UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTIONProxy Statement Pursuant to Section 14(a) OF THE SECURITIES EXCHANGE ACT OFof
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Partyparty other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c)or Section
240.14a-12
SUMMIT DESIGN, INC.
(Exact Name- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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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.required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(1)
and 0-11.
/ / Fee paid previously with preliminary materials.
/ / Check box if any part0-11
(1) Title of the fee is offset as provided byeach 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 (a)(2) and identify(set forth the amount on which the
filing for which the offsetting fee is calculated and state how it was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the datedetermined):
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(4) Proposed maximum aggregate value of its filing.transaction:
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(5) Total fee paid:
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[Summit Logo][LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN14, 1998
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders
(the "Annual Meeting") of Summit Design, Inc., a Delaware corporation (the
"Company"), will be held on Wednesday,Thursday, May 28, 199714, 1998 at 1:302:00 p.m., local time,
at the Fifth AvenueEmbassy Suites, Hotel, 5069000 S.W. Washington Street, Portland,Square Road, Tigard, Oregon
97204,97223, for the following purposes:
1. To elect one Class I director to serve for a term of one year,three years.
2. To approve an amendment to elect two Class II directorsthe Company's 1994 Stock Plan to
serveincrease the number of shares reserved for a term of two yearsissuance thereunder
by 500,000 shares and to elect two Class III directorsapprove the material terms of the 1994
Stock Plan solely for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended.
3. To approve an amendment to servethe Company's 1996 Employee Stock
Purchase Plan to increase the number of shares reserved for
a term of three years.
2.issuance thereunder by 235,000 shares.
4. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the fiscal year
ending December 31, 1997.
3.1998.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice of Annual Meeting.Meeting of Stockholders.
Only stockholders of record at the close of business on April 4, 1997March 27, 1998 are
entitled to notice of, and to vote at, the Annual Meeting.
All stockholders are cordially invited to attend the Annual
Meeting in person. However, to assure your representation at the Annual
Meeting, you are urged to mark, sign, date and return the enclosed proxy card
as promptly as possible in the postage-prepaid envelope enclosed for that
purpose. Any stockholder attending the Annual Meeting may vote in person even
if he or she has returned a proxy card.
By Order of the Board of Directors
/s/ C. Albert Koob
C. Albert Koob
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY
Beaverton, Oregon
April 28, 199713, 1998
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IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED ENVELOPE.
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SUMMIT DESIGN, INC.
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PROXY STATEMENT
FOR
19971998 ANNUAL MEETING OF STOCKHOLDERS
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PROCEDURAL MATTERS
GENERAL
The enclosed Proxy is solicited on behalf of the Board of
Directors of Summit Design, Inc., a Delaware corporation (the "Company"), for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held
on Wednesday,Thursday, May 28, 199714, 1998 at 1:302:00 p.m., local time, and at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the
Fifth AvenueEmbassy Suites, Hotel,
5069000 S.W. Washington Street, Portland,Square Road, Tigard, Oregon 97204.97223. The
telephone number at that location is (503) 222-0001.644-4000. The Company's principal
executive offices are located at 9305 S.W. Gemini Drive, Beaverton, Oregon
97008. The Company's telephone number at that location is (503) 643-9281.
This Proxy Statement and the enclosed proxy card were mailed on or
about April 28, 1997,13, 1998, together with the Company's 19961997 Annual Report to
Stockholders, to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Stockholders of record at the close of business on April 4, 1997March 27, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, 13,906,61614,736,496 shares of the Company's common
stock, $0.01 par value (the "Common Stock"), were issued and outstanding and
entitled to be voted at the Annual Meeting. For information regarding
security ownership by management and by the beneficial owners of more than 5%
of the Company's Common Stock, see "Security Ownership of Certain Beneficial
Owners and Management." The closing price of the Company's Common Stock on
the Nasdaq National Market on the Record Date was $6.75$14.38 per share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by
the person giving it at any time before it is voted by delivering to the
Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a date later than that of the previously submitted proxy, or by
attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common
Stock on all matters presented at the Annual Meeting. Stockholders do not
have the right to cumulate their votes in the election of directors.
The cost of soliciting proxies will be borne by the Company. The
Company has retained the services of Skinner & Co. to assist in the
solicitation of proxies for the Annual Meeting. The estimated cost of such
services is $2,500, plus reimbursement of reasonable out-of-pocket expenses.
In addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of Common Stock for their reasonable expenses
in forwarding solicitation materials to such beneficial owners. Proxies may
also be solicited by certain of the Company's directors, officers and regular
employees, without additional compensation, personally or by telephone,
telegram, letter or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence at the Annual Meeting, either in person or by proxy,
of the holders of a majority of the outstanding shares of Common Stock
entitled to vote shall constitute a quorum for the transaction of business.
The Company intends to include abstentions and broker non-votes as present
for purposes of establishing a quorum for the transaction of business, to
include abstentions as shares entitled to vote and to exclude broker
non-votes from the calculation of shares entitled to vote with respect to any
proposal for which authorization to vote was withheld.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Any proposal of a stockholder of the Company which is intended to
be presented by such stockholder at the Company's 19981999 Annual Meeting of
Stockholders must be received by the Company no later than December 29, 199713, 1998
in order for such proposal to be considered for inclusion in the Company's
proxy statement and form of proxy relating to such meeting.
In addition, the Company's Bylaws provide that stockholders
intending to nominate candidates for election as directors or to bring
business before an annual meeting of stockholders which were not included in
the Company's proxy statement must deliver the prescribed notice and
information to the Secretary of the Company not less than 60 days nor more
than 90 days prior to the annual meeting. However, the Bylaws also provide
that, where less than 70 days notice or prior public disclosure of the date
of the stockholders' meeting is given, advance notice of stockholder
nominations for the election of directors or business to be brought before
the annual meeting must be received not later than the close of business on
the tenth day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure was made. If a
stockholder who has notified the Company of his or her intention to present a
proposal at an annual meeting does not appear or send a qualified
representative to present his or her proposal at such meeting, the Company
need not present the proposal for a vote at such meeting.
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PROPOSAL NO. 1
ELECTION OF CLASS I DIRECTOR
DIRECTORS NOMINEESAND NOMINEE FOR CLASS I DIRECTOR
The Company's Board of Directors currently consists of seven persons
serving one-year terms. Effective as of this Annual Meeting, pursuant to the
Company's Certificate of Incorporation, the Board of Directors will befive
members who are divided into three classes serving staggered terms. The Board of Directors has amended
the Company's Bylaws, effective concurrently with the election of directors at
the Annual Meeting, to decrease the size of the Board to five persons. One
Class I
consists of one director, twoand Class II directors and two Class III consist of two directors
will be
elected at the Annual Meeting.each. The Class I director will be elected for a term
of one year,at the Class II directors will be elected for a term of two years and
the Class III directors will be electedAnnual Meeting for a term
of three years.
The Board of Directors has selected five nomineesthe nominee listed below to be
electedre-elected at the Annual Meeting. John Grillos, Jay B. Morrison and Mark Stevens, each a current
member ofMeeting as the Board of Directors and each affiliated with a venture capital
investor in the Company prior to its initial public offering, are not seeking
re-election. Fred L. Hanson and Zamir Paz, current members of the Board of
Directors, are also not seeking re-election.Class I director. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the Company's five
nominees named below.this
nominee. In the event that anythe nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. The proxies cannot be voted for a greater number
of persons than five. Thevacancy; however, the Company is not aware of anyhas no reason to believe that the listed
nominee who will be unable or will decline to serve as a director. EachThe director
elected at this Annual Meeting will serve until the term of that director's
class expires in 2001 or until such director's successor has been elected and
qualified.
The name of the nominees,nominee for Class I director and the names of each
of the other directors of the Company whose term of office continues after
the Annual Meeting, their ages as of April 4, 1997,March 27, 1998, and certain other
related information about each nominee are set forth below. There are no family relationships
between any director, executive officer or person nominated to
become a director of the Company.
NAME OF NOMINEE AGE POSITION WITH THE COMPANY
- - --------------------------------- --- ------------------------------------
NOMINEE FOR CLASS I DIRECTOR
Steven P. Erwin . . . . . . . . . 53 Nominee
NOMINEES FOR CLASS II DIRECTOR
William V. Botts. . . . . . . . . 61 Nominee
Barbara M. Karmel, Ph.D . . . . . 64 Nominee
NOMINEES FOR CLASS III DIRECTOR
Amihai Ben-David. . . . . . . . . 47 Director
Larry J. Gerhard. . . . . . . . . 55nominee.
NAME AGE POSITION WITH THE COMPANY
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NOMINEE FOR CLASS I DIRECTOR FOR A TERM EXPIRING IN 2001 54 Director
Steven P. Erwin ........................................
CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 1999
William V. Botts ....................................... 62 Director
Barbara M. Karmel, Ph.D................................. 65 Director
CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2000
Amihai Ben-David ....................................... 48 Director
Larry J. Gerhard ....................................... 57 Chairman of the Board, President
and Chief Executive Officer
NOMINEE FOR CLASS I DIRECTOR
Steven P. Erwin, who has served as a director since May 1997, will
stand for election as a director ofre-election at the Company in May
1997.Annual Meeting. Mr. Erwin has beenserved as
Executive Vice President and Chief Financial Officer of Foundation Health
Systems, Inc., a managed health care company, since March 1998. Mr. Erwin
was Executive Vice President and Chief Financial Officer of U.S. Bancorp,
Portland, Oregon sincefrom July 1994.1994 to July 1997. Prior to that time, Mr. Erwin
served as Treasurer of BayBanks, Inc., Boston, Massachusetts from November
1987 until July 1994.
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NOMINEES FOR CLASS II DIRECTORS
William V. Botts will stand for electionhas served as a director of the Company insince May
1997. Mr. Botts has been the Interim Chief Executive Officer of California
Lifestyles, Inc., a footwear company, since August 1997. Mr. Botts served as
Chief Executive Officer of Hard Candy, Inc., a cosmetics company, from March
1996 to March 1997. From June 1993 to March 1996, Mr. Botts was the owner
and President of WV Associates, a consulting firm for mergers, acquisitions,
business turnarounds and strategic planning. From October 1992 to June 1993,
Mr. Botts served as President and Chief Executive Officer of Aurora
Electronics, Inc., a semiconductor company. From March 1992 to September
1992, Mr. Botts served as President and Chief Executive Officer of Micro-C
Corporation, a semiconductor company that was acquired by Aurora Electronics,
Inc. Mr. Botts served as President and Chief Executive Officer of Vertex
Design Systems, Inc., a computer software company, from September 1988 to
March 1992 and as Chairman of the Board, Chief Executive Officer and
President of EI International, Inc., a computer systems, software and
consulting company, from April 1978 to January 1988. Prior to that time, Mr.
Botts was a divisional Vice President of Rockwell International Corporation.
Mr. Botts is currently a director of XLNT Corporation.
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Barbara M. Karmel, Ph.D. will stand for electionhas served as a director of the Company
insince May 1997. Dr. Karmel has been President of The Reed Company, a
management consulting firm, since 1982. Prior to that time, she served as a
professor of management in the business schools at Oregon State University,
University of Wisconsin-Madison, and the Atkinson Graduate School of
Management at Willamette University. She currently is a member of the board
of Oregon Enterprise Forum and Oregon Independent Colleges Foundation. Dr.
Karmel has previously served as a member of the Board of Directors of U.S.
Bancorp and United States National Bank of Oregon, and as Commissioner of
Portland Development Commission, Director and Vice-President-SmallVice President-Small Business
for the Portland Metropolitan Chamber of Commerce and a member of the board
of the Academy of Management.
NOMINEES FOR CLASS III DIRECTORS
Amihai Ben-David has served as a director of the Company since
January 1994. He has been the founder, Chief Executive Officer and Chairman
of DCL Technologies Ltd., a public company located in Israel and traded on
the Tel-Aviv Stock Exchange, since May 1982. DCL Technologies Ltd.
specializes in the development of high technology companies in the areas of
communications, computer telephony, expert systems and electronic design
automation. From January 1991 until the acquisition of SEE Technologies
Software Environment for Engineers Ltd. ("SEE Technologies") by the Company
in February 1994, Mr. Ben-David was Chairman of the Board of SEE Technologies.
Larry J. Gerhard has served as President, Chief Executive Officer
and a director of the Company since January 1993 and was elected Chairman of
the Board in May 1996. From November 1991 to November 1992, Mr. Gerhard was
the President and Chief Executive Officer of Enterprise Communications and
Computing Inc., a communications products provider for the Unix-based virtual
mainframe market. Mr. Gerhard was the President and Chief Executive Officer
of Ventura Software, Inc., a desktop publishing company and a wholly-owned
subsidiary of Xerox Corporation from November 1989 to November 1991. Prior
to that time, Mr. Gerhard was employed for nine years with Decision Data,
Inc., a supplier of peripherals and applications software for IBM System 3X
and AS400, including the last three years as President and Chief Executive
Officer.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of fivefifteen
meetings during fiscal 1996.1997. Each incumbent director attended at least 75%
of the aggregate of the total number of meetings of the Board of Directors
and the total number of meetings of the committees upon which he or she
served. Certain matters were approved by the Board of Directors and its
committees by unanimous written consent. The Board of Directors of the
Company has two standing committees: an Audit Committee and a Compensation
Committee.
The Audit Committee, which currently consists of John GrillosMr. Erwin and Fred L.
Hanson,Dr.
Karmel, 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 and reviewing with them
the results of their examinations, (iv) reviewing and approving any material
accounting policy changes affecting the Company's operating results, (v)
reviewing the -4-
Company's control procedures and personnel and (vi) reviewing
and evaluating the Company's accounting principles and its system of internal
accounting controls. The Audit Committee held one meetingthree meetings during fiscal
1996.1997.
The Compensation Committee, which currently consists of AmihaiMr.
Ben-David John Grillos and Mark Stevens,Mr. Botts, is responsible for (i) reviewing and approving the
compensation and benefits for the Company's officers and other employees,
(ii) administering the Company's stock option plans and (iii) making
recommendations to the Board of Directors regarding such matters. The
Compensation Committee held foursix meetings during fiscal 1996.1997.
DIRECTOR COMPENSATION
Prior to the Annual Meeting, directors did not receive any cash
compensation for their services as members of the Board of Directors or its
committees, except for Fred L. Hanson. The Company entered into a one-year
directorship agreement with Mr. Hanson in September 1995 pursuant to which he
received a salary of $17,500 per year as compensation for acting as a director
and was entitled to reimbursement for expenses incurred in attending Board
meetings outside of the Oregon area. In addition, in September 1995, Mr. Hanson
was granted an option to purchase 20,000 shares of the Company's Common Stock at
an exercise price of $1.75 per share. In lieu of quarterly salary payments, the
Company, on Mr. Hanson's behalf, purchased 10,000 of the shares subject to the
option for an aggregate purchase price of $17,500. Mr. Ben-David is reimbursed
for travel costs incurred in attending Board meetings.
Effective as of the date of the Annual Meeting, allAll non-employee directors
will receive $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 willare also be reimbursed for all
travel and related expenses incurred in connection with attending Board and
committee meetings.
In addition, non-employee directors are eligible to receive option
grants under the Company's 1996 Director Option Plan (the "Director Plan"),
under which was
adopted by the Board of Directors in May 1996, approved by the stockholders in
October 1996 and took effect on October 18, 1996, the date of the final
prospectus for the Company's initial public offering. A total of 150,000 shares of Common Stock hashave been reserved for issuance under the Director Plan.issuance.
The Director Plan provided for an automatic grant of an option (the "First Option")
to purchase 7,500 shares of Common Stock to each non-employee director on the
date on which the Director Plan became effective and provides for an automatic grant of an option to purchase
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10,000 shares of Common Stock on the date on which a person first becomes a
non-employee director. After the First Option is
granted to a non-employee director,Thereafter, he or she will automatically be granted
an additional option to purchase 10,000 shares (a "Subsequent Option") on the date of the annual
meeting of each subsequent year, provided he or she is then a non-employee
director and provided further, that on such date he or she has served on the
Board for at least six months. All of the shares subjectThe first option granted to a First Option become vested and exercisable 12director
pursuant to the Director Plan vests twelve months after the date of the
grant,
provided that the shares subject to a First Option granted on the
effective date of the Director Plan become vested and exercisableexcept for Mr. Erwin's which vests one business day prior to the date of the Company's
first annual meeting after the grant date. All of the shares subject to each Subsequent Optionsubsequent options vest and
become vested and 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 First Option and each Subsequent Option areoptions is subject to
the optionee continuing to serve as a director on the vesting date. Messrs.Mr.
Ben-David, Hanson, Grillos, MorrisonMr. Botts, Mr. Erwin and StevensDr. Karmel were each granted First
Options10,000
options in October 1996May 1997 at an exercise price of $9.50. However, such options
were canceled on April 19, 1997$9.125 per share. Mr. Ben-David,
Mr. Botts, Dr. Karmel and as of such date, there were no options
outstanding under the Director Plan. Non-employee directorsMr. Erwin, subject to his re-election, are eligible
to receive future option grants pursuant to the Director Plan.
REQUIRED VOTE
The one nominee infor Class I the two nominees in Class II and the two
nominees in Class IIIdirector receiving the highest number of
affirmative votes of the shares entitled to be voted shall be elected to the
Board of Directors. Votes withheld from any director are counted for purposes of determining
the presence or absence of a quorum for the transaction of business, but they
otherwise have no legal effect under Delaware law.
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RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE NOMINEES LISTED ABOVE.ELECTION OF MR. ERWIN.
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PROPOSAL NO. 2
AMENDMENT TO 1994 STOCK PLAN
GENERAL
The Company's 1994 Stock Plan was adopted by the Board of
Directors and approved by the Company's stockholders in January 1994 and
provides for the granting to employees (including officers and employee
directors) of the Company of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
for the granting to employees and consultants of the Company of nonstatutory
stock options. A total of 2,322,000 shares of Common Stock has been reserved
for issuance under the 1994 Stock Plan and, as of March 27, 1998, a total of
36,904 shares remained available for future grant.
In 1993, Section 162(m) was added to the Code. Section 162(m) may
limit the Company's ability to deduct for United States federal income tax
purposes compensation in excess of $1,000,000 paid to the Company's Chief
Executive Officer and its four other highest paid executive officers in any
one fiscal year. Grants under the 1994 Stock Plan will not be subject to the
deduction limit if the stockholders approve the material terms of the 1994
Stock Plan, including the option grant limitations described below, for the
purposes of Section 162(m) of the Code.
PROPOSAL
In March 1998, the Board of Directors adopted, subject to
stockholder approval, an amendment to the 1994 Stock Plan to increase the
number of shares reserved for issuance by an additional 500,000 shares of
Common Stock, for an aggregate of 2,822,000 shares reserved for issuance
thereunder. This amendment will enable the Company to continue to grant
options to eligible employees and consultants under the terms and conditions
of the 1994 Stock Plan.
The Board of Directors is also seeking stockholder approval of the
material terms of the 1994 Stock Plan, including, but not limited to, the
share limitations for purposes of Section 162(m) of the Code only.
The Board of Directors believes that the approval of the amendment
to the 1994 Stock Plan and the material terms of the 1994 Stock Plan for
purposes of Section 162(m) of the Code is in the best interests of the
Company and its stockholders, as the availability of an adequate number of
shares for issuance under the 1994 Stock Plan and the ability to grant stock
options are important factors in attracting, motivating and retaining
qualified personnel essential to the success of the Company, as is the
ability of the Company to deduct compensation.
REQUIRED VOTE
The affirmative vote by the holders of a majority of the Common
Stock present in person or represented by proxy and entitled to vote on the
subject matter is required to approve (i) the amendment to the 1994 Stock
Plan and (ii) the material terms of the 1994 Stock Plan for the purposes of
Section 162(m) of the Code only.
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RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT TO THE 1994 STOCK PLAN AND APPROVAL OF THE MATERIAL TERMS OF
THE 1994 STOCK PLAN.
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SUMMARY OF THE 1994 STOCK PLAN
The following summary of the 1994 Stock Plan is qualified in its
entirety by the specific language of the 1994 Stock Plan, a copy of which is
available to any stockholder upon written request to the Secretary of the
Company.
PURPOSE. The purposes of the 1994 Stock Plan are to attract and
retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees and consultants
of the Company and to promote the success of the Company's business.
ADMINISTRATION. The 1994 Stock 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
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Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
applicable laws. Subject to the other provisions of the 1994 Stock Plan, the
Administrator has the power to determine the employees and consultants to
whom options may be granted, the number of shares subject to the option and
the exercisability thereof. The Administrator also has the power to reprice
options if the exercise price of outstanding options exceeds the fair market
value of the Company's Common Stock.
ELIGIBILITY; LIMITATIONS. The 1994 Stock Plan provides that
nonstatutory stock options may be granted to employees and consultants.
Incentive stock options may be granted only to employees. An optionee who has
been granted an option may, if he or she is otherwise eligible, be granted
additional options.
Section 162(m) of the Code limits the deductibility of
compensation paid to certain executive officers of the Company. To maximize
the Company's deduction attributable to options granted to such persons, the
1994 Stock Plan provides that no employee may be granted, in any fiscal year,
options to purchase more than 500,000 shares of Common Stock.
TERMS AND CONDITIONS OF OPTIONS. Each option granted under the
1994 Stock Plan is evidenced by a written stock option agreement between the
optionee and the Company and is subject to the following terms and conditions:
(a) Exercise Price. The Administrator determines the
exercise price of options to purchase shares of Common Stock at the time the
options are granted. However, the exercise price of an incentive stock option
must not be less than 100% (110% if issued to any person possessing more than
10% of the voting power of all classes of stock of the Company (a "10%
Stockholder")) of the fair market value of the Common Stock on the date the
option is granted. For so long as the Company's Common Stock is traded on the
Nasdaq National Market, the fair market value of a share of Common Stock will
be the closing sales price for such stock (or the closing bid if no sales
were reported) on the last trading day prior to the date of grant as quoted
on such system.
(b) Exercise of the Option. Each stock option agreement
will specify the term of the option and the date when the option is to become
exercisable. The terms of such vesting are to be determined by the
Administrator. Options granted under the 1994 Stock Plan to date generally
become exercisable over four years at a rate of one-fourth of the shares
subject to the options at the end of one year from the date of grant and
1/48th at the end of each month thereafter and have a ten-year term. The
maximum term of an option granted to a 10% Stockholder is five years. An
option is exercised by giving written notice of exercise to the Company,
specifying the number of full shares of Common Stock to be purchased and by
tendering full payment of the purchase price to the Company.
(c) Form of Consideration. The consideration to be paid for
the shares of Common Stock issued upon exercise of an option shall be
determined by the Administrator and is set forth in the stock option
agreement. Such form of consideration may vary for each option, and may
consist entirely of cash, check, promissory note, other shares of the
Company's Common Stock, any combination thereof, or any other legally
permissible form of consideration as may be provided in the stock option
agreement.
(d) Termination of Employment. In the event an optionee's
continuous status as an employee or consultant terminates for any reason
(other than upon the optionee's death or disability), the optionee may
exercise his or her option within such period of time as is specified in such
optionee's stock option agreement but only to the extent that the optionee
was entitled to exercise the option at the date of such termination (but in
no event later than the expiration of the term of such option as set forth in
the stock option agreement). Options granted under the 1994 Stock Plan to
date have generally provided that optionees may exercise their options within
sixty days from the date of termination of employment (other than for death
or disability).
(e) Disability. In the event an optionee's continuous
status as an employee or consultant terminates as a result of permanent and
total disability (as defined in Section 22(e)(3) of the Code), the optionee
may exercise his or her option, but only within twelve months from the date
of such termination, and only to the extent that the optionee was entitled
to exercise it at the date of such termination (but in no event later than
the expiration of the term of such option as set forth in the stock option
agreement).
(f) Death. In the event of an optionee's death, the
optionee's estate or a person who acquired the right to exercise the deceased
optionee's option by bequest or inheritance may exercise the option, but only
within twelve months
-7-
following the date of death, and only to the extent that the optionee was
entitled to exercise it at the date of death (but in no event later than the
expiration of the term of such option as set forth in the stock option
agreement).
(g) Term of Options. The term of each option is the term
stated in the stock option agreement; provided, however, that the term may
not exceed ten years from the date of grant. In the case of an incentive
stock option granted to a 10% Stockholder, the term may not exceed five years
from the date of grant. No option may be exercised by any person after the
expiration of its term.
(h) Nontransferability of Options. An option is
nontransferable by the optionee, other than by will or the laws of descent
and distribution, and is exercisable during the optionee's lifetime only by
the optionee. In the event of the optionee's death, options may be exercised
by a person who acquires the right to exercise the option by bequest or
inheritance.
(i) Value Limitation. If the aggregate fair market value
(as determined on date of grant) of all shares of Common Stock subject to an
optionee's incentive stock option which are exercisable for the first time
during any calendar year exceeds $100,000, the excess options shall be
treated as nonstatutory options.
(j) Other Provisions. The stock option agreement may
contain such other terms, provisions and conditions not inconsistent with the
1994 Stock 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 of the Company 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: (i) the number of shares of Common Stock
subject to the 1994 Stock Plan, (ii) the number and class of shares of stock
subject to any option outstanding under the 1994 Stock Plan, (iii) and the
exercise price of any such outstanding option. The determination of the
Administrator as to which adjustments made shall be conclusive. In the event
of a proposed dissolution or liquidation of the Company, the Board will
notify the holders of options as soon as practicable prior to such action,
and all outstanding options will terminate immediately prior to the
consummation of such proposed action. 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, the 1994 Stock Plan
requires that each outstanding option be assumed or an equivalent option be
substituted by the successor corporation; provided, however, if such
successor or purchaser refuses to assume or substitute the then outstanding
options, the 1994 Stock Plan provides for the full acceleration of the
exercisability of all outstanding options for a period of ten days from the
date of notice of acceleration to the holder and all options will terminate
upon the expiration of such period.
AMENDMENT AND TERMINATION OF THE 1994 STOCK PLAN. The Board may
at any time amend, alter, suspend or terminate the 1994 Stock Plan. The
Company shall obtain stockholder approval of any amendment to the 1994 Stock
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 Sections 162(m) and 422 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 1994 Stock Plan shall not affect
options already granted and such options shall remain in full force and
effect as if the 1994 Stock 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 optionee and the Company. In
any event, the 1994 Stock Plan shall terminate in May 2004. Any options
outstanding under the 1994 Stock Plan at the time of its termination shall
remain outstanding until they expire by their terms.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive
stock option does not recognize taxable income at the time the option is
granted or upon its exercise, although the exercise may subject the optionee
to the alternative minimum tax. Upon a disposition of the shares more than
two years after grant of the option and one year after exercise of the
option, any gain or loss is treated as long-term capital gain or loss. If
these holding periods are not satisfied, the optionee recognizes ordinary
income at the time of disposition equal to the difference between the
exercise price and the lower of (i) the fair market value of the shares at
the date of the option exercise or (ii) the sale price of the shares. Any
gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. Long-term
capital gains are grouped and netted by
-8-
holding periods. Net capital gains on assets held for more than twelve
months and up to eighteen months is currently taxed at a maximum federal rate
of 28%. Net capital gains on assets held for more than 18 months is capped at
20%. Capital losses are allowed in full against capital gains and up to
$3,000 against other income. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an
officer, director, or 10% Stockholder of the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized
by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any
taxable income at the time he or she is granted a nonstatutory stock option.
Upon exercise, the optionee recognizes taxable income generally measured by
the excess of the then fair market value of the shares over the exercise
price. Any taxable income recognized in connection with an option exercise
by an employee of the Company is subject to tax withholding by the Company.
The Company is entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Upon a disposition of such shares by the
optionee, any difference between the sale price and the optionee's exercise
price, to the extent not recognized as taxable income as provided above, is
treated as long-term or short-term capital gain or loss, depending on the
holding period. Net capital gains on assets held for more than twelve months
and up to eighteen months is currently taxed at a maximum federal rate of
28%. Net capital gains on assets held for more than 18 months is capped at
20%. Capital losses are allowed in full against capital gains and up to
$3,000 against other income.
The purchaser may accelerate to the date of purchase his or her
recognition of ordinary income, if any, and the beginning of any capital gain
holding period by timely filing an election pursuant to Section 83(b) of the
Code. In such event, the ordinary income recognized, if any, is measured as
the difference between the purchase price and the fair market value of the
stock on the date of purchase, and the capital gain holding period commences
on such date. The ordinary income recognized by a purchaser who is an
employee will be subject to tax withholding by the Company. Different rules
may apply if the purchaser is also an officer, director, or 10% Stockholder
of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND
EXERCISE OF OPTIONS UNDER THE 1994 STOCK PLAN. IT DOES NOT PURPORT TO BE
COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE'S OR
CONSULTANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY
MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT
MAY RESIDE.
-9-
PARTICIPATION IN THE 1994 STOCK PLAN
The grant of options under the 1994 Stock Plan to employees,
including the Named Executive Officers (as defined under "Executive Officer
Compensation"), is subject to the discretion of the Administrator. As of the
date of this proxy statement, there has been no determination by the
Administrator with respect to future awards under the 1994 Stock Plan.
Accordingly, future awards are not determinable. Non-employee directors are
not eligible to participate in the 1994 Stock Plan. The following table sets
forth information with respect to the grant of options pursuant to the 1994
Stock Plan to the Named Executive Officers, to all current executive officers
as a group and to all other employees as a group during the last fiscal year.
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS EXERCISE PRICE
NAME OF INDIVIDUAL AND POSITION GRANTED ($ PER SHARE)
- ---------------------------------------------- ---------- --------------
Larry J. Gerhard . . . . . . . . . . . . . . 75,000 8.13
President and Chief Executive Officer
C. Albert Koob . . . . . . . . . . . . . . . 28,000 8.13
Vice President-Finance, Chief Financial
Officer and Secretary
Moshe Guy . . . . . . . . . . . . . . . . . . 761 6.52
Vice President, General Manager and 8,000 8.13
Chief Operating Officer of the Design 391 17.00
Solutions Division
John DiFerdinando . . . . . . . . . . . . . . 25,000 5.38
Senior Vice President-Worldwide
Marketing
Eric Benhayoun . . . . . . . . . . . . . . . 20,000 8.13
Vice President, General Manager-European 12,500 9.63
Operations
All current executive officers as a group (9
persons) . . . . . . . . . . . . . . . . . . 360,652 8.61(1)
All other employees as a group . . . . . . . 337,127 9.23(1)
- --------------------
(1) Represents a weighted average per share exercise price.
ADDITIONAL INFORMATION RELATED TO PROPOSAL NO. 2
1997 NONSTATUTORY STOCK OPTION PLAN
In December 1997, the Board of Directors adopted the 1997
Nonstatutory Stock Option Plan. A total of 250,000 shares of Common Stock
has been reserved for issuance under the 1997 Nonstatutory Stock Option Plan,
and as of March 27, 1998, a total of 15,000 shares remained eligible for
future grant. The 1997 Nonstatutory Stock Option Plan provides for grants
to employees, directors and consultants of the Company; however, no greater
than 25,000 options may be granted to directors and executive officers of the
Company. In December 1997, Mr. Guy, a Named Executive Officer of the
Company, received an option grant exercisable for 25,000 shares of the
Company's Common Stock at an exercise price of $9.63 per share pursuant to
the 1997 Nonstatutory Stock Option Plan.
-10-
PROPOSAL NO. 3
AMENDMENT TO 1996 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The 1996 Employee Stock Purchase Plan was adopted by the Board of
Directors and approved by the Company's stockholders in October 1996. The
1996 Employee Stock Purchase Plan, which is intended to qualify under Section
423 of the Code, permits eligible employees to purchase the Company's 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 Company has reserved a total of 150,000 shares of Common Stock for
issuance under the 1996 Employee Stock Purchase Plan, and as of March 27,
1998, 91,299 shares remained available for future issuances.
PROPOSAL
In March 1998, the Board of Directors adopted, subject to
stockholder approval, an amendment to the 1996 Employee Stock Purchase Plan
to increase the number of shares reserved for issuance by an additional
235,000 shares of Common Stock, for an aggregate of 385,000 shares reserved
for issuance thereunder. This amendment will enable the Company to continue
to grant purchase rights to eligible employees under the terms and conditions
of the 1996 Employee Stock Purchase Plan.
The Board of Directors believes that the approval of the amendment
to the 1996 Employee Stock Purchase Plan is in the best interests of the
Company and its stockholders, as the availability of an adequate number of
shares for issuance under the 1996 Employee Stock Purchase Plan and the
ability of employees to participate in the 1996 Employee Stock Purchase Plan
are important factors in attracting, motivating and retaining qualified
personnel essential to the success of the Company.
REQUIRED VOTE
The affirmative vote by the holders of a majority of the Common
Stock present in person or represented by proxy and entitled to vote on the
subject matter is required to approve the amendment to the 1996 Employee
Stock Purchase Plan.
- -------------------------------------------------------------------------------
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN.
- -------------------------------------------------------------------------------
SUMMARY OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN
The following summary of the 1996 Employee Stock Purchase Plan is
qualified in its entirety by the specific language of the 1996 Employee Stock
Purchase Plan, a copy of which is available to any stockholder upon written
request to the Secretary of the Company.
PURPOSE. The purposes of the 1996 Employee Stock Purchase Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to employees of
the Company and to promote the success of the Company's business.
ADMINISTRATION. The 1996 Employee Stock 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.
ELIGIBILITY; LIMITATIONS. The 1996 Employee Stock 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.
-11-
TERMS AND CONDITIONS OF SUBSCRIPTION. Participation under the
1996 Employee Stock Purchase Plan is evidenced by a written subscription
agreement between the employee and the Company and is subject to the
following terms and conditions of the 1996 Employee Stock Purchase Plan:
(a) Purchase Price and Method. Employees who participate in
the 1996 Employee Stock Purchase Plan purchase the Company's Common Stock
through payroll deductions of up to 10% of their base salary, up to a maximum
number of shares per purchase period determined by dividing $12,500 by the
fair market value of a share of Common Stock on the first day of the offering
period of $25,000 of Common Stock (determined as of the first day of an
offering period) for all purchase periods ending within any calendar year.
The price of Common Stock purchased under the 1996 Employee Stock Purchase
Plan is 85% of the lower of the fair market value of the Common Stock on the
first day of each 24-month 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 any exercise date in an offering period is lower than the fair
market value of the Common Stock on the first day of the offering period,
then all participants in such offering period will be automatically withdrawn
from such offering period immediately after the exercise of their options on
such exercise date and automatically re-enrolled in the immediately following
offering period as of the first day thereof.
(b) Offering Periods. Offering periods last 24 months and
commence on the first trading day on or after May 1 and November 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. The first offering period, however,
commenced on October 18, 1996, the date on which the Company's registration
statement on Form S-1 was declared effective, and will end on the last
trading day on or before October 31, 1998.
(c) Withdrawal; Termination of Employment. If an employee
decides to terminate his or her participation in the 1996 Employee Stock
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.
(d) Death. A participating employee may designate who is to
receive any shares and cash, if any, from the participant's account under the
1996 Employee Stock 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.
(e) Nontransferability. Rights granted under the 1996
Employee Stock 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.
(f) Other Provisions. The subscription agreement may contain
such other terms, provisions and conditions not inconsistent with the 1996
Employee Stock 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 of the Company 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: (i) the number of shares of Common Stock
subject to the 1996 Employee Stock Purchase Plan and (ii) the number and
class of shares of stock subject to any purchase right outstanding under the
1996 Employee Stock 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 Company's 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, any 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 1996 EMPLOYEE STOCK PURCHASE
PLAN. The Board may at any time amend, alter, suspend or terminate the 1996
Employee Stock Purchase Plan. The Company shall obtain stockholder approval
of any amendment to the 1996 Employee Stock 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
-12-
of the 1996 Employee Stock Purchase Plan shall not affect options already
granted and such options shall remain in full force and effect as if the 1996
Employee Stock 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 1996 Employee Stock Purchase Plan shall terminate in
October 2006.
FEDERAL INCOME TAX CONSEQUENCES
No income will be taxable to a participant until the shares
purchased under the 1996 Employee Stock Purchase Plan are sold or otherwise
disposed of. Upon sale or other disposition of the shares, the participant
will generally be subject to tax and the amount of the tax will depend upon
the holding period. If the shares are sold or otherwise disposed of more than
two (2) years from the first day of the offering period or more than one (1)
year from the date of transfer of the stock to the participant (the
"Statutory Holding Periods"), then the participant will recognize ordinary
income measured as the lesser of (i) the excess of the fair market value of
the shares at the time of such sale or disposition over the purchase price,
or (ii) an amount equal to 15% of the fair market value of the shares as of
the first day of the offering period. Any additional gain will be treated as
long-term capital gain. Net capital gains on assets held for more than
twelve months and up to eighteen months are currently taxed at a maximum
federal rate of 28%. Net capital gains on assets held for more than 18 months
are capped at 20%. Capital losses are allowed in full against capital gains
and up to $3,000 against other income. If the shares are sold or otherwise
disposed of before the expiration of the Statutory Holding Periods, the
participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased
over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending
on the holding periods. The Company is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to
the extent of ordinary income is recognized by participants upon a sale or
disposition of shares prior to the expiration of the Statutory Holding
Periods described above.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE SHARES
PURCHASED UNDER THE PURCHASE PLAN. REFERENCE SHOULD BE MADE TO THE
APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS
THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF ANY
STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
-13-
PARTICIPATION IN THE 1996 EMPLOYEE STOCK PURCHASE PLAN
The following table sets forth information with respect to
participation by the Named Executive Officers, all current executive officers
as a group and all other employees as a group during the last fiscal year.
PURCHASED
NUMBER OF PRICE
SECURITIES ($ PER
NAME OF INDIVIDUAL AND POSITION PURCHASED SHARE)
- -------------------------------------- ---------- ---------
Larry J. Gerhard . . . . . . . . . . 1,471 5.95
President and Chief Executive 2,100 5.95
Officer
C. Albert Koob . . . . . . . . . . . 1,176 5.95
Vice President-Finance, Chief
Financial Officer
and Secretary
Moshe Guy . . . . . . . . . . . . . . --(1) N/A
Vice President, General Manager
and Chief Operating Officer of
the Design Solutions Division
John DiFerdinando . . . . . . . . . . 1,125 5.95
Senior Vice President-Worldwide 1,252 5.95
Marketing
Eric Benhayoun . . . . . . . . . . . 1,000 5.95
Vice President, General Manager- 963 5.95
European Operations
All current executive officers as a
group (9 persons) . . . . . . . . . . 10,531 5.95(2)
All other employees as a group . . . 48,170 5.95(2)
- -------------------
(1) The Company's employees in Israel do not participate in the 1996
Employee Stock Purchase Plan.
(2) Represents a weighted average per share purchase price.
-14-
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P.,
independent accountants, to audit the financial statements of the Company for
the fiscal year ending December 31, 1997.1998. Coopers & Lybrand L.L.P. has been
the Company's auditors since 1996. Representatives of Coopers & Lybrand
L.L.P. are expected to be present atattend the Annual Meeting will have the opportunity to make a statement and are expected to be available to
respond to appropriate questions.
REQUIRED VOTE
The Board of Directors has conditioned its appointment of the
Company's independent accountants upon the receipt of the affirmative vote by
the holders of a majority of the shares represented,Common Stock present in person or
represented by proxy and voting at the Annual Meeting. In the event that the
stockholders do not approve the selection of Coopers & Lybrand L.L.P., the
appointment of the independent accountants will be reconsidered by the Board
of Directors.
- -------------------------------------------------------------------------------
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS.
-6-- -------------------------------------------------------------------------------
-15-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company, as of April 4, 1997,March 27, 1998, by
(a) each person known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock, (b) each director and nominee
for director, (c) each of the executive officers named in the Summary
Compensation Table, and (d) all directors and executive officers of the
Company as a group. Unless otherwise noted in the footnotes to the table,
the Company believes that the persons named in the table have sole voting and
investing power with respect to all shares of Common Stock indicated as being
beneficially owned by them.
PERCENT
NUMBER OF
SHARES PERCENT
BENEFICIALLY OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) TOTAL(1)
- -------------------------------------- ------------- -----------
DCL Technologies Ltd.(2) . . . . . . . 1,595,680 10.8%
P.O. Box 544
46105 Herzlia Israel
GeoCapital, LLC (3) . . . . . . . . . . 1,523,100 10.3%
767 Fifth Avenue, 45th Floor
New York, NY 10153
Pilgrim Baxter & Associates, Ltd.(4) 1,209,900 8.2%
825 Duportail Road
Wayne, PA 19087
T. Rowe Price Associates, Inc.(5) . . . 801,300 5.4%
100 East Pratt Street
Baltimore, MD 21202
Massachusetts Financial Services
Company(6) . . . . . . . . . . . . . . 843,250 5.7%
500 Boylston Street, 15th Floor
Boston, MA 02116
Larry J. Gerhard(7) . . . . . . . . . . 303,056 2.0%
C. Albert Koob(8) . . . . . . . . . . . 54,312 *
Moshe Guy(9) . . . . . . . . . . . . . 43,203 *
John DiFerdinando . . . . . . . . . . . 23,877 *
Eric Benhayoun(10) . . . . . . . . . . 38,500 *
Amihai Ben-David(11). . . . . . . . . . 1,595,680 10.8%
William Botts . . . . . . . . . . . . . 2,500 *
Steven P. Erwin(12) . . . . . . . . . . 15,000 *
Barbara M. Karmel, Ph.D. . . . . . . . 1,000 *
All directors and executive officers as
a group (13 persons)(13) . . . . . . . 2,803,234 18.8%
- - ------------------------------------- ----------------------- ----------
DCL Technologies Ltd. (2). . . . . . 2,055,680 14.8
P.O. Box 544
46105 Herzlia Israel
Sequoia Capital (3). . . . . . . . . 1,116,242 8.0
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Larry J. Gerhard (4) . . . . . . . . 646,735 4.6
C. Albert Koob (5) . . . . . . . . . 79,000 *
Zamir Paz (6). . . . . . . . . . . . 501,320 3.6
D. Gregory Kott (7). . . . . . . . . 85,500 *
Roger A. Bitter (8). . . . . . . . . 110,194 *
Eric Benhayoun (9) . . . . . . . . . 65,500 *
Amihai Ben-David (10). . . . . . . . 2,055,680 14.8
John Grillos (11). . . . . . . . . . 685,655 4.9
Fred L. Hanson (12). . . . . . . . . 20,000 *
Jay B. Morrison (13) . . . . . . . . 185,886 1.3
Mark Stevens (14). . . . . . . . . . 1,116,242 8.0
William V. Botts . . . . . . . . . . -- --
Steven P. Erwin. . . . . . . . . . . -- --
Barbara M. Karmel, Ph.D. . . . . . . -- --
All directors and executive . . . . 5,728,713 40.3
officers as a group (14 persons)(15)
- - ------------------------------------------------------
* Represents less than 1% of the total.
(1) Based on 13,906,61614,736,496 shares of Common Stock outstanding as of April 4, 1997March 27,
1998. A person is deemed to be the beneficial owner of securities that can
be acquired by such person within 60 days upon the exercise of options.
Calculations of percentage of beneficial ownership assume the exercise by
only the respective named stockholder of all options for the purchase of
Common Stock held by such stockholder which are exercisable within 60 days.
The number of shares beneficially owned excludes shares which could be
acquired pursuant to the exercise of options granted under the Director
Plan on October 18, 1996, which options were canceled on April 19, 1997.
(2) Includes 2,025,6801,565,680 shares held by DCL Holding & Investments in Technology
(1993) Ltd., a wholly-owned subsidiary of DCL Technologies Ltd. DCL
Technologies Ltd. is an Israeli public company, the shares of which are
traded on the Tel-Aviv stock exchange. The Company believes that the
following stockholders own at least 5% of the outstanding shares of DCL
Technologies Ltd.: Comverse Technologies Inc., ISCAL Holdings Ltd., Uri
Melamed, Bank Hapoalim, Danbar Ltd. and Amihai Ben-David.
(3) As indicated in the Schedule 13G filed by GeoCapital, LLC pursuant to the
Exchange Act on February 23, 1998.
(4) As indicated in the Schedule 13G, as amended, filed by Pilgrim Baxter &
Associates, Ltd. pursuant to the Exchange Act on February 13, 1998.
-16-
(5) As indicated in the Schedule 13G filed by T. Rowe Price Associates, Inc.
pursuant to the Exchange Act on February 12, 1998.
(6) As indicated in the Schedule 13G filed by Massachusetts Financial Services
Company pursuant to the Exchange Act on February 12, 1998.
(7) Includes 65,076 shares held by Sequoia Technology Partners III, 1,019,555
shares held by Sequoia Capital Growth Fund, 20,445 shares held by Sequoia
XVI and 11,166 shares held by Sequoia XVII.
(4) Includes 75,00093,750 shares issuable upon exercise of options, all of which
would be subject to the Company's right of repurchase if issued at June 3,
1997.options. Also includes
531,735205,735 shares held by L&K Properties Limited Partnership, of which Mr.
Gerhard is the sole general partner and a limited partner, 20,000 shares held by the Kristen Noel Gerhard Trust and 20,000
shares held by the Kamala Nicole Gerhard Trust. Mr. Gerhard disclaims
beneficial ownership of the shares held by the trusts.
(5)partner.
(8) Includes 75,00050,312 shares issuable upon exercise of options of which 35,417
would be subject to the Company's right of repurchase if issued at June 3,
1997.
-7-
(6) All shares are held by Fiering & Sjolie Handelsgesellschaft m.b.H.
Mr. Paz may be deemed to be a beneficial owner of such shares, but
disclaims beneficial ownership of such shares.
(7) Includes 77,500 shares issuable upon exercise of options of which 49,532
would be subject to the Company's right of repurchase if issued at June 3,
1997.
(8) Includes 12,000 shares issuable upon exercise of options of which 8,250
would be subject to the Company's right of repurchase if issued at June 3,
1997.options.
(9) Includes 58,5005,703 shares issuable upon exercise of options.
(10) Includes 2,025,68031,500 shares issuable upon exercise of options.
(11) Includes 1,565,680 shares held by DCL Holding & Investments in Technology
(1993) Ltd. and 30,000 shares held by DCL Technologies Ltd. Mr. Ben-David
is the Chief Executive Officer and Chairman of DCL Technologies Ltd. and
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein.
(11) Includes 172,568 shares held by Bayview Investors, Ltd. and 513,087 shares
held by RCS III, L.P. Robertson, Stephens & Company Private Equity Group,
LLC is the general partner of RCS III and Bayview Investors, Ltd. Mr.
Grillos has been employed by Robertson, Stephens & Company LLC in its
venture capital group and is a limited partner of Bayview Investors, Ltd.
As such, Mr. Grillos may be deemed to have or to share investment control
over the above shares. Mr. Grillos disclaims any beneficial interest in
such shares in excess of his pecuniary interest as an employee of
Robertson, Stephens & Company LLC in its venture capital group and as a
limited partner of Bayview Investors, Ltd.
(12) Includes 10,000 shares issuable upon exercise of options of which 5,834
would be subject to the Company's right of repurchase if issued at June 3,
1997.options.
(13) These shares are owned by Jerusalem Pacific Ventures (1994) L.P., of which
Mr. Morrison is affiliated with the General Partner of the fund that
manages Jerusalem Pacific Ventures (1994) L.P. and as such may be deemed a
beneficial owner of such shares. Mr. Morrison disclaims beneficial
ownership of such shares.
(14) Includes 65,076 shares held by Sequoia Technology Partners III, 1,019,555
shares held by Sequoia Capital Growth Fund, 20,445 shares held by Sequoia
XVI and 11,166 shares held by Sequoia XVII. Mr. Stevens is a special
limited partner of Sequoia Capital Growth Fund and, as such, may be deemed
to be a beneficial owner of such shares. Mr. Stevens disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein.
(15) Includes 17,200 shares subject to the Company's right of repurchase and
326,000212,181 shares issuable upon exercise of options of which 158,952 would be
subject to the Company's right of repurchase if issued at June 3, 1997.
-8-options.
-17-
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company determined as of the end of the
last fiscal year (hereafter referred to as the "Named Executive Officers")
for services rendered to the Company in all capacities during the last twothree
fiscal years.
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- --------------------------
------------------------------------------------- NO. OF
SECURITIES
SALARY BONUS
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($SALARY($)(1) ($BONUS($)(2) COMPENSATION($) OPTIONS COMPENSATION($)
- - ------------------------------ ------- ------------------------------------------ ---- ------------ ----------- --------------------------------- ------------ ---------------
Larry J. Gerhard . . . . . . . . 1997 341,667 160,000 5,000(3) 75,000 3,575(4)
President and Chief 1996 260,000 60,000 -- 75,000 105,088(3)
President and Chief105,088(5)
Executive Officer 1995 240,000 -- -- -- 6,589(4)
Officer6,589(6)
C. Albert Koob . . . . . . . . . 1997 143,333 64,000 3,750(7) 28,000 2,350(8)
Vice President-Finance, 1996 127,500 20,000 -- 15,000 7,067(5)
Vice President-Finance,7,067(9)
Chief Financial Officer and 1995 24,198 20,000 -- 75,000 45,740(6)
Financial Officer and45,740(10)
Secretary
D. Gregory Kott.Moshe Guy(11) . . . . . . . . . . 1997 113,392 69,810(12) 10,515(13) 34,152 --
Vice President, General 1996 129,167 20,000 -- 20,000 7,410(5)
Vice President-Worldwide SalesN/A N/A N/A N/A N/A
Manager and Chief Operating 1995 116,042 25,000 1,200(7) 52,500(8) 342(9)
Roger A. Bitter.N/A N/A N/A N/A N/A
Officer of the Design
Solutions Division
John DiFerdinando(14) . . . . . . 1997 108,958 30,290(15) 6,150(16) 25,000 117,114(17)
Senior Vice President- 1996 128,333 15,000 1,100(7) 12,000 5,000(5)
General Manager-TSSI DivisionN/A N/A N/A N/A N/A
Worldwide Marketing 1995 135,157 -- -- -- 121,200(10)N/A N/A N/A N/A N/A
Eric Benhayoun . . . . . . . 1996 125,000 27,549(11). . 1997 120,252 26,945(18) -- --32,500 --
Vice President, General 1995 117,557 53,732(121996 125,000 27,549(19) -- --(13) --
Manager-European - - ------------------------Operations 1995 117,570 53,732(20) -- --(21) --
- ---------------------------
(1) 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.
(2) The 1996Consists of year-end bonuses were paid in 1997.January of the following year.
(3) IncludesConsists of car allowance.
(4) 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.
(5) Consists of $103,888 paid to Mr. Gerhard for accrued vacation and $1,200
paid by the Company for medical insurance premiums for Mr. Gerhard. In
1996, the Company changed its vacation policy which triggered a one-time
pay out of balances previously accrued.
(4) Includes(6) Consists of $5,389 paid to Mr. Gerhard for moving expenses incurred in
connection with completing his relocation from Southern California and
$1,200 paid by the Company for medical insurance premiums for Mr. Gerhard.
(5)(7) Consists of car allowance.
(8) Consists of the Company's matching contribution to Mr. Koob's 401(k) plan.
(9) Consists of payment for accrued vacation. In 1996, the Company changed its
vacation policy which triggered a one-time payout of balances previously
accrued.
(6)(10) Consists of relocation expenses.
(7)(11) Mr. Guy became an executive officer of the Company in May 1997.
(12) Consists of a$64,000 of bonus and $5,810 of commissions.
(13) Consists of car allowance.
(8) Includes(14) Mr. DiFerdinando became an option granted on March 1, 1995 to purchase 45,000 sharesexecutive officer of
Common Stock and an option granted on December 20, 1995 to purchase
7,500 shares of Common Stock. On September 13, 1995, in connection with
a repricing of all outstanding options having an exercise price in
excess of $1.75 per share, the Company canceledin May 1997.
Mr. DiFerdinando terminated his employment with the Company in January
1998.
-18-
(15) Consists of commissions.
(16) Consists of car allowance.
(17) Consists of relocation expenses, including losses incurred by Mr.
DiFerdinando as a result of an expedited sale of his home, and replaced the
optionCompany's matching contribution to purchase 45,000 shares of Common Stock at a purchase price of $2.50
per share with a new option to purchase the same number of shares of
Common Stock at an exercise price of $1.75 per share. Such new option
is not reflectedMr. DiFerdinando's 401(k) plan in the
above table.
(9) Contribution made by the Company on behalfamount of Mr. Kott pursuant to the
Company's 401(k) Plan.
(10)$2,375.
(18) Consists of reimbursements to Mr. Bitter for taxes and housing costscommissions, $12,000 of which was paid in Japan.
(11) Commissions earned during the fiscal year ended December 31, 1996,1998.
(19) Consists of commissions, $11,572 of which was paid in 1997.
(12) Commissions earned during the fiscal year ended December 31, 1995,(20) Consists of commissions, $9,625 of which was paid in 1996.
(13)(21) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, the Company
canceled and replaced the option to purchase 58,500 shares of Common Stock
at a purchase price of $2.50 per share with a new option to purchase the
same number of shares of Common Stock at an exercise price of $1.75 per share.shares.
Such new option is not reflected in the above table.
-9-
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options
granted during the fiscal year ended December 31, 19961997 to each of the Named
Executive Officers.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1997
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996POTENTIAL REALIZABLE
INDIVIDUAL GRANTS
----------------------------------------------------------------------- POTENTIAL REALIZABLE
NO. OF VALUE AT ASSUMED
------------------------------------------------------------------------- ANNUAL RATES OF
NO. OF STOCK PRICE
SECURITIES % OF TOTAL FAIR ANNUAL RATES OF STOCKMARKET APPRECIATION FOR
UNDERLYING OPTIONS MARKET PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE VALUE ON OPTION TERM(3)
GRANTEDOPTIONS TO EMPLOYEES IN PRICE DATE OF EXPIRATION ------------------------
(1) 1996(2)-----------------------
GRANTED(1) 1997(2) ($)/SHARE GRANT($) DATE 5%($) 10%($)
----------------------- --------------- ----------- ----------- ------------- --------- ----------------------- ---------- ------- -------
Larry J. Gerhard . . . . . 75,000 18.6% 9.50 9.50 10/17/2006 448,087 1,135,5428.9% 8.13 8.13 7/28/07 383,233 971,187
C. Albert Koob . . . . . . 15,000 3.7% 9.25 9.25 12/19/2006 87,259 221,132
D. Gregory Kott.28,000 3.3% 8.13 8.13 7/28/07 143,074 362,576
Moshe Guy . . . . . 20,000 5.0% 9.25 9.25. . 761 0.1% 6.52 6.52 4/15/07 3,118 7,902
8,000 0.9% 8.13 8.13 7/28/07 40,878 103,593
391 0.1% 17.00 17.00 10/17/07 4,180 10,594
25,000(4) 3.0% 9.63 9.63 12/19/2006 116,346 294,842
Roger A. Bitter.22/07 151,328 383,494
25,000 3.0% 5.38 5.38 4/16/07 84,508 214,159
John DiFerdinando . . . . . 12,000 3.0% 5.00 5.00 03/01/2006 37,734 95,62520,000 2.4% 8.13 8.13 7/28/07 102,195 258,983
Eric Benhayoun . . . . . . -- -- -- -- -- -- --12,500 1.5% 9.63 9.63 12/22/07 75,664 191,747
- - ----------------------------------------------------------
(1) Options granted in 19961997 are either incentive stock options or nonstatutory
stock options and generally vest over four years, with 25% of the option
shares becoming fully vested one year from the grant date and 1/48th
vesting in each successive month, with full vesting occurring on the fourth
anniversary date. Under the terms of the 1994 Stock Plan and the 1997
Nonstatutory Stock Option 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 402,500846,777 options granted to all employees and
consultants during 1996.1997.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
(4) Granted under the 1997 Nonstatutory Stock Option Plan.
-19
OPTION EXERCISES AND HOLDINGS
The following table sets forth, as to the Named Executive
Officers, certain information concerning stock options exercised during 19961997
and the number of shares subject to exercisable and unexercisable stock
options as of December 31, 1996.1997. The table also sets forth certain
information with respect to the value of stock options held by such
individuals as of December 31, 1996.1997.
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 19961997 AND OPTION VALUES
ON DECEMBER 31, 1996 OPTION VALUES1997
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
IN-THE-MONEY
SHARES AT 12/31/96 OPTIONS AT 12/31/96($97 AT 12/31/97($)(2)(1)
ACQUIRED ON VALUE ----------------------------- ----------------------------------------------------------- ------------------------------
NAME EXERCISE REALIZED($) EXERCISABLE(1)EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------------- ------------ ------------ ------------------------------------------- ----------- ----------- ----------- ------------- ------------ -------------------------- -------------
Larry J. Gerhard . . . . . -- -- 75,000(3) -- 56,250 --0 0 85,416 64,584 110,415 161,460
C. Albert Koob . . . . . . -- -- 75,000(4) 15,000 637,500 15,000
D. Gregory Kott.20,000 216,260 58,750 39,250 493,281 85,469
Moshe Guy . . . . . 5,000 37,500 77,500(5) 20,000 690,000 20,000
Roger A. Bitter.. . . . 0 0 4,902 44,250 8,284 60,469
John DiFerdinando . . . . . -- -- 12,000(6) -- 63,000 --0 0 21,500 25,000 195,813 131,250
Eric Benhayoun . . . . . . -- --0 0 58,500 -- 497,250 --32,500 519,188 62,500
- - ------------------------------------------------
(1) Unvested options granted prior to October 18, 1996 are immediately
exercisable, provided that any unvested shares are subject to repurchase
by the Company at the original exercise price paid per share upon the
optionee's cessation of service to the Company.
(2) These values have been calculated based on the closing price of the
Company's Common Stock on the Nasdaq National Market on December 31, 19961997
of $10.25$10.38 per share minus the exercise price.
(3) Includes 75,000 unvested shares of Common Stock that would have been
subject to repurchase by the Company on December 31, 1996, if the
options had been exercised.
(4) Includes 45,834 unvested shares of Common Stock that would have been
subject to repurchase by the Company on December 31, 1996, if the
options had been exercised.
(5) Includes 34,688 unvested shares of Common Stock that would have been
subject to repurchase by the Company on December 31, 1996, if the
options had been exercised.
(6) Includes 12,000 unvested shares of Common Stock that would have been
subject to repurchase by the Company on December 31, 1996, if the
options had been exercised.
-10-
EMPLOYMENT AGREEMENTS
The Company entered into a four-yearthree-year employment agreement with
Mr. Gerhard effective August 12, 1996,1, 1997, pursuant to which he receives an annual
base salary, an annual bonus of $75,000up to 25% of his base salary payable if
certain revenue targets are achieved and all standard benefits accorded other
executives of the Company as well as certain additional medical benefits.
Under the agreement, as of the date of the
Company's initial public offering, Mr. Gerhard was also granted options to purchase up to 75,000 shares of
Common Stock, subject to vesting over a four-yearthree-year period. In addition, ifMr.
Gerhard is entitled to an allowance for car expenses of $1,000 per month. In
the event Mr. Gerhard is terminated other than for cause, he is entitled to
severance of $25,000$33,333.33 per month plus all insurance benefits until he
accepts other full time employment, but in no event for longer than
24twenty-four months. InThis agreement will be automatically extended for
additional one-year terms unless terminated by either party with 90 days
written notice prior to the event
of a merger or sale of substantially allend of the assets of the Company and its
subsidiaries and Mr. Gerhard is not retained as President and Chief Executive
Officer of the successor company, Mr. Gerhard will be entitled to severance
benefits for 24 months.then current term.
On October 21, 1995, the Company entered into a four-year
employment agreement with Mr. Koob pursuant to which he receives an annual
base salary, an annual bonus of up to 25% of his base salary, all standard
benefits accorded other executives of the Company, and relocation costs.
Under the agreement, Mr. Koob was granted options to purchase up to 75,000
shares of Common Stock, subject to vesting over a four-year period. Such
options automatically vest upon termination of Mr. Koob other than for cause
and upon the sale of more than 75% of the assets or 50% of the outstanding
capital stock of the Company. In addition, the agreement provided that upon
consummation of the Company's initial public offering, the four-year vesting
schedule with respect to such options accelerated by one year. In the event
Mr. Koob is terminated other than for cause, he is entitled to severance of
$10,416.67 per month plus all insurance benefits until he accepts other full
time employment, but in no event for longer than nine months. In the event
Mr. Koob resigns or is terminated for cause within 36 months after the date
of the employment agreement, any unvested options and any options which
vested, and shares issued upon exercise of such options, within one year
prior to such resignation or termination may be repurchased by the Company at
the option exercise price. This agreement will be automatically extended for
additional one-year terms unless terminated by either party with 90 days
written notice prior to the end of the then current term.
On MarchJuly 1, 1995,1997, the Company entered into a four-year employment
agreement with Mr. KottGuy, pursuant to which he receives an annual base salary,
an annual bonus of up to 25% of his base salary, and all standard benefits
accorded other executives of the Company. Under the agreement, Mr. Kott was granted options to
purchase up to 52,500 shares of Common Stock, subject to vesting over a
four-year period. Such options automatically vest upon termination of Mr. Kott
other than for cause and upon the sale of more than 50% of the assets or
outstanding capital stock of the Company. In addition, in the event Mr. KottGuy is terminated
other than for cause, he is entitled to severance of $10,000 per
monthequal to his then monthly
base salary plus all current insurance benefits until he accepts other full
time employment, but in no event for
-20-
longer than sixtwelve months. InThis agreement will be automatically extended for
additional one-year terms unless terminated by either party with 90 days
written notice prior to the event Mr. Kott resigns or is
terminated for cause within 36 months after the dateend of the employment
agreement, any vested and unvested options, and shares issued upon exercise of
such options, may be repurchased by the Company at the option exercise price.then current term.
On January 1, 1995,April 15, 1997, the Company entered into a four-year employment
agreement with Mr. BitterDiFerdinando, pursuant to which he receivesreceived an annual base
salary, an annual bonus of up to 25% of his base salary, and all standard
benefits accorded other executives of the Company and relocation costs. In addition, pursuant toCompany. Under the agreement, the Company also reimbursed Mr.
Bitter for certain living
expenses while he resided in Japan and, subject to certain conditions, agreed to
provide Mr. Bitter with a loan to repay his prior tax liabilities, which loan
has been forgiven by the Company. The agreement also provides thatDiFerdinando was granted options to purchase up to 103,19425,000 shares of Common
Stock, previously grantedsubject to vesting over a four-year period, unless the Company sold
substantially all of its assets or was acquired, in which case all shares
would have vested immediately. In the event Mr. Bitter
shall automatically vest upon termination of Mr. BitterDiFerdinando was terminated
other than for cause, and
upon the sale of more than 20% of the assets or more than 50% of the outstanding
capital stock of the Company. In addition, the agreement provided that upon
consummation of the Company's initial public offering, the four-year vesting
schedule with respect to such options accelerated by one year. In the event
Mr. Bitter is terminated for other than cause, he iswould have been entitled to severance of
$10,000 per monthequal to his
then monthly base salary plus all current insurance benefits until he
acceptsaccepted other full time employment, but in no event for longer than ninesix
months. InMr. DiFerdinando also received relocation expense reimbursement as
well as an equity protection over the eventsale price of his home. Mr.
Bitter
resigns or isDiFerdinando terminated for cause prior to November 23, 1997,his employment with the Company may
cancel the options to purchase the 103,194 shares, whether vested or unvested,
and any shares previously issued upon exercise of such options may be
repurchased by the Company at the option exercise price. However, in certain
circumstances, the Company's right to repurchase or cancel is limited to 67% of
such options or shares issued in respect of options.
-11-
January 1998.
Effective October 31, 1994, the Company entered into a four-year
employment agreement with Mr. Benhayoun pursuant to which he receives an
annual base salary, an annual bonus of 30% of his base salary if he meets specifiedcommissions based on sales revenue targets,generated, and all
standard benefits accorded other executives of the Company. Under the
employment agreement, Mr. Benhayoun was granted options to purchase up to
58,500 shares of Common Stock, of which 15,000 vested immediately, 15,000
vested on October 31, 1995, and the remainder vestvested ratably over the 24
months following October 31, 1995. Such options also automatically vest upon
termination of Mr. Benhayoun other than for cause and upon the sale of more than
50% of the assets or outstanding capital stock of the Company. In addition, the agreement provided that
upon consummation of the Company's initial public offering, the two-year
vesting schedule with respect to such options accelerated by one year. In
addition, in the event Mr. Benhayoun is terminated other than for cause, he
is entitled to severance of 52,083 French francs (approximately $9,234$8,502.65 as
of March 31, 1997)27, 1998) per month plus all insurance benefits until he accepts
other full-time employment, but in no event longer than nine months.
In
the event Mr. Benhayoun resigns within 36 months after the date of the
employment agreement, any unvested options and any options which vested, and
shares issued upon exercise of such options, within one year prior to such
resignation or termination may be repurchased by the Company at the option
exercise price. The Company is negotiating an amendment to Mr. Benhayoun's
employment agreement which provides for the payment of commissions in lieu of
the annual bonus.
-12-
CERTAIN TRANSACTIONS
In connection with the reorganization in December 1993, DCL Holding and
Investments in Technology (1993),the Company's Israeli subsidiary, Summit Design
(EDA) Ltd. ("DCL") and Zamir Paz, the former
stockholders of(formerly named SEE Technologies, exchanged all of their shares of SEE
Technologies stock for an aggregate of 2,661,154 and 935,000 shares of Series A
Preferred Stock of Summit, respectively. As a result, SEE Technologies became a
wholly-owned subsidiary of Summit. In February 1994, DCL and Mr. Paz contributed
an aggregate of 185,474 and 43,680 and shares of Series A Preferred Stock,
respectively, to Summit. Also in connection with the reorganization, a
wholly-owned subsidiary of the Company merged with and into Test Systems
Strategies, Inc. ("TSSI") with TSSI being the surviving corporation. As
consideration, the former stockholders of TSSI received capital stock of Summit
under the following conversion schedule: (i) holders of TSSI common stock
received .5896815 shares of Common Stock of Summit for each TSSI share; (ii)
holders of TSSI Series A, B and C Preferred Stock received .5896815 shares of
Series B Preferred Stock of Summit for each such TSSI share; and (iii) holders
of TSSI Series D Preferred Stock received 1.179363 shares of Series B Preferred
Stock of Summit for each TSSI Series D share.
At the time of the reorganization, SEE TechnologiesTechnologies), entered into a four-year
sublease pursuant to which SEE TechnologiesSummit Design (EDA) Ltd. subleases space for its
corporate offices from DCL Holding & Investment in Technology (1993), Ltd.
("DCL") on terms and conditions similar to those under which DCL leases such
office space from the third-party owner of the office space. DCL is a 5%
stockholder of the Company and wholly-owned subsidiary of DCL Technologies
Ltd. Amihai Ben-David, a director of the Company, is the Chief Executive
Officer and Chairman of DCL Technologies Ltd. The Company believes that the
terms of the foregoing lease are no less favorable to the Company than those
that could have been obtained from unaffiliated third parties.
To facilitate the relocation of Larry J. Gerhard to Beaverton, Oregon in
October 1993, the Company agreed with a third-party real estate firm ("PHH")
that PHH would purchase Mr. Gerhard's former residence in Southern California
and thereafter undertake to resell such residence. The Company further agreed to
reimburse PHH for all expenses and any loss incurred on resale. The residence
was sold for $870,000 in August 1995 following a drop in the Southern California
housing market and, as a result, in addition to payment of certain carrying
costs, the Company issued to PHH a note in the aggregate principal amount of
$441,705. The note was scheduled to mature on August 30,In May 1997, and accrued
interest at an annual rate of prime plus 1%. The closing of the Company's
initial public offering caused the maturity date of the note to accelerate to
ten business days after the closing date. The outstanding balance on the note
was repaid in full in October 1996.
In September 1995, the Company entered into a one-year directorship
agreement with Fred Hanson, a non-employee director of the Company, pursuant to
which Mr. Hanson received a salary of $17,500 for one year. The Company also
issued Mr. Hanson an option to purchase 20,000 shares of the Company's Common
Stock at an exercise price of $1.75 per share. In lieu of receiving quarterly
salary payments, the Company, on Mr. Hanson's behalf, purchased 10,000 of the
shares subject to the option for the aggregate purchase price of $17,500.
In September 1995, the Company loaned $87,056$350,000 to Zamir Paz,Moshe Guy, an
executive officer of the Company, for the purchase of a primary residence
pursuant to a promissory note that bore interest at the annual rate of prime plus 1%.5% per year.
The principal wasand accrued interest were repaid in September 1997.
In July 1997, the Company loaned an aggregate of $165,000 to John
DiFerdinando for the purchase of a primary residence pursuant to two
promissory notes that bore interest at the rate of 5.98% per year. The
principal and accrued interest were repaid in October 1995 and the interest was repaid in June 1996.
In February 1996, the Company agreed to forgive a loan of approximately
$101,000 made to Roger Bitter,1997. Mr.
DiFerdinando, formerly an executive officer of the Company, as part of
Mr. Bitter's relocation back toterminated his
employment with the United States. The loan was originally made
to Mr. Bitter to repay his prior tax liabilities while residingCompany in Japan. The
loan accrued interest at an annual rate of 6%January 1998.
In September 1997, the Company repurchased 24,000 and prior to forgiveness, was
repayable by Mr. Bitter upon demand by the Company. As150,000
shares of the dateCompany's Common Stock at a price of forgiveness, the outstanding amount due on the loan was approximately $89,892.
In October$12.56 per share from C.
Albert Koob and November 1996, the Company sold 2,000,000 shares and
stockholdersL&K Properties Limited Partnership, respectively. Mr. Koob
is an executive officer of the Company, sold 2,600,000and Larry Gerhard, the sole general
partner and a limited partner of L&K Properties Limited Partnership, is an
executive officer and director of the Company. The Company also repurchased
200,000 shares from DCL.
In September 1997, the Company acquired Simulation Technologies,
Corp. ("SimTech"). In connection with the acquisition, Richard Davenport, an
executive officer of the Company, received $2,202,731 and 692,089 shares of
the Company's Common Stock in an
underwritten initial public offering co-managed by Robertson, Stephens & Company
LLC.exchange for his shares of SimTech stock. Part
of those shares are subject to a lock-up arrangement and held in escrow. The
shares will be released from the lock-up over a 24-month period subject to
Mr. Grillos, a directorDavenport's continued employment with the Company. The Richard Davenport
1997 Irrevocable Annuity Trust also received $362,153 and 113,786 shares of
the Company, has been employed by Robertson,
Stephens & Company LLCCompany's Common Stock in exchange for its venture capital group.
-13-shares of SimTech stock.
-21-
The Company has a line of credit for $1,000,000 with the United
States National Bank of Oregon, a subsidiary of U.S. Bancorp. Steven P.
Erwin, a nominee for director of the Company, iswas Executive Vice President
and Chief Financial Officer of U.S. Bancorp.Bancorp until July 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Executive officers, directors and greater than 10%
stockholders are required by SEC rules to furnish the Company with copies of
all forms they file. Based solely on its review of the copies of such forms
received by the Company and written representations from certain reporting
persons, the Company believes that, during the period from October 17, 1996 (the date on which the Company
first became subject to Section 16(a)) until December 31, 1996,1997, all Section 16(a) filing
requirements applicable to its executive officers, directors and 10%
stockholders were complied with,satisfied, except that the Form 5s3 for Messrs. Ben-David,
Grillos, Hanson, MorrisonRichard Davenport and
Stevens, directors of the Company,Form 4's for DCL Technologies Ltd. for September 1997 and November 1997
were filed late.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed in August 1994 and is
currently composed of Messrs. Ben-David Grillos and Stevens.Botts. No interlocking
relationship exists between any member of the Company's Compensation
Committee and any member of any other company's board of directors or
compensation committee.
CHANGES IN ACCOUNTANTS
On February 9, 1996, Coopers & Lybrand L.L.P. was engaged as the
principal independent accountants for the Company and its subsidiaries,
replacing KPMG Peat Marwick LLP ("KPMG"), which was dismissed in January
1996. The change was approved by the audit committeeAudit Committee of the Company's Board
of Directors. In connection with the audits of the two fiscal years in the periodyear ended December 31,
1995 and through the interim period ended January 31,February 8, 1996, there were no
disagreements with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements, if not resolved to KPMG's satisfaction, would have caused them
to make reference to the matter in their report. The audit reports of KPMG
on the consolidated financial statements of the Company as of and for the
year ended December 31, 1994 did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty
or audit scope. The audit report for the year ended December 31, 1994 was
modified to include a discussion on the restatement of the Company's 1993
financial statements for the timing of when certain expenses were recognized
in the financial statements. During the audit period ended December 31,
1994, and through the interim period ended January 31, 1996 there have been
no reportable events.
During the two fiscal years ended December 31, 1995,1996, and through
the interim period ended February 8, 1996, the Company had not consulted with
Coopers & Lybrand L.L.P. on items which concerned the subject matter of a
disagreement or reportable event with the former auditor.
-14--22-
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the
"Committee") was established in August 1994 and is responsible for reviewing
the compensation and benefits for the Company's executive officers, as well
as supervising and making recommendations to the Board on compensation
matters generally. The Committee also administers the Company's stock plans.
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 Committee are to:
- attract, retain and motivate highly qualified executive
officers and employees who contribute to the long-term success
of the CompanyCompany;
- align the compensation of executive officers with business
objectives and performanceperformance; and
- align incentives for executive officers with the interests of
stockholders in maximizing valuevalue.
The Company currently intends to takehas taken the necessary steps to conform its
compensation practices to comply with the $1 million compensation deduction
cap under Section 162(m) of the Internal Revenue Code, as amended.
ELEMENTS OF COMPENSATION
Compensation for executive officers includes both cash and equity
elements.
Cash compensation consists of (i) base salary which is determined
on the basis of 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.
Ownership of the Company's Common Stock is a key element of
executive compensation. Executive officers and other employees of the
Company are eligible to participate in the 1994 Stock Plan (the "Option
Plan") and the 1996 Employee Stock Purchase Plan (the "Purchase Plan"). The
Option Plan permits the Board of Directors or the Committee to grant stock
options to employees on such terms as the Board or the Committee may
determine. The Committee has the sole authority to grant stock options to
executive officers of the Company and is currently administering stock option
grants to all employees. In determining the size of a stock option grant to
a new executive officer or other employee, the Committee takes into account
equity participation by comparable employees 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's continuing service to the Company. The Purchase Plan permits
employees to acquire Common Stock of the Company 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.
The Company also maintains a 401(k) Plan to provide retirement
benefits through tax deferred salary deductions for all its employees. TheIn
1997, the Company did not contributecontributed to the 401(k) Plan in 1996.
-15-by partially matching
employees' contribution at a one-to-four ratio; provided, however, that the
Company's matching contribution for any employee could not exceed 1.5% of
such employee's salary.
-23-
19961997 EXECUTIVE COMPENSATION
Executive compensation for fiscal 19961997 included base salary and
cash bonuses based upon achievement of corporate goals and individual
performance goals. Executive officers, like other employees, were eligible
for option grants under the Option Plan and to participate in the Purchase
Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 19961997
Mr. Gerhard's compensation package is set forth in an employment
agreement that was approved by the Committee and took effect in August 1996,1997,
replacing his then existing employment agreement. In 1996,1997, Mr. Gerhard
received a salary of $260,000$341,667 and a bonus of $60,000.$160,000. Mr. Gerhard's bonus
for 1996 reflected1997 consisted of $100,000 pursuant to his employment agreement for the
achievement of the corporate revenue goal set for 1996.1997 and an additional
$60,000 for the Company's performance in 1997. Mr. Gerhard was also granted
an option to purchase 75,000 shares of the Company's Common Stock.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Amihai Ben-David
John Grillos
Mark Stevens
-16-William V. Botts
-24-
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return to
stockholders on the Company's Common Stock with the cumulative total return
of the Nasdaq Stock Market--U.S. Index and the Dow Jones Software Index. The
graph assumes that $100 was invested on October 28, 1996 (the date of the
Company's initial public offering) in the Company's Common Stock, the Nasdaq
Stock Market--U.S. Index and the Dow Jones Software Index, including
reinvestment of dividends. No dividends have been declared or paid on the
Company's Common Stock. Note that historic stock price performance is not
necessarily indicative of future stock price performance.
[Performance Graph]
Summit Design, Inc. Nasdaq Stock Market Dow Jones
Common Stock --U.S. Index Software Index
------------ ------------ --------------
Value at
December 31, 1996 108 104 101
-17-
10/18/96 12/96 12/97
-------------------------------------------
DOLLARS
Summit Design, Inc................ 100 108 109
NASDAQ Stock Market (U.S.)........ 100 104 127
Dow Jones Software ............... 100 101 114
-25-
OTHER MATTERS
The Company knows of no other matters to be submitted at the
meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the Board of Directors may recommend.
It is important that your shares be represented at the meeting,
regardless of the number of shares which you hold. You are, therefore, urged
to execute and return, at your earliest convenience, the accompanying proxy
card in the envelope which has been enclosed.enclosed envelope.
THE BOARD OF DIRECTORS
Beaverton, Oregon
April 28, 1997
-18-13, 1998
1557-PS-98
-26-
PROXYSUMMIT DESIGN, INC.
1994 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means Summit Design, Inc., a Delaware
corporation.
(g) "CONSULTANT" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means
that the employment or consulting relationship with the Company, any Parent or
Subsidiary is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave. For purposes of Incentive Stock Options, no
such leave may exceed 90 days, unless reemployment upon expiration of such leave
is guaranteed by statute or contract, including Company policies. If
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(i) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(j) "EMPLOYEE" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("Nasdaq") System, 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 market trading day
prior to the time of determination as reported in THE WALL STREET JOURNAL or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq
System (but not on the National Market System thereof) or if the Market Value of
the Common Stock cannot be determined under (i) above but 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 between the high bid and low
asked prices for the Common Stock for the last market trading day prior to the
time of determination or;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(m) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
-2-
(p) "OPTION" means a stock option granted pursuant to the Plan.
(q) "OPTIONED STOCK" means the Common Stock subject to an
Option.
(r) "OPTIONEE" means an Employee or Consultant who receives an
Option.
(s) "PARENT" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "PLAN" means this 1994 Stock Plan.
(u) "PRIOR TSSI ISO" means any incentive stock option granted
to an employee of Test Systems Strategies, Inc. ("TSSI") pursuant to the TSSI
1988 Incentive Stock Option Plan (the "TSSI Plan") and thereafter substituted
for by an Incentive Stock Option exercisable for Shares of the Company pursuant
to the terms of this Plan and of the Agreement and Plan of Reorganization dated
January 19, 1994 between Summit Design, Inc., TSSI, Summit Sub, Inc. and See
Technologies Software Environment for Engineers, Ltd.
(v) "SEE" means See Technologies Software Environment for
Engineers, Ltd.
(w) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.
(x) "SUBSIDIARY" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 12 of the Plan, the maximum aggregate number of shares which may be
optioned and sold under the Plan is 914,577 shares of Common Stock. The shares
may be authorized but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PLAN PROCEDURE.
(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS. With respect to grants of Options to Employees who are also officers
or directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with
-3-
Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule
16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a Committee designated by the Board to administer
the Plan, which Committee shall be constituted in such a manner as to permit
the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by Rule 16b-3 with
respect to a plan intended to qualify thereunder as a discretionary plan.
(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted
by Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS
AND OTHER EMPLOYEES. With respect to grants of Options to Employees or
Consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock
option plans, if any, of applicable state corporate and securities laws, of
the Code, and of any applicable stock exchange (including Nasdaq) (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by the Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any stock exchange upon
which the Common Stock is listed, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to
whom Options may from time to time be granted hereunder;
-4-
(iii) to determine whether and to what extent
Options or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreements for use under
the Plan, which forms may differ with respect to individual Optionees;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder,
including the terms of any right of first refusal of the Company to purchase
Shares granted pursuant to the Plan and the terms of any repurchase option of
the Company with respect to unvested Shares;
(vii) with respect to any Option, to determine
whether and under what circumstances an Option may be settled in cash under
subsection 9(f) instead of Common Stock;
(viii) to reduce the exercise price of the Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted; and
(ix) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary, including Options granted in substitution of options granted under
the TSSI Plan) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
-5-
(c) For purposes of Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment relationship with the Company, nor shall
it interfere in any way with his or her right or the Company's right to
terminate his or her employment relationship at any time, with or without cause.
(e) The following limitations shall apply to grants of Options
to Employees:
(i) No Employee shall be granted, in any fiscal
year of the Company, Options to purchase more than 500,000 Shares.
(ii) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 11(a).
(iii) If an Option is canceled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 11), the canceled Option shall be counted
against the limit set forth in Section 5(e)(i). For this purpose, if the
exercise price of an Option is reduced, the transaction shall be treated as a
cancellation of the Option and the grant of a new Option.
6. 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, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement.
-6-
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Committee, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option,
the per Share exercise price shall be determined by the Committee.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and, in the case of a Prior TSSI ISO may
consist entirely of (1) cash, (2) check, or (3) other Shares which (x) in the
case of Shares acquired upon exercise of an Option, have been owned by the
Optionee for more than six months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised. In the case of all other
Options, the consideration may consist entirely of (1) cash, (2) check,
(3) promissory note, (4) other Shares which (x) in the case of Shares acquired
upon exercise of an Option, have been owned by the Optionee for more than six
months on the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
(6) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
-7-
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Nonstatutory Option and, subject to the $100,000 limitation of Section 5(b) on
the exercisability of Incentive Stock Options in any one year, any Incentive
Stock Option granted hereunder shall be exercisable under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment shall be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company, such Optionee may within sixty (60) days after the
date of such termination (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise his or her
Option to the extent that Optionee was entitled to exercise it at the date of
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate. Notwithstanding the above provisions of this Section 9(b), in
the event of an Optionee's change of status from Consultant to Employee, an
Optionee's Nonstatutory Stock Option shall not automatically terminate solely as
a result of such change of status. In addition, in the case of an Option other
than a Prior TSSI ISO, in the event of an Optionee's change of status from
Employee to Consultant, an Employee's Incentive Stock Option shall not
automatically terminate but shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option on
the ninety-first (91st) day following such change of status.
-8-
(c) DISABILITY OF OPTIONEE. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after death, the Optionee's estate or a person who acquired the
right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(e) RULE 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which have
been authorized for
-9-
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, 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 issued 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, 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.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Optionee shall have the right to exercise his or her Option
until ten (10) days prior to such transaction as to all of the Optioned Stock
covered thereby. In addition, any Company repurchase option applicable to
Shares shall lapse as to all such Shares, provided such transaction takes place
at the time and in the manner contemplated. To the extent it has not been
previously exercised, the Option will terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. 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:
(i) OPTIONS. Each Option shall be assumed or an
equivalent Option shall be substituted by such successor corporation (including
as a "Successor" any purchaser of substantially all of the assets of the
Company) or a parent or subsidiary of such successor corporation. In the event
that the successor corporation or a parent or subsidiary of such successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Administrator shall, as soon as practicable prior to the effective
date of such transaction, provide for the Optionee to have the right to exercise
the Option as to all or a portion of the Optioned Stock, including Shares that
would not otherwise be exercisable. In such event the Administrator shall
notify the Optionee as soon as practicable prior to the effective date of such
transaction that the Option shall be fully exercisable for a period of ten (10)
days from the date of such notice, and the Option shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger, the Option confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger, the consideration (whether stock, cash, or other securities
or property) received in the merger by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration
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chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger was not solely
common stock of the successor corporation or its Parent, the Administrator
may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger.
(ii) SHARES SUBJECT TO REPURCHASE OPTION. Any
Shares subject to a repurchase option of the Company shall be exchanged for the
consideration (whether stock, cash, or other securities or property) received in
the merger or asset sale by the holders of Common Stock for each Share held on
the effective date of the transaction, as described in the preceding paragraph.
If the Optionee receives shares of stock of the successor corporation or a
parent or subsidiary of such successor corporation in exchange for Shares
subject to a repurchase option, such exchanged shares shall continue to be
subject to the repurchase option as provided in the Restricted Stock Purchase
Agreement.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of Nasdaq or an established stock
exchange), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the grant and exercise of such
Option and the issuance and delivery
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of such Shares pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of Nasdaq or 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 relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
16. AGREEMENTS. Options shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.
17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
18. ADDENDUM TO THE 1994 SUMMIT DESIGN, INC. STOCK PLAN. This
Addendum shall apply to any person who is granted an Option under the 1994
Summit Design, Inc. Stock Plan (the "Plan") and is an employee or consultant of
SEE and is a resident of the State of Israel, or is otherwise subject to the
laws of the State of Israel (such persons are referred to collectively
hereinafter as the "Israelis").
The Summit Design, Inc. Option Agreements and Restricted Stock
Purchase Agreements delivered to the Israelis pursuant to the Options granted to
the Israelis (each an "Israeli Option") shall contain certain terms and
conditions as is required by applicable Israeli law or approved by the Company,
including, but not limited to the following:
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1) Each Israeli Option granted to an Israeli on or before
January 31, 1994 shall be immediately exercisable for 25% of the shares subject
to such Option, with the remaining Shares to vest equally on a monthly basis
over a three year period beginning on January 1, 1994. Such vesting schedule
may be accelerated by the Administrator of the Plan and shall be accelerated in
accordance with any employment agreement an Israeli may have with the Company.
2) The Common Stock issuable upon exercise of an Israeli
Option that is not yet vested shall be held in escrow and trust in Israel for
the benefit of the Company and the applicable Israeli Optionee as required by
Israeli law and according to the terms and conditions of such Israeli Optionee's
Restricted Stock Purchase Agreement.
3) To the fullest extent possible, all terms and conditions
necessary to qualify each Israeli Option intended by the Company to be taxed as
the Israeli equivalent of an Incentive Stock Option or Nonstatutory Option, as
the case may be, to be so taxed by the State of Israel.
4) All applicable foreign currency control requirements of any
Israeli governmental entity.
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SUMMIT DESIGN, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of Summit Design, 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 Internal Revenue Code of 1986, as amended. 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 Summit Design, Inc. and any Designated
Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross earnings
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(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.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(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 market trading day prior to the time of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator 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) For the purposes of the Enrollment Date under the first
Offering Period under the Plan, the Fair Market Value of the Common Stock shall
be the price to public as set forth in the final prospectus included within the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Common Stock.
(4) 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 May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later. The first Offering Period shall be the period
commencing with the first Trading Day on or after the date on which the
Company's registration statement on Form S-1 is declared effective by the
Securities and Exchange Commission and terminating on the last Trading Day on or
before October 31, 1998. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this Employee Stock Purchase Plan.
(m) "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.
(n) "PURCHASE PERIOD" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
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(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 a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(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.
(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 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.
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 May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. The first Offering Period shall begin on the
effective date of the initial public offering of the Company's Common Stock that
is filed with the Securities and Exchange Commission and shall end on the last
Trading Day on or before October 31, 1998. The Board shall have the power to
change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without stockholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.
5. PARTICIPATION.
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(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 with the Company's payroll office prior
to the applicable Enrollment Date.
(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.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. 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 or 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 rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at such time during any
Purchase Period which is scheduled to end during the current calendar year (the
"Current Purchase Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Purchase Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
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(e) At the time the option is exercised, in whole or in part, or at
the time some or all 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 on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. 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 the Exercise Date, and the maximum number of
full shares subject to option 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 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, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
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
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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. 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, he 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. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
(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 which
commence after the termination of the Offering Period from which the participant
withdraws.
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 150,000 shares, subject
to adjustment upon changes in capitalization of the Company as provided in
Section 18 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.
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13. ADMINISTRATION.
(a) ADMINISTRATIVE BODY. 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.
(b) RULE 16b-3 LIMITATIONS. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
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
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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. Subject to any required action by the
stockholders of the Company, the Reserves, as well as the 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, 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.
(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) MERGER OR ASSET SALE. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, any Purchase Periods then in
progress shall be shortened by setting a new Exercise Date (the "New Exercise
Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the
Company's proposed sale or merger. 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
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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 of Directors 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 Rule 16b-3 or under 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.
(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.
-9-
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 Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on such
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.
-10-
EXHIBIT A
SUMMIT DESIGN, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________________________________________ hereby elects to
participate in the Summit Design, Inc. 1996 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.
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. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to stockholder approval of the Employee Stock Purchase 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 understand 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, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in
an amount equal to the excess of the fair market value of the shares at
the time such shares were purchased by me over the price which I paid
for the shares. I HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN
30 DAYS AFTER THE DATE OF ANY DISPOSITION OF MY SHARES AND I WILL MAKE
ADEQUATE PROVISION FOR FEDERAL, STATE OR OTHER TAX WITHHOLDING
OBLIGATIONS, IF ANY, WHICH ARISE UPON THE DISPOSITION OF THE COMMON
STOCK. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year and 1-year holding periods, I
understand that I will be treated for federal income tax purposes as
having received income only at the time of such disposition, and that
such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of
the shares at the time of such disposition over the purchase price which
I paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Offering Period. The remainder of the gain, if
any, recognized on such disposition will be taxed as capital gain.
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.
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:
NAME: (Please print)_________________________________________________________
(First) (Middle) (Last)
_______________________________ ___________________________________________
Relationship
____________________________________________
(Address)
-2-
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)
-3-
EXHIBIT B
SUMMIT DESIGN, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Summit Design,
Inc. 1996 Employee Stock Purchase Plan which began on ____________, 19____ (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:____________________________
DETACH HERE
PROXY
SUMMIT DESIGN, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Summit Design, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 28, 1997,13, 1998, and hereby
appoints Larry J. Gerhard and C. Albert Koob, and each of them, proxies, with
full power of substitution, to represent the undersigned and to vote as
designated on the reverse side, all shares of Common Stock of Summit Design,
Inc. that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Summit Design, Inc. to be held on May 28, 199714, 1998 at 1:302:00 p.m.,
local time, at the Fifth AvenueEmbassy Suites, Hotel, 5069000 S.W. Washington Street, Portland,Square Road, Tigard,
Oregon 97204,97223 and at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR EACH OF THE PROPOSALS ON THE REVERSE SIDE HEREOF AND FOR SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXIES DEEM ADVISABLE.
- -------------- --------------
| SEE REVERSE | CONTINUED AND TO BE SIGNED | SEE REVERSE |
| SIDE | ON REVERSE SIDE SEE REVERSE| SIDE |
- -------------- --------------
DETACH HERE
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE
A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS.
1. To elect one Class I director to serve for a term
of one year, to elect two Class II directors to
serve for a term of two years and to elect two
Class III directors to serve for a term of three
years.
FOR AGAINST ABSTAIN
CLASS I NOMINEE: Steven P. Erwin 2. Proposal to ratify the appointment of / / / / / /
CLASS II NOMINEES: William V. Botts and Barbara M. Karmel Coopers & Lybrand L.L.P. as
CLASS III NOMINEES: Amihai Ben-David and Larry J. Gerhard Summit Design, Inc.'s independent
accountants for the fiscal year
FOR WITHHELD ending December 31, 1997.
/ / / /
3. In their discretion, the Proxies are authorized to vote or
otherwise represent the shares on any and all such other
/ / business which may properly come before the meeting or any
------------------------------------------ adjournment thereof.
For all nominees except as noted above
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
Please sign exactly as your name appears on your stock certificate.
If the stock is held by joint tenants or as community property,
both should sign. Executors, administrators, trustees, guardians,
attorneys and corporate officers should insert their titles.
Signature ____________________________________ Date ___________ Signature ____________________________________ Date ___________
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS.
1. Proposal to elect Steven P. Erwin as the Class I director to serve for a
term of three years.
FOR WITHHELD MARK HERE
/ / / / FOR ADDRESS / /
CHANGE AND
NOTE BELOW
FOR AGAINST ABSTAIN
2. Proposal to amend Summit Design, Inc.'s / / / / / /
1994 Stock Plan and to approve the
material terms of such plan as described
in the accompanying Proxy Statement.
FOR AGAINST ABSTAIN
3. Proposal to amend Summit Design, Inc.'s / / / / / /
1996 Employee Stock Purchase Plan as
described in the accompanying Proxy
Statement.
FOR AGAINST ABSTAIN
4. Proposed to ratify the appointment of / / / / / /
Coopers & Lybrand L.L.P. as Summit
Design Inc.'s independent accountants
for the fiscal year ending December 31,
1998.
In their discretion, the Proxies are authorized to vote or otherwise
represent the shares on any and all such other business which may properly
come before the meeting or any adjournment thereof.
Please sign exactly as your name appears on your stock certificate. If the
stock is held by joint tenants or as community property, both should sign.
Executors, administrators, trustees, guardians, attorneys and corporate
officers should insert their titles.
Signature:_____________________________________________ Date:_______________
Signature:_____________________________________________ Date:_______________