<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by 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
ZYCAD CORPORATION
- --------------------------------------------------------------------------------
(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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
------------------------------------------------------------------------
/X/ 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:
------------------------------------------------------------------------
<PAGE>
[LOGO]
ZYCAD CORPORATION
47100 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 18, 1995
------------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Zycad
Corporation (the "Company"), a Delaware corporation, will be held on Monday,
December 18, 1995 at 3:30 p.m., Pacific Standard Time, at the Company's
principal executive offices at 47100 Bayside Parkway, Fremont, California, for
the following purposes:
1. To ratify and approve the Company's 1993 Stock Option Plan (the
"1993 Plan") and authorize the issuance of 1,500,000 shares of Common Stock
upon the exercise of stock options granted under the 1993 Plan.
2. To ratify and approve the amendment to the 1993 Plan increasing the
number of shares that may be issued under the 1993 Plan from 1,500,000
shares to 3,000,000 shares.
3. To ratify the amendment to the Zycad Corporation Employee Stock
Purchase Plan (the "Stock Purchase Plan") increasing the number of shares
that may be issued under the Stock Purchase Plan from 300,000 shares to
500,000 shares.
4. To approve the 1995 Stock Option Plan for Non-employee Board
Directors and reserve 200,000 shares of stock for issuance thereunder.
5. To amend the Certificate of Incorporation of the Company to increase
the number of shares of authorized Common Stock from 25,000,000 shares to
30,000,000 shares.
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of the business on October 18, 1995
are entitled to notice of and to vote at the meeting and at any continuation or
adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to vote,
sign, date and return the enclosed proxy as promptly as possible in the
postage-paid envelope enclosed for that purpose.
Any stockholder attending the meeting may vote in person even if he or she
has returned a proxy.
By Order of the Board of Directors
Douglas E. Klint
CORPORATE SECRETARY
Fremont, California
November 17, 1995
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
ZYCAD CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of Zycad
Corporation, a Delaware corporation ("Zycad" or the "Company"), for use at the
Special Meeting of Stockholders to be held Monday, December 18, 1995 at 3:30
p.m., Pacific Standard Time, and at any adjournment thereof. The Special Meeting
will be held at Zycad's principal executive offices, 47100 Bayside Parkway,
Fremont, California 94538. The Company's telephone number at this address is
(510) 623-4400.
The Company intends to mail this Proxy Statement to Stockholders on or about
November 22, 1995.
BACKGROUND
Shareholders have previously approved the 1984 Stock Option Plan under which
4,000,000 shares were reserved for issuance to Zycad employees. Of this amount,
3,535,000 option shares were actually granted and 465,000 option shares expired.
In 1993 the Board of Directors approved the 1993 Stock Option Plan and 1,500,000
shares were reserved (this amount includes the 465,000 shares that expired under
the 1984 Stock Option Plan and 1,035,000 new shares). All of these 1,500,000
shares have been granted under the 1993 Plan. Consequently an additional
1,500,000 shares were approved for issuance under the 1993 Plan by the Board in
August 1995.
Stock options are required to provide incentives to both retain existing
employees or to recruit new employees. Because the competition for highly
specialized personnel is extremely keen in the electronic technology industry,
stock incentives are often the difference between retaining and hiring key
people or losing them to competitors. With the approval of the additional
1,500,000 shares under the 1993 Stock Option Plan, the increase of 200,000
shares in the Employee Stock Purchase Plan and the 200,000 shares for
non-employee members of the Board of Directors, the total outstanding shares and
shares reserved for issuance will amount to 24,228,000 or 97% of the 25,000,000
authorized amount. Accordingly, management recommends that the authorized shares
of Common Stock be increased from 25 million shares to 30 million shares. This
increase would allow management to raise additional capital, if necessary, to
satisfy the growth demands of either the company's traditional business or the
GateField business.
Accordingly, the Board of Directors recommends approval of the items
described on the proxy statement.
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A summary of the current option/warrant shares and the new shares being
recommended by management follows (rounded to the nearest 1,000):
<TABLE>
<S> <C> <C>
Shares outstanding at October 18, 1995.............................. 19,641,000
1984 STOCK OPTION PLAN -- 4,000,000 shares authorized
Exercised and included in the 19.6 M above........................ 2,458,000
Outstanding options not yet exercised............................. 1,077,000 1,077,000
---------
Total granted..................................................... 3,535,000
Expired and not used.............................................. 465,000
---------
TOTAL........................................................... 4,000,000
1993 STOCK OPTION PLAN -- 1,500,000 shares approved by the Board of
Directors
Not used in the 1984 Plan......................................... 465,000
New additions..................................................... 1,035,000
---------
TOTAL........................................................... 1,500,000 1,500,000
Less: Options exercised and included in the 19.6M above........... (20,000)
Warrants outstanding.............................................. 130,000
----------
Total shares, options and warrants currently outstanding or
reserved......................................................... 22,328,000
Total shares, options and warrants currently outstanding.......... 22,328,000
1993 Plan Increase................................................ 1,500,000
Employee stock purchase plan increase............................. 200,000
1995 Plan for Outside Directors................................... 200,000
TOTAL........................................................... 24,228,000
Unreserved and remaining for future issuance...................... 772,000
----------
Current authorized amount......................................... 25,000,000
Recommended increase in authorized amount......................... 5,000,000
----------
NEW AUTHORIZED AMOUNT........................................... 30,000,000
</TABLE>
RECORD DATE AND SHARES OUTSTANDING
Stockholders of record at the close of business on October 18, 1995 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 19,640,838 shares of the Company's Common Stock ("Common Stock"),
$.10 par value, were issued and outstanding. The closing price of the Common
Stock on the Record Date, as reported by the NASDAQ National Market, was $8.125
per share.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it any time before it is exercised. It may be revoked by
filing with the Corporate Secretary of the Company at the Company's principal
executive office, 47100 Bayside Parkway, Fremont, California 94538, an
instrument of revocation or a duly executed proxy bearing a later date, or it
may be revoked by attending the meeting and voting in person.
VOTING AND SOLICITATION
On each matter being presented at the Special Meeting, stockholders are
entitled to one vote for each share of Common Stock held.
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
card and any additional material furnished to stockholders. The solicitation of
proxies by mail may be supplemented by telephone, telegram, video or personal
solicitation by directors, officers or employees of the Company. No additional
compensation will be paid to these persons for any such services. In addition,
The Company has retained the services
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<PAGE>
of Beacon Hill Partners, Inc. as a paid solicitor to solicit proxies for an
estimated fee of $3,500 plus out-of-pocket expenses. The Company may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners.
Except as described above, the Company does not intend to solicit proxies other
than by mail.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Special Meeting
is a majority of the shares of Common Stock issued and outstanding on the Record
Date (excluding treasury stock). Shares that are voted "FOR", "AGAINST" or
"WITHHELD FROM" a matter are treated as being present at the meeting for
purposes of establishing a quorum and are also treated as votes eligible to cast
by the Common Stock present in person or represented by proxy at the Special
Meeting and "entitled to vote on the subject matter" (the "Votes Cast") with
respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both the presence or absence of a
quorum for the transaction of business and the total number of Votes Cast with
respect to a particular matter. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner. Accordingly,
an abstention has the same effect as a vote against a proposal. In a 1988
Delaware case, BERLIN V. EMERALD PARTNERS, the Delaware Supreme Court held that,
while broker non-votes should be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, broker
non-votes with respect to proposals such as those set forth in this Proxy
Statement should not be considered "Votes Cast" and, accordingly, will not
affect the determination as to whether the requisite majority of Votes Cast has
been obtained with respect to a particular matter other than the amendment of
the Certificate of Incorporation.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be included in
the proxy statement relating to the Company's 1996 Annual Meeting of
Stockholders must be received by the Company no later than December 29, 1995 in
order that they may be considered for possible inclusion in the proxy statement
and form of proxy relating to that meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the Record Date (i) by each person
known by the Company to own beneficially more than five percent (5%) of the
Company's Common Stock, (ii) by each of the Company's directors, (iii) by each
of the executive officers named in the Summary Compensation Table, and (iv) by
all executive officers and directors of the Company as a group.
3
<PAGE>
SHARES OF COMMON STOCK BENEFICIALLY OWNED
<TABLE>
<CAPTION>
APPROXIMATE
NAME OF INDIVIDUAL NUMBER OF PERCENT
IDENTITY OF GROUP SHARES OWNED OWNED
- ------------------------------------------------------------------------------ --------------- -----------------
<S> <C> <C>
Phillips W. Smith ............................................................ 1,021,993 5.2%
4601 E. Indian Bend Rd.
Paradise Valley, AZ 85253
James Fiebiger ............................................................... 23,668(1) *
Benjamin Huberman ............................................................ 90,000(2) *
Peter J. Cassidy ............................................................. 300,000(3) 1.5%
Douglas E. Klint ............................................................. 4,001(4) *
John R. Harding .............................................................. -- --
(Resigned 10/31/94)
All directors and current executive officers as a group (7 persons) . 1,435,479(5) 7.2%
</TABLE>
- ------------------------
* Less than (1) percent.
(1) Includes 20,000 shares subject to warrants held by Dr. Fiebeger that are
exercisable within 60 days of the Record Date.
(2) Includes 70,000 shares subject to warrants held by Mr. Huberman that are
exercisable within 60 days of the Record Date.
(3) Represents 300,000 shares subject to options held by Mr. Cassidy that are
exercisable within 60 days of the Record Date.
(4) Includes 4,000 shares subject to options held by Mr. Klint that are
exercisable within 60 days of the Record Date.
(5) Includes 394,818 shares subject to options and warrants held by five persons
that are exercisable within 60 days of the Record Date.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company
receive a retainer of $2,500 per quarter plus a fee of $1,000 for attendance at
each Board and Board Committee meeting and are reimbursed for their expenses in
attending meetings of the Board of Directors. On September 10, 1990, Mr.
Huberman received warrants from the Company entitling him to purchase 50,000
shares of the Company's Common Stock at an exercise price of $1.00 per share,
the then market value. The warrants granted on September 10, 1990, did not
become exercisable until six months from the issue date (sixth month anniversary
date), at which time these warrants became exercisable for 16.6% of such shares
and became exercisable cumulatively as to 2.78% of such shares on the seventh
month anniversary date and on each monthly anniversary date thereafter. These
1990 warrants are now exercisable in full. On August 16, 1993, Mr. Huberman
received additional warrants from the Company entitling him to purchase 30,000
shares of the Company's Common Stock at an exercise price of $2.06 per share,
the then market value. These warrants become exercisable cumulatively for 10,000
shares on each yearly anniversary date. On February 4, 1994, Dr. Fiebiger
received warrants from the Company entitling him to purchase 50,000 shares of
the Company's Common Stock at an exercise price of $3.63 per share, the then
market value. These warrants become exercisable for 10,000 shares on each yearly
anniversary date. All warrants expire six years after their respective issue
dates or 90 days after resignation from the Board of Directors, whichever occurs
first.
4
<PAGE>
PROPOSAL ONE
APPROVAL OF THE 1993 STOCK OPTION PLAN
The Company has two employee stock option plans, the 1984 Stock Option Plan
and the 1993 Stock Option Plan. The 1984 Stock Option Plan (the "1984 Plan") was
adopted in March 1984 and is described in the Section titled "Stock Options and
Stock Appreciation Rights" under Executive Compensation. There are a total of
4,000,000 shares of Common Stock reserved for issuance and approved by the Board
of Directors and stockholders under the 1984 Plan. As of September 30, 1995,
options to purchase approximately 3,535,000 shares had been granted under the
1984 Plan, 2,458,000 shares had been exercised and options to purchase 1,077,000
shares were outstanding. Due to the fact that the 1984 Plan expired in March
1994, there are no options available under this Plan for future grants.
The 1993 Stock Option Plan (the "1993 Plan") was adopted by the Board of
Directors in August 1993, at which time 1,500,000 shares of Common Stock were
authorized by the Board of Directors for issuance under the 1993 Plan. As of
September 30, 1995, options to purchase approximately 1,500,000 shares had been
granted under the 1993 Plan, 20,000 shares had been exercised and options to
purchase 1,480,000 were outstanding. There are currently no shares available
from this initial reserve of 1,500,000 shares for future grant under the 1993
Plan.
PROPOSAL
In August 1993, the Board of Directors adopted the 1993 Plan and reserved
1,500,000 shares for issuance thereunder. The Board adopted the 1993 Plan in
anticipation of the expiration of the 1984 Plan in March 1995. At the Special
Meeting, the stockholders are being requested to ratify and approve the 1993
Plan and authorize the issuance 1,500,000 shares of Common Stock thereunder in
Proposal One.
The Company believes stock options play a key role in the Company's ability
to recruit, reward and retain executives and key employees. High technology
companies like Zycad have historically used stock options as an important part
of recruitment and retention packages. The Company competes directly with these
companies for experienced engineers, executives and key personnel and must be
able to offer comparable packages to attract the caliber of individual that the
Company believes is necessary to achieve the Company's objectives. The Company's
growth and diversification through the Gatefield division is partly responsible
for the need to adopt a new stock option plan to replace the expired 1984 Plan.
The 1993 Plan is structured to comply with the requirements of Rule 16b-3
under the Exchange Act, which provides an exemption from the short-swing trading
restrictions applicable to officers and directors for certain employee benefit
plans. In order to comply with the rule, such plans must be in writing, approved
by the stockholders and subject to "disinterested administration," as defined in
the rule, and the options granted thereunder must be nontransferable and must be
held at least six months prior to disposition of the option (other than by way
of exercise) or the underlying stock. Failure to comply with Rule 16b-3 would
impair the value of the plan in providing equity incentives to officers in that
the grant of an option could be characterized as a "purchase" of a security,
subject to the prohibition against realizing profit from any purchase and sale
within a six-month period, as set forth in Section 16 of the Exchange Act.
All of the Company's employees, currently approximately 212, are eligible to
participate in the Option Plan.
SUMMARY OF THE 1993 STOCK OPTION PLAN
GENERAL. The 1993 Plan gives the Board, or a committee appointed by the
Board, authority to grant options to purchase Common Stock. Options granted to
employees under the 1993 Plan may be
5
<PAGE>
either "incentive stock options" as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock options, at
the discretion of the Board or its committee, except that options granted prior
to the Share Increase Amendment may not be ISO's.
PURPOSES. The purposes of the 1993 Plan are to attract and retain the best
available personnel for the Company, to provide additional incentive to the
employees of the Company and to promote the success of the Company's business.
ADMINISTRATION. The 1993 Plan may be administered by the Board or a
committee of the Board so long as administration complies with the provisions of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). All option grants to officers of the Company are
determined by the Compensation Committee, while grants to other employees are
proposed by such committee and approved by the Board of Directors.
ELIGIBILITY. The 1993 Plan provides that stock options may be granted to
employees (including officers and directors who are also employees), of the
Company and its majority-owned subsidiaries. The Board or a committee of the
Board selects the participants and determines the number of shares to be subject
to each stock option. As of the Record Date, the Company and its majority-owned
subsidiaries had a total of 212 employees.
EXERCISE PRICE. The per share price for shares issued pursuant to options
granted under the 1993 Plan is determined by the Board or its committee and must
not be less than 100% of the fair market value of the Common Stock on the date
of the grant. Fair market value per share is the closing price as reported on
the NASDAQ National Market on the date of grant.
Incentive stock options granted to stockholders owning more than 10% of the
Company's outstanding stock are subject to the additional restriction that the
exercise price must be at least 110% of the fair market value on the date of
grant.
TERMS OF OPTIONS. Each option is evidenced by a written agreement between
the Company and the person to whom such option is granted. The Board or its
committee determines the terms of the options granted under the 1993 Plan.
Each option shall be designated either an incentive stock option or a
nonstatutory stock option, except that 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 an optionee during any
calendar year (under all plans of the Company) exceeds $100,000, such excess
options shall be treated as nonstatutory stock options.
Options typically vest over a four-year period at a rate of one-fourth after
each year for the first two years and ratably each month thereafter. Pursuant to
the 1993 Plan, options may be subject to the following additional terms and
conditions:
(a) EXPIRATION OF OPTIONS. The term of each option granted under the 1993
Plan is ten years from the date of grant, unless a shorter period is
provided in the stock option agreement.
However, incentive stock options granted to an optionee who, at the time
of the grant, owns stock representing more than 10% of the Company's
outstanding stock, expire five years from the date of grant or such
shorter time as may be provided in the stock option agreement.
(b) EXERCISE OF OPTION. The optionee must earn the right to exercise the
option by continuing to work for the Company. The Board or a committee of
the Board may determine when options are exercisable.
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 tendering payment of the purchase price to the Company. The
permissible methods of payment of the exercise price of
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<PAGE>
the shares purchased upon exercise of an option shall be determined by
the Board or its committee in accordance with the provisions of the 1993
Plan and the applicable option agreement.
(c) TERMINATION OF EMPLOYMENT. If an optionee's employment with the Company
is terminated for any reason other than death or permanent disability,
the optionee's options outstanding under the 1993 Plan may be exercised
within three (3) months (or such other period of time as determined by
the Board, not to exceed certain limits) after the date of such
termination (but in no event later than the date of expiration of the
term of such option) to the extent the options were exercisable on the
date of termination.
(d) DISABILITY OF OPTIONEE. If an optionee's employment by the Company
terminates because of total and permanent disability, the optionee's
options outstanding under the 1993 Plan may be exercised within 12 months
(or such other period of time as determined by the Board, not to exceed
certain limits) after termination (but in no event later than the date of
expiration of the term of such option) to the extent such options were
exercisable at the date of termination.
(e) DEATH OF OPTIONEE. If an optionee should die while employed by the
Company, the optionee's options outstanding under the 1993 Plan may be
exercised by his or her representatives at any time within 12 months
after death (but in no event later than the date of expiration of the
term of such option) to the extent the options were exercisable at the
date of death.
(f) 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.
(g) ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR MERGER. In the event any
change is made in the Company's capitalization, such as a stock split or
reverse stock split, appropriate adjustment shall be made to the purchase
price and to the number of shares subject to the stock option. In the
event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation,
the successor corporation shall assume all outstanding options or
substitute new options therefor. If the successor corporation refuses to
assume the options or substitute equivalent options, the Board may
determine in its discretion to accelerate the exercisability of such
options.
(h) AMENDMENT AND TERMINATION OF THE 1993 PLAN. The Board may amend or
terminate the 1993 Plan from time to time in such respects as the Board
may deem advisable, without approval of the stockholders, except to the
extent and in the manner required by Rule 16b-3 under the Exchange Act
[or Section 422 of the Code]. Any amendment or termination of the 1993
Plan shall not affect options already granted and such options shall
remain in full force and effect as if the 1993 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 1993 Plan shall terminate in August 2003. Any options
outstanding under the 1993 Plan at the time of its termination shall
remain outstanding until they expire by their terms.
FEDERAL TAX INFORMATION
Options granted under the 1993 Stock Option Plan may be either "incentive
stock options," as defined in Section 422 of the Code, or nonstatutory options,
except that all options granted under the 1993 Plan prior to the Share Increase
Amendment are nonstatutory options.
If an option is an incentive stock option, the optionee will recognize no
income upon grant of the incentive stock option and incur no tax liability due
to the exercise unless the optionee is subject to the alternative minimum tax.
The Company will not be allowed a deduction for federal income tax
7
<PAGE>
purposes as a result of the exercise of an incentive stock option regardless of
the applicability of the alternative minimum tax. Upon the sale or exchange of
the shares at least two years after grant of the option and one year after
receipt of the shares by the optionee, any gain will be treated as long-term
capital gain and any loss will be treated as long-term capital loss. If these
holding periods are not satisfied, the optionee will recognize ordinary income
equal to the difference between the exercise price and the lower of (i) the fair
market value of the stock at the date of the option exercise or (ii) the sale
price of the stock. 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 will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Any gain or
loss recognized on such a premature disposition of the shares in excess of the
amount treated as ordinary income will be characterized as short-term or
long-term capital gain or loss, depending on the holding period, and will not
result in any deduction by the Company.
All options that do not qualify as incentive stock options are referred to
as nonstatutory options. An optionee will not recognize any taxable income at
the time he or she is granted a nonstatutory option. However, upon its exercise,
the optionee will generally recognize ordinary income for tax purposes measured
by the excess of the then fair market value of the shares over the exercise
price and the Company will be entitled to a tax deduction in the same amount.
The income recognized by an optionee who is also an employee of the Company will
be subject to tax withholding by the Company by payment in cash or out of the
current earnings paid to the optionee. Upon resale of such shares by the
optionee, any difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, will be treated as
capital gain or loss.
Different rules may apply with respect to optionees subject to Section 16(b)
of the Exchange Act.
The foregoing summary of the effect of federal income taxation upon the
participant and the Company with respect to the purchase of shares under the
1993 Plan does not purport to be complete, and reference should be made to the
applicable provisions of the Code. In addition, this summary does not discuss
the tax consequences of the optionee's death or the income tax laws of any
municipality, state or foreign country in which the participant may reside.
PARTICIPATION IN THE 1993 STOCK OPTION PLAN
The grant of options under the 1993 Plan to employees, including the
executive officers named in the Summary Compensation Table (the "Named Executive
Officers"), is subject to the discretion of the Board or its committee. As of
the date of this Proxy Statement, there has been no determination by the
Committee with respect to future awards under the 1993 Plan. Accordingly, future
awards are not
8
<PAGE>
determinable. The following table sets forth information with respect to the
grant of options under the 1993 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 ended December 31, 1994.
NEW PLAN BENEFITS
1993 STOCK OPTION PLAN
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
PRICE
OPTIONS PER
NAME OF INDIVIDUAL OR IDENTITY OF GROUP AND POSITION GRANTED (#) SHARE ($/SH.)
- -------------------------------------------------------------------------------- ------------- ----
<S> <C> <C>
Phillips W. Smith, President and CEO............................................ 0 0
Peter J. Cassidy, Executive Vice President and CFO.............................. 0 0
John R. Harding, Executive Vice President, Sales and Marketing (Resigned on
10/31/94)...................................................................... 0 0
Douglas E. Klint, Vice President, Secretary and General Counsel................. 0 0
Horst Sandfort, President, GateField Division (Hired 9/6/95).................... 400,000(1) $6.81
Charles Olson, Vice President and General Manager, Accelerator Division (Became
an executive officer on 6/30/95)............................................... 150,000(2) $1.00
All current executive officers as a group (5 persons)........................... 550,000(1)(2) $5.23
All other employees as a group.................................................. 950,000 $2.46
</TABLE>
- ------------------------
(1) Represents options granted in September 1995 subject to stockholder approval
of the 1993 Plan.
(2) Represents options granted prior to Mr. Olson's appointment as an executive
officer in June 1995.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Affirmative votes constituting a majority of the Votes Cast will be required
to approve the 1993 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE 1993 PLAN.
PROPOSAL TWO
AMENDMENT TO THE 1993 PURCHASE PLAN
PROPOSAL
In August 1993, the Board of Directors adopted the 1993 Plan and reserved
1,500,000 shares for issuance thereunder. See Proposal One "Approval of the 1993
Stock Option Plan". Options for all of the initial reserve of 1,500,000 shares
have been granted under the 1993 Plan.
In August 1995, the board of Directors adopted an amendment (the "Share
Increase Amendment") to increase the number of shares reserved for issuance
under the 1993 Plan from 1,500,000 to 3,000,000 shares. At The Special Meeting,
the stockholders are requested to ratify and approve the Share Increase
Amendment increasing the number of shares reserved for issuance under the 1993
Plan from 1,500,000 to 3,000,000 shares.
The Company believes stock options play a key role in the Company's ability
to recruit, reward and retain executives and key employees. High technology
companies like Zycad have historically used stock options as an important part
of recruitment and retention packages. The Company competes directly with these
companies for experienced engineers, executives and key personnel and must be
9
<PAGE>
able to offer comparable packages to attract the caliber of individual that the
Company believes is necessary to achieve the Company's objectives. The Company's
growth and diversification through the Gatefield division is partly responsible
for the need to adopt the Share Increase Amendment.
See Proposal One "Approval of the 1993 Stock Option Plan" for a summary of
the 1993 Plan, federal tax information, and information on participation in the
1993 Plan.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Affirmative votes constituting a majority of the votes cast will be required
to approve the Share Increase Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE SHARE
INCREASE AMENDMENT.
PROPOSAL THREE
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "Stock Purchase Plan") was adopted by
the Board of Directors in March 1987 and approved by the stockholders in May
1987. The Stock Option Plan originally provided for 100,000 shares of the
Company's Common Stock for sale to employees. In February 1992, the Board of
Directors increased the number of shares authorized to be issued under the Stock
Purchase Plan from 100,000 shares to 300,000 shares, which increase was approved
by the stockholders at the 1992 Annual Meeting of Stockholders. As of January 1,
1995, all of the 300,000 shares available under the Stock Purchase Plan had been
purchased by employees and there were no shares available for future issuance
under the Stock Purchase Plan.
PROPOSAL
On August 30, 1995, the Board of Directors approved an amendment to the
Stock Purchase Plan to increase the number of shares reserved for issuance
thereunder from 300,000 shares to 500,000 shares. The stockholders are being
asked to approve this amendment at the Special Meeting.
The Company estimates that it will utilize substantially all of this
increase of 200,000 shares through employee purchases under the Stock Purchase
Plan during fiscal years 1996 and 1997 until the Stock Purchase Plan expires on
December 31, 1997.
The Board of Directors believes it is in the best interests of the Company
to provide employees with an opportunity to purchase Common Stock of the Company
through payroll deductions. The Board of Directors further believes that the
availability of an adequate number of shares for issuance under the Stock
Purchase Plan is important to provide employees with an opportunity to acquire a
proprietary interest in the Company and a stronger incentive to work for its
continued success.
SUMMARY OF THE STOCK PURCHASE PLAN
PURPOSE. The purpose of the Stock Purchase Plan is to provide employees of
the Company and its wholly-owned subsidiaries who participate in the Stock
Purchase Plan with an opportunity to purchase Common Stock of the Company
through payroll deductions.
ADMINISTRATION. The Purchase Plan is administered by a committee of three
employees appointed by the Board of Directors. All questions of interpretation
or application of the Stock Purchase Plan are determined in the sole discretion
of the Board of Directors or its committee, and its decisions are final and
binding upon all participants.
ELIGIBILITY. Any person who is employed by the Company (or by any of its
wholly-owned subsidiaries) for at least 20 hours per week and more than 30 days
and is not a 5% stockholder is eligible to participate in the Purchase Plan. As
of January 1, 1995, approximately 247 employees were eligible to participate in
the Purchase Plan and approximately 51 of such eligible employees were
participating.
10
<PAGE>
Eligible employees become participants in the Stock Purchase Plan by
delivering to the Company's personnel office at least 20 days prior to the
commencement of an offering period an agreement authorizing payroll deductions.
An employee who becomes eligible to participate in the Purchase Plan after the
commencement of an offering may not participate in the Purchase Plan until the
commencement of the next offering period.
OFFERING PERIODS. The three-month offering periods commence January 1,
April 1, July 1 and October 1 of each year.
PURCHASE PRICE. The purchase price per share at which shares are sold under
the Stock Purchase Plan is the lower of the fair market value of a share of
Common Stock on the date of commencement of the offering period or the fair
market value of a share of Common Stock on the last day of such offering period.
The fair market value of the Common Stock on a given date shall be the closing
sales price as reported by NASDAQ on such date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS. The purchase price of the
shares is accumulated by payroll deductions during the offering period. The
deductions may not be less than 3% nor more than 10% of a participant's eligible
compensation, which is defined in the Stock Purchase Plan to include the regular
straight-time salary as of each payday during the offering period plus any
commissions, exclusive of any payments for bonuses or other incentive
compensation. A participant may institute decreases or increases in the rate of
payroll deductions at any time and such increases or decreases are effective as
of the commencement of the next offering period.
No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose and such payroll deductions need not be segregated.
PURCHASE OF STOCK; EXERCISE OF OPTION. At the beginning of each offering
period, by executing an agreement to participate in the Stock Purchase Plan,
each employee is in effect granted an option to purchase shares of Common Stock.
The maximum number of shares placed under option to a participant in an offering
period is determined by dividing the compensation that such participant has
elected to have withheld during the exercise period by the fair market value of
the Common Stock at the beginning of the offering period or on the last day of
the exercise period, whichever is lower, provided that such number shall not be
less than 10 shares nor more than 800 shares. Notwithstanding the foregoing, no
employee may make aggregate purchases of stock of the Company and any other
employee stock purchase plan that may be adopted by the Company qualified as
such under Section 423(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), in excess of $25,000 (determined using the fair market value of the
shares at the time the option is granted) during any calendar year.
WITHDRAWAL. While each participant in the Stock Purchase Plan is required
to sign an agreement authorizing payroll deductions, a participant may terminate
his or her participation in the Stock Purchase Plan at any time by signing and
delivering to the Company a notice of withdrawal from the Stock Purchase Plan.
All of the participant's accumulated payroll deductions will be paid to the
participant within 30 days after receipt of his or her notice of withdrawal and
his or her participation in the current offering period will be automatically
terminated, and no further payroll deductions for the purchase of shares will be
made during the offering period. No resumption of payroll deductions will occur
on behalf of such participant unless such participant re-enrolls in the Stock
Purchase Plan by delivering a new agreement to the Company during the applicable
open enrollment period preceding the commencement of a subsequent offering
period. A participant's withdrawal from the Stock Purchase Plan during an
offering period does not have any effect upon such participant's eligibility to
participate in subsequent offering periods under the Stock Purchase Plan.
TERMINATION OF EMPLOYMENT. Termination of a participant's employment for
any reason, including retirement or death, cancels his or her participation in
the Stock Purchase Plan immediately. In
11
<PAGE>
such event, the payroll deductions credited to the participant's account will be
returned to such participant or, in the case of death, to the person or persons
entitled thereto as specified by the employee in the subscription agreement.
CAPITAL CHANGES. If any change is made in the capitalization of the
Company, such as stock splits or stock dividends, which results in an increase
or decrease in the number of shares of Common Stock outstanding without receipt
of consideration by the Company, appropriate adjustments will be made by the
Company in the number of shares subject to purchase and in the purchase price
per share, subject to any required action by the stockholders of the Company.
AMENDMENT AND TERMINATION OF THE PURCHASE PLAN. The Board of Directors may
at any time amend or terminate the Stock Purchase Plan, except that such
termination shall not affect options previously granted nor may any amendment
make any change in an option granted prior thereto that adversely affects the
rights of any participant. No amendment may be made to the Stock Purchase Plan
without prior approval of the stockholders of the Company if such amendment
would increase the number of shares reserved under the Stock Purchase Plan,
permit payroll deductions at a rate in excess of 10% of a participant's
compensation, modify the eligibility requirements or materially increase the
benefits that may accrue to participants under the Stock Purchase Plan.
CERTAIN FEDERAL INCOME TAX INFORMATION.
The Stock Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of shares. Upon disposition of
the shares, the participant will generally be subject to tax and the amount of
the tax will depend upon the holding period. If the shares have been held by the
participant for more than two years after the beginning of the offering period,
offering date and more than one year after the purchase date, the lesser of: (a)
the excess of the fair market value of the shares at the time of such
disposition over the purchase price, or (b) the excess of the fair market value
of the shares at the time the option was granted over the purchase price (which
purchase price will be computed as of the grant date) will be treated as
ordinary income, and any further gain will be treated as long-term capital gain.
If the shares are disposed of before the expiration of these holding periods,
the excess of the fair market value of the shares on the purchase date over the
purchase price will be treated as ordinary income, and any further gain or any
loss on such disposition will be long-term or short-term capital gain or loss,
depending on the holding period. Different rules may apply with respect to
participants subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended. The Company is not entitled to a deduction for amounts taxed as
ordinary income or capital gain to a participant except to the extent of
ordinary income reported by participants upon disposition of shares prior to the
expiration of the two 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 purchase of shares
under the Stock Purchase Plan, does not purport to be complete, and does not
discuss the income tax laws of any municipality, state or foreign country in
which a participant may reside. It is advisable that a participant contact his
or her own tax advisor concerning the application of these tax laws.
12
<PAGE>
PARTICIPATION IN THE EMPLOYEE STOCK PURCHASE PLAN
The Company cannot now determine the number of shares to be purchased in the
future by the Named Executive Officers, all current executive officers as a
group or all employees (including current officers who are not executive
officers) as a group. During 1994, the following shares of Common Stock were
purchased by such persons pursuant to the Purchase Plan:
PLAN BENEFITS
AMENDED EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR IDENTITY NUMBER OF SHARES
OF GROUP AND POSITION PURCHASED (#) DOLLAR VALUE ($)(1)
- ---------------------------------------------------------------------------- ----------------- -----------------------
<S> <C> <C>
Phillips W. Smith .......................................................... 8,486 0
President and CEO
Peter J. Cassidy ........................................................... 0 0
Exec. VP and CFO
John R. Harding ............................................................ 0 0
Exec VP, Sales and Marketing
(Resigned 10/31/94)
Douglas E. Klint ........................................................... 0 0
VP, Secretary and General Counsel
All Current Executive Officers as a group (5 persons) ...................... 8,486 0
All employees (including current officers who are not executive
officers) ................................................................. 89,384 0
</TABLE>
- ------------------------
(1) Market value of shares on date of purchase, minus the purchase price paid.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Approval of the amendment to the Stock Purchase Plan requires the
affirmative vote of the holders of a majority of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE
EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL FOUR
APPROVAL OF 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE BOARD DIRECTORS AND
RESERVATION OF 200,000 SHARES FOR ISSUANCE THEREUNDER
The 1995 Stock Option Plan For Non-Employee Board Directors (the "1995
Director Plan") was adopted by the Board of Directors in November 1995, and
200,000 shares of Common Stock were reserved for issuance thereunder. The terms
of the 1995 Director Plan provide that it shall become effective on the date
that it is approved by the stockholders. The stockholders are being requested to
approve the 1995 Director Plan at the Special Meeting.
The Company believes that the ability to grant options to non-employee
directors is crucial in order to attract and retain the best available personnel
for service as directors, to provide additional incentive to non-employee
directors and to encourage their continued service.
SUMMARY OF 1995 BOARD OF DIRECTOR PLAN
PURPOSE. The purposes of the 1995 Director Plan are to attract and retain
the best available personnel for service as directors of the Company, to provide
additional incentive to the non-employee directors and to encourage their
continued service on the Board.
13
<PAGE>
ADMINISTRATION. The 1995 Director Plan is designed to work automatically
and not to require administration. However, to the extent administration is
necessary, it will be provided by the Board of Directors of the Company. Members
of the Board of Directors receive no additional compensation for their services
in connection with the administration of the 1995 Director Plan.
ELIGIBILITY. The 1995 Director Plan provides for the grant of nonstatutory
stock options to non-employee directors of the Company ("Outside Directors").
Each Outside Director shall be granted an option to purchase 15,000 shares of
Common Stock (the "First Option") on the date on which he or she first becomes
an Outside Director; provided, however, that no Outside Director who was an
Outside Director immediately prior to the effective date of the 1995 Director
Plan will receive a First Option. In addition, on the date of each Annual
Meeting of Stockholders, (commencing in 1996), each Outside Director shall
automatically be granted an option to purchase 7,500 shares of Common Stock of
the Company (a "Subsequent Option"), if on this date such Outside Director's
previously granted stock warrants or stock options, if any, are fully vested.
The 1995 Director Plan provides for a maximum of 100,000 option shares that may
be granted to any Outside Director.
Currently there are four seats on the Board of Directors of the Company, two
of which are occupied by non-employee directors. Each of the two non-employee
directors whom will be eligible to participate in the 1995 Director Plan,
subject to the terms and conditions stated below, but neither will be granted a
First Option.
TERMS OF OPTIONS. Options granted under the 1995 Director Plan have a term
of ten years. Each option is evidenced by a stock option agreement between the
Company and the director to whom such option is granted and is subject to the
following additional terms and conditions.
(a) EXERCISE OF THE OPTION. Options become exercisable cumulatively to
the extent of 50% of the shares subject to the option on each of the first
year anniversary of the date of grant and the remaining 50% of the shares
shall become vested and exercisable on the second year anniversary of the
date of grant. The Subsequent Options become fully vested and exercisable on
the first year anniversary of the date of grant. 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 tendering payment to the
Company of the purchase price. Payment for shares issued upon exercise of an
option may consist of any of the following, or any combination of them: (i)
cash, (ii) check, (iii) other shares of Common Stock (which, in the case of
shares acquired upon exercise of an option granted under the 1995 Director
Plan, shall have been owned by the options for more than six months on the
date of surrender).
(b) EXERCISE PRICE. The exercise price of options granted under the
1995 Director Plan shall be the fair market value on the date of grant. The
Board of Directors determines such fair market value based upon the closing
price of the Common Stock on the NASDAQ on the date of grant. If the date of
grant is not a trading day, the price shall be determined as of the next
trading day immediately preceding the date of grant.
(c) TERMINATION OF STATUS AS A DIRECTOR. The 1995 Director Plan
provides that if there is any break in continuous service of an optionee as
a director (other than as a result of death or total and permanent
disability), the optionee may exercise his or her options to the extent
otherwise exercisable under the 1995 Director Plan as of the date of such
cessation, but only within three months following the date of such
cessation. Notwithstanding the foregoing, in no event may an option be
exercised after its ten-year term has expired.
(d) DEATH. If an optionee should die while serving as a director of the
Company, the optionee's estate or a person who acquired the right to
exercise the option by bequest or inheritance may exercise his or her
options to the extent otherwise exercisable under the 1995 Director Plan as
of the date of such cessation, but only within twelve months following the
date of the optionee's death. Notwithstanding the foregoing, in no event may
an option be exercised after its ten-year term has expired.
14
<PAGE>
(e) DISABILITY. If an Optionee's continuous service as a director
terminates as a result of total and permanent disability, the optionee may
exercise his or her options to the extent otherwise exercisable under the
1995 Director Plan as of the date of such cessation, but only within 12
months following the date of such cessation. Notwithstanding the foregoing,
in no event may an option be exercised after its ten-year term has expired.
(f) NON-TRANSFERABILITY OF OPTIONS. An option may not be sold, pledged,
assigned, HYPOTHECATED, transferred or disposed of in any manner other than
by will or the laws of descent or distribution and may be exercised during
the lifetime of the optionee only by the optionee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION AND OTHER EVENTS. Subject to any
required action by the stockholders of the Company, the number of shares covered
by each outstanding option, the number of shares that have been authorized for
issuance under the 1995 Director Plan but as to which no options have yet been
granted, as well as the price per share covered by each such outstanding option,
and the number of shares issuable on exercise of options granted pursuant to the
automatic grant provisions of the 1995 Director Plan shall be proportionately
adjusted for any increase or decrease in the number of issued shares 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 effected without receipt of consideration by the Company
(excluding conversion of any convertible securities) .
In the event of the proposed dissolution or liquidation of the Company, to
the extent that an option has not been previously exercised, it shall terminate
immediately prior to the consummation of such proposed action.
AMENDMENT AND TERMINATION. The Board of Directors may at any time amend,
alter, suspend or discontinue the 1995 Director Plan; provided, however, that
the 1995 Director Plan may not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. In addition, the
Company shall obtain stockholder approval of any amendment to the 1995 Director
Plan to the extent necessary and desirable to comply with Rule 16b-3 promulgated
under the Securities Exchange Act of 1934. No action by the Board of Directors
or stockholders, however, may alter or impair any option previously granted
under the 1995 Director Plan without the consent of the optionee. In any event,
the 1995 Director Plan will terminate in 2005. Finally, the 1995 Director Plan
is subject to approval by the stockholders at the Special Stockholders Meeting.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1995 Director Plan, does not purport to be complete, and does
not discuss the income tax laws of any municipality, state or foreign country in
which an optionee may reside.
Options granted under the 1995 Director Plan are nonstatutory options
("NSO"). An optionee will not recognize any taxable income at the time he or she
is granted an NSO. However, upon the exercise of an NSO, the optionee will
recognize ordinary income measured by the excess of the then fair market value
of the shares over the exercise price. In certain circumstances, where the
shares arc subject to a substantial risk of forfeiture when acquired or where
the optionee is subject to Section 16 of the Exchange Act, the date of taxation
may be deferred unless the options files an election with the internal Revenue
Service under Section 83 (b) of the Code. Upon resale of such shares by the
optionee, any difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, will be treated as
capital gain (or loss). The Company will be entitled to a tax deduction in the
same amount as the ordinary income recognized by the optionee with respect to
shares acquired upon exercise of an NSO.
As each of the directors eligible to participate in the 1995 Director Plan
could be subject to suit under Section 16(b) of the Exchange Act in the event he
or she disposes of the shares acquired upon
15
<PAGE>
exercise of a stock option granted under the 1995 Director Plan, such directors
generally will not recognize ordinary income at the time of exercise of the
option or right. Instead, the time of taxation generally will be deferred until
the date that the director would no longer be subject to suit upon disposition
of such shares. The directors will recognize ordinary income at that time in an
amount equal to the excess of the then fair market value of the shares over the
purchase price. A director can avoid this deferral by filing a Section 83(b)
election within 30 days after exercise of the option or right.
PLAN BENEFITS
Non-employee directors are the only eligible participants in the 1995
Director Plan. Current non-employee directors are eligible to receive an option
to purchase 7,500 shares of the Common Stock of the Company if they continue
serving as such until the first annual meeting of stockholders after the options
and warrants that they currently hold have fully vested. In addition, each new
non-employee director will be eligible to receive an initial grant of 15,000
shares on the date on which he or she first becomes a director. See SUMMARY OF
1995 DIRECTOR PLAN, above.
REQUIRED VOTE
Approval of the amendment to the 1995 Director Plan requires the affirmative
vote of the holders of a majority of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1995
DIRECTOR PLAN.
PROPOSAL FIVE
AMENDMENT TO CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of the Company, as currently in effect,
provides that authorized capital stock shall consist of 25,000,000 shares of
Common Stock, $0.10 par value, and 2,000,000 shares of Preferred Stock. The
proposed amendment would increase the number of shares of Common Stock
authorized for issuance by 5,00,000 to a total of 30,000,000 shares. As more
fully described below, the proposed amendment is intended to provide the Company
flexibility to meet its future needs for unreserved Common Stock.
The stockholders are being asked to approve such amendment to the
Certificate of Incorporation. The proposed amendment would give the Board the
authority to issue additional shares of Common Stock without requiring future
stockholder approval of such issuance's, except as may otherwise be required by
applicable law.
REASONS FOR THE PROPOSED AMENDMENT
The Company's number of authorized shares of Common Stock has remained at
25,000,000 since 1983. As of October 18, 1995, 19,640,838 shares of the Common
Stock were issued and outstanding; 130,000 shares were reserved for issuance
upon exercise of certain stock warrants; 4,057,000 shares were reserved for
issuance under the Company's employee stock option plans (of which 3,000,000
shares are subject to stockholder approval); 200,000 shares were reserved for
issuance under the 1995 Directors Plan (subject to stockholder approval); and
200,000 shares were reserved for issuance under the Company's Employee Stock
Purchase Plan (subject to stockholder approval); leaving only 772,000 shares of
Common Stock available for future issuance. The number of shares remaining
available is not considered adequate for the Company's future possible
requirements.
Although the Company has no specific plans to use the additional authorized
shares of Common Stock, the Company's Board of Directors believes that it is
prudent to increase the number of authorized shares of Common Stock to the
proposed level in order to provide a reserve of shares available for issuance's
in connection with possible future actions. Such actions may include, but are
not limited, to stock splits or stock dividends if the Board of Directors were
to determine that it would be desirable to facilitate a broader base of
shareholders. The Company's Board of Directors also believes that the increased
number of shares will provide the flexibility to effect other possible actions
16
<PAGE>
such as financings, corporate mergers, acquisitions, employee benefit plans and
for other general corporate purposes. Having such additional authorized Common
Stock available for issuance in the future would allow the Board of Directors to
issue shares of Common Stock without the delay and expense associated with
seeking stockholder approval. Elimination of such delays and expense occasioned
by the necessity of obtaining stockholder approval will better enable the
Company, among other things, to engage in financing transactions and
acquisitions as well as to take advantage of changing market and financial
conditions on a more competitive basis as determined by the Board of Directors.
POSSIBLE EFFECTS OF THE AMENDMENT
If the proposed amendment is approved, the Board of Directors may cause the
issuance of additional shares of Common Stock without further vote of
stockholders of the Company, except as provided under applicable law. Current
holders of Common Stock have no preemptive or similar rights, which means that
current stockholders do not have a prior right to purchase any new issue of
capital stock of the Company in order to maintain their proportionate ownership
thereof.
The increase in authorized Common Stock will not have any immediate effect
on the rights of existing stockholders. To the extent that the additional
authorized shares are issued in the future, they will decrease the existing
stockholders' percentage equity ownership and, depending on the price at which
they are issued, could be dilutive to the existing stockholders.
In addition, the Board of Directors could use authorized but unissued shares
to create impediments to a takeover or a transfer of control of the Company.
Accordingly, an effect of the increase in the number of authorized shares of
Common Stock may be to deter a future takeover attempt, which holders of Common
Stock may deem to be in their best interest or in which holders of Common Stock
may be offered a premium for their shares over the market price.
The Board of Directors is not currently aware of any attempt to take over or
acquire the Company. While it may be deemed to have potential anti-takeover
effects, the proposed amendment to increase the authorized Common Stock is not
prompted by any specific effort or takeover threat currently perceived by
management. Moreover, management does not currently intend to propose
anti-takeover measures in the foreseeable future.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the shares of Common Stock issued and
outstanding on the Record Date will be required to approve the amendment to the
Certificate of Incorporation. The effect of an abstention is the same as that of
a vote against the proposal. If the proposed amendment to the Certificate of
Incorporation is approved by the stockholders, such amendment will become
effective upon filing an amendment to the Certificate of Incorporation with the
Delaware Secretary of State. If the amendment is authorized, the text of the
first paragraph of Article 4 of the Company's Certificate of Incorporation will
be amended to read as follows:
"The corporation is authorized to issue a total of 32,000,000 shares of all
classes of stock, of which, 30,000,000 shall be shares of Common Stock with a
par value of $0.10 per share and 2,000,000 shall be shares of series Preferred
Stock with a par value of $0.10 per share."
If the proposed amendment to the Certificate of Incorporation is not so
approved, the Company's authorized capital stock will not change.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION.
17
<PAGE>
EXECUTIVE COMPENSATION INFORMATION TABLE
SUMMARY
The following table shows, as to the Chief Executive Officer and each of the
three other executive officers, information concerning compensation paid for
services to the Company in all capacities during the fiscal year ended December
31, 1994 as well as the Company's two previous fiscal years (if such person was
the Chief Executive Officer or an executive officer, as the case may be, during
any part of such fiscal year).
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION-AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS COMPENSATION
(1) YEAR ($) ($) (2) ($) (#) $
- ---------------------------- ----- ------- ------------ ---------------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Phillips W. Smith 1994 200,000 0 64,912(3) 0 19,990(4)
President and Chief 1993 177,258 0 25,732(5) 0 11,173(6)
Executive Officer 1992 200,000 0 -- 0 12,310(6)
Peter J. Cassidy 1994 175,000 0 -- 0 7,314(6)
Executive Vice President 1993 161,965 0 -- 0 8,098(6)
and Chief Financial Officer 1992 175,000 0 -- 0 8,750(6)
John R. Harding 1994 155,167 69,167 9,912(7) 0 15,112(8)
Executive Vice President, 1993 150,866 79,134 234,465(7)(9) 0 14,206(6)
Sales & Marketing 1992 162,005 98,000(10) 149,644(7) 0 10,348(6)
(Resigned 10/31/94)
Douglas E. Klint 1994 120,998 0 -- 0 6,050(6)
Vice President, General 1993 107,692 0 -- 10,000 5,385(6)
Counsel and Corporate 1992 106,835 0 3,500(11) 0 5,341(6)
Secretary
</TABLE>
- ------------------------
(1) On December 31, 1994 the Company had four executive officers, including the
Chief Executive Officer. Mr. Harding resigned from the Company effective
October 31, 1994.
(2) Messrs. Smith, Cassidy and Klint are paid bonuses based on the Company's
profitability. Mr. Harding was paid incentive compensation based on the
Company revenues and profit margin.
(3) Represents $25,937 in cost of living adjustments for California housing and
$38,975 in tax gross-up reimbursement payments for 1994.
(4) Includes $10,000 contributed by the Company to a cafeteria benefit plan,
$2,310 contributed by the Company to a 401 (K) plan, and $7,680 for term
life insurance expense reimbursement.
(5) Represents $25,732 in cost of living adjustments for California housing.
(6) Represents Company contributions to defined benefit plans.
(7) Represents relocation expenses reimbursed by the Company in connection with
Mr. Harding's relocation to California.
(8) Includes $6,661 contributed by the Company to a cafeteria benefit plan,
$2,310 contributed by the Company to a 401 (K) plan, and $6,141 for interest
forgiven on a Company loan.
(9) Approximately $65,000 of these relocation expenses represent the costs
associated with the sale of Mr. Harding's New Jersey House; $80,000
represent California housing and cost of living adjustment, which expired on
2/28/94; and $90,000 represent tax gross-up reimbursement payments.
18
<PAGE>
(10) Incentive compensation partially guaranteed in 1992 in connection with Mr.
Harding's promotion to Executive Vice President, Sales and Marketing, and
his relocation to California.
(11) Represents $3,500 reimbursed by the Company for relocation expenses.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The 1984 Stock Option Plan (the "1984 Plan") was originally adopted by the
Board of Directors in March 1984 and approved by the stockholders in April 1984
and has been subsequently amended. The 1984 Plan provided for a maximum of
3,500,000 shares of Common Stock to be issued pursuant to options granted
thereunder. On February 11, 1992, The Board of Directors approved an amendment
to the 1984 Plan, increasing the number of shares reserved under the 1984 Plan
from 3,500,000 to 4,000,000, which increase was approved by the stockholders at
the 1992 Annual Meeting of Stockholders. Options granted under the 1984 Plan may
be either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or nonstatutory options,
which do not qualify for special tax treatment. The 1984 Plan also permitted the
grant of stock appreciation rights ("SARs") for all or any part of the number of
shares covered by an unexercised option under the 1984 Plan. However, no SARs
were ever granted. All employees of the Company were eligible to receive options
and SARs under the 1984 Plan. The 1984 Plan expired in March 1994 and no further
options may be granted under this plan.
The 1984 Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors. No member of the Committee may be
granted an option under the 1984 Plan. The Committee (i) designates the
employees (including officers and directors who are employees of the Company) to
receive options, (ii) determines the number and price of shares to be optioned
to each optionee, and (iii) determines such other provisions of the individual
options as it may deem necessary or desirable, subject to the limitations
contained in the 1984 Plan. The Board of Directors may amend the 1984 Plan at
any time; however, certain amendments are subject to approval by the
stockholders and any adversely affected optionees.
Incentive stock options granted under the Plan must have a per-share
exercise price of not less than the fair market value per share at the date of
grant. Nonstatutory stock options may be granted at such price as may be
determined by the Committee.
The exercise price of options granted under the 1984 Plan payable in cash,
but the Board of Directors may, in its discretion, allow all or any portion of
the exercise price is to be paid by tendering shares of Common Stock valued at
fair market value. Options may not be transferred by the optionee except by will
or the laws of descent and distribution and may be exercised only while the
optionee is employed by the Company or a subsidiary and for three months
thereafter.
The Committee may grant options that are exercisable in full at any time or
from time to time or in installments or upon the occurrence of specified events.
No option may be exercised more than ten years after the date of grant, and no
option granted to any person who owns stock of the Company possessing more than
10% of the voting power of all capital stock of the Company may be exercised
more than five years after the date of grant.
In August 1993, the Board of Directors adopted the 1993 Stock Option Plan.
See "Approval of the 1993 Stock Option Plan".
There were no individual grants of stock options pursuant to any of the
Company's stock option plans during 1994 to any of the Executive Officers named
in the Summary Compensation Table above.
19
<PAGE>
The following table shows, as to the Executive Officers named in the Summary
Compensation Table above, information concerning stock options exercised during
the fiscal year ended December 31, 1994 and options held at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END ($) FY-END ($) (2)
SHARES ACQUIRED VALUE REALIZED ------------------------------ -----------------------------
NAME ON EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Phillips W. Smith....... 0 0 0 0 0 0
Peter J. Cassidy........ 0 0 300,000 0 114,000 0
John R. Harding......... 100,000 48,800 96,141 108,750(3) 36,534 41,325(3)
(Resigned on 10/31/94)
Douglas E. Klint........ 0 0 2,000 8,000 0 0
</TABLE>
- ------------------------
(1) Market value of underlying securities, based on the last sale price of the
Company's Common Stock on the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") National Market System on the date of
exercise, minus the exercise price.
(2) Market value of underlying securities, based on the last sale price of the
Company's Common Stock on the NASDAQ National Market System at 1994 fiscal
year end ($1.38 per share), minus the exercise price.
(3) These unexercised stock options expired in 1995.
CERTAIN TRANSACTIONS
The following table sets forth information with respect to all executive
officers of the Company who had indebtedness in excess of $60,000 outstanding
during the past fiscal year.
<TABLE>
<CAPTION>
LARGEST
PRINCIPAL PRINCIPAL
AMOUNT BALANCE AT
NAME/PRINCIPAL OUTSTANDING DECEMBER 31,
POSITION LOANS LOAN DATE INTEREST RATE MATURITY DATE DURING 1994 1994
- ----------------- ---------- -------------------- -------------------- -------------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Phillips W. Smith $1,500,000 August 27, 1992 for one percent over August 27, 1995 for $1,500,000 $1,500,000
President & CEO $600,000 and Prime rate $600,000 and
September 1, 1993 September 1, 1995
for $900,000 for $900,000
</TABLE>
THESE LOANS WERE PAID IN FULL IN AUGUST AND SEPTEMBER, 1995.
These loans were made in connection with the purchase and financing of real
property and in connection with the exercise of stock options by Dr. Smith. Both
loans are documented with full recourse Promissory Notes signed by Dr. Smith.
These loans were secured by certain real property including Dr. Smith's home in
Paradise Valley, Arizona; as well as 1,200,000 shares of Common Stock of the
Company owned by Dr. Smith, of which 300,000 shares were previously purchased by
him in the open market.
20
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented for
consideration at the meeting. If other matters are properly brought before the
meeting, however, it is the intention of the persons named in the accompanying
proxy to vote the shares of represented thereby on such matters in accordance
with their best judgment.
By Order of the Board of Directors
Douglas E. Klint
SECRETARY
Fremont, California
November 17, 1995
21
<PAGE>
ZYCAD CORPORATION
47100 BAYSIDE PARKWAY
FREMONT, CA 94538
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Undersigned stockholder of Zycad Corporation, a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Proxy Statement, each dated November 13, 1995, and hereby
appoints Phillips W. Smith and Douglas E. Klint, and each of them, proxies and
attorneys-in-fact, with full power to represent the undersigned at the 1995
Special Annual Meeting of Stockholders of Zycad Corporation to be held on
Monday, December 18, 1995 at 3:30 p.m., local time, at the Company's
Headquarters, 47100 Bayside Parkway, Fremont, California, and at any adjournment
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
on the reverse side. Either of such attorneys or substitutes shall have and may
exercise all of the powers of said attorneys-in-fact hereunder.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE APPROVAL OF THE 1993 STOCK OPTION PLAN,
FOR THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN, FOR THE APPROVAL OF
THE 1995 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS, FOR THE AMENDMENT TO
THE CERTIFICATE OF INCORPORATION, AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
1. Proposal to ratify and approve the Company's 1993 Stock Option Plan (the
"1993 Plan") and authorize the issuance of 1,500,000 shares of Common
Stock upon the exercise of stock options granted under the 1993 Plan.
[] FOR [] AGAINST [] ABSTAIN
2. Proposal to ratify and approve the amendment to the 1993 Plan increasing the
number of shares that may be issued under the 1993 Plan from 1,500,000
shares to 3,000,000 shares.
3. Proposal to ratify the amendment to the Zycad Corporation Employee Stock
Purchase Plan (the "Stock Purchase Plan") increasing the number of shares
that may be issued under the Stock Purchase Plan from 300,000 shares to
500,000 shares.
[] FOR [] AGAINST [] ABSTAIN
4. Proposal to approve the 1995 Stock Option Plan for Nonemployee Directors and
reserve 200,000 shares of stock for issuance hereunder.
[] FOR [] AGAINST [] ABSTAIN
5. Proposal to amend the Certificate of Incorporation of the Company to
increase the number of shares of authorized Common Stock from 25,000,000
shares to 30,000,000 shares.
[] FOR [] AGAINST [] ABSTAIN
[ ] Mark here for address change and note below
And upon such other matter or matters which may properly come before the
meeting and any adjournment thereof.
This proxy should be dated, signed by the stockholder exactly as his or
her name appears herein, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If proxies are held
by joint tenants or as community property, both should sign.
Signature: Date:
----------------------------------------- ---------------------
Signature: Date:
---------------------------------------- ---------------------
