<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SYNOPSYS, INC.
--------------
(Name of Registrant as Specified In Its Charter)
-------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 27, 1998
------------------------
To the Stockholders of Synopsys, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Synopsys,
Inc., a Delaware corporation (the "Company"), will be held on Friday, February
27, 1998, at 4:00 p.m., local time, at the Company's principal executive offices
at 700 East Middlefield Road, Mountain View, California 94043, for the following
purposes:
1. To elect seven directors to serve for the ensuing year or until
their successors are elected.
2. To approve an amendment to the Company's Employee Stock Purchase
Plan and International Employee Stock Purchase Plan (the "Plans") to
increase the number of shares of Common Stock reserved for issuance
thereunder by 1,400,000 shares.
3. To approve amendments to the Company's 1994 Non-Employee Directors
Stock Option Plan to (i) increase the number of options to purchase shares
of Common Stock granted to non-employee directors who are re-elected to the
Board of Directors (the "annual option grant") from 8,000 shares per year
to 10,000 shares per year; (ii) provide an annual option grant to
newly-elected or newly-appointed directors; (iii) provide an annual grant
of options to purchase 5,000 shares of Common Stock as compensation for
service on selected committees of the Board of Directors (a
"committee-service grant"), subject to a limit of two such grants per
non-employee director per year; and (iv) provide that annual option grants
and committee-service grants vest immediately prior to the first Annual
Meeting following the date of grant.
4. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for fiscal year 1998.
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on January 8, 1998 are
entitled to notice of and to vote at the meeting. All stockholders are cordially
invited to attend the meeting in person. However, to assure your representation
at the meeting, you are urged to sign and return the enclosed proxy (the
"Proxy") as promptly as possible in the envelope enclosed. Any stockholder
attending the meeting may vote in person even if he or she has previously
returned a Proxy.
Sincerely,
/s/ HARVEY C. JONES, JR.
Harvey C. Jones, Jr.
Chairman of the Board
Mountain View, California
January 20, 1998
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE> 3
LOGO
700 EAST MIDDLEFIELD ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 27, 1998
------------------------
GENERAL INFORMATION
The enclosed proxy (the "Proxy") is solicited on behalf of the Board of
Directors of Synopsys, Inc., a Delaware corporation ("Synopsys" or the
"Company"), for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on February 27, 1998 at the Company's principal executive offices,
700 East Middlefield Road, Mountain View, California 94043.
These proxy solicitation materials were mailed on or about January 20, 1998
to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The cost of soliciting Proxies will be borne by the Company. The Company
has retained the services of Beacon Hill Partners, Inc. to assist in the
solicitation of Proxies, for which it will receive a fee from the Company of
approximately $4,000 plus out-of-pocket expenses. In addition, the Company may
reimburse brokerage houses and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such beneficial
owners. The Company will furnish copies of solicitation material to such
brokerage houses and other representatives. Proxies may also be solicited by
certain of the Company's directors, officers and employees, without additional
compensation, personally or by telephone, telecopy or telegram. Except as
described above, the Company does not presently intend to solicit Proxies other
than by mail.
REVOCABILITY OF PROXIES
Any person giving a Proxy has the power to revoke it at any time before its
use by delivering to the Company's principal executive offices a written notice
of revocation or a duly executed Proxy bearing a later date. The Proxy may also
be revoked by attending the Annual Meeting and voting in person.
RECORD DATE, VOTING AND SHARE OWNERSHIP
Stockholders of record on January 8, 1998 are entitled to notice of and to
vote at the Annual Meeting. As of the record date, 64,770,059 shares of the
Company's common stock, $.01 par value ("Common Stock"), were issued and
outstanding. No shares of the Company's preferred stock were outstanding.
Each stockholder is entitled to one vote for each share of Common Stock
held by such stockholder of record as of the close of business on January 8,
1998. The holders of a majority of the shares issued and outstanding,
represented in person or by Proxy, shall constitute a quorum. All valid Proxies
received before the meeting will be exercised. All shares represented by a Proxy
will be voted, and where a stockholder specifies by means of his or her Proxy a
choice with respect to any matter to be acted upon, the shares will be voted in
accordance with the specification so made. If no choice is indicated on the
Proxy, the shares will be voted in favor of the proposal. A stockholder who
abstains on any or all matters will be deemed present at the meeting for
purposes of determining whether a quorum is present and the total number of
votes cast with respect to a proposal (other than votes cast for the election of
directors), but will be deemed not to have voted in favor of the particular
matter (or matters) as to which the stockholder has abstained. In the event a
nominee (such as
<PAGE> 4
a brokerage firm) that is holding shares for a beneficial owner does not receive
instructions from such beneficial owner as to how to vote those shares on a
proposal and does not have discretionary authority to vote on such proposal,
then the shares held by the nominee will be deemed present at the meeting for
quorum purposes but will not be deemed to have voted on such proposal (a
so-called "broker non-vote").
NOTE REGARDING SHARE-RELATED DATA
On September 8, 1995, the Company effected a two-for-one stock split in the
form of a stock dividend. All references to numbers of shares appearing in this
Proxy Statement have been adjusted to reflect such stock dividend.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE -- ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall consist
of not fewer than five and not more than eight persons; within that range, the
Board has set the number of directors at seven persons. At the Annual Meeting,
seven directors are to be elected to serve until the Company's next Annual
Meeting or until their successors are elected and qualified. The Board of
Directors has selected seven nominees, six of whom are current directors of the
Company. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unavailable to
serve. Unless otherwise instructed, the Proxy holders will vote the Proxies
received by them FOR the nominees named below. The seven candidates receiving
the highest number of affirmative votes of the shares represented and voting on
this proposal at the Annual Meeting will be elected directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE FOLLOWING NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY
UNTIL THE NEXT ANNUAL MEETING OR UNTIL THEIR SUCCESSORS HAVE BEEN ELECTED AND
QUALIFIED.
NOMINEES
Set forth below is information regarding the nominees, including
information furnished by them as to principal occupations, certain other
directorships held by them, any arrangements pursuant to which they were
selected as directors or nominees and their ages as of December 31, 1997.
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE ELECTED DIRECTOR
-------------------------------------------------------- ---- ----------------
<S> <C> <C>
Harvey C. Jones, Jr..................................... 44 1988
Aart J. de Geus......................................... 43 1986
Chi-Foon Chan........................................... 48 *
Deborah A. Coleman...................................... 45 1995
William W. Lattin....................................... 57 1995
A. Richard Newton....................................... 46 1987;1995
Steven C. Walske........................................ 45 1991
</TABLE>
- ---------------
* Standing for election for the first time at the Annual Meeting.
BACKGROUND OF DIRECTORS
HARVEY C. JONES, JR. has served as Chairman of the Board since December
1992. Mr. Jones joined Synopsys in December 1987, serving as President through
December 1992 and as Chief Executive Officer until January 1994. After 10 years
of distinguished service, Mr. Jones resigned as an employee of the Company on
December 15, 1997 and has informed the Board that he will not stand for
reelection as Chairman after the Annual Meeting. Prior to joining Synopsys, Mr.
Jones served as President and Chief Executive Officer of Daisy Systems
Corporation, a company he co-founded in 1981. From 1974 to 1981, Mr. Jones was
2
<PAGE> 5
employed by Calma Company where his last position was Vice President, Business
Development. Mr. Jones holds a B.S. in mathematics and computer sciences from
Georgetown University and an M.S. in management from the Massachusetts Institute
of Technology. Mr. Jones is a Director of Remedy Corporation, a developer of
client-server software.
DR. AART J. DE GEUS co-founded Synopsys and currently serves as President
and Chief Executive Officer. From the inception of Synopsys in December 1986, he
has held a variety of positions ranging from Senior Vice President of
Engineering to Senior Vice President of Marketing. From 1986 to 1992, Dr. de
Geus served as Chairman of the Board. He has served as President since 1992 and
has held the additional title of Chief Executive Officer since January 1994. He
has served as a Director since 1986. From 1982 to 1986, Dr. de Geus was employed
by General Electric Corporation, where he was the Manager of the Advanced
Computer-Aided Engineering Group. Dr. de Geus holds an M.S.E.E. from the Swiss
Federal Institute of Technology in Lausanne, Switzerland and a Ph.D. in
electrical engineering from Southern Methodist University.
DR. CHI-FOON CHAN joined Synopsys as the Vice President of Application
Engineering & Services in May 1990. Since September 1996 he has served as
Executive Vice President, Office of the President and since April 1997 he has
served as Chief Operating Officer. From February 1994 until April 1997 he served
as Senior Vice President, Design Tools Group and from October 1996 until April
1997 as Acting Senior Vice President, Design Reuse Group. Prior to February
1994, Dr. Chan served as Vice President, Engineering and General Manager,
DesignWare Operations. From March 1987 to May 1990, Dr. Chan was employed by NEC
Electronics, where his last position was General Manager, Microprocessor
Division. From 1977 to 1987, Dr. Chan held a number of senior engineering
positions at Intel Corporation. Dr. Chan holds an M.S. and Ph.D. in computer
engineering from Case Western Reserve University.
DEBORAH A. COLEMAN has been a Director of Synopsys since November 1995. Ms.
Coleman has been Chairman and Chief Executive Officer of Merix Corporation, a
manufacturer of printed circuit boards, since May 1994, when it was spun off
from Tektronix, Inc., and has been President since March 1997. Ms. Coleman
joined Merix from Tektronix, a diversified electronics corporation, where she
served as Vice President of Materials Operations, responsible for worldwide
procurement, distribution, component engineering and component manufacturing
operation. Prior to joining Tektronix in November 1992, Ms. Coleman was with
Apple Computer, Inc. for eleven years, where she held several executive
positions, including Chief Financial Officer, Chief Information Officer and Vice
President of Operations. She is a Director of Applied Materials, a manufacturer
of fabrication equipment.
DR. WILLIAM W. LATTIN is an Executive Vice President of Synopsys and has
been a Director of Synopsys since July 1995. Dr. Lattin joined Synopsys in
February 1994 in connection with Synopsys' merger with Logic Modeling
Corporation ("LMC"). He has served as Executive Vice President since July 1995.
From October 1994 to July 1995 he served as Senior Vice President, Corporate
Marketing, and from February 1994 until October 1994 as Senior Vice President,
Logic Modeling Group. From December 1992 to February 1994, Dr. Lattin served as
President, Chief Executive Officer and Director of LMC, and from May 1992 to
December 1992 he served as Chairman of the Board and Chief Executive Officer of
LMC. From 1986 to 1992, Dr. Lattin served as Chairman of the Board of Directors,
President and Chief Executive Officer of Logic Automation Inc., a predecessor of
LMC. Dr. Lattin holds a B.S.E.E. and an M.S.E.E. from the University of
California at Berkeley, and a Ph.D. in electrical engineering from Arizona State
University. Dr. Lattin is a Director of RadiSys Corporation, a supplier of
embedded computers, as well as a Trustee of the Oregon Graduate Institute.
DR. A. RICHARD NEWTON has been a Director of Synopsys since January 1995.
Previously, Dr. Newton was a Director of Synopsys from January 1987 to June
1991. Dr. Newton has been a Professor of Electrical Engineering and Computer
Sciences at the University of California at Berkeley since 1979. Since 1988, Dr.
Newton has acted as a Venture Partner with Mayfield Fund, a venture capital
organization. From November 1994 to July 1995, he was acting President and Chief
Executive Officer of Silicon Light Machines, a private company which is
developing display systems based on the application of micromachined silicon
light-valves.
3
<PAGE> 6
STEVEN C. WALSKE has been a Director of Synopsys since December 1991. Mr.
Walske has been Chairman and Chief Executive Officer and a Director of
Parametric Technology Corporation, a supplier of software products for
mechanical computer-aided engineering, since August 1994. From December 1986 to
July 1994, Mr. Walske was President and Chief Executive Officer of Parametric.
Mr. Walske is a Director of Videoserver, Inc., a supplier of network conference
servers, and Object Design Inc., which makes object data management software.
There are no family relationships among any executive officers, directors
or persons chosen or nominated to become executive officers or directors of the
Company.
BOARD COMMITTEES AND MEETINGS
During fiscal year 1997, the Board of Directors held six meetings and acted
by unanimous written consent on one occasion. During such year the Board of
Directors had an Audit Committee and a Compensation Committee and an Executive
Committee.
During fiscal year 1997, the Audit Committee consisted of two directors,
Ms. Coleman and Dr. Newton, each of whom served on the Committee for the entire
fiscal year. Dr. Newton resigned from the Committee on October 15, 1997. As of
the date of this Proxy Statement a successor has not been appointed. The Audit
Committee is primarily responsible for reviewing the Company's quarterly results
prior to their release to the public, approving the services performed by the
Company's independent auditors and reviewing their reports regarding the
Company's accounting practices and systems of internal accounting controls. The
Audit Committee held three meetings during the last fiscal year.
During fiscal year 1997, the Compensation Committee consisted of three
directors, Mr. Walske, Dr. Newton and Ms. Coleman, each of whom served on the
Committee for the entire fiscal year. Dr. Newton resigned from the Committee on
October 15, 1997. As of the date of this Proxy Statement a successor has not
been appointed. The Compensation Committee is primarily responsible for
reviewing and approving the Company's general compensation policies, setting
compensation levels for the Company's executive officers and administering the
1992 Plan, Employee Stock Purchase Plan, International Employee Stock Purchase
Plan and 401(k) Savings Plan. The Committee held four meetings during fiscal
year 1996 and acted by unanimous written consent on two occasions.
The Company currently has no standing nominating committee. Nominations for
election of directors at the Annual Meeting were made by the full Board of
Directors of the Company.
During fiscal year 1997, all directors attended 100% of the meetings of the
Board of Directors and Committees of the Board on which they served.
DIRECTORS' COMPENSATION
During fiscal year 1997, each non-employee Board member was paid $3,000
plus certain expenses for each Board Meeting attended. Board members received no
compensation for attending meetings of Board Committees. Effective for fiscal
year 1998, each non-employee member of the Board will be paid an annual retainer
of $8,000, and will be paid $1,000 for each Board or Board Committee meeting
attended, plus expenses.
In addition, non-employee Board members receive automatic option grants
under the 1994 Non-Employee Directors Stock Option Plan (the "Directors Plan").
As of the date of this Proxy four non-employee Board members were eligible to
participate in the Directors Plan. Under the Directors Plan, each eligible
non-employee Board member is automatically granted, at the time of his or her
initial election or appointment to the Board (unless such member was previously
an employee of the Company), a non-statutory option to purchase 20,000 shares of
Common Stock. On the date of each annual stockholders meeting each individual
re-elected as a non-employee Board member at the annual meeting is automatically
granted a non-statutory option to purchase 8,000 shares of Common Stock (an
"annual option grant").
4
<PAGE> 7
Proposal Three on the Proxy, as described in this Proxy Statement, amends
the Directors Plan in the following ways: (i) the annual option grant to
re-elected non-employee Board members would be increased to 10,000 shares; (ii)
the annual option grant would be provided to newly-elected and newly-appointed
non-employee Board members (prorated, in the case of directors appointed by the
Board during the year, to reflect the number of months from the date of
appointment remaining until the next Annual Meeting); and (iii) non-employee
Board members would receive an annual grant of options to purchase 5,000 shares
of Common Stock as compensation for service on selected committees of the Board
of Directors, prorated to reflect the number of months from the date of
appointment to such a committee until the next Annual Meeting (a
"committee-service grant"), and subject to a limit of two committee service
grants per non-employee Board member per year.
A total of 250,000 shares has been reserved for issuance under the
Directors Plan, of which 156,000 shares are reserved for issuance in respect of
options that have yet to be issued. The exercise price per share of Common Stock
subject to each option grant is equal to one hundred percent (100%) of the fair
market value per share on the grant date. The options have a maximum term of 10
years, measured from the grant date, subject to earlier termination upon
cessation of service as a director.
Options granted under the Directors Plan are immediately exercisable for
shares, but any shares purchased are subject to repurchase by the Company at the
exercise price until the recipient's right in such shares vests. The initial
automatic grant for 20,000 shares made to each non-employee Board member vests,
and the Company's repurchase right relating thereto lapses, in a series of four
successive equal installments on the date immediately prior to each of the first
four annual meetings of stockholders following the grant date of that option,
provided the optionee continues in Board service through each such vesting date.
Each annual option grant vests in full, and the Company's repurchase right
relating thereto lapses, on the date immediately prior to the fourth annual
meeting of stockholders following the grant date of that option, provided the
optionee continues in Board service through such vesting date. Proposal Three on
the Proxy, as described in this Proxy Statement, shortens the vesting period for
the annual option grants. Such Proposal provides that annual option grants and
committee-service grants vest immediately prior to the first Annual Meeting
following the date of grant.
Notwithstanding the preceding paragraph, options granted under the
Directors Plan automatically vest upon the occurrence of certain corporate
transactions, including certain mergers or changes in control of the Company or
the sale of all or substantially all of the Company's assets. In the event of a
hostile tender offer for securities possessing more than 50% of the Company's
outstanding voting power, options granted under the Directors Plan and held for
more than six months may be surrendered for a cash distribution equal to the
excess of the tender offer price over the exercise price of the options.
During fiscal year 1997, Mr. Walske, Dr. Newton and Ms. Coleman each
received automatic grants of options to purchase 8,000 shares of Common Stock on
February 28, 1997, at an exercise price of $35.70. In connection with the 1998
Annual Stockholders Meeting, and subject to shareholder approval of Proposal
Three, Mr. Jones, Mr. Walske, Dr. Newton and Ms. Coleman each will receive
automatic grants of options to purchase 10,000 shares of Common Stock.
During fiscal year 1997, Dr. Newton provided consulting services to the
Company, for which he was paid $50,000 in fiscal year 1998. Under the Company's
agreement with Dr. Newton, at the Company's request, Dr. Newton provides advice
as to industry and competitive developments and market conditions. In October
1997 the Company and Dr. Newton entered into a revised agreement pursuant to
which Dr. Newton may be paid up to $120,000 for consulting services provided
during fiscal year 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 8, 1997 by (i)
each person known by the Company to own beneficially more than five percent of
the outstanding shares of Common Stock on that date, (ii) each director and each
person nominated to become a director of the Company, (iii) each of the
executive officers named in
5
<PAGE> 8
the "Executive Compensation -- Summary Compensation Table" on page 7 (the "Named
Executive Officers") and (iv) all directors and current executive officers as a
group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
--------------------------
PERCENTAGE
NAME OF BENEFICIAL OWNER(1) NUMBER OWNERSHIP
------------------------------------------------------------ --------- ----------
<S> <C> <C>
FMR Corp. .................................................. 5,813,500(2) 9.0%
82 Devonshire Street
Boston, Massachusetts 02109
T. Rowe Price............................................... 5,771,613(3) 8.9%
100 East Pratt Street
Baltimore, Maryland 21202
Massachusetts Financial Services Company.................... 5,542,653(3) 8.6%
500 Boylston Street, 15th Floor
Boston, Massachusetts 02116
J. & W. Seligman Co., Incorporated ......................... 3,954,249(3) 6.1%
100 Park Avenue
New York, New York 10017
Chi-Foon Chan............................................... 98,547(4) *
Deborah A. Coleman.......................................... 33,000(5) *
Aart J. de Geus............................................. 503,473(6) *
Harvey C. Jones, Jr......................................... 153,622(7) *
William W. Lattin........................................... 196,108(8) *
Paul Lippe.................................................. 37,996(9) *
A. Richard Newton........................................... 33,078(10) *
Robert Russo................................................ 24,582(11) *
Steven C. Walske............................................ 28,200(12) *
Sang Wang................................................... 342,480(13) *
All directors and executive officers as a group
(19 persons).............................................. 2,050,112(14) 3.2%
</TABLE>
- ---------------
* Less than 1%.
(1) The persons named in the table above have sole voting and investment power
with respect to all shares of the Company's Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
Unless otherwise indicated, the business address of each of the beneficial
owners listed is 700 East Middlefield Road, Mountain View, California
94043.
(2) Based solely upon the information contained in a Schedule 13G filed by FMR
Corp. on behalf of itself and certain of its affiliates with the Securities
and Exchange Commission (the "Commission") on October 9, 1997. FMR Corp.
and such affiliates have shared voting power with respect to 416,900 such
shares and no voting power with respect to the remainder of such shares.
(3) Based on information that the Company believes to be correct as of
September 1997, but that is not reflected in filings with the Commission.
The Company does not know the extent to which voting or dispositive power
with respect to such shares is shared. Does not include shares of the
Company's Common Stock, if any, received by the beneficial owner pursuant
to the acquisition of Viewlogic Systems, Inc. by the Company on December 4,
1997.
(4) Includes options to purchase 92,124 shares of Synopsys Common Stock
exercisable by Dr. Chan within 60 days of December 8, 1997.
(5) Includes options to purchase 33,000 shares of Synopsys Common Stock
exercisable by Ms. Coleman within 60 days of December 8, 1997.
(6) Includes options to purchase 177,250 shares of Synopsys Common Stock
exercisable by Dr. de Geus within 60 days of December 8, 1997. Excludes
11,000 shares held by Dr. de Geus' spouse and for which he disclaims
beneficial ownership.
6
<PAGE> 9
(7) Includes options to purchase 101,025 shares of Synopsys Common Stock
exercisable by Mr. Jones within 60 days of December 8, 1997.
(8) Includes options to purchase 94,259 shares of Synopsys Common Stock
exercisable by Dr. Lattin within 60 days of December 8, 1997.
(9) Includes options to purchase 31,996 shares of Synopsys Common Stock
exercisable by Mr. Lippe within 60 days of December 8, 1997.
(10) Includes options to purchase 33,000 shares of Synopsys Common Stock
exercisable by Dr. Newton within 60 days of December 8, 1997.
(11) Includes options to purchase 23,020 shares of Synopsys Common Stock
exercisable by Mr. Russo within 60 days of December 8, 1997.
(12) Includes options to purchase 28,000 shares of Synopsys Common Stock
exercisable by Mr. Walske within 60 days of December 8, 1997.
(13) Includes options to purchase 24,304 shares of Synopsys Common Stock
exercisable by Dr. Wang within 60 days of December 8, 1997.
(14) Includes options to purchase 1,049,800 shares of Synopsys Common Stock
exercisable by directors and executive officers within 60 days of December
8, 1997. Excludes 11,000 shares held by Dr. de Geus' spouse, and for which
he disclaims beneficial ownership, and 9,725 shares held by the spouse and
children of another executive officer (not a Named Executive Officer), for
which he disclaims beneficial ownership.
EXECUTIVE COMPENSATION
Executive Compensation and Other Matters
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers whose compensation for fiscal year 1997 exceeded $100,000
(the "Named Executive Officers"), for services rendered in all capacities to the
Company during the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------
-------------------------------------- SECURITIES
OTHER ANNUAL AWARDS ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND POSITIONS YEAR SALARY($) BONUS($)(1) ($)(1)(2) OPTIONS (#) ($)(3)
- ------------------------------- ---- --------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Aart J. de Geus................ 1997 299,231 200,363 -- 200,000 1,870
President and Chief 1996 260,000 240,000 -- 120,000 2,517
Executive Officer 1995 230,000 190,277 -- -- 1,488
Chi-Foon Chan.................. 1997 281,914 144,441 -- 165,000(4) 2,494
Chief Operating Officer 1996 224,138 153,930 -- 35,000(5) 3,122
1995 200,000 146,199 -- 24,000 2,082
Robert Russo................... 1997 191,327 160,188 231,600 82,000(6) 3,144
Senior Vice President, 1996 145,000 98,695 234,659 15,000 2,902
Sales and Services for 1995 130,000 15,156 93,448 6,000 2,198
the Americas and Europe
Harvey C. Jones, Jr............ 1997 241,379 232,113 -- 16,000 2,061
Chairman of the Board 1996 241,379 -- -- 50,000 2,061
1995 230,000 50,277 -- -- 1,686
Paul Lippe..................... 1997 194,750 118,717 -- 65,000(7) 1,870
Sr. Vice President, 1996 165,000 81,789 -- 17,000 2,505
Business and Market 1995 152,000 78,771 -- 16,000 1,460
Development, and Secretary
</TABLE>
- ---------------
(1) Includes amounts paid in the subsequent fiscal year in respect of services
rendered (or, in the case of commissions, orders booked) during the fiscal
year for which information is provided.
(2) "Other Annual Compensation" includes the following: (i) commissions of
$224,677, $227,182, and $86,248 earned by Mr. Russo for fiscal years 1997,
1996 and 1995, respectively, and (ii) car allowances of $6,923, $7,477 and
$7,200 paid to Mr. Russo for fiscal years 1997, 1996 and 1995, respectively.
7
<PAGE> 10
(3) Amounts in this column reflect premiums paid for group term life insurance
and Synopsys 401(k) contributions.
(4) Includes options to purchase 75,000 shares which were granted in fiscal
years 1996 and 1997 and canceled and regranted in fiscal year 1997 in
connection with an option repricing. See "-- Stock Option Grants."
(5) Options granted in fiscal year 1996 were canceled and regranted in fiscal
year 1997.
(6) Includes options to purchase 12,000 shares which were canceled and regranted
in fiscal year 1997 in connection with an option repricing. See "-- Stock
Option Grants."
(7) Includes options to purchase 20,000 shares which were canceled and regranted
in fiscal year 1997 in connection with an option repricing. See "-- Stock
Option Grants."
Stock Option Grants
The following table sets forth further information regarding individual
grants of options for Synopsys' Common Stock during fiscal 1997 for each of the
Named Executive Officers. All grants for each of the Named Executive Officers
were made pursuant to Synopsys' 1992 Stock Option Plan (the "1992 Plan"). In
accordance with the rules of the Commission, the table sets forth the
hypothetical gains or "option spreads" that would exist for the options at the
end of their respective ten-year terms based on assumed annualized rates of
compound stock price appreciation of 0%, 5%, and 10% from the dates the options
were granted to the end of the respective option terms. Actual gains, if any, on
option exercises are dependent on the future performance of Synopsys Common
Stock and overall market conditions. There can be no assurance that the
potential realizable values shown in this table will be achieved. No stock
appreciation rights were granted to such officers during fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZED VALUE AT
TOTAL OPTIONS ASSUMED ANNUAL RATES OF
NUMBER OF GRANTED TO STOCK PRICE APPRECIATION FOR
SECURITIES EMPLOYEES IN EXERCISE OR OPTION TERM ($)
UNDERLYING OPTIONS FISCAL 1997 BASE PRICE EXPIRATION ----------------------------
NAME GRANTED(1) (%)(2) ($/SHARE) DATE 0% 5% 10%
- ------------------- ------------------ --------------- ----------- ---------- --- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aart J. de Geus.... 150,000 2.33 35.5000 9/04/07 0 3,348,864 8,486,679
50,000 0.78 44.6250 10/03/06 0 1,403,221 3,556,038
Chi-Foon Chan...... 60,000 0.93 35.5000 9/04/07 0 1,339,546 3,394,671
75,000(3) 1.16 28.1875 4/28/07 0 1,329,523 3,369,272
30,000 0.47 35.6250 7/02/07 0 672,131 1,703,312
Robert Russo....... 40,000 0.62 35.5000 9/04/07 0 893,030 2,263,114
12,000(3) 0.19 28.1875 4/28/07 0 212,724 539,083
30,000 0.47 35.6250 7/02/07 0 672,131 1,703,312
Harvey C. Jones,
Jr............... 16,000 0.25 44.6250 10/30/06 0 449,031 1,137,932
Paul Lippe......... 30,000 0.47 35.5000 9/04/07 0 669,773 1,697,336
20,000(3) 0.31 28.1875 4/28/07 0 354,539 898,473
15,000 0.23 35.6250 7/02/07 0 336,066 851,656
</TABLE>
- ---------------
(1) These options become exercisable ratably in a series of monthly installments
over a four-year period from the grant date, assuming continued service to
Synopsys, subject to acceleration under certain circumstances involving
change in control of Synopsys. Each option has a maximum term of 10 years,
subject to earlier termination upon the optionee's cessation of service.
(2) Based on aggregate options to acquire 6,438,452 shares of Synopsys Common
Stock granted in fiscal 1997, including certain options which were
subsequently canceled and regranted for an equivalent number of shares in
connection with an option repricing.
(3) Represents option canceled and regranted for an equivalent number of shares
in connection with an option repricing.
8
<PAGE> 11
The following table sets forth certain information regarding the
participation of each of the Named Executive Officers in the Company's repricing
of options during the past ten years:
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL OPTION
NUMBER OF TERM
SECURITIES MARKET PRICE EXERCISE REMAINING AT
UNDERLYING OF STOCK AT PRICE AT DATE OF
OPTIONS TIME OF TIME OF NEW REPRICING OR
REPRICED OR REPRICING OR REPRICING OR EXERCISE AMENDMENT
NAME AND POSITION DATE AMENDED AMENDMENT AMENDMENT ($) PRICE ($) (MONTHS)
- ------------------------------------- ------- ----------- ------------ ------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Aart J. de Geus...................... 4/28/97 0 -- -- -- --
President and Chief Executive
Officer
Chi-Foon Chan........................ 4/28/97 35,000 28.1875 35.5000 28.1875 102
Chief Operating Officer 40,000 28.1875 44.6250 28.1875 114
Robert Russo......................... 4/28/97 10,000 28.1875 45.3125 28.1875 114
Senior Vice President, Sales and 4/28/97 2,000 28.1875 34.5000 28.1875 118
Services for the Americas and
Europe
Harvey C. Jones, Jr.................. 4/28/97 0 -- -- -- --
Chairman of the Board of Directors
Paul Lippe........................... 4/28/97 20,000 28.1875 44.6250 28.1875 114
Senior Vice President, Business and
Market Development, and Secretary
</TABLE>
Option Exercises and Year-End Values
The following table sets forth, for each of the Named Executive Officers,
each exercise of stock options during fiscal year 1997 and the year-end value of
unexercised options.
No stock appreciation rights were exercised during such fiscal year by the
Named Executive Officers, and no stock appreciation rights were outstanding at
the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS AT FY-END: ($)(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Aart J. de Geus........... -- -- 128,916 277,084 1,753,078 1,696,484
Chi-Foon Chan............. 55,000 1,790,095 79,166 173,334 1,924,731 1,618,813
Robert Russo.............. 28,200 676,283 9,817 94,448 108,879 686,282
Harvey C. Jones, Jr....... -- -- 79,149 62,251 1,564,029 662,946
Paul Lippe................ 6,000 128,394 21,986 81,564 352,980 695,476
</TABLE>
- ---------------
(1) Market value at exercise less aggregate exercise price.
(2) Market value of underlying securities at September 27, 1997 (based on a
closing price of $41.00 per share) less the aggregate exercise price.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE OF
CONTROL AGREEMENTS
Under the 1992 Plan, in the event of certain changes in the ownership or
control of the Company involving a "Corporate Transaction," which includes an
acquisition of the Company by merger or asset sale, all outstanding options
under the 1992 Plan will automatically become exercisable, unless the option is
assumed by the successor corporation (or parent thereof) or replaced by a
comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof).
9
<PAGE> 12
In addition, in the event of a successful hostile tender offer for more
than 50% of the Company's outstanding Common Stock or a change in the majority
of the Board as a result of one or more contested elections for Board
membership, the Compensation Committee has the authority to provide for the
acceleration of vesting of the shares of Common Stock subject to outstanding
options under the 1992 Plan.
Synopsys has entered into Employment Agreements, effective October 1, 1997,
with its President and Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer. Each Employment Agreement provides that if the
executive is terminated involuntarily other than for cause within 24 months of a
change of control, (a) the executive will be paid an amount equal to two times
the sum of the executive's annual base pay plus target cash incentive, plus the
cash value of the executive's health benefits for the next 18 months and (b) all
stock options held by the executive will immediately vest in full. If the
executive is terminated involuntarily other than for cause in any other
situation, the executive will receive a cash payment equal to the sum of the
executive's annual base pay for one year plus target cash incentive for such
year, plus the cash value of the executive's health benefits for twelve months.
The terms "involuntary termination," "cause" and "change of control" are defined
in the Employment Agreement.
REPORTS OF THE COMPENSATION COMMITTEE AND THE BOARD OF DIRECTORS
The following is the report of the Compensation Committee of the Board of
Directors describing the compensation policies, and the rationale therefor, with
respect to the compensation paid to the Company's executive officers for fiscal
year 1997 and a report of the Board of Directors describing the Company's option
repricing and the rationale therefor.
Executive Compensation
Purpose of the Compensation Committee
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for determining compensation levels for the executive officers for
each fiscal year based upon a consistent set of policies and procedures.
Committee Structure
During fiscal year 1997 the Committee was made up of three independent,
non-employee members of the Board of Directors, Steven C. Walske, Ms. Deborah
Coleman, and Dr. A. Richard Newton, each of whom served as members of the
Committee for the full year. The Committee met during the first quarter of the
fiscal year to set executive officer salaries and bonus plans.
Objectives of the Compensation Program
The objectives of the compensation program as established by the Committee
are: (1) to provide a means for the Company to attract and retain high-quality
executives; (2) to tie executive compensation directly to the Company's business
and performance objectives; and (3) to reward outstanding individual performance
that contributes to the long-term success of the Company.
Elements of Compensation
Each executive officer's compensation package is comprised of three
elements: (1) base compensation, which reflects individual performance and is
designed primarily to be competitive with salary levels in a comparative group;
(2) variable compensation payable in cash and tied to the achievement of
financial performance goals and specific individual performance objectives
established by the Chief Executive Officer for his direct reports, and by the
Committee for the Chief Executive Officer and the Chairman of the Board; and (3)
long-term stock-based incentive compensation, which rewards Company growth and
increased stockholder value.
Base Compensation. The base compensation for each executive officer is
determined using an analysis of competitive salary ranges provided by an
independent compensation survey firm which focuses on software and related
companies similar in size and business that compete with Synopsys in the
recruitment and retention of senior personnel.
10
<PAGE> 13
For purposes of the stock price performance graph which appears later in
this Proxy Statement, the Company has selected the S&P Technology Sector Index
as the industry index. Some of the companies which the Committee surveyed as
part of the peer group for comparative compensation purposes are included in
that index. The S&P Technology Sector Index also includes a significant number
of companies that are of greater size than the Company, that participate in
different industries than the Company or are located in different regions from
the Company, and use of index companies alone would have incorrectly affected
compensation comparisons. Therefore, the Committee selected additional companies
to survey from the Radford Survey of competitive salaries in the high technology
sector, and focused primarily on whether those companies were actually
competitive with the Company in seeking executive talent. Consequently, the
additional companies included in the compensation comparison survey are not
necessarily included in the S&P Technology Sector Index.
The Committee considered the following factors in determining base
compensation: (1) salary levels for comparable positions in the compensation
comparison group; (2) each executive's past performance relative to corporate,
business group (if applicable) and individual objectives; and (3) each
executive's responsibility level and financial and strategic objectives for the
subsequent year. In general, the total cash compensation for the executive
officers of the Company for fiscal year 1997 was at or below the mean total cash
compensation for executive officers at companies in the compensation comparison
group with which the Company competes for talent.
Variable Compensation. The Company's fiscal year 1997 bonus plan provided
for incentive bonus compensation to all officers and a number of key employees
based on the achievement of specific performance targets established at the
beginning of the fiscal year relating to accepted orders, revenue and operating
margin for the Company as a whole and, for officers and employees in business
groups, contribution margin. Individual performance goals also were established.
An executive officer may receive additional compensation based on a qualitative
assessment of his or her performance by the Chief Executive Officer, in
consultation with the Board of Directors. For fiscal year 1997, a bonus formula
was established such that achievement of planned levels of accepted orders,
revenue, operating margin and, where applicable, contribution margin would
result in a specified bonus level. For performance levels over or under plan,
the bonus compensation amount would increase or decrease proportionately. For
fiscal year 1997, accepted orders, revenue and operating margin all were below
the established targets, and contribution margin varied by business unit. Bonus
compensation (except for the qualitative component) was determined according to
the compensation formula established at the beginning of the year and was below
the target amount established at the beginning of the year. Total Bonus
Compensation for the Named Executive Officers is shown in the Summary
Compensation Table on page 7. The Committee believes that these levels of
compensation are a fair reflection of the performance of the named individuals.
The Company's incentive bonus compensation structure was reviewed for
fiscal year 1998 and revised to include specific corporate performance targets
relating to accepted orders, revenue, individual performance and operating
margin (or, for individual business groups, contribution margin).
Long-Term Incentive Compensation. Long-term compensation provided to the
Company's executives has been in the form of stock options. The Committee
believes that equity-based compensation closely aligns the interests of
executive officers with those of stockholders by providing an incentive to
manage the Company with a focus on long-term strategic objectives set by the
Board of Directors relating to growth and stockholder value. Stock options are
granted under the 1992 Plan according to guidelines that take into account the
executive's responsibility level, comparison with comparable awards to
individuals in similar positions in the industry, the Company's long-term
objectives for maintaining and expanding technological leadership through
product development and growth, expected Company performance, and the
executive's existing holdings of unvested stock options. However, the Committee
does not strictly adhere to these factors in all cases and will vary the size of
the grant made to each executive officer as the particular circumstances
warrant. Each grant allows the officer to acquire shares of the Company's Common
Stock at the fair market value in effect on the date of grant.
11
<PAGE> 14
The options vest in a series of installments over a four-year period,
contingent upon the executive's continued employment with the Company.
Accordingly, the option will provide a return to the executive only if he or she
remains in the Company's employ, and then only if the market price of the Common
Stock appreciates over the option term. Subsequent grants may be made to
officers when the Committee believes that the officer has demonstrated greater
potential, achieved more than originally expected, or assumed expanded
responsibilities. Additionally, subsequent grants may be made to remain
competitive with similar companies.
The Committee evaluated the performance of the executive officers against
the strategic objectives for fiscal year 1997 set by the Board and concluded
that such performance warrants the level of long-term compensation awarded them
as set forth in the Summary Compensation Table on page 7. The Committee will
reexamine long-term compensation levels each year.
Chief Executive Officer's Compensation
Compensation for the Chief Executive Officer is determined by a process
similar to that discussed above for executive officers. Dr. de Geus' base
compensation for fiscal year 1997 was established by the Committee in November
1996. Dr. de Geus' base compensation remained below the mean base compensation
for the chief executive officers in the compensation comparison group with which
the Company competes for executives.
The Committee also established Dr. de Geus' individual bonus plan for the
fiscal year by establishing a formula based on accepted orders, revenue and
operating margin. For performance levels over or under plan, the bonus
compensation amount would increase or decrease proportionately. Dr. de Geus was
also eligible for an additional bonus based on a qualitative assessment of his
performance by the Board of Directors. For fiscal year 1997, accepted orders,
revenue and operating margin all were below the established targets. Bonus
compensation (except for the qualitative component) was determined according to
the compensation formula established at the beginning of the year. Dr. de Geus'
total bonus compensation is shown in the Summary Compensation Table on page 7,
and reflects receipt of the full discretionary bonus amount. In determining the
amount of long term compensation to grant to Dr. de Geus the Committee reviewed
publicly-available data relating to companies in the Company's industry, and
concluded that he held relatively fewer unvested stock options than the chief
executive officers of many of these companies. The level of stock options
granted to Dr. de Geus includes an amount intended to establish parity between
Dr. de Geus and his peer group. The Committee believes that the overall level of
compensation is a fair reflection of Dr. de Geus' performance for the year.
Tax Deductibility of Executive Compensation
The cash compensation to be paid to the Company's executive officers for
fiscal year 1997 is not expected to exceed the $1 million limit per officer on
the tax deductibility of such compensation under the Internal Revenue Code.
Under the 1992 Plan, compensation deemed paid to an executive officer when he or
she exercises an outstanding option under the Plan will qualify as
performance-based compensation which will not be subject to the $1 million
limitation.
Stock Option Repricing
In April 1997, the Board of Directors of the Company determined that the
purposes of the 1992 Plan were not being adequately achieved with respect to
those employees holding options with exercise prices greater than the
then-current market value of the Company's Common Stock and that it was in the
best interests of the Company and the Company's stockholders that the Company
retain and motivate such employees. The Board of Directors further determined
that it would be in the best interests of the Company and the Company's
stockholders to provide such optionees the opportunity to exchange their options
with exercise prices equal to the then-current market value of the Company's
Common Stock. Accordingly, the Board of Directors unanimously voted to approved
the option repricing, with Mr. Walske abstaining.
12
<PAGE> 15
On April 28, 1997, upon approval of the Board of Directors of the Company,
the Company offered employees who were holders of outstanding options under the
1992 Plan, other than the Chairman of the Board, the Chief Executive Officer and
the other employee members of the Board, the opportunity to exchange such
options for new stock options having an exercise price of $28.1875 per share,
the fair market value of the Company's Common Stock at the close of business on
that date. Any option holder accepting such offer was required to re-start
completely a 48-month vesting period on options issued in such exchange. In
addition, options issued in such exchange to Senior Vice Presidents and above
were subject to a one-year vesting "cliff" (i.e., no shares vest for the first
twelve months following the grant date, at which time 25% of the shares vest and
monthly vesting commences). A total of 1,864 employees of the Company were
eligible to participate in the repricing. The average exercise price of options
held by those employees was $36.05 per share prior to the repricing (excluding
options with exercise prices below $27.00). Of such eligible employees, 1,134
participated in the repricing, including the Named Executive Officers who were
eligible to participate. In aggregate, options to purchase 2,456,568 shares were
exchanged.
<TABLE>
<S> <C>
BOARD OF DIRECTORS COMPENSATION COMMITTEE
Harvey C. Jones, Jr. Steven C. Walske
Aart J. de Geus A. Richard Newton
Deborah A. Coleman Deborah A. Coleman
William W. Lattin
A. Richard Newton
Steven C. Walske
Sang Wang
</TABLE>
13
<PAGE> 16
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee was at any time during
the 1997 fiscal year or at any other time an officer or employee of the Company.
As described on page 5, Dr. Newton served as a consultant to the Company during
fiscal year 1997, for which he was paid $50,000.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as members of the Company's Board of Directors or the
Compensation Committee.
PERFORMANCE GRAPH
The following graph compares the cumulative total return to stockholders of
the Company's Common Stock since February 26, 1992 (the date the Company first
became subject to the reporting requirements of the Securities Exchange Act of
1934, as amended) to the cumulative total return since January 31, 1992 of (1)
the S&P 500 Index and (2) the S&P Technology Sector Index over the same period
(assuming the investment of $100 in the Company's Common Stock and in each of
the other indexes, and reinvestment of all dividends).
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN*
AMONG SYNOPSYS, INC., THE S&P 500 INDEX
AND THE S&P TECHNOLOGY SECTOR INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S & P TECHNOLOGY
(FISCAL YEAR COVERED) SECTOR S & P 500 SYNOPSIS INC.
<S> <C> <C> <C>
SEP-92 100 100 100
SEP-93 121 113 161
SEP-94 140 117 163
SEP-95 222 152 206
SEP-96 272 183 313
SEP-97 442 257 288
</TABLE>
* $100 INVESTED ON 02/26/92 IN STOCK OR ON 01/31/92 IN INDEX -- INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
14
<PAGE> 17
PROPOSAL TWO -- AMENDMENT TO THE
EMPLOYEE STOCK PURCHASE PLAN
PROPOSED AMENDMENTS
At the Annual Meeting, the Company's stockholders will be asked to approve
an increase in the total number of shares authorized under the Employee Stock
Purchase Plan and International Employee Stock Purchase Plan (the "Plans") by
1,400,000 shares.
EXPLANATION
The Plans permit employees of the Company and its subsidiaries to purchase
the Company's Common Stock at a discounted price. The Plans are designed to
encourage and assist a broad spectrum of employees of the Company and its
subsidiaries to acquire an equity interest in the Company through the purchase
of Common Stock. The Plans also are intended to provide to United States
employees participating in the Plans the tax benefits available under Section
421 of the Internal Revenue Code. At December 31, 1997, approximately 1,575 of
approximately 2,760 eligible employees were participants in the Plans. The
number of eligible employees includes 720 employees of Viewlogic Systems, Inc.
who became Synopsys employees in connection with the Company's merger with
Viewlogic on December 4, 1997. These employees are eligible to participate in
the Plans, but cannot enroll in the Plans until May 1998.
A summary of the principal provisions of the Plans is set forth below.
Management believes that maintaining a competitive employee stock purchase
program is an important element in recruiting and retaining employees. The
Company's Plans are designed to more closely align the interests of employees
and shareholders by encouraging employees to invest in the Company's securities,
and to help employees share in the Company's success. ESPP gains have become an
important part of overall compensation of employees.
In March 1996, the Company's stockholders approved an increase of 750,000
in the number of shares authorized for issuance under the Plans. At that time,
the Board expected that these shares would be sufficient to cover stock
purchases under the Plans for one year. These shares now have covered purchases
under the Plans for two years. As of December 31, 1997, only 180,998 shares
remained available for issuance under the Plans. The Plans' share reserve is
currently insufficient to cover purchases under the Plans expected to occur in
April 1998. Therefore, the Board is requesting that the stockholders approve an
increase in the share reserve at the 1998 Annual Meeting.
In November 1997, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Plans to increase the aggregate number of shares
issuable under the Plans by 1,400,000 shares. If approved by stockholders,
approximately 1,580,998 shares would be available for issuance under the Plans.
Management expects this share increase to be sufficient for all stock purchases
under the Plans for the next two years, absent extraordinary corporate
transactions such as one or more mergers that materially increase the number of
participants in the Plan.
Approval of the amendments requires the affirmative vote of a majority of
the votes cast at a duly held stockholders meeting at which there is a quorum.
RECOMMENDATION
The Board of Directors believes that the proposed amendment is in the best
interests of the Company, its stockholders, and its employees. ACCORDINGLY, THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCREASE IN PLAN
SHARES.
15
<PAGE> 18
DESCRIPTION OF PLANS
The following is a summary of the principal features of the Plans. The
summary, however, does not purport to be a complete description of all of the
provisions of the Plans. Any stockholder who wishes to obtain a copy of the
actual plan documents may do so by written request to the Company's Secretary at
the Company's executive offices.
All regular employees, including executive officers and directors who are
employees, customarily employed more than 20 hours per week and more than five
months per year by the Company or a participating subsidiary, are eligible to
participate in the Plans as of the first enrollment date following employment.
Participants may elect to make contributions up to a maximum of 10% of base
earnings. On the last trading date of each semi-annual purchase period, the
Company applies the funds then in each participant's account to the purchase of
shares. The purchase dates are the last trading day of April and October. The
cost of each share purchased is 85% of the lower of the closing prices for the
Company's Common Stock on (i) the first trading day in the enrollment period in
which the purchase is made and (ii) the purchase date. (The closing price of the
Company's Common Stock as reported by the Nasdaq National Market on October 31,
1997, the most recent purchase date under the Plans, was $38.875 per share.) The
length of the enrollment period may not exceed 24 months. A new 24-month
enrollment period commences each May 1 and November 1. Enrollment dates are the
first business day of May and November. Under the Plans, the maximum amount of
payroll deductions by a participant during any semi-annual purchase period is
$7,500, and no participant's right to acquire shares may accrue at a rate
exceeding $25,000 of fair market value of Common Stock (determined as of the
first business day in an enrollment period) in any calendar year. No single
participant may acquire more than 2,000 shares, and all participants may not
acquire more than 500,000 shares in the aggregate, on any semi-annual purchase
date.
The Plans are administered by the Compensation Committee, but routine
matters are delegated to management committees. The Board of Directors may amend
or terminate the Plans at any time and may provide for an adjustment in the
purchase price and the number and kind of securities available under the Plans
in the event of a reorganization, recapitalization, stock split, or other
similar event. Amendments that would increase the number of shares reserved for
purchase, materially increase the benefits to participants, or materially modify
the requirements for participation under the Plans also require stockholder
approval. Shares available under the Plans may be either outstanding shares
repurchased by the Company or newly issued shares.
FEDERAL INCOME TAX CONSEQUENCES
In general, participants who are citizens or residents of the United States
("U.S. Participants") will not have taxable income or loss under the Plans until
they sell or otherwise dispose of shares acquired under the Plans (or die
holding such shares). If the shares are held, as of the date of sale or
disposition, for longer than both (i) two years after the beginning of the
enrollment period during which the shares were purchased, and (ii) one year
following purchase, a U.S. Participant will have taxable ordinary income equal
to 15% of the fair market value of the shares on the first day of the enrollment
period (but not in excess of the gain on the sale). Any additional gain from the
sale will be long-term capital gain. The Company is not entitled to an income
tax deduction if the holding periods are satisfied.
If the shares are disposed of within either of the foregoing holding
periods (a "disqualifying disposition"), a U.S. Participant will have taxable
ordinary income equal to the excess of the fair market value of the shares on
the purchase date over the purchase price. In addition, the U.S. Participant
will have taxable capital gain (or loss) measured by the difference between the
sale price and the U.S. participant's purchase price plus the amount of ordinary
income recognized, which gain (or loss) will be long-term if the shares have
been held, as of the date of sales, for more than one year. The Company is
entitled to an income tax deduction equal to the amount of ordinary income
taxable to a U.S. Participant in a disqualifying disposition.
Special rules apply to U.S. Participants who are directors or officers. The
consequences to non-U.S. Participants are governed by foreign laws, which
typically do not offer the same tax advantages as United States law.
16
<PAGE> 19
NEW PLAN BENEFITS TABLE
The following table shows, as to each of the Named Executive Officers and
the indicated groups, the "Dollar Value" and number of shares purchased under
the Plans during fiscal year 1997. The "Dollar Value" is the difference between
the fair market value of the stock at the date of purchase and the participant's
purchase price for the stock.
NEW PLAN BENEFITS
EMPLOYEE STOCK PURCHASE PLAN AND
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
NUMBER
DOLLAR OF
NAME AND POSITION VALUE(1) SHARES
- --------------------------------------------------------------------- --------- -------
<S> <C> <C>
Aart J. de Geus...................................................... 3,381 488
President and Chief Executive Officer
Chi-Foon Chan........................................................ 3,381 488
Chief Operating Officer
Robert Russo......................................................... 3,381 488
Sr. Vice President, Sales and Services for the Americas and Europe
Harvey C. Jones, Jr.................................................. 3,381 488
Chairman of the Board
Paul Lippe........................................................... 3,381 488
Sr. Vice President, Business and Market Development, and Secretary
Executive Group (16 persons)......................................... 31,730 4,512
Non-Executive Director Group......................................... -- --(2)
Non-Executive Officer Employee Group................................. 2,059,158 308,189(3)
</TABLE>
- ---------------
(1) Future benefits or amounts received cannot be calculated as they are
dependent on each individual's decision as to the amount of salary to be
deducted for stock purchases and the stock price on the date of purchase and
date of sale.
(2) Non-employee members of the Board of Directors are ineligible to participate
in the Plans. Presently, only Dr. de Geus, Dr. Lattin and Dr. Wang are
eligible. Mr. Jones was eligible to participate in the Plans until December
15, 1997.
(3) Represents all employees other than the executive officers of the Company.
PROPOSAL THREE -- AMENDMENT TO THE
1994 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
PROPOSED AMENDMENTS
The Board of Directors is requesting stockholder approval of amendments to
the Company's 1994 Non-Employee Directors Stock Option Plan to (i) increase the
number of options to purchase shares of Common Stock granted to non-employee
directors who are re-elected to the Board of Directors (the "annual option
grant") from 8,000 shares per year to 10,000 shares per year; (ii) provide an
annual option grant to newly-elected or newly-appointed directors (prorated, in
the case of directors appointed by the Board during the year, to reflect the
number of months from the date of grant until the next Annual Meeting); (iii)
provide for an annual grant of options to purchase 5,000 shares of Common Stock
as compensation for service on selected committees of the Board of Directors (a
"committee-service grant"), subject to a limit of two committee service grants
per non-employee director per year; and (iv) provide that annual option grants
and committee-service grants vest immediately prior to the first Annual Meeting
following the date of grant.
17
<PAGE> 20
EXPLANATION
The Directors Plan is designed to serve as an equity incentive program to
attract and retain highly-qualified individuals with substantial experience in
relevant industries to serve as non-employee members of the Board. In general,
the Company currently offers a lower level of cash compensation to its
non-employee directors than is offered by companies with whom it competes for
outside directors. The Board has decided that the best way to attract and retain
qualified non-employee directors is through equity-based compensation rather
than cash compensation. In that way, non-employee directors will share in the
success of the Company and their financial interests will be more closely
aligned with that of the Company's stockholders.
Approval of the amendments requires the affirmative vote of a majority of
the votes cast at a duly held stockholders meeting at which there is a quorum.
RECOMMENDATION
The Board of Directors believes that the proposed amendment is in the best
interests of the Company, its stockholders and its employees. ACCORDINGLY, THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF PROPOSAL THREE.
DESCRIPTION OF DIRECTORS PLAN
The following is a summary of the principal features of the Directors Plan.
The summary, however, does not purport to be a complete description of all of
the provisions of the Directors Plan. Any stockholder who wishes to obtain a
copy of the actual plan document may do so by written request to the Company's
Secretary at the Company's executive offices.
Plan Administration
The terms and conditions of each option grant (including the timing and
pricing of the option grant) will be governed by the express terms and
conditions of the Directors Plan, and neither the Board nor any Committee of the
Board will exercise any discretionary functions with respect to such option
grants (except for determination of the Board committees with respect to which a
director may receive a committee service grant).
Issuable Shares
Under the Directors Plan, 250,000 shares of Common Stock have been reserved
for issuance and may be drawn from the Company's authorized but unissued shares
of Common Stock, including shares repurchased by the Company. The share reserve
automatically increases by 25,000 shares on the first trading day of each
calendar year. As of December 8, 1997, options in respect of 89,000 shares were
outstanding under the Directors Plan and options in respect of 156,000 shares
were available for issuance.
Upon expiration or termination of an outstanding option for any reason
prior to exercise in full, the shares subject to the portion of each option not
so exercised will be available for subsequent option grants. Shares issued under
the Directors Plan, whether or not such shares are subsequently repurchased by
the Company, and shares subject to any option or portion thereof surrendered in
accordance with the cash-out provisions of the Directors Plan, will reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent option grants.
In the event of any change in the Common Stock issuable under the Directors
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Company's receipt of consideration, then, in order
to prevent the dilution or enlargement of the rights and benefits under each
option, appropriate adjustments will be made to (i) the maximum number and/or
class of securities issuable under the Directors Plan, (ii) the number and/or
class of securities by which the share reserve is to increase automatically each
calendar year, (iii) the number and/or class of securities for which automatic
option grants are to be subsequently made to
18
<PAGE> 21
each newly-elected or continuing non-employee Board member and (iv) the number
and/or class of securities and exercise price per share under each outstanding
option.
Eligibility for Grants
Under the Directors Plan, grants are made to non-employee directors. A
non-employee Board member who has previously been an employee of the Company
will not be eligible to receive an automatic option grant upon his or her
initial election or appointment to the Board, but will be eligible to receive
annual option grants and committee-service grants. As of January 9, 1998, four
non-employee Board members were eligible to participate in the Directors Plan.
Option Grants
Upon the initial election of a non-employee Board member, such member is
automatically granted an option to purchase 20,000 shares of Common Stock,
unless such Board member has previously been an employee of the Company.
In addition, under the current terms of the Directors Plan, on the date of
each annual stockholders meeting, each individual re-elected as a non-employee
Board member at the annual meeting will automatically be granted a non-statutory
option to purchase 8,000 shares of Common Stock. Mr. Walske, Dr. Newton and Ms.
Coleman each received such a grant in connection with their re-election to the
Board at the 1997 annual meeting.
If this Proposal Three is adopted, the annual option grant will be
increased to 10,000 shares. Assuming adoption of this Proposal, Mr. Jones, Mr.
Walske, Dr. Newton and Ms. Coleman each will receive an option for 10,000 shares
if they are re-elected to the Board at the Annual Meeting. There is no limit on
the number of such annual option grants that any one non-employee Board member
may receive over his or her period of continued Board service.
If this Proposal Three is adopted, the annual option grant also will be
provided to non-employee Directors who are first elected to the Board of
Directors at an Annual Meeting or first appointed to the Board of Directors by
the Board itself to fill a vacancy or a newly-created board seat. Such grant
would be in addition to the grant of options to purchase 20,000 shares described
in the preceding paragraph. In addition, if this Proposal Three is adopted,
non-employee Board members who serve on selected Board committees will annually
be granted an option to purchase 5,000 shares of Common Stock, subject to a
limit of two committee-service grants per non-employee director per year.
Price, Vesting and Exercisability
The exercise price per share of Common Stock subject to each option grant
issued under the Directors Plan is equal to 100% of the fair market value per
share of the Common Stock on the grant date, which is deemed to be equal to the
closing selling price per share of Common Stock on the grant date, as reported
on the Nasdaq Stock Market. On December 8, 1997 the fair market value per share
was $46.0625.
Each automatic grant is immediately exercisable for any or all of the
option shares. Any shares purchased under such options are subject to repurchase
by the Company, at the exercise price paid per share, upon the optionee's
cessation of Board service prior to vesting of those shares.
Upon exercise of the option, the option price for the purchased shares is
immediately payable in cash or in shares of Common Stock valued at fair market
value on the date of exercise. For vested shares the option may also be
exercised through a cashless exercise procedure pursuant to which the optionee
provides irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of the purchased shares and to remit to the Company,
out of the sale proceeds, an amount equal to the aggregate option price payable
for the purchased shares plus all applicable withholding taxes.
19
<PAGE> 22
The initial automatic grant of 20,000 shares vests in a series of four
successive equal installments on the date immediately prior to each of the first
four annual stockholders' meetings following the grant date of that option,
provided the optionee continues in Board service through that vesting date.
Each annual option grant vests in full on the date immediately prior to the
fourth annual stockholders' meeting following the grant date of that option,
provided the optionee continues in Board service through that vesting date. If
this Proposal Three is adopted, each such grant, and each committee-service
grant, will vest in full on the date immediately prior to the first Annual
Meeting following the date of grant, provided the optionee continues in Board
service through that vesting date.
The options have a maximum term of ten years, measured from the grant date.
Termination of Board Service
Should the optionee cease to serve as a Board member for any reason (other
than death or disability) while holding one or more automatic option grants,
then that individual will have a six-month period following the date of such
cessation of Board service in which to exercise each such option for any or all
of the option shares in which he or she is vested at the time of cessation of
Board service.
Special Acceleration Events
In the event the Company is acquired by a merger or asset sale, the shares
of Common Stock at the time subject to each outstanding automatic grant but not
otherwise vested will vest in full so that each such option will, immediately
prior to the specified effective date for such acquisition, become exercisable
for fully-vested shares. Immediately following the consummation of the
acquisition, each automatic option grant will terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its
parent company.
In connection with any hostile takeover of the Company, whether effected by
a tender offer for securities possessing more than 50% of the Company's
outstanding voting power or by a change in the majority of the Board resulting
from one or more contested elections for Board membership, the shares of Common
Stock at the time subject to each outstanding automatic grant but not otherwise
vested will vest in full so that each such option will, immediately prior to the
specified effective date for such takeover, become exercisable for fully-vested
shares. Each such option will remain so exercisable until the expiration or
sooner termination of the option term.
Upon the successful completion of a hostile tender offer for securities
possessing more than 50% of the Company's outstanding voting power, each
optionee will have a thirty-day period in which to surrender to the Company each
automatic option grant held by him or her for a period of at least six months.
The optionee will in return be entitled to a cash distribution from the Company
in an amount per surrendered option share equal to the highest price paid per
share of Common Stock in the tender offer, less the exercise price payable per
share under the surrendered option.
The automatic option grants will in no way affect the right of the Company
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets. However, the acceleration of vesting of
the option shares upon an acquisition of the Company by merger or asset sale or
upon a hostile takeover may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other effort
to gain control of the Company.
Amendment and Termination
The Board of Directors may amend or modify the Directors Plan in any or all
respects whatsoever. However, the provisions of the Directors Plan, together
with the option grants outstanding thereunder, may not be amended at intervals
more frequently than once every six months, other than to the extent necessary
to comply with applicable Federal income tax laws and regulations. In addition,
without the approval of the Company's stockholders, the Board may not (i)
materially increase the maximum number of shares issuable
20
<PAGE> 23
under the Directors Plan, (ii) materially modify the eligibility requirements
for participation, or (iii) otherwise materially increase the benefits accruing
to participants under the Directors Plan.
The Directors Plan will terminate upon the earlier of (i) October 26, 2004
or (ii) the date on which all shares available for issuance under the Directors
Plan are issued or canceled pursuant to the exercise or cash-out of the granted
options. Each stock option outstanding at the time of a termination pursuant to
clause (i) will remain in force in accordance with the provision of the
instruments evidencing such grant.
Tax Information
Options granted under the Directors Plan will be non-statutory options that
are not intended to meet the requirements of Section 422 of the Internal Revenue
Code. No taxable income is recognized by an optionee upon the grant of a
non-statutory option. The optionee will in general recognize ordinary income, in
the year in which the option is exercised, equal to the excess of the fair
market value of the purchased shares on the date of exercise over the exercise
price paid for such shares, and the optionee will be required to satisfy the tax
withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
unvested shares of Common Stock under a non-statutory option. These special
provisions may be summarized as follows:
If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company at the original option exercise price in
the event of the optionee's termination of Board service prior to vesting in
those shares, then the optionee will not recognize any taxable income at the
time of exercise but will have to report as ordinary income, as the optionee
vests in the shares, an amount equal to the excess of (i) the fair market value
of those shares on the vesting date over (ii) the option exercise price paid for
such shares.
The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of the
non-statutory option an amount equal to the excess of (i) the fair market value
of the purchased shares on the exercise date over (ii) the option exercise price
paid for such shares. If the Section 83(b) election is made, the optionee will
not recognize any additional income as and when he or she vests in such shares.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option for the taxable year of the Company in which such ordinary
income is recognized by the optionee.
21
<PAGE> 24
NEW PLAN BENEFITS TABLE
The table below shows, as to each of the Named Executive Officers and the
indicated groups, the number of options on Common Stock of the Company granted
under the Directors Plan during fiscal year 1997, together with the weighted
average exercise price payable per share.
NEW PLAN BENEFITS
DIRECTORS PLAN
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE EXERCISE
NAME AND POSITION OPTIONS GRANTED PRICE($)(1)
- --------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
Aart J. de Geus(2)............................................. -- --
President and Chief Executive Officer
Chi-Foon Chan(2)............................................... -- --
Chief Operating Officer
Robert Russo(2)................................................ -- --
Sr. Vice President, Sales and Services for the Americas and
Europe
Harvey C. Jones, Jr.(2)........................................ -- --
Chairman of the Board
Paul Lippe(2).................................................. -- --
Sr. Vice President, Business and Market Development, and
Secretary
Executive Group (16 persons)................................... -- --
Non-Executive Director Group (3 persons)....................... 24,000(1) 35.6975
Non-Executive Officer Employee Group(2)........................ -- --
</TABLE>
- ---------------
(1) Future benefits or amounts received cannot be calculated as they are
dependent on the number of committees on which an individual serves which
are eligible for committee service grants, and the stock price on the date
of grant and date of sale. Figures reflect 8,000 options granted in fiscal
1997 to each of Ms. Coleman and Messrs. Newton and Walske, and the weighted
average execise price of those options.
(2) Employees of the Company are not eligible to participate in the Directors
Plan and are included in Table to satisfy reporting requirements.
PROPOSAL FOUR -- RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP,
independent auditors, to audit the financial statements of the Company for
fiscal year 1998. KPMG Peat Marwick LLP has audited the Company's consolidated
financial statements since fiscal year 1992.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Ratification of the appointment of KPMG
Peat Marwick LLP requires the affirmative vote of a majority of the votes cast
at a duly held stockholders meeting at which there is a quorum.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 1998.
22
<PAGE> 25
ADDITIONAL INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and greater than ten percent beneficial owners of its stock
to file reports of ownership and changes in ownership with the Commission.
Directors, officers and greater than ten percent stockholders are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of the copies of the Forms 3, 4 and 5 received
by the Company and/or written representations from certain reporting persons
that no Form 5 reports were required for such persons, the Company believes that
each of its directors, officers and greater than ten percent beneficial owners
of its stock during the fiscal year ended September 27, 1997 have complied with
all filing requirements applicable to such person.
ANNUAL REPORT
A copy of the Annual Report of the Company for fiscal year 1997 has been
mailed concurrently with this Proxy Statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. The Annual Report is not
incorporated into this Proxy Statement and is not considered proxy solicitation
material.
FORM 10-K
The Company has filed an Annual Report on Form 10-K with the Securities and
Exchange Commission. Stockholders may obtain a copy of this report, without
charge, by writing to Paul Lippe, Secretary, at the Company.
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
Proxy to vote the shares they represent as the Board of Directors may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed Proxy.
Stockholders of the Company that intend to present one or more proposals at
the Company's 1999 Annual Meeting, including nominations to the Board of
Directors of persons other than those nominated by the Board, must notify the
Company no later than September 22, 1998 in order that they may be included in
the proxy statement and proxy relating to that meeting. A stockholder's notice
to the Company must include, with respect to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description of the
matter and the reasons for conducting such business at the annual meeting, (ii)
the name and address of the stockholder, as they appear on the Company's books,
(iii) the number of shares beneficially owned by the stockholder, (iv) any
material interest of the stockholder in the proposal and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934 (the "1934 Act").
Nominations of persons to the Board of Directors must include, with respect to
each nomination and the nominating stockholder, (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the Company
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for elections of directors, or is otherwise required under the 1934 Act.
23
<PAGE> 26
Notwithstanding the foregoing, the stockholder must also provide notice as
required by the 1934 Act and the applicable regulations thereunder. The chairman
of the annual meeting may determine, if the facts warrant, that a matter has not
been properly brought before the meeting and, therefore, may not be considered
at the meeting.
THE BOARD OF DIRECTORS
Dated: January 20, 1998
24
<PAGE> 27
DETACH HERE
SYNOPSYS, INC.
Annual Meeting of Stockholders, February 27, 1998
This Proxy is Solicited on Behalf of the Board of Directors of
Synopsys, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of Annual Meeting of Stockholders to be held February 27, 1998 and the
Proxy Statement and appoints Aart J. de Geus and Dave Sugishita, and each of
them individually, the Proxy of the undersigned, with full power of
substitution, to vote all shares of Common Stock of Synopsys, Inc. (the
"Company") that the undersigned is entitled to vote, either on his or her own
behalf or on behalf of any entity or entities, at the Annual Meeting of
Stockholders of the Company to be held at the Company's offices at 700 East
Middlefield Road, Mountain View, California on Friday, February 27, 1998 at 4:00
p.m., and at any adjournment or adjournments thereof, with the same force and
effect as the undersigned might or could do if personally present. The shares
represented by the Proxy shall be voted in the manner as set forth on the
reverse side.
-------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-------------
<PAGE> 28
[X] Please mark
votes as in
this example.
<TABLE>
<S><C>
The Board of Directors recommends a vote FOR each of the directors listed below and a vote FOR the other proposals. This Proxy, when
properly executed, will be voted as specified below. This Proxy will be voted FOR the election of the directors listed below and FOR
the other proposals if no specification is made.
FOR AGAINST ABSTAIN
1. To elect the following directors to serve for the 2. To amend the Company's Employee Stock Purchase [ ] [ ] [ ]
ensuing year or until their successors are elected Plan and International Stock Purchase Plan to
increase the number of shares of Common Stock
Nominees: Harvey C. Jones Jr., Aart J. de Geus, reserved for issuance by 1,400,000 shares.
Chi-Foon Chan, Deborah A. Coleman, FOR AGAINST ABSTAIN
William W. Lattin, A. Richard Newton, 3. To approve amendments to the 1994 Non- [ ] [ ] [ ]
Steven C. Walske Employee Directors Stock Option Plan to
(i) increase the number of options to
[ ] FOR [ ] WITHHOLD purchase Common Stock granted to
ALL FROM ALL non-employee directors who are re-elected to
NOMINEES NOMINEES the Board (the "Annual Option Grant") from
8,000 to 10,000 shares per year, (ii) provide
an Annual Option Grant to newly-appointed
[ ] MARK HERE [ ] directors, (iii) provide an annual grant of
_______________________ FOR ADDRESS options to purchase 5,000 shares of Common
For all nominees except CHANGE AND Stock as compensation for service on selected
as noted above NOTE BELOW committees of the Board ("Committee-Service
Grant"), and (iv) provide that Annual Option
Grants and Committee Service Grants vest
immediately prior to the first annual meeting
following the date of grant.
FOR AGAINST ABSTAIN
4. To ratify the appointment of KPMG Peat [ ] [ ] [ ]
Marwick LLP as independent auditors of
the Company for fiscal year 1998.
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Please sign exactly as name appears at left. When shares are held by
joint tenants both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by
an authorized person.
Signature: _____________________________ Date: _________________ Signature: _____________________________ Date: _________________
</TABLE>
<PAGE> 29
SYNOPSYS, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As Amended through November 5, 1997)
I. PURPOSE
The Synopsys, Inc. Employee Stock Purchase Plan (the "Plan") is intended
to provide eligible employees of the Company and one or more of its Corporate
Affiliates with the opportunity to acquire a proprietary interest in the Company
through the periodic application of their payroll deductions to the purchase of
shares of the Company's common stock.
II. DEFINITIONS
For purposes of plan administration, the following terms shall have the
meanings indicated.
Base Salary means all compensation paid as wages, salaries, commissions,
overtime, and bonuses, but excluding all of the following items (even if
included in taxable income): reimbursements, car allowances or other expense
allowances, severance pay, fringe benefits (cash and noncash), moving expenses,
deferred compensation, income attributable to stock options, restricted stock
grants, SARs and other equity-related incentive programs, and welfare benefits.
Code means the Internal Revenue Code of 1986, as amended from time to
time.
Company means Synopsys, Inc., a Delaware corporation, and any corporate
successor to all or substantially all of the assets or voting stock of Synopsys,
Inc. which shall by appropriate action adopt the Plan.
Common Stock means shares of the Company's common stock.
Corporate Stock means shares of the Company's common stock.
Corporate Affiliate means any company which is a parent or subsidiary
corporation of the Company (as determined in accordance with Code Section 424),
including any parent or subsidiary corporation which becomes such after the
Effective Date.
Effective Date means the first day of the initial offering period
scheduled to commence upon the later of (i) February 1, 1992 or (ii) the
effective date of the S-8 Registration Statement covering the share of Common
Stock issuable under the Plan. However, for any Corporate Affiliate which
becomes a participating Company in the Plan after the first day of the initial
offering period, a subsequent Effective Date shall be designated with respect to
participation by its Eligible
<PAGE> 30
Employees.
Eligible Employee means any person who is engaged, on a
regularly-scheduled basis of more than twenty (20) hours per week and more than
five (5) months per calendar year, in the rendition of personal services to the
Company or any other Participating Company for earnings considered wages under
Section 3121(a) of the Code.
Enrollment Date has the meaning ascribed to it in Section V.A.
Participant means any Eligible Employee of a Participating Company who
is actively participating in the Plan.
Participating Company means the Company and such Corporate Affiliate or
Affiliates as may be designated from time to time by the Board.
Semi-Annual Entry Date means the first business day of May and the first
business day of November during each calendar year within an offering period in
effect under the Plan. The earliest Semi-Annual Entry Date under the Plan shall
be November 2, 1992.
Semi-Annual Period of Participation means each semi-annual period for
which the Participant actually participates in an offering period in effect
under the Plan. There shall be a maximum of four (4) semi-annual periods of
participation within each offering period. Except as otherwise designated by the
Plan Administrator, each such semi-annual period shall be measured from the
applicable Semi-Annual Entry Date.
Semi-Annual Purchase Date means the last business day of April and
October each year on which shares of Common Stock are automatically purchased
for Participants under the Plan.
III. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
or a committee that will satisfy Rule 16b-3 of the Securities and Exchange
Commission, as in effect with respect to the Company from time to time (in
either case, the "Board"). The Board may from time to time select a committee or
persons (the "Plan Administrator") to be responsible for any transactions not
subject to Rule 16b-3. Subject to the express provisions of the Plan, to the
overall supervision of the Board, and to the limitations of Section 423 of the
Code, the Plan Administrator may administer and interpret the Plan in any manner
it believes to be desirable (including the designation of a brokerage firm at
which accounts for the holding of shares purchased under the Plan must be
established by each employee desiring to participate in the Plan), and any such
interpretation shall be final and binding on all parties who have an interest in
the Plan.
-2-
<PAGE> 31
IV. OFFERING PERIODS
The Plan shall be implemented in a series of offering periods. Each
offering period shall be of a duration of twenty-four (24) months or less as
designated by the Plan Administrator prior to the start date of any offering
period. Within each offering period, there shall be a maximum of four (4)
Semi-Annual Periods of Participation.
V. ELIGIBILITY AND PARTICIPATION
A. Each Eligible Employee will be automatically enrolled in the Plan in
the offering period that begins on the first Semi-Annual Entry Date following
the commencement of employment; thereafter, any Eligible Employee may enroll or
re-enroll in the Plan in the offering period that begins as of any Semi-Annual
Entry Date, or such other days as may be established by the Board from time to
time (each, an "Enrollment Date"). To participate, an Eligible Employee must
complete, sign, and submit to the Company an enrollment form prescribed by the
Plan Administrator. Any enrollment form received by the Company by the 15th day
of the month preceding an Enrollment Date (or by the Enrollment Date in the case
of employees hired after such 15th day), or such other date established by the
Plan Administrator from time to time, will be effective on that Enrollment Date.
Enrollment or re-enrollment by a Participant in the Plan on an Enrollment Date
will constitute the grant by the Company to the Participant of an option to
purchase shares of Common Stock from the Company under the Plan. At the end of
each offering period, each Participant who has not withdrawn from the Plan will
automatically be re-enrolled in the Plan in the offering period that begins on
the Enrollment Date immediately following the date on which the option expires.
Furthermore, except as may otherwise be determined by the Plan Administrator,
each Participant who has not withdrawn from the Plan will automatically be
re-enrolled in the Plan in each offering period that begins on an Enrollment
Date on which the fair market value per share of the Company's Common Stock is
lower than the fair market value per share of the Company's Common Stock on the
Enrollment Date for the offering period in which the Participant is then
enrolled.
B. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock under the Plan may be zero percent (0%) or any
whole multiple of one percent (1%) of the Base Salary paid to the Participant
during each Semi-Annual Period of Participation within the offering period, up
to a maximum of ten percent (10%). The deduction rate so authorized shall
continue in effect for the entire Semi-Annual Period of Participation and for
each successive Semi-Annual Period of Participation unless (i) the Participant
shall change the rate for a subsequent Semi-Annual Period of Participation by
filing the appropriate form with the Plan Administrator prior to the
commencement of that Semi-Annual Period of Participation or (ii) the Participant
shall change the rate within a Semi-Annual Period
-3-
<PAGE> 32
of Participation by filing the appropriate form with the Plan Administrator. The
new rate shall become effective as soon as practicable following the filing of
such form. A Participant may not increase or decrease the deduction rate more
than once per Semi-Annual Period of Participation in addition to fixing the rate
at the beginning of the Semi-Annual Period of Participation. Payroll deductions,
however, will automatically cease upon the termination of the Participant's
purchase right in accordance with Article VII below.
C. In no event may any Participant's payroll deductions for any one
Semi-Annual Period of Participation exceed Seven Thousand Five Hundred Dollars
($7,500.00).
VI. STOCK SUBJECT TO PLAN
A. The Common Stock purchasable by Participants under the Plan shall,
solely in the discretion of the Plan Administrator, be made available from
either authorized but unissued shares of the Common Stock or from shares of
Common Stock reacquired by the Company, including shares of Common Stock
purchased on the open market. The total number of shares which may be issued
under the Plan shall not exceed 3,550,000 shares, less any shares sold under the
Synopsys, Inc. International Employee Stock Purchase Plan (subject to adjustment
under Section VI.B below). Such share reserve includes the increase of 1,400,000
shares approved by the Board in November 1997, subject to approval by the
stockholders in February 1998.
B. In the event any change is made to the Company's outstanding Common
Stock by reason of any stock dividend, stock split, combination of shares or
other change affecting such outstanding Common Stock as a class without receipt
of consideration, then appropriate adjustments shall be made by the Plan
Administrator to (i) the class and maximum number of shares issuable over the
term of the Plan, (ii) the class and maximum number of shares purchasable per
Participant during each Semi-Annual Period of Participation, (iii) the class and
maximum number of shares purchasable in the aggregate by all Participants on any
one purchase date under the Plan and (iv) the class and number of shares and the
price per share of the Common Stock subject to each purchase right at the time
outstanding under the Plan. Such adjustments shall be designed to preclude the
dilution or enlargement of rights and benefits under the Plan.
VII. PURCHASE RIGHTS
An Employee who participates in the Plan for a particular offering
period shall have the right to purchase shares of Common Stock, in a series of
successive semi-annual installments during such offering period, upon the terms
and conditions set forth below and shall execute a purchase agreement embodying
such terms and conditions and such other provisions (not inconsistent with the
Plan) as the Plan Administrator may deem advisable.
-4-
<PAGE> 33
Purchase Price. Common Stock shall be issuable on each Semi-Annual
Purchase Date at a purchase price equal to 85 percent of the lower of (i) the
fair market value per share on the Participant's Enrollment Date or (ii) the
fair market value per share on the Semi-Annual Purchase Date. However, for each
Participant whose Enrollment Date is other than the start date of the offering
period in effect under the Plan, the clause (i) amount shall in no event be less
than the fair market value of the Common Stock on the start date of such
offering period.
Valuation. For purposes of determining the fair market value per share
of Common Stock on any relevant date, the following procedures shall be in
effect:
(i) If such fair market value is to be determined on any date on
or after the date the Common Stock is first registered under Section
12(g) of the Securities Exchange Act of 1934, then the fair market value
shall be the closing selling price on that date, as officially quoted on
the Nasdaq National Market System. If there is no quoted selling price
for such date, then the closing selling price on the next preceding day
for which there does exist such a quotation shall be determinative of
fair market value.
(ii) If such fair market value is to be determined on any date
prior to the time of such Section 12(g) registration of the Common
Stock, then the fair market value of the Common Stock on such date shall
be determined by the Plan Administrator, after taking into account such
factors as the Plan Administrator deems appropriate.
Number of Purchasable Shares. The number of shares purchasable per
Participant on each Semi-Annual Purchase Date shall be the number of whole
shares obtained by dividing the amount collected from the Participant through
payroll deductions during the corresponding Semi-Annual Period of Participation
by the purchase price in effect for the Semi-Annual Purchase Date. However, no
Participant may, during any Semi-Annual Purchase Period, purchase more than
2,000 shares of Common Stock, subject to periodic adjustment under Section VI.B.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Corporate Affiliates.
Payment. Payment for the Common Stock purchased under the Plan shall be
effected by means of the Participant's authorized payroll deductions. Such
deductions shall begin on the first pay day coincident with or immediately
following the Participant's
-5-
<PAGE> 34
Enrollment Date and shall (unless sooner terminated by the Participant) continue
through the pay day ending with or immediately prior to the last day of the
offering period.
The amounts so collected shall be credited to the Participant's book
account under the Plan, but no interest shall be paid on the balance from time
to time outstanding in such account. The amounts collected from a Participant
may be commingled with the general assets of the Company and may be used for
general corporate purposes.
Termination of Purchase Right. The following provisions shall govern the
termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last five (5)
business days of the Semi-Annual Period of Participation, terminate
his/her outstanding purchase right under the Plan by filing the
prescribed notification form with the Plan Administrator. No further
payroll deductions shall be collected from the Participant with respect
to the terminated purchase right, and any payroll deductions collected
for the Semi-Annual Period of Participation in which such termination
occurs shall, at the Participant's election, be immediately refunded or
held for the purchase of shares on the next Semi-Annual Purchase Date.
If no such election is made, then such funds shall be refunded as soon
as possible after the close of such Semi-Annual Period of Participation.
(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not subsequently rejoin the offering period for
which such terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual must
re-enroll in the Plan in accordance with Section V.A.
(iii) Should a Participant cease to remain an Eligible Employee
while his/her purchase right remains outstanding or should there
otherwise occur a change in such individual's employee status so that
he/she is no longer an Eligible Employee while holding such purchase
right, then such purchase right shall immediately terminate upon such
termination of service or change in status and all sums previously
collected from the Participant during the Semi-Annual Period of
Participation in which the purchase right so terminates shall be
promptly refunded to the Participant. However, should the Participant
die or become permanently disabled while in service or should the
Participant cease employment by reason of a leave of absence, then the
Participant (or the person or persons to whom the rights of the deceased
Participant under the Plan are transferred by will or the laws of
inheritance) shall have the election, exercisable up until the end of
the Semi-Annual Period of Participation in which the Participant dies or
becomes
-6-
<PAGE> 35
permanently disabled or in which the leave of absence commences, to
(i) withdraw all the funds credited to the Participant's account at
the time of his/her cessation of service or at the commencement of such
leave or (ii) have such funds held for the purchase of shares of Common
Stock at the next Semi-Annual Purchase Date. If no such election is
made, then such funds shall automatically be held for the purchase of
shares of Common Stock at the next Semi-Annual Purchase Date. In no
event, however, shall any further payroll deductions be added to the
Participant's account following his/her cessation of service or the
commencement of such leave. Should the Participant return to active
service following a leave of absence, then his/her payroll deductions
under the Plan shall automatically resume at the rate in effect at the
time the leave began, provided such return to service occurs prior to
the end of the offering period in which such leave began. For purpose of
the Plan: (i) the Participant shall be considered to remain in service
for so long as such Participant remains in the active employ of the
Company or one or more other Participating Companies and (ii) the
Participant shall be deemed to be permanently disabled if he/she is
unable to engage in any substantial gainful employment, by reason of any
medically determinable physical or mental impairment expected to result
in death or to be of continuous duration of at least twelve (12) months.
Stock Purchase. Shares of Common Stock shall automatically be purchased
on behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded or set aside for refund in accordance with the
"Termination of Purchase Right" provisions above) on each Semi-Annual Purchase
Date. The purchase shall be effected by applying each Participant's payroll
deductions for the Semi-Annual Period of Participation ending on such
Semi-Annual Purchase Date (together with any carryover deductions from the
preceding Semi-Annual Period of Participation) to the purchase of whole shares
of Common Stock (subject to the limitation on the maximum number of purchasable
shares set forth above) at the purchase price in effect for such Semi-Annual
Period of Participation. Any payroll deductions not applied to such purchase
because they are not sufficient to purchase a whole share shall be held for the
purchase of Common Stock in the next Semi-Annual Period of Participation.
However, any payroll deductions not applied to the purchase of Common Stock by
reason of the limitation on the maximum number of shares purchasable by the
Participant for that Semi-Annual Period of Participation shall be promptly
refunded to the Participant.
Proration of Purchase Rights. Not more than 500,000 shares of Common
Stock, subject to periodic adjustment under Section VI.B, may be purchased in
the aggregate by all Participants on any one Semi-Annual Purchase Date. Should
the total number of
-7-
<PAGE> 36
shares of Common Stock which are to be purchased pursuant to outstanding
purchase rights on any particular date exceed either (i) the maximum limitation
on the number of shares purchasable in the aggregate on such date or (ii) the
number of shares then available for issuance under the Plan, the Plan
Administrator shall make a pro-rata allocation of the available shares on a
uniform and non-discriminatory basis, and the payroll deductions for each
Participant, to the extent in excess of the aggregate purchase price payable for
the Common Stock pro-rated to such individual, shall be refunded to such
Participant.
Rights as Stockholder. A Participant shall have no stockholder rights
with respect to the shares subject to his/her outstanding purchase right until
the shares are actually purchased on the Participant's behalf in accordance with
the applicable provisions of the Plan. No adjustments shall be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
Assignability.No purchase right granted under the Plan shall be
assignable or transferable by the Participant other than by will or by the laws
of descent and distribution following the participant's death, and during the
Participant's lifetime the purchase right shall be exercisable only by the
Participant.
Change in Ownership. Should the Company or its stockholders enter into
an agreement to dispose of all or substantially all of the assets or outstanding
capital stock of the Company by means of:
(i) a sale, merger or other reorganization in which the Company
will not be the surviving corporation (other than a reorganization
effected primarily to change the State in which the Company is
incorporated), or
(ii) a reverse merger in which the Company is the surviving
corporation but in which more than fifty percent (50%) of the Company's
outstanding voting stock is transferred to holders different from those
who held the stock immediately prior to the reverse merger, then all
outstanding purchase rights under the Plan shall automatically be
exercised immediately prior to the consummation of such sale, merger,
reorganization or reverse merger by applying the payroll deductions of
each Participant for the Semi-Annual Period of participation in which
such transaction occurs to the purchase of whole shares of Common Stock
at eighty-five percent (85%) of the lower of (i) the fair market value
of the Common Stock on the Participant's Enrollment Date for the
offering period in which such transaction occurs or (ii) the fair market
value of the Common Stock immediately prior to the consummation of such
transaction. However, the applicable share limitations of Articles VII
and VIII shall continue to apply to any such purchase, and the clause
(i) amount above shall not, for any
-8-
<PAGE> 37
Participant whose Enrollment Date for the offering period is other than
the start date of such offering period, be less than the fair market
value of the Common Stock on such start date.
The Company shall use its best efforts to provide at least ten (10)
days' advance written notice of the occurrence of any such sale, merger,
reorganization or reverse merger, and Participants shall, following the receipt
of such notice, have the right to terminate their outstanding purchase rights in
accordance with the applicable provisions of this Article VII.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (I) rights to purchase Common Stock
accrued under any other purchase right outstanding under this Plan and (II)
similar rights accrued under other employee stock purchase plans (within the
meaning of Section 423 of the Code) of the Company or its Corporate Affiliates,
would otherwise permit such Participant to purchase more than $25,000 worth of
stock of the Company or any Corporate Affiliate (determined on the basis of the
fair market value of such stock on the date or dates such rights are granted to
the Participant) for each calendar year such rights are at any time outstanding.
B. For purposes of applying such accrual limitations, the right to
acquire Common Stock pursuant to each purchase right outstanding under the Plan
shall accrue as follows:
(i) The right to acquire Common Stock under each such purchase
right shall accrue in a series of successive semi-annual installments as
and when the purchase right first becomes exercisable for each
semi-annual installment on the last business day of each Semi-Annual
Period of Participation for which the right remains outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire $25,000 worth of
Common Stock (determined on the basis of the fair market value on the
date or dates of grant) pursuant to one or more purchase rights held by
the Participant during such calendar year.
(iii) If by reason of such accrual limitations, any purchase
right of a Participant does not accrue for a particular Semi-Annual
Period of Participation, then the payroll deductions which the
Participant made during that Semi-Annual Period of Participation with
respect to such purchase right shall be promptly refunded.
-9-
<PAGE> 38
C. In the event there is any conflict between the provisions of this
Article VIII and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article VIII shall be controlling.
IX. STATUS OF PLAN UNDER FEDERAL TAX LAWS
The Plan is designed to qualify as an employee stock purchase plan under
Code Section 423.
X. AMENDMENT AND TERMINATION
A. The Board may amend, alter, suspend, discontinue, or terminate the
Plan at any time, including amendments to outstanding options/purchase rights.
However, the Board may not, without the approval of the Company's stockholders:
(i) increase the number of shares issuable under the Plan or the
maximum number of shares which may be purchased per Participant or in
the aggregate during any one Semi-Annual Period of Participation under
the Plan, except that the Plan Administrator shall have the authority,
exercisable without such stockholder approval, to effect adjustments to
the extent necessary to reflect changes in the Company's capital
structure pursuant to Section VI.B;
(ii) alter the purchase price formula so as to reduce the
purchase price payable for the shares issuable under the Plan; or
(iii) materially increase the benefits accruing to Participants
under the Plan or materially modify the requirements for eligibility to
participate in the Plan.
B. The Board may elect to terminate any or all outstanding purchase
rights at any time. In the event the Plan is terminated, the Board may also
elect to terminate outstanding purchase rights either immediately or upon
completion of the purchase of shares on the next Semi-Annual Purchase Date, or
may elect to permit purchase rights to expire in accordance with their terms
(and participation to continue through such expiration dates). If purchase
rights are terminated prior to expiration, all funds contributed to the Plan
that have not been used to purchase shares shall be returned to the Participants
as soon as administratively feasible.
IX. GENERAL PROVISIONS
A. The Plan shall become effective on the designated Effective Date,
provided that no offering period shall commence, and no shares of Common Stock
shall be issued hereunder, until (i) the Plan shall have been approved by the
stockholders and
-10-
<PAGE> 39
(ii) the Company shall have complied with all applicable requirements of the
Securities Act of 1933 (as amended), all applicable listing requirements of any
securities exchange on which shares of the Common Stock are listed and all other
applicable requirements established by law or regulation. In the event such
stockholder approval is not obtained, or such Company compliance is not
effected, within twelve (12) months after the date on which the Plan is adopted
by the Board, the Plan shall terminate and have no further force of effect.
B. All costs and expenses incurred in the administration of the Plan
shall be paid by the Company.
C. Neither the action of the Company in establishing the Plan, nor any
action taken under the Plan by the Board or the Plan Administrator, nor any
provision of the Plan itself shall be construed so as to grant any person the
right to remain in the employ of the Company or any of its Corporate Affiliates
for any period of specific duration, and such person's employment may be
terminated at any time, with or without cause.
D. The provisions of the Plan shall be governed by the laws of the State
of California without resort to that State's conflict-of-laws rules.
-11-
<PAGE> 40
SYNOPSYS, INC.
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
(As Amended through November 5, 1997)
I. PURPOSE
The Synopsys, Inc. International Employee Stock Purchase Plan
(the "Plan") is intended to provide eligible employees of designated
subsidiaries of the Company with the opportunity to acquire a proprietary
interest in the Company through the periodic application of their payroll
deductions to the purchase of shares of the Company's common stock.
II. DEFINITIONS
For purposes of plan administration, the following terms shall
have the meanings indicated:
Base Salary means all compensation paid as wages, salaries,
commissions, overtime, and bonuses, but excluding all of the following items
(even if included in taxable income): reimbursements, car allowances or other
expense allowances, severance pay, fringe benefits (cash and noncash), moving
expenses, deferred compensation, income attributable to stock options,
restricted stock grants, SARs and other equity-related incentive programs, and
welfare benefits.
Code means the Internal Revenue Code of 1986, as amended from
time to time.
Company means Synopsys, Inc., a Delaware corporation, and any
corporate successor to all or substantially all of the assets or voting stock of
Synopsys, Inc. which shall by appropriate action adopt the Plan.
Common Stock means shares of the Company's common stock.
Corporate Affiliate means any company which is a parent or
subsidiary corporation of the Company (as determined in accordance with Code
Section 424), including any parent or subsidiary corporation which becomes such
after the Effective Date.
Effective Date means the first day of the initial offering period
scheduled to commence on May 3, 1993. However, for any Subsidiary which becomes
a Participating Subsidiary in the Plan after the first day of the initial
offering period, a subsequent Effective Date shall be designated with respect to
participation by its Eligible Employees.
Eligible Employee means any person who is engaged, on a
regularly-scheduled basis of more than twenty (20) hours per week
<PAGE> 41
and more than five (5) months per calendar year, in the rendition of personal
services to any Participating Subsidiary for earnings considered wages under
Section 3121(a) of the Code, but shall not include persons prohibited by the
laws of the nation of their residence or employment from participating in the
Plan.
Enrollment Date has the meaning ascribed to it in Section V.A.
Participant means any Eligible Employee of a Participating
Subsidiary who is actively participating in the Plan.
Participating Subsidiary means a Subsidiary of the Company that
has been designated as a Participating Subsidiary by the Board.
Semi-Annual Entry Date means the first business day of May and
the first business day of November during each calendar year within an offering
period in effect under the Plan. The earliest Semi-Annual Entry Date under the
Plan shall be May 3, 1993.
Semi-Annual Period of Participation means each semi-annual period
for which the Participant actually participates in an offering period in effect
under the Plan. There shall be a maximum of four (4) semi-annual periods of
participation within each offering period. Except as otherwise designated by the
Plan Administrator, each such semi-annual period shall be measured from the
applicable Semi-Annual Entry Date.
Semi-Annual Purchase Date means the last business day of April
and October each year on which shares of Common Stock are automatically
purchased for Participants under the Plan.
Subsidiary shall mean any corporation described in Section 425(e)
or (f) of the Code.
III. ADMINISTRATION
The Plan shall be administered by the Board of Directors or a
committee that will satisfy Rule 16b-3 of the Securities and Exchange
Commission, as in effect with respect to the Company from time to time (in
either case, the "Board"). The Board may from time to time select a committee or
persons (the "Plan Administrator") to be responsible for any transactions.
IV. OFFERING PERIODS
The Plan shall be implemented in a series of offering periods.
Each offering period shall be of a duration of twenty-four (24) months or less
as designated by the Plan Administrator prior to the start date of any offering
period. Within each offering period, there shall be a maximum of four (4)
Semi-Annual Periods of Participation.
-2-
<PAGE> 42
V. ELIGIBILITY AND PARTICIPATION
A. Each Eligible Employee of a Participating Subsidiary shall be
eligible to participate in the Plan in accordance with the following provisions:
- The Board may at any time designate one or more
Subsidiaries as participating in the Plan. The names of all
Participating Subsidiaries shall be shown on Exhibit A to the
Plan, which shall be amended from time to time to reflect
additions and deletions of Participating Subsidiaries; failure to
show a Participating Subsidiary on Exhibit A shall not, however,
prevent otherwise eligible employees of that Subsidiary from
participating in the Plan. No Subsidiary participating in the
Company's Employee Stock Purchase Plan effective May 3, 1993 may
be designated for participation in the Plan.
- Each Eligible Employee will be automatically enrolled in
the Plan in the offering period that begins on the first
Semi-Annual Entry Date following the commencement of employment;
thereafter, any Eligible Employee may enroll or re-enroll in the
Plan in the offering period that begins as of any Semi-Annual
Entry Date, or such other days as may be established by the Board
from time to time (each, an "Enrollment Date"). To participate,
an Eligible Employee must complete, sign, and submit to the
Company an enrollment form prescribed by the Plan Administrator.
Any enrollment form received by the Company by the 15th day of
the month preceding an Enrollment Date (or by the Enrollment Date
in the case of employees hired after such 15th day), or such
other date established by the Plan Administrator from time to
time, will be effective on that Enrollment Date. Enrollment or
re-enrollment by a Participant in the Plan on an Enrollment Date
will constitute the grant by the Company to the Participant of an
option to purchase shares of Common Stock from the Company under
the Plan. At the end of each offering period, each Participant
who has not withdrawn from the Plan will automatically be
re-enrolled in the Plan in the offering period that begins on the
Enrollment Date immediately following the date on which the
option expires. Furthermore, except as may otherwise be
determined by the Plan Administrator, each Participant who has
not withdrawn from the Plan will automatically be re-enrolled in
the Plan in each offering period that begins on an Enrollment
Date on which the fair market value per share of the Company's
Common Stock is lower than the fair market value per share of the
Company's Common
-3-
<PAGE> 43
Stock on the Enrollment Date for the offering period in which the
Participant is then enrolled.
- An individual who becomes an Eligible Employee
immediately following termination of such employee's
participation in the Synopsys, Inc. Employee Stock Purchase Plan
shall, for purposes of participation in the Plan, have a deemed
Enrollment Date corresponding to such employee's most recent
Enrollment Date under the Synopsys, Inc. Employee Stock Purchase
Plan.
B. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be zero percent
(0%) or any whole multiple of one percent (1%) of the Base Salary paid to the
Participant during each Semi-Annual Period of Participation within the offering
period, up to a maximum of ten percent (10%). The deduction rate so authorized
shall continue in effect for the entire Semi-Annual Period of Participation and
for each successive Semi-Annual Period of Participation unless (i) the
Participant shall change the rate for a subsequent Semi-Annual Period of
Participation by filing the appropriate form with the Plan Administrator prior
to the commencement of that Semi-Annual Period of Participation or (ii) the
Participant shall change the rate within a Semi-Annual Period of Participation
by filing the appropriate form with the Plan Administrator. The new rate shall
become effective as soon as practicable following the filing of such form. A
Participant may not increase or decrease the deduction rate more than once per
Semi-Annual Period of Participation in addition to fixing the rate at the
beginning of the Semi-Annual Period of Participation. Payroll deductions,
however, will automatically cease upon the termination of the Participant's
purchase right in accordance with Article VII below.
C. In no event may any Participant's payroll deductions for any
one Semi-Annual Period of Participation exceed Seven Thousand Five Hundred
Dollars ($7,500.00) calculated on the Purchase Date following conversion of
accumulated withholdings into U.S. Dollars.
D. It is intended that all eligible employees shall have
substantially equivalent rights and privileges with respect to the Plan;
notwithstanding any other provision of the Plan, however, the Plan Administrator
may make such changes in the terms of eligibility and participation from
Subsidiary to Subsidiary that it determines, in its discretion, to be necessary
or desirable to reflect or comply with local laws or conditions.
VI. STOCK SUBJECT TO PLAN
A. The Common Stock purchasable by Participants under the Plan
shall, solely in the discretion of the Plan Administrator, be made available
from either authorized but unissued shares of the Common Stock or from Shares
of Common
-4-
<PAGE> 44
Stock reacquired by the Company, including shares of Common Stock purchased on
the open market. The total number of shares which may be issued under the Plan
shall not exceed 3,550,000 shares, less any shares sold under the Synopsys, Inc.
Employee Stock Purchase Plan (subject to adjustment under Section VI.B below).
Such share reserve includes the increase of 1,400,000 shares approved by the
Board in November 1997 and subject to shareholder approval in February 1998.
B. In the event any change is made to the Company's outstanding
Common Stock by reason of any stock dividend, stock split, combination of shares
or other change affecting such outstanding Common Stock as a class without
receipt of consideration, then appropriate adjustments shall be made by the Plan
Administrator to (i) the class and maximum number of shares issuable over the
term of the Plan, (ii) the class and maximum number of shares purchasable per
Participant during each Semi-Annual Period of Participation, (iii) the class and
maximum number of shares purchasable in the aggregate by all Participants on any
one purchase date under the Plan and (iv) the class and number of shares and the
price per share of the Common Stock subject to each purchase right at the time
outstanding under the Plan. Such adjustments shall be designed to preclude the
dilution or enlargement of rights and benefits under the Plan.
VII. PURCHASE RIGHTS
An Employee who participates in the Plan for a particular
offering period shall have the right to purchase shares of Common Stock, in a
series of successive semi-annual installments during such offering period, upon
the terms and conditions set forth below and shall execute such agreements and
documents embodying such terms and conditions and such other provisions (not
inconsistent with the Plan) as the Plan Administrator may deem advisable.
Purchase Price. Common Stock shall be issuable on each
Semi-Annual Purchase Date at a purchase price equal to eighty-five percent (85%)
of the lower of (i) the fair market value per share on the Participant's
Enrollment Date or (ii) the fair market value per share on the Semi-Annual
Purchase Date. However, for each Participant whose Enrollment Date is other than
the start date of the offering period in effect under the Plan, the clause (i)
amount shall in no event be less than the fair market value of the Common Stock
on the start date of such offering period.
Valuation. The fair market value per share of Common Stock on any
relevant date shall be the closing selling price of the Common Stock on that
date, as officially quoted on the Nasdaq National Market System. If there is no
quoted selling price for such date, then the closing selling price on the next
preceding day for which there does exist such a quotation shall be determinative
of fair market value.
-5-
<PAGE> 45
Number of Purchasable Shares. The number of shares purchasable
per Participant on each Semi-Annual Purchase Date shall be the number of whole
shares obtained by dividing the amount collected, after conversion into U.S.
Dollars on the Purchase Date, from the Participant through payroll deductions
during the corresponding Semi-Annual Period of Participation by the purchase
price in effect for the Semi-Annual Purchase Date. However, no Participant may,
during any one Semi-Annual Purchase Period, purchase more than 2,000 shares of
Common Stock, subject to periodic adjustment under Section VI.B.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or any of its Corporate Affiliates.
Payment; Withholding. Payment for the Common Stock purchased
under the Plan shall be effected by means of the Participant's authorized
payroll deductions. Such deductions shall begin on the first pay day coincident
with or immediately following the Participant's Enrollment Date into the
offering period and shall (unless sooner terminated by the Participant) continue
through the pay day ending with or immediately prior to the last day of the
offering period. The amounts so collected shall be credited to the Participant's
book account under the Plan in local currency, but no interest shall be paid on
the balance from time to time outstanding in such account. The amounts collected
from a Participant may be commingled with the general assets of the Company
and/or any Participating Subsidiary and may be used for general corporate
purposes. Upon disposition of shares acquired by exercise of purchase right, the
Participant shall pay, or make provision adequate to the Company and the
Participating Subsidiary for payment of, all federal, state, and other tax (and
similar) withholdings that the Company or the Participating Subsidiary
determines, in its discretion, are required due to the disposition, including
any such withholding that the Company or the Participating Subsidiary
determines, in its discretion, is necessary to allow the Company or the
Participating Subsidiary to claim tax deductions or other benefits in connection
with the disposition. A Participant shall make such similar provisions for
payment that the Company or the Participating Subsidiary determines, in its
discretion, are required due to the exercise of purchase right, including such
provisions as are necessary to allow the Company or the Participating Subsidiary
to claim tax deductions or other benefits in connection with the exercise of
purchase right.
Termination of Purchase Right. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the
last five (5) business days of the
-6-
<PAGE> 46
Semi-Annual Period of Participation, terminate his/her
outstanding purchase right under the Plan by filing the
prescribed notification form with the Plan Administrator. No
further payroll deductions shall be collected from the
Participant with respect to the terminated purchase right, and
any payroll deductions collected for the Semi-Annual Period of
Participation in which such termination occurs shall, at the
Participant's election, be immediately refunded or held for the
purchase of shares on the next Semi-Annual Purchase Date. If no
such election is made, then such funds shall be refunded as soon
as possible after the close of such Semi-Annual Period of
Participation.
(ii) The termination of such purchase right shall
be irrevocable, and the Participant may not subsequently rejoin
the offering period for which such terminated purchase right was
granted. In order to resume participation in any subsequent
offering period, such individual must enroll in the Plan in
accordance with Section V.A.
(iii) Should a Participant cease to remain an
Eligible Employee while his/her purchase right remains
outstanding or should there otherwise occur a change in such
individual's employee status so that he/she is no longer an
Eligible Employee while holding such purchase right, then such
purchase right shall immediately terminate upon such termination
of service or change in status and all sums previously collected
from the Participant during the Semi-Annual Period of
Participation in which the purchase right so terminates shall be
promptly refunded to the Participant. However, should the
Participant die or become permanently disabled while in service
or should the Participant cease employment by reason of a leave
of absence, then the Participant (or the person or persons to
whom the rights of the deceased Participant under the Plan are
transferred by will or the laws of inheritance) shall have the
election, exercisable up until the end of the Semi-Annual Period
of Participation in which the Participant dies or becomes
permanently disabled or in which the leave of absence commences,
to (i) withdraw all the funds credited to the Participant's
account at the time of his/her cessation of service or at the
commencement of such leave or (ii) have such funds held for the
purchase of shares of Common Stock at the next Semi-Annual
Purchase Date. If no such election is made, then such funds shall
automatically be held for the purchase of shares of Common Stock
at the next Semi-Annual Purchase
-7-
<PAGE> 47
Date. In no event, however, shall any further payroll deductions
be added to the Participant's account following his/her cessation
of service or the commencement of such leave; provided, however,
that if a Participant's employment is terminated because of a
transfer of employment to the Company or any subsidiary of the
Company other than a Participating Subsidiary, any outstanding
purchase right shall not terminate until the occurrence of the
earlier of (x) the last Semi-Annual Purchase Date in the offering
period or (y) enrollment of the Participant in the Company's
Employee Stock Purchase Plan. While a purchase right remains
outstanding, the Company or other subsidiary to which the
participant is transferred shall effect payroll deductions
authorized by the Participant and shall remit them to the
Participating Subsidiary that employed the Participant at the
time of the transfer for purposes of acquiring shares of Common
Stock under the Plan. Following approval by the Company and the
Participating Subsidiary, the Participant may, in lieu of payroll
deduction, pay a corresponding amount to the Participating
Subsidiary if such amount is received on or before the relevant
Purchase Date. Should the Participant return to active service
following a leave of absence, then his/her payroll deductions
under the Plan shall automatically resume at the rate in effect
at the time the leave began, provided such return to service
occurs prior to the end of the offering period in which such
leave began. For purpose of the Plan: (i) the Participant shall
be considered to remain in service for so long as such
Participant remains in the active employ of the Company or one or
more other Participating Subsidiaries and (ii) the Participant
shall be deemed to be permanently disabled if he/she is unable to
engage in any substantial gainful employment, by reason of any
medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of at least
twelve (12) months.
Stock Purchase. Shares of Common Stock shall automatically be
purchased on behalf of each Participant (other than Participants whose payroll
deductions have previously been refunded or set aside for refund in accordance
with the Termination of Purchase Right provisions above) on each Semi-Annual
Purchase Date. The purchase shall be effected by applying each Participant's
payroll deductions after conversion to U.S. Dollars for the Semi-Annual Period
of Participation ending on such semiannual Purchase Date (together with any
carryover deductions from the preceding Semi-Annual Period of Participation) to
the purchase of whole shares of Common Stock
-8-
<PAGE> 48
(subject to the limitation on the maximum number of purchasable shares as set
forth above) at the purchase price in effect for such Semi-Annual Period of
Participation. Any payroll deductions not applied to such purchase because they
are not sufficient to purchase a whole share shall be held in local currency for
the purchase of Common Stock in the next Semi-Annual Period of Participation.
However, any payroll deductions not applied to the purchase of Common Stock by
reason of the limitation on the maximum number of shares purchasable by the
Participant for that Semi-Annual Period of Participation shall be promptly
refunded to the Participant.
Proration of Purchase Rights. Not more than 500,000 shares of
Common Stock, subject to periodic adjustment under Section VI.B, may be
purchased in the aggregate by all participants under the Plan and under the
Synopsys, Inc. Employee Stock Purchase Plan on any one Semi-Annual Purchase
Date. Should the total number of shares of Common Stock which are to be
purchased pursuant to outstanding purchase rights on any particular date exceed
either (i) the maximum limitation on the number of shares purchasable in the
aggregate on such date or (ii) the number of shares then available for issuance
under the Plan and the Synopsys, Inc. Employee Stock Purchase Plan, the Plan
Administrator shall make a pro-rata allocation of the available shares on a
uniform and non-discriminatory basis (including, to the extent practicable vis a
vis participants in the Synopsys, Inc. Employee Stock Purchase Plan) and the
payroll deductions for each Participant, to the extent in excess of the
aggregate purchase price payable for the Common Stock pro-rated to such
individual, shall be refunded to such Participant.
Rights as Stockholder. A Participant shall have no stockholder
rights with respect to the shares subject to his/her outstanding purchase right
until the shares are actually purchased on the Participant's behalf in
accordance; with the applicable provisions of the Plan. No adjustments shall be
made for dividends, distributions, or other rights for which the record date is
prior to the date of such purchase.
Assignability. No purchase right granted under the Plan shall be
assignable or transferable by the Participant other than by will or by the laws
of descent and distribution following the Participant's death, and during the
Participant's lifetime the purchase right shall be exercisable only by the
Participant.
Change in Ownership. Should the Company or its stockholders enter
into an agreement to dispose of all or substantially all of the assets or
outstanding capital stock of the Company by means of:
(i) a sale, merger or other reorganization in which
the Company will not be the surviving corporation (other than a
reorganization effected primarily to change the State in which
the Company is incorporated), or
-9-
<PAGE> 49
(ii) a reverse merger in which the Company is the
surviving corporation but in which more than fifty percent (50%)
of the Company's outstanding voting stock is transferred to
holders different from those who held the stock immediately prior
to the reverse merger,
then all outstanding purchase rights under the Plan shall
automatically be exercised immediately prior to the consummation of such sale,
merger, reorganization or reverse merger by applying the payroll deductions of
each Participant, after conversion into U.S. Dollars on the date of purchase,
for the Semi-Annual Period of Participation in which such transaction occurs to
the purchase of whole shares of Common Stock at eighty-five percent (85%) of the
lower of (i) the fair market value of the Common Stock on the Participant's
Enrollment Date into the offering period in which such transaction occurs or
(ii) the fair market value of the Common Stock immediately prior to the
consummation of such transaction. However, the applicable share limitations of
Sections VII and VIII shall continue to apply to any such purchase, and the
clause (i) amount above shall not, for any Participant whose Enrollment Date for
the offering period is other than the start date of such offering period, be
less than the fair market value of the Common Stock on such start date.
The Company shall use its best efforts to provide at least ten
(10) days' advance written notice of the occurrence of any such sale, merger,
reorganization or reverse merger, and Participants shall, following the receipt
of such notice, have the right to terminate their outstanding purchase rights in
accordance with the applicable provisions of this Article VII.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right outstanding under this Plan and
(ii) similar rights accrued under other employee stock purchase plans (within
the meaning of Section 423 of the Code) of the Company and its Corporate
Affiliates would otherwise permit such Participant to purchase more than $25,000
worth of stock of the Company or any Corporate Affiliate (determined on the
basis of the fair market value of such stock on the date or dates such rights
are granted to the Participant) for each calendar year such rights are at any
time outstanding.
B. For purposes of applying such accrual limitations, the right
to acquire Common Stock pursuant to each purchase right outstanding under the
Plan shall accrue as follows:
(i) The right to acquire Common Stock under each
such purchase right shall accrue in a series of successive
semi-annual installments as and when the purchase right first
becomes
-10-
<PAGE> 50
exercisable for each semi-annual installment on the last business
day of each Semi-Annual Period of Participation for which the
right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the
Participant has already accrued in the same calendar year the
right to acquire $25,000 worth of Common Stock (determined on the
basis of the fair market value on the date or dates of grant)
pursuant to one or more purchase rights held by the Participant
during such calendar year.
(iii) If by reason of such accrual limitations, any
purchase right of a Participant does not accrue for a particular
Semi-Annual Period of Participation, then the payroll deductions
which the Participant made during that Semi-Annual Period of
Participation with respect to such purchase right shall be
promptly refunded.
C. In the event there is any conflict between the provisions of
this Section VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Section VIII shall be controlling.
IX. AMENDMENT AND TERMINATION
A. The Board may amend, alter, suspend, discontinue, or terminate
the Plan at any time, including amendments to outstanding options/purchase
rights. However, the Board may not, without the approval of the Company's
stockholders:
(i) increase the number of shares issuable under
the Plan or the maximum number of shares which may be purchased
per Participant or in the aggregate during any one Semi-Annual
Period of Participation under the Plan, except that the Plan
Administrator shall have the authority, exercisable without such
stockholder approval, to effect adjustments to the extent
necessary to reflect changes in the Company's capital structure
pursuant to Section VI.B;
(ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares issuable under
the Plan; or
(iii) materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements
for eligibility to participate in the Plan.
-11-
<PAGE> 51
B. The Board may elect to terminate any or all outstanding
purchase rights at any time. In the event the Plan is terminated, the Board may
also elect to terminate outstanding purchase rights either immediately or upon
completion of the purchase of shares on the next Semi-Annual Purchase Date, or
may elect to permit purchase rights to expire in accordance with their terms
(and participation to continue through such expiration dates). If purchase
rights are terminated prior to expiration, all funds contributed to the Plan
that have not been used to purchase shares shall be returned to the Participants
as soon as administratively feasible.
X. GENERAL PROVISIONS
A. The Plan shall become effective on the date on which it is
adopted by the Board, provided the Company has complied with all applicable
requirements established by law or regulation.
B. All costs and expenses incurred in the administration of the
Plan shall be paid by the Company.
C. Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Board or the Plan Administrator, nor
any provision of the Plan itself shall be construed so as to grant any person
the right to remain in the employ of the Company or any of its Corporate
Affiliates for any period of specific duration, and such person's employment may
be terminated at any time, with or without cause.
D. The provisions of the Plan shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
E. If the Plan Administrator in its discretion so elects, it may
retain a brokerage firm, bank, or other financial institution to assist in the
purchase of shares, delivery of reports, or other administrative aspects of the
Plan. If the Plan Administrator so elects, each Participant shall (unless
prohibited by the laws of the nation of his or her employment or residence) be
deemed upon enrollment in the Plan to have authorized the establishment of an
account on his or her behalf at such institution. Shares purchased by a
Participant under the Plan shall be held in the account in the name in which the
share certificate would otherwise be issued pursuant to Section VII.
12
<PAGE> 52
Schedule A
Companies Participating in
International Employee Stock Purchase
Plan As of the Effective Date
German Subsidiary: Synopsys GmbH
French Subsidiary: Synopsys SARL
UK Subsidiary: Synopsys (Northern Europe) Limited
Japan Subsidiary: Nihon Synopsys K.K.
Korea Subsidiary: Synopsys Korea, Inc.
-13-
<PAGE> 53
SYNOPSYS, INC.
1994 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
(REFLECTING AMENDMENTS THROUGH NOVEMBER 4, 1997)
I. PURPOSE OF THE PLAN
This 1994 Non-Employee Directors Stock Option Plan (the "Plan")
is intended to promote the interests of Synopsys, Inc., a Delaware corporation
(the "Corporation"), by providing the non-employee members of the Board of
Directors with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
II. DEFINITIONS
For purposes of the Plan, the following definitions shall be in
effect:
ANNUAL MEETING: the annual meeting of the Corporation's
stockholders.
BOARD: the Corporation's Board of Directors.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK: shares of the Corporation's common stock.
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
a. any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such
stockholders to accept; or
b. there is a change in the composition of the Board over
a period of twenty-four (24) consecutive months or less such that a
majority of the
-1-
<PAGE> 54
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or
nomination was approved by the Board.
CORPORATE TRANSACTION: any of the following stockholder-approved
transactions to which the Corporation is a party:
a. a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal purpose
of which is to change the State of the Corporation's incorporation,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to holders different from those
who held such securities immediately prior to such merger.
EFFECTIVE DATE: October 27, 1994, the date on which the Plan was adopted
by the Board.
FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed or
admitted to trading on any national securities exchange but is traded on
the Nasdaq National Market, the Fair Market Value shall be the closing
selling price per share on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no reported closing
selling price for the Common Stock on the date in question, then the
closing selling price on the last preceding date for which such
quotation exists shall be determinative of Fair Market Value.
b. If the Common Stock is at the time listed or admitted
to trading on any national securities exchange, then the Fair Market
Value shall be
-2-
<PAGE> 55
the closing selling price per share on the date in question on the
exchange serving as the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of Common Stock on such exchange
on the date in question, then the Fair Market Value shall be the closing
selling price on the exchange on the last preceding date for which such
quotation exists.
HOSTILE TAKE-OVER: a change in ownership of the Corporation
effected through the following transaction:
a. any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such
stockholders to accept, and
b. more than fifty percent (50%) of the securities so
acquired in such tender or exchange offer are accepted from holders
other than the officers and directors of the Corporation subject to the
short-swing profit restrictions of Section 16 of the 1934 Act.
1934 ACT: the Securities Exchange Act of 1934, as amended.
OPTIONEE: any person to whom an option is granted under the Plan.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of
the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.
TAKE-OVER PRICE: the greater of (a) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (b) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over.
III. ADMINISTRATION OF THE PLAN
-3-
<PAGE> 56
The terms and conditions of each automatic option grant
(including the timing and pricing of the option grant) shall be determined by
the express terms and conditions of the Plan, and neither the Board nor any
committee of the Board shall exercise any discretionary functions with respect
to option grants made pursuant to the Plan.
IV. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be available
for issuance under the Plan and shall be drawn from either the Corporation's
authorized but unissued shares of Common Stock or from reacquired shares of
Common Stock, including shares repurchased by the Corporation on the open
market. The number of shares of Common Stock reserved for issuance over the term
of the Plan shall initially be fixed at 100,000 shares.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of each
calendar year during the term of the Plan, beginning with the 1996 calendar
year, by an additional 25,000 shares (taking into account all stock splits as of
November 5, 1997).
C. Should one or more outstanding options under this Plan expire
or terminate for any reason prior to exercise in full, then the shares subject
to the portion of each option not so exercised shall be available for subsequent
option grant under the Plan. Shares subject to any option or portion thereof
surrendered in accordance with Article VII and all share issuances under the
Plan, whether or not the shares are subsequently repurchased by the Corporation
pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent option grant under the Plan. In addition, should the exercise price
of an outstanding option under the Plan be paid with shares of Common Stock,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock actually issued
to the holder of such option.
D. Should any change be made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the number
and/or class of securities by which the share reserve is to increase
automatically each calendar year, (iii) the number and/or class of securities
for which automatic option grants are to be subsequently made to each
newly-elected or continuing non-employee Board member under the Plan, and (iv)
the number and/or class of securities and price per share in effect under each
option outstanding under the Plan. The adjustments to the outstanding options
shall be made by the Board in a
-4-
<PAGE> 57
manner which shall preclude the enlargement or dilution of rights and benefits
under such options and shall be final, binding and conclusive.
V. ELIGIBILITY
A. Eligible Optionees. The individuals eligible to receive
automatic option grants pursuant to the provisions of this Plan shall be limited
to (i) those individuals serving as non-employee Board members on the Effective
Date who have indicated their intention to stand for re-election to the Board at
the 1995 Annual Meeting and who have not otherwise previously received a stock
option grant from the Corporation, (ii) those individuals who are first elected
or appointed as non-employee Board members after the Effective Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (iii) those individuals who are re-elected as non-employee Board members at
one or more Annual Meetings held after the Effective Date. A non-employee Board
member shall not be eligible to receive the initial automatic option grant under
clause (i) or clause (ii) if such individual has previously been in the employ
of the Corporation (or any parent or subsidiary). However, a non-employee Board
member shall be eligible to receive one or more clause (iii) option grants,
whether or not he or she has previously been in the employ of the Corporation
(or any parent or subsidiary). Each non-employee Board member eligible to
participate in the Plan pursuant to the foregoing criteria is hereby designated
an Eligible Director.
B. Limitation. Except for the grants to be made pursuant to this
Plan, non-employee Board members shall not be eligible to receive any stock
options, stock appreciation rights, direct stock issuances or other stock awards
under this Plan or any other stock plan of the Corporation or any parent or
subsidiary.
VI. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Date. Option grants shall be made on the dates specified
below:
- Each individual serving as an Eligible Director on the
Effective Date who has indicated his or her intention to stand for
re-election to the Board at the 1995 Annual Meeting and who has not
otherwise previously received a stock option grant from the Corporation
year shall automatically be granted at that time a non-statutory stock
option to purchase 20,000 shares of Common Stock.
- Initial Grants. Each individual who first becomes an Eligible
Director after the Effective Date, whether through election by the
Corporation's stockholders or appointment by the Board, shall
automatically be granted, at the time of such initial election or
appointment, a non-statutory option to purchase 20,000 shares of Common
Stock.
-5-
<PAGE> 58
- Annual Grants. On the date of each Annual Meeting each Eligible
Director who is re-elected to the Board at that Annual Meeting shall
automatically be granted a non-statutory option to purchase an
additional 10,000 shares of Common Stock (an "annual option grant"). On
the date on which an individual first becomes an Eligible Director by
election or appointment by the Board, such Eligible Director shall
automatically be granted, at the time of such appointment, a
non-statutory option to purchase 10,000 shares of Common Stock, reduced,
in the case of Eligible Directors appointed to the Board, by one twelfth
for each whole month that has elapsed since the most recent Annual
Meeting (also an "annual option grant"). There shall be no limit on the
number of annual option grants any one Eligible Director may receive
over his or her period of continued Board service.
- Committee Service Grants. Each Eligible Director who serves on
the Audit Committee, Compensation (or comparable) Committee or other
eligible committee as determined by the Board (each such committee a
"grant-eligible committee") shall automatically be granted a
non-statutory option to purchase 5,000 shares of Common Stock for
service on such a grant-eligible committee (a "committee-service option
grant"). Such grants shall be awarded on the date of each Annual Meeting
to Eligible Directors serving on such committees as of such date and
re-elected to the Board at such Annual Meeting, and otherwise upon
appointment to a grant-eligible committee. The number of option shares
granted to Eligible Directors who are appointed to a grant-eligible
committee between Annual Meetings shall be reduced by one twelfth for
each whole month that has elapsed from the Annual Meeting until the date
of appointment, except with respect to Eligible Directors who are first
elected to the Board at the Annual Meeting and elected to serve on a
grant-eligible committee at the first meeting of the Board following the
Annual Meeting. There shall be no limit on the number of such annual
5,000-share committee-service option grants any one Eligible Director
may receive over his or her period of continued Board service, except
that no Eligible Director shall receive more than two committee service
grants in any year (with such year being measured from one annual
meeting to the next).
B. Exercise Price. The exercise price per share of Common Stock
subject to each automatic option grant shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the automatic grant
date.
C. Payment.
-6-
<PAGE> 59
The exercise price shall become immediately due upon exercise of
the option and shall be payable in one of the alternative forms specified below:
(i) full payment in cash or check made payable to the
Corporation's order; or
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial-reporting purposes and valued at Fair Market
Value on the Exercise Date (as such term is defined below); or
(iii) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial-reporting purposes and valued at
Fair Market Value on the Exercise Date and cash or check payable to the
Corporation's order; or
(iv) to the extent the option is exercised for vested
shares, full payment through a broker-dealer sale and remittance
procedure pursuant to which the non-employee Board member (I) shall
provide irrevocable written instructions to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares and (II) shall concurrently provide
written directives to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to
complete the sale transaction.
For purposes of this Section VI.C, the Exercise Date shall be the
date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure specified
above is utilized in connection with the exercise of the option for vested
shares, payment of the exercise price for the purchased shares must accompany
the exercise notice. However, if the option is exercised for any unvested
shares, then the Optionee must also execute and deliver to the Corporation a
stock purchase agreement for those unvested shares which provides the
Corporation with the right to repurchase, at the exercise price paid per share,
any unvested shares held by the Optionee at the time of his or her cessation of
Board service and which precludes the sale, transfer or other disposition of any
shares purchased under the option, to the extent those shares are at the time
subject to the Corporation's repurchase right.
D. Exercisability/Vesting. Each automatic grant shall be
immediately exercisable for any or all of the option shares. Any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's
-7-
<PAGE> 60
cessation of Board service prior to vesting in those shares in accordance with
the applicable schedule below.
- The initial automatic grant for 20,000 shares made to each
Eligible Director shall vest, and the Corporation's repurchase right
shall lapse, in a series of four (4) successive equal installments as
such individual continues in Board service through the date immediately
preceding each of the first four (4) Annual Meetings following the grant
date of that option.
- Each annual option grant made to an Eligible Director (and each
prorated grant issued pursuant to the third paragraph of Section VI.A.)
shall vest in full, and the Corporation's repurchase right shall lapse
in its entirety, on the date immediately prior to the Annual Meeting
following the grant date of that option, provided the Optionee continues
in Board service through that vesting date.
- Each committee-service option grant made to an Eligible
Director shall vest in full, and the Corporation's repurchase right
shall lapse in its entirety, on the date immediately prior to the Annual
Meeting following the grant date of that option, provided the Optionee
continues in Board service and remains a member of the committee with
respect to which the grant was awarded through that vesting date.
Vesting of the option shares shall be subject to acceleration as
provided in Section VI.G and Article VII. In no event, however, shall any
additional option shares vest after the Optionee's cessation of Board service.
E. Option Term. Each automatic grant under the Plan shall have a
maximum term of ten (10) years measured from the automatic grant date.
F. Non-Transferability. During the lifetime of the Optionee, each
automatic option grant, together with the limited stock appreciation right
pertaining to such option, shall be exercisable only by the Optionee and shall
not be assignable or transferable by the Optionee other than a transfer of the
option effected by will or by the laws of descent and distribution following
Optionee's death.
-8-
<PAGE> 61
G. Effect of Termination of Board Service.
1. Should the Optionee cease to serve as a Board member
for any reason (other than death or Permanent Disability) while holding one or
more option grants issued under the Plan, then such individual shall have a six
(6)-month period following the date of such cessation of Board service in which
to exercise each such option for any or all of the option shares in which the
Optionee is vested at the time of his or her cessation of Board service. Each
such option shall immediately terminate and cease to be outstanding, at the time
of such cessation of Board service, with respect to any option shares in which
the Optionee is not otherwise at that time vested.
2. Should the Optionee die within six (6) months after
cessation of Board service, then any option grant issued under the Plan held by
the Optionee at the time of death may subsequently be exercised, for any or all
of the option shares in which the Optionee is vested at the time of his or her
cessation of Board service (less any option shares subsequently purchased by the
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
The right to exercise each such option shall lapse upon the expiration of the
twelve (12)-month period measured from the date of the Optionee's death.
3. Should the Optionee die or become Permanently Disabled
while serving as a Board member, then any option grant issued under the Plan
held by the Optionee at the time of his or her death or Permanent Disability may
subsequently be exercised for any or all of the option shares in which the
Optionee is vested at that time plus an additional number of option shares equal
to the number of option shares (if any) in which the Optionee would have vested
had he or she continued in Board service until the next Annual Meeting. The
Optionee (or the personal representative of the Optionee's estate or the person
or persons to whom the option is transferred upon the Optionee's death) shall
have the right to exercise the option for such number of option shares at any
time prior to the expiration of the twelve (12)-month period measured from the
date of the Optionee's death or Permanent Disability.
4. In no event shall any option grant under this Plan
remain exercisable after the expiration date of the maximum ten (10)-year option
term. Upon the expiration of the applicable post-service exercise period under
subparagraphs 1 through 3 above or (if earlier) upon the expiration of the
maximum ten (10)-year option term, the grant shall terminate and cease to be
outstanding for any option shares in which the Optionee was vested at the time
of his or her cessation of Board service but for which such option was not
otherwise exercised.
-9-
<PAGE> 62
H. Stockholder Rights. The holder of an option grant issued under
the Plan shall have none of the rights of a stockholder with respect to any
shares subject to such option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
option grant issued under the Plan shall be as set forth in the form Stock
Option Agreement attached as Exhibit A.
VII. SPECIAL ACCELERATION EVENTS
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option issued under the
Plan but not otherwise vested shall automatically vest in full so that each such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of such shares as fully-vested shares of Common Stock. Immediately
following the consummation of the Corporate Transaction, each option grant
issued under the Plan shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation or its parent company.
B. In connection with any Change in Control of the Corporation,
the shares of Common Stock at the time subject to each outstanding option issued
under the Plan but not otherwise vested shall automatically vest in full so that
each such option shall, immediately prior to the specified effective date for
the Change in Control, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of such shares as fully-vested shares of Common Stock. Each such option
shall remain exercisable for such fully-vested option shares until the
expiration or sooner termination of the option term or the cash-out of the
option in accordance with Section VII.C.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
option grant issued under the Plan held by him or her for a period of at least
six (6) months. The Optionee shall in return be entitled to a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over Price
of the shares of Common Stock at the time subject to the surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. No approval or consent of the Board shall be required
in connection with such option surrender and cash distribution.
-10-
<PAGE> 63
D. The shares of Common Stock subject to each option surrendered
in connection with the Hostile Take-Over shall NOT be available for subsequent
option grant under this Plan.
E. The automatic option grants outstanding under the Plan shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
VIII. AMENDMENT OF THE PLAN AND AWARDS
The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) the Plan, together with the option grants outstanding under the
Plan, may not be amended at intervals more frequently than once every six (6)
months, other than to the extent necessary to comply with applicable Federal
income tax laws and regulations, and (ii) no such amendment or modification
shall adversely affect rights and obligations with respect to options at the
time outstanding under the Plan, unless the affected Optionees consent to such
amendment. In addition, the Board may not, without the approval of the
Corporation's stockholders, amend the Plan to (i) materially increase the
maximum number of shares issuable under the Plan or the number of shares
issuable per newly-elected or continuing Eligible Director, except for
permissible adjustments under Section IV.B., (ii) materially modify the
eligibility requirements for participation in the Plan or (iii) materially
increase the benefits accruing to participants in the Plan.
IX. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan became effective immediately upon adoption by the
Board on the Effective Date, and one or more automatic option grants may be made
under the Plan at any time on or after such Effective Date. However, no options
granted under the Plan shall become exercisable in whole or in part prior to
approval of the Plan by the Corporation's stockholders at the 1995 Annual
Meeting. If such approval is not obtained, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
option grants shall be made under the Plan.
B. The Plan shall terminate upon the earlier of (i) October 26,
2004 or (ii) the date on which all shares available for issuance under the Plan
shall have been issued or canceled pursuant to the exercise or cash-out of the
options granted under the Plan. If the date of termination is determined under
clause (i) above, then all option grants and unvested stock issuances
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the agreements evidencing those option grants
or stock issuances.
-11-
<PAGE> 64
X. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or share issuances under the Plan shall be used
for general corporate purposes.
XI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan and the issuance of Common Stock upon the exercise of the option
grants made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the Common Stock is then listed for trading.
XII. NO IMPAIRMENT OF RIGHTS
Neither the action of the Corporation in establishing the Plan
nor any provision of the Plan shall be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the stockholders
to remove any individual from the Board at any time in accordance with the
provisions of applicable law.
XIII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any Optionee.
B. The provisions of the Plan relating to the exercise of options
and the vesting of shares shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and performed in
such State.
C. The provisions of the Plan shall inure to the benefit of, and
be binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Optionees, the legal representatives
of their respective estates, their respective heirs or legatees and their
permitted assignees.
-12-
