SUMMIT DESIGN INC, DEF 14A, 1999-04-30

SUMMIT DESIGN INC
DEF 14A, 1999-04-30
PREPACKAGED SOFTWARE

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant /X/

Filed by a party other than the Registrant / /

Check the appropriate box:

/ / Preliminary Proxy Statement

/ / Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

/X/ Definitive Proxy Statement

/ / Definitive Additional Materials

/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

SUMMIT DESIGN, INC.

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(Name of Registrant as Specified in its Charter)

SUMMIT DESIGN, INC.

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(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

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(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

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[LOGO]

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999

To the Stockholders:

Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Summit Design, Inc., a Delaware corporation (the
"Company"), will be held on Wednesday, May 26, 1999 at 2:00 p.m., local time, at
the Embassy Suites, 9000 S.W. Washington Square Road, Tigard, Oregon 97223, for
the following purposes:

1. To elect two Class II directors to serve for a term of three
years.

2. To approve an amendment to the Company's 1994 Stock Plan to
increase the number of shares reserved for issuance thereunder
by 625,000 shares.

3. To approve an amendment to the Company's 1996 Employee Stock
Purchase Plan to increase the number of shares reserved for
issuance thereunder by 150,000 shares.

4. To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for the fiscal year
ending December 31, 1999.

5. To transact such other business as may properly come before
the meeting or any adjournment thereof.

The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice of Annual Meeting of Stockholders. Only
stockholders of record at the close of business on April 12, 1999 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 mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person even if he or she
has returned a proxy card.

By Order of the Board of Directors

/s/ C. Albert Koob
----------------------------------

C. Albert Koob
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY

Beaverton, Oregon
April 30, 1999

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IMPORTANT
WHETHER OR NOT YOU PLANT TO ATTEND THE MEETING, PLEASE COMPLETE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOP PROVIDED. IF YOU ATTEND THE MEETING,
YOU MAY VOTE IN PERSON, EVEN IF YOU RETURN A PROXY.
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SUMMIT DESIGN, INC.
-----------------------------------
PROXY STATEMENT
FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
-----------------------------------
PROCEDURAL MATTERS

GENERAL

The enclosed Proxy is solicited on behalf of the Board of Directors of
Summit Design, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held on Wednesday,
May 26, 1999 at 2:00 p.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 Embassy Suites, 9000 S.W.
Washington Square Road, Tigard, Oregon 97223. The telephone number at that
location is (503) 644-4000. The Company's principal executive offices are
located at 9305 S.W. Gemini Drive, Beaverton, Oregon 97008. The Company's
telephone number at that location is (503) 643-9281.

This Proxy Statement and the enclosed proxy card were mailed on or
about April 30, 1999, together with the Company's 1998 Annual Report to
Stockholders, to all stockholders entitled to vote at the Annual Meeting.

RECORD DATE

Stockholders of record at the close of business on April 12, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, 15,611,775 shares of the Company's common stock, $0.01 par
value (the "Common Stock"), were issued and outstanding and entitled to be voted
at the Annual Meeting. For information regarding security ownership by
management and by the beneficial owners of more than 5% of the Company's Common
Stock, see "Security Ownership of Certain Beneficial Owners and Management." The
closing price of the Company's Common Stock on the Nasdaq National Market on the
Record Date was $3.00 per share.

REVOCABILITY OF PROXIES

Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted by delivering to the Secretary
of the Company a written notice of revocation or a duly executed proxy bearing a
date later than that of the previously submitted proxy, or by attending the
Annual Meeting and voting in person.

VOTING AND SOLICITATION

Each stockholder is entitled to one vote for each 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 Skinner & Co. to assist in the solicitation
of proxies for the Annual Meeting. The estimated cost of such services is
$2,500, plus reimbursement of reasonable out-of-pocket expenses. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of Common Stock for their reasonable expenses in forwarding
solicitation materials to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, telegram, letter or
facsimile.

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QUORUM; ABSTENTIONS; BROKER NON-VOTES

The presence at the Annual Meeting, either in person or by proxy, of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote shall constitute a quorum for the transaction of business. The Company
intends to include abstentions and broker non-votes as present for purposes of
establishing a quorum for the transaction of business, to include abstentions as
shares entitled to vote and to exclude broker non-votes from the calculation of
shares entitled to vote with respect to any proposal for which authorization to
vote was withheld.

PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS

Any proposal of a stockholder of the Company which is intended to be
presented by such stockholder at the Company's 2000 Annual Meeting of
Stockholders must be received by the Company no later than December 31, 1999 in
order for such proposal to be considered for inclusion in the Company's proxy
statement and form of proxy relating to such meeting.

In addition, the Company's Bylaws provide that stockholders intending
to nominate candidates for election as directors or to bring business before an
annual meeting of stockholders which were not included in the Company's proxy
statement must deliver the prescribed notice and information to the Secretary of
the Company not less than 60 days nor more than 90 days prior to the annual
meeting. However, the Bylaws also provide that, where less than 70 days notice
or prior public disclosure of the date of the stockholders' meeting is given,
advance notice of stockholder nominations for the election of directors or
business to be brought before the annual meeting must be received not later than
the close of business on the tenth day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure was made. If
a stockholder who has notified the Company of his or her intention to present a
proposal at an annual meeting does not appear or send a qualified representative
to present his or her proposal at such meeting, the Company need not present the
proposal for a vote at such meeting.

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PROPOSAL NO. 1
ELECTION OF CLASS II DIRECTORS

DIRECTORS AND NOMINEES FOR CLASS II DIRECTORS

The Company's Board of Directors currently consists of five members who
are divided into three classes serving staggered terms. Class I consists of one
director, and Class II and Class III consist of two directors each. Two Class II
directors will be elected at the Annual Meeting for terms of three years.

The Board of Directors has selected the two nominees listed below to be
re-elected at the Annual Meeting as the Class II directors. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for these
nominees. In the event that a nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy; however, the Company has no reason to believe that the listed nominees
will be unable or decline to serve as a director. The directors elected at this
Annual Meeting will serve until the term of that director's class expires in
2002 or until such director's successor has been elected and qualified.

The names of the nominees for Class II directors and the names of each
of the other directors of the Company whose term of office continues after the
Annual Meeting, their ages as of April 12, 1999, and certain other related
information are set forth below. There are no family relationships between any
director, executive officer or the nominees.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
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<S> <C> <C>
NOMINEES FOR CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 1999
William V. Botts ................................................. 63 Director
Barbara M. Karmel, Ph.D........................................... 66 Director

CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2000
Amihai Ben-David ................................................. 49 Director
Larry J. Gerhard.................................................. 58 Chairman of the Board and Chief
Executive Officer

CLASS I DIRECTOR WHOSE TERM EXPIRES IN 2001
Steven P. Erwin................................................... 55 Director

</TABLE>

Steven P. Erwin has served as a director since May 1997. Mr. Erwin has
served as Executive Vice President and Chief Financial Officer of Foundation
Health Systems, Inc., a managed health care company, since March 1998. Mr. Erwin
was Executive Vice President and Chief Financial Officer of U.S. Bancorp,
Portland, Oregon from July 1994 to July 1997. Prior to that time, Mr. Erwin
served as Treasurer of BayBanks, Inc., Boston, Massachusetts from November 1987
until July 1994.

William V. Botts, who has served as a director of the Company since May
1997, will stand for re-election at the Annual Meeting. Mr. Botts has been the
Interim Chief Executive Officer of California Lifestyles, Inc., a footwear
company, since August 1997. Mr. Botts served as Chief Executive Officer of Hard
Candy, Inc., a cosmetics company, from March 1996 to March 1997. From June 1993
to March 1996, Mr. Botts was the owner and President of WV Associates, a
consulting firm for mergers, acquisitions, business turnarounds and strategic
planning. From October 1992 to June 1993, Mr. Botts served as President and
Chief Executive Officer of Aurora Electronics, Inc., a semiconductor company.
From March 1992 to September 1992, Mr. Botts served as President and Chief
Executive Officer of Micro-C Corporation, a semiconductor company that was
acquired by Aurora Electronics, Inc. Mr. Botts served as President and Chief
Executive Officer of Vertex Design Systems, Inc., a computer software company,
from September 1988 to March 1992 and as Chairman of the Board, Chief Executive
Officer and President of EI International, Inc., a computer systems,

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software and consulting company, from April 1978 to January 1988. Prior to that
time, Mr. Botts was a divisional Vice President of Rockwell International
Corporation.

Barbara M. Karmel, Ph.D., who has served as a director of the Company
since May 1997, will stand for re-election at the Annual Meeting. Dr. Karmel has
been President of The Reed Company, a management consulting firm, since 1982.
Prior to that time, she served as a professor of management in the business
schools at Oregon State University, University of Wisconsin-Madison, and the
Atkinson Graduate School of Management at Willamette University. She currently
is a member of the board of Oregon Enterprise Forum and Oregon Independent
Colleges Foundation. Dr. Karmel has previously served as a member of the Board
of Directors of U.S. Bancorp and United States National Bank of Oregon, and as
Commissioner of Portland Development Commission, Director and Vice
President-Small Business for the Portland Metropolitan Chamber of Commerce and a
member of the board of the Academy of Management.

Amihai Ben-David has served as a director of the Company since January
1994. He has been the founder, Chief Executive Officer and Chairman of DCL
Technologies Ltd., a public company located in Israel and traded on the Tel-Aviv
Stock Exchange, since May 1982. DCL Technologies Ltd. specializes in the
development of high technology companies in the areas of communications,
computer telephony, expert systems and electronic design automation. From
January 1991 until the acquisition of SEE Technologies Software Environment for
Engineers Ltd. ("SEE Technologies") by the Company in February 1994, Mr.
Ben-David was Chairman of the Board of SEE Technologies.

Larry J. Gerhard has served as Chief Executive Officer and a director
of the Company since January 1993 and was elected Chairman of the Board in May
1996. Mr. Gerhard was President of the Company from January 1993 to February
1999. The Company currently expects that Mr. Gerhard will retire on or before
December 31, 1999, possibly as soon as this summer. However, the exact timing of
his retirement will depend on developments at the Company as well as personal
considerations. From November 1991 to November 1992, Mr. Gerhard was the
President and Chief Executive Officer of Enterprise Communications and Computing
Inc., a communications products provider for the Unix-based virtual mainframe
market. Mr. Gerhard was the President and Chief Executive Officer of Ventura
Software, Inc., a desktop publishing company and a wholly-owned subsidiary of
Xerox Corporation from November 1989 to November 1991. Prior to that time, Mr.
Gerhard was employed for nine years with Decision Data, Inc., a supplier of
peripherals and applications software for IBM System 3X and AS400, including the
last three years as President and Chief Executive Officer.

BOARD MEETINGS AND COMMITTEES

The Board of Directors of the Company held a total of 20 meetings
during fiscal 1998. Each incumbent director attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings of the committees upon which he or she served. Certain
matters were approved by the Board of Directors and its committees by unanimous
written consent. The Board of Directors of the Company has two standing
committees: an Audit Committee and a Compensation Committee.

The Audit Committee, which currently consists of Mr. Erwin and Dr.
Karmel, is responsible for (i) recommending engagement of the Company's
independent accountants, (ii) approving the services performed by such
accountants, (iii) consulting with such accountants and reviewing with them the
results of their examinations, (iv) reviewing and approving any material
accounting policy changes affecting the Company's operating results, (v)
reviewing the Company's control procedures and personnel and (vi) reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. The Audit Committee held 2 meetings during fiscal 1998.

The Compensation Committee, which currently consists of Mr. Ben-David
and Mr. Botts, 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 option plans and (iii) making recommendations to the Board
of Directors regarding such matters. The Compensation Committee held 7 meetings
during fiscal 1998.

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DIRECTOR COMPENSATION

All non-employee directors receive $20,000 per year and $1,000 per
meeting (excluding committee meetings and telephonic board meetings) as
compensation for their services as members of the Board of Directors. During
1998, directors received a per meeting fee for attending the five non-telephonic
board meetings. Members are also reimbursed for all travel and related expenses
incurred in connection with attending Board and committee meetings.

In addition, non-employee directors are eligible to receive option
grants under the Company's 1996 Director Option Plan (the "Director Plan"),
under which 150,000 shares of Common Stock have been reserved for issuance. The
Director Plan provides for an automatic grant of an option to purchase 10,000
shares of Common Stock on the date on which a person first becomes a
non-employee director. Thereafter, he or she will automatically be granted an
additional option to purchase 10,000 shares on the date of the annual meeting of
each subsequent year, provided he or she is then a non-employee director and
provided further, that on such date he or she has served on the Board for at
least six months. The first option granted to a director pursuant to the
Director Plan vests twelve months after the date of grant. All subsequent
options vest and become exercisable on the earlier of (i) 12 months after the
date of the grant or (ii) one business day prior to the date of the Company's
first annual meeting after the grant date. Vesting of the options is subject to
the optionee continuing to serve as a director on the vesting date. Mr.
Ben-David, Mr. Botts, Mr. Erwin and Dr. Karmel were each granted 10,000 options
in May 1998 at an exercise price of $14.50 per share. Mr. Ben-David, Mr. Botts,
Mr. Erwin and Dr. Karmel (subject to the re-election of Mr. Botts and Dr.
Karmel) are eligible to receive future option grants pursuant to the Director
Plan.

REQUIRED VOTE

The two nominees for Class II directors receiving the highest number of
affirmative votes of the shares entitled to be voted shall be elected to the
Board of Directors. Votes withheld are counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but they
otherwise have no legal effect under Delaware law.

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RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ELECTION OF MR. BOTTS AND DR. KARMEL.
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PROPOSAL NO. 2
AMENDMENT TO 1994 STOCK PLAN

GENERAL

The Company's 1994 Stock Plan was adopted by the Board of Directors and
approved by the Company's stockholders in January 1994 and provides for the
granting to employees (including officers and employee directors) of the Company
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and for the granting to employees
and consultants of the Company of nonstatutory stock options. A total of
2,822,000 shares of Common Stock has been reserved for issuance under the 1994
Stock Plan and, as of April 12, 1999, a total of 122,572 shares remained
available for future grant.

PROPOSAL

In April 1999, the Board of Directors adopted, subject to stockholder
approval, an amendment to the 1994 Stock Plan to increase the number of shares
reserved for issuance by an additional 625,000 shares of Common Stock, for an
aggregate of 3,447,000 shares reserved for issuance thereunder. This amendment
will enable the Company to continue to grant options to eligible employees and
consultants under the terms and conditions of the 1994 Stock Plan.

The Board of Directors believes that the approval of the amendment to
the 1994 Stock Plan is in the best interests of the Company and its
stockholders, as the availability of an adequate number of shares for issuance
under the 1994 Stock Plan and the ability to grant stock options are important
factors in attracting, motivating and retaining qualified personnel essential to
the success of the Company, as is the ability of the Company to deduct
compensation.

REQUIRED VOTE

The affirmative vote by the holders of a majority of the Common Stock
present in person or represented by proxy and entitled to vote on the subject
matter is required to approve the amendment to the 1994 Stock Plan.

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RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT OF THE 1994 STOCK PLAN.
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SUMMARY OF THE 1994 STOCK PLAN

The following summary of the 1994 Stock Plan is qualified in its
entirety by the specific language of the 1994 Stock Plan, a copy of which is
available to any stockholder upon written request to the Secretary of the
Company.

PURPOSE. The purposes of the 1994 Stock Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to employees and consultants of the Company and to
promote the success of the Company's business.

ADMINISTRATION. The 1994 Stock Plan may be administered by the Board of
Directors or a committee of the Board of Directors (the "Administrator"), which
committee is required to be constituted to comply with Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and applicable
laws. Subject to the other provisions of the 1994 Stock Plan, the Administrator
has the power to determine the employees and consultants to whom options may be
granted, the number of shares subject to the option and the exercisability
thereof. The Administrator also has the power to reprice options if the exercise
price of outstanding options exceeds the fair market value of the Company's
Common Stock.

ELIGIBILITY; LIMITATIONS. The 1994 Stock Plan provides that
nonstatutory stock options may be granted to employees and consultants.
Incentive stock options may be granted only to employees. An optionee who has
been granted an option may, if he or she is otherwise eligible, be granted
additional options.

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Section 162(m) of the Code limits the deductibility of compensation
paid to certain executive officers of the Company. To maximize the Company's
deduction attributable to options granted to such persons, the 1994 Stock Plan
provides that no employee may be granted, in any fiscal year, options to
purchase more than 500,000 shares of Common Stock.

TERMS AND CONDITIONS OF OPTIONS. Each option granted under the 1994
Stock Plan is evidenced by a written stock option agreement between the optionee
and the Company and is subject to the following terms and conditions:

(a) EXERCISE PRICE. The Administrator determines the exercise
price of options to purchase shares of Common Stock at the time the options are
granted. However, the exercise price of an incentive stock option must not be
less than 100% (110% if issued to any person possessing more than 10% of the
voting power of all classes of stock of the Company (a "10% Stockholder")) of
the fair market value of the Common Stock on the date the option is granted. For
so long as the Company's Common Stock is traded on the Nasdaq National Market,
the fair market value of a share of Common Stock will be the closing sales price
for such stock (or the closing bid if no sales were reported) on the last
trading day prior to the date of grant as quoted on such system.

(b) EXERCISE OF THE OPTION. Each stock option agreement will
specify the term of the option and the date when the option is to become
exercisable. The terms of such vesting are to be determined by the
Administrator. Options granted under the 1994 Stock Plan to date generally
become exercisable over four years at a rate of one-fourth of the shares subject
to the options at the end of one year from the date of grant and 1/48th at the
end of each month thereafter and have a ten-year term. The maximum term of an
option granted to a 10% Stockholder is five years. An option is exercised by
giving written notice of exercise to the Company, specifying the number of full
shares of Common Stock to be purchased and by tendering full payment of the
purchase price to the Company.

(c) FORM OF CONSIDERATION. The consideration to be paid for
the shares of Common Stock issued upon exercise of an option shall be determined
by the Administrator and is set forth in the stock option agreement. Such form
of consideration may vary for each option, and may consist entirely of cash,
check, promissory note, other shares of the Company's Common Stock, any
combination thereof, or any other legally permissible form of consideration as
may be provided in the stock option agreement.

(d) TERMINATION OF EMPLOYMENT. In the event an optionee's
continuous status as an employee or consultant terminates for any reason (other
than upon the optionee's death or disability), the optionee may exercise his or
her option within such period of time as is specified in such optionee's stock
option agreement but only to the extent that the optionee was entitled to
exercise the option at the date of such termination (but in no event later than
the expiration of the term of such option as set forth in the stock option
agreement). Options granted under the 1994 Stock Plan to date have generally
provided that optionees may exercise their options within sixty days from the
date of termination of employment (other than for death or disability).

(e) DISABILITY. In the event an optionee's continuous status
as an employee or consultant terminates as a result of permanent and total
disability (as defined in Section 22(e)(3) of the Code), the optionee may
exercise his or her option, but only within twelve months from the date of such
termination, and only to the extent that the optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
the term of such option as set forth in the stock option agreement).

(f) DEATH. In the event of an optionee's death, the optionee's
estate or a person who acquired the right to exercise the deceased optionee's
option by bequest or inheritance may exercise the option, but only within twelve
months following the date of death, and only to the extent that the optionee was
entitled to exercise it at the date of death (but in no event later than the
expiration of the term of such option as set forth in the stock option
agreement).

(g) TERM OF OPTIONS. The term of each option is the term
stated in the stock option agreement; provided, however, that the term may not
exceed ten years from the date of grant. In the case of an incentive stock
option granted to a 10% Stockholder, the term may not exceed five years from the
date of grant. No option may be exercised by any person after the expiration of
its term.

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(h) NONTRANSFERABILITY OF OPTIONs. An option is
nontransferable by the optionee, other than by will or the laws of descent and
distribution, and is exercisable during the optionee's lifetime only by the
optionee. In the event of the optionee's death, options may be exercised by a
person who acquires the right to exercise the option by bequest or inheritance.

(i) VALUE LIMITATION. If the aggregate fair market value (as
determined on date of grant) of all shares of Common Stock subject to an
optionee's incentive stock option which are exercisable for the first time
during any calendar year exceeds $100,000, the excess options shall be treated
as nonstatutory options.

(j) OTHER PROVISIONS. The stock option agreement may contain
such other terms, provisions and conditions not inconsistent with the 1994 Stock
Plan as may be determined by the Administrator.

ADJUSTMENT UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS. In
the event of changes in the outstanding Common Stock of the Company by reason of
any stock splits, reverse stock splits, stock dividends, combinations,
reclassifications or other similar change in the capital structure of the
Company, an appropriate adjustment shall be made by the Administrator in the
following: (i) the number of shares of Common Stock subject to the 1994 Stock
Plan, (ii) the number and class of shares of stock subject to any option
outstanding under the 1994 Stock Plan, and (iii) the exercise price of any such
outstanding option. The determination of the Administrator as to which
adjustments made shall be conclusive. In the event of a proposed dissolution or
liquidation of the Company, the Board will notify the holders of options as soon
as practicable prior to such action, and all outstanding options will terminate
immediately prior to the consummation of such proposed action. Notwithstanding
the above, in the event of a merger of the Company with or into another
corporation or the sale of substantially all of the assets of the Company, the
1994 Stock Plan requires that each outstanding option be assumed or an
equivalent option be substituted by the successor corporation; provided,
however, if such successor or purchaser refuses to assume or substitute the then
outstanding options, the 1994 Stock Plan provides for the full acceleration of
the exercisability of all outstanding options for a period of ten days from the
date of notice of acceleration to the holder and all options will terminate upon
the expiration of such period.

AMENDMENT AND TERMINATION OF THE 1994 STOCK PLAN. The Board may at any
time amend, alter, suspend or terminate the 1994 Stock Plan. The Company shall
obtain stockholder approval of any amendment to the 1994 Stock Plan in such a
manner and to such a degree as is necessary and desirable to comply with Rule
16b-3 under the Exchange Act and Sections 162(m) and 422 of the Code (or any
other applicable law or regulation, including the requirements of any exchange
or quotation system on which the Common Stock is traded). Any amendment or
termination of the 1994 Stock Plan shall not affect options already granted and
such options shall remain in full force and effect as if the 1994 Stock Plan had
not been amended or terminated, unless mutually agreed otherwise between the
optionee and the Company, which agreement must be in writing and signed by the
optionee and the Company. In any event, the 1994 Stock Plan shall terminate in
May 2004. Any options outstanding under the 1994 Stock Plan at the time of its
termination shall remain outstanding until they expire by their terms.

FEDERAL INCOME TAX CONSEQUENCES

INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. Long-term capital gains are grouped and netted by holding
periods. Net capital gains on assets held for more than twelve months are
currently taxed at a maximum federal rate of 20%. Capital losses are allowed in
full against capital gains and up to $3,000 against other income. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director, or 10% Stockholder of the Company.
The Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee.

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<PAGE>

NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period. Net capital
gains on assets held for more than twelve months are currently taxed at a
maximum federal rate of 20%. Capital losses are allowed in full against capital
gains and up to $3,000 against other income.

The purchaser may accelerate to the date of purchase his or her
recognition of ordinary income, if any, and the beginning of any capital gain
holding period by timely filing an election pursuant to Section 83(b) of the
Code. In such event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the stock on
the date of purchase, and the capital gain holding period commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company. Different rules may apply if the
purchaser is also an officer, director, or 10% Stockholder of the Company.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE
OF OPTIONS UNDER THE 1994 STOCK PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND
DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR
THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT MAY RESIDE.

-9-
<PAGE>

PARTICIPATION IN THE 1994 STOCK PLAN

The grant of options under the 1994 Stock Plan to employees, including
the Named Executive Officers (as defined under "Executive Officer
Compensation"), is subject to the discretion of the Administrator. As of the
date of this proxy statement, there has been no determination by the
Administrator with respect to future awards under the 1994 Stock Plan.
Accordingly, future awards are not determinable. Non-employee directors are not
eligible to participate in the 1994 Stock Plan. The following table sets forth
information with respect to the grant of options pursuant to the 1994 Stock Plan
to the Named Executive Officers, to all current executive officers as a group
and to all other employees as a group during the last fiscal year.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING EXERCISE PRICE
NAME OF INDIVIDUAL AND POSITION OPTIONS GRANTED ($ PER SHARE)
- ----------------------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
Larry J. Gerhard ................................................................ 75,000 $14.50
Chief Executive Officer

C. Albert Koob................................................................... 10,000 14.06
Vice President-Finance, Chief Financial
Officer and Secretary

Moshe Guy ....................................................................... 535 15.88
Vice President, General Manager and 1,220 6.75
Chief Operating Officer of the Design Solutions Division

Joseph G. Masarich............................................................... 10,000 14.06
Senior Vice President-Worldwide Marketing and Sales

Eric Benhayoun................................................................... -- --
Vice President, General Manager-European Operations

All current executive officers as a group (7 Persons)............................ 86,755 14.35 (1)

All other employees as a group................................................... 152,221 10.48 (1)

</TABLE>

- -------------
(1) Represents a weighted average per share exercise price..

ADDITIONAL INFORMATION RELATED TO PROPOSAL NO. 2

1997 NONSTATUTORY STOCK OPTION PLAN

In December 1997, the Board of Directors adopted the 1997 Nonstatutory
Stock Option Plan. A total of 1,050,000 shares of Common Stock has been reserved
for issuance under the 1997 Nonstatutory Stock Option Plan, and as of April 12,
1999, a total of 27,828 shares remained eligible for future grant. The 1997
Nonstatutory Stock Option Plan provides for grants to non-executive officer
employees and consultants of the Company.

-10-
<PAGE>

PROPOSAL NO. 3
AMENDMENT TO 1996 EMPLOYEE STOCK PURCHASE PLAN

GENERAL

The 1996 Employee Stock Purchase Plan was adopted by the Board of
Directors and approved by the Company's stockholders in October 1996. The 1996
Employee Stock Purchase Plan, which is intended to qualify under Section 423 of
the Code, permits eligible employees to purchase the Company's Common Stock
through payroll deductions at a price equal to 85% of the lower of the fair
market value of the Common Stock on the first day of each 24-month offering
period or the last day of the applicable six-month purchase period. The Company
has reserved a total of 385,000 shares of Common Stock for issuance under the
1996 Employee Stock Purchase Plan, and as of April 12, 1999, 246,047 shares
remained available for future issuances.

PROPOSAL

In March 1999, the Board of Directors adopted, subject to stockholder
approval, an amendment to the 1996 Employee Stock Purchase Plan to increase the
number of shares reserved for issuance by an additional 150,000 shares of Common
Stock, for an aggregate of 535,000 shares reserved for issuance thereunder. This
amendment will enable the Company to continue to grant purchase rights to
eligible employees under the terms and conditions of the 1996 Employee Stock
Purchase Plan.

The Board of Directors believes that the approval of the amendment to
the 1996 Employee Stock Purchase Plan is in the best interests of the Company
and its stockholders, as the availability of an adequate number of shares for
issuance under the 1996 Employee Stock Purchase Plan and the ability of
employees to participate in the 1996 Employee Stock Purchase Plan are important
factors in attracting, motivating and retaining qualified personnel essential to
the success of the Company.

REQUIRED VOTE

- --------------------------------------------------------------------------------
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN.
- --------------------------------------------------------------------------------

SUMMARY OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN

The following summary of the 1996 Employee Stock Purchase Plan is
qualified in its entirety by the specific language of the 1996 Employee Stock
Purchase Plan, a copy of which is available to any stockholder upon written
request to the Secretary of the Company.

PURPOSE. The purposes of the 1996 Employee Stock Purchase Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees of the Company and
to promote the success of the Company's business.

ADMINISTRATION. The 1996 Employee Stock Purchase Plan may be
administered by the Board of Directors or a committee of the Board of Directors
(the "Administrator"), which committee is required to be constituted to comply
with Section 16(b) of the Exchange Act, and applicable laws.

-11-
<PAGE>

ELIGIBILITY; LIMITATIONS. The 1996 Employee Stock Purchase Plan
provides that employees are eligible to participate if they are customarily
employed by the Company or any designated subsidiary for at least 20 hours per
week and for more than five months in any calendar year.

TERMS AND CONDITIONS OF SUBSCRIPTION. Participation under the 1996
Employee Stock Purchase Plan is evidenced by a written subscription agreement
between the employee and the Company and is subject to the following terms and
conditions of the 1996 Employee Stock Purchase Plan:

(a) PURCHASE PRICE AND METHOD. Employees who participate in
the 1996 Employee Stock Purchase Plan purchase the Company's Common Stock
through payroll deductions of up to 10% of their base salary, up to a maximum
number of shares per purchase period determined by dividing $12,500 by the fair
market value of a share of Common Stock on the first day of the offering period
of $25,000 of Common Stock (determined as of the first day of an offering
period) for all purchase periods ending within any calendar year. The price of
Common Stock purchased under the 1996 Employee Stock Purchase Plan is 85% of the
lower of the fair market value of the Common Stock on the first day of each
24-month offering period and the last day of the applicable six-month purchase
period. To the extent the fair market value of the Common Stock on any exercise
date in an offering period is lower than the fair market value of the Common
Stock on the first day of the offering period, then all participants in such
offering period will be automatically withdrawn from such offering period
immediately after the exercise of their options on such exercise date and
automatically re-enrolled in the immediately following offering period as of the
first day thereof.

(b) OFFERING PERIODS. Offering periods last 24 months and
commence on the first trading day on or after May 1 and November 1 of each year
and terminate on the last trading day in the periods ending 24 months later.
Each 24-month offering period consists of four purchase periods of approximately
six months duration. The first offering period, however, commenced on October
18, 1996, the date on which the Company's registration statement on Form S-1 was
declared effective, and ended on April 30, 1997. The current offering period
began on November 2, 1998, and will end on October 31, 2000;

(c) WITHDRAWAL; TERMINATION OF EMPLOYMENT. If an employee
decides to terminate his or her participation in the 1996 Employee Stock
Purchase Plan, he or she must withdraw all the payroll deductions credited to
his or her purchase account, and such funds will be returned to him or her. Upon
the termination of employment for any reason, all payroll deductions will
likewise be returned to the (former) employee.

(d) DEATH. A participating employee may designate who is to
receive any shares and cash, if any, from the participant's account under the
1996 Employee Stock Purchase Plan in the event of such participant's death
subsequent to exercising a purchase option but prior to delivery of the share of
Common Stock.

(e) NONTRANSFERABILITY. Rights granted under the 1996 Employee
Stock Purchase Plan are not transferable by a participant other than by will,
the laws of descent and distribution, or as otherwise provided under the plan,
and the Company may treat any prohibited attempt to transfer as an election to
withdraw.

(f) OTHER PROVISIONS. The subscription agreement may contain
such other terms, provisions and conditions not inconsistent with the 1996
Employee Stock Purchase Plan as may be determined by the Administrator.

-12-
<PAGE>

shall be shortened by setting a new exercise date and any offering period then
in progress shall end on the new exercise date.

AMENDMENT AND TERMINATION OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN. The
Board may at any time amend, alter, suspend or terminate the 1996 Employee Stock
Purchase Plan. The Company shall obtain stockholder approval of any amendment to
the 1996 Employee Stock Purchase Plan in such a manner and to such a degree as
is necessary and desirable to comply with Rule 16b-3 under the Exchange Act and
423 of the Code (or any other applicable law or regulation, including the
requirements of any exchange or quotation system on which the Common Stock is
traded). Any amendment or termination of the 1996 Employee Stock Purchase Plan
shall not affect options already granted and such options shall remain in full
force and effect as if the 1996 Employee Stock Purchase Plan had not been
amended or terminated, unless mutually agreed otherwise between the optionee and
the Company, which agreement must be in writing and signed by the participant
and the Company. In any event, the 1996 Employee Stock Purchase Plan shall
terminate in October 2006.

FEDERAL INCOME TAX CONSEQUENCES

No income will be taxable to a participant until the shares purchased
under the 1996 Employee Stock Purchase Plan are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the holding period. If
the shares are sold or otherwise disposed of more than two (2) years from the
first day of the offering period or more than one (1) year from the date of
transfer of the stock to the participant (the "Statutory Holding Periods"), then
the participant will recognize ordinary income measured as the lesser of (i) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (ii) an amount equal to 15% of the fair
market value of the shares as of the first day of the offering period. Any
additional gain will be treated as long-term capital gain. Net capital gains on
assets held for more than twelve months are currently taxed at a maximum federal
rate of 20%. Capital losses are allowed in full against capital gains and up to
$3,000 against other income. If the shares are sold or otherwise disposed of
before the expiration of the Statutory Holding Periods, the participant will
recognize ordinary income generally measured as the excess of the fair market
value of the shares on the date the shares are purchased over the purchase
price. Any additional gain or loss on such sale or disposition will be long-term
or short-term capital gain or loss, depending on the holding periods. The
Company is not entitled to a deduction for amounts taxed as ordinary income or
capital gain to a participant except to the extent of ordinary income is
recognized by participants upon a sale or disposition of shares prior to the
expiration of the Statutory Holding Periods described above.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE SHARES
PURCHASED UNDER THE PURCHASE PLAN. REFERENCE SHOULD BE MADE TO THE APPLICABLE
PROVISIONS OF THE CODE. IN ADDITION, THE SUMMARY DOES NOT PURPORT TO BE
COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE'S OR
CONSULTANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY,
STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT MAY RESIDE.

-13-
<PAGE>

PARTICIPATION IN THE 1996 EMPLOYEE STOCK PURCHASE PLAN

The following table sets forth information with respect to
participation by the Named Executive Officers, all current executive officers as
a group and all other employees as a group during the last fiscal year.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PURCHASE PRICE
NAME OF INDIVIDUAL AND POSITION PURCHASED ($ PER SHARE)
- ------------------------------------------------------------------------------------ -------------- ------------------
<S> <C> <C>
Larry J. Gerhard ................................................................ 1,681 $5.95
Chief Executive Officer 1,586 5.95

C. Albert Koob................................................................... 1,331 5.95
Vice President-Finance, Chief Financial Officer and Secretary 1,344 5.95

Moshe Guy ....................................................................... --(1) N/A
Vice President, General Manager and
Chief Operating Officer of the Design Solutions Division

Joseph G. Masarich............................................................... 1,709 7.65
Senior Vice President-Worldwide Marketing and Sales

Eric Benhayoun................................................................... 1,192 5.95
Vice President, General Manager-European Operations 1,317 5.95

All current executive officers as a group (7 Persons)............................ 12,660 6.36(2)
All other employees as a group................................................... 67,592 7.72(2)

</TABLE>

- -------------
(1) The Company's employees in Israel do not participate in the 1996
Employee Stock Purchase Plan.
(2) Represents a weighted average per share purchase price.

-14-
<PAGE>

PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors has selected PricewaterhouseCoopers LLP,
independent accountants, to audit the financial statements of the Company for
the fiscal year ending December 31, 1999. PricewaterhouseCoopers LLP and its
predecessor, Coopers and Lybrand L.L.P., have been the Company's auditors since
1996. Representatives of PricewaterhouseCoopers LLP are expected to attend the
Annual Meeting to make a statement and respond to appropriate questions.

REQUIRED VOTE

The Board of Directors has conditioned its appointment of the Company's
independent accountants upon the receipt of the affirmative vote by the holders
of a majority of the Common Stock present in person or represented by proxy and
voting at the Annual Meeting. In the event that the stockholders do not approve
the selection of PricewaterhouseCoopers LLP, the appointment of the independent
accountants will be reconsidered by the Board of Directors.

- --------------------------------------------------------------------------------
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS.
- --------------------------------------------------------------------------------

-15-
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company, as of April 12, 1999, by
(a) each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock, (b) each director and nominee for
director, (c) each of the executive officers named in the Summary Compensation
Table, and (d) all directors and executive officers of the Company as a group.
Unless otherwise noted in the footnotes to the table, the Company believes that
the persons named in the table have sole voting and investing power with respect
to all shares of Common Stock indicated as being beneficially owned by them.

<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED(1) OF TOTAL(1)
- --------------------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
GeoCapital, LLC (2).............................................. 1,758,800 11.3%
767 Fifth Avenue, 45th Floor
New York, NY 10153

T. Rowe Price Associates, Inc.(3)................................ 1,407,100 9.0%
100 East Pratt Street
Baltimore, MD 21202

Massachusetts Financial Services Company (4)..................... 1,098,316 7.0%
500 Boylston Street, 15th Floor
Boston, MA 02116

Chartwell Investment Partners (5)................................ 1,035,117 6.6%
1235 Westlakes Drive, Suite 330
Wayne, PA 19087

DCL Technologies Ltd.(6)......................................... 977,730 6.3%
P.O. Box 544
46105 Herzlia Israel

Paul J. Schupf Associates (7).................................... 799,600 5.1%
27 Payne St.
Hamilton, NY 13346

Larry J. Gerhard(8).............................................. 152,533 1.0%
C. Albert Koob(9)................................................ 55,018 *
Moshe Guy(10).................................................... 23,728 *
Joseph G. Masarich .............................................. 0 *
Eric Benhayoun (11).............................................. 27,602 *
Amihai Ben-David (12)............................................ 987,730 6.3%
William Botts (13)............................................... 22,500 *
Steven P. Erwin (13)............................................. 25,000 *
Barbara M. Karmel, Ph.D. (13).................................... 21,000 *
All directors and executive officers as a group (11 persons) (14) 1,826,275 11.4%

</TABLE>

- ----------
* Represents less than 1% of the total.
(1) Based on 15,611,775 shares of Common Stock outstanding as of April 12,
1999. A person is deemed to be the beneficial owner of securities that
can be acquired by such person within 60 days upon the exercise of
options. Calculations of percentage of beneficial ownership assume the
exercise by only the respective named stockholder of all options for
the purchase of Common Stock held by such stockholder which are
exercisable within 60 days.

-16-
<PAGE>

(2) As indicated in the Schedule 13G filed by GeoCapital, LLC pursuant to
the Exchange Act on February 10, 1999.
(3) As indicated in the Schedule 13G filed by T. Rowe Price Associates,
Inc. pursuant to the Exchange Act on February 11, 1999.
(4) As indicated in the Schedule 13G filed by Massachusetts Financial
Services Company pursuant to the Exchange Act on February 11, 1999.
(5) As indicated in the Schedule 13G filed by Chartwell Investment Partners
pursuant to the Exchange Act on February 16, 1999.
(6) Includes 947,730 shares held by DCL Holding & Investments in Technology
(1993) Ltd., a wholly-owned subsidiary of DCL Technologies Ltd. DCL
Technologies Ltd. is an Israeli public company, the shares of which are
traded on the Tel-Aviv stock exchange. The Company believes that the
following stockholders own at least 5% of the outstanding shares of DCL
Technologies Ltd.: Comverse Technologies Inc., ISCAL Holdings Ltd., Uri
Melamed, Bank Hapoalim, Danbar Ltd. and Amihai Ben-David.
(7) As indicated in the Schedule 13G filed by Paul J. Schupf Associates
pursuant to the Exchange Act on February 12, 1999.
(8) Includes 147,166 shares issuable upon exercise of options. Also
includes 5,367 shares held by L&K Properties Limited Partnership, of
which Mr. Gerhard is the sole general partner and a limited partner.
(9) Includes 55,018 shares issuable upon exercise of options.
(10) Includes 23,728 shares issuable upon exercise of options.
(11) Includes 25,093 shares issuable upon exercise of options.
(12) Includes 10,000 shares issuable upon exercise of options. Includes
947,730 shares held by DCL Holding & Investments in Technology (1993)
Ltd. and 30,000 shares held by DCL Technologies Ltd. Mr. Ben-David is
the Chief Executive Officer and Chairman of DCL Technologies Ltd. and
disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest therein.
(13) Includes 20,000 shares issuable upon exercise of options.
(14) Includes 347,770 shares issuable upon exercise of options.

-17-
<PAGE>

EXECUTIVE OFFICER COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth the compensation paid to the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company determined as of the end of the last fiscal
year (hereafter referred to as the "Named Executive Officers") for services
rendered to the Company in all capacities during the last three fiscal years.

<TABLE>
<CAPTION>
LONG-TERM
-------------------
COMPENSATION
AWARDS
NO. OF
-------------------
ANNUAL COMPENSATION
----------------------------------------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL SALARY COMPENSATION UNDERLYING ALL OTHER
POSITION YEAR ($)(1) BONUS ($) (2) ($) OPTIONS COMPENSATION ($)
- -------------------------------- ---- ---------- ---------------- ---------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Larry J. Gerhard................ 1998 $400,000 $ -- $12,000 (3) 75,000 $4,333 (4)
Chief Executive Officer 1997 341,667 160,000 5,000 (3) 75,000 3,575 (5)
1996 260,000 60,000 -- 75,000 105,088 (6)

C. Albert Koob.................. 1998 160,000 30,000 7,214 (3) 10,000 2,425 (7)
Vice President Finance, 1997 143,333 64,000 3,750 (3) 248,000 2,350 (7)
Chief Financial Officer and 1996 127,500 20,000 -- 15,000 7,067 (8)
Secretary

Moshe Guy (9)................... 1998 170,000 30,000 12,804 (3) 1,755 --
Vice President, General 1997 113,392 69,810 (10) 10,515 (3) 34,152 --
Manager and Chief Operating 1996 N/A N/A N/A N/A N/A
Officer of the Design
Solutions Division

Joseph G. Masarich (11)......... 1998 160,000 190,644 (12) 9,000 (3) 10,000 12,500 (13)
Senior Vice President 1997 N/A N/A N/A N/A N/A
Worldwide Marketing and Sales 1996 N/A N/A N/A N/A N/A

Eric Benhayoun.................. 1998 154,890 57,109 (14) -- -- --
Vice President, General 1997 120,252 26,945 (15) -- 32,500 --
Manager-European Operations 1996 125,000 27,549 (16) -- -- --

</TABLE>

- ------------
(1) Amounts shown include cash and noncash compensation earned and received
by executive officers as well as amounts earned but deferred at the
election of those officers.
(2) Consists of year-end bonuses paid in February of the following year.
(3) Consists of car allowance.
(4) Consists of the Company's matching contribution to Mr. Gerhard's 401(k)
plan in the amount of $2,500 and medical insurance premiums in the
amount of $1,833.

-18-
<PAGE>

(5) Consists of the Company's matching contribution to Mr. Gerhard's 401(k)
plan in the amount of $2,375 and medical insurance premiums in the
amount of $1,200.
(6) Consists of $103,888 paid to Mr. Gerhard for accrued vacation and
$1,200 paid by the Company for medical insurance premiums for Mr.
Gerhard. In 1996, the Company changed its vacation policy which
triggered a one-time pay out of balances previously accrued.
(7) Consists of the Company's matching contribution to Mr. Koob's 401(k)
plan.
(8) Consists of payment for accrued vacation. In 1996, the Company changed
its vacation policy which triggered a one-time payout of balances
previously accrued.
(9) Mr. Guy became an executive officer of the Company in May 1997.
(10) Consists of $64,000 bonus and $5,810 of commissions.
(11) Mr. Masarich became an executive officer of the Company in January
1998. Mr. Masarich terminated his employment with the Company in
January 1999.
(12) Consists of $80,000 relocation bonus and $110,644 of commissions,
$28,791 of which was paid in 1999.
(13) Consists of the Company's matching contribution to Mr. Masarich's
401(k) plan in the amount of $2,500 and the payment of $10,000 for
closing costs incurred in connection with Mr. Masarich's purchase of a
residence.
(14) Consists of commissions, $21,194 of which was paid in 1999.
(15) Consists of commissions, $12,000 of which was paid in 1998.
(16) Consists of commissions, $11,572 of which was paid in 1997.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information regarding stock options
granted during the fiscal year ended December 31, 1998 to each of the Named
Executive Officers.

OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
NO. OF % OF TOTAL STOCK PRICE APPRECIATION
SECURITIES OPTIONS EXERCISE FAIR MARKET FOR OPTION TERM (3)
UNDERLYING GRANTED TO PRICE VALUE ON ----------------------------
OPTIONS EMPLOYEES IN ($) / DATE OF EXPIRATION
GRANTED (1) 1998 (2) SHARE GRANT ($) DATE 5% ($) 10% ($)
----------- ------------ -------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry J. Gerhard..... 75,000 19.7% $14.50 $14.50 5/14/08 $683,923 $1,733,195
C. Albert Koob....... 10,000 2.6 14.06 14.06 2/17/08 88,438 224,120
Moshe Guy............ 535 0.1 15.88 15.88 4/16/08 5,341 15,536
1,220 0.3 6.75 6.75 10/19/08 5,179 13,124
Joseph G. Masarich... 10,000 2.6 14.06 14.06 2/17/08 88,438 224,120
Eric Benhayoun....... 0 -- -- -- -- -- --

</TABLE>

- ----------
(1) Options granted in 1998 are either incentive stock options or
nonstatutory stock options and generally vest over four years, with 25%
of the option shares becoming fully vested one year from the grant date
and 1/48th vesting in each successive month, with full vesting
occurring on the fourth anniversary date. Under the terms of the 1994
Stock Plan, the administrator retains discretion, subject to plan
limits, to modify the terms of outstanding options and to reprice
outstanding options. The options have a term of 10 years, subject to
earlier termination in certain situations related to termination of
employment.
(2) Based on a total of 380,599 options granted to all employees and
consultants during 1998.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules
of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price.

-19-
<PAGE>

OPTION EXERCISES AND HOLDINGS

The following table sets forth, as to the Named Executive Officers,
certain information concerning stock options exercised during 1998 and the
number of shares subject to exercisable and unexercisable stock options as of
December 31, 1998. The table also sets forth certain information with respect to
the value of stock options held by such individuals as of December 31, 1998.

AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1998 AND OPTION VALUES ON
DECEMBER 31, 1998

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISABLE OPTIONS OPTIONS AT FISCAL
AT FISCAL YEAR END YEAR END ($)(1)
SHARES VALUE ------------------------------- -------------------------------
ACQUIRED REALIZED
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ------------- ---------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Larry J. Gerhard............... 7,000 $49,000 122,860 95,140 $0 $0

C. Albert Koob................. 25,000 286,381 47,416 35,584 187,500 0

Moshe Guy...................... 761 6,076 18,729 31,417 1,525 0

Joseph G. Masarich............. 0 0 41,250 133,750 0 0

Eric Benhayoun................. 47,000 583,625 21,708 22,292 71,875 0

</TABLE>

- ----------
(1) These values have been calculated based on the closing price of the
Company's Common Stock on the Nasdaq National Market on December 31,
1998 of $8.00 per share minus the exercise price.

EMPLOYMENT AGREEMENTS

Effective February 25, 1999, the Company entered into an employment
agreement with Mr. Gerhard, pursuant to which he receives a monthly base salary
and all standard benefits accorded other executives of the Company as well as
certain additional medical benefits. In addition, Mr. Gerhard is entitled to an
allowance for car expenses of $1,000 per month. This agreement expires on
December 31, 1999 at which time Mr. Gerhard has agreed to resign from his
positions as Chief Executive Officer and a director of the Company, if he has
not already done so. Upon termination of his employment on or prior to December
31, 1999, Mr. Gerhard is entitled to payments of $33,333.33 per month plus
benefits for twenty-four months.

Effective February 14, 1999, the Company entered into an employment
agreement with Mr. Koob, pursuant to which he receives an annual base salary and
all standard benefits accorded other executives of the Company. In addition, Mr.
Koob is entitled to an allowance for car expenses of $750 per month. This
agreement expires on December 31, 1999. If Mr. Koob remains employed by the
Company until July 31, 1999 or his employment is terminated for any reason other
than for cause, he is entitled to payments of $13,333.33 per month plus benefits
for twelve months.

Effective July 1, 1997, the Company entered into a four-year employment
agreement with Mr. Guy, pursuant to which he receives an annual base salary, an
annual bonus of up to 25% of his base salary, and all standard benefits accorded
other executives of the Company. In the event Mr. Guy is terminated other than
for cause, he is entitled to severance equal to his then monthly base salary
plus benefits until he accepts other full time employment, but in no event for
longer than twelve months. This agreement will be automatically extended for
additional one-year terms unless terminated by either party with 90 days written
notice prior to the end of the then current term.

Effective January 22, 1999, the Company entered into a severance
agreement with Mr. Masarich in connection with the termination of his
employment. Pursuant to the agreement, in February 1999 Mr. Masarich began to
receive payments of $13,333.33 per month. These payments will continue until
January 2000.

Effective October 31, 1994, the Company entered into a four-year
employment agreement with Mr. Benhayoun pursuant to which he receives an annual
base salary, commissions based on sales revenue generated, and all standard

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<PAGE>

benefits accorded other executives of the Company. Under the employment
agreement, Mr. Benhayoun was granted options to purchase up to 58,500 shares of
Common Stock, of which 15,000 vested immediately, 15,000 vested on October 31,
1995, and the remainder vested ratably over the 24 months following October 31,
1995. In addition, the agreement provided that upon consummation of the
Company's initial public offering, the two-year vesting schedule with respect to
such options accelerated by one year. In addition, in the event Mr. Benhayoun is
terminated other than for cause, he is entitled to severance of 52,083 French
francs (approximately $8,403.19 as of April 12, 1999) per month plus benefits
until he accepts other full-time employment, but in no event longer than nine
months.

CERTAIN TRANSACTIONS

In December 1993, the Company's Israeli subsidiary, Summit Design (EDA)
Ltd. (formerly named SEE Technologies), entered into a four-year sublease
pursuant to which Summit Design (EDA) Ltd. subleased space for its corporate
offices from DCL Holding & Investment in Technology (1993), Ltd. ("DCL") on
terms and conditions similar to those under which DCL leased such office space
from the third-party owner of the office space. DCL is a 5% stockholder of the
Company and wholly-owned subsidiary of DCL Technologies Ltd. Amihai Ben-David, a
director of the Company, is the Chief Executive Officer and Chairman of DCL
Technologies Ltd. The lease ended on December 31, 1998 and the Company has moved
out of the office building. The Company believes that the terms of the foregoing
lease were no less favorable to the Company than those that could have been
obtained from unaffiliated third parties.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors and greater than 10% stockholders are
required by SEC rules to furnish the Company with copies of all forms they file.
Based solely on its review of the copies of such forms received by the Company
and written representations from certain reporting persons, the Company believes
that, during 1998, all Section 16(a) filing requirements applicable to its
executive officers, directors and 10% stockholders were satisfied.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee was formed in August 1994 and is currently
composed of Mr. Ben-David and Mr. Botts. No interlocking relationship exists
between any member of the Company's Compensation Committee and any member of any
other company's board of directors or compensation committee.

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<PAGE>

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee of the Board of Directors (the "Committee")
was established in August 1994 and is responsible for reviewing the compensation
and benefits for the Company's executive officers, as well as supervising and
making recommendations to the Board on compensation matters generally. The
Committee also administers the Company's stock plans.

COMPENSATION PHILOSOPHY AND POLICY

The policy of the Committee is to attract and retain executive officers
and employees through the payment of competitive base salaries and to encourage
and reward performance through bonuses and stock ownership. The objectives of
the Committee are to:

- attract, retain and motivate highly qualified executive
officers and employees who contribute to the long-term success
of the Company;

- align the compensation of executive officers with business
objectives and performance; and

- align incentives for executive officers with the interests of
stockholders in maximizing value.

The Company has taken the necessary steps to conform its compensation
practices to comply with the $1 million compensation deduction cap under Section
162(m) of the Internal Revenue Code, as amended.

ELEMENTS OF COMPENSATION

Compensation for executive officers includes both cash and equity
elements.

Cash compensation consists of (i) base salary which is determined on
the basis of the level of responsibility, expertise and experience of the
executive officer, taking into account competitive conditions in the industry
and (ii) cash bonuses up to an established percentage of base salary, subject to
meeting all or a portion of targeted objectives.

Ownership of the Company's Common Stock is a key element of executive
compensation. Executive officers and other employees of the Company are eligible
to participate in the 1994 Stock Plan (the "Option Plan") and the 1996 Employee
Stock Purchase Plan (the "Purchase Plan"). The Option Plan permits the Board of
Directors or the Committee to grant stock options to employees on such terms as
the Board or the Committee may determine. The Committee has the sole authority
to grant stock options to executive officers of the Company and is currently
administering stock option grants to all employees. In determining the size of a
stock option grant to a new executive officer or other employee, the Committee
takes into account equity participation by comparable employees within the
Company, external competitive circumstances and other relevant factors.
Additional options may be granted to current executive officers and employees to
reward exceptional performance or to provide additional unvested equity
incentives. These options typically vest over a four-year period and thus
require the employee's continuing service to the Company. The Purchase Plan
permits employees to acquire Common Stock of the Company through payroll
deductions and promotes broad-based equity participation throughout the Company.
The Committee believes that such stock plans align the interests of the
employees with the long-term interests of the stockholders.

The Company also maintains a 401(k) Plan to provide retirement benefits
through tax deferred salary deductions for all its employees. In 1998, the
Company contributed to the 401(k) Plan by partially matching employees'
contribution at a one-to-four ratio; provided, however, that the Company's
matching contribution for any employee could not exceed 1.5% of such employee's
salary.

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<PAGE>

1998 EXECUTIVE COMPENSATION

Executive compensation for fiscal 1998 included base salary and cash
bonuses based upon achievement of corporate goals and individual performance
goals. Executive officers, like other employees, were eligible for option grants
under the Option Plan and to participate in the Purchase Plan.

CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1998

Mr. Gerhard's 1998 compensation package was set forth in an employment
agreement that was approved by the Committee and took effect in August 1997. In
1998, Mr. Gerhard received a salary of $400,000. Mr. Gerhard was also granted an
option to purchase 75,000 shares of the Company's Common Stock. In February
1999, the Company entered into a new employment agreement with Mr. Gerhard.

COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS

Amihai Ben-David
William V. Botts

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<PAGE>

STOCK PERFORMANCE GRAPH

The following graph compares the cumulative total return to
stockholders on the Company's Common Stock with the cumulative total return of
the Nasdaq Stock Market--U.S. Index and the Dow Jones Software Index. The graph
assumes that $100 was invested on October 18, 1996 (the date of the Company's
initial public offering) in the Company's Common Stock, the Nasdaq Stock
Market--U.S. Index and the Dow Jones Software Index, including reinvestment of
dividends. No dividends have been declared or paid on the Company's Common
Stock. Note that historic stock price performance is not necessarily indicative
of future stock price performance.

CUMULATIVE TOTAL RETURN
--------------------------------------------
10/18/96 12/96 12/97 12/98
--------------------------------------------
DOLLARS
<S> <C> <C> <C> <C>
Summit Design, Inc............... 100 108 109 98
NASDAQ Stock Market (U.S.)....... 100 104 127 179
Dow Jones Software............... 100 101 114 205

</TABLE>

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<PAGE>

OTHER MATTERS

The Company knows of no other matters to be submitted at the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.

It is important that your shares be represented at the 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 card in
the enclosed envelope.

THE BOARD OF DIRECTORS

Beaverton, Oregon
April 30, 1999

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<PAGE>
APPENDIX A

SUMMIT DESIGN, INC.

1994 STOCK PLAN

1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.

2. DEFINITIONS. As used herein, the following definitions shall
apply:

(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

(b) "BOARD" means the Board of Directors of the Company.

(d) "COMMITTEE" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.

(e) "COMMON STOCK" means the Common Stock of the Company.

(f) "COMPANY" means Summit Design, Inc., a Delaware
corporation.

(g) "CONSULTANT" means any person who is engaged by the
Company or any Parent or Subsidiary to render consulting or advisory services
and is compensated for such services, and any director of the Company whether
compensated for such services or not.

(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means
that the employment or consulting relationship with the Company, any Parent or
Subsidiary is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave. For purposes of Incentive Stock Options, no
such leave may exceed 90 days, unless reemployment upon expiration of such leave
is guaranteed by statute or contract, including Company policies. If
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any

A-1
<PAGE>

Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option.

(i) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.

(j) "EMPLOYEE" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.

(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.

(l) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:

(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination as reported in THE WALL STREET JOURNAL or
such other source as the Administrator deems reliable;

(ii) If the Common Stock is quoted on the Nasdaq System
(but not on the National Market System thereof) or if the Market Value of the
Common Stock cannot be determined under (i) above but the Common Stock is
regularly quoted by a recognized securities dealer but selling prices are not
reported, its Fair Market Value shall be the mean between the high bid and low
asked prices for the Common Stock for the last market trading day prior to the
time of determination or;

(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.

(m) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

(n) "NONSTATUTORY STOCK OPTION" means an Option not intended
to qualify as an Incentive Stock Option.

(o) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

A-2
<PAGE>

(p) "OPTION" means a stock option granted pursuant to the
Plan.

(q) "OPTIONED STOCK" means the Common Stock subject to an
Option.

(r) "OPTIONEE" means an Employee or Consultant who receives
an Option.

(s) "PARENT" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(t) "PLAN" means this 1994 Stock Plan.

(u) "PRIOR TSSI ISO" means any incentive stock option granted
to an employee of Test Systems Strategies, Inc. ("TSSI") pursuant to the TSSI
1988 Incentive Stock Option Plan (the "TSSI Plan") and thereafter substituted
for by an Incentive Stock Option exercisable for Shares of the Company pursuant
to the terms of this Plan and of the Agreement and Plan of Reorganization dated
January 19, 1994 between Summit Design, Inc., TSSI, Summit Sub, Inc. and See
Technologies Software Environment for Engineers, Ltd.

(v) "SEE" means See Technologies Software Environment for
Engineers, Ltd.

(w) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.

(x) "SUBSIDIARY" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 12 of the Plan, the maximum aggregate number of shares which may be
optioned and sold under the Plan is 3,447,000 shares of Common Stock. The
shares may be authorized but unissued, or reacquired Common Stock.

If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.

4. ADMINISTRATION OF THE PLAN.

(a) PLAN PROCEDURE.

(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS. With respect to grants of Options to Employees who are also officers
or directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with

A-3
<PAGE>

Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a Committee designated by the Board to administer the
Plan, which Committee shall be constituted in such a manner as to permit the
Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended
to qualify thereunder as a discretionary plan.

(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.

(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND
OTHER EMPLOYEES. With respect to grants of Options to Employees or Consultants
who are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of incentive stock option plans, if
any, of applicable state corporate and securities laws, of the Code, and of any
applicable stock exchange (including Nasdaq) (the "Applicable Laws"). Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.

(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions
of the Plan and, in the case of a Committee, the specific duties delegated by
the Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any stock exchange upon
which the Common Stock is listed, the Administrator shall have the authority, in
its discretion:

(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(l) of the Plan;

(ii) to select the Consultants and Employees to whom
Options may from time to time be granted hereunder;

A-4
<PAGE>

(iii) to determine whether and to what extent Options or
any combination thereof are granted hereunder;

(iv) to determine the number of shares of Common Stock
to be covered by each such award granted hereunder;

(v) to approve forms of agreements for use under the
Plan, which forms may differ with respect to individual Optionees;

(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder,
including the terms of any right of first refusal of the Company to purchase
Shares granted pursuant to the Plan and the terms of any repurchase option of
the Company with respect to unvested Shares;

(vii) with respect to any Option, to determine whether
and under what circumstances an Option may be settled in cash under
subsection 9(f) instead of Common Stock;

(viii) to reduce the exercise price of the Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted; and

(ix) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan.

(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

5. ELIGIBILITY.

(a) Nonstatutory Stock Options may be granted to Employees
and Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.

(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary, including Options granted in substitution of options granted under
the TSSI Plan) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.

A-5
<PAGE>

(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.

(d) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment relationship at any time, with or without cause.

(e) The following limitations shall apply to grants of
Options to Employees:

(i) No Employee shall be granted, in any fiscal year
of the Company, Options to purchase more than 500,000 Shares.

(ii) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 11(a).

(iii) If an Option is canceled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 11), the canceled Option shall be counted
against the limit set forth in Section 5(e)(i). For this purpose, if the
exercise price of an Option is reduced, the transaction shall be treated as a
cancellation of the Option and the grant of a new Option.

6. TERM OF PLAN. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.

7. TERM OF OPTION. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement.

A-6
<PAGE>

8. OPTION EXERCISE PRICE AND CONSIDERATION.

(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Committee, but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.

(B) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Committee.

(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and, in the case of a Prior TSSI ISO may
consist entirely of (1) cash, (2) check, or (3) other Shares which (x) in the
case of Shares acquired upon exercise of an Option, have been owned by the
Optionee for more than six months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised. In the case of all other
Options, the consideration may consist entirely of (1) cash, (2) check,
(3) promissory note, (4) other Shares which (x) in the case of Shares acquired
upon exercise of an Option, have been owned by the Optionee for more than six
months on the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
(6) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

A-7
<PAGE>

9. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Nonstatutory Option and, subject to the $100,000 limitation of Section 5(b) on
the exercisability of Incentive Stock Options in any one year, any Incentive
Stock Option granted hereunder shall be exercisable under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment shall be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.

Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.

(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company, such Optionee may within sixty (60) days after the
date of such termination (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise his or her
Option to the extent that Optionee was entitled to exercise it at the date of
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate. Notwithstanding the above provisions of this Section 9(b), in
the event of an Optionee's change of status from Consultant to Employee, an
Optionee's Nonstatutory Stock Option shall not automatically terminate solely as
a result of such change of status. In addition, in the case of an Option other
than a Prior TSSI ISO, in the event of an Optionee's change of status from
Employee to Consultant, an Employee's Incentive Stock Option shall not
automatically terminate but shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option on
the ninety-first (91st) day following such change of status.

A-8
<PAGE>

(c) DISABILITY OF OPTIONEE. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after death, the Optionee's estate or a person who acquired the
right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

(e) RULE 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

(f) BUYOUT PROVISIONS. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.

10. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.

(a) CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for

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issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Optionee shall have the right to exercise his or her Option
until ten (10) days prior to such transaction as to all of the Optioned Stock
covered thereby. In addition, any Company repurchase option applicable to
Shares shall lapse as to all such Shares, provided such transaction takes place
at the time and in the manner contemplated. To the extent it has not been
previously exercised, the Option will terminate immediately prior to the
consummation of such proposed action.

(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company:

(i) OPTIONS. Each Option shall be assumed or an
equivalent Option shall be substituted by such successor corporation (including
as a "Successor" any purchaser of substantially all of the assets of the
Company) or a parent or subsidiary of such successor corporation. In the event
that the successor corporation or a parent or subsidiary of such successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Administrator shall, as soon as practicable prior to the effective
date of such transaction, provide for the Optionee to have the right to exercise
the Option as to all or a portion of the Optioned Stock, including Shares that
would not otherwise be exercisable. In such event the Administrator shall
notify the Optionee as soon as practicable prior to the effective date of such
transaction that the Option shall be fully exercisable for a period of ten (10)
days from the date of such notice, and the Option shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger, the Option confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger, the consideration (whether stock, cash, or other securities
or property) received in the merger by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of

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a majority of the outstanding Shares); provided, however, that if such
consideration received in the merger was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock subject to the Option,
to be solely common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by holders of Common
Stock in the merger.

(ii) SHARES SUBJECT TO REPURCHASE OPTION. Any Shares
subject to a repurchase option of the Company shall be exchanged for the
consideration (whether stock, cash, or other securities or property) received in
the merger or asset sale by the holders of Common Stock for each Share held on
the effective date of the transaction, as described in the preceding paragraph.
If the Optionee receives shares of stock of the successor corporation or a
parent or subsidiary of such successor corporation in exchange for Shares
subject to a repurchase option, such exchanged shares shall continue to be
subject to the repurchase option as provided in the Restricted Stock Purchase
Agreement.

12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.

13. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of Nasdaq or an established stock
exchange), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.

(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment
or termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the grant and exercise of such
Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without

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limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of Nasdaq or any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

15. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

16. AGREEMENTS. Options shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.

17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject
to approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such stockholder approval shall be
obtained in the degree and manner required under applicable state and federal
law and the rules of any stock exchange upon which the Common Stock is listed.

18. ADDENDUM TO THE 1994 SUMMIT DESIGN, INC. STOCK PLAN. This
Addendum shall apply to any person who is granted an Option under the 1994
Summit Design, Inc. Stock Plan (the "Plan") and is an employee or consultant of
SEE and is a resident of the State of Israel, or is otherwise subject to the
laws of the State of Israel (such persons are referred to collectively
hereinafter as the "Israelis").

The Summit Design, Inc. Option Agreements and Restricted Stock
Purchase Agreements delivered to the Israelis pursuant to the Options granted to
the Israelis (each an "Israeli Option") shall contain certain terms and
conditions as is required by applicable Israeli law or approved by the Company,
including, but not limited to the following:

1) Each Israeli Option granted to an Israeli on or before
January 31, 1994 shall be immediately exercisable for 25% of the shares subject
to such Option, with the remaining

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<PAGE>

Shares to vest equally on a monthly basis over a three year period beginning on
January 1, 1994. Such vesting schedule may be accelerated by the Administrator
of the Plan and shall be accelerated in accordance with any employment agreement
an Israeli may have with the Company.

2) The Common Stock issuable upon exercise of an Israeli
Option that is not yet vested shall be held in escrow and trust in Israel for
the benefit of the Company and the applicable Israeli Optionee as required by
Israeli law and according to the terms and conditions of such Israeli Optionee's
Restricted Stock Purchase Agreement.

3) To the fullest extent possible, all terms and conditions
necessary to qualify each Israeli Option intended by the Company to be taxed as
the Israeli equivalent of an Incentive Stock Option or Nonstatutory Option, as
the case may be, to be so taxed by the State of Israel.

4) All applicable foreign currency control requirements of
any Israeli governmental entity.

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SUMMIT DESIGN, INC.

1996 EMPLOYEE STOCK PURCHASE PLAN

The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of Summit Design, Inc.

1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

2. DEFINITIONS.

(a) "BOARD" shall mean the Board of Directors of the Company.

(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.

(d) "COMPANY" shall mean Summit Design, Inc. and any
Designated Subsidiary of the Company.

(e) "COMPENSATION" shall mean all base straight time gross
earnings and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.

(f) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.

(g) "EMPLOYEE" shall mean any individual who is an Employee
of the Company for tax purposes whose customary employment with the Company is
at least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.

(h) "ENROLLMENT DATE" shall mean the first day of each
Offering Period.

(i) "EXERCISE DATE" shall mean the last day of each Purchase
Period.

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(j) "FAIR MARKET VALUE" shall mean, as of any date, the value
of Common Stock determined as follows:

(1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable, or;

(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in THE WALL STREET
JOURNAL or such other source as the Board deems reliable, or;

(3) For the purposes of the Enrollment Date under the
first Offering Period under the Plan, the Fair Market Value of the Common Stock
shall be the price to public as set forth in the final prospectus included
within the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Common Stock.

(4) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.

(k) "OFFERING PERIODS" shall mean the periods of
approximately twenty-four (24) months during which an option granted pursuant to
the Plan may be exercised, commencing on the first Trading Day on or after May 1
and November 1 of each year and terminating on the last Trading Day in the
periods ending twenty-four months later. The first Offering Period shall be the
period commencing with the first Trading Day on or after the date on which the
Company's registration statement on Form S-1 is declared effective by the
Securities and Exchange Commission and terminating on the last Trading Day on or
before October 31, 1998. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.

(l) "PLAN" shall mean this Employee Stock Purchase Plan.

(m) "PURCHASE PRICE" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.

(n) "PURCHASE PERIOD" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.

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<PAGE>

(o) "RESERVES" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.

(p) "SUBSIDIARY" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.

(q) "TRADING DAY" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.

3. ELIGIBILITY.

(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.

(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.

4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. The first Offering Period shall begin on the
effective date of the initial public offering of the Company's Common Stock that
is filed with the Securities and Exchange Commission and shall end on the last
Trading Day on or before October 31, 1998. The Board shall have the power to
change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without stockholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.

5. PARTICIPATION.

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<PAGE>

(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.

(b) Payroll deductions for a participant shall commence on
the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.

6. PAYROLL DEDUCTIONS.

(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.

(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.

(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at such
time during any Purchase Period which is scheduled to end during the current
calendar year (the "Current Purchase Period") that the aggregate of all payroll
deductions which were previously used to purchase stock under the Plan in a
prior Purchase Period which ended during that calendar year plus all payroll
deductions accumulated with respect to the Current Purchase Period equal
$21,250. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.

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<PAGE>

(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.

7. GRANT OF OPTION. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.

8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.

9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.

10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.

(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any

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<PAGE>

time by giving written notice to the Company in the form of Exhibit B to this
Plan. All of the participant's payroll deductions credited to his or her
account shall be paid to such participant promptly after receipt of notice of
withdrawal and such participant's option for the Offering Period shall be
automatically terminated, and no further payroll deductions for the purchase of
shares shall be made for such Offering Period. If a participant withdraws from
an Offering Period, payroll deductions shall not resume at the beginning of the
succeeding Offering Period unless the participant delivers to the Company a new
subscription agreement.

(b) Upon a participant's ceasing to be an Employee (as
defined in Section 2(g) hereof), for any reason, he or she shall be deemed to
have elected to withdraw from the Plan and the payroll deductions credited to
such participant's account during the Offering Period but not yet used to
exercise the option shall be returned to such participant or, in the case of his
or her death, to the person or persons entitled thereto under Section 14 hereof,
and such participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.

(c) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.

11. INTEREST. No interest shall accrue on the payroll deductions of
a participant in the Plan.

12. STOCK.

(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be 535,000
shares, subject to adjustment upon changes in capitalization of the Company as
provided in Section 18 hereof. If, on a given Exercise Date, the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.

(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.

(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.

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<PAGE>

13. ADMINISTRATION.

(a) ADMINISTRATIVE BODY. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The Board
or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties.

(b) RULE 16b-3 LIMITATIONS. Notwithstanding the provisions
of Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.

14. DESIGNATION OF BENEFICIARY.

(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to exercise of the option. If a participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.

15. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt

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at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.

16. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.

17. REPORTS. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE.

(a) CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the Reserves, as well as the price
per share and the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.

(c) MERGER OR ASSET SALE. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, any Purchase Periods then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date") and
any Offering Periods then in progress shall end on the New Exercise Date. The
New Exercise Date shall be before the date of the Company's proposed sale or
merger. The Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New

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Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.

19. AMENDMENT OR TERMINATION.

(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.

(b) Without stockholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.

20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.

21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

B-9
<PAGE>

As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

22. TERM OF PLAN. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.

23. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on such
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.

B-10
<PAGE>

EXHIBIT A

SUMMIT DESIGN, INC.

1996 EMPLOYEE STOCK PURCHASE PLAN

SUBSCRIPTION AGREEMENT

_______ Original Application Enrollment Date: _____________
_______ Change in Payroll Deduction Rate
_______ Change of Beneficiary(ies)

1. ________________________________ hereby elects to participate in the
Summit Design, Inc. 1996 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.

2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 10%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)

3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.

4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to stockholder approval of the Employee Stock Purchase Plan.

5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only): ______
__________________________________________________.

6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in

B-11
<PAGE>

an amount equal to the excess of the fair market value of the shares at
the time such shares were purchased by me over the price which I paid
for the shares. I HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN
30 DAYS AFTER THE DATE OF ANY DISPOSITION OF MY SHARES AND I WILL MAKE
ADEQUATE PROVISION FOR FEDERAL, STATE OR OTHER TAX WITHHOLDING
OBLIGATIONS, IF ANY, WHICH ARISE UPON THE DISPOSITION OF THE COMMON
STOCK. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year and 1-year holding periods, I
understand that I will be treated for federal income tax purposes as
having received income only at the time of such disposition, and that
such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of
the shares at the time of such disposition over the purchase price which
I paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Offering Period. The remainder of the gain, if
any, recognized on such disposition will be taxed as capital gain.

7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.

8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:

NAME: (Please print)
-----------------------------------------------------------
(First) (Middle) (Last)

- ------------------------------- ------------------------------------------
Relationship

------------------------------------------
(Address)

B-12
<PAGE>

Employee's Social
Security Number: ----------------------------------------

Employee's Address: ----------------------------------------

----------------------------------------

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:
------------------------- ----------------------------------------
Signature of Employee

----------------------------------------
Spouse's Signature (If beneficiary other
than spouse)

B-13
<PAGE>

EXHIBIT B

SUMMIT DESIGN, INC.

1996 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

The undersigned participant in the Offering Period of the Summit Design,
Inc. 1996 Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.

Name and Address of Participant:

-----------------------------------

Signature:

-----------------------------------

Date:
------------------------------

B-14

<PAGE>
DETACH HERE
- --------------------------------------------------------------------------------
PROXY

SUMMIT DESIGN, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of Summit Design, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 30, 1999, and hereby appoints Larry J.
Gerhard, Richard Davenport and C. Albert Koob, and each of them, proxies, with
full power of substitution, to represent the undersigned and to vote as
designated on the reverse side, all shares of Common Stock of Summit Design,
Inc. that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Summit Design, Inc. to be held on May 26, 1999 at 2:00 p.m.,
local time, at the Embassy Suites, 9000 S.W. Washington Square Road, Tigard,
Oregon 97223 and at any adjournment thereof.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR EACH OF THE PROPOSALS ON THE REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXIES DEEM ADVISABLE.

- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------

<PAGE>

<TABLE>
<S><C>
DETACH HERE
- ------------------------------------------------------------------------------------------------------------------------------------
/X/ Please mark
votes as in
this example

A vote FOR the following proposals is recommended by the Board of Directors.
FOR AGAINST ABSTAIN
1. Proposal to elect William V. Botte and Barbara M. Karmel 2. Proposal to amend Summit Design, / / / / / /
as the Class II directors to serve for a term of three years. Inc.'s 1994 Stock Plan as described
in the accompanying Proxy Statement.
FOR WITHHELD 3. Proposal to amend Summit Design, / / / / / /
/ / / / Inc's 1996 Employee Stock Purchase
Plan as described in the
accompanying Proxy Statement.
4. Proposal to ratify the appointment / / / / / /
/ / of PricewaterhouseCoopers LLP as
--------------------------------------- Summit Design, Inc.'s Independent
For all nominee except as noted above accountants for the fiscal year
ending December 31, 1999.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /

In their discretion, the Proxies are authorized to vote or
otherwise represent the shares on any and all such other
business which may properly come before the meeting or any
adjournment thereof.

Please sign exactly as your name appears on your stock
certificate. If the stock is held by joint tenants or as
community property, both should sign. Executors,
administrators, trustees, guardians, attorneys and corporate
officers should insert their titles.

Signature: Date: Signature: Date:
---------------------------------- ----------- -------------------------------------- ------------
</TABLE>