<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Section 240.14a-11(c) or Section
240.14a-12
QUICKTURN DESIGN SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(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:
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(4) Date Filed:
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<PAGE>
QUICKTURN DESIGN SYSTEMS, INC.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 17, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Quickturn Design Systems, Inc., a Delaware corporation (the
"Company"), will be held on Friday, April 17, 1998 at 8:00 a.m., local time, at
the Company's headquarters located at 55 W. Trimble Road, San Jose, California
95131, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the Company for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only holders of record of the Company's common stock at the close of
business on February 25, 1998, the record date, are entitled to notice of and to
vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Annual Meeting may vote in person even if he or she has returned a proxy.
THE BOARD OF DIRECTORS
San Jose, California
March 13, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE.
<PAGE>
QUICKTURN DESIGN SYSTEMS, INC.
------------------
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF STOCKHOLDERS
---------------------
PROCEDURAL MATTERS
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Quickturn Design Systems, Inc. (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Friday, April 17, 1998 at 8:00
a.m., local time, and at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Company's headquarters located at 55 W.
Trimble Road, San Jose, California 95131. The Company's telephone number at that
location is (408) 914-6000.
These proxy solicitation materials were mailed on or about March 13, 1998,
together with the Company's 1997 Annual Report to Stockholders, to all
stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Holders of record of the Company's common stock (the "Common Stock") at the
close of business on February 25, 1998 (the "Record Date") are entitled to
notice of and to vote at the Annual Meeting. As of the Record Date, 17,770,833
shares of Common Stock were issued and outstanding. For information regarding
security ownership by management and by the beneficial owners of more than 5% of
the Common Stock, see "Beneficial Security Ownership of Management and Certain
Beneficial Owners." The closing sales price of the Common Stock on the Nasdaq
National Market on the Record Date was $14.19 per share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date, or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Stockholders do not have the right
to cumulate their votes in the election of directors.
The cost of soliciting proxies will be borne by the Company. The Company has
retained the services of Corporate Investor Communications, Inc. to assist in
obtaining proxies from brokers and nominees of stockholders for the Annual
Meeting. The estimated cost of such services is $6,000, plus out-of-pocket
expenses. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone, telegram, letter or
facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock outstanding on the Record Date. The
Company intends to include abstentions and broker non-votes as present or
represented for purposes of establishing a quorum for the transaction of
business, but the Company will exclude abstentions and broker non-votes from the
calculation of shares entitled to vote with respect to any proposal for which
authorization to vote was withheld.
<PAGE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting of Stockholders must
be received by the Company no later than November 13, 1998 in order to be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
A board of six directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's six nominees named below, all of whom are presently directors
of the Company. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. The term of office of each person
elected as a director will continue until the next annual meeting of
stockholders or until a successor has been elected and qualified.
<TABLE>
<CAPTION>
NAME AGE(1) PRINCIPAL OCCUPATION
- ------------------------------------ ----------- --------------------------------------------------------------------
<S> <C> <C>
Glen M. Antle....................... 59 Chairman of the Board of the Company
Keith R. Lobo....................... 46 President and Chief Executive Officer of the Company
Richard C. Alberding................ 67 Executive Vice President, Hewlett-Packard Company, Retired
Michael R. D'Amour.................. 44 President of D'Amour and Associates
Dr. Yen-Son (Paul) Huang............ 52 Entrepreneur
Dr. David K. Lam.................... 55 Technology and Business Advisor
</TABLE>
- ------------------------
(1) As of February 25, 1998.
Glen M. Antle joined the Company in June 1993 as Chairman of the Board. From
July 1990 to June 1993, he served as Chairman of PiE Design Systems, Inc.
("PiE"), and from September 1992 to June 1993, he served as Chief Executive
Officer of PiE. He served as Chairman, from August 1982 to May 1988, as
co-Chairman, from May 1988 to June 1989, and as Chief Executive Officer, from
August 1982 to September 1988, of Cadence Design Systems, Inc., a company that
develops CAD software products. Mr. Antle is currently a director of Trident
Microsystems, Inc.
Keith R. Lobo joined the Company in November 1992 as President, Chief
Executive Officer and Director. From March 1992 to October 1992, Mr. Lobo served
as a consultant in the venture capital field and was a private investor. From
March 1988 to February 1992, he served as Executive Vice President and Chief
Operating Officer of Chips & Technologies, Inc., a semiconductor supplier of
microcomputer components to the personal computer industry.
Richard C. Alberding has served as Director of the Company since May 1995.
Mr. Alberding has served as a management consultant since June 1991. From 1958
to 1991, he served in a variety of positions for Hewlett-Packard Company, most
recently as Executive Vice President. Mr. Alberding also serves as a director of
Walker Interactive Systems, Inc., Paging Network, Inc., Sybase, Inc., Kennametal
Inc., Digital Microwave Corp., Digital Link Corp., Storm Technology, Inc. and
JLK Direct, Inc.
Michael R. D'Amour co-founded the Company and has served as Director since
the Company's inception. Since December 1995, Mr. D'Amour has served as
President of D'Amour and Associates, a research and development company. From
January 1995 to April 1995, he served as the Company's Executive Vice President.
He previously served as the Company's Executive Vice President, International
2
<PAGE>
Sales from June 1990 to December 1994, as the Company's Executive Vice
President, Research and Development from September 1987 to June 1990, as the
Company's President and Chief Executive Officer from September 1987 to July 1988
and as the Company's Chairman of the Board from the Company's inception until
June 1993.
Dr. Yen-Son (Paul) Huang has served as Director of the Company since June
1993. Dr. Huang served as Executive Vice President of the Company between
January 1996 and September 1997. He served as the Company's Executive Vice
President, Product Development, from June 1993 to January 1996. From January
1990 to June 1993, Dr. Huang served as President of PiE, a company he
co-founded.
Dr. David K. Lam has served as Director of the Company since September 1996.
Dr. Lam is a technology and business advisor in the semiconductor equipment
industry. Between April 1989 and October 1996, Dr. Lam served as President and
Chief Executive Officer of ExpertEdge, Inc., a provider of integrated,
multimedia client-server software. From 1987 to 1989, he was Vice President at
Wyse Technology, Inc., and he founded Lam Research in 1980. Dr. Lam is currently
a director of Asante Technology, Inc.
REQUIRED VOTE
The six nominees receiving the highest number of affirmative votes of the
shares present or represented at the Annual Meeting and entitled to be voted for
them shall be elected as directors of the Company. Votes withheld from any
director are counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but they have no legal effect under
Delaware law.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED HEREIN.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company has four standing committees: an Audit
Committee, a Compensation Committee, a Nominating Committee and a Technology
Committee.
The Audit Committee, which currently consists of Messrs. Alberding and Antle
and Dr. Lam, is responsible for (i) recommending engagement of the Company's
independent auditors, (ii) approving the services performed by such auditors,
(iii) consulting with such auditors and reviewing with them the results of their
examination, (iv) reviewing and approving any material accounting policy changes
affecting the Company's operating results, (v) reviewing the Company's control
procedures and personnel and (vi) reviewing and evaluating the Company's
accounting principles and its system of internal accounting controls. The Audit
Committee held three meetings during fiscal 1997.
The Compensation Committee, which currently consists of Messrs. Alberding
and Antle, is responsible for (i) reviewing and approving the compensation and
benefits for the Company's officers and other employees, (ii) administering the
Company's stock purchase and stock option plans and (iii) making recommendations
to the Board of Directors regarding such matters. The Compensation Committee
held seven meetings during fiscal 1997.
The Nominating Committee, which currently consists of Messrs. Alberding,
Antle and Lobo, is responsible for making recommendations to the Board of
Directors regarding nominations for membership on the Board of Directors. The
Nominating Committee will consider nominees recommended by stockholders,
provided such recommendations are submitted in writing to the Secretary of the
Company. The Nominating Committee held two meetings during fiscal 1997.
The Technology Committee, which currently consists of Mr. D'Amour, Dr.
Huang, Dr. Lam and Mr. Lobo, was formed in January 1998. The Technology
Committee is responsible for meeting with the Company's key technology managers
to discuss the Company's technology issues and direction.
3
<PAGE>
The Board of Directors held a total of seven meetings (including regularly
scheduled and special meetings) during fiscal 1997. No incumbent director during
the last fiscal year attended fewer than 75% of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total number of
meetings held by all committees on which he served.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for their services as directors of the Company. However,
nonemployee members of the Board of Directors receive an annual cash retainer of
$12,000 and an annual committee membership stipend of $1,500 for each committee
of the Board of Directors on which such director serves.
In addition, nonemployee directors participate in the Company's 1994 Outside
Director Stock Option Plan (the "Director Plan"). The Director Plan was adopted
by the Board of Directors in January 1994 and was approved by the stockholders
in May 1994. The Director Plan provides for an automatic grant of a nonstatutory
stock option to purchase 20,000 shares of Common Stock to a nonemployee director
on the date of the first meeting on which such individual participates as a
director (an "Initial Option"). An Initial Option has a term of ten years and
vests monthly over four years. Beginning four years after the grant of an
Initial Option to a director, such director is granted an automatic annual
option to purchase 3,500 shares of Common Stock, which option has a term of ten
years and vests monthly over one year. The exercise price of each option granted
equals 100% of the fair market value of the Common Stock, based on the closing
sales price of the Common Stock as reported on the Nasdaq National Market on the
date of grant. Options granted under the Director Plan must be exercised within
three months following the end of the optionee's tenure as a director of the
Company or within twelve months after the termination of a director's tenure due
to death or disability. The Director Plan is designed to work automatically,
without administration; however, to the extent administration is necessary, the
Director Plan has been structured so that options granted to nonemployee
directors who administer the Company's other employee benefit plans qualify as
transactions exempt from Section 16(b) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), pursuant to Rule 16b-3 promulgated
thereunder.
4
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P., certified
public accountants, to audit the financial statements of the Company for the
fiscal year ending December 31, 1998. Coopers & Lybrand L.L.P. has audited the
Company's financial statements since the Company's inception. A representative
of Coopers & Lybrand L.L.P. is expected to be present at the meeting, will have
the opportunity to make a statement and is expected to be available to respond
to appropriate questions.
REQUIRED VOTE
The Board of Directors has conditioned its appointment of the Company's
independent auditors upon the receipt of the affirmative vote of a majority of
the shares represented, in person or by proxy, and voting at the Annual Meeting,
which shares voting affirmatively also constitute at least a majority of the
required quorum. In the event that the stockholders do not approve the selection
of Coopers & Lybrand L.L.P., the appointment of the independent auditors will be
reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
5
<PAGE>
BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of Common Stock as
of February 25, 1998 for the following: (i) each person or entity who is known
by the Company to own beneficially more than 5% of the outstanding shares of the
Common Stock, (ii) each of the Company's current directors, (iii) each of the
officers named in the Summary Compensation Table and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED
- ---------------------------------------------------------------------------------------- ----------- --------------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS
Kopp Investment Advisors, Inc.(2)....................................................... 2,597,975 14.6%
7701 France Avenue South, Suite 500
Edina, MN 55435
State of Wisconsin Investment Board(2).................................................. 1,149,500 6.5%
121 East Wilson Street
Madison, WI 53707
DIRECTORS
Glen M. Antle(3)........................................................................ 323,282 1.8%
Keith R. Lobo(4)........................................................................ 473,750 2.6%
Richard C. Alberding(5)................................................................. 15,000 *
Michael R. D'Amour(6)................................................................... 44,471 *
Dr. Yen-Son (Paul) Huang(7)............................................................. 351,425 2.0%
Dr. David K. Lam(5)..................................................................... 7,917 *
NAMED OFFICERS
Jeffrey K. Jordan(5).................................................................... 16,271 *
Raymond K. Ostby(8)..................................................................... 111,142 *
Dugald H. Stewart(9).................................................................... 30,166 *
Tung-sun Tung(10)....................................................................... 69,673 *
All directors and executive officers as a group (20 persons)(11)........................ 2,710,805 14.4%
</TABLE>
- ------------------------
* Less than 1%.
(1) The number and percentage of shares beneficially owned is determined under
rules of the Securities and Exchange Commission ("SEC"), and the information
is not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares which the individual has the right to acquire within sixty days of
February 25, 1998 through the exercise of any stock option or other right.
Unless otherwise indicated in the footnotes, each person has sole voting and
investment power (or shares such powers with his or her spouse) with respect
to the shares shown as beneficially owned.
(2) This information was obtained from filings made with the SEC pursuant to
Sections 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended.
(3) Includes 207,270 shares held by The Antle Family Trust, as to which Mr.
Antle shares voting and dispositive power, and 116,012 shares of Common
Stock exercisable within sixty days of February 25, 1998.
6
<PAGE>
(4) Includes options to purchase 468,750 shares of Common Stock exercisable
within sixty days of February 25, 1998.
(5) All such shares are subject to options exercisable within sixty days of
February 25, 1998.
(6) Includes 37,388 shares held by The D'Amour Family Trust, as to which Mr.
D'Amour shares voting and dispositive power, and 7,083 shares of Common
Stock subject to options exercisable within sixty days of February 25, 1998.
(7) Includes 37,548 shares held by The Huang Living Trust, as to which Mr. Huang
shares voting and dispositive power, and 28,125 shares of Common Stock
subject to options exercisable within sixty days of February 25, 1998.
(8) Includes options to purchase 103,042 shares of Common Stock exercisable
within sixty days of February 25, 1998.
(9) Includes options to purchase 29,896 shares of Common Stock exercisable
within sixty days of February 25, 1998.
(10) Includes options to purchase 56,760 shares of Common Stock exercisable
within sixty days of February 25, 1998.
(11) Includes options to purchase 1,117,064 shares of Common Stock exercisable
within sixty days of February 25, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and amendments thereto and changes in ownership on Form 4 or
Form 5 and amendments to each with the Securities and Exchange Commission (the
"SEC") and the National Association of Securities Dealers, Inc. Such officers,
directors and ten-percent stockholders are also required by SEC rules to furnish
the Company with copies of all such forms that they file.
Based solely on its review of the copies of such forms and amendments
thereto received by the Company, or written representations from certain
reporting persons that no Forms 5 were required for such persons, which
representations have been maintained for at least two years, the Company
believes that during fiscal 1997 all Section 16(a) filing requirements
applicable to its officers, directors and ten-percent stockholders were complied
with. However, Mr. Stewart did not report a sale of Common Stock on a Form 4 he
filed in fiscal 1996, which sale was subsequently reported on an amended Form 4,
and Mr. Tung filed a late Form 3 following his assumption of responsibilities as
an executive officer.
7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in October 1993 and is
currently composed of Messrs. Alberding and Antle. No interlocking relationship
exists between any member of the Company's Board of Directors or Compensation
Committee and any member of the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past. No member of the Compensation Committee is or was formerly an officer or
an employee of the Company or its subsidiaries.
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning total
compensation received by the person serving as Chief Executive Officer and each
of the four most highly compensated executive officers during the last fiscal
year (the "Named Officers"), for services rendered to the Company in all
capacities during the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------- ALL OTHER
------------------------- SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS (2)
- -------------------------------------------------- ----- ----------- --------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Keith R. Lobo .................................... 1997 $ 250,000 $ 144,000 0 $ 11,168
PRESIDENT AND CHIEF EXECUTIVE OFFICER 1996 $ 250,000 $ 200,000 100,000 $ 6,768
1995 $ 227,369 $ 150,000 20,000 $ 3,978
Jeffrey K. Jordan ................................ 1997 $ 227,351(3) $ 17,000 0 $ 16,400
VICE PRESIDENT, NORTH AMERICAN SALES 1996 $ 382,499 $ 30,000 25,000 $ 34,000
1995 $ 544,567 $ 30,000 10,000 $ 10,800
Raymond K. Ostby ................................. 1997 $ 205,000 $ 59,000 0 $ 6,968
VICE PRESIDENT, FINANCE AND ADMINISTRATION, 1996 $ 190,000 $ 70,000 40,000 $ 6,768
CHIEF FINANCIAL OFFICER AND SECRETARY 1995 $ 156,667 $ 66,000 0 $ 5,863
Dugald H. Stewart ................................ 1997 $ 205,223 $ 57,000 0 $ 9,073
VICE PRESIDENT, MANUFACTURING 1996 $ 184,333 $ 102,000 40,000 $ 8,873
1995 $ 151,667 $ 56,000 10,000 $ 6,000
Tung-sun Tung .................................... 1997 $ 188,666 $ 40,000 0 $ 9,073
VICE PRESIDENT, RESEARCH & DEVELOPMENT 1996 $ 174,584 $ 64,000 60,000 $ 8,873
1995 $ 140,000 $ 36,000 0 $ 6,000
</TABLE>
- ------------------------
(1) Includes bonuses earned or accrued with respect to services rendered in the
fiscal year indicated, whether or not such bonus was actually paid during
such fiscal year.
(2) Includes health care premiums and 401(k) contributions.
(3) Includes $126,370 from commissions.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the Named Officers during the fiscal year ended
December 31, 1997.
OPTION EXERCISES AND HOLDINGS
The following table sets forth, as to the Named Officers, certain
information concerning stock options exercised during fiscal 1997 and the number
of shares subject to both exercisable and unexercisable stock options as of
December 31, 1997. Also reported are values for "in-the-money" options that
represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of the Common Stock on the
last trading day of fiscal 1997, which was $11.75 per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------- --------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Keith R. Lobo.................. 0 $ 0 458,750 76,250 $ 4,015,519 $ 25,731
Jeffrey K. Jordan.............. 7,000 $ 68,377 15,354 22,646 $ 22,237 $ 12,138
Raymond K. Ostby............... 0 $ 0 93,208 41,792 $ 452,684 $ 84,191
Dugald H. Stewart.............. 5,000 $ 21,875 24,896 32,104 $ 55,090 $ 23,035
Tung-sun Tung.................. 5,000 $ 48,050 49,744 43,966 $ 161,857 $ 41,711
</TABLE>
- ------------------------
(1) Market value of underlying securities based on the closing price of the
Common Stock on the last trading day of fiscal 1997 on the Nasdaq National
Market of $11.75 minus the exercise price.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") is responsible for establishing
policies and programs which determine the compensation of the Company's
executive officers, as well as supervising and making recommendations to the
Board on compensation matters generally. The Committee also has exclusive
authority to grant stock options to executive officers of the Company under the
1988 Stock Option Plan (the "1988 Plan"), the 1996 Supplemental Stock Plan (the
"1996 Plan") and the 1997 Stock Option Plan (the "1997 Plan").
COMPENSATION PHILOSOPHY AND POLICIES
The Committee's compensation philosophy is to provide cash and equity
incentives to the Company's officers and other employees through programs
designed to attract and retain personnel of the highest caliber in order to
maintain the Company's competitive position in its market. The Company seeks to
motivate its key employees by rewarding superior performance and by joining the
interests of employees to those of the stockholders through equity incentives.
The Committee seeks to foster teamwork and to motivate high performance
through a bonus program which depends upon achievement of corporate performance
objectives and, increasingly, individual performance objectives.
The Committee's policy is to establish a total compensation program at the
beginning of each year which is designed to enhance the Company's ability to
meet its financial, technical and other strategic goals for the year, while
creating an environment which will attract, retain and motivate highly skilled
officers and key employees to promote the success of the Company's business.
ELEMENTS OF COMPENSATION
Compensation for officers and key employees includes both cash and equity
elements.
Cash compensation consists of base salary, which is determined on the basis
of the level of responsibility, expertise and experience of the employee, taking
into account competitive conditions in the industry. In addition, cash
performance awards are paid to officers and other key employees up to an
established percentage of base salary, subject to meeting all or a portion of
targeted objectives. Performance awards are based on achievement of corporate
financial goals and discretionary individual performance reviews. Compensation
of sales personnel includes two additional components, sales commissions and
sales bonuses tied to quarterly and annual targets.
Ownership of Common Stock is a key element of executive compensation.
Officers and other employees of the Company are eligible to participate in the
1988 Plan, the 1996 Plan, the 1997 Plan and the 1993 Employee Qualified Stock
Purchase Plan (the "Purchase Plan"). The 1988 Plan, the 1996 Plan and the 1997
Plan permit the Board of Directors or any committee delegated by the Board to
grant stock options to employees on such terms as the Board or its committee may
determine. The Committee has sole authority to grant stock options to executive
officers of the Company and is currently administering stock option grants to
all employees. In determining the size of a stock option grant to a new officer
or other key employee, the Committee takes into account equity participation by
comparable employees within the Company, external competitive circumstances and
other relevant factors. Additional options may be granted to current employees
to reward exceptional performance or to provide additional unvested equity
incentives. These options typically vest over a four-year period and thus
require the employee's continuing efforts on behalf of the Company. The Purchase
Plan permits employees to acquire Common Stock through payroll deductions and
promotes broad-based equity participation throughout the Company. The Committee
believes that it is in the stockholders' interests to link employees'
compensation as closely as possible to equity appreciation and thus to share
with the employees the benefits of their efforts on behalf of the Company's
success.
10
<PAGE>
The Company also maintains a 401(k) Plan to provide retirement benefits
through tax deferred salary deductions for all its employees. The Company may
also make discretionary contributions towards the 401(k) Plan. The Company made
contributions of $497,000 to the 401(k) Plan for fiscal 1997.
1997 EXECUTIVE COMPENSATION
Executive compensation for fiscal 1997 included base salary and cash
performance awards, plus, in the case of sales executives, sales commissions and
sales bonuses. Executive officers, like other employees, were eligible for
option grants under the 1988 Plan, the 1996 Plan and the 1997 Plan, and to
participate in the Purchase Plan. Performance awards for the 1997 fiscal year
were based upon achievement by the Company of corporate revenue and profit goals
which had been established at the beginning of the year (as to which no payments
were made in fiscal 1997) and individual performance goals. Performance awards
were paid after the 1997 fiscal year end.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1997
Keith R. Lobo joined the Company in November 1992. His annual base
compensation is set by the Committee in January of each year, after review of
salaries paid to chief executives of comparable companies and in light of Mr.
Lobo's performance during the prior year. Like all officers, he is eligible to
receive options under the 1988 Plan, the 1996 Plan and the 1997 Plan, and to
participate in the Purchase Plan. Mr. Lobo received a performance award for
fiscal 1997 in the amount of $144,000. Mr. Lobo declined an increase in base
compensation for fiscal 1997 over fiscal 1996.
SUMMARY
The Committee sets policy and administers the Company's cash and equity
incentive programs to attract and retain highly skilled executives who will
promote the Company's business goals and to incentivize them to achieve goals
which will build long-term stockholder value.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Richard C. Alberding
Glen M. Antle
11
<PAGE>
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return with those of the S&P 500 Index and the S&P Technology Sector Index. The
graph assumes that $100 was invested (i) on December 15, 1993 (the effective
date of the Company's initial public offering) in the Common Stock and (ii) on
November 30, 1993 in the S&P 500 Index and the S&P Technology Sector Index,
including reinvestment of dividends. Note that historic stock price performance
is not necessarily indicative of future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
QUICKTURN DESIGN SYSTEMS,
INC. S&P 500 S&P TECHNOLOGY SECTOR
<S> <C> <C> <C>
12/15/93 $ 100.00 $ 100.00 $ 100.00
12/93 $ 104.17 $ 101.21 $ 102.61
12/94 $ 114.58 $ 102.55 $ 119.59
12/95 $ 83.33 $ 141.09 $ 172.26
12/96 $ 170.83 $ 173.48 $ 244.39
12/97 $ 97.92 $ 231.36 $ 308.15
</TABLE>
12
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted to 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 Company may recommend.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares which you hold. You are, therefore, urged to
execute and return, at your earliest convenience, the accompanying Proxy in the
envelope which has been enclosed.
THE BOARD OF DIRECTORS
San Jose, California
March 13, 1998
13
<PAGE>
APPENDIX A
PROXY
QUICKTURN DESIGN SYSTEMS, Inc.
ANNUAL MEETING OF STOCKHOLDERS, APRIL 17, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF QUICKTURN DESIGN SYSTEMS, Inc.
PROXY--The undersigned stockholder of QUICKTURN DESIGN SYSTEMS, Inc., a
Delaware corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated March 13, 1998, and
hereby appoints Keith R. Lobo and Raymond K. Ostby, or either of them, as
proxies, each with the power to appoint a substitute, and hereby authorizes them
to represent and to vote, as designated on the reverse side, all shares of
Common Stock of Quickturn Design Systems, Inc. held on record by the undersigned
on February 25, 1998 at the Annual Meeting of Stockholders to be held on April
17, 1998, or any postponement or adjournment thereof.
This proxy, when properly executed, will be voted as directed by the
undersigned stockholder, or if no directions are indicated, this proxy will be
voted FOR Items 1 and 2 and as said proxies deem advisable on such other matters
as may properly come before the Annual Meeting.
Please mark votes as in this example /X/
1. Election of all nominees listed below to the Board of Directors to serve
until the next annual meeting of stockholders and until their successors
have been duly elected and qualified, except as noted (write the names, if
any, of nominees for whom you withhold authority to vote).
Nominees: Glen M. Antle, Keith R. Lobo, Richard C. Alberding, Michael R.
D'Amour, Dr. Yen-Son (Paul) Huang, Dr. David K. Lam.
<TABLE>
<S> <C>
FOR ALL NOMINEES WITHHELD FROM ALL NOMINEES
/ / / /
</TABLE>
/ /
-----------------------------------------------
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
2. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the Company for the fiscal year ending December 31, 1998.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
MARK HERE FOR CHANGE OF ADDRESS AND NOTE AT LEFT: / /
Please sign your name exactly as it appears hereon. If acting as attorney,
executor, trustee, or in any other representative capacity, sign name and title.
<TABLE>
<S> <C> <C> <C>
Signature: ------------------------------------ Date: ------------------------------------
Signature: Date:
------------------------------------ ------------------------------------
</TABLE>
A-1
