responsible for
(i) recommending engagement of the Company's independent accountants,
(ii) approving the services performed by such accountants, (iii) consulting with
such accountants regarding the scope, method and reviewing with them the results of their examinations, (iv)
reviewing and approving any material accounting policy changes affectingthe audit of the
Company's operating results,books and accounts, (iv) recommending and implementing any desired
changes to the Company's audit policies, practices and procedures,
(v) reviewing the Company's financial control procedures and personnel and
(vi) reviewing and evaluating the Company's accounting principles and its
systemsystems and internal accounting controls. The Audit Committee held one
meetingten meetings
during 1999.2000. Currently, the Audit Committee consists of Messrs. Botts and Erwin.
For the period January 2000 to March 2000, the Audit Committee consisted of
Mr. Erwin and Ms. Barbara Karmel, served ona former director of the Audit Committee
throughout the fiscal year ended December 31, 1999.Company.
The Board of Directors has a Compensation Committee which is responsible for
(i) recruiting and approvingdetermining the compensation policies applicable to the executive officers
of the Company, (ii) determining the compensation and benefits for the Company's
executive officers and directors, (ii) administering(iii) exercising all rights of the Board of Directors
under the Company's stock option plans and (iii) making recommendations to the Board of Directors regarding such matters.stock purchase plans. The Compensation
Committee held sixfour meetings during 1999.2000. Currently, the Compensation Committee
consists of Messrs. Geeslin and Erwin. Amihai Ben-David
served onFor the period January 2000 to
March 2000, the Compensation Committee throughoutconsisted of Mr. Erwin and Amihai
Ben-David, a former director of the year ended December 31,
1999. During that year, Mr. Botts also served on the Compensation Committee
until he began serving as the Company's Interim Chief Executive Officer in July
1999.Company.
DIRECTOR COMPENSATION
All non-employee directors currently receive compensation for their services
as directors of the Company as follows: (i) an annual cash retainer of $7,500
and (ii) $1,000 for each day of each meeting of the Board or any committee
thereof. In 1999,addition, Messrs. Botts, Cooper, Erwin and Geeslin were each granted
a stock option in April 2000 to purchase 50,000 shares of Common Stock at an
exercise price of $4.85 per share. Mr. Hashimoto was granted an option in
September 2000 to purchase 50,000 shares of Common Stock at a purchase price of
$3.69 per share. Each new non-employee director will be granted a stock option
to purchase 50,000 shares of Common Stock upon first being elected to the Board
of Directors. All of these options vest in equal monthly installments over the
48-month period succeeding the date of grant. If a director is involuntarily
removed from the Board following a change in control of the Company, the
unvested portion of these options immediately becomes fully vested. Directors
are also reimbursed for all reasonable travel expenses related to attending
Board and committee meetings.
From January 2000 to March 2000, all non-employee directors received $20,000
per year and $1,000 per meeting (excluding committee meetings) as compensation
for their services as members of the Board of Directors. Members were also
reimbursed for all travel and related expenses incurred in connection with
attending Board and committee meetings. In addition, non-employee directors were
eligible to receive option grants under the Company's 1996 Director Option Plan,Plan.
No options were granted under which 150,000 shares
of Common Stock have been reserved for issuance. The Director Plan provides for
an automatic grant of an option to purchase 10,000 shares of Common Stock on the
date on which a person first becomes a non-employee director. Thereafter, he or
she will automatically be granted an additional option to purchase 10,000 shares
on the date of the annual meeting of each subsequent year, provided he or she is
then a non-
5
employee director and provided further, that on such date he or she has served
on the Board for at least six months. The first option granted to a director
pursuant to the Director Plan vests twelve months after the date of grant,
except for Mr. Erwin's which vests one business day prior to the Company's first
annual meeting after the grant date. All subsequent options vest and become
exercisable on the earlier of (i) 12 months after the date of the grant or
(ii) one business day prior to the date of the Company's first annual meeting
after the grant date. Vesting of the options is subject to the optionee
continuing to serve as a director on the vesting date. Amihai Ben-David, William
V. Botts, Steven P. Erwin and Barbara M. Karmel were each granted 10,000 options
in May 1999 at an exercise price of $2.50 per share. As of the date of such
grants each such individual was a non-employee director of the Company who had
served on the Board for at least six months.
Beginning in March 2000, all non-employee directors will receive
compensation for their services as directors of the Company as follows: (i) an
annual cash retainer of $7,500 and (ii) $1,000 for each day of each meeting of
the Board or any committee thereof. In addition, and in lieu of further grants
of stock options under the Company's 1996 Director Option Plan Messrs. Botts,
Cooper, Erwin and Geeslin were each granted a stock option in April 2000 to
purchase 50,000 shares of Common Stock at an exercise price of $4.85 per share.
Each new non-employee director will be granted a stock option to purchase 50,000
shares of Common Stock upon first being elected to the Board of Directors. All
of these options vest in equal monthly installments over the 48 month period
succeeding the date of grant. If a director is involuntarily removed from the
Board following a change in control of the Company, the unvested portion of
these options immediately becomes fully vested. Directors continue to be
reimbursed for all reasonable travel expenses related to attending Board and
committee meetings.
EXECUTIVE OFFICERS
For each executive officer of the Company who is not a director of the
Company, there follows information given by each concerning his or her principal
occupation and business experience for at least the last five years and his or
her age and length of service as an executive officer of the Company.
PAULA J. CASSIDY, 31, has served as the Company's Vice President, Human
Resources since March 2000. Ms. Cassidy served as the Vice President, Human
Resources of Viewlogic from October 1998 to March 2000. From December 1997 to
September 1998, Ms. Cassidy served as Vice President of Human Resources of the
Viewlogic Systems Group of Synopsys. From 1989 to November 1997, Ms. Cassidy
served in various capacities, most recently as Manager, Human Resources, at the
former Viewlogic Systems, Inc.
PETER T. JOHNSON, 52, has served as the Company's Vice President, Business
Development, Chief Legal Officer and Secretary since March 2000. Mr. Johnson
served as the Vice President, Business Development and Chief Legal Officer of
Viewlogic from October 1998 to March 2000 and as Secretary from May 1999 to
March 2000. From May 1998 to October 1998, Mr. Johnson served as Vice President,
Chief Legal Officer and Secretary of Avid Technology, Inc., a digital media
software developer. From December 1997 to April 1998, Mr. Johnson served as Vice
President and General Counsel of the Viewlogic Systems Group of Synopsys. From
June 1995 to November 1997, Mr. Johnson served as Vice President, General
Counsel and Secretary of the former Viewlogic Systems, Inc. From 1993 to
February 1995, Mr. Johnson served as General Counsel and Secretary of Phoenix
Technologies Ltd., a software development firm.
GARY L. KIASKI, 45, has served as the Company's Vice President, Worldwide
Sales since March 2000. Mr. Kiaski served as the Vice President, Worldwide Sales
of Viewlogic from October 1998 to March 2000. From December 1997 to September
1998, Mr. Kiaski served as Vice President of Worldwide Sales of the Viewlogic
Systems Group of Synopsys. From 1988 to November 1997, Mr. Kiaski served in
various capacities, most recently as Vice President, Western Region Sales, at
the former Viewlogic Systems, Inc.
6
RICHARD G. LUCIER, 40, has served as the Company's Executive Vice President
and Chief Operating Officer since March 2000. Mr. Lucier served as the Executive
Vice President and Chief Operating Officer of Viewlogic from October 1998 to
March 2000 and served as a director of Viewlogic from October 1998 to December
1999. From December 1997 to September 1998, Mr. Lucier served as Senior Vice
President of Engineering and Marketing of the Viewlogic Systems Group of
Synopsys. From 1986 to November 1997, Mr. Lucier served in various capacities,
most recently as Group Vice President of the Systems Group, at the former
Viewlogic Systems, Inc.
GUY MOSHE, 42, has served as the Company's Senior Vice President and General
Manager of Innoveda Israel since March 2000. Mr. Moshe served as Chief
Technology Officer and President of Summit Design (EDA), Ltd. from
February 1999 to March 2000 and as Vice President, General Manager and Chief
Operating Officer of the Design Solutions Division of the Company from
September 1997 to March 2000. From May 1996 to September 1997 Mr. Moshe served
as General Manager of Summit Design (EDA) Ltd. Mr. Moshe served as the Vice
President of Product Marketing of the Company from 1994 to May 1996.
KEVIN P. O'BRIEN, 43, has served as the Company's Vice President, Finance
and Chief Financial Officer since March 2000. Mr. O'Brien served as the Vice
President, Finance and Chief Financial Officer of Viewlogic from October 1998 to
March 2000 and as Secretary from October 1998 to May 1999. From April 1998 to
September 1998, Mr. O'Brien served as Vice President of Finance of the Viewlogic
Systems Group of Synopsys. From September 1997 to March 1998, Mr. O'Brien served
as an independent management consultant. From October 1995 to August 1997, Mr.
O'Brien served as Chief Financial Officer at SmarTel Communications, Inc., a
telecommunications company. From 1989 to June 1995 Mr. O'Brien served in various
capacities, most recently as Vice President, Finance and Chief Financial
Officer, at Easel Corporation, a client server software developer. Mr. O'Brien
is a certified public accountant.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information concerning the
compensation of (i) the Company's Chief Executive Officer as of December 31,
1999,30,
2000, (ii) the Company's former Chief Executive Officer who was not serving in
such capacity as of December 31, 199930, 2000 and (iii) the Company's other four most
highly compensated executive officers who were serving as executive officers of
the Company as of December 31, 1999 (the30, 2000 (collectively, the "Named Executive
Officers"):
7
SUMMARY COMPENSATION TABLETABLE(1)
ANNUAL COMPENSATION LONG TERMCOMPENSATION(2) LONG-TERM AWARDS
--------------------------------------------- -------------------------------------
OTHER ANNUAL SECURITIES ALL OTHER----------------------------------------------- ----------------------------------------
NAME AND PRINCIPAL POSITION(1)OTHER ANNUAL RESTRICTED STOCK SECURITIES UNDERLYING
POSITION(3) YEAR SALARY($)(2)(4) BONUS($)(3) COMPENSATION($(5) COMPENSATION(6)($) UNDERLYING OPTIONS COMPENSATION($AWARDS($)(7) OPTIONS(8)
- ------------------------------------------------ -------- ------------ ----------- ---------------- ------------------ ---------------- ---------------------
William J. Herman..... 2000 263,212 235,783 6,000 1,658,611 860,046
Chairman of the 1999 228,212 69,800 6,000
Board, President and 1998 220,000 238,309 6,000
Chief Executive
Officer
William V. Botts (4)2000 22,500 -- 19,500(11) 50,000
Botts(10)........... 1999 112,500 60,000 20,000(5)20,000(11) 30,000
--
Chairman of the BoardFormer President and 1998 -- -- 25,000(5)25,000(11) 10,000
Chief Executive
Officer
Richard G. Lucier..... 2000 239,693 167,856 6,000 1,290,000 679,280
Executive Vice 1999 219,692 71,611 6,000
President and Chief 1998 215,000 221,450 6,000
Operating Officer
Guy Moshe............. 2000 220,143 91,255 16,871 2,962
Senior Vice 1999 180,000 -- 12,804 256,681
President and 1998 170,000 30,000 12,804 1,755
General
Manager-Israel
Peter T. Johnson...... 2000 203,519 97,738 -- 275,100 142,648
Vice President, 1999 188,519 43,383 --
Business Development 1998 92,832 51,475 2,258
and Chief Legal
Officer
Gary Kiaski........... 2000 270,733 28,260 6,000 180,839
Vice President, 1999 262,600 16,542 6,000
Worldwide Sales 1998 233,090 25,859 6,000
LONG-TERM AWARDS
------------------
NAME AND PRINCIPAL ALL OTHER
POSITION(3) COMPENSATION($)(9)
- ------------------ ------------------
William J. Herman..... 1,500
Chairman of the 1,500
Board, President and 5,028
Chief Executive
Officer
William V. --
Botts(10)........... --
Former President and --
Chief Executive
Officer
1997 -- -- 15,865(5) 10,000 --
Larry J. Gerhard(6)............ 1999 200,000 -- 12,000(7) -- 200,000(8)
FormerRichard G. Lucier..... 1,500
Executive Vice 1,500
President and Chief 1998 400,0004,829
Operating Officer
Guy Moshe............. --
12,000(7) 75,000 4,333(9)
Executive Officer 1997 341,667 160,000 5,000(7) 75,000 3,575(10)
Richard Davenport(11).......... 1999 230,500 -- 9,000(7) --Senior Vice --
President and 1998 141,000 --
9,000(7) -- --
Chief-Operating Officer 1997 37,510 -- 2,250(7) -- --
C. Albert Koob(12)............. 1999 160,000 144,500(13) 7,214(7) -- --General
Manager-Israel
Peter T. Johnson...... 1,500
Vice President, Finance, 1998 160,000 30,000 7,214(7) 10,000 2,425(14)1,500
Business Development 438,820(12)
and Chief FinancialLegal
Officer
1997 143,333 64,000 3,750(7) 248,000 2,350(14)
and Secretary
Guy Moshe...................... 1999 180,000 -- 12,804(7) 256,681 --
Chief Technology Officer 1998 170,000 30,000 12,804(7) 1,755 --
and President of Summit 1997 113,392 69,810(15) 10,515(7) 34,152 --
Design (EDA), Ltd.
Eric Benhayoun................. 1999 153,860 39,174(16) -- 75,000 --Gary Kiaski........... 1,500
Vice President, General 1998 154,890 57,109(16) -- -- --
Manager--European Operations 1997 120,252 26,945(16) -- 32,500 --1,500
Worldwide Sales 4,686
- ------------------------------------------------------
(1) In March 2000, Viewlogic merged (the "Merger") with and into a wholly owned
subsidiary of the Company, with Viewlogic surviving the merger and each
outstanding share of capital stock of Viewlogic being converted into
0.67928 of a share of Common Stock (the "Exchange Ratio"). See "Certain
Relationships and Related Transactions". Upon the effective time of the
Merger, Mr. Herman, Mr. Lucier, Mr. Johnson and Mr. Kiaski joined the
Company as executive officers. With respect to Mr. Herman, Mr. Lucier,
Mr. Johnson and Mr. Kiaski, (i) all compensation data for the periods prior
to March 2000 reflects compensation paid to each in his capacity as an
executive officer of Viewlogic and (ii) stock-based compensation paid to
each during that period is adjusted to reflect the Exchange Ratio.
(2) In accordance with the rules of the Securities and Exchange Commission, the
compensation set forth in the table above does not include (i) medical,
group life or other benefits which are available to all of the Company's
salaried employees, and (ii) perquisites and other personal benefits,
securities or property which do not exceed the lesser of $50,000 or 10% of
the total annual salary and bonuses for each of the Named Executive
Officers.
7
(3) Unless otherwise noted, lists the principal position with the Company as of
December 31, 1999.
(2)30, 2000.
(4) Amounts shown include cash and noncash compensation earned and received by
executive officers as well as amounts earned but deferred at the election
of those officers.
(3)(5) Consists of annual incentive bonuses.
(4)(6) Unless otherwise noted, consists of car allowance.
(7) All shares of restricted stock were issued upon the exercise of stock
options. On November 23, 1998, Mr. Herman was granted options to purchase
860,046 shares of Common Stock, Mr. Lucier was granted options to purchase
679,280 shares of Common Stock, Mr. Johnson was granted options to purchase
142,648 shares of Common Stock and Mr. Kiaski was granted options to
purchase 180,839 shares of Common Stock. All of these options were
exercisable in full immediately upon grant, but the shares issuable upon
exercise are restricted shares, subject to a repurchase right of the
Company if the executive officer ceases to be an employee, officer or
director of, or a consultant to, the Company. The shares issuable upon
exercise of the options vest from this repurchase right over time.
Twenty-five percent of the shares for Mr. Herman, Mr. Lucier, and
Mr. Kiaski vested as of October 2, 1999. Twenty-five percent of the shares
for Mr. Johnson vested as of October 19, 1999. The remaining 75% vest in
equal increments over the succeeding 36 months. If, within 24 months after
a change of control of Innoveda, the executive officer ceases to be an
employee, officer or director of, or a consultant to, the Company as a
result of termination without cause by the Company or for good reason by
the executive, 100% of the original number of shares subject to the
executive's options vest. Each holder of restricted stock is entitled to
the same dividends with respect to his restricted stock as are paid to
holders of unrestricted shares of Innoveda common stock. Mr. Herman and
Mr. Johnson exercised their options in full on August 11, 1999. Mr. Lucier
exercised his options in full on August 12, 1999. As of those dates, all
shares of stock issued upon exercise were restricted stock. All amounts set
forth under the heading "Restricted Stock Awards" represent the aggregate
dollar value of all shares of restricted stock issued to the executive
officer based upon the fair market value of the restricted stock on the
date of the issuance minus the aggregate exercise price of the stock
options. On December 29, 2000, the last trading day in fiscal 2000, the
closing per share sale price of the Common Stock was $2.06. Mr. Herman held
860,046 shares of restricted stock with a vested value of $1,067,895,
Mr. Lucier held 679,280 shares of restricted stock with a vested value of
$843,488 and Mr. Johnson held 142,648 shares of restricted stock with a
vested value of $173,706. Mr. Botts, Mr. Moshe and Mr. Kiaski held no
shares of restricted stock on December 29, 2000.
(8) Represents the grant of options to purchase shares of Common Stock.
(9) Unless otherwise noted, consists of matching contributions by the Company
to the Company's 401(k) plan.
(10) Mr. Botts served as an executive officer of the Company from July 1999 to
March 2000.
(5)(11) Consists of director's fee.
(6)fees paid to Mr. Gerhard servedBotts for his services as an executive officera non-employee
director of the Company from January 1993
to June 1999.
(7)Company.
(12) Consists of car allowance.
(8) Consists$436,274 in severance payments and $2,546 of severance payments.
(9) Consists ofmatching
contributions by the Company to the Company's matching contribution to Mr. Gerhard's 401(k) plan
in the amount of $2,500 and medical insurance premiums in the amount of
$1,833.
(10) Consists of the Company's matching contribution to Mr. Gerhard's 401(k)
plan in the amount of $2,375 and medical insurance premiums in the amount of
$1,200.
(11) Mr. Davenport served as an executive officer of the Company from September
1997 to February 2000.
(12) Mr. Koob served as an executive officer of the Company from October 1995 to
January 2000.
(13) Consists of a $100,000 retention bonus and a $44,500 annual incentive
bonus.
(14) Consists of the Company's matching contribution to Mr. Koob's 401(k) plan.
(15) Consists of $64,000 of annual incentive bonus and $5,810 of commissions.
(16) Consists of commissions.
8
OPTION GRANTS, EXERCISES AND YEAR-END VALUES
The following table sets forth thecertain information concerning grants of
stock option grants made by the Companyoptions to each of the Named Executive Officers during the fiscal year
ended December 31, 1999:
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 199930, 2000. The Company granted no stock appreciation rights during
the year ended December 30, 2001.
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT INDIVIDUAL GRANTS ASSUMED
------------------------------ ANNUAL
-------------------------------------------------- RATES OF
NUMBER OF %PERCENT OF TOTAL STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(4)TERM(1)
OPTIONS EMPLOYEES IN PRICE($/EXERCISE PRICE EXPIRATION ---------------------
GRANTED(1) 1999(2) GRANTED(2) 2000(3) ($/SHARE)(3)(4) DATE 5%($) 10%($)
---------- ------------ ---------------------- -------------- ---------- --------- ---------
William V. Botts........................ 10,000 0.5 2.50 5/26/09 15,722 39,844
20,000 1.1 2.56 7/26/09 32,199 81,600
Larry J. Gerhard........................Herman................. -- -- -- -- -- --
William V. Botts.................. 50,000(5) 1.332% 4.8438 4/13/10 152,312 385,988
Richard Davenport....................... -- -- -- -- -- --
C. Albert Koob..........................G. Lucier................. -- -- -- -- -- --
Guy Moshe............................... 100,000 5.3 3.44 2/25/09 216,340 548,247
2,892 0.2 3.00 4/16/09 5,456 13,827
150,000 8.0 3.00Moshe......................... 2,962(6) 0.079% 3.9375 9/16/09 283,003 717,184
3,789 0.2 2.38 10/15/99 5,671 14,371
Eric Benhayoun.......................... 75,000 4.0 3.44 10/25/09 162,255 411,1865/10 7,335 18,588
Peter T. Johnson.................. -- -- -- -- -- --
Gary Kiaski....................... -- -- -- -- -- --
- ------------------------
(1) Options granted in 1999 generally vest over four years, with 25%1. As required by the rules of the option shares becoming fully vested one year from the grant dateSecurities and 1/48th
vesting in each successive month, with full vesting occurring on the fourth
anniversary date. Under the terms of the Company's 1994 Stock Plan, the
administrator retains discretion, subject to plan limits, to modify the
terms of outstanding options and to reprice outstanding options. The options
have a term of 10 years, subject to earlier termination in certain
situations related to termination of employment.
(2) Based on a total of 1,879,360 options granted to all employees and
consultants during 1999.
(3) Equal to the per share market value of the underlying shares of Common Stock
on the date of grant.
(4) AmountsExchange Commission, amounts
represent hypothetical gains that could be achieved for the respective
options if exercised at the end of the option term. These gains are based on
the prescribed assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will depend
on the future performance of the Common Stock and the date on which the
options are exercised. No gain to the optionees is possible without an
appreciation in stock price, which will benefit all stockholders
commensurately.
2. Represents the grant of options to purchase shares of Common Stock.
3. Based on a total of 3,754,069 shares subject to options granted by the
Company to its employees and consultants during fiscal 2000.
4. Equals the per share fair market value of the underlying shares of Common
Stock on the date of grant.
5. This option was granted to Mr. Botts in his capacity as a non-employee
director of the Company. See "Director Compensation". This option vests in
equal monthly installments over the 48-month period succeeding the date of
grant. If Mr. Botts is involuntarily removed from the Board following a
change in control of the Company, the unvested portion of this option
immediately becomes fully vested.
6. This option was fully vested on the date of grant.
9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
The following table sets forth on an aggregated basis,certain information concerning the exercisevalue of
unexercised stock options during the year ended December 31, 1999held by each of the Named Executive Officers and the year-end valueas of
unexercised options held by such
officers:December 30, 2000. No Named Executive Officer exercised an option to purchase
Common Stock during fiscal 2000.
AGGREGATED OPTION EXERCISES ANDFISCAL YEAR END OPTION VALUES IN YEAR ENDED
DECEMBER 31, 1999
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISABLEUNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES
OPTIONS AT YEAR END YEAR END ($END($)(1)
ACQUIRED ON VALUE
--------------------------- ---------------------------
NAME EXERCISE REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
William V. Botts............... 0 0 40,000 10,000 18,800 10,000
Larry J. Gerhard...............Herman.............................. 0 0 0 0
William V. Botts............................... 59,375 40,625 0 0
Richard Davenport..............G. Lucier.............................. 0 0 0 0
Guy Moshe...................................... 190,913 118,876 0 0
C. Albert Koob................. 15,000 26,250 47,749 20,251 26,250 0
Guy Moshe......................Peter T. Johnson............................... 0 0 81,075 225,752 8,190 78,500
Eric Benhayoun................. 0 0
38,436 80,564 1,125 23,500Gary Kiaski.................................... 97,954 82,885 154,033 130,337
- ------------------------
(1) Represents the difference between the aggregate fair market value of the
underlying shares of Common Stock on the date of exercise and the aggregate
exercise price.
(2) Based on the aggregate fair market value of the underlying shares of
Common Stock on December 31, 199929, 2000, the last trading day of fiscal 2000
($3.502.06 per share), lessminus the aggregate option
exercise price.
10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee was established in August 1994 and is responsible for (i) recruiting and approvingdetermining the
compensation policies applicable to the executive officers of the Company,
(ii) determining the compensation and benefits for the Company's executive
officers and directors, (ii) administering(iii) exercising all rights of the Board of Directors under the
Company's stock option plans and (iii) making recommendations to the Board of Directors regarding such matters.stock purchase plans. The Compensation Committee is
currently comprised of two directors who are not employees of the Company. The Committee also administers the Company's stock
plans. Each
member of the Compensation Committee is a "non-employee director"
within the meaning of Rule 16b-3 under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"), and an "outside director" within the meaning
of Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as
amended (the "Code"). This report addresses the Company's compensation policies
for 19992000 and how they affected the Company's current and former Chief Executive
Officers and the Company's other executive officers, including the Named
Executive Officers.
COMPENSATION PHILOSOPHY AND POLICY
The policy of the Committee is to attract and retain executive officers and
employees through the payment of competitive base salaries and to encourage and
reward performance through bonuses and stock ownership. The objectives of the
Compensation Committee are to:
- attract, retain and motivate highly qualified executive officers and
employees who contribute to the long-term success of the Company;
- align the compensation of executive officers with the Company's business
objectives and performance; and
- align incentives for executive officers with the interests of
stockholders
in maximizing value.
10
stockholders.
ELEMENTS OF COMPENSATION
The principal components of compensation for the Company's executive
officers are cash components, in the form of salary and variable pay, and
non-cash compensation in the form of equity compensation.
CASH COMPENSATION
Cash compensation consists of (i) base salary which is determined onin the
basisdiscretion of the Compensation Committee after considering the level of
responsibility, expertise and experience of the executive officer, taking into
account competitive conditions in the industry and (ii) cash bonuses up to an
established percentage of base salary, subject to meeting all or a portion of
targeted objectives.
EQUITY COMPENSATION
Ownership of Common Stock is a key element of executive compensation.
Executive officers and other employees of the Company are eligible to
participate in the Company's 1994 Stock Plan and the Company's existing stock
plans, generally, and if each is approved by the stockholders at the Meeting,
will be eligible to participate in the Company's 2000 Stock Incentive Plan and the Company's 2000
Employee Stock Purchase Plan. The 1994 Stock Plan and 2000 Stock Incentive Plan each permits the Board of
Directors or the Compensation Committee to grant stock options to employees on
such terms as the Board of Directors or the Compensation Committee may
determine. The 2000 Stock Incentive Plan also permits the Board of Directors or
the Compensation Committee to grant restricted stock to employees. The 2000
Employee Stock Purchase Plan permits employees to acquire Common Stock through
payroll deductions and promotes broad-based equity participation throughout the
Company. The Committee believes that such stock plans align the interests of the
employees with the long-term interests of the stockholders.
11
In determining the size of a stock option grant to a new executive officer,
or other employee, the Compensation Committee takes into account equity participation by comparable
employeesexecutives within the Company, external competitive circumstances and other
relevant factors. Additional options may be granted to current executive
officers and employees to reward exceptional performance or to provide
additional unvested equity incentives. These options typically vest over a
four-year period and thus require the employee'sexecutive's continuing service to the
Company. The 1996 Employee Stock Purchase Plan and the 2000 Employee Stock
Purchase Plan each permits employees to acquire Common Stock through payroll
deductions and promotes broad-based equity participation through the Company.
The Committee believes that such stock plans align the interests of the
employees with the long-term interests of the stockholders.
In 1999, the Company granted options to purchase an aggregate of 476,681
shares of Common Stock to eight executive officers.
The Company also maintains a 401(k) Plan to provide retirement benefits
through tax deferred salary deductions for all its employees.employees, including
executive officers. In 1999,fiscal 2000, the Company contributed to the 401(k) Plan
by partially matching the employees' contribution at a one-to-fourone-to-two and a half
ratio; provided, however, that the Company's matching contribution for any
employee can notcannot exceed 1.5% of such employee's
salary.
1999$1,500.
2000 EXECUTIVE COMPENSATION AND COMPENSATION OF THE CURRENT AND FORMER CHIEF
EXECUTIVE OFFICERS
Executive compensation for fiscal 19992000 included base salary, cash bonuses
based upon achievement of corporate goals and individual performance goals,
retention bonuses and severance payments. Executive officers, like other
employees, were eligible for option grants under the 1994 Stock Incentive Plan
and to participate in the 19962000 Employee Stock Purchase
Plan. William V. Botts,J. Herman, who served as the Company's Chairman of the BoardPresident and Chief
Executive Officer on December 31, 199930, 2000 received $112,500$263,212 as a base salary $60,000and
$235,783 in the form of a bonus. Mr. Herman's base salary was determined based
on his twenty years experience in the EDA industry, the level of responsibility
required to implement the Company's strategy and competitive compensation data.
Mr. Herman's bonus paymentwas based on the achievement of the Company's sales, revenue
and $20,000 as a director fee. Larry J. Gerhard,operating income targets and sixteen other specific objectives. William V.
Botts, who served as the Company's Chief Executive Officer from January 19992000
until June 1999 during
fiscal 1999,March 2000, received $200,000$22,500 as a base salary $12,000and $19,500 as compensation
for serving as a car allowance and
$200,000 indirector of the 11
form of severance payments during fiscal 1999.Company. Mr. Botts was granted options to
purchase an aggregate of 30,000 shares of Common Stock during fiscal 1999.
Mr. GerhardHerman was not granted any stock
options during fiscal 1999.2000. Mr. Botts was granted an option to purchase 50,000
shares of Common Stock at $4.85 per share under the Company's director
compensation program.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) generally disallows a tax deduction to public companies for
compensation in excess of $1$1.0 million paid to the Company's chief executive
officer and four other most highly most compensated executive officers. Certain
performance-based compensation is excluded from this limitation. The
Compensation Committee periodically reviews the potential consequences of
Section 162(m) and may structure the performance-based portion of its executive
compensation to comply with certain exemptions in Section 162(m). However, the
Compensation Committee reserves the right to use its judgment to authorize
compensation payments that do not comply with the exemptions in Section 162(m)
when the Compensation Committee believes that such payments are appropriate and
in the best interests of the stockholders, after taking into consideration
changing business conditions or the executive officer's performance. In any
event, there can be no assurance that compensation attributable to stock options
and other awards granted under the Company's stock plans will be exempt from
Section 162(m).
William V. BottsSTEVEN P. ERWIN AND KEITH B. GEESLIN
12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has aCurrently, the Compensation Committee which is responsible for
(i) recruiting and approving the compensation and benefits for the Company's
officers and directors, (ii) administering the Company's stock option plans and
(iii) making recommendations toof the Board of Directors regarding such matters.
The Compensation Committeeconsists of
Mr. Erwin and Mr. Geeslin. Pursuant to the agreement under which the Company
acquired Viewlogic in March 2000, the 14,000,000 shares of capital stock of
Viewlogic which may be deemed to be beneficially held six meetings during 1999. Currently,by Mr. Geeslin was
automatically converted into 9,509,916 shares of Common Stock on March 23, 2000.
From January to March 2000, the Compensation Committee consistsconsisted of Messrs. GeeslinMr. Erwin
and Erwin. Amihai Ben-David, a former director of the Company. No executive officer of
the Company served during fiscal 2000 as a director or member of the
compensation committee (or other committee serving an equivalent function) of
any other entity, whose executive officers served on the Compensation Committee throughout the year ended December 31,
1999. During that year, Mr. Botts also served onBoard or Directors or
the Compensation Committee until he began serving asof the Company's Interim Chief Executive Officer in July
1999.Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective JanuaryOn September 22, 1999,2000, pursuant to that certain Agreement and Plan of Merger
and Reorganization dated as of June 2, 2000 (the "PADS Acquisition Agreement")
by and among the Company, Innovative Software, Inc., a Delaware corporation and
a wholly owned subsidiary of the Company ("Innovative Sub"), PADS
Software, Inc., a Delaware corporation ("PADS"), and Kyoden Company Limited, a
Japanese corporation and the majority stockholder of PADS, Innovative Sub merged
with and into PADS with PADS surviving as a wholly owned subsidiary of the
Company (the "PADS Acquisition"). In connection with the PADS Acquisition, the
shares of capital stock of PADS issued and outstanding immediately prior to the
effective time of the PADS Acquisition (the "PADS Acquisition Time") were
automatically converted into the right to receive approximately 1.9 shares of
Common Stock and $0.579 in cash. Pursuant to the PADS Acquisition Agreement, at
the PADS Acquisition Time, the 2,500,000 outstanding shares of PADS's capital
stock beneficially held by both Hiroshi Hashimoto, a director of the Company,
and Kyoden Company Limited, an entity known to the Company to beneficially own
more than 5% of the outstanding shares of Common Stock, were automatically
converted into 4,741,491 shares of Common Stock.
On July 28, 2000, the Company entered into a severancean agreement with
Joseph A, Masarich, former Senior Vice President-Worldwide MarketingSynopsys, Inc., a Delaware Corporation, ("Synopsys") in which Synopsys agreed to
acquire the Company's VirSim electronic design software tool and Salescertain related
assets for a purchase price of $7.0 million. The sale was completed on
August 2, 2000. The terms of this transaction were the result of arm's-length
negotiations among the parties thereto. Those terms were approved by the Board
of Directors. VirSim is used as a debugging and analysis environment with
hardware description language simulators, including the Synopsys VCS Verilog
simulator. Previously, Synopsys licensed VirSim from the Company in connection with the termination of his employment.
Pursuantfor resale. The
Company has retained rights to the agreement, in February 1999 Mr. Masarich beganproduct source code and plans to receive
paymentsintegrate
the functionality of $13,333.33 per month. The payments continued until January 2000.VirSim with its suite of verification tools.
The Company entered into a four-yeartwo-year employment agreement with Mr. Moshe on
February 25, 1999,in
May 2000, pursuant to which he receives an annual base salary of 721,8001,050,500 New
Israeli SchekelsShekels (or approximately $178,222$250,000 U.S. Dollars, based on the exchange
rate on February 25, 1999)March 23, 2001), an annual bonus of up to 25%50% of his base salary, and
all standard benefits accordedafforded other executives of the Company. In the event
Mr. Moshe is terminated other than for cause, he is entitled to severance
payments in accordance with Israeli law plus severance equal to his then monthly
base salary, plus benefits, for a period of fifteennine months. In addition, if
Mr. Moshe is terminated other than for cause, the unvested portion of the stock
option covering 100,000 shares of Common Stock granted to Mr. Moshe on
February 25, 1999 shall become fully exercisable. If, within 12 months after a
change of control of the Company, Mr. Moshe ceases to be an employee of the
Company as a result of termination without cause by the Company or for good
reason by Mr. Moshe, he is entitled to severance payments in accordance with
Israeli law plus severance equal to his then monthly base salary, plus benefits,
for a period of nine months, and the unvested portion of the stock option
covering 150,000 shares of Common Stock granted to Mr. Moshe in September, 1999
shall become fully exercisable. Also, Mr. Moshe is prohibited from competing
with
13
the Company for one year from termination of his employment and from recruiting
the Company's employees for two years from termination of his employment.
The Company entered into an employment agreement with Mr.Richard Davenport, the
former President and Chief Operating Officer of the Company, on February 25,
1999 which was amended on October 24, 1999, pursuant to which he received an
annual base salary of $225,000, an annual bonus of up to 25% of his base salary,
and all standard benefits accordedafforded other executives of the Company. In addition,
Mr. Davenport was entitled to an allowance for car expenses of $750 per month.
Mr. Davenport also received a retention bonus in the amount of $150,000 on
January 1, 2000. Mr. Davenport resigned from his position as President and Chief
Operating Officer 12
effective as of February 29, 2000. Upon his resignation from
the Company, Mr. Davenport became entitled to payments of $18,750 per month,
plus benefits, for twelve months.
The Company entered into a four-year employment agreement with Mr.Eric
Benhayoun, on February 25,the Company's Vice President of Sales for Europe, in April 1999
pursuant to which he receives an annual base salary of 935,0001,040,853 French Francs
(or approximately $157,407$150,000 U.S. Dollars, based on the exchange rate on
February 25, 1999)January 2, 2001), commissions based on sales revenue
generated, and all standard
benefits accordedafforded other executives of the Company. In the event Mr. Benhayoun is
terminated other than for cause, he is entitled to severance equal to his then
monthly base salary, plus benefits, for a period of twelve months. In addition,
the unvested portion of the stock option covering 75,000 shares of common stockCommon Stock
granted to Mr. Benhayoun on February 25, 1999 shall become fully exercisable
upon termination of Mr. Benhayoun without cause or upon a sale of more than 75%
of the assets of the Company or if more than 50% of the outstanding shares of
the Company have been acquired by another company.
The Company modified an employment agreement with Mr. Gerhard on February
29, 1999 which was amended April 30, 1999, pursuant to which he received an
annual base salary of $400,000 and all standard benefits accorded other
executives of the Company as well as certain additional medical benefits. In
addition, Mr. Gerhard was entitled to an allowance for car expenses of $1,000
per month. Mr. Gerhard resigned from his position as Chief Executive Officer
effective June 30, 1999. Upon termination of his employment, Mr. Gerhard became
entitled to payments of $33,333.33 per month plus benefits for twenty-four
months.
The Company entered into an employment agreement with Mr.Alan Koob, the former
Chief Financial Officer and Secretary of the Company, on July 30, 1999, pursuant
to which he received an annual base salary of $160,000 and all standard benefits
accordedafforded other executives of the Company. In addition, Mr. Koob was entitled to
an allowance for car expenses of $750 per month. Mr. Koob also received a
retention bonus in the amount of $100,000 on January 2, 2000. Mr. Koob resigned
from his position as Vice President, Finance, Chief Financial Officer and
Secretary of the Company effective January 31, 2000. Upon termination of his
employment, Mr. Koob became entitled to payments of $13,333.33 per month, plus
benefits, for twelve months.
On March 23, 2000, pursuant to that certain Agreement and Plan of
Reorganization dated as of September 16, 2000 (the "Reorganization Agreement")
by and among the Company, Hood Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of the Company ("Merger Sub"), and Viewlogic, Systems,
Inc., a Delaware corporation ("Viewlogic"), Merger Sub
merged with and into Viewlogic with Viewlogic surviving as a wholly owned
subsidiary of the Company (the "Merger"). In connection with the Merger, the
shares of capital stock of Viewlogic issued and outstanding immediately prior to
the effective time of the Merger (the "Effective Time") were automatically
converted into the right to receive (i) shares of Common Stock based upon an
exchange ratio of 0.67928 of a share of Common Stock for each share of
Viewlogic's capital stock (the "Exchange Ratio"), plus (ii) cash in lieu of any
fractional shares of Common Stock, based on the then-fair market value of the
Common Stock. As a result of the above-described conversion of Viewlogic's
then-outstanding capital stock, the former holders of Viewlogic's capital stock
held approximately 51% of the shares of Common Stock at the Effective Time. The
ownership interest held by the former holders of Viewlogic's capital stock
constituted a change of control of the Company from the holders of the Common
Stock prior to the Effective Time.
Pursuant to the Reorganization Agreement, at the Effective Time the
outstanding shares of Viewlogic's capital stock held beneficially by the
following current executive officers and directors of the Company and persons and
entities know to the Company to beneficially own more than 5% of the
14
outstanding shares of Common Stock were automatically converted into shares of
Common Stock as set forth in the table below:
NUMBER OF SHARES OF COMMON STOCK INTOVIEWLOGIC'S NUMBER OF SHARES OF VIEWLOGIC'SCOMMON
CAPITAL STOCK HELD BENEFICIALLY STOCK INTO WHICH SUCH SHARES OF
IMMEDIATELY PRIOR TO THE EFFECTIVE VIEWLOGIC'S CAPITAL STOCK HELD IMMEDIATELY PRIOR CAPITAL STOCK WERE
EXECUTIVE OFFICER TIME CONVERTED AT THE
EXECUTIVE OFFICER TO THE EFFECTIVE TIME EFFECTIVE TIME
- ----------------- ------------------------------------ ----------------------------------------------------------------------- -------------------------------
William J. Herman..............Herman...................... 1,266,115 860,046
Paula J. Cassidy...............Cassidy....................... 66,556 45,210
Keith B. Geeslin....................... 14,000,000 9,509,916
Peter T. Johnson...............Johnson....................... 210,000 142,648
Richard G. Lucier..............Lucier...................... 1,000,000 679,280
Kevin P. O'Brien...............O'Brien....................... 266,223 180,839
The Sprout Group....................... 14,000,000 9,509,916
Synopsys, Inc.......................... 3,966,722 2,694,514
13
All of thesethe above shares held by Mr. Herman, Ms. Cassidy, Mr. Johnson,
Mr. Lucier and Mr. O'Brien are restricted stock, subject to a repurchase right
of the Company if the executive officer ceases to be an employee, officer or
director of, or a consultant to, the Company. ThisThese shares vest from the
repurchase right vests over time. Twenty-five percent of all of these shares vested
from the repurchase right in October 1999. The remaining 75% vest in equal
monthly increments over the succeeding 36 months. If the executive officer ceases to be an employee,
officer or director of, or a consultant to, the Company as a result of the
Company's actions without cause, 50% of the shares become vested shares. If, within 24 months after a
change of control of the Company, the executive officer ceases to be an
employee, officer or director of, or a consultant to, the Company as a result of
termination without cause by the Company or for good reason by the executive,
100% of the shares become vested shares. The Merger did not constitute a change
of control for purposes of the vesting of the restricted stock. In connection
with the Merger, the Company became the holder of a promissory note made by each
of the individuals listed above in connection with the purchase of their
restricted shares. The notes bear no interest and are secured by a pledge of the
restricted shares. In the event of default under the promissory note, if the
value of the restricted shares is not sufficient to insure full payment of the
promissory note, the maximum liability of each individual is limited to the
lesser of one-half of the original principal amount of their promissory note and
the then current balance under the promissory note. Throughout fiscal 2000, the
principal balance of each promissory note was; $417,818 for Mr. Herman; $21,964
for Ms. Cassidy; $330,000 for Mr. Lucier; $69,300 for Mr. Johnson and $87,854
for Mr. O'Brien.
In addition, at the Effective Time, all options to purchase Viewlogic's
capital stock then outstanding under Viewlogic's stock plans were assumed by the
Company with appropriate adjustments, based upon the Exchange Ratio, to both the
exercise price thereof and the number of shares for which such options are
exercisable. Consequently, at the Effective Time, the outstanding option held by
Gary L. Kiaski to purchase up to 266,223 shares of Viewlogic's capital stock at
a per share purchase price of $0.33 was converted into an option to purchase up
to 180,839 shares of the Company's Common Stock at a per share purchase price of
$0.49 on the same terms and conditions set forth in Mr. Kiaski's stock option
agreement with Viewlogic. Twenty-five percent of the shares subject to this
stock option vested in October 1999. The remaining 75% vest in equal monthly
increments over the succeeding 36 months. Mr. Kiaski has the right to exercise
this option prior to the time it vests. Upon such early exercise, if any,
Mr. Kiaski will receive shares of restricted stock, which are subject to the
same vesting schedule as the original option. In the event Mr. Kiaski's
employment is terminated prior to October 2, 2002, the vesting of this stock
option will accelerate (i) as to the first 90,420 shares, if he is terminated without cause,
and (ii) in full, if he is terminated without cause or resigns his
employment for good reason in connection with, or within 24 months subsequent
to, a change of control. The Merger did not constitute a change of control for
purposes of this stock option.
In connection with the Merger, the Company also assumed the employment
agreements of Mr. Herman and Mr. Lucier. Under the terms of Mr. Herman's
employment agreement, Mr. Herman's
15
employment will continue until October 2, 2001 unless Mr. Herman resigns or the
Company terminates his employment. Mr. Herman receives a base salary of $255,000$315,000
annually and standard benefits afforded other employees of the Company. If the
Company terminates Mr. Herman's employment without cause, he will continue to
receive his benefits and base salary for a period of nine months. This agreement
includes post-termination restrictions for a period of one year which restrict
Mr. Herman from competing with the Company and which prohibit him from
soliciting the Company's employees and customers during that period.
Mr. Herman's compensation is subject to adjustment after the first year of employment but his base salary may not
be decreased.
Mr. Lucier's employment agreement provides that Mr. Lucier's employment will
continue until October 2, 2001 unless Mr. Lucier resigns or the Company
terminates his employment. Mr. Lucier receives a base salary of $235,000$270,000
annually and standard benefits afforded other employees of the Company. If the
Company terminates Mr. Lucier's employment without cause, he will continue to
receive his benefits and base salary for a period of nine months. This agreement
includes post-termination restrictions for a period of one year which restrict
Mr. Lucier from competing with Viewlogic and which prohibit him from soliciting
the Company's employees and customers during that period. Mr. Lucier's
compensation is subject to adjustment after the first year of employment but his base salary may not be decreased.
14Kyoden Company Limited owns 50% of PADS Japan. Mr. Hashimoto, a director of
the Company, is the President, Chairman and 58% shareholder of Kyoden Company
Limited. PADS Japan distributes certain products of the Company in Japan. The
Company has no ownership interest in PADS Japan. During fiscal 2000, Innoveda's
sales to PADS Japan were $1,062,887, which represents a discount of fifty
percent from the list price of the products purchased.
16
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total stockholder return on the
Common Stock with the cumulative return of (i) the Nasdaq Stock Market--U.S.
Index and (ii) the Dow Jones Software Index. The graph assumes the investment of
$100 on October 18, 1996, the date on which the Common Stock was first publicly
traded, in the Common Stock, the Nasdaq Stock Market--U.S. Index and the Dow
Jones Software Index and assumes dividends are reinvested. Measurement points
are the last trading days for the fiscal years ended December 31, 1996, 1997,
1998, 1999 and 1999.2000. No dividends have been declared or paid on the Common
Stock.
[STOCK PERFORMANCE GRAPH APPEARS HERE]EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPANY/MARKET INDEX
10/18/96 1996 1997 1998 1999 - --------------------2000
Innoveda, Inc. 100 86.32 87.37 78.42 29.47 17.36
Nasdaq Stock Market (U.S.) 100 104.24 137.07 230.85 444.38 241.54
Dow Jones Software 100 103.75 127.12 179.25 332.27 200.28
INITIAL INVESTMENT CUMULATIVE DATA RETURN
FOR FISCAL YEAR
----------------------------------------------------
10/18/96 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- --------
Company/Market Index
Innoveda, Inc......................................Inc..................................... $100.00 $86.32 $87.37 $78.42 $29.47 NASDAQ$17.36
Nasdaq Stock Market (U.S.)................................................. 100.00 104.24 137.07 230.85 444.38 241.54
Dow Jones Software................................ 100.00 103.75 127.12 179.25 332.27 Dow Jones Software................................. 100.00 103.75 137.44 227.54 439.24200.28
1517
PROPOSAL 2--APPROVAL OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
The Company's Amended and Restated Certificate of Incorporation,INDEPENDENT AUDITORS
Deloitte & Touche, LLP ("Deloitte & Touche") serve as amended
(the "Restated Charter"), currently authorizes the issuance of 50,000,000 shares
of Common Stock. In May 2000, the Board of Directors adopted resolutions,
subject to stockholder approval, proposing an amendment to the Restated Charter
providing for an increase in the authorized number of shares of Common Stock
from 50,000,000 to 100,000,000 shares. If approved by the stockholders, such
amendment would become effective upon the filing of a certificate of amendment
to the Restated Charter with the Secretary of State of the State of Delaware. As
of May 26, 2000, the Company had outstanding 32,528,321 shares of Common Stock
and an aggregate of approximately 5.3 million shares of Common Stock reserved
for issuance under the Company's
stock incentive and purchase plans.
CHARTER AMENDMENT
The Board of Directors has adopted resolutions setting forth the proposed
amendment to the first paragraph of Article Fourth of the Restated Charter (the
"Charter Amendment"), the advisability of the Charter Amendment, and a call for
submission of the Charter Amendment for approval by the Company's stockholders
at the Meeting. The following is the test of the first of paragraph as proposed
to be amended:
FOURTH. The corporation is authorized to issue two classes of stock to be
designated respectively, "Common Stock" and "Preferred Stock". The total
number of shares that the corporation is authorized to issue is One
Hundred-Five Million (105,000,000) shares, consisting of One Hundred
Million (100,000,000) shares of Common Stock, par value $0.01 per share,
and Five Million (5,000,000) shares of Preferred Stock, par value $0.01
per share.
PURPOSE AND EFFECT OF THE PROPOSED CHARTER AMENDMENT
On June 2, 2000, the Company announced that it had entered into an agreement
to acquire PADS Software, Inc. ("PADS") for a total of approximately 6.5 million
shares of Common Stock and $2 million in cash. The Company has also acquired a
number of other companies in order to augment its technological capabilities and
expand its product offerings. The Company may acquire additional companies for
these and other business reasons. As in the case of the agreement to acquire
PADS, from time to time, the Company uses shares of Common Stock to pay for
acquisitions. The Board believes that the proposed increase in the number of
authorized shares of Common Stock is desirable to maintain the Company's
flexibility in choosing how to pay for acquisitions. While the Company is in
acquisition discussions from time to time with other companies and may consider
issuing shares of Common Stock in the future for such acquisitions, the Company
does not presently have any plans, agreements, understandings or arrangements
that will or could result in the issuance of any shares, other than its
agreement to acquire PADS. The approval of the Charter Amendment by the
Company's stockholders is not a condition to the closing of the Company's
acquisition of PADS.
In addition, the Board believes that the availability of additional shares
of Common Stock will provide the Company with the flexibility to issue shares
for a variety of other purposes that the Board of Directors may deem advisable
without further action by the Company's stockholders, unless required by law,
regulation or stock market rule. These purposes could include, among other
things, the sale of stock to obtain additional capital funds, the purchase of
property, the use of additional shares for various equity compensation and other
employee benefit plans, and other bona fide corporate purposes.
In some situations, the issuance of additional shares of Common Stock could
have a dilutive effect on earnings per share and, for a person who does not
purchase additional shares to maintain his or her pro rata interest, on a
stockholder's percentage voting power in the Company. In addition, depending
upon the nature and terms thereof, such issuances could enable the Board to
render more difficult or
16
discourage an attempt to obtain a controlling interest in the Company or the
removal of the incumbent Board and may discourage unsolicited takeover attempts
which might be desirable to stockholders. For example, the issuance of shares of
Common Stock in a public or private sale, merger or similar transaction would
increase the number of the Company's outstanding shares, thereby diluting the
interest of a party seeking to take over the Company. Furthermore, many
companies have issued warrants or other rights to acquire additional shares to
the holders of Common Stock to discourage or defeat unsolicited stock
accumulation programs and acquisition proposals. If the Charter Amendment is
adopted, more Common Stock of the Company would be available for such purposes
than is currently available.
The Board of Directors is not proposing the Charter Amendment in response to
any effort to accumulate the Company's stock or to obtain control of the Company
by means of a merger, tender offer or solicitation in opposition to management.
In addition, the Charter Amendment is not part of any plan by management to
recommend a series of similar amendments to the Board of Directors and the
stockholders. Finally, the Board does not currently contemplate recommending the
adoption of any other amendments to the Certificate of Incorporation which could
be construed to affect the ability of third parties to take over or change
control of the Company.
If this proposal is approved by the stockholders at the Meeting, upon the
filing of the Charter Amendment with the Secretary of State of the State of
Delaware, the Company will have approximately 62.0 million authorized but
unreserved shares of Common Stock. The Charter Amendment is not necessary to
provide shares of Common Stock for the proposed approval of the Company's 2000
Stock Incentive Plan or the Company's 2000 Employee Stock Purchase Plan. See
"Proposal 3--Approval of 2000 Stock Incentive Plan" and Proposal 4--Approval of
2000 Employee Stock Purchase Plan".
Holders of Common Stock do not have preemptive rights to subscribe to
additional securities that may be issued by the Company. This means that current
stockholders do not have a prior right to purchase any new issue of Common Stock
of the Company in order to maintain their proportionate ownership interest.
THE BOARD OF DIRECTORS BELIEVES THAT THE CHARTER AMENDMENT IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR THIS
PROPOSAL.
PROPOSAL 3--APPROVAL OF AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN
In May 2000, the Board of Directors adopted resolutions, subject to
stockholder approval, to approve the Company's Amended and Restated 2000 Stock
Incentive Plan (the "2000 Stock Plan"). The purpose of the 2000 Stock Plan is to
advance the interests of the Company's stockholders by enhancing the Company's
ability to attract, retain and motivate persons who make (or are expected to
make) important contributions to the Company by providing such persons with
equity ownership opportunities and performance-based incentives and thereby
better aligning the interests of such persons with those of the Company's
stockholders. The Board of Directors believes that continued grants of stock
options, as well as grants of restricted stock, will be an important element in
attracting, retaining motivating persons who make and who are expected to make
contributions to the Company's growth and success. If approved by the
stockholders, 4,500,000 shares of Common Stock will be authorized for issuance
under the 2000 Stock Plan. In addition, on each anniversary of the adoption of
the 2000 Stock Plan by the Board of Directors, the number of shares of Common
Stock authorized for issuance under the 2000 Stock Plan will automatically
increase, without additional Board or stockholder approval, by 2,000,000 shares
of Common Stock. If our acquisition of PADS is completed, we expect that we will
grant awards under the 2000 Stock Plan for an aggregate of approximately
1.0 million shares of Common Stock to attract, motivate and retain the former
employees of PADS. The 2000 Stock Plan also provides that any shares of Common
Stock reserved for issuance under certain other stock plans ("Prior Plans") of
the Company which shares are not issued as awards or which shares are subject to
17
awards that terminate or are otherwise surrendered, shall be available for
issuance under the 2000 Stock Plan, provided that the maximum number of shares
of Common Stock reserved for issuance under Prior Plans that may be issued under
the 2000 Stock Plan shall be 2,400,000.
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE 2000 STOCK PLAN AND
AUTHORIZATION OF AN INITIAL 4,500,000 SHARES OF COMMON STOCK FOR ISSUANCE UNDER
SUCH PLAN, PLUS AN ADDITIONAL 2,000,000 SHARES OF COMMON STOCK EACH YEAR OF THE
PLAN TERM, IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE FOR THIS PROPOSAL.
SUMMARY OF THE 2000 STOCK PLAN
The following is a brief summary of the material provisions of the 2000
Stock Plan. This summary is qualified in all respects by reference to the full
text of the 2000 Stock Plan.
The 2000 Stock Plan provides for the grant of incentive stock options
("incentive stock options") within the meaning of Section 422 of the Code,
options not intended to qualify as incentive stock options ("nonstatutory
options") and restricted stock awards. Generally, awards under the 2000 Stock
Plan are not assignable or transferable except by will or the laws of descent
and distribution.
INCENTIVE STOCK OPTIONS, NONSTATUTORY STOCK OPTIONS AND RESTRICTED STOCK AWARDS
Optionees receive the right to purchase a specified number of shares of
Common Stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. Subject to the
limitations described below, the exercise price of options shall not be less
than 85% of the fair market value of the Common Stock on the date of grant.
Under present law, however, incentive stock options and options intended to
qualify as performance-based compensation under Section 162(m) of the Code may
not be granted at an exercise price less than the fair market value of the
Common Stock on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more than 10%
of the total combined voting power of the Company or its parent or
subsidiaries). The 2000 Stock Plan permits the Board of Directors to determine
the manner of payment of the exercise price of options, including through
payment by cash, check or in connection with a "cashless exercise" through a
broker, by surrender to the Company of shares of Common Stock, by delivery to
the Company of a promissory note, or by any combination of the permitted forms
of payment. Restricted stock awards entitle recipients to acquire shares of
Common Stock, subject to the Company's right to repurchase all or part of such
shares from the recipient in the event that the conditions specified in the
applicable restricted stock award are not satisfied prior to the end of the
applicable restriction period established for such restricted stock award. The
2000 Stock Plan permits the Board of Directors to determine the purchase price,
if any, for restricted stock awards.
ELIGIBILITY TO RECEIVE AWARDS
Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries are eligible to receive awards under the 2000 Stock Plan. Under
present law, however, incentive stock options may only be granted to employees.
No participant may receive awards for more than 500,000 shares in any calendar
year.
As of April 30, 2000, the Company had approximately 416 employees and four
non-employee directors, all of whom were eligible to participate in the 2000
Stock Plan. The number of individuals receiving awards varies from year to year
depending on various factors, such as the number of promotions and the Company's
hiring needs during the year, and thus the Company cannot now determine award
recipients.
18
On the Record Date, the closing sale price of the Common Stock on the Nasdaq
National Market was $4.625.
ADMINISTRATION
The Board of Directors and the Compensation Committee administer the 2000
Stock Plan. The Board of Directors has the authority to adopt, amend and repeal
the administrative rules, guidelines and practices relating to the 2000 Stock
Plan and to interpret its provisions. The Board of Directors may delegate
authority under the 2000 Stock Plan to one or more committees of the Board of
Directors. Pursuant to this authority, the Board of Directors has appointed the
Compensation Committee to administer certain aspects of the 2000 Stock Plan.
Subject to any applicable limitations contained in the 2000 Stock Plan, the
Board of Directors or a committee of the Board of Directors to whom the Board of
Directors delegates authority, as the case may be, selects the recipients of
awards and determines:
- the number of shares of Common Stock covered by options and the dates upon
which such options become exercisable;
- the exercise price of options;
- the duration of options; and
- the number of shares of Common Stock subject to any restricted stock award
and the terms and conditions of such award, including the conditions for
repurchase, issue price and repurchase price.
In the event of a merger, liquidation or other reorganization event, the
Board of Directors is authorized to provide for:
- the assumption or substitution of all outstanding options by the acquirer;
- the termination of all unexercised options immediately prior to the
closing of the acquisition event;
- appropriate cash payments to option holders, if the Company's stockholders
would receive cash payments as consideration in the acquisition event; and
- the vesting in full of outstanding options prior to the reorganization
event provided that, to the extent the option was not exercisable for
unrestricted shares prior to the acquisition event, the participant shall
receive upon exercise of the option, shares of common stock subject to
repurchase by the Company in the event that the conditions specified in
the applicable option agreement are not satisfied.
No award may be granted under the 2000 Stock Plan ten years after the
approval and adoption of the 2000 Stock Plan by the Board of Directors and
stockholders, but the vesting and effectiveness of awards previously granted may
extend beyond that date. The Board of Directors may at any time amend, suspend
or terminate the 2000 Stock Plan, except that no award granted after an
amendment of the 2000 Stock Plan and designated as subject to Section 162(m) by
the Board of Directors shall become exercisable, realizable or vested, to the
extent the amendment was required to grant the award, unless and until the
amendment is approved by the Company's stockholders.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES THAT GENERALLY WILL ARISE WITH RESPECT TO AWARDS GRANTED UNDER THE
2000 STOCK PLAN AND WITH RESPECT TO THE SALE OF COMMON STOCK ACQUIRED UNDER THE
2000 STOCK PLAN.
19
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from the
Exercise Date (a "Disqualifying Disposition"), then all or a portion of the gain
recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO Stock for more than
one year prior to the date of the sale.
RESTRICTED STOCK AWARDS
A participant will not recognize taxable income upon the grant of a
restricted stock award unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
20
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin the day after the forfeiture
provisions or restrictions lapse if a Section 83(b) Election is not made, or the
day after the award is granted if a Section 83(b) Election is made.
TAX CONSEQUENCES TO THE COMPANY
The grant of an award under the 2000 Stock Plan will have no tax
consequences to the Company. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any Common Stock acquired under the 2000
Stock Plan will have any tax consequences to the Company. The Company generally
will be entitled to a business-expense deduction, however, with respect to any
ordinary compensation income recognized by a participant under the 2000 Stock
Plan, including as a result of the exercise of a nonstatutory stock option or a
Disqualifying Disposition. Any such deduction will be subject to the limitations
of Section 162(m) of the Code.
GRANTS AND BENEFITS UNDER THE 2000 STOCK PLAN TO DIRECTORS AND EXECUTIVE
OFFICERS
The stock option grants and the benefits that will be paid under the 2000
Stock Plan to directors, executive officers and all other employees are
currently not determinable.
PROPOSAL 4--APPROVAL OF 2000 EMPLOYEE STOCK PURCHASE PLAN
In May 2000, the Board of Directors adopted resolutions, subject to
stockholder approval, to approve the Company's 2000 Employee Stock Purchase Plan
(the "2000 Purchase Plan"). The purpose of the 2000 Purchase Plan is to provide
eligible employees of the Company with opportunities to purchase shares of
Common Stock. The Board of Directors believes that the 2000 Purchase Plan is an
important factor in attracting, motivating and retaining qualified personnel
essential to the success of the Company.
The 2000 Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions at a price equal to 85% of the lower of the fair
market value of the Common Stock on the first day of each 24-month offering
period or the last day of the applicable six-month purchase period. The 2000
Purchase Plan is intended to qualify under Section 423 of the Code. The Board
has adopted the 2000 Purchase Plan because the number of shares currently
available under the Company's 1996 Employee Stock Purchase Plan is insufficient
to satisfy the expected employee participation in 2000. If approved by the
stockholders, 700,000 shares of Common Stock will be authorized for issuance
under the 2000 Purchase Plan.
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE 2000 PURCHASE PLAN
AND THE AUTHORIZATION OF 700,000 SHARES OF COMMON STOCK FOR ISSUANCE UNDER SUCH
PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS
A VOTE FOR THIS PROPOSAL.
SUMMARY OF THE 2000 PURCHASE PLAN
ADMINISTRATION
The 2000 Purchase Plan may be administered by the Board of Directors or a
committee of the Board of Directors (the "Administrator"), which committee is
required to be constituted to comply with Section 16(b) of the Exchange Act, and
applicable laws.
21
ELIGIBILITY; LIMITATIONS
The 2000 Purchase Plan provides that employees are eligible to participate
if they are customarily employed by the Company or any designated subsidiary for
at least 20 hours per week and for more than five months in any calendar year.
As of April 30, 2000, 416 employees of the Company satisfied the eligibility
criteria for participation in the 2000 Purchase Plan.
TERMS AND CONDITIONS OF SUBSCRIPTION
Participation under the 2000 Purchase Plan is evidenced by a written
subscription agreement between the employee and the Company and is subject to
the following terms and conditions:
PURCHASE PRICE AND METHOD. Employees who participate in the 2000
Purchase Plan purchase the Common Stock through payroll deductions of up to
10% of their base salary and shall receive an option to purchase up to a
maximum number of shares per 24-month offering period determined by dividing
$50,000 by the fair market value of a share of Common Stock on the first day
of the offering period (the "Option Shares"). Such option shall be
exercisable as to 25% of the Option Shares at the end of each six-month
purchase period within the offering period. The price of Common Stock
purchased under the 2000 Purchase Plan is 85% of the lower of the fair
market value of the Common Stock on the first day of the offering period and
the last day of the applicable six-month purchase period. To the extent the
fair market value of the Common Stock on the first day of the subsequent
24-month offering period is lower than the fair market value of the Common
Stock on the first day of the current offering period, then all participants
in such current offering period will be automatically withdrawn from the
current offering period immediately after the exercise of their options on
the exercise date and automatically re-enrolled in the subsequent offering
period as of the first day thereof.
OFFERING PERIODS. Offering periods last 24 months and commence on the
first trading day on or after August 1 and February 1 of each year and
terminate on the last trading day in the periods ending 24 months later.
Each 24-month offering period consists of four purchase periods of
approximately six months duration.
WITHDRAWAL; TERMINATION OF EMPLOYMENT. If an employee decides to
terminate his or her participation in the 2000 Purchase Plan, he or she must
withdraw all the payroll deductions credited to his or her purchase account,
and such funds will be returned to him or her. Upon the termination of
employment for any reason, all payroll deductions will likewise be returned
to the (former) employee.
DEATH. A participating employee may designate who is to receive any
shares and cash, if any, from the participant's account under the 2000
Purchase Plan in the event of such participant's death subsequent to
exercising a purchase option but prior to delivery of the share of Common
Stock.
NONTRANSFERABILITY. Rights granted under the 2000 Purchase Plan are not
transferable by a participant other than by will, the laws of descent and
distribution, or as otherwise provided under the plan, and the Company may
treat any prohibited attempt to transfer as an election to withdraw.
OTHER PROVISIONS. The subscription agreement may contain such other
terms, provisions and conditions not inconsistent with the 2000 Purchase
Plan as may be determined by the Administrator.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS
In the event of changes in the outstanding Common Stock by reason of any
stock splits, reverse stock splits, stock dividends, combinations,
reclassifications or other similar change in the capital structure of the
Company, an appropriate adjustment shall be made by the Administrator in the
following:
22
(i) the number of shares of Common Stock available under the 2000 Purchase Plan
and (ii) the number and class of shares of stock subject to any option
outstanding under the 2000 Purchase Plan. The determination of the Administrator
as to which adjustments shall be made shall be conclusive. In the event of a
proposed dissolution or liquidation of the Company, the offering periods shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board of Directors. Notwithstanding the above, in the
event of a merger of the Company with or into another corporation or the sale of
substantially all of the assets of the Company, unless the acquiring or
succeeding corporation (or an affiliate thereof) agrees to assume or substitute
for, outstanding options under the plan, each purchase period then in progress
shall be shortened by setting a new exercise date and any offering period then
in progress shall end on the new exercise date.
AMENDMENT AND TERMINATION OF THE 2000 PURCHASE PLAN
The Board may at any time amend, alter, suspend or terminate the 2000
Purchase Plan. The Company shall obtain stockholder approval of any amendment to
the 2000 Purchase Plan in such a manner and to such a degree as is necessary and
desirable to comply with Rule 16b-3 under the Exchange Act and 423 of the Code
(or any other applicable law or regulation, including the requirements of any
exchange or quotation system on which the Common Stock is traded). Any amendment
or termination of the 2000 Purchase Plan shall not affect options already
granted and such options shall remain in full force and effect as if the 2000
Purchase Plan had not been amended or terminated, unless mutually agreed
otherwise between the optionee and the Company, which agreement must be in
writing and signed by the participant and the Company. In any event, the
Purchase Plan shall terminate in May 2010.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES THAT GENERALLY WILL ARISE WITH RESPECT TO PURCHASES MADE UNDER THE
2000 PURCHASE PLAN AND WITH RESPECT TO THE SALE OF COMMON STOCK ACQUIRED UNDER
THE 2000 PURCHASE PLAN.
TAX CONSEQUENCES TO PARTICIPANTS
In general, a participant will not recognize taxable income upon enrolling
in the 2000 Purchase Plan or upon purchasing shares of Common Stock at the end
of a purchase period. Instead, if a participant sells Common Stock acquired
under the 2000 Purchase Plan at a sale price that exceeds the price at which the
participant purchased the Common Stock, then the participant will recognize
taxable income in an amount equal to the excess of the sale price of the Common
Stock over the price at which the participant purchased the Common Stock. A
portion of that taxable income will be ordinary income, and a portion may be
capital gain.
If the participant sells the Common Stock more than one year after acquiring
it and more than two years after the date on which the offering period commenced
(the "Grant Date"), then the participant will be taxed as follows. If the sale
price of the Common Stock is higher than the price at which the participant
purchased the Common Stock, then the participant will recognize ordinary
compensation income in an amount equal to the lesser of:
- fifteen percent of the fair market value of the Common Stock on the Grant
Date; and
- the excess of the sale price of the Common Stock over the price at which
the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
23
If the participant sells the Common Stock within one year after acquiring it
or within two years after the Grant Date (a "Disqualifying Disposition"), then
the participant will recognize ordinary compensation income in an amount equal
to the excess of the fair market value of the Common Stock on the date that it
was purchased over the price at which the participant purchased the Common
Stock. The participant will also recognize capital gain in an amount equal to
the excess of the sale price of the Common Stock over the fair market value of
the Common Stock on the date that it was purchased, or capital loss in an amount
equal to the excess of the fair market value of the Common Stock on the date
that it was purchased over the sale price of the Common Stock. This capital gain
or loss will be a long-term capital gain or loss if the participant has held the
Common Stock for more than one year prior to the date of the sale and will be a
short-term capital gain or loss if the participant has held the Common Stock for
a shorter period.
TAX CONSEQUENCES TO THE COMPANY
The offering of Common Stock under the 2000 Purchase Plan will have no tax
consequences to the Company. Moreover, in general, neither the purchase nor the
sale of Common Stock acquired under the 2000 Purchase Plan will have any tax
consequences to the Company except that the Company will be entitled to a
business-expense deduction with respect to any ordinary compensation income
recognized by a participant upon making a Disqualifying Disposition. Any such
deduction will be subject to the limitations of Section 162(m).
GRANTS AND BENEFITS UNDER THE 2000 PURCHASE PLAN TO EXECUTIVE OFFICERS
The stock option grants and the benefits that will be paid under the 2000
Purchase Plan to directors, executive officers and all other employees are
currently not determinable. No options have been granted under the 2000 Purchase
Plan.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, independent public accountants and audited the Company's consolidated financial
statements for fiscal 1999.2000. The CompanyBoard of Directors, at the recommendation of the
Audit Committee, has not
yet selected independent public accountantselected to audit its 2000 consolidated
financial statements.continue to retain Deloitte & Touche LLP served as Viewlogic'sthe
Company's independent public accountants prior toauditors for the Merger. The Company is deciding between
PricewaterhouseCoopers LLP andcurrent fiscal year. Deloitte & Touche LLP as its independent public
accountants for the fiscal year 2000. The Company intendsis
expected to engage its
accountants for such purpose in June 2000. The Company expects that, if it
selects its accountants prior to the Meeting,have a representative of such
accountants will be available at the Meeting to respond to
appropriate questions. Such representative will be permitted to make a statement
if he desires to do so.
As of the Company's acquisition of Viewlogic on March 23, 2001, the former
holders of Viewlogic's capital stock held approximately 51% of the shares of
Common Stock. As the former stockholders of Viewlogic held a controlling
interest in the Company, for accounting purposes, the acquisition was a "reverse
acquisition", and Viewlogic was the "accounting acquirer". Therefore,
Viewlogic's accounts are being recorded at historical cost, and the assets and
liabilities of the Company are being recorded at their estimated fair value as
of the closing date of the acquisition. Due to this accounting treatment of the
acquisition, management of the Company, together with the Audit Committee,
evaluated whether PricewaterhouseCoopers LLP ("PwC"), then the Company's
independent auditors, or Deloitte & Touche, Viewlogic's independent auditors
prior to the acquisition, should be engaged as the Company's independent
auditors for the fiscal year ending December 30, 2000. On June 23, 2000, the
Company dismissed PwC as its independent auditors and engaged Deloitte & Touche
to audit its financial statements as of and for the fiscal year ending
December 30, 2000. The decision to change auditors was recommended by the Audit
Committee and approved by the Board of Directors.
During the fiscal years ended December 31, 1998 and 1999 and through
June 23, 2000, there was not any disagreement with PwC on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
PwC would have caused PwC to make reference to the subject matter of the
disagreement in connection with any report issued by PwC. The reports of PwC on
the Company's financial statements as of and for the years ended December 31,
1998 and 1999, did not contain an adverse opinion or a disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the fiscal years ended December 31, 1998 and 1999 and through
June 23, 2000, Innoveda (formerly Summit Design, Inc.) did not consult with
Deloitte & Touche regarding: (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on Innoveda's financial statements, and either a
written report was provided to Innoveda or oral advice was provided that
Innoveda believes Deloitte & Touche concluded was an important factor considered
by Innoveda in reaching a decision as to the accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a
disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K)
or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of
Regulation S-K).
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Company's Board of Directors is composed of two
members and acts under a written charter first adopted and approved in
May 2000. A copy of this charter is attached to this proxy statement as
Appendix A. The members of the Audit Committee are independent directors, as
defined by its charter and the rules of the Nasdaq Stock Market. The Audit
Committee held ten meetings during the fiscal year ended December 30, 2000.
The Audit Committee reviewed the Company's audited financial statements for
the fiscal year ended December 30, 2000 and discussed these financial statements
with the Company's management. Management is responsible for the Company's
internal controls and the financial reporting process. The Company's independent
accountants are responsible for performing an independent audit of the
18
Company's financial statements in accordance with generally accepted accounting
principles and to issue a report on those financial statements. The Audit
Committee is responsible for monitoring and overseeing these processes. As
appropriate, the Audit Committee reviews and evaluates, and discusses with the
Company's management, internal accounting, financial and auditing personnel and
the independent auditors, the following:
- the plan for, and the independent auditors' report on, each audit of the
Company's financial statements;
- the Company's financial disclosure documents, including all financial
statements and reports filed with the Securities and Exchange Commission
or sent to shareholders;
- changes in the Company's accounting practices, principles, controls or
methodologies;
- significant developments or changes in accounting rules applicable to the
Company; and
- the adequacy of the Company's internal controls and accounting, financial
and auditing personnel.
Management represented to the Audit Committee that the Company's financial
statements had been prepared in accordance with generally accepted accounting
principles.
The Audit Committee also reviewed and discussed the audited financial
statements and the matters required by Statement on Auditing Standards 61
(Communication with Audit Committees) with Deloitte &Touche LLP, the Company's
independent auditors. SAS 61 requires the Company's independent auditors to
discuss with the Company's Audit Committee, among other things, the following:
- methods to account for significant unusual transactions;
- the effect of significant accounting policies in controversial or emerging
areas for which there is a lack of authoritative guidance or consensus;
- the process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions regarding
the reasonableness of those estimates; and
- disagreements with management over the application of accounting
principles, the basis for management's accounting estimates and the
disclosures in the financial statements.
The Company's independent auditors also provided the Audit Committee with
the written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). Independence
Standards Board Standard No. 1 requires auditors annually to disclose in writing
all relationships that in the auditor's professional opinion may reasonably be
thought to bear on independence, confirm their perceived independence and engage
in a discussion of independence. In addition, the Audit Committee discussed with
the independent auditors their independence from the Company. The Audit
Committee also considered whether the independent auditors' provision of certain
other, non-audited related services to the Company is compatible with
maintaining such auditors' independence.
Based on its discussions with management and the independent auditors, and
its review of the representations and information provided by management and the
independent auditors, the Audit Committee recommended to the Company's Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 30, 2000.
By the Audit Committee of the Board of Directors of Innoveda, Inc.
WILLIAM V. BOTTS AND STEVEN P. ERWIN
19
INDEPENDENT AUDITORS' FEES AND OTHER MATTERS
AUDIT FEES
Deloitte & Touche billed the Company an aggregate of $114,000 in fees for
professional services rendered in connection with the audit of the Company's
financial statements for the most recent fiscal year and the reviews of the
financial statements included in each of the Company's Quarterly Reports on
Form 10-Q during the fiscal year ended December 30, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Deloitte & Touche billed the Company an aggregate of $60,086 in fees for
professional services rendered to the Company and its affiliates for the fiscal
year ended December 30, 2000 in connection with the design and implementation of
financial information systems and the operation of information systems.
ALL OTHER FEES
Deloitte & Touche billed the Company an aggregate of $351,746 in fees for
other services rendered to the Company and its affiliates for the fiscal year
ended December 30, 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities ("Reporting Persons"), to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers, directors and
greater-than-ten-percent stockholdersReporting
Persons are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) formsreports they file.
To the Company's knowledge, based on a review of the copies of
suchSection 16(a) reports furnished to the Company or written representations from
certain Reporting Persons that no Form 5 filing was required for such person,
during fiscal 19992000 all of the Company's officers,
directors and greater-than-ten-percent beneficial ownersReporting Persons complied with the
applicable Section 16(a) filing requirements.requirements, except that (a) Mr. Herman filed a
Form 4 reporting his purchase of 28,875 shares of Common Stock eight days late
and (b) DLJ Capital Corporation filed a Form 3 five days late.
STOCKHOLDER PROPOSALS FOR THE MEETING AND FOR THE 20012002 ANNUAL MEETING
Written notice of proposals of stockholders submitted outside the processes
of Rule 14a-8 under the Exchange Act for consideration at the Meeting must have
been received by the Company on or 24
before June 19, 2000,April 25, 2001, in order to be
considered timely for purposes of Rule 14a-414a-3 under the Exchange Act. The persons
designated in the Company's proxy card will be granted discretionary authority
with respect to any stockholder proposal with respect to which the Company does
not receive timely notice. Stockholder proposals submitted pursuant to
Rule 14a-8 under the Exchange Act for inclusion in the Company's proxy materials
for its 20012002 Annual Meeting of Stockholders must be received by the Secretary of
the Company at the principal executive offices of the Company no later than
February 9, 2001.January 4, 2002.
OTHER MATTERS
The Board of Directors knows of no other business, which will be presented for
consideration at the Meeting, other than that described above. However, if any
other business should come before the
20
Meeting, it is the intention of the persons named in the enclosed proxy card to
vote, or otherwise act, in accordance with their best judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, facsimile
and personal interviews. The Company will reimburse such persons for their
reasonable expenses in connection with any such solicitations. In addition, the
Company may retain a proxy solicitation firm for assistance in connection with
the Meeting at an expected cost of no more than $15,000, plus reasonable
expenses. The Company will also request brokerage houses, custodians, nominees
and fiduciaries to forward copies of the proxy materials to those persons for
whom they hold shares and request instructions for voting the proxies. The
Company will reimburse such brokerage houses and other persons for their
reasonable expenses in connection with the distribution.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR SHARES
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXY CARDS.
BY THE ORDER OF THE BOARD OF DIRECTORS,
Peter T. Johnson,[LOGO]
PETER T. JOHNSON, SECRETARY
June 9, 2000
25May 4, 2001
21
AppendixAPPENDIX A
INNOVEDA, INC.
AUDIT COMMITTEE CHARTER
I. MEMBERSHIP
A. NUMBER. The Audit Committee shall consist of at least two independent,
financially literate members of the board of directors meeting the
requirements set forth in Sections I.B and I.C. below.
B. INDEPENDENCE. A director is independent if he or she is not an officer
or employee of the Company or its subsidiaries, if he or she has no
relationship which, in the opinion of the Company's board of directors,
would interfere with his or her exercise of independent judgment in
carrying out the responsibilities of a director, and if he or she:
1. Has no immediate family member who is employed by the Company or an
affiliate of the Company (an immediate family member includes a
person's spouse, parents, children, siblings, mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in a person's home);
2. Is not employed as an executive of an entity other than the Company
having a compensation committee which includes any of the Company's
executives;
3. Has not in any of the past three years been a partner in, or
controlling shareholder or executive of, a for profit business
organization to which the Company made, or from which the Company
received, payment (other than payment arising solely from investments
in the Company's securities) that exceeds the greater of:
(i) $200,000; or (ii) more than 5% of the Company's or business
organization's consolidated gross revenues.
Under exceptional and limited circumstances, one director who has a
relationship making him or her not independent, and who is not a Company
employee or an immediate family member of a Company employee, may serve
on the Audit Committee if the board of directors determines that the
director's membership on the Audit Committee is required by the best
interests of the Company and its shareholders, and discloses in the next
annual proxy statement after such determination the nature of the
relationship and the reasons for the determination.
C. FINANCIAL LITERACY. Each member of the Audit Committee must be able to
read and understand fundamental financial statements, including the
Company's balance sheet, income statement, and cash flow statement, or
must become able to do so within a reasonable time after his or her
appointment to the Audit Committee. At least one member of the Audit
Committee must have past employment experience in finance or accounting,
professional certification in accounting, or other comparable experience
or background which result in the member having financial sophistication
(such as being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight
responsibilities).
D. CHAIRMAN. Unless a Chairman is elected by the board of directors, the
Audit Committee shall elect a Chairman by majority vote.
II. RESPONSIBILITIES OF THE AUDIT COMMITTEE
The Audit Committee shall assist the board of directors in fulfilling their
responsibilities to shareholders concerning the Company's accounting and
reporting practices, and shall facilitate open
A-1
communication between the Audit Committee, board of directors, outside auditors,
and management. The Audit Committee shall discharge its responsibilities, and
shall assess the information provided by the Company's management and the
outside auditor, in accordance with its business judgment. The responsibilities
set forth herein do not reflect or create any duty or obligation of the Audit
Committee to plan, conduct, oversee or determine the appropriate scope of any
audit, or to determine that the Company's financial statements are complete,
accurate, fairly presented, or in accordance with Generally Accepted Accounting
Principles or applicable law. In exercising its business judgment, the Audit
Committee shall rely on the information and advice provided by the Company's
management and/or its outside auditor.
A. The Audit Committee shall review and reassess the adequacy of this charter at
least annually.
B. The outside auditor shall be accountable to the Audit Committee and the
board of directors, which together shall have the ultimate authority and
responsibility to nominate the outside auditor to be proposed for
shareholder approval in any proxy statement, and to select, evaluate, and
(where appropriate) replace the outside auditor.
C. The Audit Committee shall ensure that they receive from the outside auditor
the written disclosures and letter from the outside auditor required by
Independence Standards Board Standard No. 1.
D. The Audit Committee shall discuss with the outside auditor its independence,
and shall actively engage in a dialogue with the outside auditor regarding
any disclosed relationships or services that might impact the objectivity
and independence of the auditor. The Audit Committee shall take, or
recommend that the full board of directors take, appropriate action to
oversee the independence of the outside auditor.
E. The Audit Committee shall review and discuss with the Company's management
the Company's audited financial statements.
F. The Audit Committee shall discuss with the outside auditor the matters about
which Statement on Auditing Standards No. 61 requires discussion.
G. Based upon its discharge of its responsibilities pursuant to Sections II.C
through II.F and any other information, discussion or communication that the
Audit Committee in its business judgment deems relevant, the Audit Committee
shall consider whether they will recommend to the board of directors that
the Company's audited financial statements be included in the Company's
annual reports on Forms 10-K.
H. The Audit Committee shall annually inform the outside auditor, the Chief
Financial Officer, the Controller, and the most senior other person, if any,
responsible for the internal audit activities, that they should promptly
contact the Audit Committee or its Chairman about any significant issue or
disagreement concerning the Company's accounting practices or financial
statements that is not resolved to their satisfaction. Where such
communications are made to the Chairman, he or she shall confer with the
outside auditor concerning any such communications, and shall notify the
other members of the Audit Committee of any communications which the outside
auditor or the Chairman in the exercise of his or her business judgment
believes should be considered by the Audit Committee prior to its next
scheduled meeting.
I. The Audit Committee shall direct the outside auditor to use its best efforts
to perform all reviews of interim financial information prior to disclosure
by the Company of such information, and to discuss promptly with the
Chairman of the Audit Committee and the Chief Financial Officer any matters
identified in connection with the auditor's review of interim financial
information which are required to be discussed by Statement on Auditing
Standards No. 61. The Chairman of the Audit Committee shall discuss any such
matters with the outside auditor, and shall notify the other
A-2
members of the Audit Committee of any discussions which the outside auditor
or the Chairman in the exercise of his or her business judgment believes
should be considered by the Audit Committee prior to disclosure or filing of
the interim financial information, or the Audit Committee's next scheduled
meeting.
J. The Audit Committee shall direct management to advise the Audit Committee in
the event that the Company proposes to disclose or file interim financial
information prior to completion of review by the outside auditor.
K. The Audit Committee shall meet privately at least once per year with:
(i) the outside auditor; (ii) the Chief Financial Officer; (iii) the
Controller; and (iv) the most senior person (if any) responsible for the
internal audit activities of the Company.
A-3
ZINO7B DETACH HERE
INNOVEDA, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2000 ANNUAL MEETING OF STOCKHOLDERS
JULY 13, 20002001 Annual Meeting Of Stockholders
June 15, 2001
The undersigned, revoking all prior proxies, hereby appoints William J. Herman
and Peter T. Johnson, and each of them, with full power of substitution, as
proxies for the undersigned to act and to vote at the Annual Meeting of
Stockholders of Innoveda, Inc. (the "Company") to be held on July
13, 2000June 15, 2001 (the
"Meeting") and at any adjournment or adjournments thereof as designated herein
upon all matters referred to on the reverse side of this Proxy and as described
in the Proxy Statement for the Meeting and, in their discretion, upon any other
matters that may properly come before the Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THE PROXIES WILL VOTE FOR
THE ELECTION OF THE DIRECTOR NOMINEE AND FOR PROPOSALS 2, 3, AND 4.NOMINEES.
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE OF THIS PROXY AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- ----------------- ---------------------------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------------- ---------------------------- -----------
ZINO7A DETACH HERE
|X| Please mark votes as in this example.PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
A VOTE FOR THE FOLLOWING PROPOSALSPROPOSAL IS RECOMMENDED BY THE BOARD OF DIRECTORS.
FOR AGAINST ABSTAIN
1. To elect William J. Herman as a Class III director 2. To approve an amendment to |_| |_| |_|1. To elect (01) Lorne J. Cooper and (02) Steven P. Erwin as Class
I Directors to serve for the ensuing three years and until the Company's Amended
his successor is duly elected and qualified. and Restated Certificate of
FOR WITHHELD Incorporation, as amended,
|_| |_| to increase the authorized
number of shares of Common
Stock of the Company
from 50,000,000 to
100,000,000.
3. To approve the Company's |_| |_| |_|
Amended and Restated 2000 Stock
Incentive Plan and the
authorization of an initial
4,500,000 shares of Common
Stock of the Company for
issuance under such plan,
plus an additional 2,000,000
shares of Common Stock of the
Company each year of the plan
term.
4. To approve the Company's |_| |_| |_|
2000 Employee Stock Purchase
Plan and the authorization
of 700,000 shares of Common
Stock of the Company for
issuance under such plan.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
Please sign exactly as name(s) appear(s) heron.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such. If a
corporation or partnership, please sign by
authorized person.
Signature ___________________________________ Date _____ Signature ___________________________________ Date ______
APPENDIX B
INNOVEDA, INC.
Amended and Restated 2000 Stock Incentive Plan
1. PURPOSE
The purpose of this Amended and Restated 2000 Stock Incentive Plan (the
"Plan") of Innoveda, Inc., a Delaware corporation (the "Company"), is to
advance the interests of the Company's stockholders by enhancing the
Company's ability to attract, retain and motivate persons who make (or are
expected to make) important contributions to the Company by providing such
persons with equity ownership opportunities and performance-based incentives
and thereby better aligning the interests of such persons with those of the
Company's stockholders. Except where the context otherwise requires, the term
"Company" shall include any of the Company's present or future subsidiary
corporations as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code") and
any other business venture (including, without limitation, joint venture or
limited liability company) in which the Company has a significant interest,
as determined by the Board of Directors of the Company (the "Board").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options and restricted stock awards (each, an "Award")
under the Plan. Each person who has been granted an Award under the Plan shall
be deemed a "Participant".
3. ADMINISTRATION AND DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by
the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
(b) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board to the
extent that the Board's powers or authority under the Plan have been delegated
to such Committee.
4. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 7, Awards may be
made under the Plan for a number of shares of common stock, $0.01 par value per
share, of the Company (the "Common Stock") equal to the sum of:
(1) 4,500,000 shares of Common Stock;
1
(2) any shares of Common Stock reserved for issuance under each of
(i) the Summit Designs, Inc. 1994 Stock Plan, as amended, (ii) the Summit
Designs 1997 NonStatutory Stock Option Plan, and (iii) the Viewlogic, Inc.
1998 Stock Incentive Plan, as amended (collectively, the "Prior Plans") that
remain available for issuance upon the adoption of this Plan by the Board;
and
(3) any shares of Common Stock subject to awards under the Prior Plans
which awards expire, terminate, or are otherwise surrendered, canceled or
forfeited (subject, however, in the case of Incentive Stock Options (as
hereinafter defined) to any limitations under the Code);
PROVIDED, HOWEVER, that the maximum number of shares of Common Stock reserved
for issuance under the Prior Plans that may be issued under this Plan shall be
2,400,000 (the "Authorized Shares"); and PROVIDED, FURTHER, HOWEVER, that the
number of Authorized Shares shall be increased automatically by 2,000,000 shares
of Common Stock annually on the anniversary of the adoption of this Plan by the
Board until the expiration of the Plan Term. If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 7, for Awards
granted after the Common Stock is registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the maximum number of shares of Common
Stock with respect to which Awards may be granted to any Participant under the
Plan shall be 500,000 per calendar year. The per-Participant limit described in
this Section 4(b) shall be construedensuing three years and applied consistently with Section
162(m) of the Code ("Section 162(m)").
5. STOCK OPTIONS
(a) GENERAL. The Board may grant options to purchase Common Stock (each, an
"Option")until their
successors are duly elected and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price at the time
each Option is granted and specify it in the applicable option agreement
provided, however, that the exercise price shall not be less than 85% of the
fair market value of the Common Stock, as determined by the Board, at the time
the Option is granted.
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement provided, however, that no Option will be granted for a term in
excess of 10 years.
(e) EXERCISE OF OPTION. Options may be exercised by delivery to the Company
of a written notice of exercise signed by the proper person or by any other form
of notice (including electronic notice) approved by the Board together with
payment in full as specified in Section 5(f) for the number of shares for which
the Option is exercised.
2
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2)qualified.
FOR WITHHELD
/ / / /
/ / ______________________________________
For all nominees except as the Board may, in its sole discretion, otherwise provide
in an option agreement, by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price and any required tax withholdingnoted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name(s) appear(s) hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
(ii) delivery by the Participant to the Company of a copy of irrevocable
and unconditional instructions to a creditworthy broker to deliver promptly
to the Company cash or a check sufficient to pay the exercise price and any
required tax withholding;
(3) by delivery of shares of Common Stock owned by the Participant
valued at their fair market valueguardian, please give full title as determined by (or in a manner approved
by) the Board in good faith ("Fair Market Value"), provided (i) such method
of payment is then permitted under applicable law and (ii) such Common Stock
was owned by the Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (ii) payment of such other lawful consideration
as the Board may determine; or
(5) by any combination of the above permitted forms of payment.
(g) SUBSTITUTE OPTIONS. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in the other sections of this Section 5.
6. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and conditions
of any such Restricted Stock Award, including the conditions for repurchase (or
forfeiture) and the issue price, if any. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
(a) CHANGES IN CAPITALIZATION. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit
3
set forth in Section 4(b), (iii) the number and class of securities and exercise
price per share subject to each outstanding Option, (iv) the repurchase price
per share subject to each outstanding Restricted Stock Award, and (v) the terms
of each other outstanding Award shall be appropriately adjusted by the Company
(or substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 7(a) applies and Section 7(c) also applies to
any event, Section 7(c) shall be applicable to such event, and this Section
7(a) shall not be applicable.
(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed liquidation or
dissolution of the Company, Options shall be treated as described below in
Section 7(c)(2)(b) as if the liquidation or dissolution of the Company were a
Reorganization Event and the acquiring or succeeding corporation (or an
affiliate thereof) did not agree to assume, or substitute for, the Options. The
Board may specify the effect of a liquidation or dissolution on any Restricted
Stock Award or other Award granted under the Plan at the time of the grant of
such Award.
(c) REORGANIZATION EVENTS
(1) Definition. A "Reorganization Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of
which the Common Stock is converted into or exchanged for the right to
receive cash, securities or other property or (b) any exchange of shares of
the Company for cash, securities or other property pursuant to a share
exchange transaction.
(2) Consequences of a Reorganization Event on Options.
(a) Upon the occurrence of a Reorganization Event, or the execution
by the Company of any agreement with respect to a Reorganization Event,
the Board shall provide that all outstanding Options shall be assumed, or
equivalent options shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof). For purposes hereof, an Option
shall be considered to be assumed if, following consummation of the
Reorganization Event, the Option confers the right to purchase, for each
share of Common Stock subject to the Option immediately prior to the
consummation of the Reorganization Event, the consideration (whether
cash, securities or other property) received as a result of the
Reorganization Event by holders of Common Stock for each share of Common
Stock held immediately prior to the consummation of the Reorganization
Event (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if the consideration
received as a result of the Reorganization Event is not solely common
stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or
succeeding corporation, provide for the consideration to be received upon
the exercise of Options to consist solely of common stock of the
acquiring or succeeding corporation (or an affiliate thereof) equivalent
in fair market value to the per share consideration received by holders
of outstanding shares of Common Stock as a result of the Reorganization
Event.
(b) Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not not agree to assume, or
substitute for, such Options, then the Board shall provide that (I) each
Option shall become exercisable in full as of a specified time prior to
the Reorganization Event, as determined by the Board; provided, however,
that upon exercise of such Option (x) to the extent the Option would have
been exercisable prior to the Reorganization Event absent this Section
7(c)(2)(b)(I) for shares not subject to restrictions or conditions, the
Participant shall receive shares free from all conditions or restrictions
upon the exercise of such Option, and (y) to the extent that the Option
would not have been exercisable absent this Section 7(c)(2)(b)(I), the
Participant shall receive shares subject to the Company's right to
repurchase such shares at the Option exercise price with such repurchase
right lapsing at the same rate as the Option would have become
exercisable under the applicable
4
Option agreement; and (II) each Option that was exercisable prior to the
Reorganization Event for shares subject to the Company's right to
repurchase such shares, shall remain exercisable for shares subject to
the Company's right to repurchase such shares at the Option exercise
prices, with such repurchase right lapsing at the same rate as set forth
in the applicable Option agreement; provided, however, that all Options
will terminate immediately prior to the consummation of such
Reorganization Event, except to the extent exercised by the Participants
before the consummation of such Reorganization Event; and provided,
further, however, that in the event of a Reorganization Event under the
terms of which holders of Common Stock will receive upon consummation
thereof a cash payment for each share of Common Stock surrendered
pursuant to such Reorganization Event (the "Acquisition Price"), then the
Board may instead provide that all outstanding Options shall terminate
upon consummation of such Reorganization Event and that each Participant
shall receive, in exchange therefor, a cash payment equal to the amount
(if any) by which (A) the Acquisition Price multiplied by the number of
shares of Common Stock subject to such outstanding Options (whether or
not then exercisable), exceeds (B) the aggregate exercise price of such
Options.
(3) Consequences of a Reorganization Event on Restricted Stock Awards.
Upon the occurrence of a Reorganization Event, the repurchase and other
rights of the Company under each outstanding Restricted Stock Award shall
inure to the benefit of the Company's successor and shall apply to the cash,
securities or other property which the Common Stock was converted into or
exchanged for pursuant to such Reorganization Event in the same manner and
to the same extent as they applied to the Common Stock subject to such
Restricted Stock Award.
8. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award shall be evidenced by a written instrument in
such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each Award
may be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an Award
of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may, to the extent then permitted under applicable law, satisfy
such tax obligations in whole or in part by delivery of shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
5
(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) ACCELERATION. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any shares of Common
Stock acquired upon exercise of an Option which shares are subject to the
Company's repurchase right shall be free of restrictions in full or in part, and
that any Restricted Stock Awards shall be free of restrictions in full or in
part.
9. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on the
date on which it is adopted by the Board, but no Award granted to a Participant
that is intended to comply with Section 162(m) shall become exercisable, vested
or realizable, as applicable to such Award, unless and until the Plan has been
approved by the Company's stockholders to the extent stockholder approval is
required by Section 162(m) in the manner required under Section 162(m)
(including the vote required under Section 162(m)). No Awards shall be granted
under the Plan after the completion of ten years from the earlier of (i) the
date on which the Plan was adopted by the Board or (ii) the date the Plan was
approved by the Company's stockholders, but Awards previously granted may extend
beyond that date (the "Plan Term").
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become
exercisable, realizable or vested, as applicable to such Award, unless and
until such amendment shall have been approved by the Company's stockholders
as required by Section 162(m) (including the vote required under Section
162(m)).
(e) GOVERNING LAW. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors
on May 31, 2000
6
APPENDIX C
INNOVEDA, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock Purchase
Plan of Innoveda, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Innoveda, Inc. and any Designated Subsidiary of the
Company.
(e) "COMPENSATION" shall mean the amount of money reportable on an
Employee's Federal income Tax Withholding Statement (Form W-2) before any
withholdings for health insurance or under a Section 401(k), 125, 129 or similar
plan, including without limitation, salary, wages, and sales commissions, but
excluding overtime, shift premium, bonuses and incentive compensation other than
sales commissions, third party sick or disability pay, allowances or
reimbursements for expenses such as relocation allowances or travel expenses,
whether specifically designated as such or designated as signing bonuses, income
or gains attributable to restricted stock, stock options, stock appreciation
rights or other similar equity-based compensation, imputed income or non-cash
items, such as life insurance premiums, and similar items, whether or not
specifically itemized on the Form W-2.
(f) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the Company
for tax purposes whose customary employment with the Company is at least twenty
(20) hours per week and more than five (5) months in any calendar year.
(h) "ENROLLMENT DATE" shall mean the first day of each Offering Period.
(i) "EXERCISE DATE" shall mean the last day of each Purchase Period.
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last
1
market trading day prior to the time of determination, as reported in The
Wall Street Journal or such other source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be
the mean of the closing bid and asked prices for the Common Stock on the
date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the Board.
(k) "OFFERING PERIODS" shall mean the periods of approximately twenty-four
(24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after August 1 and February
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this 2000 Employee Stock Purchase Plan.
(m) "PURCHASE PERIOD" shall mean the period commencing the day after an
Exercise Date and ending on the Trading Day closest to the day that is six
months after the preceding Exercise Date, except that the first Purchase Period
of any Offering Period shall commence on the Enrollment Date and end with the
Trading Day that is six months after the Enrollment Date. The duration and
timing of Purchase Periods may be changed pursuant to Section 4 of the Plan.
(n) "PURCHASE PRICE" shall mean an amount equal to 85% of the Fair Market
Value of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower.
(o) "RESERVES" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(p) "SUBSIDIARY" shall mean any present or future subsidiary corporation as
defined in Section 424(f) of the Code.
(q) "TRADING DAY" shall mean a day on which national stock exchanges and the
Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee (as defined in Section 2(g)), who shall be employed by the
Company on a given Enrollment Date shall be eligible to participate in the Plan;
provided, however, that an Employee may not participate in more than one
Offering Period at the same time.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) to the extent that, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
capital stock of the Company or of any Subsidiary and/or hold outstanding
options to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time. In the event that an Employee may not be granted an
option under the Plan because of the foregoing restrictions, the Employee shall
be granted an option to purchase the maximum number of shares that would not
violate the foregoing restrictions.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after August 1 and February 1
2
each year, or on such other date as the Board shall determine, and continuing
thereafter until terminated in accordance with Section 19 hereof. The Board
shall have the power to change the duration of Offering Periods and Purchase
Periods (including the commencement dates thereof) with respect to future
offerings without stockholder approval.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement authorizing payroll deductions in the form of Exhibit A
to this Plan and filing it on or prior to the applicable Enrollment Date with
the Company's payroll office or such other office as the Company may direct.
(b) Payroll deductions for a participant shall commence on the first payroll
following the Enrollment Date and shall end on the last payroll in the Offering
Period to which such authorization is applicable, unless sooner terminated by
the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription agreement, he or
she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period. Such
payroll deductions shall be in whole percentages only.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan. A participant may not make any additional
payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing and filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in payroll
deduction rate shall be effective with the first full payroll period following
ten (10) business days after the Company's receipt of the new subscription
agreement. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10 hereof.
(d) At the time the option is exercised, in whole or in part, or at the time
any of the Company's Common Stock issued under the Plan is disposed of, the
participant must make adequate provision for the Company's federal, state, or
other tax withholding obligations, if any, which arise upon the exercise of the
option or the disposition of the Common Stock. At any time, the Company may, but
shall not be obligated to, withhold from the participant's compensation the
amount necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Common Stock
by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase (at the applicable Purchase Price) up to a whole number of
shares of the Company's Common Stock the ("Option Shares") determined by
dividing $50,000 by the Fair Market Value of a share of Common Stock on the
Enrollment Date (subject to any adjustment pursuant to Section 18), and provided
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. The option shall be exercisable as to 25% of the Option
Shares on each Exercise Date during the Offering Period. Exercise of the option
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof. The option shall expire on the last day
of the Offering Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on each Exercise Date during the Offering
Period, and a number of full shares not exceeding the number of shares as to
3
which such participant's option is exercisable on such Exercise Date shall be
purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in his or her account. No fractional shares shall
be purchased. Any payroll deductions accumulated in a participant's account
which are not sufficient to purchase a full share of Common Stock shall be
retained in the participant's account for the subsequent Purchase Period or
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. DELIVERY. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant or to his or her designee, as appropriate, of a certificate
representing the shares purchased upon exercise of his or her option. The
Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing
certificates.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period.such. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in Section
2(g) hereof), for any reason, hecorporation or she shall be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to such participant's
account during the Offering Period but not yet used to exercise the option shall
be returned to such participant or, in the case of his or her death, to the
person or persons entitled thereto under Section 14 hereof, and such
participant's option shall be automatically terminated. If, prior to the last
day of the Offering Period, the Designated Subsidiarypartnership,
please sign by which the Employee is
employed shall cease to be a Subsidiary of the Company, or if the Employee is
transferred to a Subsidiary of the Company that is not a Designated Subsidiary,
the Employee shall be deemed to have terminated employment for purposes of this
Plan.
(c) A participant's withdrawal from an Offering Period shall not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods.
11. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock which shall
be made available for sale under the Plan shall be 700,000 shares, subject to
adjustment as provided in Section 18(a) hereof. If, on a given Exercise Date,
the number of shares with respect to which options are to be exercised exceeds
the number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares covered
by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
4
13. ADMINISTRATION. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
INTERPRET and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to an Exercise Date on
which the option is exercised but prior to delivery to such participant of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan in the event of such participant's death prior to exercise of the option.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such shares and/or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares and/or cash to
the spouse or to any one or more dependents or relatives of the participant, or
if no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
15. TRANSFERABILITY. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.
16. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. REPORTS. Individual accounts shall be maintained for each participant in
the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(A) CHANGES IN CAPITALIZATION. The maximum number of shares of Common Stock
available for sale under the Plan, the Reserves, the maximum number of shares
each participant may purchase during each Purchase Period (pursuant to Section
7), as well as the Purchase Price per share and the number of shares of Common
Stock covered by each option under the Plan which has not yet been exercised,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration". Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect,
5
and no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an option granted hereunder.
(B) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, the Offering Periods shall terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board.
(C) REORGANIZATION EVENTS.
(1) DEFINITION. A "Reorganization Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of
which the Common Stock is converted into or exchanged for the right to
receive cash, securities or other property, (b) any exchange of shares of
the Company for cash, securities or other property pursuant to a share
exchange transaction, or (c) any sale of all or substantially all of the
assets of the Company, each while unexercised options remain outstanding
under the Plan.
(2) CONSEQUENCES OF A REORGANIZATION EVENT ON OPTIONS. Upon the
occurrence of a Reorganization Event, or the execution by the Company of any
agreement with respect to a Reorganization Event, the Board shall provide
that all outstanding options shall be assumed, or equivalent options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an option shall be considered to be assumed
if, following consummation of the Reorganization Event, the option confers
the right to purchase, for each share of Common Stock subject to the option
immediately prior to the consummation of the Reorganization Event, the
consideration (whether cash, securities or other property) received as a
result of the Reorganization Event by holders of Common Stock for each share
of Common Stock held immediately prior to the consummation of the
Reorganization Event (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the
outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Reorganization Event is not solely
common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or succeeding
corporation, provide for the consideration to be received upon the exercise
of options to consist solely of common stock of the acquiring or succeeding
corporation (or an affiliate thereof) equivalent in fair market value to the
per share consideration received by holders of outstanding shares of Common
Stock as a result of the Reorganization Event.
Notwithstanding the foregoing, in the event that the acquiring or succeeding
corporation refuses to assume, or substitute for, the options, any Offering
Periods then in progress shall be shortened by setting a new Exercise Date (the
"New Exercise Date"), determined by the Board. The New Exercise Date shall be
before the date of the proposed Reorganization Event. The Board shall notify
each participant in writing at least ten (10) business days prior to the New
Exercise Date that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
19. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for any reason
terminate or amend the Plan. Except as provided in Section 18 hereof, no such
termination can affect options previously granted, provided that an Offering
Period may be terminated by the Board on any Exercise Date if the Board
determines that the termination of the Plan is in the best interests of the
Company and its stockholders. Except as provided in Section 18 hereof, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any participant. To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any other
applicable law or regulation), the Company shall obtain stockholder approval in
such a manner and to such a degree as required.
6
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation and establish such other limitations or procedures as
the Board (or its committee) determines in its sole discretion advisable which
are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
SECURITIES Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. TERM OF PLAN. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 19 hereof.
23. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent permitted
by any applicable laws, regulations, or rules of the established stock exchange,
national market system, or over-the-counter market on which the Common Stock
trades, if the Fair Market Value of the Common Stock on the Enrollment Date of
the next Offering Period is lower than the Fair Market Value of the Common Stock
on the Enrollment Date of the current Offering Period, then all participants in
the current Offering Period shall be automatically withdrawn from such Offering
Period immediately after the exercise of their option on the Exercise Date and
shall be automatically re-enrolled in the next Offering Period as of the first
day thereof.
24. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on an established stock
exchange or quotation on a national market system or an over the counter market
(to the extent the Common Stock is then so listed or quoted) and the approval of
all governmental authorities required in connection with the authorization,
issuance, or sale of such stock.
25. GOVERNING LAW. The Plan SHALL be governed by Delaware law except to the
extent that such law is preempted by federal law.
26. SOURCE OF SHARES. Shares may be issued upon exercise of an option from
authorized but unissued Common Stock, from shares held in the treasury of the
Company, or from any other proper source.
7
27. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by participating
in the Plan, to promptly give notice to the Company of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of the grant of the option pursuant to which such shares were purchased
or within one year of the date of exercise of such option pursuant to which such
shares were purchased.
Adopted by the Board of Directors
on May 16, 2000
8
EXHIBIT A
INNOVEDA, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
____Original Application Enrollmentperson.
Signature: _______________________________ Date: ________
____Change in Payroll Deduction Rate
____Change of Beneficiary(ies)
____Decline Participation
1. hereby elects to participate in the Innoveda, Inc. 2000
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes
to purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
% of my Compensation on each payday (from 1 to 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note that no
fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option on each Exercise Date.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in all
respects subject to the terms of the Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only): .
6. I hereby agree that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the Offering
Period during which I purchased such shares) or one year after the Exercise Date
on which I purchased such shares, I will notify the Company in writing within 30
days after the date of any disposition of my shares.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan.
The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
A-1
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
BENEFICIARY:
NAME:
(Please print) _________________________________________________________________
(First) (Middle) (Last)
________________________________________________________________________________
Relationship
____________________________
Address
Employee's Social
Security Number:
______________________________________________________________________________
Employee's Address:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ____________________________
____________________________
Signature of Employee
____________________________________
Spouse's Signature (If beneficiary other than spouse)
A-2
EXHIBIT B
INNOVEDA, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Innoveda, Inc.
2000 Employee Stock Purchase Plan which began on , 2000 (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
--------------------------------------------
--------------------------------------------
--------------------------------------------_____________
Signature: --------------------------------------------_______________________________ Date: --------------------------------------
B-1_____________