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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 a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
CADENCE DESIGN SYSTEMS, 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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CADENCE DESIGN SYSTEMS, INC.
2655 SEELY AVENUE
SAN JOSE, CALIFORNIA 95134
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 1, 1997
------------------------
TO THE STOCKHOLDERS OF
CADENCE DESIGN SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CADENCE
DESIGN SYSTEMS, INC., a Delaware corporation (the "Company"), will be held on
May 1, 1997, at 3:00 p.m. local time at 2655 Seely Avenue, San Jose, California
95134 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve the amendment to the Certificate of Incorporation, as
amended, to increase the authorized shares of Common Stock of the Company
from 150,000,000 to 300,000,000.
3. To approve the 1990 Employee Stock Purchase Plan, as amended.
4. To approve the 1987 Incentive Stock Option Plan, as amended.
5. To ratify the selection of Arthur Andersen LLP as independent auditors
of the Company for its fiscal year ending January 3, 1998.
6. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 3, 1997, as
the Record Date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
R.L. Smith McKeithen
SECRETARY
San Jose, California
March 31, 1997
<PAGE>
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
CADENCE DESIGN SYSTEMS, INC.
2655 SEELY AVENUE
SAN JOSE, CALIFORNIA 95134
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 1997
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Cadence Design Systems, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on May 1, 1997, at 3:00 p.m. local
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at 2655 Seely Avenue, San Jose, California
95134. The Company intends to mail this proxy statement and accompanying proxy
card on or about March 31, 1997, to all stockholders entitled to vote at the
Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company
or, at the Company's request, Corporate Investor Communications, Inc. No
additional compensation will be paid to directors, officers or other regular
employees for such services, but, Corporate Investor Communications, Inc. will
be paid its customary fee, estimated to be approximately $5,500, if it renders
solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March 3,
1997 ("Record Date") will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on March 3, 1997, the Company had outstanding
and entitled to vote 88,596,639 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
On May 3, 1996, the Company declared a 3-for-2 stock split effected by means
of a stock dividend. All share numbers contained herein give effect to such
stock split.
All votes will be tabulated by the inspector of elections appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Except for Proposal 2, abstentions and broker
non-votes are counted towards a quorum, but are not counted for any purpose in
determining whether a matter has been approved.
<PAGE>
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 2655 Seely
Avenue, San Jose, California 95134, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
1998 Annual Meeting of Stockholders must be received by the Company not later
than November 24, 1997, in order to be included in the proxy statement and proxy
relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently is composed of nine directors, two of whom,
James E. Solomon and Henry E. Johnston have elected not to stand for re-election
upon the expiration of their current term. Accordingly, pursuant to the
Company's By-laws, the Board of Directors has decreased the authorized number of
directors from nine to seven as of such date.
There are seven nominees for the seven Board positions presently authorized
by the Company's By-laws. Each director to be elected will hold office until the
next annual meeting of stockholders and until his or her successor is elected
and has qualified, or until such director's earlier death, resignation or
removal. Each nominee listed below is currently a director of the Company, all
of the directors having been elected by the stockholders.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the seven nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected, and management has no reason to believe that any
nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
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NOMINEES
The names of the nominees, and certain information about them (including
their term of service), are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------------------------ --- --------------------------------------- -----------
<S> <C> <C> <C>
Carol A. Bartz.................................. 48 Chairman and Chief Executive Officer, 1994
Autodesk, Inc.
Joseph B. Costello.............................. 43 President and Chief Executive Officer 1988
of the Company
Dr. Leonard Y.W. Liu............................ 55 Chairman, Chief Executive Officer and 1989
President, Walker Interactive Systems,
Inc.
Donald L. Lucas................................. 67 Chairman of the Board of the Company 1988
and Private Venture Capital Investor
Dr. Alberto Sangiovanni-Vincentelli............. 49 Professor of Electrical Engineering and 1992
Computer Sciences, University of
California, Berkeley
George M. Scalise............................... 62 Executive Vice President and Chief 1989
Administrative Officer, Apple Computer,
Inc.
Dr. John B. Shoven.............................. 49 Dean of Humanities and Sciences, 1992
Stanford University
</TABLE>
CAROL A. BARTZ has served as a director of the Company since 1994. Ms. Bartz
has been the Chairman and Chief Executive Officer of Autodesk, Inc. since 1992.
From 1983 to 1992, Ms. Bartz served in various positions with Sun Microsystems,
Inc., most recently as Vice President of Worldwide Field Operations. Ms. Bartz
is also a director of AirTouch Communications, Inc., Cisco Systems, Inc. and
Network Appliance, Inc.
JOSEPH B. COSTELLO has served as President and Chief Executive Officer and a
director of the Company since 1988. He is also a director of Racotek, Inc.
DR. LEONARD Y.W. LIU has served as a director of the Company since 1989. Dr.
Liu has served as Chairman, President and Chief Executive Officer of Walker
Interactive Systems, Inc. since 1995. From 1993 until 1995 Dr. Liu served as
Chief Operating Officer of the Company. Before joining the Company, Dr. Liu was
Chairman and Chief Executive Officer of Acer America Corporation and President
of Acer Group, a personal computer manufacturer, from 1989 until 1992. Dr. Liu
is also a director of Trident Microsystems, Inc. and Advanced Semiconductor
Engineering, Inc.
DONALD L. LUCAS has served as Chairman of the Board of the Company since
1988. From its inception in 1983 to 1987, Mr. Lucas served as Chairman of the
Board and a director of SDA, a predecessor of the Company. Mr. Lucas has been a
private venture capital investor since 1960. He is a director of Amati
Communications Corporation, Coulter Pharmaceutical, Inc., Macromedia, Inc.,
Oracle Corporation, Racotek, Inc., Transcend Services, Inc. and Tricord Systems,
Incorporated.
DR. ALBERTO SANGIOVANNI-VINCENTELLI has served as a director of the Company
since 1992. Dr. Sangiovanni-Vincentelli has been Professor of Electrical
Engineering and Computer Sciences at the University of California at Berkeley
since 1976.
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GEORGE M. SCALISE has served as a director of the Company since June 1989.
Mr. Scalise became Executive Vice President and Chief Administrative Officer of
Apple Computer, Inc. in 1996. Mr. Scalise served as Senior Vice President of
Planning and Development and Chief Administrative Officer of National
Semiconductor Corporation from 1991 to 1996.
DR. JOHN B. SHOVEN has served as a director of the Company since 1992. Dr.
Shoven has been Dean of Humanities and Sciences at Stanford University since
1993. From 1979 to 1993, he served as Professor of Economics at Stanford
University. He also served as Director for the Center for Economics Policy
Research at Stanford University from 1988 to 1993.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 28, 1996, the Board of Directors held
six meetings. The Board has an Audit Committee, a Compensation Committee, a
Nominating Committee and a Venture Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; reviews financial and auditing issues of the Company; recommends to
the Board the independent auditors to be retained; receives and considers the
accountants' comments as to controls, adequacy of staff and management
performance and procedures in connection with audit and financial controls and
makes recommendations to the Board. The Audit Committee is composed of two
non-employee directors, Messrs. Lucas and Scalise. It met four times during such
fiscal year.
The Compensation Committee reviews and approves the general compensation
plans of the Company, including the Company's stock option, stock purchase and
bonus plans, as well as determining specific compensation matters for the Chief
Executive Officer and all executive staff who report directly to the Chief
Executive Officer, including salaries, bonuses, stock options and incentive
compensation. The Compensation Committee also performs such other functions
regarding compensation as the Board may delegate. The Compensation Committee is
composed of two non-employee directors, Dr. Shoven and Mr. Lucas. It met two
times during such fiscal year.
The Nominating Committee interviews, evaluates, nominates and recommends
individuals for membership on the Company's Board of Directors and nominates
specific individuals to be elected as officers of the Company by the Board of
Directors. No procedure has been established for the consideration of nominees
recommended by stockholders. The Nominating Committee for fiscal year 1996 was
composed of four directors: Messrs. Costello and Lucas and Drs.
Sangiovanni-Vincentelli and Liu. It met once during such fiscal year. As of
February 5, 1997, Dr. Liu is no longer a member of the Nominating Committee.
The Venture Committee advises the Board and acts on behalf of the Company in
monitoring the Company's investment in Telos Venture Partners, L.P. (the
"Venture Fund"). The Venture Committee for 1996 was composed of four
non-employee directors, Messrs. Lucas and Scalise and Drs. Liu and Shoven. It
met two times during such fiscal year. As of February 5, 1997, Dr. Liu and Mr.
Scalise are no longer members of the Venture Committee.
During the fiscal year ended December 28, 1996, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he or she served, held during the period for which he or she was a
director or committee member, respectively.
4
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDMENT OF CERTIFICATE OF INCORPORATION, AS
AMENDED, TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
On February 5, 1997, the Board approved the amendment of the introductory
paragraph of Article IV of the Company's Certificate of Incorporation, as
amended (the "Charter"), to increase the number of authorized shares of Common
Stock, par value $.01 per share, from 150,000,000 shares to 300,000,000 shares
("Amendment"). If the proposal is adopted, the introductory paragraph of Article
IV will read in its entirety as follows:
"The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 300,400,000, consisting of (1) 300,000,000
shares of Common Stock, par value $.01 per share (hereinafter referred to as
"Common Stock") and (2) 400,000 shares of Preferred Stock, par value $.01
per share (hereinafter called the "Preferred Stock")."
PURPOSES AND REASONS FOR AMENDMENT
The Company has proposed the Amendment because the Board believes it to be
in the best interests of Company to have additional shares of Common Stock
available for issuance for general corporate purposes, including possible future
stock dividends, equity financings, mergers and acquisitions and stock based
compensation plans. If the Amendment is adopted, the increased number of
authorized shares of Common Stock will be available for issuance from time to
time, for such purposes and consideration and on such terms as the Board may
approve, and no further vote of the shareholders of the Company will be
required, except as may be provided under the Delaware General Corporation Law
in certain circumstances, or as may be required by the rules of the New York
Stock Exchange ("NYSE").
On the Record Date, there were 88,596,639 shares of Common Stock
outstanding, and an aggregate of 23,857,487 shares reserved for issuance
pursuant to exercise of options granted under the Company's 1987 Employee Stock
Option Plan, 1988 Directors Stock Option Plan, 1993 Directors Stock Option Plan,
1993 Non-Statutory Stock Option Plan, 1995 Directors Stock Option Plan, Employee
Stock Purchase Plan, Gateway Stock Option Plan, ASI Stock Option Plan, Valid
Stock Option Plan, HLDS 1993 Employee Stock Option Plan, HLDS 1995 Employees
Stock Option Plan and OP Stock Option Plan and various other options and
warrants. Accordingly, there were 37,545,874 shares of Common Stock available
for issuance on the Record Date for general corporate purposes such as equity
financings, stock-based compensation and mergers and acquisitions. Given the
small number of available unissued shares, the Company may not be able to take
advantage of opportunities to raise equity capital or effect acquisitions
through the issuance of stock without the need to amend the Charter. If the
Amendment were not to be adopted, the issuance of additional shares of Common
Stock could be impeded by the delay and expense incident to calling a special
meeting of the Company's stockholders to approve an increase in the number of
authorized shares of Common Stock in cases where such a meeting would not
otherwise be required.
On May 3, 1996, the Company declared a dividend of Common Stock in the form
of a 3 for 2 stock split. Although at present the Board of Directors has no
other plans to issue additional shares of Common Stock, it desires to have such
shares available to provide additional flexibility to use its capital stock for
business and financial purposes in the future. The additional shares may be
used, without further stockholder approval, for various purposes including,
without limitation, issuing additional dividends in the form of stock splits,
raising capital, providing equity incentives to employees, officer or directors,
establishing strategic relationships with other companies and expanding the
Company's business or product lines through the acquisition of other businesses
or products.
The terms of the additional shares of Common Stock for which authorization
is sought will be identical with the terms of the shares of Common Stock
currently authorized and outstanding, and the Amendment will not affect the
terms, or the rights of the holders, of such shares, except for effects
incidental to increasing the number of shares of the Company's Common Stock
outstanding, such as
5
<PAGE>
dilution of the earnings per share and voting rights of current holders of
Common Stock. The Common Stock has no cumulative voting, conversion, preemptive
or subscription rights and is not redeemable.
POSSIBLE ANTI-TAKEOVER EFFECTS
The additional shares of Common Stock that would become available for
issuance if this proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example without further stockholder approval, the
Board could strategically sell shares of Common Stock in a private transaction
to purchasers who would oppose a takeover or favor the current Board. Although
this proposal to increase the authorized Common Stock has been prompted by
business and financial considerations and not by the threat of any hostile
takeover attempt (nor is the Board currently aware of any such attempts directed
at the Company), nevertheless, stockholders should be aware that approval of
this proposal could facilitate future efforts by the Company to deter or prevent
changes in control of the Company, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices.
NO DISSENTERS' RIGHTS OF APPRAISAL
Dissenters' rights of appraisal will not be available under Delaware law
with respect to the Amendment.
EFFECTIVENESS OF AMENDMENT
If the proposal is adopted, the Amendment will become effective upon the
filing of a Certificate of Amendment to the Certificate of Incorporation, as
amended, with the Secretary of State of the State of Delaware.
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock will be required to approve this amendment to the
Company's Certificate of Incorporation, as amended. For purposes of the vote,
abstentions and broker non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
6
<PAGE>
PROPOSAL 3
APPROVAL OF 1990 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In January 1990, the Board adopted the 1990 Employee Stock Purchase Plan
(the "Purchase Plan") authorizing the issuance of 450,000 shares of the
Company's Common Stock. Subsequent amendments approved by the Board and
stockholders increased to 6,750,000 the number of shares reserved for issuance
under the Purchase Plan. In February 1997, the Board adopted amendments to the
Purchase Plan to increase the number of shares authorized for issuance under the
Purchase Plan by an additional 2,000,000 shares, to an aggregate of 8,750,000
shares. This amendment is intended to afford the Company greater flexibility in
providing employees with stock incentives and ensures that the Company can
continue to provide such incentives at levels determined appropriate by the
Board. As of March 3, 1997, an aggregate of 6,750,000 shares have been reserved
for issuance under the Purchase Plan, 5,726,770 shares have been issued under
the Purchase Plan and 1,023,230 shares remained available for grant of future
rights under the Purchase Plan. During the last fiscal year, shares were
purchased in the amounts and at the weighted average prices per share under the
Purchase Plan as follows: Mr. Olsen, 1,270 shares ($16.7350), Mr. Bingham, 914
shares ($23.2333), Mr. Leach, 1,323 shares ($16.0478), Mr. Robison, 914 shares
($23.2333), all current executive officers as a group, 8,928 shares ($19.3722),
and all employees (excluding executive officers) as a group, 596,609 shares
($18.5444).
Stockholders are requested in this Proposal 3 to approve the Purchase Plan,
as amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting
will be required to approve the Purchase Plan, as amended. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the Purchase Plan, as amended, are outlined below:
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees of
the Company (and any subsidiary of the Company designated by the Board as
eligible to participate in the Purchase Plan) may be given an opportunity to
purchase Common Stock of the Company through payroll deductions, to assist the
Company in retaining the services of its employees, to secure and retain the
services of new employees, and to provide incentives for such persons to exert
maximum efforts for the success of the Company. The rights to purchase Common
Stock granted under the Purchase Plan are intended to qualify as options issued
under an "employee stock purchase plan" as that term is defined in Section
423(b) of the Internal Revenue Code of 1986, as amended (the "Code").
ADMINISTRATION
The Purchase Plan is administered by the Board or by a committee designated
by the Board (in which event all references herein to the Board shall be to the
committee). Subject to the provisions of the Purchase Plan and the limitations
of Section 423 of the Code or any successor provision in the Code, all questions
of interpretation or application of the Purchase Plan shall be determined by the
Board and its decisions shall be final and binding upon all participants.
Members of the Board receive no compensation for their services in connection
with the administration of the Purchase Plan, other than standard fees as
established from time to time by the Board for services rendered by Board
members on Board committees. All expenses incurred in connection with the
administration of the Purchase Plan are paid by the Company.
7
<PAGE>
OFFERING DATES
The Offering Periods of the Purchase Plan (the "Offering Period") are of six
(6) months duration commencing February 1 and August 1 of each year and ending
on July 31 and January 31, respectively, during which payroll deductions of the
participant are accumulated under the Purchase Plan. The first day of each
Offering Period is referred to as the "Offering Date." The last day of each
Offering Period is hereinafter referred to as the "Purchase Date." The Board has
the power to change the duration of Offering Periods with respect to future
offerings without stockholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
to be affected.
ELIGIBILITY
Any person who is customarily employed at least twenty (20) hours per week
and five (5) months per calendar year by the Company or a designated subsidiary
of the Company on the first day of an Offering Period is eligible to participate
in that Offering Period, provided such employee has been in the continuous
employ of the Company or designated subsidiary since the fifteenth (15th) day of
the month prior to the month in which such Offering Period commences.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or a
subsidiary of the Company (including any stock which such employee may purchase
under all outstanding rights and options), nor will any employee be granted
rights that would permit him or her to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under the Purchase Plan and all other employee stock purchase plans of
the Company in any calendar year.
PARTICIPATION IN THE PURCHASE PLAN
Eligible employees who otherwise satisfy the eligibility requirements may
become participants in the Offering Period under the Purchase Plan on the first
Offering Date by delivering to the Company's Stock Administration department,
not later than the fifteenth (15th) day of the month before such Offering Date,
a subscription agreement authorizing payroll deductions from two percent (2%) to
twelve percent (12%) of such employees' base salary and bonus compensation and
commissions during the Offering Period. A participant will automatically
participate in all future Offering Periods unless such participant withdraws
from the Purchase Plan or subsequently becomes ineligible to participate in the
Purchase Plan.
PURCHASE PRICE
The purchase price per share at which shares are sold under the Purchase
Plan is the lower of (a) 85% of the closing price of a share of Common Stock on
the Offering Date or (b) 85% of the closing price of a share of Common Stock on
the Purchase Date, as reported on the NYSE.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the Offering Period. One time during the Offering Period, a participant may
reduce or terminate his or her payroll deductions. A participant may increase or
reduce his or her payroll deductions for any subsequent Offering Period by
filing a new authorization not later than the fifteenth (15th) day of the month
before the beginning of such subsequent Offering Period. All payroll deductions
made for a participant are credited to his or her account under the Purchase
Plan and deposited with the general funds of the Company.
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PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under the Purchase Plan. In connection with
offerings made under the Purchase Plan, the Board specifies a maximum number of
shares any employee may be granted the right to purchase and the maximum
aggregate number of shares which may be purchased pursuant to such offering by
all participants. If the aggregate number of shares to be purchased upon
exercise of rights granted in the Offering Period would exceed the maximum
aggregate number of shares available for issuance under the Purchase Plan, the
Board would make a pro rata allocation of shares available in a uniform and
equitable manner and any excess payroll deductions will be refunded to
participants. Unless the employee's participation is discontinued, the right to
purchase shares is exercised automatically at the end of the Offering Period at
the applicable purchase price. Only whole shares are purchased under the
Purchase Plan. Any amount insufficient to purchase whole shares on a Purchase
Date is carried forward into the next Offering Period.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a Offering
Period by delivering to the Company a notice of withdrawal from the Purchase
Plan. Such withdrawal may be elected at any time prior to the fifteenth (15th)
day of the last month of the applicable Offering Period.
Upon any withdrawal from the Purchase Plan by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions, less any
accumulated deductions previously applied to the purchase of stock on the
employee's behalf during such Offering Period, and such employee's interest in
the Offering Period will be automatically terminated. The employee is not
entitled to again participate in the same Offering Period. An employee's
withdrawal from an Offering Period will not have any effect upon such employee's
eligibility to participate in subsequent Offering Period under the Purchase
Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason including
death, and the Company will distribute to such employee or his or her
representative all of his or her accumulated payroll deductions, without
interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable other than by
will or the laws of descent and distribution and may be exercised only by the
person to whom such rights are granted. A participant may designate a
beneficiary who is to receive any shares and/or cash upon such participant's
death.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, the Purchase Plan will terminate upon the earlier of Board
termination or the issuance of all shares reserved for issuance under the
Purchase Plan.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within twelve (12) months of
its adoption by the Board if such amendment would constitute an amendment for
which stockholder approval is required in order to comply with the requirements
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), Section 423 of the Code or any securities exchange listing
requirements.
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<PAGE>
Rights granted before amendment or termination of the Purchase Plan will not
be adversely affected by any amendment or termination of the Purchase Plan
without consent of the person to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of certain changes in the Common Stock effected without receipt
of consideration, the Board shall appropriately adjust the shares reserved for
issuance under the Purchase Plan and each individual purchase right. In the
event of a dissolution or liquidation of the Company, the Offering Period will
be terminated immediately prior to the consummation of such action unless the
Board specifically provides otherwise. In the event of a proposed sale of the
Company or substantially all of its assets or the merger of the Company with or
into another corporation, the surviving corporation either will assume the
rights under the Purchase Plan or substitute similar rights, or the Board, in
its sole discretion, may accelerate the Purchase Date of the Offering Period. In
the event of such acceleration, any unexercised purchase rights will terminate
if not exercised prior to such event.
STOCK SUBJECT TO PURCHASE PLAN
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under the Purchase Plan.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan which qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of at least two (2) years after the beginning of
the Offering Period and at least one (1) year after the stock is transferred to
the participant, then the lesser of (a) the excess of the fair market value of
the stock at the time of such disposition over the exercise price or (b) the
excess of the fair market value of the stock as of the beginning of the Offering
Period over the exercise price (determined as of the beginning of the Offering
Period) will be treated as ordinary income. Any further gain or any loss will be
taxed as a long-term capital gain or loss. Capital gains currently are generally
subject to lower tax rates than ordinary income. At the present time, the
maximum capital gains rate for federal income tax purposes is 28% while the
maximum ordinary income rate is effectively 39.6%.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be long or short-term
depending on whether the stock has been held for more than one year.
There are no federal income tax consequences to the Company by reason of the
grant or exercise of rights under the Purchase Plan. The Company is entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
(subject to the requirement of reasonableness, the provisions of Section 162(m)
of the Code and the satisfaction of a tax reporting obligation).
10
<PAGE>
PROPOSAL 4
APPROVAL OF 1987 STOCK OPTION PLAN, AS AMENDED
In April 1987, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1987 Stock Option Plan (the "1987 Plan").
As a result of a series of amendments, as of March 3, 1997 there were 30,685,050
post-split shares (13,637,800 pre-split shares, including 568,791 shares issued
upon exercise of options granted under the terms of the predecessor plan) of the
Company's Common Stock authorized for issuance under the 1987 Plan.
At March 3, 1997, options (net of canceled or expired options) covering an
aggregate of 27,068,297 shares of the Company's Common Stock had been granted
under the 1987 Plan, and 3,616,753 shares (plus any shares that might in the
future be returned to the Plan as a result of cancellations or expiration of
options) remained available for future grant under the 1987 Plan. During the
last fiscal year, under the 1987 Plan, the Company has granted to all current
executive officers as a group options to purchase 393,750 shares at exercise
prices of $28.0416 to $35.3750 per share and to all current directors who are
not officers as a group options to purchase 30,000 shares at exercise prices of
$28.7083 per share. In the last fiscal year, no options were granted under the
1987 Plan to employees other than executive officers.
On February 5, 1997, the Board approved an amendment to the 1987 Plan,
subject to stockholder approval to readopt the 1987 Plan and extend its term
until January 31, 2002. An aggregate of 3,616,753 shares, (plus any shares that
might in the future be returned to the Plan as a result of cancellation or
expiration of options) remained for grant under the 1987 Plan, and only that
number may be granted under the 1987 Plan, as amended. The Board adopted this
amendment to ensure that the Company can continue to grant stock options to
employees at levels determined appropriate by the Board.
In February 1997, the Board also amended the 1987 Plan, subject to
stockholder approval, generally to permit the Company, under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), to continue to be
able to deduct as a business expense certain compensation attributable to the
exercise of stock options granted under the 1987 Plan. Section 162(m) denies a
deduction to any publicly held corporation for certain compensation paid to
specified employees in a taxable year to the extent that the compensation
exceeds $1,000,000 for any covered employee. See "Federal Income Tax
Information" below for a discussion of the application of Section 162(m). In
light of the Section 162(m) requirements, the Board has amended the 1987 Plan,
subject to stockholder approval, to include a limitation providing that no
employee may be granted options under the 1987 Plan during a calendar year to
purchase in excess of 1.5% of the issued and outstanding shares of Common Stock
on the Record Date. Previously, no such formal limitation was placed on the
number of shares available for option grants to an employee. In addition, the
1987 Plan was amended, subject to stockholder approval, to provide that, in the
Board's discretion, directors who grant options to covered employees generally
will be "outside directors" as defined in Section 162(m). For a description of
this requirement, see "Administration."
Stockholders are requested in this Proposal 4 to approve the amendments to
the 1987 Plan. If the stockholders fail to approve this Proposal 4, the 1987
Plan will terminate on April 24, 1997. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote at the meeting will be required to approve the 1987 Plan, as amended.
Abstentions will be counted toward the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether this matter has been approved.
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
The essential features of the 1987 Plan are outlined below:
GENERAL
The 1987 Plan provides for the grant of both incentive and nonstatutory
stock options. Incentive stock options granted under the 1987 Plan are intended
to qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Nonstatutory stock
options granted under the 1987 Plan are intended not to qualify as incentive
stock options under the Code. See "Federal Income Tax Information" for a
discussion of the tax treatment of incentive and nonstatutory stock options.
PURPOSE
The 1987 Plan was adopted to provide a means by which employees of and
consultants to the Company and any parent or subsidiary corporation could be
given an opportunity to purchase stock in the Company, to assist in retaining
the services of employees holding key positions, to secure and retain the
services of persons capable of filling such positions and to provide incentives
for such persons to exert maximum efforts for the success of the Company.
ADMINISTRATION
The 1987 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1987 Plan and, subject to the
provisions of the 1987 Plan, to determine the persons to whom and the dates on
which options will be granted, the number of shares to be subject to each
option, the time or times during the term of each option within which all or a
portion of such option may be exercised, the exercise price, the type of
consideration and other terms of the option. The Board of Directors is
authorized to delegate administration of the 1987 Plan to a committee of the
Board.
The regulations under Section 162(m) require that the directors who serve as
members of the committee must be "outside directors." The 1987 Plan has been
amended, subject to stockholder approval, to provide that, in the Board's
discretion, directors serving on the committee will be "outside directors"
within the meaning of Section 162(m). This limitation would exclude from the
committee (i) current employees of the Company, (ii) former employees of the
Company receiving compensation for past services (other than benefits under a
tax-qualified pension plan), (iii) current and former officers of the Company,
and (iv) directors currently receiving direct or indirect remuneration from the
Company in any capacity (other than as a director), unless any such person is
otherwise considered an "outside director" for purposes of Section 162(m).
ELIGIBILITY
Incentive stock options may be granted under the 1987 Plan only to employees
of the Company. Employees and consultants are eligible to receive nonstatutory
stock options under the 1987 Plan.
No incentive stock option may be granted under the 1987 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. In
addition, the aggregate fair market value, determined at the time of grant, of
the shares of Common Stock with respect to which incentive stock options are
exercisable
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<PAGE>
for the first time by an optionee during any calendar year (under all such plans
of the Company and its affiliates) may not exceed $100,000.
Subject to stockholder approval of this Proposal, the Company has added to
the 1987 Plan a per-employee, per-calendar year limitation equal to 1.5% of the
issued and outstanding shares of Common Stock on the Record Date. The purpose of
adding this limitation is generally to permit the Company to continue to be able
to deduct for tax purposes the compensation attributable to the exercise of
options granted under the 1987 Plan. Previously, the Board determined in its
discretion the number of shares subject to an option for any individual and no
such formal limitation was placed on the number of shares available for an
option to an individual.
STOCK SUBJECT TO THE 1987 PLAN
If options granted under the 1987 Plan expire or otherwise terminate without
being exercised, the Common Stock not purchased pursuant to such options again
becomes available for issuance under the 1987 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1987 Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of options granted under the
1987 Plan may not be less than the fair market value of the Common Stock subject
to the option on the date of the option grant, and in some cases (see
"Eligibility" above), may not be less than 110% of such fair market value. As of
March 3, 1997, the closing price of the Company's Common Stock as reported on
the NYSE was $36.875 per share. The fair market value for purposes of the 1987
Plan is the average of the high and low price as reported on the NYSE.
The exercise price of options granted under the 1987 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (i) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement or (c) in any other form of
legal consideration acceptable to the Board.
OPTION EXERCISE. Options granted under the 1987 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Shares covered by
currently outstanding options under the 1987 Plan typically vest at the rate of
25% after the first year and 1/48th per month thereafter during the optionee's
employment or services as a consultant. Shares covered by options granted in the
future under the 1987 Plan may be subject to different vesting terms. The Board
has the power to accelerate the time during which an option may be exercised.
TERM. The maximum term of options under the 1987 Plan is ten (10) years,
except that in certain cases (see "Eligibility") the maximum term is five (5)
years. Options under the 1987 Plan generally terminate thirty (30) days (or such
other period not exceeding three (3) months as determined by the Board) after
termination of the optionee's employment or relationship as a consultant of the
Company or any affiliate of the Company, unless the optionee dies while employed
by or serving as a consultant of the Company or any affiliate of the Company, or
within one (1) month after termination of such relationship, in which case the
option may, but need not, provide that it may be exercised (to the extent the
option was exercisable at the time of the optionee's death) within three (3)
months of the optionee's death by the person or persons to whom the rights to
such option pass by will or by the laws of descent and distribution. Individual
options by their terms may provide for exercise within a longer period of time
following termination of employment or the consulting relationship. The option
term any also be extended in the event that exercise of the option within these
periods is prohibited for specified reasons.
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<PAGE>
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1987 Plan or subject to
any option granted under the 1987 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction effected without
receipt of consideration by the Company), the 1987 Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to the 1987 Plan,
and the outstanding options will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding
options.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1987 Plan provides that, in the event of a dissolution or liquidation of
the Company, the proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company into another company, options outstanding
under the 1987 Plan will terminate immediately prior to such corporate
transaction, unless the Board specifically provides otherwise. The Board in its
sole discretion may provide that the time during which such options may be
exercised will be accelerated and the options terminated if not exercised during
such time. The acceleration of an option in the event of an acquisition or
similar corporate event may be viewed as an antitakeover provision, which may
have the effect of discouraging a proposal to acquire or otherwise obtain
control of the Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1987 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated and if approved by this Proposal, the 1987 Plan will terminate on
January 31, 2002.
The Board may also amend the 1987 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its adoption by the Board if
the amendment would require stockholder approval in order to comply with Rule
16b-3 of the Exchange Act, Section 422 of the Code or any securities exchange
listing requirement. The Board may submit any other amendment to the 1987 Plan
for stockholder approval, including, but not limited to, amendments intended to
satisfy the requirements of Section 162(m) of the Code regarding the exclusion
of performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1987 Plan, an incentive stock option may not be transferred by the
optionee otherwise than by will or by the laws of descent and distribution and
during the lifetime of the optionee, may be exercised only by the optionee. A
nonstatutory stock option may not be transferred except by will or by the laws
of descent and distribution or pursuant to a "domestic relations order," unless
the nonstatutory option agreement specifically provides otherwise. In any case,
the optionee may designate in writing a third party who may exercise the option
in the event of the optionee's death.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1987 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
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<PAGE>
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two (2) years from the date on which the option is granted
AND at least one (1) year from the date on which the shares are transferred to
the optionee upon exercise of the option, any gain or loss on a disposition of
such stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on whether
the stock was held for more than one year. Long-term capital gains currently are
generally subject to lower tax rates than ordinary income. At the present time,
the maximum capital gains rate for federal income tax purposes is currently 28%
while the maximum ordinary income rate is effectively 39.6%. Slightly different
rules may apply to optionees who acquire stock subject to certain repurchase
options or who are subject to Section 16(b)of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
1987 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
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<PAGE>
compensation committee while the outcome is substantially uncertain, and the
option is approved by stockholders.
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending January 3, 1998 and has further
directed that management submit the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. Arthur Andersen LLP has
audited the Company's financial statements since 1983. Representatives from
Arthur Andersen LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Arthur Andersen LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Arthur Andersen LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Arthur Andersen LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 5
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 3, 1997 by: (i) each nominee for
director; (ii) each of the executive officers named in the Summary Compensation
Table; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)(2)
---------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
- ---------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Massachusetts Financial Services(3)
500 Boylston Street
Boston, MA 02116...................................................................... 10,762,338 12.1%
FMR Corp.(4)
82 Devonshire Street
Boston, MA 02109...................................................................... 4,328,475 4.9
Joseph B. Costello(5)................................................................... 2,020,158 2.2
H. Raymond Bingham(5)................................................................... 507,615 *
M. Robert Leach(5)...................................................................... 353,127 *
John Olsen(5)........................................................................... 216,920 *
Shane V. Robison(5)..................................................................... 69,068 *
Donald L. Lucas(5)(6)................................................................... 99,868 *
Carol A. Bartz(5)....................................................................... 5,000 *
Henry E. Johnston(5).................................................................... 46,425 *
Leonard Y.W. Liu(5)..................................................................... 69,784 *
Alberto Sangiovanni-Vincentelli(5)...................................................... 173,994 *
George M. Scalise(5).................................................................... 38,709 *
John B. Shoven(5)....................................................................... 68,670 *
James E. Solomon(5)..................................................................... 202,518 *
All executive officers and directors as a group (21 persons)(5)......................... 4,183,331 4.6
</TABLE>
- ------------------------
* Less than 1%
(1) On May 3, 1996, the Company declared a 3-for-2 stock split effected by means
of a stock dividend. All share numbers contained herein give effect to such
stock split.
(2) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13G filed with the Securities and
Exchange Commission (the "SEC"). Unless otherwise indicated in the footnotes
to this table and subject to community property laws where applicable, the
Company believes that each of the stockholders named in this table has sole
voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages are based on 88,596,639 shares
outstanding on March 3, 1997, adjusted as required by rules promulgated by
the SEC.
(3) The Company has received an amended Schedule 13G dated February 11, 1997,
indicating that Massachusetts Financial Services holds 10,762,338 shares for
which it has sole investment power and 10,491,688 shares for which it has
sole voting power.
(4) The Company has received an amended Schedule 13G dated February 14, 1997,
indicating that FMR Corp. holds 4,328,475 shares for which it has sole
investment power and 690,500 shares for which it has sole voting power.
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<PAGE>
(5) Includes shares which certain executive officers and directors of the
Company have the right to acquire within 60 days after the date of this
table pursuant to outstanding options as follows: Joseph B. Costello,
1,435,158 shares; H. Raymond Bingham, 505,237 shares; M. Robert Leach,
351,250 shares; John Olsen, 213,514 shares; Alberto Sangiovanni-Vincentelli,
158,015 shares; Leonard Y. W. Liu, 63,709 shares; John B. Shoven, 68,670
shares; Shane V. Robison, 69,068 shares; Donald L. Lucas, 59,203 shares;
Henry E. Johnston, 41,250 shares; George M. Scalise, 39,709 shares; Carol
Bartz, 5,000 shares and all executive officers and directors as a group,
3,299,880 shares.
(6) Includes 40,665 shares held under a trust agreement for the benefit of Mr.
Lucas and his wife.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 28, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that an
amendment to one report covering one transaction in March 1996 was filed late on
December 10, 1996 by Mr. James Solomon, and one report covering one transaction
in November 1996 was filed late on December 23, 1996 by Dr. Leonard Liu.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives an annual retainer of
$27,000, a per meeting fee of $2,000 and $1,000 for each committee meeting
attended by committee members, if held on a date other than the date of a Board
of Directors meeting. Mr. Lucas is not paid for his attendance at meetings of
the Board, but, is paid annual retainers of $100,000 and $50,000, respectively,
for his service as Chairman of the Board and a member of the Venture Committee,
respectively. Dr. Shoven is not paid for his attendance at meetings of the
Board, but, is paid annual retainers of $40,000 and $25,000, respectively, for
his service as Chairman of the Compensation Committee and a member of the
Venture Committee, respectively. During the fiscal year ended December 28, 1996,
the total compensation paid to non-employee directors was $354,900. The members
of the Board of Directors are also eligible for reimbursement for their expenses
incurred in connection with attendance at Board meetings in accordance with
Company policy. Directors who are executive officers of the Company do not
receive additional compensation for their service on the Board.
Each non-employee director of the Company also receives stock option grants
under the 1995 Directors Stock Option Plan. A "Non-Employee Director" is defined
in the 1995 Directors Stock Option Plan as a director of the Company and its
affiliates who is not otherwise an employee of the Company or any affiliate.
Only Non-Employee Directors of the Company are eligible to receive options under
the 1995 Directors Stock Option Plan. Options granted under the 1995 Directors
Stock Option Plan are intended by the Company not to qualify as incentive stock
options under the Code.
Under the 1995 Directors Stock Option Plan, each person who is first elected
to be a Non-Employee Director after October 3, 1995 is automatically granted an
option to purchase the number of shares of Common Stock of the Company equal to
3,750 multiplied by the number of calendar quarters occurring between the date
on which such person begins serving as a director of the Company and the first
July 1 occurring after the date on which such person begins serving as a
director of the Company. On July 1 of
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<PAGE>
each year, commencing in 1996, each Non-Employee Director is automatically
granted an option to purchase the following number of shares of the Common Stock
of the Company: (a) 15,000 shares of Common Stock of the Company; (b) 7,500
shares of Common Stock of the Company, provided that on such date the
Non-Employee Director is also serving as the chairman of one committee of the
Board AND is a member of at least one additional committee of the Board (but is
not serving as the Chairman of the Board); and (c) 15,000 shares of Common Stock
of the Company, provided that on such date the Non-Employee Director is also
serving as the Chairman of the Board. On January 30 of each year, commencing in
1996, the Non-Employee Director who on that date is then serving as the Chairman
of the Board and has completed 5 years of service as the Chairman of the Board
is automatically granted a one-time option to purchase 67,500 shares of Common
Stock of the Company. Each Non-Employee Director who is a member of the Venture
Committee of the Board is, on the later of October 3, 1995 or the date of his or
her initial selection to serve on the Venture Committee of the Board,
automatically granted an option to purchase 22,500 shares of Common Stock of the
Company. The Non-Employee Director who is serving as the Chairman of the Venture
Committee of the Board is, on the later of October 3, 1995 or the date of his or
her initial selection to serve as the Chairman of the Venture Committee of the
Board, granted an additional option to purchase 22,500 shares of Common Stock of
the Company. As of February 27, 1997, no options had been exercised under the
1995 Directors Stock Option Plan.
The Company has consulting agreements with Mr. Johnston and Dr.
Sangiovanni-Vincentelli. During the fiscal year ended December 28, 1996,
pursuant to such consulting agreements, Mr. Johnston and Dr.
Sangiovanni-Vincentelli received cash compensation of $45,000 and $282,500,
respectively.
19
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended 1994, 1995 and 1996,
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and its other four most highly compensated executive officers at
December 28, 1996 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------------
AWARDS
ANNUAL COMPENSATION ------------------
------------------------ SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1)($) BONUS($) UNDERLYING OPTIONS COMPENSATION($)
- ------------------------------------------ --------- ------------- --------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Joseph B. Costello........................ 1996 600,000 873,000 -- 2,250 (2)
President and Chief 1995 550,000 803,500 -- 5,115(3)(4)
Executive Officer 1994 550,000 601,438 -- --
John Olsen................................ 1996 275,000 397,000 56,250 2,250 (2)
Senior Vice President 1995 260,000 393,900 -- 4,000(3)(4)
Worldwide Sales 1994 121,083(5) 0 262,500 --
H. Raymond Bingham........................ 1996 300,000 361,000 -- 2,250 (2)
Executive Vice President & 1995 300,000 359,000 -- 4,154(3)(4)
Chief Financial Officer 1994 300,000 269,875 -- 19,582 (6)
Shane V. Robison.......................... 1996 300,000 253,000 18,750 2,250 (2)
Senior Vice President 1995 130,769(7) 151,000 281,250 --
Engineering 1994 -- -- -- --
M. Robert Leach........................... 1996 300,000 217,000 -- 2,250 (2)
Senior Vice President 1995 300,000 271,069 -- 5,308(3)(4)
Spectrum Services 1994 300,000 205,875 -- 4,077 (6)
</TABLE>
- ------------------------
(1) Includes amounts deferred pursuant to Section 401(k) of the Internal Revenue
Code of 1986, as amended.
(2) Includes Company contribution to 401(K) savings plan of $2,250 per Named
Executive Officer
(3) Includes Company contribution to 401(k) savings plan of $3,000 per Named
Executive Officer.
(4) Includes value of accrued but unused vacation converted into cash and
donated by executive to charity. $2,115 for Mr. Costello, $1,000 for Mr.
Olsen, $1,154 for Mr. Bingham and $2,308 for Mr. Leach.
(5) Employment commenced in May 1994.
(6) Represents reimbursement of relocation and moving expenses.
(7) Employment commenced in July 1995.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1987 Stock
Option Plan (the "1987 Plan"), and its 1993 Stock Option Plan (the "1993 Plan")
(collectively, the "Plans"). As of March 3, 1997, options to purchase a total of
16,794,674 shares were outstanding under the Plans and options to purchase
4,407,429 shares remained available for grant thereunder.
20
<PAGE>
The following tables show for the fiscal year ended December 28, 1996,
certain information regarding options granted to, exercised by, and held at year
end by, the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE OR FOR OPTION TERM(1)
GRANTED FISCAL BASE PRICE EXPIRATION ---------------------
NAME (#)(2) YEAR(%) ($/SH) DATE 5%($) 10%($)
- ---------------------------------------- ----------- ------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joseph B. Costello...................... -- -- -- -- -- --
John Olsen.............................. 56,250 1.75 28.0416 2/5/06 993,724 2,507,971
H. Raymond Bingham...................... -- -- -- -- -- --
Shane V. Robison........................ 18,750 .58 28.0416 2/5/06 331,241 835,990
M. Robert Leach......................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Calculated on the assumption that the market value of the underlying stock
increases at the stated values compounded annually for the ten-year term of
the option.
(2) Such options generally vest over a 4 year period with 25% of the options
vesting after one year, and 1/48th of the options vesting each month
thereafter. The options have a ten year term. The Board of Directors may
reprice or accelerate the options under the terms of the Plans.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT 12/28/96 AT 12/28/96
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE(#) UNEXERCISABLE($)(2)
- -------------------------------------------- ----------- ---------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Joseph B. Costello.......................... -- -- 2,088,283/105,469 72,258,594/3,579,354
John Olsen.................................. 90,000 2,586,263 164,296/195,704 5,315,660/5,110,746
H. Raymond Bingham.......................... 83,200 2,522,528 483,987/70,313 16,613,515/2,413,589
Shane V. Robison............................ 30,000 655,834 69,608/200,392 1,586,967/4,340,798
M. Robert Leach............................. 80,000 2,421,253 313,750/56,250 10,525,883/1,887,110
</TABLE>
- ------------------------
(1) Value realized is based upon the fair market value of the Company's Common
Stock on the date of exercise less the exercise price and does not
necessarily indicate that the optionee sold such stock.
(2) The fair market value of the Company's Common Stock at December 28, 1996
($38.6875) less the exercise price of the options.
21
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Compensation Committee Report on Executive Compensation shall not be
deemed to be incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933,
as amended ("1933 Act") or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The Compensation Committee (the "Committee") of the Board of Directors is
composed of two non-employee directors. The members of the Committee are Mr.
Lucas and Dr. Shoven. Although Mr. Costello attends some meetings at the
invitation of the Committee. However, he does not participate in deliberations
that relate to his own compensation.
COMPENSATION COMMITTEE POLICY
The Committee typically establishes base salary levels and target bonuses
for the Chief Executive Officer ("CEO") and other executive officers of the
Company (who report directly to the CEO of the Company) at or about the
beginning of each fiscal year. The Committee acts on behalf of the Board of
Directors to establish the general compensation policy of the Company for all
executive officers of the Company. The Committee administers the equity
incentive plans, including the 1987 Plan and the Bonus Plan for Executive
Officers (the "Bonus Plan"). The Committee believes that the compensation of the
CEO and the Company's other executive officers should be greatly influenced by
the Company's performance. Consistent with this philosophy, a designated portion
of the compensation of each executive is contingent upon corporate performance
and adjusted where appropriate, based on an executive's performance against
personal performance objectives. Long-term equity incentives for executive
officers are provided through the granting of stock options under the 1987 Plan.
Stock options generally have value for the executive only if the price of the
Company's stock increases above the fair market value on the grant date and the
executive remains in the Company's employ for the period required for the shares
to vest. During the formal Committee meetings in 1996, all discussions regarding
compensation of the CEO were held without his attendance. Similarly, none of the
other executive officers of the Company was present during discussions regarding
his compensation.
The base salaries, incentive compensation and stock option grants of the
executive officers are determined in part by the Committee in reliance on the
Radford Survey (the "Survey") of the prevailing competitive salaries in the
technology sector for similar positions and by evaluating those salary standards
against the achievement by the Company of its corporate goals. The compensation
of the Company's executive officers was compared to equivalent data in the
Survey and competitive market compensation levels to determine base salary,
target bonuses and target total cash compensation. Practices of such companies
with respect to stock option grants were also reviewed and compared. In
preparing the performance graph for its 1997 Proxy Statement, the Company used
the Standard & Poor's Technology Sector Index (the "S&P TS Index") as its
published line of business index.
The Survey companies selected were intended to match the Company closely in
terms of such things as product or industry, geography and revenue levels. A
significant percentage of the companies in the Survey base, for instance, had
average sales that closely approximate the Company's revenue level. A portion of
the companies in the S&P TS Index were included in the Survey. The balance of
the S&P TS Index companies, however, were too large or of a different business
profile, and would have incorrectly increased the market compensation
comparisons used to adjust executive officer salaries. The additional
- ------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the Exchange Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
22
<PAGE>
companies in the Survey base were felt to be relevant by the Company's
independent compensation consultants because they compete for executive talent
with the Company notwithstanding the fact that they are not included in the S&P
TS Index.
1996 EXECUTIVE COMPENSATION
BASE COMPENSATION. The foregoing information along with the CEO's
recommendation of base salary and target bonus for 1996 for each executive
officer, other than the CEO, was presented to the Committee in February 1996.
The Company sets its salaries for executive officers, including the CEO, at
about the seventy-fifth percentile of the range of salaries paid by the
companies referred to above. The Committee reviewed the recommendation by the
CEO and the performance and market data outlined above and established a base
salary level to be effective January 1, 1996 for each executive officer and the
CEO (see specific report on CEO compensation below).
INCENTIVE COMPENSATION. The Bonus Plan is established by the Board of
Directors at the start of each year. As more fully discussed below, the
Committee reviewed and approved the 1996 Company performance targets to be used
for purposes of bonus determination, which targets were included in the
Company's 1996 operating plan as approved by the full Board of Directors. The
Committee in its discretion assigns a target bonus to each executive officer,
approves Company performance objectives to be used for bonus determination,
approves the overall structure and mechanics of the Bonus Plan, and after the
end of the year, in its discretion approves individual performance factors for
all executive officers except the CEO (who participated only in the CEO Bonus
Plan, the terms of which are described later). As a general rule, provided that
such threshold Company performance levels are achieved, the target bonus pool
(the sum of participants' target bonuses) and individual target bonuses are
adjusted on the basis of the percentage relationship of actual to targeted
earnings per share ("EPS"). In addition, in the Committee's discretion, each
executive officer's target bonus is further adjusted to take account of
individual performance. The total of individual bonuses is controlled by the
overall bonus pool, as adjusted by the EPS performance factor. In February 1997,
the Committee determined bonus awards for 1996 for executive officers covered by
the Bonus Plan. Bonuses were determined with reference to the EPS targets and
individual performance. The Committee determined that bonuses should be paid to
executive officers for all of the annual target bonus, adjusted for performance,
established in February 1996.
STOCK OPTIONS. Stock options typically have been granted to executive
officers when the executive first joins the Company, in connection with a
significant change in responsibilities and, occasionally, to achieve equity
within a peer group. The Committee may grant additional stock options to
executives to continue to retain such executives and provide incentives. The
number of shares subject to each stock option granted is based on anticipated
future contribution and ability to impact corporate and/or business unit
results, past performance or consistency within the executive's peer group. The
Survey data was also used for general comparison purposes in determining stock
option grants to executive officers. The stock options generally become
exercisable over a four-year period and are granted at a price that is equal to
the fair market value of the Company's Common Stock on the date of grant. In
1996, stock options were granted, at the Committee's discretion, to three
executive officers who were not Named Executive Officers as incentives for them
to become employees and align their interests with those of the stockholders.
1996 CEO COMPENSATION
Compensation for the CEO is determined through a process similar to that
discussed above for executive officers in general.
In February 1996, the Committee established a base salary for Mr. Costello
which exceeded his 1995 base salary by 8.3%. The Committee also established a
target bonus for Mr. Costello under the Chief Executive Officer Bonus Plan which
was approved by the Company's Stockholders at the 1996 Annual Meeting of
Stockholders (the "CEO Bonus Plan"). The 1996 base salary level and target bonus
were
23
<PAGE>
based, at the Committee's discretion, upon a number of factors, including (a)
the Company's EPS objectives for 1996, (b) individual performance objectives
established by the Committee for Mr. Costello for 1996, and (c) the market
compensation data discussed above.
The determination of Mr. Costello's bonus for 1996 was fixed under the CEO
Bonus Plan. The amount of an annual payment varies with the degree to which the
Company achieves its goal for Earnings Per Share ("EPS") for the fiscal year for
which the payment is being made.
If the Company meets the EPS goal for that year, then Mr. Costello will be
paid an amount equal to 100% of his target bonus. If the Company fails to meet
its EPS goal, then Mr. Costello will receive a smaller bonus, or no bonus at
all. If the Company surpasses its EPS goal, then Mr. Costello will receive a
larger bonus. However, in no event shall the amount of an annual bonus exceed
$2,000,000.
Mr. Costello's base salary, target bonus, EPS goal, and schedule of
adjustment to the target bonus for EPS goal for a given fiscal year are
established by the Committee within the first ninety (90) days for that fiscal
year.
Any annual payment under the CEO Bonus Plan will be made only after the
Committee has certified both the Company's EPS performance and the amount of the
bonus to be paid. In addition, the Chief Executive Officer must remain employed
by the Company until the time the bonus is actually paid, except in the event of
the Chief Executive Officer's death or disability.
In February 1997 the Committee applied the formula provided for in the CEO
Bonus Plan and based upon such formula the Committee determined that Mr.
Costello was entitled to the full 1996 bonus specified under the 1996 CEO Bonus
Plan.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986. The
Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the Code,
which limits deductions for certain executive compensation in excess of $1
million. Certain types of compensation are deductible only if performance
criteria are specified in detail and payments are contingent on stockholder
approval of the compensation arrangement. The Company believes that it is in the
best interests of its stockholders to structure compensation arrangements to
achieve deductibility under Section 162(m), except where the benefit of such
deductibility is outweighed by the need for flexibility or the attainment of
other corporate objectives. The Committee will continue to monitor issues
concerning the deductibility of executive compensation and will take appropriate
action if and when it is warranted. To this end, the Company's 1987 Stock Option
Plan has been amended to meet the requirements of Section 162(m). If the 1987
Plan, as amended, is approved by the stockholders, at the Company's 1997 Annual
Meeting of Stockholders, all awards under the 1987 Plan will continue to be
deductible under Section 162(m). With respect to compensation other than stock
options, since corporate objectives may not always be consistent with the
requirements for full deductibility, the Committee is prepared, if it deems
appropriate, to enter into compensation arrangements under which payments may
not be deductible under Section 162(m); thus, deductibility will not be the sole
factor used by the Committee in ascertaining appropriate levels or modes of
compensation.
COMPENSATION COMMITTEE
John B. Shoven, Chairman
Donald L. Lucas
24
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on December 31, 1991 for (i) the Company's Common Stock, (ii) the
Standards & Poor's 500 Composite Index (the "S&P 500") and (iii) the S&P
Technology Sector Index (the "S&P TS"). All values assume reinvestment of the
full amount of all dividends and are calculated as of December 31 of each year:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CADENCE DESIGN SYSTEMS, INC., THE S&P INDEX
AND THE S&P TECHNOLOGY SECTOR INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CADENCE DESIGN SYSTEMS, INC. S&P 500 S&P TECHNOLOGY
<S> <C> <C> <C>
12/91 $100 $100 $100
12/92 85 108 104
12/93 46 118 128
12/94 82 120 149
12/95 251 165 215
12/96 354 203 305
</TABLE>
* $100 invested on 12/31 in stock or index--
including reinvestment of dividends.
Fiscal year ending December 31.
- ------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the company
under the 1933 Act or the Exchange Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
25
<PAGE>
CERTAIN TRANSACTIONS
From January 1, 1996 to the present, there have been no transactions
involving in excess of $60,000, between the Company and any current executive
officer, director, 5% beneficial owner of the Common Stock or member of the
immediate family of any of the foregoing persons, in which one of the foregoing
individuals or entities had a material interest, except for certain transactions
identified in "Executive Compensation" and "Director Compensation" above.
All transactions from January 1, 1996 to the present between the Company and
any current executive officer or director have been approved by a majority of
the disinterested members of the Company's Board of Directors. Any future
transactions with officers, directors or affiliates will be approved by a
majority of the disinterested members of the Board of Directors and will be on
terms that are no less favorable to the Company than could be obtained from
unaffiliated third parties and that may reasonably be expected to benefit the
Company.
The Company's policy is to enter into agreements with each of its directors
and executive officers providing for the indemnification of such persons to the
fullest extent permitted by law for any liability they may incur by reason of
their service as officers and/or directors to the Company.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
R.L. Smith McKeithen
SECRETARY
March 31, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, CADENCE DESIGN
SYSTEMS, INC., 2655 SEELY AVENUE, SAN JOSE, CALIFORNIA 95134.
26
<PAGE>
PROXY CADENCE DESIGN SYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 1997
The undersigned hereby appoints Joseph B. Costello and R. L. Smith
McKeithen, or either of them, each with power of substitution, to represent
the undersigned at the Annual Meeting of Stockholders of Cadence Design
Systems, Inc. (the "Company") to be held at Cadence Design Systems, Inc.,
2655 Seely Avenue, San Jose, California on May 1, 1997 at 3:00 p.m. and any
continuation or adjournment thereof, and to vote the number of shares the
undersigned would be entitled to vote if personally present at the meeting on
the following matters.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
THE SHARES WILL BE VOTED AS DIRECTED ON REVERSE. IN THE ABSENCE OF
DIRECTION, THIS PROXY WILL BE VOTED FOR THE NINE
NOMINEES FOR ELECTION AND FOR PROPOSALS 2, 3, 4 AND 5.
<PAGE>
CADENCE DESIGN SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. ELECTION OF DIRECTORS
Nominees: Carol A. Bartz, Joseph B. Costello, Leonard Y.W. Liu,
Donald L. Lucas, Alberto Sangiovanni-Vincentelli, George M. Scalise and
John B. Shoven (INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name on the space provided
to the right)
Nominee Exception__________________________________________________________
For Withheld For All
All From All Except
/ / / / / /
2. APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1990 EMPLOYEE STOCK PURCHASE
PLAN
For Against Abstain
/ / / / / /
3. APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED SHARES OF COMMON STOCK
For Against Abstain
/ / / / / /
4. APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1987 STOCK OPTION PLAN
For Against Abstain
/ / / / / /
5. RATIFICATION OF SELECTION OF ARTHUR ANDERSEN & CO. INDEPENDENT PUBLIC
ACCOUNTANTS.
For Against Abstain
/ / / / / /
6. In their discretion, upon such other business as may properly come before
the meeting or any adjournment thereof.
For Abstain
/ / / /
The undersigned hereby acknowledges receipt of (a) Notice of Annual Meeting of
Stockholders of the Company, (b) accompanying Proxy Statement and (c) Annual
Report to Stockholders for the year ended December 28, 1996.
Dated ____________________________________________________________________, 1997
Signature(s): __________________________________________________________________
Sign exactly as your name(s) appear on your stock certificate
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
