SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities EXCHANGE ACT OFExchange Act of 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SUMMIT DESIGN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
SUMMIT DESIGN, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
INNOVEDA, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
- --------------------------------------------------------------------------------
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
[LOGO]INNOVEDA, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
To the Stockholders:
Notice is hereby givenTHURSDAY, JULY 13, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Summit Design,Innoveda,
Inc., a Delaware corporation (the "Company"), will be held on Wednesday, May 26, 1999Thursday, July 13,
2000, at 2:10:00 p.m.a.m., local time, at the Embassy Suites, 9000 S.W. Washington Square Road, Tigard, Oregon 97223,offices of Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts (the "Meeting") for the purposes of considering
and voting upon the following purposes:matters:
1. To elect twoone Class II directors to serveIII Director for a term ofthe ensuing three years.years and until his
successor is duly elected and qualified;
2. To approve an amendment to the Company's 1994 Stock PlanAmended and Restated Certificate of
Incorporation, as amended, to increase the authorized number of shares reserved for issuance thereunder
by 625,000 shares.of
Common Stock of the Company from 50,000,000 to 100,000,000;
3. To approve an amendment to the Company's 1996Amended and Restated 2000 Stock Incentive Plan and
the authorization of an initial 4,500,000 shares of the Company's Common
Stock for issuance under such plan, plus an additional 2,000,000 shares of
the Company's Common Stock each year of the plan term;
4. To approve the Company's 2000 Employee Stock Purchase Plan to increaseand the
numberauthorization of 700,000 shares reservedof the Company's Common Stock for issuance
thereunder by 150,000 shares.
4. To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for the fiscal year
ending December 31, 1999.under such plan; and
5. To transact such other business as may properly come before the meeting orMeeting and
any adjournment or adjournments thereof.
The foregoing itemsBoard of Directors has no knowledge of any other business are more fully described into be
transacted at the Proxy
Statement accompanying this NoticeMeeting.
The Board of Annual Meeting of Stockholders. Only
stockholders of record atDirectors has fixed the close of business on April 12, 1999 areFriday, May 26,
2000 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting and at any adjournment or adjournments thereof.
The stock transfer books of the Company remain open.
A copy of the Company's Annual Meeting.Report for the year ended December 31, 1999,
which contains consolidated financial statements and other information of
interest to stockholders, accompanies this Notice and the enclosed Proxy
Statement.
All stockholders are cordially invited to attend the Annual MeetingMeeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Peter T. Johnson,
SECRETARY
Marlboro, Massachusetts
June 9, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY CARD IS MAILED IN THE UNITED STATES.
INNOVEDA, INC.
293 BOSTON POST ROAD WEST
MARLBORO, MASSACHUSETTS 01752
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, JULY 13, 2000
This Proxy Statement is furnished in person. However, to assure your representation atconnection with 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 Ordersolicitation of
proxies of the Board of Directors /s/ C. Albert Koob
----------------------------------
C. Albert Koob
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY
Beaverton, Oregon
April 30, 1999
- --------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU PLANT TO ATTEND THE MEETING, PLEASE COMPLETE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOP PROVIDED. IF YOU ATTEND THE MEETING,
YOU MAY VOTE IN PERSON, EVEN IF YOU RETURN A PROXY.
- --------------------------------------------------------------------------------
SUMMIT DESIGN, INC.
-----------------------------------
PROXY STATEMENT
FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
-----------------------------------
PROCEDURAL MATTERS
GENERAL
The enclosed Proxy is solicited on behalf(the "Board of Directors" or the Board"Board") of
Directors of
Summit Design,Innoveda, Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting of Stockholders (the "Annual Meeting") to
be held on Wednesday,
May 26, 1999Thursday, July 13, 2000 at 2:10:00 p.m.a.m., local time, at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts and at any adjournment
or adjournments thereof for(the "Meeting"). All proxies will be voted in accordance
with the purposesinstructions of the stockholder. If no choice is specified, the proxies
will be voted in favor of the matters set forth herein and in the accompanying Notice of Annual Meeting
accompanying this Proxy Statement. Any proxy may be revoked by a stockholder at
any time before its exercise by delivery of Stockholders. The Annuala written revocation or a
subsequently dated proxy to the Secretary of the Company or by voting in person
at the Meeting. Attendance at the Meeting will not itself be helddeemed to revoke a
proxy unless the stockholder gives affirmative notice at the Embassy Suites, 9000 S.W.
Washington Square Road, Tigard, Oregon 97223. The telephone number atMeeting that location is (503) 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 Statementthe
stockholder intends to revoke the proxy and vote in person.
On May 26, 2000, the enclosed proxy card were mailed on or
about April 30, 1999, together with the Company's 1998 Annual Report to
Stockholders, to allrecord date for determination of stockholders entitled
to vote at the Annual Meeting.
RECORD DATE
Stockholders of record at the close of business on April 12, 1999Meeting (the "Record Date") are, there were outstanding and entitled
to noticevote an aggregate of and to vote at the Annual Meeting. As
of the Record Date, 15,611,77532,528,321 shares of the Company's common stock, $0.01 par value (the "Commonper
share, of the Company ("Common Stock"). Each share entitles the record holder to
one vote on each of the matters to be voted upon at the Meeting.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1999 ARE
FIRST BEING SENT OR GIVEN TO STOCKHOLDERS ON OR ABOUT JUNE 9, 2000. INCLUDED IN
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS IS A COPY OF ITS ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WITHOUT EXHIBITS. THE COMPANY WILL, UPON WRITTEN REQUEST OF
ANY STOCKHOLDER, FURNISH UPON PAYMENT OF AN APPROPRIATE PROCESSING FEE COPIES OF
THE EXHIBITS TO ITS ANNUAL REPORT ON FORM 10-K. PLEASE ADDRESS ALL SUCH REQUESTS
TO INNOVEDA, INC., 293 BOSTON POST ROAD WEST, MARLBORO, MASSACHUSETTS 01752,
ATTENTION: PETER T. JOHNSON. EXHIBITS WILL BE PROVIDED UPON WRITTEN REQUEST AND
PAYMENT OF AN APPROPRIATE PROCESSING FEE.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 1999 with
respect to the beneficial ownership of the Common Stock by (i) each person or
entity known to the Company to beneficially own more than 5% of the outstanding
shares of the Common Stock, (ii) each director of the Company, (iii) the
Company's Chief Executive Officer as of December 31, 1999, (iv) the Company's
former Chief Executive Officer who was not serving in such capacity as of
December 31, 1999, (v) the Company's other four most highly compensated
executive officers who were serving as executive officers of the
Company as of December 31, 1999 and (vi) all directors and executive officers of
the Company, as a group.
NUMBER OF SHARES
BENEFICIALLY OWNED(1) PERCENT OF TOTAL(2)
--------------------- -------------------
Keith B. Geeslin(3)....................................... 9,509,920 29.6%
The Sprout Group
300 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
The Sprout Group(4)....................................... 9,509,920 29.6%
300 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Synopsys, Inc(5).......................................... 2,694,514 8.4%
700 East Middlefield Road
Mountain View, CA 93404
William J. Herman......................................... 860,046 2.7%
Richard G. Lucier......................................... 679,280 2.1%
Richard Davenport......................................... 376,082 1.2%
Gary L. Kiaski(6)......................................... 180,839 *
Kevin P. O'Brien.......................................... 180,839 *
Peter T. Johnson.......................................... 142,648 *
Guy Moshe(7).............................................. 81,075 *
William Botts(8).......................................... 62,500 *
Eric Benhayoun(9)......................................... 52,445 *
C. Albert Koob(10)........................................ 48,852 *
Paula J. Cassidy.......................................... 45,210 *
Steven P. Erwin(11)....................................... 25,000 *
Lorne J. Cooper........................................... 0 0.0%
Larry J. Gerhard(12)...................................... 0 0.0%
All directors and executive officers as a group 11,767,357 36.3%
(11 persons) (13).......................................
- ------------------------
* Less than 1%.
(1) Unless otherwise noted, reflects beneficial ownership as of December 31,
1999. Includes shares of the capital stock of Viewlogic Systems, Inc.,
beneficially owned as of December 31, 1999, based upon a conversion ratio of
0.67928 shares of the Common Stock for each share of Viewlogic's capital
stock. On March 23, 2000, all outstanding shares of Viewlogic capital stock
were converted into shares of Common Stock at such conversion ratio in
connection with the merger of Viewlogic with a wholly owned subsidiary of
the Company. The inclusion herein of any shares of Common Stock deemed
beneficially owned does not constitute an admission of beneficial ownership
of those shares. Unless otherwise indicated, each person listed above has
sole voting and investment power with respect to the shares listed. For
purposes of this table, each person is deemed to beneficially own any shares
subject to stock options, warrants or other securities convertible into
Common Stock, held by such person which are currently exercisable (or
convertible) or exercisable (or convertible) within 60 days after December
31, 1999.
(2) Number of shares deemed outstanding includes 32,095,470 shares issued and
outstanding as of December 31, 1999 (including 16,280,983 shares
representing the outstanding shares of capital stock of Viewlogic Systems,
Inc. on an as converted basis, based upon a conversion ratio of 0.67928
shares of Common Stock for each share of Viewlogic's capital stock) plus any
shares subject to stock options, warrants or other securities convertible
into Common Stock, held by the referenced beneficial owner(s).
2
(3) Consists of 9,509,920 shares beneficially owned by The Sprout Group, as more
fully described in note (4) below. Mr. Geeslin is a general partner of The
Sprout Group. Mr. Geeslin disclaims beneficial ownership of all shares owned
by The Sprout Group.
(4) Consists of 771,715 shares owned by DLJ ESC II, L.P., 6,440,804 shares owned
by Sprout Capital VIII, L.P., 1,755,195 shares owned by Sprout Growth II,
L.P., 29,273 shares owned by Sprout CEO Fund, L.P., 185,918 shares owned by
DLJ Capital Corp., and 386,448 shares owned by Sprout Venture Capital, L.P.
(5) On March 31, 2000, Synopsys, Inc. filed a Schedule 13G with the Securities
and Exchange Commission reporting beneficial ownership of 2,694,514 shares
of Common Stock. Such information is reported herein in reliance upon such
filing.
(6) Consists of 180,839 shares issuable upon the exercise of stock options held
by Mr. Kiaski which are exercisable within the 60 day period following
December 31, 1999.
(7) Includes 81,075 shares issuable upon the exercise of stock options held by
Mr. Moshe which are exercisable within the 60 day period following December
31, 1999.
(8) Includes 40,000 shares issuable upon the exercise of stock options held by
Mr. Botts which are exercisable within the 60 day period following December
31, 1999.
(9) Includes 49,936 shares issuable upon the exercise of stock options held by
Mr. Benhayoun which are exercisable within the 60 day period following
December 31, 1999.
(10) Consists of 48,852 shares issuable upon the exercise of stock options held
by Mr. Koob which are exercisable within the 60 day period following
December 31, 1999.
(11) Includes 20,000 shares issuable upon the exercise of stock options held by
Mr. Erwin which are exercisable within the 60 day period following December
31, 1999.
(12) As of November 1999.
(13) Includes 321,914 shares issuable upon the exercise of stock options held by
such officers and directors which are exercisable within the 60 day period
following December 31, 1999.
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to be votedvote at the AnnualMeeting, shall constitute a quorum for
the transaction of business at the 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 $3.00 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 shareShares of Common Stock on allpresent in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Annual Meeting.
Stockholders do not haveThe affirmative vote of the rightholders of a plurality of the votes cast by the
stockholders entitled to cumulate their votes invote at the Meeting is required for 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,affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitledoutstanding on the Record Date is required to approve the amendment
to the Company's Amended and Restated Certificate of Incorporation, as amended.
The affirmative vote of the holders of a majority of the shares of Common Stock
present or represented by proxy and voting on the matter is required to approve
the 2000 Stock Incentive Plan and the 2000 Employee Stock Purchase Plan.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote shall constitutesuch shares as to a quorum for the transactionparticular
matter, will not be counted as votes in favor of business. The Company
intends to includesuch matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and broker non-votes as present for purposes"broker non-votes" will have no effect on the voting 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 2000 Annual Meeting of
Stockholders must be received by the Company no later than December 31, 1999 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, which requires the affirmative vote of a plurality of the
votes cast or businessshares voting on a matter. However, because shares which abstain
and shares represented by "broker non-votes" are nonetheless outstanding shares,
abstentions and "broker non-votes" will have the same effect as a vote against
the proposed amendment to be brought before the
annual meeting must be received not later than
the close3
Company's Amended and Restated Certificate of businessIncorporation, as amended.
Abstentions and "broker non-votes" will have no effect on the tenth day followingvoting on the
day on which such noticeapproval of the date2000 Stock Incentive Plan and the 2000 Employee Stock Purchase
Plan, each of which requires the affirmative vote of a majority of the annual meeting was mailedvotes
cast or such public disclosure was made. If
a stockholder who has notifiedshares voting on 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.
-2-
matter.
PROPOSAL NO. 1
ELECTION1--ELECTION OF CLASS II DIRECTORS
DIRECTORS AND NOMINEES FOR CLASS II DIRECTORS
The Company'sCompany has a classified Board of Directors currently consistsconsisting of five members who
are divided into three classes serving staggered terms.two Class I
consists ofdirectors, two Class II directors and one director, andClass III director. The Class I, Class
II and Class III consistdirectors will serve until the annual meeting of twostockholders
to be held in 2001, 2002 and 2000, respectively, and until their respective
successors are duly elected and qualified. At each annual meeting of
stockholders, directors each. Twoare elected for a full term of three years to succeed
those whose terms are expiring. The persons named in the enclosed proxy will
vote to elect, William J. Herman as a Class II
directorsIII director, to serve for the
ensuing three years and until his successor is duly elected and qualified,
unless the proxy is marked otherwise. Mr. Herman is currently a director of the
Company.
The Class III director will be elected atto hold office until the Annual Meeting2003 annual
meeting of stockholders and until his successor is duly elected and qualified.
Mr. Herman has indicated his willingness to serve, if elected; however, if Mr.
Herman should be unable to serve, the person acting under the proxy may vote the
proxy for termsa substitute nominee designated by the Board of three years.Directors. The Board
of Directors has selected the two nominees listed below to be
re-elected at the Annual Meeting as the Class II directors. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for these
nominees. In the event that a nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy; however, the Company has no reason to believe that the listed nomineesMr. Herman will be unable or decline to serve as a director. The directors elected at this
Annual Meeting will serve until the term of that director's class expires in
2002 or until such director's successor has been elected and qualified.
The namesif
elected.
For each member of the nomineesBoard of Directors, including the nominee for
election as the Class II directorsIII director, there follows information given by each
concerning his principal occupation and business experience for at least the
past five years, the names of eachother public reporting companies of which he
serves as a director and his age and length of service as a director of the
other directors of the Company whose term of office continues after the
Annual Meeting, their ages as of April 12, 1999, and certain other related
information are set forth below.Company. There are no family relationships betweenamong any of the directors, the
nominee for Class III director and the executive officer orofficers of the nominees.
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------------------------------------ ----- --------------------------------
NOMINEES FOR CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 1999
William V. Botts ................................................. 63 Director
Barbara M. Karmel, Ph.D........................................... 66 Director
CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2000
Amihai Ben-David ................................................. 49 Director
Larry J. Gerhard.................................................. 58 Chairman of the Board and Chief
Executive Officer
CLASS I DIRECTOR WHOSE TERM EXPIRES IN 2001
Steven P. Erwin................................................... 55Company.
NOMINEE FOR CLASS III DIRECTOR
WILLIAM J. HERMAN, 40, has served as the Company's President and Chief
Executive Officer and a director since March 2000. From October 1998 to March
2000, Mr. Herman served as, Director,
Steven P. ErwinPresident and Chief Executive Officer and
a director of Viewlogic Systems, Inc., an electronic design automation company.
From December 1997 to September 1998, Mr. Herman served as President of the
Viewlogic Systems Group of Synopsys, Inc., an electronic design automation
company. From March 1995 to November 1997, Mr. Herman served in various senior
management capacities, most recently as President and Chief Executive Officer,
at the former Viewlogic Systems, Inc., a larger electronic design automation
company which Mr. Herman co-founded in 1984. From 1994 to February 1995, Mr.
Herman served as President of Silerity, Inc., a computer-aided engineering
software company.
THE BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF WILLIAM J. HERMAN AS A
CLASS III DIRECTOR TO HOLD OFFICE UNTIL THE 2003 ANNUAL MEETING OF STOCKHOLDERS
AND UNTIL HIS SUCCESSOR IS ELECTED AND QUALIFIED, IS IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR MR. HERMAN AS A
DIRECTOR.
CLASS I DIRECTORS (TERMS EXPIRE AT 2001 ANNUAL MEETING)
LORNE J. COOPER, 42, has served as a director of the Company since March
2000. Mr. Cooper was a director of Viewlogic from December 1999 to March 2000.
Since November 1994, Mr. Cooper has served as the President of Sente, Inc., a
software company that develops and markets tools for electronic design
automation.
STEVEN P. ERWIN, 56, has served as a director of the Company since May 1997.
Mr. Erwin has served as Executive Vice President and Chief Financial Officer of
Foundation Health Systems, Inc., a managed health care company, since
March 1998. From 1994 to July 1997, Mr. Erwin was Executive Vice President and
Chief Financial Officer of U.S. Bancorp, Portland, Oregon from July 1994 to July 1997. Prior to that time, Mr. Erwin
served as Treasurer of BayBanks, Inc., Boston, Massachusetts from November 1987
until July 1994.
WilliamOregon.
4
CLASS II DIRECTORS (TERMS EXPIRE AT 2002 ANNUAL MEETING)
WILLIAM V. Botts, whoBOTTS, 64, has served as a director of the Company since May
1997, will stand for re-election at the Annual Meeting.1997. Mr. Botts has beenserved as Interim Chief Executive Officer and Chairman of the
Board of the Company from July 1999 to March 2000. From August 1997 to July
1999, Mr. Botts was the Interim Chief Executive Officer of California
Lifestyles, Inc., a footwear company, since August 1997.company. From March 1996 to March 1997, Mr. Botts
served as Chief Executive Officer of Hard Candy, Inc., a cosmetics company, from March 1996 to March 1997.company. From June
1993 to March 1996, Mr. Botts was the owner and President of WV Associates, a
consulting firm for mergers,business combinations, 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,
-3-
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.
Barbara M. Karmel, Ph.D., whoKEITH B. GEESLIN, 47, has served as a director of the Company since May 1997, will stand for re-election at the Annual Meeting. 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-Small Business for the Portland Metropolitan Chamber of Commerce and a
member of the board of the Academy of Management.
Amihai Ben-David has served asMarch
2000. Mr. Geeslin was 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,Viewlogic from October 1998 to March 2000.
Since July 1984, Mr. Ben-David was Chairman of the Board of SEE Technologies.
Larry J. GerhardGeeslin has served in various capacities, most recently as
Chief Executive Officer anda general partner, of The Sprout Group, a venture capital firm. In addition, Mr.
Geeslin is a general or limited partner in a series of investment funds
associated with The Sprout Group, a division of DLJ Capital Corporation, which
is a subsidiary of Donaldson, Lufkin & Jenrette. Mr. Geeslin is also a director
of the Company since January 1993GlobeSpan, Inc., Paradyne Corp., Rhythms NetConnections Inc., and was elected Chairman of the Board in May
1996. Mr. Gerhard was President of the Company from January 1993 to February
1999. The Company currently expects that Mr. Gerhard will retire on or before
December 31, 1999, possibly as soon as this summer. However, the exact timing of
his retirement will depend on developments at the Company as well as personal
considerations. From November 1991 to November 1992, Mr. Gerhard was the
President and Chief Executive Officer of Enterprise Communications and ComputingSDL, 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 MEETINGSOF DIRECTORS AND COMMITTEESCOMMITTEE MEETINGS
The Board of Directors of the Company held a total of 20 meetingsmet 25 times during fiscal 1998. Each incumbent director1999. All directors 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 uponon
which he or she served. Certain
matters were approved bythey served while serving as a director of the Board of Directors and its committees by unanimous
written consent.Company.
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 Mr. Erwin and 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 Company's control procedures and
personnel and (vi) reviewing and evaluating the Company's accounting principles
and its system ofand internal accounting controls. The Audit Committee held 2 meetingsone
meeting during 1999. Currently, the Audit Committee consists of Messrs. Botts
and Erwin. Mr. Erwin and Ms. Barbara Karmel served on the Audit Committee
throughout the fiscal 1998.year ended December 31, 1999.
The Board of Directors has a Compensation Committee which currently consists of Mr. Ben-David
and Mr. Botts, is responsible for
(i) reviewingrecruiting and approving the compensation and benefits for the Company's
officers and other employees,directors, (ii) administering the Company's stock option plans and
(iii) making recommendations to the Board of Directors regarding such matters.
The Compensation Committee held 7six meetings during fiscal 1998.
-4-
1999. Currently, the
Compensation Committee consists of Messrs. Geeslin and Erwin. Amihai Ben-David
served on the Compensation Committee throughout the year ended December 31,
1999. During that year, Mr. Botts also served on the Compensation Committee
until he began serving as the Company's Interim Chief Executive Officer in July
1999.
DIRECTOR COMPENSATION
AllIn 1999, all non-employee directors receivereceived $20,000 per year and $1,000 per
meeting (excluding committee meetings and telephonic board meetings) as compensation for their services as
members of the Board of Directors. During
1998, directors received a per meeting fee for attending the five non-telephonic
board meetings. Members arewere also reimbursed for all travel
and related expenses incurred in connection with attending Board and committee
meetings. In addition, non-employee directors arewere eligible to receive option
grants under the Company's 1996 Director Option Plan, (the "Director Plan"), under which 150,000 shares
of Common Stock have been reserved for issuance. The Director Plan provides for
an automatic grant of an option to purchase 10,000 shares of Common Stock on the
date on which a person first becomes a non-employee director. Thereafter, he or
she will automatically be granted an additional option to purchase 10,000 shares
on the date of the annual meeting of each subsequent year, provided he or she is
then a non-employeenon-
5
employee director and provided further, that on such date he or she has served
on the Board for at least six months. The first option granted to a director
pursuant to the Director Plan vests twelve months after the date of grant.grant,
except for Mr. Erwin's which vests one business day prior to the Company's first
annual meeting after the grant date. All subsequent options vest and become
exercisable on the earlier of (i) 12 months after the date of the grant or
(ii) one business day prior to the date of the Company's first annual meeting
after the grant date. Vesting of the options is subject to the optionee
continuing to serve as a director on the vesting date. Mr.Amihai Ben-David, Mr.William
V. Botts, Mr.Steven P. Erwin and Dr.Barbara M. Karmel were each granted 10,000 options
in May 19981999 at an exercise price of $14.50$2.50 per share. Mr. Ben-David, Mr.As of the date of such
grants each such individual was a non-employee director of the Company who had
served on the Board for at least six months.
Beginning in March 2000, all non-employee directors will receive
compensation for their services as directors of the Company as follows: (i) an
annual cash retainer of $7,500 and (ii) $1,000 for each day of each meeting of
the Board or any committee thereof. In addition, and in lieu of further grants
of stock options under the Company's 1996 Director Option Plan, Messrs. Botts,
Mr.Cooper, Erwin and Dr. Karmel (subjectGeeslin were each granted a stock option in April 2000 to
the re-electionpurchase 50,000 shares of Mr. Botts and Dr.
Karmel) are eligibleCommon Stock at an exercise price of $4.85 per share.
Each new non-employee director will be granted a stock option to receive future option grants pursuant to the Director
Plan.
REQUIRED VOTE
The two nominees for Class II directors receiving the highest numberpurchase 50,000
shares of affirmative votes of the shares entitled to be voted shall beCommon Stock upon first being elected to the Board of Directors. Votes withheld are countedAll
of these options vest in equal monthly installments over the 48 month period
succeeding the date of grant. If a director is involuntarily removed from the
Board following a change in control of the Company, the unvested portion of
these options immediately becomes fully vested. Directors continue to be
reimbursed for purposesall reasonable travel expenses related to attending Board and
committee meetings.
EXECUTIVE OFFICERS
For each executive officer of determining the presenceCompany who is not a director of the
Company, there follows information given by each concerning his or absenceher principal
occupation and business experience for at least the last five years and his or
her age and length of service as an executive officer of the Company.
PAULA J. CASSIDY, 31, has served as the Company's Vice President, Human
Resources since March 2000. Ms. Cassidy served as the Vice President, Human
Resources of Viewlogic from October 1998 to March 2000. From December 1997 to
September 1998, Ms. Cassidy served as Vice President of Human Resources of the
Viewlogic Systems Group of Synopsys. From 1989 to November 1997, Ms. Cassidy
served in various capacities, most recently as Manager, Human Resources, at the
former Viewlogic Systems, Inc.
PETER T. JOHNSON, 52, has served as the Company's Vice President, Business
Development, Chief Legal Officer and Secretary since March 2000. Mr. Johnson
served as the Vice President, Business Development and Chief Legal Officer of
Viewlogic from October 1998 to March 2000 and as Secretary from May 1999 to
March 2000. From May 1998 to October 1998, Mr. Johnson served as Vice President,
Chief Legal Officer and Secretary of Avid Technology, Inc., a digital media
software developer. From December 1997 to April 1998, Mr. Johnson served as Vice
President and General Counsel of the Viewlogic Systems Group of Synopsys. From
June 1995 to November 1997, Mr. Johnson served as Vice President, General
Counsel and Secretary of the former Viewlogic Systems, Inc. From 1993 to
February 1995, Mr. Johnson served as General Counsel and Secretary of Phoenix
Technologies Ltd., a software development firm.
GARY L. KIASKI, 45, has served as the Company's Vice President, Worldwide
Sales since March 2000. Mr. Kiaski served as the Vice President, Worldwide Sales
of Viewlogic from October 1998 to March 2000. From December 1997 to September
1998, Mr. Kiaski served as Vice President of Worldwide Sales of the Viewlogic
Systems Group of Synopsys. From 1988 to November 1997, Mr. Kiaski served in
various capacities, most recently as Vice President, Western Region Sales, at
the former Viewlogic Systems, Inc.
6
RICHARD G. LUCIER, 40, has served as the Company's Executive Vice President
and Chief Operating Officer since March 2000. Mr. Lucier served as the Executive
Vice President and Chief Operating Officer of Viewlogic from October 1998 to
March 2000 and served as a director of Viewlogic from October 1998 to December
1999. From December 1997 to September 1998, Mr. Lucier served as Senior Vice
President of Engineering and Marketing of the Viewlogic Systems Group of
Synopsys. From 1986 to November 1997, Mr. Lucier served in various capacities,
most recently as Group Vice President of the Systems Group, at the former
Viewlogic Systems, Inc.
GUY MOSHE, 42, has served as the Company's Senior Vice President and General
Manager of Innoveda Israel since March 2000. Mr. Moshe served as Chief
Technology Officer and President of Summit Design (EDA), Ltd. from
February 1999 to March 2000 and as Vice President, General Manager and Chief
Operating Officer of the Design Solutions Division of the Company from
September 1997 to March 2000. From May 1996 to September 1997 Mr. Moshe served
as General Manager of Summit Design (EDA) Ltd. Mr. Moshe served as the Vice
President of Product Marketing of the Company from 1994 to May 1996.
KEVIN P. O'BRIEN, 43, has served as the Company's Vice President, Finance
and Chief Financial Officer since March 2000. Mr. O'Brien served as the Vice
President, Finance and Chief Financial Officer of Viewlogic from October 1998 to
March 2000 and as Secretary from October 1998 to May 1999. From April 1998 to
September 1998, Mr. O'Brien served as Vice President of Finance of the Viewlogic
Systems Group of Synopsys. From September 1997 to March 1998, Mr. O'Brien served
as an independent management consultant. From October 1995 to August 1997, Mr.
O'Brien served as Chief Financial Officer at SmarTel Communications, Inc., a
telecommunications company. From 1989 to June 1995 Mr. O'Brien served in various
capacities, most recently as Vice President, Finance and Chief Financial
Officer, at Easel Corporation, a client server software developer. Mr. O'Brien
is a certified public accountant.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of (i) the Company's Chief Executive Officer as of December 31,
1999, (ii) the Company's former Chief Executive Officer who was not serving in
such capacity as of December 31, 1999 and (iii) the Company's other four most
highly compensated executive officers who were serving as executive officers of
the Company as of December 31, 1999 (the "Named Executive Officers"):
7
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM AWARDS
--------------------------------------------- -------------------------------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($)(2) BONUS($)(3) COMPENSATION($) UNDERLYING OPTIONS COMPENSATION($)
- ------------------------------ -------- ------------ ----------- ---------------- ------------------ ----------------
William V. Botts (4)........... 1999 112,500 60,000 20,000(5) 30,000 --
Chairman of the Board and 1998 -- -- 25,000(5) 10,000 --
Chief Executive Officer 1997 -- -- 15,865(5) 10,000 --
Larry J. Gerhard(6)............ 1999 200,000 -- 12,000(7) -- 200,000(8)
Former President and Chief 1998 400,000 -- 12,000(7) 75,000 4,333(9)
Executive Officer 1997 341,667 160,000 5,000(7) 75,000 3,575(10)
Richard Davenport(11).......... 1999 230,500 -- 9,000(7) -- --
President and 1998 141,000 -- 9,000(7) -- --
Chief-Operating Officer 1997 37,510 -- 2,250(7) -- --
C. Albert Koob(12)............. 1999 160,000 144,500(13) 7,214(7) -- --
Vice President, Finance, 1998 160,000 30,000 7,214(7) 10,000 2,425(14)
Chief Financial Officer 1997 143,333 64,000 3,750(7) 248,000 2,350(14)
and Secretary
Guy Moshe...................... 1999 180,000 -- 12,804(7) 256,681 --
Chief Technology Officer 1998 170,000 30,000 12,804(7) 1,755 --
and President of Summit 1997 113,392 69,810(15) 10,515(7) 34,152 --
Design (EDA), Ltd.
Eric Benhayoun................. 1999 153,860 39,174(16) -- 75,000 --
Vice President, General 1998 154,890 57,109(16) -- -- --
Manager--European Operations 1997 120,252 26,945(16) -- 32,500 --
- ------------------------------
(1) Unless otherwise noted, lists the principal position with the Company as of
December 31, 1999.
(2) Amounts shown include cash and noncash compensation earned and received by
executive officers as well as amounts earned but deferred at the election of
those officers.
(3) Consists of annual incentive bonuses.
(4) Mr. Botts served as an executive officer of the Company from July 1999 to
March 2000.
(5) Consists of director's fee.
(6) Mr. Gerhard served as an executive officer of the Company from January 1993
to June 1999.
(7) Consists of car allowance.
(8) Consists of severance payments.
(9) Consists of the Company's matching contribution to Mr. Gerhard's 401(k) plan
in the amount of $2,500 and medical insurance premiums in the amount of
$1,833.
(10) Consists of the Company's matching contribution to Mr. Gerhard's 401(k)
plan in the amount of $2,375 and medical insurance premiums in the amount of
$1,200.
(11) Mr. Davenport served as an executive officer of the Company from September
1997 to February 2000.
(12) Mr. Koob served as an executive officer of the Company from October 1995 to
January 2000.
(13) Consists of a quorum for$100,000 retention bonus and a $44,500 annual incentive
bonus.
(14) Consists of the transactionCompany's matching contribution to Mr. Koob's 401(k) plan.
(15) Consists of business, but they
otherwise have no legal effect under Delaware law.$64,000 of annual incentive bonus and $5,810 of commissions.
(16) Consists of commissions.
8
OPTION GRANTS, EXERCISES AND YEAR-END VALUES
The following table sets forth the stock option grants made by the Company
to each of the Named Executive Officers during the year ended December 31, 1999:
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
-------------------------------------------------- RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(4)
OPTIONS EMPLOYEES IN PRICE($/ EXPIRATION ---------------------
GRANTED(1) 1999(2) SHARE)(3) DATE 5%($) 10%($)
---------- ------------ --------- ---------- --------- ---------
William V. Botts........................ 10,000 0.5 2.50 5/26/09 15,722 39,844
20,000 1.1 2.56 7/26/09 32,199 81,600
Larry J. Gerhard........................ -- -- -- -- -- --
Richard Davenport....................... -- -- -- -- -- --
C. Albert Koob.......................... -- -- -- -- -- --
Guy Moshe............................... 100,000 5.3 3.44 2/25/09 216,340 548,247
2,892 0.2 3.00 4/16/09 5,456 13,827
150,000 8.0 3.00 9/16/09 283,003 717,184
3,789 0.2 2.38 10/15/99 5,671 14,371
Eric Benhayoun.......................... 75,000 4.0 3.44 10/25/09 162,255 411,186
- --------------------------------------------------------------------------------
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ELECTION OF MR. BOTTS AND DR. KARMEL.
- --------------------------------------------------------------------------------
-5-
PROPOSAL NO. 2
AMENDMENT TO 1994 STOCK PLAN
GENERAL
The------------------------
(1) Options granted in 1999 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 Company's 1994 Stock Plan, the
administrator retains discretion, subject to plan limits, to modify the
terms of outstanding options and to reprice outstanding options. The options
have a term of 10 years, subject to earlier termination in certain
situations related to termination of employment.
(2) Based on a total of 1,879,360 options granted to all employees and
consultants during 1999.
(3) Equal to the per share market value of the underlying shares of Common Stock
on the date of grant.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will depend
on the future performance of the Common Stock and the date on which the
options are exercised. No gain to the optionees is possible without an
appreciation in stock price, which will benefit all stockholders
commensurately.
9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
The following table sets forth, on an aggregated basis, the exercise of
stock options during the year ended December 31, 1999 by each of the Named
Executive Officers and the year-end value of unexercised options held by such
officers:
AGGREGATED OPTION EXERCISES AND OPTION VALUES IN YEAR ENDED
DECEMBER 31, 1999
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISABLE IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT YEAR END YEAR END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
William V. Botts............... 0 0 40,000 10,000 18,800 10,000
Larry J. Gerhard............... 0 0 0 0 0 0
Richard Davenport.............. 0 0 0 0 0 0
C. Albert Koob................. 15,000 26,250 47,749 20,251 26,250 0
Guy Moshe...................... 0 0 81,075 225,752 8,190 78,500
Eric Benhayoun................. 0 0 38,436 80,564 1,125 23,500
- ------------------------
(1) Represents the difference between the aggregate fair market value of the
underlying shares of Common Stock on the date of exercise and the aggregate
exercise price.
(2) Based on the aggregate fair market value of the underlying shares of Common
Stock on December 31, 1999 ($3.50 per share), less the aggregate option
exercise price.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee was adopted byestablished in August 1994 and is responsible
for (i) recruiting and approving the compensation and benefits for the Company's
officers and directors, (ii) administering the Company's stock option plans and
(iii) making recommendations to the Board of Directors and
approved byregarding such matters.
The Compensation Committee is currently comprised of two directors who are not
employees of the Company. The Committee also administers the Company's stockholders in January 1994 and provides for the
granting to employees (including officers and employee directors)stock
plans. Each member of the CompanyCompensation Committee is a "non-employee director"
within the meaning of incentive stock optionsRule 16b-3 under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"), and an "outside director" within the meaning of
Section 422162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as
amended (the "Code"). This report addresses the Company's compensation policies
for 1999 and how they affected the Company's former Chief Executive Officers and
the Company's other executive officers, including the Named Executive Officers.
COMPENSATION PHILOSOPHY AND POLICY
The policy of the Committee is to attract and retain executive officers and
employees through the payment of competitive base salaries and to encourage and
reward performance through bonuses and stock ownership. The objectives of the
Compensation Committee are to:
- attract, retain and motivate highly qualified executive officers and
employees who contribute to the long-term success of the Company;
- align the compensation of executive officers with business objectives and
performance; and
- align incentives for executive officers with the interests of stockholders
in maximizing value.
10
ELEMENTS OF COMPENSATION
The principal components of compensation for the grantingCompany's executive
officers are cash components, in the form of salary and variable pay, and
non-cash compensation in the form of equity compensation.
CASH COMPENSATION
Cash compensation consists of (i) base salary which is determined 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 employeesan established percentage of base salary, subject to meeting
all or a portion of targeted objectives.
EQUITY COMPENSATION
Ownership of Common Stock is a key element of executive compensation.
Executive officers and consultantsother employees of the Company are eligible to
participate in the Company's 1994 Stock Plan and the Company's existing stock
plans, generally, and if each is approved by the stockholders at the Meeting,
will be eligible to participate in the Company's 2000 Stock Incentive Plan and
the Company's 2000 Employee Stock Purchase Plan. The 1994 Stock Plan and 2000
Stock Incentive Plan each permits the Board of nonstatutoryDirectors or the Compensation
Committee to grant stock options. A totaloptions to employees on such terms as the Board of
2,822,000Directors or the Compensation Committee may determine. The 2000 Stock Incentive
Plan also permits the Board of Directors or the Compensation Committee to grant
restricted stock to employees.
In determining the size of a stock option grant to a new executive officer
or other employee, the Compensation Committee takes into account equity
participation by comparable 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 1996 Employee Stock Purchase Plan and the 2000 Employee Stock
Purchase Plan each permits employees to acquire Common Stock through payroll
deductions and promotes broad-based equity participation through the Company.
The Committee believes that such stock plans align the interests of the
employees with the long-term interests of the stockholders.
In 1999, the Company granted options to purchase an aggregate of 476,681
shares of Common Stock to eight executive officers.
The Company also maintains a 401(k) Plan to provide retirement benefits
through tax deferred salary deductions for all its employees. In 1999, the
Company contributed to the 401(k) Plan by partially matching the employees'
contribution at a one-to-four ratio; provided, however, that the Company's
matching contribution for any employee can not exceed 1.5% of such employee's
salary.
1999 EXECUTIVE COMPENSATION AND COMPENSATION OF THE FORMER CHIEF EXECUTIVE
OFFICERS
Executive compensation for fiscal 1999 included base salary, cash bonuses
based upon achievement of corporate goals and individual performance goals,
retention bonuses and severance payments. Executive officers, like other
employees, were eligible for option grants under the 1994 Stock Incentive Plan
and to participate in the 1996 Employee Stock Purchase Plan. William V. Botts,
who served as the Company's Chairman of the Board and Chief Executive Officer on
December 31, 1999 received $112,500 as a base salary, $60,000 in the form of a
bonus payment and $20,000 as a director fee. Larry J. Gerhard, who served as the
Company's Chief Executive Officer from January 1999 until June 1999 during
fiscal 1999, received $200,000 as a base salary, $12,000 as a car allowance and
$200,000 in the
11
form of severance payments during fiscal 1999. Mr. Botts was granted options to
purchase an aggregate of 30,000 shares of Common Stock during fiscal 1999.
Mr. Gerhard was not granted any stock options during fiscal 1999.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) generally disallows a tax deduction to public companies for
compensation in excess of $1 million paid to the Company's chief executive
officer and four other highly most compensated executive officers. Certain
performance-based compensation is excluded from this limitation. The
Compensation Committee periodically reviews the potential consequences of
Section 162(m) and may structure the performance-based portion of its executive
compensation to comply with certain exemptions in Section 162(m). However, the
Compensation Committee reserves the right to use its judgment to authorize
compensation payments that do not comply with the exemptions in Section 162(m)
when the Compensation Committee believes that such payments are appropriate and
in the best interests of the stockholders, after taking into consideration
changing business conditions or the executive officer's performance. In any
event, there can be no assurance that compensation attributable to stock options
and other awards granted under the Company's stock plans will be exempt from
Section 162(m).
William V. Botts
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has a Compensation Committee which is responsible for
(i) recruiting and approving the compensation and benefits for the Company's
officers and directors, (ii) administering the Company's stock option plans and
(iii) making recommendations to the Board of Directors regarding such matters.
The Compensation Committee held six meetings during 1999. Currently, the
Compensation Committee consists of Messrs. Geeslin and Erwin. Amihai Ben-David
served on the Compensation Committee throughout the year ended December 31,
1999. During that year, Mr. Botts also served on the Compensation Committee
until he began serving as the Company's Interim Chief Executive Officer in July
1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective January 22, 1999, the Company entered into a severance agreement
with Joseph A, Masarich, former Senior Vice President-Worldwide Marketing and
Sales of the Company, in connection with the termination of his employment.
Pursuant to the agreement, in February 1999 Mr. Masarich began to receive
payments of $13,333.33 per month. The payments continued until January 2000.
The Company entered into a four-year employment agreement with Mr. Moshe on
February 25, 1999, pursuant to which he receives an annual base salary of
721,800 New Israeli Schekels (or approximately $178,222 U.S. Dollars, based on
the exchange rate on February 25, 1999), an annual bonus of up to 25% of his
base salary, and all standard benefits accorded other executives of the Company.
In the event Mr. Moshe is terminated other than for cause, he is entitled to
severance equal to his then monthly base salary plus benefits for a period of
fifteen months. In addition, the unvested portion of the stock option covering
100,000 shares of Common Stock granted to Mr. Moshe on February 25, 1999 shall
become fully exercisable.
The Company entered into an employment agreement with Mr. Davenport on
February 25, 1999 which was amended on October 24, 1999, pursuant to which he
received an annual base salary of $225,000, an annual bonus of up to 25% of his
base salary, and all standard benefits accorded other executives of the Company.
In addition, Mr. Davenport was entitled to an allowance for car expenses of $750
per month. Mr. Davenport also received a retention bonus in the amount of
$150,000 on January 1, 2000. Mr. Davenport resigned from his position as
President and Chief Operating Officer
12
effective as of February 29, 2000. Upon his resignation from the Company,
Mr. Davenport became entitled to payments of $18,750 per month plus benefits for
twelve months.
The Company entered into a four-year employment agreement with Mr. Benhayoun
on February 25, 1999 pursuant to which he receives an annual base salary of
935,000 French Francs (or approximately $157,407 U.S. Dollars, based on the
exchange rate on February 25, 1999), commissions based on sales revenue
generated, and all standard benefits accorded other executives of the Company.
In the event Mr. Benhayoun is terminated other than for cause, he is entitled to
severance equal to his then monthly base salary plus benefits for a period of
twelve months. In addition, the unvested portion of the stock option covering
75,000 shares of common stock granted to Mr. Benhayoun on February 25, 1999
shall become fully exercisable upon termination of Mr. Benhayoun without cause
or upon a sale of more than 75% of the assets of the Company or if more than 50%
of the outstanding shares of the Company have been acquired by another company.
The Company modified an employment agreement with Mr. Gerhard on February
29, 1999 which was amended April 30, 1999, pursuant to which he received an
annual base salary of $400,000 and all standard benefits accorded other
executives of the Company as well as certain additional medical benefits. In
addition, Mr. Gerhard was entitled to an allowance for car expenses of $1,000
per month. Mr. Gerhard resigned from his position as Chief Executive Officer
effective June 30, 1999. Upon termination of his employment, Mr. Gerhard became
entitled to payments of $33,333.33 per month plus benefits for twenty-four
months.
The Company entered into an employment agreement with Mr. Koob on July 30,
1999, pursuant to which he received an annual base salary of $160,000 and all
standard benefits accorded other executives of the Company. In addition, Mr.
Koob was entitled to an allowance for car expenses of $750 per month. Mr. Koob
also received a retention bonus in the amount of $100,000 on January 2, 2000.
Mr. Koob resigned from his position as Vice President, Finance, Chief Financial
Officer and Secretary of the Company effective January 31, 2000. Upon
termination of his employment, Mr. Koob became entitled to payments of
$13,333.33 per month plus benefits for twelve months.
On March 23, 2000, pursuant to that certain Agreement and Plan of
Reorganization dated as of September 16, 2000 (the "Reorganization Agreement")
by and among the Company, Hood Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of the Company ("Merger Sub"), and Viewlogic Systems,
Inc., a Delaware corporation ("Viewlogic"), Merger Sub merged with and into
Viewlogic with Viewlogic surviving as a wholly owned subsidiary of the Company
(the "Merger"). In connection with the Merger, the shares of capital stock of
Viewlogic issued and outstanding immediately prior to the effective time of the
Merger (the "Effective Time") were automatically converted into the right to
receive (i) shares of Common Stock based upon an exchange ratio of 0.67928 of a
share of Common Stock for each share of Viewlogic's capital stock (the "Exchange
Ratio"), plus (ii) cash in lieu of any fractional shares of Common Stock, based
on the then-fair market value of the Common Stock. Pursuant to the
Reorganization Agreement, at the Effective Time the outstanding shares of
Viewlogic's capital stock held by the following current executive officers of
the Company were automatically converted into shares of Common Stock as set
forth in the table below:
NUMBER OF SHARES OF COMMON STOCK INTO
NUMBER OF SHARES OF VIEWLOGIC'S WHICH SUCH SHARES OF VIEWLOGIC'S
CAPITAL STOCK HELD IMMEDIATELY PRIOR CAPITAL STOCK WERE CONVERTED AT THE
EXECUTIVE OFFICER TO THE EFFECTIVE TIME EFFECTIVE TIME
- ----------------- ------------------------------------ -------------------------------------
William J. Herman.............. 1,266,115 860,046
Paula J. Cassidy............... 66,556 45,210
Peter T. Johnson............... 210,000 142,648
Richard G. Lucier.............. 1,000,000 679,280
Kevin P. O'Brien............... 266,223 180,839
13
All of these shares are restricted stock, subject to a repurchase right of
the Company if the executive officer ceases to be an employee, officer or
director of, or a consultant to, the Company. This repurchase right vests over
time. Twenty-five percent of all of these shares vested from the repurchase
right in October 1999. The remaining 75% vest in equal monthly increments over
the succeeding 36 months. If the executive officer ceases to be an employee,
officer or director of, or a consultant to, the Company as a result of the
Company's actions without cause, 50% of the shares become vested shares. If,
within 24 months after a change of control of the Company, the executive officer
ceases to be an employee, officer or director of, or a consultant to, the
Company as a result of termination without cause by the Company or for good
reason by the executive, 100% of the shares become vested shares. The Merger did
not constitute a change of control for purposes of the vesting of the restricted
stock.
In addition, at the Effective Time all options to purchase Viewlogic's
capital stock then outstanding under Viewlogic's stock plans were assumed by the
Company with appropriate adjustments, based upon the Exchange Ratio, to both the
exercise price thereof and the number of shares for which such options are
exercisable. Consequently, at the Effective Time, the outstanding option held by
Gary L. Kiaski to purchase up to 266,223 shares of Viewlogic's capital stock at
a per share purchase price of $0.33 was converted into an option to purchase up
to 180,839 shares of the Company's Common Stock at a per share purchase price of
$0.49 on the same terms and conditions set forth in Mr. Kiaski's stock option
agreement with Viewlogic. Twenty-five percent of the shares subject to this
stock option vested in October 1999. The remaining 75% vest in equal monthly
increments over the succeeding 36 months. Mr. Kiaski has the right to exercise
this option prior to the time it vests. Upon such early exercise, if any, Mr.
Kiaski will receive shares of restricted stock which are subject to the same
vesting schedule as the original option. In the event Mr. Kiaski's employment is
terminated prior to October 2, 2002, the vesting of this stock option will
accelerate (i) as to the first 90,420 shares, if he is terminated without cause,
and (ii) in full, if he is terminated without cause or resigns his employment
for good reason in connection with, or within 24 months subsequent to, a change
of control. The Merger did not constitute a change of control for purposes of
this stock option.
In connection with the Merger, the Company also assumed the employment
agreements of Mr. Herman and Mr. Lucier. Under the terms of Mr. Herman's
employment agreement, Mr. Herman's employment will continue until October 2,
2001 unless Mr. Herman resigns or the Company terminates his employment. Mr.
Herman receives a base salary of $255,000 annually and standard benefits
afforded other employees of the Company. If the Company terminates Mr. Herman's
employment without cause, he will continue to receive his benefits and base
salary for a period of nine months. This agreement includes post-termination
restrictions for a period of one year which restrict Mr. Herman from competing
with the Company and which prohibit him from soliciting the Company's employees
and customers during that period. Mr. Herman's compensation is subject to
adjustment after the first year of employment but his base salary may not be
decreased.
Mr. Lucier's employment agreement provides that Mr. Lucier's employment will
continue until October 2, 2001 unless Mr. Lucier resigns or the Company
terminates his employment. Mr. Lucier receives a base salary of $235,000
annually and standard benefits afforded other employees of the Company. If the
Company terminates Mr. Lucier's employment without cause, he will continue to
receive his benefits and base salary for a period of nine months. This agreement
includes post-termination restrictions for a period of one year which restrict
Mr. Lucier from competing with Viewlogic and which prohibit him from soliciting
the Company's employees and customers during that period. Mr. Lucier's
compensation is subject to adjustment after the first year of employment but his
base salary may not be decreased.
14
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total stockholder return on the
Common Stock with the cumulative return of (i) the Nasdaq Stock Market--U.S.
Index and (ii) the Dow Jones Software Index. The graph assumes the investment of
$100 on October 18, 1996, the date on which the Common Stock was first publicly
traded, in the Common Stock, the Nasdaq Stock Market--U.S. Index and the Dow
Jones Software Index and assumes dividends are reinvested. Measurement points
are the last trading days for the fiscal years ended December 31, 1996, 1997,
1998 and 1999. No dividends have been declared or paid on the Common Stock.
[STOCK PERFORMANCE GRAPH APPEARS HERE]
COMPANY/MARKET INDEX 10/18/96 1996 1997 1998 1999
- -------------------- -------- -------- -------- -------- --------
Innoveda, Inc...................................... $100.00 $86.32 $87.37 $78.42 $29.47
NASDAQ Stock Market (U.S.)......................... 100.00 103.75 127.12 179.25 332.27
Dow Jones Software................................. 100.00 103.75 137.44 227.54 439.24
15
PROPOSAL 2--APPROVAL OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
The Company's Amended and Restated Certificate of Incorporation, as amended
(the "Restated Charter"), currently authorizes the issuance of 50,000,000 shares
of Common Stock. In May 2000, the Board of Directors adopted resolutions,
subject to stockholder approval, proposing an amendment to the Restated Charter
providing for an increase in the authorized number of shares of Common Stock
from 50,000,000 to 100,000,000 shares. If approved by the stockholders, such
amendment would become effective upon the filing of a certificate of amendment
to the Restated Charter with the Secretary of State of the State of Delaware. As
of May 26, 2000, the Company had outstanding 32,528,321 shares of Common Stock
and an aggregate of approximately 5.3 million shares of Common Stock reserved
for issuance under the 1994Company's stock incentive and purchase plans.
CHARTER AMENDMENT
The Board of Directors has adopted resolutions setting forth the proposed
amendment to the first paragraph of Article Fourth of the Restated Charter (the
"Charter Amendment"), the advisability of the Charter Amendment, and a call for
submission of the Charter Amendment for approval by the Company's stockholders
at the Meeting. The following is the test of the first of paragraph as proposed
to be amended:
FOURTH. The corporation is authorized to issue two classes of stock to be
designated respectively, "Common Stock" and "Preferred Stock". The total
number of shares that the corporation is authorized to issue is One
Hundred-Five Million (105,000,000) shares, consisting of One Hundred
Million (100,000,000) shares of Common Stock, Planpar value $0.01 per share,
and asFive Million (5,000,000) shares of April 12, 1999,Preferred Stock, par value $0.01
per share.
PURPOSE AND EFFECT OF THE PROPOSED CHARTER AMENDMENT
On June 2, 2000, the Company announced that it had entered into an agreement
to acquire PADS Software, Inc. ("PADS") for a total of 122,572approximately 6.5 million
shares remainedof Common Stock and $2 million in cash. The Company has also acquired a
number of other companies in order to augment its technological capabilities and
expand its product offerings. The Company may acquire additional companies for
these and other business reasons. As in the case of the agreement to acquire
PADS, from time to time, the Company uses shares of Common Stock to pay for
acquisitions. The Board believes that the proposed increase in the number of
authorized shares of Common Stock is desirable to maintain the Company's
flexibility in choosing how to pay for acquisitions. While the Company is in
acquisition discussions from time to time with other companies and may consider
issuing shares of Common Stock in the future for such acquisitions, the Company
does not presently have any plans, agreements, understandings or arrangements
that will or could result in the issuance of any shares, other than its
agreement to acquire PADS. The approval of the Charter Amendment by the
Company's stockholders is not a condition to the closing of the Company's
acquisition of PADS.
In addition, the Board believes that the availability of additional shares
of Common Stock will provide the Company with the flexibility to issue shares
for a variety of other purposes that the Board of Directors may deem advisable
without further action by the Company's stockholders, unless required by law,
regulation or stock market rule. These purposes could include, among other
things, the sale of stock to obtain additional capital funds, the purchase of
property, the use of additional shares for various equity compensation and other
employee benefit plans, and other bona fide corporate purposes.
In some situations, the issuance of additional shares of Common Stock could
have a dilutive effect on earnings per share and, for a person who does not
purchase additional shares to maintain his or her pro rata interest, on a
stockholder's percentage voting power in the Company. In addition, depending
upon the nature and terms thereof, such issuances could enable the Board to
render more difficult or
16
discourage an attempt to obtain a controlling interest in the Company or the
removal of the incumbent Board and may discourage unsolicited takeover attempts
which might be desirable to stockholders. For example, the issuance of shares of
Common Stock in a public or private sale, merger or similar transaction would
increase the number of the Company's outstanding shares, thereby diluting the
interest of a party seeking to take over the Company. Furthermore, many
companies have issued warrants or other rights to acquire additional shares to
the holders of Common Stock to discourage or defeat unsolicited stock
accumulation programs and acquisition proposals. If the Charter Amendment is
adopted, more Common Stock of the Company would be available for future grant.such purposes
than is currently available.
The Board of Directors is not proposing the Charter Amendment in response to
any effort to accumulate the Company's stock or to obtain control of the Company
by means of a merger, tender offer or solicitation in opposition to management.
In addition, the Charter Amendment is not part of any plan by management to
recommend a series of similar amendments to the Board of Directors and the
stockholders. Finally, the Board does not currently contemplate recommending the
adoption of any other amendments to the Certificate of Incorporation which could
be construed to affect the ability of third parties to take over or change
control of the Company.
If this proposal is approved by the stockholders at the Meeting, upon the
filing of the Charter Amendment with the Secretary of State of the State of
Delaware, the Company will have approximately 62.0 million authorized but
unreserved shares of Common Stock. The Charter Amendment is not necessary to
provide shares of Common Stock for the proposed approval of the Company's 2000
Stock Incentive Plan or the Company's 2000 Employee Stock Purchase Plan. See
"Proposal 3--Approval of 2000 Stock Incentive Plan" and Proposal 4--Approval of
2000 Employee Stock Purchase Plan".
Holders of Common Stock do not have preemptive rights to subscribe to
additional securities that may be issued by the Company. This means that current
stockholders do not have a prior right to purchase any new issue of Common Stock
of the Company in order to maintain their proportionate ownership interest.
THE BOARD OF DIRECTORS BELIEVES THAT THE CHARTER AMENDMENT IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR THIS
PROPOSAL.
PROPOSAL 3--APPROVAL OF AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN
In April 1999,May 2000, the Board of Directors adopted resolutions, subject to
stockholder approval, an amendmentto approve the Company's Amended and Restated 2000 Stock
Incentive Plan (the "2000 Stock Plan"). The purpose of the 2000 Stock Plan is to
advance the interests of the Company's stockholders by enhancing the Company's
ability to attract, retain and motivate persons who make (or are expected to
make) important contributions to the 1994Company by providing such persons with
equity ownership opportunities and performance-based incentives and thereby
better aligning the interests of such persons with those of the Company's
stockholders. The Board of Directors believes that continued grants of stock
options, as well as grants of restricted stock, will be an important element in
attracting, retaining motivating persons who make and who are expected to make
contributions to the Company's growth and success. If approved by the
stockholders, 4,500,000 shares of Common Stock will be authorized for issuance
under the 2000 Stock Plan. In addition, on each anniversary of the adoption of
the 2000 Stock Plan to increaseby the Board of Directors, the number of shares reservedof Common
Stock authorized for issuance under the 2000 Stock Plan will automatically
increase, without additional Board or stockholder approval, by 2,000,000 shares
of Common Stock. If our acquisition of PADS is completed, we expect that we will
grant awards under the 2000 Stock Plan for an additional 625,000aggregate of approximately
1.0 million shares of Common Stock for an
aggregateto attract, motivate and retain the former
employees of 3,447,000PADS. The 2000 Stock Plan also provides that any shares of Common
Stock reserved for issuance thereunder. This amendment
will enableunder certain other stock plans ("Prior Plans") of
the Company which shares are not issued as awards or which shares are subject to
continue17
awards that terminate or are otherwise surrendered, shall be available for
issuance under the 2000 Stock Plan, provided that the maximum number of shares
of Common Stock reserved for issuance under Prior Plans that may be issued under
the 2000 Stock Plan shall be 2,400,000.
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE 2000 STOCK PLAN AND
AUTHORIZATION OF AN INITIAL 4,500,000 SHARES OF COMMON STOCK FOR ISSUANCE UNDER
SUCH PLAN, PLUS AN ADDITIONAL 2,000,000 SHARES OF COMMON STOCK EACH YEAR OF THE
PLAN TERM, IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE FOR THIS PROPOSAL.
SUMMARY OF THE 2000 STOCK PLAN
The following is a brief summary of the material provisions of the 2000
Stock Plan. This summary is qualified in all respects by reference to the full
text of the 2000 Stock Plan.
The 2000 Stock Plan provides for the grant of incentive stock options
("incentive stock options") within the meaning of Section 422 of the Code,
options not intended to qualify as incentive stock options ("nonstatutory
options") and restricted stock awards. Generally, awards under the 2000 Stock
Plan are not assignable or transferable except by will or the laws of descent
and distribution.
INCENTIVE STOCK OPTIONS, NONSTATUTORY STOCK OPTIONS AND RESTRICTED STOCK AWARDS
Optionees receive the right to purchase a specified number of shares of
Common Stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. Subject to the
limitations described below, the exercise price of options shall not be less
than 85% of the fair market value of the Common Stock on the date of grant.
Under present law, however, incentive stock options and options intended to
qualify as performance-based compensation under Section 162(m) of the Code may
not be granted at an exercise price less than the fair market value of the
Common Stock on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more than 10%
of the total combined voting power of the Company or its parent or
subsidiaries). The 2000 Stock Plan permits the Board of Directors to determine
the manner of payment of the exercise price of options, including through
payment by cash, check or in connection with a "cashless exercise" through a
broker, by surrender to the Company of shares of Common Stock, by delivery to
the Company of a promissory note, or by any combination of the permitted forms
of payment. Restricted stock awards entitle recipients to acquire shares of
Common Stock, subject to the Company's right to repurchase all or part of such
shares from the recipient in the event that the conditions specified in the
applicable restricted stock award are not satisfied prior to the end of the
applicable restriction period established for such restricted stock award. The
2000 Stock Plan permits the Board of Directors to determine the purchase price,
if any, for restricted stock awards.
ELIGIBILITY TO RECEIVE AWARDS
Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries are eligible to receive awards under the 2000 Stock Plan. Under
present law, however, incentive stock options may only be granted to employees.
No participant may receive awards for more than 500,000 shares in any calendar
year.
As of April 30, 2000, the Company had approximately 416 employees and consultantsfour
non-employee directors, all of whom were eligible to participate in the 2000
Stock Plan. The number of individuals receiving awards varies from year to year
depending on various factors, such as the number of promotions and the Company's
hiring needs during the year, and thus the Company cannot now determine award
recipients.
18
On the Record Date, the closing sale price of the Common Stock on the Nasdaq
National Market was $4.625.
ADMINISTRATION
The Board of Directors and the Compensation Committee administer the 2000
Stock Plan. The Board of Directors has the authority to adopt, amend and repeal
the administrative rules, guidelines and practices relating to the 2000 Stock
Plan and to interpret its provisions. The Board of Directors may delegate
authority under the 2000 Stock Plan to one or more committees of the Board of
Directors. Pursuant to this authority, the Board of Directors has appointed the
Compensation Committee to administer certain aspects of the 2000 Stock Plan.
Subject to any applicable limitations contained in the 2000 Stock Plan, the
Board of Directors or a committee of the Board of Directors to whom the Board of
Directors delegates authority, as the case may be, selects the recipients of
awards and determines:
- the number of shares of Common Stock covered by options and the dates upon
which such options become exercisable;
- the exercise price of options;
- the duration of options; and
- the number of shares of Common Stock subject to any restricted stock award
and the terms and conditions of such award, including the 1994conditions for
repurchase, issue price and repurchase price.
In the event of a merger, liquidation or other reorganization event, the
Board of Directors is authorized to provide for:
- the assumption or substitution of all outstanding options by the acquirer;
- the termination of all unexercised options immediately prior to the
closing of the acquisition event;
- appropriate cash payments to option holders, if the Company's stockholders
would receive cash payments as consideration in the acquisition event; and
- the vesting in full of outstanding options prior to the reorganization
event provided that, to the extent the option was not exercisable for
unrestricted shares prior to the acquisition event, the participant shall
receive upon exercise of the option, shares of common stock subject to
repurchase by the Company in the event that the conditions specified in
the applicable option agreement are not satisfied.
No award may be granted under the 2000 Stock Plan.Plan ten years after the
approval and adoption of the 2000 Stock Plan by the Board of Directors and
stockholders, but the vesting and effectiveness of awards previously granted may
extend beyond that date. The Board of Directors may at any time amend, suspend
or terminate the 2000 Stock Plan, except that no award granted after an
amendment of the 2000 Stock Plan and designated as subject to Section 162(m) by
the Board of Directors shall become exercisable, realizable or vested, to the
extent the amendment was required to grant the award, unless and until the
amendment is approved by the Company's stockholders.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES THAT GENERALLY WILL ARISE WITH RESPECT TO AWARDS GRANTED UNDER THE
2000 STOCK PLAN AND WITH RESPECT TO THE SALE OF COMMON STOCK ACQUIRED UNDER THE
2000 STOCK PLAN.
19
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from the
Exercise Date (a "Disqualifying Disposition"), then all or a portion of the gain
recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO Stock for more than
one year prior to the date of the sale.
RESTRICTED STOCK AWARDS
A participant will not recognize taxable income upon the grant of a
restricted stock award unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
20
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin the day after the forfeiture
provisions or restrictions lapse if a Section 83(b) Election is not made, or the
day after the award is granted if a Section 83(b) Election is made.
TAX CONSEQUENCES TO THE COMPANY
The grant of an award under the 2000 Stock Plan will have no tax
consequences to the Company. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any Common Stock acquired under the 2000
Stock Plan will have any tax consequences to the Company. The Company generally
will be entitled to a business-expense deduction, however, with respect to any
ordinary compensation income recognized by a participant under the 2000 Stock
Plan, including as a result of the exercise of a nonstatutory stock option or a
Disqualifying Disposition. Any such deduction will be subject to the limitations
of Section 162(m) of the Code.
GRANTS AND BENEFITS UNDER THE 2000 STOCK PLAN TO DIRECTORS AND EXECUTIVE
OFFICERS
The stock option grants and the benefits that will be paid under the 2000
Stock Plan to directors, executive officers and all other employees are
currently not determinable.
PROPOSAL 4--APPROVAL OF 2000 EMPLOYEE STOCK PURCHASE PLAN
In May 2000, the Board of Directors adopted resolutions, subject to
stockholder approval, to approve the Company's 2000 Employee Stock Purchase Plan
(the "2000 Purchase Plan"). The purpose of the 2000 Purchase Plan is to provide
eligible employees of the Company with opportunities to purchase shares of
Common Stock. The Board of Directors believes that the approval of the amendment to
the 1994 Stock2000 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 1994 Stock Plan and the ability to grant stock options are important factorsfactor 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 the amendment to the 1994 Stock Plan.
- --------------------------------------------------------------------------------
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT OF THE 1994 STOCK PLAN.
- --------------------------------------------------------------------------------
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
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.
-6-
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 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.
-7-
(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, and (iii) 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 holding
periods. Net capital gains on assets held for more than twelve months are
currently taxed at a maximum federal rate of 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.
-8-
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 are currently taxed at a
maximum federal rate of 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 EXERCISE PRICE
NAME OF INDIVIDUAL AND POSITION OPTIONS GRANTED ($ PER SHARE)
- ----------------------------------------------------------------------------------- --------------- --------------
Larry J. Gerhard ................................................................ 75,000 $14.50
Chief Executive Officer
C. Albert Koob................................................................... 10,000 14.06
Vice President-Finance, Chief Financial
Officer and Secretary
Moshe Guy ....................................................................... 535 15.88
Vice President, General Manager and 1,220 6.75
Chief Operating Officer of the Design Solutions Division
Joseph G. Masarich............................................................... 10,000 14.06
Senior Vice President-Worldwide Marketing and Sales
Eric Benhayoun................................................................... -- --
Vice President, General Manager-European Operations
All current executive officers as a group (7 Persons)............................ 86,755 14.35 (1)
All other employees as a group................................................... 152,221 10.48 (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 1,050,000 shares of Common Stock has been reserved
for issuance under the 1997 Nonstatutory Stock Option Plan, and as of April 12,
1999, a total of 27,828 shares remained eligible for future grant. The 1997
Nonstatutory Stock Option Plan provides for grants to non-executive officer
employees and consultants of the Company.
-10-
PROPOSAL NO. 3
AMENDMENT TO 1996 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The 1996 Employee Stock2000 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 385,000 shares of Common Stock for issuance under the
1996 Employee Stock2000
Purchase Plan and asis intended to qualify under Section 423 of April 12, 1999, 246,047 shares
remained available for future issuances.
PROPOSAL
In March 1999, the Code. The Board
of Directorshas adopted subject to stockholder
approval, an amendment to the 1996 Employee Stock2000 Purchase Plan to increasebecause the number of shares reserved for issuance by an additional 150,000 shares of Common
Stock, for an aggregate of 535,000 shares reserved for issuance thereunder. This
amendment will enable the Company to continue to grant purchase rights to
eligible employeescurrently
available under the terms and conditions of the 1996 Employee Stock
Purchase Plan.
The Board of Directors believes that the approval of the amendment to
theCompany's 1996 Employee Stock Purchase Plan is insufficient
to satisfy the expected employee participation in 2000. If approved by the
best interestsstockholders, 700,000 shares of the Company
and its stockholders, as the availability of an adequate number of sharesCommon Stock will be authorized for issuance
under the 1996 Employee Stock2000 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 RECOMMENDSBELIEVES THAT THE APPROVAL OF THE 2000 PURCHASE PLAN
AND THE AUTHORIZATION OF 700,000 SHARES OF COMMON STOCK FOR ISSUANCE UNDER SUCH
PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS
A VOTE "FOR" THE AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN.
- --------------------------------------------------------------------------------FOR THIS PROPOSAL.
SUMMARY OF THE 1996 EMPLOYEE STOCK2000 PURCHASE PLAN
ADMINISTRATION
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 Stock2000 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.
-11-21
ELIGIBILITY; LIMITATIONS.LIMITATIONS
The 1996 Employee Stock2000 Purchase Plan provides that employees are eligible to participate
if they are customarily employed by the Company or any designated subsidiary for
at least 20 hours per week and for more than five months in any calendar year.
As of April 30, 2000, 416 employees of the Company satisfied the eligibility
criteria for participation in the 2000 Purchase Plan.
TERMS AND CONDITIONS OF SUBSCRIPTION.SUBSCRIPTION
Participation under the 1996
Employee Stock2000 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)conditions:
PURCHASE PRICE AND METHOD. Employees who participate in the 1996 Employee Stock2000
Purchase Plan purchase the Company's Common Stock through payroll deductions of up to
10% of their base salary and shall receive an option to purchase up to a
maximum number of shares per purchase24-month offering period determined by dividing
$12,500$50,000 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(the "Option Shares"). Such option shall be
exercisable as to 25% of the first dayOption Shares at the end of aneach six-month
purchase period within the offering period) for all purchase periods ending within any calendar year.period. The price of Common Stock
purchased under the 1996 Employee Stock2000 Purchase Plan is 85% of the lower of the fair
market value of the Common Stock on the first day of each
24-monththe 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 anthe first day of the subsequent
24-month offering period is lower than the fair market value of the Common
Stock on the first day of the current offering period, then all participants
in such current offering period will be automatically withdrawn from suchthe
current offering period immediately after the exercise of their options on
suchthe exercise date and automatically re-enrolled in the immediately followingsubsequent 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 MayAugust 1 and NovemberFebruary 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 ended on April 30, 1997. The current offering period
began on November 2, 1998, and will end on October 31, 2000;
(c) WITHDRAWAL; TERMINATION OF EMPLOYMENT. If an employee decides to
terminate his or her participation in the 1996 Employee Stock2000 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 Stock2000
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
Stock2000 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 Stock2000 Purchase
Plan as may be determined by the Administrator.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.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:
22
(i) the number of shares of Common Stock subject toavailable under the 1996 Employee
Stock2000 Purchase Plan
and (ii) the number and class of shares of stock subject to any purchase rightoption
outstanding under the 1996 Employee Stock2000 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, anyunless the acquiring or
succeeding corporation (or an affiliate thereof) agrees to assume or substitute
for, outstanding options under the plan, each purchase period then in progress
-12-
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 STOCK2000 PURCHASE PLAN.PLAN
The Board may at any time amend, alter, suspend or terminate the 1996 Employee Stock2000
Purchase Plan. The Company shall obtain stockholder approval of any amendment to
the 1996 Employee Stock2000 Purchase Plan in such a manner and to such a degree as is necessary and
desirable to comply with Rule 16b-3 under the Exchange Act and 423 of the Code
(or any other applicable law or regulation, including the requirements of any
exchange or quotation system on which the Common Stock is traded). Any amendment
or termination of the 1996 Employee Stock2000 Purchase Plan shall not affect options already
granted and such options shall remain in full force and effect as if the 1996 Employee Stock2000
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.May 2010.
FEDERAL INCOME TAX CONSEQUENCES
NoTHE FOLLOWING IS A SUMMARY OF THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES THAT GENERALLY WILL ARISE WITH RESPECT TO PURCHASES MADE UNDER THE
2000 PURCHASE PLAN AND WITH RESPECT TO THE SALE OF COMMON STOCK ACQUIRED UNDER
THE 2000 PURCHASE PLAN.
TAX CONSEQUENCES TO PARTICIPANTS
In general, a participant will not recognize taxable income upon enrolling
in the 2000 Purchase Plan or upon purchasing shares of Common Stock at the end
of a purchase period. Instead, if a participant sells Common Stock acquired
under the 2000 Purchase Plan at a sale price that exceeds the price at which the
participant purchased the Common Stock, then the participant will recognize
taxable income in an amount equal to the excess of the sale price of the Common
Stock over the price at which the participant purchased the Common Stock. A
portion of that taxable income will be taxable toordinary income, and a portion may be
capital gain.
If the participant untilsells the shares purchased
underCommon Stock more than one year after acquiring
it and more than two years after the 1996 Employee Stock Purchase Plan are sold or otherwise disposed of.
Upon sale or other disposition ofdate on which the shares,offering period commenced
(the "Grant Date"), then the participant will generally be subject to tax andtaxed as follows. If the amountsale
price of the taxCommon Stock is higher than the price at which the participant
purchased the Common Stock, then the participant will depend uponrecognize ordinary
compensation income in an amount equal to the holding period.lesser of:
- fifteen percent of the fair market value of the Common Stock on the Grant
Date; and
- the excess of the sale price of the Common Stock over the price at which
the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the shares are sold or otherwise disposed of more than two (2) years from the
first daysale price of the
offering period or moreCommon Stock is less than one (1) year from the date of
transferprice at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the stock toprice at which the participant (the "Statutory Holding Periods"purchased the
Common Stock over the sale price of the Common Stock.
23
If the participant sells the Common Stock within one year after acquiring it
or within two years after the Grant Date (a "Disqualifying Disposition"), then
the participant will recognize ordinary compensation income measured as the lesser of (i)in an amount equal
to the excess of the fair market value of the shares atCommon Stock on the time of such sale or
dispositiondate that it
was purchased over the purchase price or (ii)at which the participant purchased the Common
Stock. The participant will also recognize capital gain in an amount equal to
15%the excess of the sale price of the Common Stock over the fair market value of
the shares as ofCommon Stock on the first day of the offering period. Any
additional gain will be treated as long-termdate that it was purchased, or capital gain. Net capital gains on
assets held for more than twelve months are currently taxed at a maximum federal
rate of 20%. Capital losses are allowedloss in full against capital gains and upan amount
equal 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 sharesCommon Stock on the date
the shares arethat it was purchased over the purchase
price. Any additionalsale price of the Common Stock. This capital gain
or loss on such sale or disposition will be a long-term capital gain or loss if the participant has held the
Common Stock for more than one year prior to the date of the sale and will be a
short-term capital gain or loss depending onif the holding periods.participant has held the Common Stock for
a shorter period.
TAX CONSEQUENCES TO THE COMPANY
The offering of Common Stock under the 2000 Purchase Plan will have no tax
consequences to the Company. Moreover, in general, neither the purchase nor the
sale of Common Stock acquired under the 2000 Purchase Plan will have any tax
consequences to the Company is notexcept that the Company will be entitled to a
business-expense 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 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.
-13-
PARTICIPATION IN THE 1996 EMPLOYEE STOCK PURCHASE PLAN
The following table sets forth information with respect to participationany ordinary compensation income
recognized by a participant upon making a Disqualifying Disposition. Any such
deduction will be subject to the Named Executive Officers, all currentlimitations of Section 162(m).
GRANTS AND BENEFITS UNDER THE 2000 PURCHASE PLAN TO EXECUTIVE OFFICERS
The stock option grants and the benefits that will be paid under the 2000
Purchase Plan to directors, executive officers as
a group and all other employees as a group duringare
currently not determinable. No options have been granted under the last fiscal year.
NUMBER OF
SECURITIES PURCHASE PRICE
NAME OF INDIVIDUAL AND POSITION PURCHASED ($ PER SHARE)
- ------------------------------------------------------------------------------------ -------------- ------------------
Larry J. Gerhard ................................................................ 1,681 $5.95
Chief Executive Officer 1,586 5.95
C. Albert Koob................................................................... 1,331 5.95
Vice President-Finance, Chief Financial Officer and Secretary 1,344 5.95
Moshe Guy ....................................................................... --(1) N/A
Vice President, General Manager and
Chief Operating Officer of the Design Solutions Division
Joseph G. Masarich............................................................... 1,709 7.65
Senior Vice President-Worldwide Marketing and Sales
Eric Benhayoun................................................................... 1,192 5.95
Vice President, General Manager-European Operations 1,317 5.95
All current executive officers as a group (7 Persons)............................ 12,660 6.36(2)
All other employees as a group................................................... 67,592 7.72(2)
- -------------
(1) The Company's employees in Israel do not participate in the 1996
Employee Stock2000 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 selectedAUDITORS
PricewaterhouseCoopers LLP, independent public accountants, audited the
Company's consolidated financial statements for fiscal 1999. The Company has not
yet selected independent public accountants to audit its 2000 consolidated
financial statements. Deloitte & Touche LLP served as Viewlogic's independent
public accountants prior to the financial statements of theMerger. The Company is deciding between
PricewaterhouseCoopers LLP and Deloitte & Touche LLP as its independent public
accountants for the fiscal year ending December 31, 1999. PricewaterhouseCoopers LLP and2000. The Company intends to engage its
predecessor, Coopers and Lybrand L.L.P., have beenaccountants for such purpose in June 2000. The Company expects that, if it
selects its accountants prior to the Company's auditors since
1996. RepresentativesMeeting, a representative of PricewaterhouseCoopers LLP are expectedsuch
accountants will be available at the Meeting to attend the
Annual Meetingrespond to appropriate
questions. Such representative will be permitted to make a statement and 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 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 PricewaterhouseCoopers LLP, 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 PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS.
- --------------------------------------------------------------------------------
-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 12, 1999, 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.
NUMBER OF SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED(1) OF TOTAL(1)
- --------------------------------------------------------------------- ------------------ -------------------
GeoCapital, LLC (2).............................................. 1,758,800 11.3%
767 Fifth Avenue, 45th Floor
New York, NY 10153
T. Rowe Price Associates, Inc.(3)................................ 1,407,100 9.0%
100 East Pratt Street
Baltimore, MD 21202
Massachusetts Financial Services Company (4)..................... 1,098,316 7.0%
500 Boylston Street, 15th Floor
Boston, MA 02116
Chartwell Investment Partners (5)................................ 1,035,117 6.6%
1235 Westlakes Drive, Suite 330
Wayne, PA 19087
DCL Technologies Ltd.(6)......................................... 977,730 6.3%
P.O. Box 544
46105 Herzlia Israel
Paul J. Schupf Associates (7).................................... 799,600 5.1%
27 Payne St.
Hamilton, NY 13346
Larry J. Gerhard(8).............................................. 152,533 1.0%
C. Albert Koob(9)................................................ 55,018 *
Moshe Guy(10).................................................... 23,728 *
Joseph G. Masarich .............................................. 0 *
Eric Benhayoun (11).............................................. 27,602 *
Amihai Ben-David (12)............................................ 987,730 6.3%
William Botts (13)............................................... 22,500 *
Steven P. Erwin (13)............................................. 25,000 *
Barbara M. Karmel, Ph.D. (13).................................... 21,000 *
All directors and executive officers as a group (11 persons) (14) 1,826,275 11.4%
- ----------
* Represents less than 1% of the total.
(1) Based on 15,611,775 shares of Common Stock outstanding as of April 12,
1999. 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.
-16-
(2) As indicated in the Schedule 13G filed by GeoCapital, LLC pursuant to
the Exchange Act on February 10, 1999.
(3) As indicated in the Schedule 13G filed by T. Rowe Price Associates,
Inc. pursuant to the Exchange Act on February 11, 1999.
(4) As indicated in the Schedule 13G filed by Massachusetts Financial
Services Company pursuant to the Exchange Act on February 11, 1999.
(5) As indicated in the Schedule 13G filed by Chartwell Investment Partners
pursuant to the Exchange Act on February 16, 1999.
(6) Includes 947,730 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.
(7) As indicated in the Schedule 13G filed by Paul J. Schupf Associates
pursuant to the Exchange Act on February 12, 1999.
(8) Includes 147,166 shares issuable upon exercise of options. Also
includes 5,367 shares held by L&K Properties Limited Partnership, of
which Mr. Gerhard is the sole general partner and a limited partner.
(9) Includes 55,018 shares issuable upon exercise of options.
(10) Includes 23,728 shares issuable upon exercise of options.
(11) Includes 25,093 shares issuable upon exercise of options.
(12) Includes 10,000 shares issuable upon exercise of options. Includes
947,730 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.
(13) Includes 20,000 shares issuable upon exercise of options.
(14) Includes 347,770 shares issuable upon exercise of 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 three fiscal years.
LONG-TERM
-------------------
COMPENSATION
AWARDS
NO. OF
-------------------
ANNUAL COMPENSATION
----------------------------------------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL SALARY COMPENSATION UNDERLYING ALL OTHER
POSITION YEAR ($)(1) BONUS ($) (2) ($) OPTIONS COMPENSATION ($)
- -------------------------------- ---- ---------- ---------------- ---------------- -------------- -------------------
Larry J. Gerhard................ 1998 $400,000 $ -- $12,000 (3) 75,000 $4,333 (4)
Chief Executive Officer 1997 341,667 160,000 5,000 (3) 75,000 3,575 (5)
1996 260,000 60,000 -- 75,000 105,088 (6)
C. Albert Koob.................. 1998 160,000 30,000 7,214 (3) 10,000 2,425 (7)
Vice President Finance, 1997 143,333 64,000 3,750 (3) 248,000 2,350 (7)
Chief Financial Officer and 1996 127,500 20,000 -- 15,000 7,067 (8)
Secretary
Moshe Guy (9)................... 1998 170,000 30,000 12,804 (3) 1,755 --
Vice President, General 1997 113,392 69,810 (10) 10,515 (3) 34,152 --
Manager and Chief Operating 1996 N/A N/A N/A N/A N/A
Officer of the Design
Solutions Division
Joseph G. Masarich (11)......... 1998 160,000 190,644 (12) 9,000 (3) 10,000 12,500 (13)
Senior Vice President 1997 N/A N/A N/A N/A N/A
Worldwide Marketing and Sales 1996 N/A N/A N/A N/A N/A
Eric Benhayoun.................. 1998 154,890 57,109 (14) -- -- --
Vice President, General 1997 120,252 26,945 (15) -- 32,500 --
Manager-European Operations 1996 125,000 27,549 (16) -- -- --
- ------------
(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) Consists of year-end bonuses paid in February of the following year.
(3) Consists of car allowance.
(4) Consists of the Company's matching contribution to Mr. Gerhard's 401(k)
plan in the amount of $2,500 and medical insurance premiums in the
amount of $1,833.
-18-
(5) 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.
(6) 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.
(7) Consists of the Company's matching contribution to Mr. Koob's 401(k)
plan.
(8) Consists of payment for accrued vacation. In 1996, the Company changed
its vacation policy which triggered a one-time payout of balances
previously accrued.
(9) Mr. Guy became an executive officer of the Company in May 1997.
(10) Consists of $64,000 bonus and $5,810 of commissions.
(11) Mr. Masarich became an executive officer of the Company in January
1998. Mr. Masarich terminated his employment with the Company in
January 1999.
(12) Consists of $80,000 relocation bonus and $110,644 of commissions,
$28,791 of which was paid in 1999.
(13) Consists of the Company's matching contribution to Mr. Masarich's
401(k) plan in the amount of $2,500 and the payment of $10,000 for
closing costs incurred in connection with Mr. Masarich's purchase of a
residence.
(14) Consists of commissions, $21,194 of which was paid in 1999.
(15) Consists of commissions, $12,000 of which was paid in 1998.
(16) Consists of commissions, $11,572 of which was paid in 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options
granted during the fiscal year ended December 31, 1998 to each of the Named
Executive Officers.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998
INDIVIDUAL GRANTS
---------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
NO. OF % OF TOTAL STOCK PRICE APPRECIATION
SECURITIES OPTIONS EXERCISE FAIR MARKET FOR OPTION TERM (3)
UNDERLYING GRANTED TO PRICE VALUE ON ----------------------------
OPTIONS EMPLOYEES IN ($) / DATE OF EXPIRATION
GRANTED (1) 1998 (2) SHARE GRANT ($) DATE 5% ($) 10% ($)
----------- ------------ -------- ----------- ---------- ------------- -------------
Larry J. Gerhard..... 75,000 19.7% $14.50 $14.50 5/14/08 $683,923 $1,733,195
C. Albert Koob....... 10,000 2.6 14.06 14.06 2/17/08 88,438 224,120
Moshe Guy............ 535 0.1 15.88 15.88 4/16/08 5,341 15,536
1,220 0.3 6.75 6.75 10/19/08 5,179 13,124
Joseph G. Masarich... 10,000 2.6 14.06 14.06 2/17/08 88,438 224,120
Eric Benhayoun....... 0 -- -- -- -- -- --
- ----------
(1) Options granted in 1998 are either incentive stock options or
nonstatutory stock options and generally vest over four years, with 25%
of the option shares becoming fully vested one year from the grant date
and 1/48th vesting in each successive month, with full vesting
occurring on the fourth anniversary date. Under the terms of the 1994
Stock Plan, the administrator retains discretion, subject to plan
limits, to modify the terms of outstanding options and to reprice
outstanding options. The options have a term of 10 years, subject to
earlier termination in certain situations related to termination of
employment.
(2) Based on a total of 380,599 options granted to all employees and
consultants during 1998.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules
of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price.
-19-
OPTION EXERCISES AND HOLDINGS
The following table sets forth, as to the Named Executive Officers,
certain information concerning stock options exercised during 1998 and the
number of shares subject to exercisable and unexercisable stock options as of
December 31, 1998. The table also sets forth certain information with respect to
the value of stock options held by such individuals as of December 31, 1998.
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1998 AND OPTION VALUES ON
DECEMBER 31, 1998
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISABLE OPTIONS OPTIONS AT FISCAL
AT FISCAL YEAR END YEAR END ($)(1)
SHARES VALUE ------------------------------- -------------------------------
ACQUIRED REALIZED
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ------------- ---------- ------------- --------------- -------------- ---------------
Larry J. Gerhard............... 7,000 $49,000 122,860 95,140 $0 $0
C. Albert Koob................. 25,000 286,381 47,416 35,584 187,500 0
Moshe Guy...................... 761 6,076 18,729 31,417 1,525 0
Joseph G. Masarich............. 0 0 41,250 133,750 0 0
Eric Benhayoun................. 47,000 583,625 21,708 22,292 71,875 0
- ----------
(1) These values have been calculated based on the closing price of the
Company's Common Stock on the Nasdaq National Market on December 31,
1998 of $8.00 per share minus the exercise price.
EMPLOYMENT AGREEMENTS
Effective February 25, 1999, the Company entered into an employment
agreement with Mr. Gerhard, pursuant to which he receives a monthly base salary
and all standard benefits accorded other executives of the Company as well as
certain additional medical benefits. In addition, Mr. Gerhard is entitled to an
allowance for car expenses of $1,000 per month. This agreement expires on
December 31, 1999 at which time Mr. Gerhard has agreed to resign from his
positions as Chief Executive Officer and a director of the Company, if he
has
not already donedesires to do so. Upon termination of his employment on or prior to December
31, 1999, Mr. Gerhard is entitled to payments of $33,333.33 per month plus
benefits for twenty-four months.
Effective February 14, 1999, the Company entered into an employment
agreement with Mr. Koob, pursuant to which he receives an annual base salary and
all standard benefits accorded other executives of the Company. In addition, Mr.
Koob is entitled to an allowance for car expenses of $750 per month. This
agreement expires on December 31, 1999. If Mr. Koob remains employed by the
Company until July 31, 1999 or his employment is terminated for any reason other
than for cause, he is entitled to payments of $13,333.33 per month plus benefits
for twelve months.
Effective July 1, 1997, the Company entered into a four-year employment
agreement with Mr. Guy, 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. In the event Mr. Guy is terminated other than
for cause, he is entitled to severance equal to his then monthly base salary
plus benefits until he accepts other full time employment, but in no event for
longer than twelve months. 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.
Effective January 22, 1999, the Company entered into a severance
agreement with Mr. Masarich in connection with the termination of his
employment. Pursuant to the agreement, in February 1999 Mr. Masarich began to
receive payments of $13,333.33 per month. These payments will continue until
January 2000.
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, commissions based on sales revenue generated, and all standard
-20-
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 vested ratably over the 24 months following October 31,
1995. 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 $8,403.19 as of April 12, 1999) per month plus benefits
until he accepts other full-time employment, but in no event longer than nine
months.
CERTAIN TRANSACTIONS
In December 1993, the Company's Israeli subsidiary, Summit Design (EDA)
Ltd. (formerly named SEE Technologies), entered into a four-year sublease
pursuant to which Summit Design (EDA) Ltd. subleased space for its corporate
offices from DCL Holding & Investment in Technology (1993), Ltd. ("DCL") on
terms and conditions similar to those under which DCL leased 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 lease ended on December 31, 1998 and the Company has moved
out of the office building. The Company believes that the terms of the foregoing
lease were no less favorable to the Company than those that could have been
obtained from unaffiliated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and
executive officers, and directors, and persons who own more than 10%ten percent of a registered
class of the Company's equity securities, to file with the Commission initial
reports of ownership and reports of changes in ownership withof Common Stock and
other equity securities of the Securities and Exchange Commission
("SEC"). Executive officers,Company. Officers, directors and
greater than 10%greater-than-ten-percent stockholders are required by SEC rulesCommission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solelyTo the Company's knowledge, based on itsa review of the copies of such formsreports
furnished to the Company, during fiscal 1999 all of the Company's officers,
directors and greater-than-ten-percent beneficial owners complied with Section
16(a) filing requirements.
STOCKHOLDER PROPOSALS FOR THE MEETING AND FOR THE 2001 ANNUAL MEETING
Written notice of proposals of stockholders submitted outside the processes
of Rule 14a-8 under the Exchange Act for consideration at the Meeting must have
been received by the Company and written representations from certain reportingon or
24
before June 19, 2000, in order to be considered timely for purposes of Rule
14a-4 under the Exchange Act. The persons designated in the Company's proxy card
will be granted discretionary authority with respect to any stockholder proposal
with respect to which the Company believes
that, during 1998, all Section 16(a) filing requirements applicabledoes not receive timely notice. Stockholder
proposals submitted pursuant to its
executive officers, directors and 10% stockholders were satisfied.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formedRule 14a-8 under the Exchange Act for inclusion
in August 1994 and is currently
composed of Mr. Ben-David and Mr. Botts. No interlocking relationship exists
between any member of the Company's Compensation Committee and any memberproxy materials for its 2001 Annual Meeting of any
other company's board of directors or compensation committee.
-21-
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee ofStockholders
must be received by 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 Company;
- align the compensation of executive officers with business
objectives and performance; and
- align incentives for executive officers with the interests of
stockholders in maximizing value.
The Company has 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 employeesSecretary of the Company are eligible
to participate inat the 1994 Stock Plan (the "Option Plan") andprincipal offices of the
1996 Employee
Stock Purchase Plan (the "Purchase Plan").Company no later than February 9, 2001.
OTHER MATTERS
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. In 1998, the
Company contributed to the 401(k) Plan 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.
-22-
1998 EXECUTIVE COMPENSATION
Executive compensation for fiscal 1998 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 1998
Mr. Gerhard's 1998 compensation package was set forth in an employment
agreement that was approved by the Committee and took effect in August 1997. In
1998, Mr. Gerhard received a salary of $400,000. Mr. Gerhard was also granted an
option to purchase 75,000 shares of the Company's Common Stock. In February
1999, the Company entered into a new employment agreement with Mr. Gerhard.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Amihai Ben-David
William V. Botts
-23-
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 18, 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.
CUMULATIVE TOTAL RETURN
--------------------------------------------
10/18/96 12/96 12/97 12/98
--------------------------------------------
DOLLARS
Summit Design, Inc............... 100 108 109 98
NASDAQ Stock Market (U.S.)....... 100 104 127 179
Dow Jones Software............... 100 101 114 205
-24-
OTHER MATTERS
The Company knows of no other matters tobusiness which will be submittedpresented
for consideration at the meeting.
IfMeeting other than that described above. However, if
any other matters properlybusiness should come before the meeting,Meeting, it is the intention of the
persons named in the enclosed proxy card to vote, or otherwise act, in
accordance with their best judgment on such matters.
The Company will bear the shares they represent
ascosts of soliciting proxies. In addition to
solicitations by mail, the BoardCompany's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, facsimile
and personal interviews. The Company will reimburse such persons for their
reasonable expenses in connection with any such solicitations. In addition, the
Company may retain a proxy solicitation firm for assistance in connection with
the Meeting at an expected cost of Directors may recommend.
It is important that your shares be represented at the meeting,
regardlessno more than $15,000, plus reasonable
expenses. The Company will also request brokerage houses, custodians, nominees
and fiduciaries to forward copies of the number ofproxy materials to those persons for
whom they hold shares which you hold. You are, therefore, urged to
execute and return, at your earliest convenience,request instructions for voting the accompanying proxy cardproxies. The
Company will reimburse such brokerage houses and other persons for their
reasonable expenses in connection with the enclosed envelope.distribution.
THE BOARD OF DIRECTORS Beaverton, Oregon
April 30, 1999
-25-HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR SHARES
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXY CARDS.
BY ORDER OF THE BOARD OF DIRECTORS,
Peter T. Johnson,
SECRETARY
June 9, 2000
25
Appendix A
DETACH HERE
INNOVEDA, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2000 ANNUAL MEETING OF STOCKHOLDERS
JULY 13, 2000
The undersigned, revoking all prior proxies, hereby appoints William J.
Herman and Peter T. Johnson, and each of them, with full power of
substitution, as proxies for the undersigned to act and to vote at the Annual
Meeting of Stockholders of Innoveda, Inc. (the "Company") to be held on July
13, 2000 (the "Meeting") and at any adjournment or adjournments thereof as
designated herein upon all matters referred to on the reverse side of this
Proxy and as described in the Proxy Statement for the Meeting and, in their
discretion, upon any other matters that may properly come before the Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THE PROXIES WILL VOTE
FOR THE ELECTION OF THE DIRECTOR NOMINEE AND FOR PROPOSALS 2, 3, AND 4.
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE OF THIS PROXY AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- ----------------- -----------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------------- -----------------
DETACH HERE
|X| Please mark votes as in this example.
A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS.
FOR AGAINST ABSTAIN
1. To elect William J. Herman as a Class III director 2. To approve an amendment to |_| |_| |_|
to serve for the ensuing three years and until the Company's Amended
his successor is duly elected and qualified. and Restated Certificate of
FOR WITHHELD Incorporation, as amended,
|_| |_| to increase the authorized
number of shares of Common
Stock of the Company
from 50,000,000 to
100,000,000.
3. To approve the Company's |_| |_| |_|
Amended and Restated 2000 Stock
Incentive Plan and the
authorization of an initial
4,500,000 shares of Common
Stock of the Company for
issuance under such plan,
plus an additional 2,000,000
shares of Common Stock of the
Company each year of the plan
term.
4. To approve the Company's |_| |_| |_|
2000 Employee Stock Purchase
Plan and the authorization
of 700,000 shares of Common
Stock of the Company for
issuance under such plan.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
Please sign exactly as name(s) appear(s) heron.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such. If a
corporation or partnership, please sign by
authorized person.
Signature ___________________________________ Date _____ Signature ___________________________________ Date ______
APPENDIX A
SUMMIT DESIGN,B
INNOVEDA, INC.
1994 STOCK PLANAmended and Restated 2000 Stock Incentive Plan
1. PURPOSES OF THE PLAN.PURPOSE
The purposespurpose of this Amended and Restated 2000 Stock Incentive Plan are(the
"Plan") of Innoveda, Inc., a Delaware corporation (the "Company"), is to
attract and retainadvance 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 successinterests of the Company's business. Options granted understockholders by enhancing the
Plan may be incentive stock options (as
defined under Section 422Company's ability to attract, retain and motivate persons who make (or are
expected to make) important contributions to the Company by providing such
persons with equity ownership opportunities and performance-based incentives
and thereby better aligning the interests of such persons with those of the
Code) or non-statutory stock options, as
determined byCompany's stockholders. Except where the Administrator atcontext otherwise requires, the time of grant of an option and subject to
the applicable provisions of Section 422term
"Company" shall include any of the Code,Company's present or future subsidiary
corporations as amended, and the
regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" means the Board or anydefined in Section 424(f) 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" meansamended, and any regulations promulgated thereunder (the "Code") and
any other business venture (including, without limitation, joint venture or
limited liability company) in which the Company has a Committee appointedsignificant interest,
as determined 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(the "Board").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options and restricted stock awards (each, an "Award")
under the Plan. Each person who has been granted an Award under the Plan shall
be deemed a "Participant".
3. ADMINISTRATION AND DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by
the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such servicesadministrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or not.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" meansreconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
(b) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board to the
extent that the employmentBoard's powers or consulting relationship withauthority under the Plan have been delegated
to such Committee.
4. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 7, Awards may be
made under the Plan for a number of shares of common stock, $0.01 par value per
share, of the Company (the "Common Stock") equal to the sum of:
(1) 4,500,000 shares of Common Stock;
1
(2) any Parentshares of Common Stock reserved for issuance under each of
(i) the Summit Designs, Inc. 1994 Stock Plan, as amended, (ii) the Summit
Designs 1997 NonStatutory Stock Option Plan, and (iii) the Viewlogic, Inc.
1998 Stock Incentive Plan, as amended (collectively, the "Prior Plans") that
remain available for issuance upon the adoption of this Plan by the Board;
and
(3) any shares of Common Stock subject to awards under the Prior Plans
which awards expire, terminate, or Subsidiary is not interruptedare otherwise surrendered, canceled or
terminated. Continuous Status as an Employee
or Consultant shall not be considered interruptedforfeited (subject, however, in the case of (i)Incentive Stock Options (as
hereinafter defined) to any leavelimitations under the Code);
PROVIDED, HOWEVER, that the maximum number of absence approvedshares of Common Stock reserved
for issuance under the Prior Plans that may be issued under this Plan shall be
2,400,000 (the "Authorized Shares"); and PROVIDED, FURTHER, HOWEVER, that the
number of Authorized Shares shall be increased automatically by 2,000,000 shares
of Common Stock annually on the anniversary of the adoption of this Plan by the
Company or (ii) transfers between locationsBoard until the expiration of the CompanyPlan Term. If any Award expires or betweenis
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the Company, its Parent, any Subsidiary, or any successor. A
leaveunused Common Stock covered by such Award shall again be available for the
grant of absence approved byAwards under the Company shall include sick leave, military
leave, or any other personal leave. For purposesPlan, subject, however, in the case 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(as hereinafter defined), to any A-1
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) oflimitation required under the Code.
(j) "EMPLOYEE" means any person, including officers and
directors, employed byShares issued under the CompanyPlan may consist in whole or any Parentin part of authorized but
unissued shares or Subsidiary oftreasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 7, for Awards
granted after 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" meansCommon Stock is registered under the Securities Exchange Act
of 1934, as amended.
(l) "FAIR MARKET VALUE" means, asamended (the "Exchange Act"), the maximum number of any date, the valueshares 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 shallwith respect to which Awards may 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.
A-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 soldany Participant under the Plan is 3,447,000 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 Plan500,000 per calendar year. The per-Participant limit described in
compliance with
A-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 Committeethis Section 4(b) shall be constituted in such a manner as to permit the
Plan to complyconstrued and applied consistently 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,Section
162(m) of the Code and of any
applicable stock exchange (including Nasdaq) (the "Applicable Laws"("Section 162(m)").
Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the5. STOCK OPTIONS
(a) GENERAL. 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, allgrant options 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 thepurchase 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(each, an
"Option") and Employees to whom
Options may from time to time be granted hereunder;
A-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 each Option and the Optionconditions and
limitations applicable to the then current Fair Market Valueexercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the Fair Market Valueexercise price at the time
each Option is granted and specify it in the applicable option agreement
provided, however, that the exercise price shall not be less than 85% of the
fair market value of the Common Stock, 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.
A-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
thegranted.
(d) DURATION OF OPTIONS. Each Option shall be five (5) years fromexercisable at such times and
subject to such terms and conditions as the dateBoard may specify in the applicable
option agreement provided, however, that no Option will be granted for a term in
excess of grant thereof or such
shorter term as10 years.
(e) EXERCISE OF OPTION. Options may be providedexercised by delivery to the Company
of a written notice of exercise signed by the proper person or by any other form
of notice (including electronic notice) approved by the Board together with
payment in full as specified in Section 5(f) for the number of shares for which
the Option Agreement.
A-6is exercised.
2
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the Shares to be issued
pursuant to exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide
in an option agreement, by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price and any required tax withholding
or (ii) delivery by the Participant to the Company of a copy of irrevocable
and unconditional instructions to a creditworthy broker to deliver promptly
to the Company cash or a check sufficient to pay the exercise price and any
required tax withholding;
(3) by delivery of shares of Common Stock owned by the Participant
valued at their fair market value as determined by (or in a manner approved
by) the Board in good faith ("Fair Market Value"), provided (i) such price asmethod
of payment is then permitted under applicable law and (ii) such Common Stock
was owned by the Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on terms
determined by the Committee, but shallBoard, or (ii) payment of such other lawful consideration
as the Board may determine; or
(5) by any combination of the above permitted forms of payment.
(g) SUBSTITUTE OPTIONS. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in the other sections of this Section 5.
6. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the following:
(i)right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and conditions
of any such Restricted Stock Award, including the conditions for repurchase (or
forfeiture) and the issue price, if any. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the caseabsence of an
Incentiveeffective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
(a) CHANGES IN CAPITALIZATION. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit
3
set forth in Section 4(b), (iii) the number and class of securities and exercise
price per share subject to each outstanding Option, (A)(iv) the repurchase price
per share subject to each outstanding Restricted Stock Award, and (v) the terms
of each other outstanding Award shall be appropriately adjusted by the Company
(or substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 7(a) applies and Section 7(c) also applies to
any event, Section 7(c) shall be applicable to such event, and this Section
7(a) shall not be applicable.
(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed liquidation or
dissolution of the Company, Options shall be treated as described below in
Section 7(c)(2)(b) as if the liquidation or dissolution of the Company were a
Reorganization Event and the acquiring or succeeding corporation (or an
affiliate thereof) did not agree to assume, or substitute for, the Options. The
Board may specify the effect of a liquidation or dissolution on any Restricted
Stock Award or other Award granted to an Employee who,under the Plan 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 CompanyAward.
(c) REORGANIZATION EVENTS
(1) Definition. A "Reorganization Event" shall mean: (a) any merger 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.
A-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.
A-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
A-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 mergerconsolidation of the Company with or into another corporation,entity as a result of
which the Common Stock is converted into or exchanged for the right to
receive cash, securities or other property or (b) any exchange of shares of
the Company for cash, securities or other property pursuant to a share
exchange transaction.
(2) Consequences of a Reorganization Event on Options.
(a) Upon the occurrence of a Reorganization Event, or the saleexecution
by the Company of substantiallyany agreement with respect to a Reorganization Event,
the Board shall provide that all of
the assets of the Company:
(i) OPTIONS. Each Optionoutstanding Options shall be assumed, or
an
equivalent Optionoptions shall be substituted, by such successorthe acquiring or succeeding
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(or 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.affiliate thereof). For the purposes of this paragraph, thehereof, an Option
shall be considered to be assumed if, following consummation of the
merger,Reorganization Event, the Option confers the right to purchase, for each
Shareshare of OptionedCommon Stock subject to the Option immediately prior to the
merger,consummation of the Reorganization Event, the consideration (whether
stock, cash, securities or other securities
or property) received inas a result of the
mergerReorganization Event by holders of Common Stock for each Shareshare of Common
Stock held onimmediately prior to the effective dateconsummation of the transactionReorganization
Event (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of A-10
a majority of the outstanding
Shares)shares of Common Stock); provided, however, that if suchthe consideration
received inas a result of the merger wasReorganization Event is not solely common
stock of the successoracquiring or succeeding corporation or its Parent,(or an affiliate
thereof), the AdministratorCompany may, with the consent of the successoracquiring or
succeeding corporation, provide for the consideration to be received upon
the exercise of the Option, for each ShareOptions to consist solely of Optioned Stock subject to the Option,
to be solely common stock of the
successoracquiring or succeeding corporation or its Parent equal(or an affiliate thereof) equivalent
in fair market value to the per share consideration received by holders
of outstanding shares of Common Stock as a result of the Reorganization
Event.
(b) Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not not agree to assume, or
substitute for, such Options, then the Board shall provide that (I) each
Option shall become exercisable in full as of a specified time prior to
the Reorganization Event, as determined by the Board; provided, however,
that upon exercise of such Option (x) to the extent the Option would have
been exercisable prior to the Reorganization Event absent this Section
7(c)(2)(b)(I) for shares not subject to restrictions or conditions, the
Participant shall receive shares free from all conditions or restrictions
upon the exercise of such Option, and (y) to the extent that the Option
would not have been exercisable absent this Section 7(c)(2)(b)(I), the
Participant shall receive shares subject to the Company's right to
repurchase such shares at the Option exercise price with such repurchase
right lapsing at the same rate as the Option would have become
exercisable under the applicable
4
Option agreement; and (II) each Option that was exercisable prior to the
Reorganization Event for shares subject to the Company's right to
repurchase such shares, shall remain exercisable for shares subject to
the Company's right to repurchase such shares at the Option exercise
prices, with such repurchase right lapsing at the same rate as set forth
in the merger.
(ii) SHARES SUBJECT TO REPURCHASE OPTION. Any Shares
subjectapplicable Option agreement; provided, however, that all Options
will terminate immediately prior to a repurchase optionthe consummation of such
Reorganization Event, except to the Company shall be exchanged forextent exercised by the consideration (whether stock, cash, or other securities or property) receivedParticipants
before the consummation of such Reorganization Event; and provided,
further, however, that in the merger or asset sale byevent of a Reorganization Event under the
terms of which holders of Common Stock will receive upon consummation
thereof a cash payment for each Share heldshare of Common Stock surrendered
pursuant to such Reorganization Event (the "Acquisition Price"), then the
Board may instead provide that all outstanding Options shall terminate
upon consummation of such Reorganization Event and that each Participant
shall receive, in exchange therefor, a cash payment equal to the amount
(if any) by which (A) the Acquisition Price multiplied by the number of
shares of Common Stock subject to such outstanding Options (whether or
not then exercisable), exceeds (B) the aggregate exercise price of such
Options.
(3) Consequences of a Reorganization Event on Restricted Stock Awards.
Upon the effectiveoccurrence of a Reorganization Event, the repurchase and other
rights of the Company under each outstanding Restricted Stock Award shall
inure to the benefit of the Company's successor and shall apply to the cash,
securities or other property which the Common Stock was converted into or
exchanged for pursuant to such Reorganization Event in the same manner and
to the same extent as they applied to the Common Stock subject to such
Restricted Stock Award.
8. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award shall be evidenced by a written instrument in
such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each Award
may be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an Award
of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the transaction,event creating the tax liability. Except as describedthe Board may otherwise
provide in an Award, when the preceding paragraph.
IfCommon Stock is registered under the Optionee receivesExchange Act,
Participants may, to the extent then permitted under applicable law, satisfy
such tax obligations in whole or in part by delivery of shares of stockCommon Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
5
(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the successor corporationsame 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 afterdifferent type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such grant.
13. AMENDMENT AND TERMINATIONaction shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) CONDITIONS ON DELIVERY OF THE PLAN.
(a) AMENDMENT AND TERMINATION.STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) ACCELERATION. The Board may at any time amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights ofprovide that 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
remainbecome immediately exercisable 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 thepart, that any shares of Common
Stock acquired upon exercise of an Option unless the grant and exercise of such
Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without
A-11
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 furthershares are subject to the
approvalCompany's repurchase right shall be free of counsel forrestrictions in full or in part, and
that any Restricted Stock Awards shall be free of restrictions in full or in
part.
9. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such compliance.
Asshares.
Notwithstanding the foregoing, in the event the Company effects a conditionsplit of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the exerciseshares of an Option, the Company may
require the person exercisingCommon
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on the
date on which it is adopted by the Board, but no Award granted to representa Participant
that is intended to comply with Section 162(m) shall become exercisable, vested
or realizable, as applicable to such Award, unless and warrant atuntil the time
of any such exercise thatPlan has been
approved by the Shares are being purchased only for investment and
without any present intentionCompany's stockholders to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representationextent stockholder approval is
required by any ofSection 162(m) in the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, duringmanner required under Section 162(m)
(including the term of this
Plan, will at all times reserve and keep available such number of Shares asvote required under Section 162(m)). No Awards shall be sufficient to satisfygranted
under the requirementsPlan after the completion of ten years from the Plan.
The inabilityearlier of (i) the
Company to obtain authority from any
regulatory body having jurisdiction,date on which authority is deemedthe Plan was adopted 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 issueBoard 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(ii) the date the Plan was
approved by the Company's stockholders, but Awards previously granted may extend
beyond that date (the "Plan Term").
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant that is adopted. Such stockholder approvalintended to comply
with Section 162(m) after the date of such amendment shall become
exercisable, realizable or vested, as applicable to such Award, unless and
until such amendment shall have been approved by the Company's stockholders
as required by Section 162(m) (including the vote required under Section
162(m)).
(e) GOVERNING LAW. The provisions of the Plan and all Awards made hereunder
shall be obtainedgoverned by and interpreted 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 toaccordance with the laws of the State of
Israel (such persons are referredDelaware, without regard 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 byany applicable Israeli law or approvedconflicts of law.
Adopted by the Company,
including, but not limited to the following:
1) Each Israeli Option granted to an IsraeliBoard of Directors
on or before
JanuaryMay 31, 1994 shall be immediately exercisable for 25% of the shares subject
to such Option, with the remaining
A-122000
6
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.
A-13
SUMMIT DESIGN,APPENDIX C
INNOVEDA, INC.
19962000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 19962000 Employee Stock Purchase
Plan of Summit Design,Innoveda, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended.Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Summit Design,Innoveda, Inc. and any Designated Subsidiary of the
Company.
(e) "COMPENSATION" shall mean all base straight time gross
earningsthe amount of money reportable on an
Employee's Federal income Tax Withholding Statement (Form W-2) before any
withholdings for health insurance or under a Section 401(k), 125, 129 or similar
plan, including without limitation, salary, wages, and sales commissions, but
exclusive of payments forexcluding overtime, shift premium, bonuses and incentive compensation incentive payments,other than
sales commissions, third party sick or disability pay, allowances or
reimbursements for expenses such as relocation allowances or travel expenses,
whether specifically designated as such or designated as signing bonuses, income
or gains attributable to restricted stock, stock options, stock appreciation
rights or other similar equity-based compensation, imputed income or non-cash
items, such as life insurance premiums, and other compensation.similar items, whether or not
specifically itemized on the Form W-2.
(f) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the Company
for tax purposes whose customary employment with the Company is at least twenty
(20) hours per week and more than five (5) months in any calendar year.
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.
B-1
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last
1
market trading day prior to the time of determination, as reported in THE WALL STREET JOURNALThe
Wall Street Journal or such other source as the AdministratorBoard 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
JOURNALThe 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 MayAugust 1 and NovemberFebruary
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 2000 Employee Stock Purchase Plan.
(m) "PURCHASE PERIOD" shall mean the period commencing the day after an
Exercise Date and ending on the Trading Day closest to the day that is six
months after the preceding Exercise Date, except that the first Purchase Period
of any Offering Period shall commence on the Enrollment Date and end with the
Trading Day that is six months after the Enrollment Date. The duration and
timing of Purchase Periods may be changed pursuant to Section 4 of the Plan.
(n) "PURCHASE PRICE" shall mean an amount equal to 85% of the Fair Market
Value of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower.
(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.
B-2
(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 aany present or future subsidiary corporation domestic or
foreign, of which not less than 50%as
defined in Section 424(f) 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.Code.
(q) "TRADING DAY" shall mean a day on which national stock exchanges and the
Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee (as defined in Section 2(g)), who shall be employed by the
Company on a given Enrollment Date shall be eligible to participate in the Plan.Plan;
provided, however, that an Employee may not participate in more than one
Offering Period at the same time.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) to the extent that, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
capital stock of the Company or of any Subsidiary and/or hold outstanding
options to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiariesSubsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market valueFair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time. In the event that an Employee may not be granted an
option under the Plan because of the foregoing restrictions, the Employee shall
be granted an option to purchase the maximum number of shares that would not
violate the foregoing restrictions.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after MayAugust 1 and NovemberFebruary 1
2
each year, or on such other date as the Board shall determine, and continuing
thereafter until terminated in accordance with Section 19 hereof. The 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 and Purchase
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.approval.
5. PARTICIPATION.
B-3
(a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement authorizing payroll deductions in the form of Exhibit A
to this Plan and filing it on or prior to the applicable Enrollment Date with
the Company's payroll office prior toor such other office as the applicable Enrollment Date.Company may direct.
(b) Payroll deductions for a participant shall commence on the first payroll
following the Enrollment Date and shall end on the last payroll in the Offering
Period to which such authorization is applicable, unless sooner terminated by
the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription agreement, he or
she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period. Such
payroll deductions shall be in whole percentages only.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and shall be withheld in whole
percentages only.Plan. A participant may not make any additional
payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing orand filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in payroll
deduction rate shall be effective with the first full payroll period following
five (5)ten (10) 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.agreement. 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.
B-4
(e) At the time the option is exercised, in whole or in part, or at the time
some or allany 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 whole number of
shares of the Company's Common Stock the ("Option Shares") 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$50,000 by the Fair Market Value of a share of the Company's Common Stock on the
Enrollment Date (subject to any adjustment pursuant to Section 18), and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. The option shall be exercisable as to 25% of the Option
Shares on each Exercise Date during the Offering Period. Exercise of the option
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof. The option shall expire on the last day
of the Offering Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on theeach Exercise Date during the Offering
Period, and the maximuma number of full shares subjectnot exceeding the number of shares as to
3
which such participant's option is exercisable on such Exercise Date shall be
purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in his or her account. No fractional shares shall
be purchased; anypurchased. Any payroll deductions accumulated in a participant's account
which are not sufficient to purchase a full share of Common Stock shall be
retained in the participant's account for the subsequent Purchase Period or
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. DELIVERY. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant or to his or her designee, as appropriate, of a certificate
representing the shares purchased upon exercise of his or her option. The
Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing
certificates.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any
B-5
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,If, prior to the last
day of the Offering Period, the Designated Subsidiary by which the Employee is
employed shall cease to be a participant who receives payment in lieuSubsidiary of noticethe Company, or if the Employee is
transferred to a Subsidiary of termination of employmentthe Company that is not a Designated Subsidiary,
the Employee shall be treated as continuingdeemed to be an Employeehave terminated employment for the participant's customary numberpurposes of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.this
Plan.
(c) A participant's withdrawal from an Offering Period shall not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which
the participant withdraws.Periods.
11. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock which shall
be made available for sale under the Plan shall be 535,000700,000 shares, subject to
adjustment upon changes in capitalization of the Company as provided in Section 1818(a) hereof. If, on a given Exercise Date,
the number of shares with respect to which options are to be exercised exceeds
the number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares covered
by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
B-64
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,
interpretINTERPRET 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 B-7
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)(A) CHANGES IN CAPITALIZATION. SubjectThe maximum number of shares of Common Stock
available for sale under the Plan, the Reserves, the maximum number of shares
each participant may purchase during each Purchase Period (pursuant to any required
action by the stockholders of the Company, the Reserves,Section
7), as well as the pricePurchase Price per share and the number of shares of Common
Stock covered by each option under the Plan which has not yet been exercised,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration". Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect,
5
and no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an option.
(b)option granted hereunder.
(B) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, the Offering Periods shall terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board.
(C) REORGANIZATION EVENTS.
(1) DEFINITION. A "Reorganization Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of
which the Common Stock is converted into or exchanged for the right to
receive cash, securities or other property, (b) any exchange of shares of
the Company for cash, securities or other property pursuant to a share
exchange transaction, or (c) MERGER OR ASSET SALE. In the event of a proposedany sale of all or substantially all of the
assets of the Company, each while unexercised options remain outstanding
under the Plan.
(2) CONSEQUENCES OF A REORGANIZATION EVENT ON OPTIONS. Upon the
occurrence of a Reorganization Event, or the mergerexecution by the Company of any
agreement with respect to a Reorganization Event, the Board shall provide
that all outstanding options shall be assumed, or equivalent options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an option shall be considered to be assumed
if, following consummation of the Reorganization Event, the option confers
the right to purchase, for each share of Common Stock subject to the option
immediately prior to the consummation of the Reorganization Event, the
consideration (whether cash, securities or other property) received as a
result of the Reorganization Event by holders of Common Stock for each share
of Common Stock held immediately prior to the consummation of the
Reorganization Event (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the
outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Reorganization Event is not solely
common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or into anothersucceeding
corporation, provide for the consideration to be received upon the exercise
of options to consist solely of common stock of the acquiring or succeeding
corporation (or an affiliate thereof) equivalent in fair market value to the
per share consideration received by holders of outstanding shares of Common
Stock as a result of the Reorganization Event.
Notwithstanding the foregoing, in the event that the acquiring or succeeding
corporation refuses to assume, or substitute for, the options, any PurchaseOffering
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, determined by the New Exercise Date.Board. The New Exercise Date shall be
before the date of the Company's proposed sale or
merger.Reorganization Event. The Board shall notify
each participant in writing at least ten (10) business days prior to the New
Exercise Date that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New
B-8
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.
6
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation and establish such other limitations or procedures as
the Board (or its committee) determines in its sole discretion advisable which
are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
SecuritiesSECURITIES 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.
B-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-3any applicable laws, regulations, or rules of the Exchange Act,established stock exchange,
national market system, or over-the-counter market on which the Common Stock
trades, if the Fair Market Value of the Common Stock on any Exercisethe Enrollment Date in anof
the next Offering Period is lower than the Fair Market Value of the Common Stock
on the Enrollment Date of suchthe current Offering Period, then all participants in
suchthe current Offering Period shall be automatically withdrawn from such Offering
Period immediately after the exercise of their option on suchthe Exercise Date and
shall be automatically re-enrolled in the immediately followingnext Offering Period as of the first
day thereof.
B-1024. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on an established stock
exchange or quotation on a national market system or an over the counter market
(to the extent the Common Stock is then so listed or quoted) and the approval of
all governmental authorities required in connection with the authorization,
issuance, or sale of such stock.
25. GOVERNING LAW. The Plan SHALL be governed by Delaware law except to the
extent that such law is preempted by federal law.
26. SOURCE OF SHARES. Shares may be issued upon exercise of an option from
authorized but unissued Common Stock, from shares held in the treasury of the
Company, or from any other proper source.
7
27. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by participating
in the Plan, to promptly give notice to the Company of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of the grant of the option pursuant to which such shares were purchased
or within one year of the date of exercise of such option pursuant to which such
shares were purchased.
Adopted by the Board of Directors
on May 16, 2000
8
EXHIBIT A
SUMMIT DESIGN,INNOVEDA, INC.
19962000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_______ Original____Original Application Enrollment Date: _____________
_______ Change________
____Change in Payroll Deduction Rate
_______ Change____Change of Beneficiary(ies)
____Decline Participation
1. ________________________________ hereby elects to participate in the Summit Design,Innoveda, Inc. 19962000
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.option on each Exercise Date.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in all
respects subject to the terms of the Plan.
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 understandhereby agree that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the Offering
Period during which I purchased such shares) or one year after the Exercise Date
on which I purchased such shares, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in
B-11
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 tonotify the Company in writing within 30
days after the date of 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.my shares.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan.
The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
A-1
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
BENEFICIARY:
NAME:
(Please print) -----------------------------------------------------------_________________________________________________________________
(First) (Middle) (Last)
- ------------------------------- ------------------------------------------________________________________________________________________________________
Relationship
------------------------------------------
(Address)
B-12
____________________________
Address
Employee's Social
Security Number:
----------------------------------------______________________________________________________________________________
Employee's Address:
----------------------------------------
----------------------------------------
----------------------------------------______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ------------------------- ----------------------------------------____________________________
____________________________
Signature of Employee
----------------------------------------____________________________________
Spouse's Signature (If beneficiary other than spouse)
B-13A-2
EXHIBIT B
SUMMIT DESIGN,INNOVEDA, INC.
19962000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Summit Design,Innoveda, Inc.
19962000 Employee Stock Purchase Plan which began on ____________, 19____, 2000 (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
-----------------------------------
-----------------------------------
-------------------------------------------------------------------------------
--------------------------------------------
--------------------------------------------
Signature:
-------------------------------------------------------------------------------
Date:
------------------------------
B-14
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 30, 1999, and hereby appoints Larry J.
Gerhard, Richard Davenport 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 26, 1999 at 2:00 p.m.,
local time, at the Embassy Suites, 9000 S.W. Washington Square Road, Tigard,
Oregon 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 ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
DETACH HERE
- ------------------------------------------------------------------------------------------------------------------------------------
/X/ Please mark
votes as in
this example
A vote FOR the following proposals is recommended by the Board of Directors.
FOR AGAINST ABSTAIN
1. Proposal to elect William V. Botte and Barbara M. Karmel 2. Proposal to amend Summit Design, / / / / / /
as the Class II directors to serve for a term of three years. Inc.'s 1994 Stock Plan as described
in the accompanying Proxy Statement.
FOR WITHHELD 3. Proposal to amend Summit Design, / / / / / /
/ / / / Inc's 1996 Employee Stock Purchase
Plan as described in the
accompanying Proxy Statement.
4. Proposal to ratify the appointment / / / / / /
/ / of PricewaterhouseCoopers LLP as
--------------------------------------- Summit Design, Inc.'s Independent
For all nominee except as noted above accountants for the fiscal year
ending December 31, 1999.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
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:
---------------------------------- ----------- -------------------------------------- ------------
--------------------------------------
B-1