-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OL8hy1YYsK3xCtvp/YN4TUo52/qi6iCi2wegzEurADcW5sjjv8JqJLfWa04ub/Cx q/aFcbiLKYvMOJ2HM9BLRA== 0000891618-96-000404.txt : 19960708 0000891618-96-000404.hdr.sgml : 19960708 ACCESSION NUMBER: 0000891618-96-000404 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COOPER & CHYAN TECHNOLOGY INC CENTRAL INDEX KEY: 0000849585 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 770409778 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26750 FILM NUMBER: 96561729 BUSINESS ADDRESS: STREET 1: 1601 SARATOGA SUNNYVALE RD CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 4083666966 10-Q 1 COOPER & CHYAN FORM 10-Q PERIOD ENDING 3/31/96 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 0-26750 COOPER & CHYAN TECHNOLOGY, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 77-0409778 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 1601 SOUTH DE ANZA BOULEVARD CUPERTINO, CALIFORNIA 95014 (Address of Principal Executive Offices) (Zip Code) (408) 366-6966 Registrant's Telephone Number, Including Area Code Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ----- As of May 7, 1996, Registrant had outstanding 12,407,916 shares of Common Stock. See Exhibit Index on page 17 Page 1 2 COOPER & CHYAN TECHNOLOGY, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 TABLE OF CONTENTS
FORM 10-Q Name of Item Page ITEM NO. PART I Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995..................... 3 Consolidated Statements of Income for the Quarters Ended March 31, 1996 and 1995........... 4 Consolidated Statements of Cash Flows for the Quarters Ended March 31, 1996 and 1995....... 5 Notes to Consolidated Financial Statements................................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................................... 7 PART II Item 5. Other Information.............................................................................. 15 Item 6. Exhibits and Reports on Form 8-K............................................................... 15 Signatures..................................................................................... 15
---------------------- ShapeBased and IC Craftsman in combination with "Inspector," "Apprentice," "Journeyman" or "Master" and SPECCTRA, in combination with "AutoRoute," "EditRoute" and "AutoPlace," are trademarks of the Company. SPECCTRA and IC Craftsman are registered trademarks of the Company. Page 2 3 PART I ITEM 1. FINANCIAL STATEMENTS COOPER AND CHYAN TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS
MARCH 31 December 31 1996 1995 ---- ---- (UNAUDITED) ASSETS Current Assets Cash and cash equivalents $ 3,059,791 $ 3,000,177 Short term investments 23,522,407 23,402,236 Accounts receivable, net 5,221,251 4,360,639 Deferred income taxes 373,525 373,525 Prepaid expenses and other current assets 1,163,786 994,152 ------------ ------------ Total current assets 33,340,760 32,130,729 Property, equipment, net 2,667,433 2,552,413 Other assets 248,708 291,093 ------------ ------------ $ 36,256,901 $ 34,974,235 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable 610,901 787,686 Accrued salary and employee benefits 1,324,949 747,943 Other accrued liabilities 1,407,550 1,725,235 Income taxes payable 391,029 142,185 Deferred revenue 2,535,180 2,601,492 ------------ ------------ Total current liabilities 6,269,609 6,004,541 Deferred income taxes 238,851 238,851 Stockholders' equity Common stock 120,757 119,408 Additional paid-in capital 25,767,055 25,728,890 Notes receivable from stockholders (8,950) (39,010) Deferred compensation (380,825) (404,626) Retained earnings 4,250,404 3,326,181 ------------ ------------ Total stockholders' equity 29,748,441 28,730,843 ------------ ------------ $ 36,256,901 $ 34,974,235 ============ ============
See accompanying notes Page 3 4 COOPER & CHYAN TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME
QUARTER ENDED Quarter ended MARCH 31 March 31 1996 1995 ---- ---- (UNAUDITED) (UNAUDITED) Revenue License $ 5,152,251 $ 2,754,000 Service 1,288,000 468,000 ------------ ------------ Total revenue 6,440,251 3,222,000 ------------ ------------ Costs and expenses Cost of license revenue 274,438 141,000 Cost of service revenue 127,664 51,000 Research and development 1,395,191 969,000 Sales and marketing 2,750,327 1,563,000 General and administrative 696,822 447,000 ------------ ------------ Total costs and expenses 5,244,442 3,171,000 ------------ ------------ Income from operations 1,195,809 51,000 Interest income 261,283 14,125 Interest expense (1,040) (13,125) Other income (expense) net (5,637) -- ------------ ------------ Income before provision for 1,450,415 52,000 income taxes Provision for income taxes 493,598 20,000 ------------ ------------ Net income $ 956,817 $ 32,000 ============ ============ Net income per share $ 0.07 $ 0.00 ============ ============ Shares used in computing per 13,759,465 11,383,000 share amounts ============ ============
See accompanying notes. Page 4 5 COOPER & CHYAN TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
QUARTER ENDED MARCH 31 ---------------------- 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES (UNAUDITED) (UNAUDITED) Net Income $ 956,817 $ 32,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 217,733 124,604 Deferred income taxes -- -- Amortization of deferred stock compensation 23,801 -- Changes in assets and liabilities: Accounts receivable (860,612) 299,811 Income taxes receivable -- (165,000) Prepaid expenses and other current assets (169,634) (24,204) Other assets 42,385 17,987 Trade accounts payable (176,785) 267,833 Accrued salary and employee benefits 577,006 (79,215) Other accrued liabilities (317,685) 202,098 Income taxes payable 248,844 -- Deferred revenue (66,312) 16,174 ----------- ----------- Total adjustments (481,259) 660,088 ----------- ----------- Net cash provided by operating activities 475,558 692,088 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (332,753) (212,445) Purchase of available-for-sale securities (9,144,017) (68,334) Proceeds from sale of available-for-sale securities 9,008,933 411288 ----------- ----------- Net cash provided by (used in) investing activities (467,837) 130,509 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds (payments) on notes payable to stockholders 30,060 (30,060) Repayment of bank credit facility -- (380,015) Proceeds from issuance of common stock 39,514 38,845 ----------- ----------- Net cash provided by (used in) financing activities 69,574 (371,230) ----------- ----------- Net increase in cash and cash equivalents 77,295 451,367 Effect of exchange rates on foreign currency cash balances (17,681) 24,732 Cash and cash equivalents at beginning of period 3,000,177 1,214,542 ----------- ----------- Cash and cash equivalents at end of period $ 3,059,791 $ 1,690,641 =========== =========== Supplemental disclosure of cash flow information Cash paid during the period for income taxes $ 202,500 $ 165,000 =========== ===========
See accompanying notes. Page 5 6 COOPER & CHYAN TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION The unaudited, condensed, consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information or footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. These financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year 1995 as filed with the Commission on April 29, 1996. The interim results presented herein are not necessarily indicative of the results of operations that may be expected for the full fiscal year ending December 31, 1996 or any other future periods. NET INCOME PER SHARE Net income per share is based on the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Common equivalent shares include common stock issuable upon exercise of stock options using the treasury stock method. Page 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Except for the historical information contained herein, the matters discussed in this Form 10-Q are forward-looking statements that involve risks and uncertainties, including the timely availability and acceptance of new products, the impact of competitive products and pricing, the management of growth and the other risks detailed herein. The actual results that the Company achieves may differ materially from any forward-looking statements due to such risks and uncertainties. The Company develops, markets and supports software tools that help designers route the physical wiring interconnections within high performance printed circuit boards ("PCBs") and integrated circuits ("ICs"). The Company was founded in 1989 and licensed its first product, SPECCTRA, for the PCB market in December 1989. The Company has subsequently developed and released several new versions of the product. As of March 31, 1996, SPECCTRA products were available on a broad number of operating system platforms with several available option packages. Until 1995, the Company derived substantially all of its revenue from its SPECCTRA line of products. The IC Craftsman product line, introduced in early 1995, has accounted for approximately 21% of the Company's total revenue in 1995 and 31% of the Company's total revenue in the first quarter of 1996. Revenue consists primarily of fees for licenses of the Company's software products and for maintenance and customer support. The Company recognizes revenue from software licenses after shipment of the products and fulfillment of acceptance terms, if any, and when no significant contractual obligations remain outstanding and collection of monies owed is probable. After delivering the software, the Company determines the significance of remaining contractual obligations, if any, based on an estimate of the costs and difficulty to fulfill the obligations in comparison to the overall contract. When the Company receives payment prior to shipment and fulfillment of significant vendor obligations, such payments are recorded as deferred revenue and are recognized as revenue upon shipment and fulfillment of significant vendor obligations. The Company also derives service revenue primarily from maintenance agreements that provide customers access to product enhancements and customer support. Most of the Company's customers have purchased annual maintenance contracts on initial licenses and have renewed such contracts upon their expiration. Maintenance revenue is deferred and recognized ratably over the term of the maintenance agreement, which is typically one year. Revenue from customer training, support and other services is recognized as the service is performed. Recently, the Company has significantly increased its research and development and sales and marketing personnel. The increase in research and development personnel was primarily to support the development of the IC Craftsman product line. The increase in sales and marketing personnel was begun in anticipation of the introduction of the IC Craftsman product line and was continued in order to expand worldwide distribution, principally in Europe and Japan. While the Company anticipates an increase in revenues as the IC Craftsman product line gains commercial acceptance and international sales increase, there can be no assurance that the Company will achieve revenue levels that justify the increased expenses. The Company's revenues and results of operations are affected by seasonal trends that may include higher revenues in the Company's second and fourth fiscal quarters and lower revenues in its first and third fiscal quarters as a result of many customers' purchasing and budgetary practices, and lower revenues in the summer months (particularly in Europe) when many businesses make fewer purchases. The Company's expense levels are based, in part, on its expectations as to future revenue. If revenue levels are below expectations due to delays associated with customers' acceptance and evaluation procedures or for any other reason, operating results are likely to be materially adversely affected. Net income, if any, may be disproportionately affected by a reduction in revenue because only a small portion of the Company's expenses varies with its revenue. Although the Company has recently experienced significant revenue growth, such growth should not be considered to be indicative of future revenue growth, if any, or of future operating results. The Company's recent revenue growth is a result of increased unit volume and new product introductions. There can be no assurance that the Company's revenue will grow or be sustained in future periods or that the Company will remain profitable in any future period. In addition, the rapid growth and expansion the Company has experienced has placed, and continues to place, a significant strain upon its management, operational and financial resources. The Company has grown from 75 permanent full time employees at December 31, 1994 to 114 permanent full time employees at March 31, 1996, and currently plans to continue to expand its staff. Page 7 8 To accommodate this recent growth, the Company is currently enhancing a variety of new and upgraded operational and financial systems, procedures and controls, including the improvement of its general ledger accounting and other internal management systems, its customer database and its transaction processing systems. There can be no assurance that the Company will be able to continue to enhance these systems, procedures and controls successfully. The failure of the Company to respond to and manage its growth and changing business conditions, or to adapt its operational, management and financial control systems to accommodate its growth, could have a material adverse effect on the Company's business, financial condition and results of operations. The increase in the number of the Company's employees and the Company's market diversification and product development activities have resulted in increased responsibilities for the Company's management. The Company's senior management team has worked together for only a short period of time. The Company's ability to operate successfully will require such personnel to work together effectively. Failure to do so could have a material adverse effect upon the Company's business, financial condition and results of operations. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain statement of operations data of the Company expressed as a percentage of total revenue.
QUARTER ENDED QUARTER ENDED MARCH 31 MARCH 31 1996 1995 ---- ---- Revenue License 80 % 85 % Service 20 15 --- --- Total revenue 100 100 --- --- Costs and expenses Cost of license revenue 4 4 Cost of service revenue 2 2 Research and development 22 30 Sales and marketing 43 48 General and administrative 10 14 --- --- Total costs and expenses 81 98 --- --- Income from operations 19 2 --- --- Interest/other income (net) 4 0 --- --- Income before provision for 23 2 income taxes --- --- Provision for income taxes 8 1 --- --- Net income 15 % 1 % === ===
Page 8 9 Revenue Total revenue increased by 100% from $3.2 million in the first quarter of 1995 to $6.4 million in the first quarter of 1996. The percentage of the Company's total revenue attributable to license fees decreased from 85% in the first quarter of 1995 to 80% in the first quarter of 1996. License revenue increased by 87% from $2.8 million in the first quarter of 1995 to $5.2 million in the first quarter of 1996. The increase in license revenue from the first quarter of 1995 to the first quarter of 1996 was primarily attributable to increased licensing of the Company's IC Craftsman products and, to a lesser extent, to increased licensing of the Company's SPECCTRA products. Service revenue increased by 175% from $0.5 million in the first quarter of 1995 to $1.3 million in the first quarter of 1996. The increase in service revenue in the period was primarily attributable to maintenance contracts in connection with the continued growth of the installed base of customers licensing the Company's products. The percentage of the Company's total revenue attributable to service revenue rose from 15% in the first quarter of 1995 to 20% in the first quarter of 1996. The company expects that service revenue in absolute dollars will continue to increase. However, service revenue as a percentage of total revenue may or may not increase depending upon a number of factors, including new maintenance sales rates, maintenance renewal rates and the level of consulting revenue. International license and service revenue accounted for $1.4 million in the first quarter of 1995, rising to $2.2 million in the first quarter of 1996. Because a majority of the Company's European revenue is denominated in U.S. dollars, the Company has not engaged in European currency hedging activities there. However, in Japan, where the Company's revenue is denominated in local currency, the Company has entered into foreign exchange hedging activities. The Company expects that international license and service revenue will continue to account for a significant portion of its revenue in the short term, and as a result, foreign currency exposure may increase. The Company's international revenue involves a number of risks, including the impact of possible recessionary environments in economies outside the United States, longer receivables collection periods and greater difficulty in accounts receivable collection, unexpected changes in regulatory requirements, reduced protection for intellectual property rights in some countries, tariffs and other trade barriers, foreign currency exchange rate fluctuations, difficulties in staffing and managing foreign operations, the burdens of complying with a variety of foreign laws, potentially adverse tax consequences and political and economic instability. There can be no assurance that the foregoing factors will not have a material adverse effect on the Company's future international license and service revenue and, consequently, on the Company's business, financial condition and results of operations. In the first quarter of 1995, sales to Mentor Graphics Corporation ('Mentor Graphics') accounted for 19% of the Company's total revenue. By the first quarter of 1996, this fell to below 10% of the Company's total revenue. No other customer accounted for more than 10% of revenue during either of these two periods. In the first quarter of 1996, revenue from distributors and OEMs accounted for 27% of the Company's total revenue. The Company is dependent upon the continued viability and financial stability of these distributors and OEMs. Since the Company's products are used by highly skilled professional engineers, an effective distributor or OEM representative must possess sufficient technical, marketing and sales resources and must devote these resources to a lengthy sales cycle, customer training and product service and support. In addition, the Company's distributors and OEMs generally offer products of several different companies, including, in some cases, products that are competitive with the Company's products. Although the Company is not aware of any financial difficulties being experienced by any of its OEMs or distributors, there can be no assurance that Mentor Graphics or any of the Company's distributors or other OEMs will be able to continue to market, service and support the Company's products effectively, that economic conditions or industry demand will not adversely affect these distributors and OEMs, that Mentor Graphics or any distributor or other OEM that licenses the Company's products will choose to continue to license such products or that any of these distributors and OEMs will not devote greater resources to marketing and supporting products of other companies. The current OEM agreement with Mentor Graphics will expire in March 1998. There can be no assurance that the Company will reach a subsequent agreement with Mentor Graphics. Should the Company fail to reach a subsequent agreement with Mentor Graphics, there can be no assurance that the Company would be successful in either securing alternative channels of distribution for its products or expanding its own direct sales to replace Mentor Graphics. The loss of, or a significant reduction in revenue from, Mentor Graphics or any of the Company's distributors or other OEMs would have a material adverse Page 9 10 effect on the Company's business, financial condition and results of operations, at least to the extent such loss is not offset by a corresponding increase in the Company's direct sales. Cost of Revenue Cost of license revenue includes personnel and related operating costs associated with order processing, documentation and other production costs related to the licensing of the Company's products. Cost of license revenue increased by 94% from $141,000 in the first quarter of 1995 to $274,000 in the first quarter of 1996. The increases in cost of license revenue was primarily attributable to an increase in licenses of the Company's products. Cost of license revenue was 4% of total revenue for both the first quarter of 1995 and the first quarter of 1996. Cost of service revenue includes personnel and related costs allocated to maintenance and other customer support activities. Cost of service revenue increased by 150% from $51,000 in the first quarter of 1995 to $128,000 in the first quarter of 1996. The increase in cost of service revenue was primarily attributable to an increase in technical support personnel. Cost of service was 2% of total revenue for both the first quarter of 1995 and the first quarter of 1996. Research and Development Research and development expenses include all costs associated with the development of new products and enhancements to existing products. Research and development expenses increased by 44% from $1.0 million in the first quarter of 1995 to $1.4 million in the first quarter of 1996. These expenses were 30% and 22% of total revenue in the first quarter of 1995 and the first quarter of 1996, respectively. The increase in expenses resulted principally from growth in the number of research and development personnel. To date, all software development costs have been expensed as incurred. The Company anticipates that it will continue to commit substantial resources to research and development in the future. At least for the short term, the Company expects research and development expenses to increase in absolute dollars but to stay flat or decrease slightly as a percentage of total revenue, to the extent revenue increases. However, there can be no assurance that there will be a corresponding increase in revenue to justify the increase in expenditure. Sales and Marketing Sales and marketing expenses consist of salaries, commissions paid to internal sales and marketing personnel and certain third parties, promotional costs and related operating expenses. Sales and marketing expenses increased by 76% from $1.6 million in the first quarter of 1995 to $2.8 million in the first quarter of 1996. These expenses were 49% and 43% of total revenue in the first quarter of 1995 and the first quarter of 1996, respectively. The increases in sales and marketing expenses in each period consist principally of the cost of additional sales and marketing personnel related to the expansion of the Company's direct sales capability in the PCB market, to support the Company's entry into the IC market and to expand worldwide distribution, principally in Europe and Japan, and increases in variable sales compensation due to increased revenue. The number of sales and marketing personnel increased from 37 at the end of the first quarter of 1995 to 48 at the end of the first quarter of 1996. At least for the short term, the Company expects sales and marketing expenses to increase in absolute dollars but to stay flat or decrease slightly as a percentage of total revenue, to the extent revenue increases. However, there can be no assurance that there will be a corresponding increase in revenue to justify the increase in expenditure. The increase in sales and marketing personnel was begun in anticipation of the introduction of the IC Craftsman product line and has been continued in order to expand worldwide distribution, principally in Europe and Japan. While the Company anticipates an increase in revenues as the IC Craftsman product line gains commercial acceptance and international sales increase, there can be no assurance that the Company will continue to achieve revenue levels that justify the increased expenses. The Company has relatively little experience in direct sales in the IC market. There can be no assurance that expansion of the Company's direct sales efforts will succeed or that such expansion will result in increased sales. Although the success of this direct channel has reduced the Company's dependence on the OEM channel, there can be no assurance that the expansion of this channel will not have an adverse effect on existing distributor and OEM relationships. The Company has expanded its sales and support organizations in Europe and Asia, which has resulted in an increase in sales and marketing expenses. The Company intends to further expand these organizations, resulting in additional increases in sales and marketing expenses. However, the Company expects the growth rate of such expenses to be lower than in the past. There can be no assurance that the Company will be able to sustain or increase Page 10 11 revenue derived from international licensing and service. Any failure to expand sales in foreign markets would have a material adverse effect on the Company's business, financial condition and results of operations. General and Administrative General and administrative expenses increased 56% from $447,000 in the first quarter of 1995 to $697,000 in the first quarter of 1996. These expenses were 14% and 11% of total revenue in the first quarter of 1995 and the first quarter of 1996, respectively. The increases in general and administrative expenses was primarily attributable to the addition of new general and administrative personnel. The number of general and administrative personnel increased from 9 at the end of the first quarter of 1995 to 12 at the end of the first quarter of 1996. A portion of the increase is also attributable to the additional cost of professional and other fees associated with being a public company, principally audit and legal fees and insurance premiums. At least for the short term, the Company expects general and administrative expenses to increase in absolute dollars but to stay flat or decrease slightly as a percentage of total revenue, to the extent revenue increases. However, there can be no assurance that there will be a corresponding increase in revenue to justify the increase in expenditure. Income Taxes The provision for income taxes as a percentage of pre-tax income was 33% for 1995 and 34% for the first quarter of 1996. These percentages are less than the federal and state combined statutory rate of approximately 40% due primarily to the utilization of research and development credits in both periods. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations to date with cash from operations and through private and public sales of equity securities. Private sales of equity securities have yielded approximately $2.5 million. In addition, in October 1995, the company completed its initial public offering, raising approximately $22.4 million. Net cash provided by operating activities in the first quarter of 1996 was $476,000 versus $692,000 in the first quarter of 1995. The cash generated resulted principally from net income, with increases in accrued salary and employee benefits being more than offset by an increase in receivables, and decreases in accounts payable, accrued liabilities and deferred revenue. The level of receivables rose in the first quarter of 1996 partly because a significant portion of the revenue was billed towards the end of the quarter, therefore not allowing sufficient time for collection before the quarter ended. An additional reason for the increase in receivables in the period was an increasing portion of the Company's revenue that was billed from its international sites, where typically the Company experiences longer payment cycles than revenue billed domestically. Cash used in investing activities resulted primarily from additions to property and equipment and purchases of available for sale securities. Purchases of property and equipment, consisting primarily of computer equipment, were $333,000 in the first quarter of 1996 versus $212,000 in the corresponding period. As of March 31, 1996, the Company had working capital of $27.1 million, including cash, cash equivalents and short term investments of $26.6 million. As of March 31, 1996, the Company had no bank indebtedness and no long-term commitments other than operating lease obligations. The Company believes that existing cash balances and funds generated from operations will provide the Company with sufficient funds to finance its operations through at least the end of 1996. Thereafter, the Company may require additional funds to support its working capital requirements and for other purposes and may seek to raise such additional funds through public or private equity financings or from other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to the Company or its stockholders. OTHER FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS The Company expects that it will face increasing pricing pressures from its current competitors and new market entrants. There can be no assurance that the Company's competitors will not engage in pricing practices that are detrimental to the Company. In addition, the Company believes that the amount of design work done by the users of the Company's products on Windows-based personal computers is increasing relative to UNIX-based workstations. If this trend continues, the average selling price of the Company's products may decrease. There can be no assurance that such a decrease in average selling price would be offset by an increase in the volume of sales. Page 11 12 Many of the Company's current and potential competitors have longer operating histories, significantly greater financial, technical, product development and marketing resources, greater name recognition and larger customer bases than the Company. There can be no assurance that the Company's competition will not be able to develop products comparable or superior to those developed by the Company, adapt more quickly to new technologies, evolving industry trends or customer requirements than the Company, or devote greater resources to the development, promotion and sale of their products than the Company. In addition, current competitors of the Company have established and may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address the needs of the Company's existing and prospective customers. Such alliances among competitors could present increased competition to the Company. Moreover, the EDA industry has become increasingly concentrated in recent years as the result of numerous mergers and acquisitions. The Company expects that competition may increase as a result of this increased concentration. There can be no assurance that the Company will be able to compete successfully against current and future competitors or that competitive pressures faced by the Company will not have a material adverse effect on its business, financial condition and results of operations. In addition, the introduction or announcement by the Company or one or more of its competitors of products embodying new technologies or features could render the Company's existing products obsolete or unmarketable. There can be no assurance that the introduction or announcement of new product offerings by the Company or one or more of its competitors will not cause customers to defer purchases of existing Company products. Such deferral of purchases could have a material adverse effect on the Company's business, financial condition and results of operations. The Company's success is heavily dependent upon its proprietary software technology. The Company does not currently have any patents and relies principally on trade secret, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect its technology, including its ShapeBased technology. The Company generally enters into confidentiality and/or license agreements with its employees, distributors and customers, and limits access to and distribution of its software, documentation and other proprietary information. The Company's software is shipped with a software security lock which limits software access to authorized users. In addition, the Company does not license or release its source code, except in connection with source code escrow arrangements. However, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries. There also can be no assurance that the additional steps taken by the Company will prevent misappropriation of its technology. Any failure by or inability of the Company to protect its proprietary technology could have a material adverse effect on the Company's business, financial condition and results of operations. Furthermore, such protections do not preclude competitors from developing products with functionality or features similar to the Company's products, and there can be no assurance that third parties will not independently develop competing technologies that are substantially equivalent or superior to the Company's technologies. However, the Company believes that, due to the rapid pace of innovation within the EDA industry, factors such as the technological and creative skills of its personnel, new product developments, frequent product enhancements, name recognition and reliable product maintenance are more important to establishing and maintaining a technology leadership position than are the various legal protections of its technology. Although the Company does not believe its products infringe the proprietary rights of any third parties and is not aware of any claims by any third party that the Company is infringing any such right, there can be no assurance that infringement claims will not be asserted against the Company or its customers in the future. Furthermore, the Company may initiate claims or litigation against third parties for infringement of the Company's proprietary rights or to establish the validity of the Company's proprietary rights. Litigation, either as plaintiff or defendant, would cause the Company to incur substantial costs and divert management resources from productive tasks, whether or not such litigation is resolved in the Company's favor, which could have a material adverse effect on the Company's business, financial condition and results of operations. Parties making claims against the Company could secure substantial damages, as well as injunctive or other equitable relief, which could effectively block the Company's ability to license its products in the United States or abroad. Such a judgment could have a material adverse effect on the Company's business, financial condition and results of operations. If it appears necessary or desirable, the Company may seek licenses to intellectual property that it is allegedly infringing. The Company is not currently seeking any such license. There can be no assurance, however, that licenses could be obtained on commercially reasonable terms, if at all, or that the terms of any offered license would be acceptable to the Company. The failure to obtain the necessary licenses or other rights could have a material adverse effect on the Company's business, financial condition and results of operations. As the number of software products in the industry increases and the functionality of these products further overlaps, the Company believes that software developers may become increasingly subject to infringement claims. Any such claims, with or without merit, can be time consuming and Page 12 13 expensive to defend and could adversely affect the Company's business, financial condition and results of operations. There are currently no pending claims that the Company's products, trademarks or other proprietary rights infringe the proprietary rights of third parties. The Company's future depends in large part on the continued service of its key technical personnel, in particular its founders, and its ability to continue to attract and retain such personnel, many of whom are highly skilled. The competition for such personnel in the software industry in general, and the EDA industry in particular, is intense, and there can be no assurance that the Company will retain its key technical personnel or continue to attract such personnel in the future. There are only a limited number of qualified EDA engineers, and competition for such individuals is especially intense. The Company has at times experienced and continues to experience difficulty in recruiting qualified technical personnel. Although such difficulties have not had a material impact on the Company's business to date, there can be no assurance that such difficulties will not do so in the future. Generally, the Company's employees are not bound by employment or noncompetition agreements or covered by key man life insurance policies. In addition, competitors may attempt to recruit the Company's key employees. The loss of any key technical, management or marketing personnel or the failure to recruit such personnel successfully in the future could have a material adverse effect on the Company's business, financial condition and results of operations. The EDA industry is characterized by extremely rapid technological change, frequent new product introductions and enhancements, evolving industry standards and rapidly changing customer requirements. Customers in the EDA industry require software products that allow them to minimize their time-to-market, differentiate their products, maximize their engineering productivity and reduce design time and costs. The Company's future success will depend upon its ability to continually enhance its current products and develop and introduce new products that keep pace with technological advancements and address the increasingly sophisticated needs of its customers. There can be no assurance that the Company will be successful in developing and marketing product enhancements or new products that respond to technological change, evolving industry standards and changing customer requirements, that the Company will not experience difficulties that could delay or prevent the successful development, introduction and marketing of these products or product enhancements or that its new products and product enhancements will adequately meet the requirements of the marketplace and achieve any significant degree of market acceptance. Failure of the Company, for technological or other reasons, to develop and introduce new products and product enhancements in a timely and cost-effective manner would have a material adverse effect on the Company's business, financial condition and results of operations. Any failure by the Company to anticipate or to respond adequately to changing market conditions, or any significant delays in product development or introduction, could cause customers to delay or decide against purchases of the Company's products and would have a material adverse effect on the Company's business, financial condition and results of operations. Software products as complex as those offered by the Company may contain defects or failures when introduced or when new versions are released. The Company has in the past discovered software defects in certain of its products and may experience delays or lost revenue correcting such defects in the future. Although the Company has corrected known material defects and has not experienced material adverse effects resulting from any such defects to date, there can be no assurance that, despite testing by the Company, errors will not be found in new products or releases after commencement of commercial shipments. Any such occurrence could result in loss of market share or failure to achieve market acceptance and could have a material adverse effect upon the Company's business, financial condition and results of operations. The Company's future operating results are significantly dependent upon continued enhancement and market acceptance of its SPECCTRA product line and successful market acceptance of its IC Craftsman product line. There can be no assurance that the SPECCTRA product line will continue to be adequately enhanced to achieve continued market acceptance or that the Company will be successful in marketing the IC Craftsman product line or any other new or enhanced products. The Company believes that a number of factors will be necessary for its IC Craftsman products to achieve, and its SPECCTRA products to continue to achieve, broad market acceptance. These factors include performance, price, interoperability with existing systems and the customer's assessment of the Company's technical, managerial, service and support expertise and capability. Failure to succeed with respect to any of these factors could result in the Company's failure to achieve market acceptance of its products, which would have a material adverse effect on the Company's business, financial condition and results of operations. A decline in demand for any of the Company's products as a result of competition, technological change or other factors would have a material adverse effect on the Company's business, financial condition and results of operations. In addition, factors adversely affecting the EDA market generally could have a material adverse effect on the Company's business, financial condition and results of operations. Page 13 14 The sales cycle for the Company's products is relatively lengthy. In particular, orders for licenses of the Company's IC Craftsman products in a given quarter are typically made by relatively fewer customers and in larger amounts as compared to orders for licenses of the Company's SPECCTRA products. Accordingly, because IC Craftsman revenues have increased as a percentage of the Company's total revenues, such licenses ordered by a single customer can account for a significant portion of a quarter's revenues. Because the Company's expenses are relatively fixed in the short term, the loss or delay of such orders by a single customer or multiple customers could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, the Company believes that its quarterly and annual operating results have in the past and may in the future vary significantly depending on factors such as variations in product development or operating expenditures, increased competition, the purchasing patterns of its customers, the timing of customer design and development projects, the timing of customer evaluation and acceptance, the timing of expenditures by the Company in anticipation of product releases or increased revenue, the timing of product enhancements and product introductions by the Company and its competitors, market acceptance of new and enhanced versions of the Company's products, the size, timing and structure of significant licenses, changes in pricing policies of the Company and its competitors, variations in the mix of products the Company licenses, delays in processing orders, the mix of direct and indirect sales, changes in Company strategy, personnel changes and general economic factors. Any unfavorable changes in these or other factors could have a material adverse effect on the Company's business, financial condition and results of operations. Page 14 15 PART II ITEM 5. OTHER INFORMATION On May 6, 1996, the Company signed agreements with Synopsys, Inc. ("Synopsys") to enter into a strategic marketing and development relationship. The strategic relationship focuses on the development of new tools and methodologies for designing multi-million gate ICs that utilize silicon geometries of quarter-micron and below. As part of this strategic relationship, Synopsys purchased approximately 9.9 percent of the outstanding Common Stock of the Company at $14.50 per share. In connection with this equity investment, Synopsys has also been granted certain rights to maintain its percentage ownership interest in the Company. The cash investment by Synopsys consisted of 1,046,250 shares of stock purchased from corporate officers as well as 160,292 newly issued shares purchased from the Company. The $14.50 share price was based on the average closing price of the Company during an agreed upon 30-day period. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The following exhibits are filed herewith or incorporated by reference: EXHIBIT NUMBER EXHIBIT TITLE (a) See attached Exhibit Index. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended March 31, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: May 9, 1996 COOPER & CHYAN TECHNOLOGY, INC. By:/s/ Robert D. Selvi ----------------------------------------- Robert D. Selvi Chief Financial Officer (Duly Authorized Officer and Chief Accounting Officer) Page 15 16 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- EXHIBITS TO FORM 10-Q UNDER THE SECURITIES EXCHANGE ACT OF 1934 ----------- COOPER & CHYAN TECHNOLOGY, INC. Page 16 17 EXHIBIT INDEX EXHIBIT PAGE NUMBER EXHIBIT TITLE NUMBER - - - ------ ------------- ------ 4.01 Stock Purchase Agreement dated as of May 6, 1996 among Synopsys, Inc., the Company, John F. Cooper, David Chyan, John R. Harding, William Portelli and Robert D. Selvi. 4.02 Investor Rights Agreement dated as of May 6, 1996 among Synopsys, Inc., the Company, John F. Cooper, David Chyan, John R. Harding, William Portelli and Robert D. Selvi. 11.01 Statement of Computation of Net Income Per Share. 27.01 Financial Data Schedule, which is submitted electronically to the Securities and Exchange Commission for information only and is not filed. Page 17 EX-4.01 2 STOCK PURCHASE AGREEMENT 1 EXHIBIT 4.01 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT is made as of May 6, 1996, by COOPER & CHYAN TECHNOLOGY, INC., a Delaware corporation (the "Company"), JOHN F. COOPER, DAVID CHYAN, JOHN R. HARDING, WILLIAM PORTELLI and ROBERT D. SELVI, individuals (the "Selling Stockholders"), and SYNOPSYS, INC., a Delaware corporation ("Synopsys"). Recitals A. The Company desires to issue and sell 160,292 shares (the "Company Shares") of its authorized Common Stock, without par value (the "Common Stock") to Synopsys at a price of $14.50 per share for an aggregate purchase price of $2,324,234.00. B. Each of the Selling Stockholders desires to sell to Synopsys that number of shares of Common Stock set forth opposite such Selling Stockholder's name on Exhibit A at a price of $14.50 per share. Collectively, the Selling Stockholders desire to sell a total of 1,046,250 shares to Synopsys for an aggregate purchase price of $15,170,625.00. C. Synopsys desires to purchase the shares of the Company's Common Stock referred to in Recitals A and B above (collectively, the "Shares") from the Company and the Selling Stockholders on the terms and subject to the conditions of this agreement. D. In connection with the transaction contemplated by this agreement, (i) counsel to the Company is delivering an opinion in the form of Exhibit B , and (ii) the Company and Synopsys are entering into an Investor Rights Agreement (the "Investor Rights Agreement"), a Joint Marketing Agreement (the "JMA"), a Cooperative Development Agreement (the "Development Agreement"), and a Sematech Development Subcontract (the "Sematech Agreement"), each dated the date of this agreement. NOW, THEREFORE, the parties, intending to be legally bound, hereby agree as follows: SECTION 1 Sale of Common Stock 1.1 The Company hereby issues and sells to Synopsys, and Synopsys hereby purchases from the Company, the Company Shares at a price of $14.50 per share. Synopsys acknowledges receipt of a stock certificate evidencing the Company Shares, bearing the legend referred to in Section 4.2(a) and standing in Synopsys' name. The Company acknowledges receipt from Synopsis of $2,324,234.00, representing payment in full for the Company Shares. 2 1.2 Each of the Selling Stockholders hereby sells to Synopsys, and Synopsys hereby purchases from such Selling Stockholder the number of Shares set forth opposite such Selling Stockholder's name under the caption "No. of Shares Sold" on Exhibit A at a price of $14.50 per share. Synopsys acknowledges receipt from each Selling Stockholder of a stock certificate evidencing the number of Shares set forth opposite such Selling Stockholder's name on Exhibit A under the caption "No. of Shares Sold" together with a stock power properly endorsed for transfer of such certificate to Synopsys. Each Selling Stockholder acknowledges receipt from Synopsys of the amount set forth opposite such Selling Stockholder's name on Exhibit A under the caption "Total Purchase Price" representing payment in full for such Shares. SECTION 2 Representations and Warranties of the Company and the Selling Stockholders Each of the Company and the Selling Stockholders, severally and not jointly, represents and warrants to Synopsys that, except as set forth in the CCT Disclosure Letter dated the date of this agreement, initialed on behalf of the Company and Synopsys and delivered to Synopsys, which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1 Organization and Standing; Certificate and Bylaws . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority, and all governmental licenses, authorizations, consents and approvals required, to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify, individually or in the aggregate, would have a material adverse effect on the assets, condition or prospects of the Company, financial or otherwise (a "Material Adverse Effect"). As of the date of this agreement, the Certificate of Incorporation and the Bylaws of the Company shall be in the form previously provided to Synopsys or its counsel. 2.2 Authorization . (a) The Company has all requisite corporate power and authority to execute and deliver, and to consummate the transactions contemplated by, this agreement, the Investor Rights Agreement, the JMA, the Development Agreement and the Sematech Agreement (collectively with the CCT Disclosure Letter referred to above, the "Transaction Documents"). All corporate action on the part of the Company, its officers, directors and stockholders necessary for (i) the execution and delivery of, and the consummation of the transactions contemplated by, the Transaction Documents, (ii) the performance of all obligations of the Company under the Transaction Documents, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Company Shares, has been taken. The Transaction Documents, upon execution and delivery by the Company, and, to the extent that they are parties thereto, the Selling Stockholders, and assuming the due and proper execution and delivery by Synopsys, constitute legal, valid and binding obligations of the Company, enforceable in -2- 3 accordance with their respective terms, except as may be limited by (x) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, and (y) the effect of rules of law governing the availability of equitable remedies. (b) The Company Shares, when issued and paid for in compliance with the provisions of this agreement, will be validly issued, fully paid and nonassessable and will be free of any liens or encumbrances known to, or caused or created by, the Company or any of the Selling Stockholders. (c) No entity has any right of first refusal or any preemptive right in connection with the issuance of the Shares or any future issuances of securities by the Company, except as set forth in the Transaction Documents. 2.3 Capitalization . The authorized capital stock of the Company consists of 30,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock. As of May 3, 1996, there are issued and outstanding 12,241,929 shares of Common Stock and no shares of Preferred Stock. There are no outstanding rights, employee benefit plans, options, warrants, conversion rights or agreements for the purchase or acquisition from the Company of any shares of its capital stock, except (i) the 4,184,099 shares of Common Stock reserved for issuance under the Company's 1989 Stock Option Plan, 1993 Equity Incentive Plan, 1995 Directors Stock Option Plan and 1995 Employee Stock Purchase Plan and the rights of the Company under such plans, (ii) the Company Shares reserved for issuance pursuant to this agreement, and (iii) as set forth in the Transaction Documents. 2.4 Subsidiaries . The Company does not own or control, directly or indirectly, any equity interest in any other corporation, limited liability company, partnership, or other entity. 2.5 Consents and Authorizations . (a) No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the execution, delivery and performance of, and the consummation of the transactions contemplated by, the Transaction Documents, except for such filings as may be required to be made with the Securities and Exchange Commission (the "Commission") and the National Association of Securities Dealers, Inc. (the "NASD"). (b) No consent, approval, waiver or other action by any entity under any material contract, agreement, indenture, lease, instrument or other document to which the Company is a party or by which it is bound is required or necessary for the execution, delivery and performance of, or the consummation of the transactions contemplated by, any of the Transaction Documents by the Company. -3- 4 2.6 No Conflict . The execution and delivery of the Transaction Documents do not, and the consummation of the transactions contemplated thereby will not, (i) conflict with any provision of the Certificate of Incorporation or Bylaws of the Company, or (ii) result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company, its properties or assets, which, individually or in the aggregate, would have a Material Adverse Effect on the Company or materially impair or restrict its power to perform its obligations as contemplated by the Transaction Documents. 2.7 Accuracy of Reports . The Company's Registration Statement on Form S-1, as amended and declared effective by the Commission on October 30, 1995, and all reports required to be filed by the Company thereafter to the date of this agreement under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), copies of which have been furnished to Synopsys or its counsel, have been duly filed, were in compliance with the requirements of their respective forms, and contained as of their respective dates no untrue statement of a material fact nor omitted to state a material fact necessary in order to make the statements made therein in light of the circumstances in which made not misleading. 2.8 Financial Statement and Changes . The Company has delivered to Synopsys the Company's consolidated balance sheets as of December 31, 1993, 1994, and 1995 and the related statements of operations, stockholders' equity and changes in financial position and notes thereto for the fiscal years ended on December 31, 1993, 1994, and 1995, all of which (the "Audited Financial Statements") are accompanied by the related audit opinion(s) of the Company's independent certified public accountants. The Audited Financial Statements, including, without limitation, the notes thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the fiscal years covered by such statements (except as may be stated in the notes to such statements or the related report(s) of such accountants). The Company has delivered to Synopsys the Company's unaudited consolidated balance sheet as of March 31, 1996, and the related statement of operations for the fiscal quarter ended on March 31, 1996 (the "Unaudited Financial Statements" and, together with the Audited Financial Statements, the "Financial Statements"). The Unaudited Financial Statements have been prepared in accordance with generally accepted accounting principles applied on the same basis as applied in the Audited Financial Statements, except that the Unaudited Financial Statements (i) are subject to normal year-end adjustments, which adjustments will not individually or on the aggregate be material, and (ii) do not contain all footnotes required under generally accepted accounting principles. The Financial Statements present fairly the Company's financial condition, results of operations and changes in financial position as of the dates and for the periods indicated. Except as otherwise disclosed herein or in Financial Statements, since March 31, 1996, there has not been: -4- 5 (a) any change in the assets, liabilities, financial condition or operations of the Company from that reflected in the Financial Statements except changes in the ordinary course of business that have not, individually or in the aggregate, had a Material Adverse Effect on the Company; (b) any change, except in the ordinary course of business, in the contingent obligations of the Company that would be required by generally accepted accounting principles to be reflected in the Financial Statements if the Financial Statements were prepared as of and for the period ended on the date of this agreement; (c) any damage, destruction or loss, whether or not covered by insurance, that had a Material Adverse Effect on the Company; (d) any declaration or payment of any dividend or other distribution of the assets of the Company; (e) any labor organization activity; or (f) to the best of the Company's knowledge, any other events or conditions of any character that, individually or in the aggregate, have had a Material Adverse Effect on the Company. 2.9 Litigation . There is no action, suit, proceeding or investigation pending or, to the best knowledge of the Company and the Selling Stockholders, currently threatened against (i) the Company or any of its employees or prospective employees to whom the Company has issued an offer letter that is outstanding as of the date of this agreement ("Proposed Employees") that questions the validity of any of the Transaction Documents or the right of the Company to enter into any of them or to consummate the transactions contemplated thereby, or (ii) the Company or any of its employees or Proposed Employees that might result, either individually or in the aggregate, in any Material Adverse Effect on the Company or any change in the current equity ownership of the Company, nor, to the best knowledge of the Company and the Selling Stockholders, is there any valid basis for the foregoing. The foregoing includes, without limitation, actions pending or threatened (or any valid basis therefor known to the Company or the Selling Stockholders) involving the prior employment of any of the Company's employees or Proposed Employees, their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company currently intends to initiate. To the best knowledge of the Company and the Selling Stockholders, none of the employees or Proposed Employees of the Company is obligated under any contract (including, without limitation, licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any -5- 6 court or administrative agency, that interferes with the use of his or her best efforts to promote the interests of the Company, or that conflicts with the business of the Company as currently conducted and as proposed to be conducted. 2.10 Offering . Subject in part to the accuracy of Synopsys' representations set forth in Section 4, the offer, issuance and sale of the Shares as contemplated by this agreement is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the registration, qualification or compliance requirements of any applicable blue sky or other state securities laws. 2.11 Registration Rights . Other than as granted pursuant to the Transaction Documents and that certain Rights Agreement dated May 11, 1995, among the Company and certain investors, the Company has not granted any currently outstanding rights to register (as that term is defined in the Investor Rights Agreement), or agreed to grant any rights to register, its securities to any entity. 2.12 Disclosure . No representation or warranty by the Company in the Transaction Documents, or in any document or certificate furnished or to be furnished to Synopsys pursuant thereto or in connection with the transactions contemplated thereby, when taken together, contains, or in the case of documents and certificates to be furnished subsequent to the date of this agreement will contain, any untrue statement of a material fact or omits, or in the case of documents and certificates to be furnished subsequent to the date of this agreement will omit to state, a material fact necessary to make the statements made herein and therein, in the light of the circumstances under which they were made, not misleading. SECTION 3 Additional Representations and Warranties of the Selling Stockholders . Each of the Selling Stockholders, severally and not jointly, represents and warrants to Synopsys as follows: 3.1 Ownership . Such Selling Stockholder is the owner, beneficially and of record, of all the Shares to be sold to Synopsys by such Selling Stockholder pursuant to this agreement and holds such Shares free and clear of any liens, encumbrances, security agreements, options, claims, charges or restrictions of any nature whatsoever except for restrictions imposed by state and federal securities laws. 3.2 Authority . Such Selling Stockholder has the full legal power and authority to sell and deliver such Selling Stockholder's Shares as provided in this agreement. The Transaction Documents, upon execution and delivery by the Company, and, to the extent that they are parties thereto, the Selling Stockholders, and assuming the due and proper execution and delivery by Synopsys, constitute legal, valid and binding obligations of such Selling Stockholder, enforceable in accordance -6- 7 with their respective terms, except as may be limited by (x) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, and (y) the effect of rules of law governing the availability of equitable remedies. 3.3 Title . The delivery of the certificates representing such Selling Stockholder's Shares pursuant to this agreement will convey marketable title to such shares, free and clear of any security interests, claims, liens, equities or other encumbrances. 3.4 Investigation; Access to Information . Such Selling Stockholder acknowledges that he has investigated the business, financial condition and prospects of the Company and has had access to such information concerning the Company's business and prospects as he has deemed necessary or desirable to reach an informed and knowledgeable decision to enter into this agreement and to sell his Shares in accordance with the terms hereof. Such Selling Stockholder's decision has not been based upon any representation or warranty made by the Company or by any officer, director, employee or agent of the Company, with respect to any matter including, without limitation: (i) any projected or estimated future financial performance of the Company, or (ii) any estimate of the current or future value of the Common Stock. 3.5 Disclosure . No representation or warranty by such Selling Stockholder in the Transaction Documents, or in any document or certificate furnished or to be furnished to Synopsys pursuant thereto or in connection with the transactions contemplated thereby, when taken together, contains, or in the case of documents and certificates to be furnished subsequent to the date of this agreement will contain, any untrue statement of a material fact or omits, or in the case of documents and certificates to be furnished subsequent to the date of this agreement will omit, to state a material fact necessary to make the statements made herein and therein, in the light of the circumstances under which they were made, not misleading. SECTION 4 Representations and Warranties of Synopsys; Legends; Transfer Restrictions 4.1 Representations and Warranties of Synopsys . Synopsys represents and warrants to the Company and each of the Selling Stockholders as follows: (a) Synopsys is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) Synopsys has all requisite corporate power and authority to execute and deliver, and to consummate the transactions contemplated by, the Transaction Documents. All corporate action on the part of Synopsys, its officers, directors and stockholders necessary for (i) the execution and delivery of, and the consummation of the transactions contemplated by, the Transaction -7- 8 Documents, and (ii) the performance of all obligations of Synopsys under the Transaction Documents, has been taken. The Transaction Documents, upon execution and delivery by Synopsys and assuming the due and proper execution and delivery by the Company and, to the extent they are parties thereto, the Selling Stockholders, constitute legal, valid and binding obligations of Synopsys, enforceable in accordance with their respective terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, and (ii) the effect of rules of law governing the availability of equitable remedies. (c) No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the execution, delivery and performance of, and the consummation of the transactions contemplated by, the Transaction Documents, except for such filings as may be required to be made with the Commission and the NASD. (d) No consent, approval, waiver or other action by any entity under any material contract, agreement, indenture, lease, instrument or other document to which Synopsys is a party or by which it is bound is required or necessary for the execution, delivery and performance of, or the consummation of the transactions contemplated by, any of the Transaction Documents by Synopsys. (e) The Shares will be acquired for Synopsys' own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act. (f) Synopsys understands that the Shares have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, that the Company has no present intention of registering the Securities, that the Shares must be held by Synopsys indefinitely, and that Synopsys must therefore bear the economic risk of its investment indefinitely, unless a subsequent disposition thereof is registered under the Securities Act or is exempt from registration thereunder. (g) Synopsys is an "accredited investor", as that term is defined in Regulation D promulgated under the Securities Act. (h) Synopsys has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Shares. Synopsys further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares, and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Synopsys or to which the Synopsys had access. -8- 9 (i) Synopsys (i) has experience as an investor in securities of companies and acknowledges that it is able to fend for itself, can bear the economic risk of its investment in the Shares and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the Shares and protecting its own interests in connection with this investment and/or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Synopsys to be aware of the character, business acumen and financial circumstances of such persons. 4.2 Legends . Each certificate or instrument representing Shares shall bear legends in substantially the following forms: (a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') AND ARE 'RESTRICTED SECURITIES' AS DEFINED IN RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR (II) IN COMPLIANCE WITH RULE 144, OR (III) PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SUCH SALE, OFFER OR DISTRIBUTION." (b) "THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR RIGHTS AGREEMENT BETWEEN THE ISSUER OF THESE SECURITIES AND THE ORIGINAL HOLDER OF SUCH SHARES DATED AS OF MAY 6, 1996, A COPY OF WHICH IS AVAILABLE FOR EXAMINATION AT THE ISSUER'S PRINCIPAL OFFICE." (c) Any other legends required by California law or other applicable blue sky or state securities laws. The Company need not register a transfer of any Shares, and may also instruct its transfer agent not to register a transfer of any Shares, unless the conditions specified in the foregoing legends are satisfied to the extent applicable. -9- 10 4.3 Removal of Legends and Transfer Restrictions . (a) Any legend endorsed on a certificate or instrument pursuant to Section 4.2(a) and the stop transfer instructions with respect to the Shares evidenced thereby shall be removed and the Company shall issue a certificate or instrument without such legend to the holder thereof if such Shares are registered under the Securities Act and a prospectus meeting the requirements of Section 10 of the Securities Act is available, if such legend may be properly removed under the terms of Rule 144 promulgated under the Securities Act or if such holder provides the Company with an opinion of counsel for such holder reasonably satisfactory to legal counsel for the Company to the effect that a sale, transfer or assignment of such Shares may be made without registration. (b) Any legend endorsed on a certificate or instrument pursuant to Section 4.2(b) and the stop transfer instructions with respect to the Shares evidenced thereby shall be removed upon the expiration or earlier termination in accordance with its terms of the Investor Rights Agreement. (c) Any legend endorsed on a certificate or instrument pursuant to Section 4.2(c) and the stop transfer instructions with respect to the Shares evidenced thereby shall be removed upon receipt by the Company of an order of the appropriate state securities authority authorizing such removal, which order the Company shall seek in a timely manner in those circumstances in which such order is appropriate in the Company's reasonable opinion. SECTION 5 Covenants of the Parties 5.1 No Objection . Provided Synopsys is in compliance with and has performed all covenants, agreements and conditions contained in this agreement to be performed by Synopsys, the Company shall not interpose any objection or take any legal action as a plaintiff in connection with the acquisition by Synopsys of such number of shares of Common Stock as is permitted to be owned by Synopsys pursuant to the Transaction Documents. 5.2 Sale of Additional Shares . The Company shall take such action as is reasonably necessary, subject to compliance with applicable law, to issue and sell to Synopsys any additional shares which Synopsys shall be entitled to purchase from the Company pursuant to the Transaction Documents. 5.3 Equity Method Accounting . If Synopsys desires at some date to account for its investment in the Company under the equity method, the Company will furnish to Synopsys all information that is required by generally accepted accounting principles to enable Synopsys so to account. To the extent reasonably requested by Synopsys, the Company shall provide information -10- 11 regarding the Company to, and otherwise cooperate with, Synopsys so as to enable Synopsys to prepare financial statements in accordance with accounting principles generally accepted in the United States and to comply with its reporting requirements under applicable United States securities laws and regulations. 5.4 Publicity . The Company and Synopsys will not, and will not permit any of their respective affiliates to, issue or cause the issuance of any press release or other public announcement with respect to the transactions contemplated by the Transaction Documents without the prior consent of the other party, except as required to comply with applicable securities laws. None of the Selling Stockholders will issue or cause the issuance of any such press release or other public announcement, except in his position as an officer on behalf of the Company in accordance with the preceding sentence. 5.5 Securities Law Filings . Synopsys will use reasonable commercial efforts to make all filings regarding its ownership of the Shares as may required by applicable securities laws. The Company will use reasonable commercial efforts promptly to make available to Synopsys any information regarding the Company necessary to make such filings. 5.6 Exemption . None of the parties, directly or through any authorized agent acting on its behalf, will take any action that would cause the loss of the exemption from registration referred to in Section 2.10. SECTION 6 Miscellaneous 6.1 Waivers and Amendments . Neither this agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 6.2 Governing Law . This agreement shall be governed by and construed in accordance with the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California. 6.3 Survival . The representations, warranties, covenants and agreements made herein shall survive the execution of this agreement and the closing of the transactions contemplated hereby, except that the representations and warranties of the Company and the Selling Stockholders made in Section 2, the representations and warranties of the Selling Stockholders made in Section 3 and the representation and warranties of Synopsys made in Section 4 shall expire on the first anniversary of the date of this agreement. -11- 12 6.4 Successors and Assigns . Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 6.5 Entire Agreement . The Transaction Documents and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects thereof. 6.6 Notices, etc . All notices and other communications required or permitted hereunder shall be in writing and shall be sent by facsimile, overnight courier or mailed by certified or registered mail, postage prepaid, return receipt requested, to the facsimile number or address as follows: Company: Cooper & Chyan Technology, Inc. 1601 South De Anza Boulevard Cupertino, California 95014 Telephone: (408) 342-5518 Facsimile: (408) 342-5650 Attention: Mr. John R. Harding, President with a copy (which will not constitute notice) to: Fenwick & West Two Palo Alto Square, Suite 800 Palo Alto, California 94306 Telephone: (415) 494-0600 Facsimile: (415) 857-0361 Attention: Gordon Davidson, Esq. Selling c/o Cooper & Chyan Technology, Inc. Stockholders: 1601 South De Anza Boulevard Cupertino, California 95014 Telephone: (408) 342-5518 Facsimile: (408) 342-5650 Synopsys: Synopsys, Inc. 700 East Middlefield Road Mountain View, California 94043-4033 Telephone: (415) 962-5000 Facsimile: (415) 694-4087 Attention: Paul Lippe, Vice President, Legal -12- 13 with a copy (which will not constitute notice) to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304-1050 Telephone: (415) 493-9300 Facsimile: (415) 493-6811 Attention: Thomas C. DeFilipps, Esq. or to such other facsimile number or address provided to the parties to this agreement in accordance with this Section 6.6. Such notices or other communications shall be deemed delivered upon receipt, in the case of overnight delivery or facsimile transmission (as evidenced by the confirmation thereof), or 3 days after deposit in the mails (as determined by reference to the postmark). 6.7 Severability . In case any provision of this agreement shall be declared invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 6.8 Finder's Fees . (a) The Company and each of the Selling Stockholders (i) represents and warrants to Synopsys that none of the Company or the Selling Stockholders has retained any finder or broker in connection with any of the transactions contemplated by the Transaction Documents, and (ii) agree to indemnify and to hold Synopsys harmless of and from any liability for any commission or compensation in the nature of a finder's fee to any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which the Company, or any of its employees or representatives, or any of the Selling Stockholders are responsible. (b) Synopsys (i) represents and warrants to the Company and each of the Selling Stockholders that it has not retained any finder or broker in connection with the transactions contemplated by the Transaction Documents, and (ii) agrees to indemnify and to hold the Company and the Selling Stockholders harmless of and from any liability for any commission or compensation in the nature of a finder's fee to any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which it, or any of its employees or representatives, are responsible. 6.9 Expenses . Each party will bear its own expenses with respect to the origination, negotiation, documentation and consummation of the transactions contemplated by the Transaction Documents. 6.10 Counterparts . This agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. -13- 14 6.11 Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to a party upon any breach or default of another party under this agreement shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on a party's part of any breach or default under this agreement or any waiver on such party's part of any provisions or conditions of this agreement must be in writing and will be effective only to the extent specifically set forth in such writing, and all remedies, either under this agreement, or by law or otherwise afforded to the parties, will be cumulative and not alternative. 6.12 Limitation of Liability . Notwithstanding anything to the contrary in this agreement, the liability of a Selling Stockholder for breaches of his representations and warranties in Sections 2 and 3, other than breaches resulting from fraud or willful misrepresentation by such Selling Stockholder, will be limited to the amount set forth opposite such Selling Stockholder's name under the caption "Total Purchase Price" on Exhibit A . -14- 15 IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement as of the date first above written. COOPER & CHYAN TECHNOLOGY, INC. By: /s/ John R. Harding ------------------------------------ John R. Harding, President /s/ John F. Cooper ---------------------------------------- John F. Cooper /s/ David Chyan ---------------------------------------- David Chyan /s/ John R. Harding ---------------------------------------- John R. Harding /s/ William Portelli ---------------------------------------- William Portelli /s/ Robert D. Selvi ---------------------------------------- Robert D. Selvi SYNOPSYS, INC. By: /s/ Paul Lippe ------------------------------------- Name: Paul Lippe ---------------------------------- Title: VP, Business Development --------------------------------- -15- 16 EXHIBIT A Selling Stockholders
No. of Price Total Name Shares Sold Per Share Purchase Price ---- ----------- --------- -------------- John F. Cooper 648,250 $14.50 $ 9,399,625 David Chyan 296,000 $14.50 $ 4,292,000 John R. Harding 57,000 $14.50 $ 826,500 William Portelli 22,500 $14.50 $ 326,250 Robert D. Selvi 22,500 $14.50 $ 326,250 ------- ----------- TOTAL: 1,046,250 $15,170,625 ========= ===========
17 EXHIBIT B Legal Opinion of Counsel to the Company 18 May 6, 1996 Synopsys, Inc. 700 East Middlefield Road Mountain View, California 94043-4033 Re: Sale of 1,206,542 shares of Common Stock of Cooper & Chyan Technology, Inc. ---------------------------------------- Ladies and Gentlemen: We have acted as counsel for Cooper & Chyan Technology, Inc., a Delaware corporation (the "Company"), in connection with the sale of an aggregate of 1,206,542 shares (the "Shares") of the Company's Common Stock ("Common Stock") to be sold on the date hereof, of which 160,292 shares (the "Company Shares") are to issued and sold by the Company and an aggregate of 1,046,250 shares (the "Selling Stockholder Shares") are to be sold by certain stockholders of the Company (collectively, the "Selling Stockholders") who are listed in Exhibit A to that certain Stock Purchase Agreement (the "Purchase Agreement"), dated May 6, 1996, among the Company, the Selling Stockholders and Synopsys, Inc., a Delaware corporation ("Synopsys" or "you"). The Shares are being purchased today by Synopsys pursuant to the terms of, and this opinion is being delivered to you in connection with, the Purchase Agreement. Unless otherwise defined in this opinion or the context otherwise requires, all capitalized terms used in this opinion shall have the meanings given to such terms in the Purchase Agreement. The Purchase Agreement, together with the Investor Rights Agreement of even date therewith and referred to therein, are collectively referred to herein as the "Investment Agreements." To render this opinion, we have examined the documents referred to, and made the investigation described, below. We have not independently verified any information obtained from third persons. As to matters of fact, we have relied solely upon our actual knowledge, the information obtained from public officials and public records that is set forth below, and representations contained in the Purchase Agreement or made by representatives of the Company, including, without limitation, those representations set forth in the Management Certificate referred to below. The documents we have examined in rendering this opinion, and upon which we have relied, are the following: (a) The Certificate of Incorporation of the Company, as filed with the Secretary of State of Delaware on August 9, 1995. 19 Synopsys, Inc. May 6, 1996 Page 2 (b) The Company's Certificate of Designation of Series A Preferred Stock, as filed with the Secretary of State of the State of Delaware on August 24, 1995, and as amended by the Company's Certificate of Elimination filed with the Secretary of State of the State of Delaware on November 6, 1995. (c) The Bylaws of the Company, as amended, certified to be true and correct by the Secretary of the Company on November 8, 1995. (d) The minutes of meetings and actions by written consent of the stockholders and Board of Directors of the Company and its predecessor, Cooper & Chyan Technology, Inc., a California corporation ("CCT California"), contained as of the date of this opinion in the minute books of the Company and CCT California in our possession. (e) The Agreement and Plan of Merger dated as of September 25, 1995 between the Company and CCT California. (f) A certificate of good standing from the Office of the Secretary of State of the State of Delaware dated as of April 29, 1996. (g) The Purchase Agreement. (h) The Investor Rights Agreement. (i) The other certificates and documents delivered by or on behalf of the Company, the Selling Stockholders and Synopsys at the Closing. (j) A Management Certificate addressed to us executed by the Company dated May 6, 1996, a copy of which has been delivered to your counsel. In our examination, we have assumed, and express no opinion as to, the authenticity of all documents submitted to us as originals, the genuineness of all signatures on original documents, the genuineness of certificates of public officials, the conformity to original documents of all documents submitted to us as copies thereof, the completeness of all documents submitted to us, the lack of any undisclosed terminations, modifications, waivers or amendments to any agreements or documents reviewed by us and (except with respect to the execution and delivery by the Company of the Investment Agreements) the due and valid execution and delivery of all documents by all parties thereto where due execution and delivery are prerequisites to the effectiveness thereof. In rendering this opinion we have also assumed the validity of all signatures of the Selling Stockholders and the legal competency and capacity of each of the Selling Stockholders to make and enter into contracts, and for all other purposes. For the purposes of this opinion, we have also assumed that (a) Synopsys has all requisite power and authority, and has taken any and all corporate or other action necessary, for the due authorization by Synopsys of the execution and delivery of the Investment Documents and the performance by Synopsys of all its obligations thereunder, (b) Synopsys has paid for all 20 Synopsys, Inc. May 6, 1996 Page 3 the Shares as provided in the Purchase Agreement and has fully performed all the other obligations that Synopsys is to perform under the Purchase Agreement at or before the Closing, and (c) the representations and warranties of Synopsys in the Purchase Agreement are true and complete. A matter stated in this opinion to be "to our knowledge," refers only to the knowledge of those attorneys currently within the firm who have furnished legal services to the Company in connection with the Purchase Agreement and the transactions contemplated therein, and is so stated to reflect the fact that, while nothing has come to our attention that causes us to believe that the matter stated is factually inaccurate (based on information we have as a result of representing the Company in connection with the Purchase Agreement and the transactions contemplated therein), we have made no independent factual investigation with respect to such statement or matter other than as described above. The opinions expressed below are also qualified by, subject to, and we render no opinion with respect to, the limitations and exceptions to the enforceability of or the binding nature of contracts and obligations in general, including, without limitation: (a) the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance and other similar laws relating to or affecting the rights of creditors generally; (b) the effect of general principles of equity and similar principles, including, without limitation, concepts of materiality, reasonableness, good faith, fair dealing and unconscionability; (c) the possible unavailability of the remedies of specific performance, injunctive relief or other equitable remedies, regardless of whether considered in a proceeding in equity or at law, and the effect of public policy; (d) the validity, legality or enforceability of the indemnification provisions of the Investor Rights Agreement; and (e) compliance by the Company, the Selling Stockholders or Synopsys with antifraud provisions of applicable state and federal statutes, rules and regulations concerning the issuance or sale of securities. We are admitted to practice law in the State of California, and we express no opinion herein as to any laws other than the existing laws of the State of California, the General Corporation Law of the State of Delaware and the existing federal securities laws of the United States, and we express no opinion with respect to the application or effect of the laws of any other jurisdiction. In rendering the opinions below, we are opening only as to the specific legal issues expressly set forth herein, and no opinion shall be inferred as to any other matters. We also call your attention to the fact that under various reports published by committees of the State Bar of California, certain assumptions, qualifications and exceptions are implicit in opinions of lawyers. Although we have expressly set forth certain assumptions, qualifications and exceptions herein, we are not limiting or omitting any others set forth in the various reports or otherwise deemed standard for practice by lawyers in the State of California. 21 Synopsys, Inc. May 6, 1996 Page 4 Based upon and subject to the foregoing, and subject to the qualifications and exceptions contained herein, we are of the opinion that: 1. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has the requisite corporate power to carry on its business as now conducted. 2. The Company has all requisite corporate power and corporate authority to execute and deliver the Investment Agreements, to sell and issue the Company Shares, and to otherwise carry out and perform its obligations under the terms of the Investment Agreements. 3. The Investment Agreements have been duly and validly authorized, executed and delivered by the Company, and each constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its respective terms. 4. The Company Shares have been duly authorized and will be validly issued, fully paid and non-assessable when issued and paid for as contemplated by the Purchase Agreement. The Selling Stockholder Shares have been duly authorized and validly issued and are non-assessable and are, to our knowledge, fully paid. 5. The offer and sale of the Shares are (i) exempt from the registration provisions of the Securities Act of 1933, as amended, and (ii) exempt from the qualification requirements of the California Corporate Securities Law of 1968, as amended. This opinion is furnished to you by us as counsel for the Company, is intended solely for your use and benefit in connection with the Purchase Agreement and is not to be made available to or relied upon by you for any other purpose or by other persons or entities, whether or not named in the Purchase Agreement, without our prior written consent. This opinion is given as of the date first written above. We assume no obligation to advise you of facts, circumstances, events or changes in the law that may hereafter be brought to our attention that may alter, affect or modify the opinions expressed herein. Very truly yours, FENWICK & WEST By: ----------------------------- EX-4.02 3 INVESTOR RIGHTS AGREEMENT 1 EXHIBIT 4.02 INVESTOR RIGHTS AGREEMENT This INVESTOR RIGHTS AGREEMENT is made as of May 6, 1996, by COOPER & CHYAN TECHNOLOGY, INC., a Delaware corporation (the "Company"), SYNOPSYS, INC, a Delaware corporation ("Synopsys"), and, solely for purposes of Sections 7.1, 7.2 and 9, JOHN F. COOPER, DAVID CHYAN, JOHN R. HARDING, WILLIAM PORTELLI and ROBERT D. SELVI, individuals (the "Selling Stockholders"). Recitals The Company and the Selling Stockholders propose to sell to Synopsys, and Synopsys desires to purchase, in aggregate 1,206,542 shares of the Company's Common Stock pursuant to a Stock Purchase Agreement dated as of even date herewith, as it may be amended (the "Purchase Agreement") and in connection therewith desire to enter into this agreement. NOW, THEREFORE, the parties, intending to be legally bound, hereby agree as follows: SECTION 1 Certain Definitions As used in this agreement: 1.1 "Acquisition" means any of the events set forth in Section 7.1 (a) and (b). 1.2 "Common Stock" means the Common Stock of the Company, par value $0.01 per share. 1.3 "Dilutive Securities" shall mean any Voting Stock, whether now authorized or not; provided, however, that the term "Dilutive Securities" does not include: (a) any shares of Common Stock issued under the Purchase Agreement; (b) any securities issued in connection with any stock split, stock dividend or similar event in which Synopsys is entitled to participate on a pro rata basis; (c) any securities for which the issuance gave rise to the Right of Participation (regardless of whether any such right was exercised); and (d) any securities issuable upon the exercise, conversion or exchange of any securities described in Section 1.3(b) or (c) above. 1.4 The terms "Holder" and "Holders" mean any person or persons, respectively, to whom Registrable Securities have been or will be originally issued and/or sold and who execute and deliver this agreement and qualifying transferees under Section 2.8 who hold Registrable Securities. As of the date of this agreement, Synopsys is a Holder. 2 1.5 "Initiating Holder(s)" means any Holder or Holders of in aggregate at least 25% of the Registrable Securities that have not been resold to the public in a registered public offering, so long as such Holder or Holders hold in aggregate at least 50,000 Registrable Securities. 1.6 "Market Price" means, with respect to any securities of the Company on a given day, the closing price quoted on the Nasdaq National Market, or, if the securities are then traded on a national securities exchange, the last sale price on such day, or, if on such day such security is not quoted on the Nasdaq National Market or a national securities exchange, the Market Price shall be the fair value thereof determined jointly by the Company and Synopsys. 1.7 "New Securities" means any Voting Stock, whether now authorized or not, and rights, options or warrants to purchase such Voting Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into such Voting Stock; provided, however, that the term "New Securities" does not include: (a) any shares of the Company's Common Stock (and/or options or warrants therefor) issued to employees, officers, directors, contractors, advisors or consultants of the Company pursuant to incentive agreements or incentive plans approved by the Board of Directors of the Company; (b) any shares of Common Stock issued under the Purchase Agreement; (c) up to 5,409 shares of Common Stock purchased by Synopsys pursuant to the first Maintenance Notice; (d) any securities issued in connection with any stock split, stock dividend or other similar event in which Synopsys is entitled to participate on a pro rata basis; (e) any securities issued upon the exercise, conversion or exchange of any outstanding security, if such outstanding security constituted a New Security; and (f) any securities issued pursuant to the acquisition of another entity by the Company by consolidation, merger, purchase of assets, or other reorganization in which the Company acquires, in a single transaction or series of related transactions, substantially all of the assets of such other entity or 50% or more of the voting power of such other entity or 50% or more of the equity ownership of such other entity. 1.8 "Other Registrable Securities" means all shares that are Registrable Securities, as that term is defined in that certain Rights Agreement dated May 11, 1995, among the Company and certain investors. 1.9 Synopsys' "Prior Percentage Interest" means, with respect to a Maintenance Notice (as defined in Section 5.4), the ratio of: -2- 3 (a) (i) the number of shares of Common Stock held by Synopsys as of the date of such Maintenance Notice that Synopsys purchased pursuant to (x) the Purchase Agreement, (y) prior exercises of the Right of Participation, or (z) prior exercises of the Right of Maintenance, plus (ii) with respect to the first Maintenance Notice only, 5,409 shares of Common Stock, to (b) the difference between (i) the total number of shares of Voting Stock outstanding on the date of such Maintenance Notice, and (ii) the total number of Dilutive Securities issued since the later of the date of this agreement or, if applicable, the date of the last Maintenance Notice, excluding any Maintenance Securities, as defined in Section 5.1, issued pursuant to the last Maintenance Notice. 1.10 "Pro Rata Share" means the ratio of: (a) (i) the number of shares of Common Stock then held by Synopsys that Synopsys purchased pursuant to (x) the Purchase Agreement, (y) prior exercises of the Right of Participation, or (z) prior exercises of the Right of Maintenance, plus (ii) until the earlier of the date on which Synopsys first purchases Maintenance Securities or the date 15 days after Synopsys receives its first Maintenance Notice, 5,409 shares of Common Stock, to (b) the difference between (i) the total number of shares of Voting Stock then outstanding (immediately prior to the issuance of New Securities giving rise to the Right of Participation), and (ii) the number of Dilutive Securities issued since the date of the last Maintenance Notice, excluding any Maintenance Securities issued pursuant to the last Maintenance Notice. 1.11 The terms "register", "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of the effectiveness of such registration statement. 1.12 "Registrable Securities" means any and all shares of Common Stock of the Company that have not been resold to the public that are (i) sold to the Holder by the Company or the Selling Stockholders pursuant to the Purchase Agreement, (ii) not more than 5,409 shares of Common Stock sold to the Holder by the Company pursuant to the first Maintenance Notice, (iii) issued or issuable with respect to or in any exchange for or replacement of securities referred to in this sentence, or (iv) issued or issuable in respect of securities referred to in this sentence as a result of a stock split, stock dividend or the like. 1.13 "Securities Act" means the Securities Act of 1933, as amended. 1.14 "Voting Power" of any Voting Stock, as defined below, means the number of votes such Voting Stock is entitled to cast for the election of directors of the Company (other than votes that may be cast only upon the happening of a contingency). 1.15 "Voting Stock" means the Common Stock and any other securities issued by the Company having the ordinary power to vote in the election of directors of the Company (other than securities having such power only upon the happening of a contingency). -3- 4 SECTION 2 Registration Rights 2.1 Requested Registration. (a) Request for Registration. Initiating Holders of Registrable Securities shall have the right to request an unlimited number of registrations on Form S-3 (such requests shall be in writing and shall state the number of Registrable Securities to be disposed of and the intended method of disposition of such Registrable Securities by such Holder), on the terms and subject to the conditions of this Section 2. In case the Company shall receive from the Initiating Holder(s) a written request that the Company effect any registration with respect to all or a part of the Registrable Securities, the Company will: (i) within 10 days after the receipt thereof give written notice of the proposed registration to all other Holders; and (ii) as soon as practicable, use its best efforts to effect all such registrations (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualifications under the applicable blue sky or other state securities laws and appropriate compliance with exemptive regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request given within 20 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to take any action to effect such registration pursuant to this Section 2: (w) if Form S-3 is not available for such offering by the Holders(s); (x) if the Holder or Holders requesting registration propose to dispose of Registrable Securities having an aggregate disposition price (before deduction of underwriting discounts and expenses of sale) less than $1,500,000; (y) with respect to more than two registrations pursuant to this Section 1.2 in any 12-month period; or (z) if the Company shall furnish to the Holder(s) a certificate signed by the President of the Company certifying that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration on Form S-3 to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement no more than once during any twelve-month period for a period of not more than 90 days. -4- 5 Subject to the foregoing clauses (w), (x), (y) and (z), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practical, but in any event not later than 90 days after receipt of the request or requests of the Initiating Holder(s). (b) Underwriting. If the Initiating Holder(s) intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1 and the Company shall include such information in the written notice referred to in Section 2.1(a)(i). In such event, if so requested in writing by the Company, the Initiating Holder(s) shall negotiate in good faith with an underwriter or underwriters selected by the Company with regard to the underwriting of such requested registration; provided, however, that if a majority in interest of the Initiating Holder(s) have not agreed with such underwriter or underwriters as to the terms and conditions of such underwriting within 20 days following commencement of such good faith negotiations, a majority in interest of the Initiating Holder(s) may select a an underwriter or underwriters of their choice, at least one of which will be a nationally recognized underwriter. The right of any Holder to registration pursuant to Section 1.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holder(s) and such Holder) to the extent provided herein. The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. 2.2 Company Registration. (a) Notice; Inclusion of Registrable Securities. If at any time or from time to time the Company proposes to register any of its securities, for its own account or the account of any of its stockholders other than the Holders, other than a registration relating solely to employee stock option or purchase plans, or a registration on Form S-4 relating solely to a transaction under Rule 145 promulgated under the Securities Act, or a registration on any other form (other than Form S-1, S-2 or S-3, or their successor forms) or any successor to such forms, which does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities, the Company will: (i) promptly give to each Holder written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and (ii) include in such registration (and any related qualification under applicable blue sky or other state securities laws, or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within 30 days after receipt of such written notice from the Company, by any Holder or Holders to be included in any such registration, except as set forth in Section 2.2(b) below. (b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 2.2(a)(i). In such event, the right of any Holder -5- 6 to registration pursuant to Section 2.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Section 2.2, if the underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the underwriter may limit the number of Registrable Securities to be included in the registration and underwriting. In the event a cutback of the number of Registrable Securities to be included in the registration and underwriting is deemed necessary by the underwriter, the Company shall advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto. The number of Registrable Securities and Other Registrable Securities that may be included in the registration and underwriting shall be allocated among all of such Holders and holders of Other Registrable Securities, in proportion, as nearly as practicable, to the respective amounts of Registrable Securities and Other Registrable Securities held by each such Holder or holder and proposed to be included in the offering. Notwithstanding the foregoing, in no event shall the amount of securities of the selling Holders and holders of Other Registrable Securities included in the offering be reduced below 30% of the total amount of the securities included in such offering. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriters. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. 2.3 Expenses of Registration. All expenses incurred in connection with any registration, qualification or compliance pursuant to this agreement, including without limitation, all registration, filing and qualification fees, printing expenses, fees and disbursements of counsel for the Company and expenses of any special audits incidental to or required by such registration, shall be borne by the Company, except as follows: (a) the Company shall not be required to pay for expenses of any registration proceeding begun pursuant to Section 2.1, the request for which has been subsequently withdrawn by the Initiating Holder(s), in which such case such expenses shall be borne by the Holder(s) requesting such withdrawal; provided, however, that if at the time of such withdrawal, the Holder(s) have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holder(s) at the time of their request, then the Company shall be required to pay such expenses and the Holder(s) shall retain their rights pursuant to Section 2.1; and (b) the Company shall not be required to pay underwriters' fees, discounts or commissions relating to Registrable Securities or fees of legal counsel to any Holder, except for a single counsel acting on behalf of all selling Holders (which counsel shall be selected by such Holders) with respect to the first registration effected pursuant to Section 2.1. 2.4 Registration Procedures. In the case of each registration, qualification or compliance effected by the Company pursuant to this agreement, the Company will keep each Holder participating therein advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense the Company will: -6- 7 (a) keep such registration, qualification or compliance pursuant to Section 2.1 or 2.2 effective for a period of 45 days or until the Holder or Holders have completed the distribution described in the registration statement relating thereto, whichever first occurs; (b) furnish to the Holder such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration; (c) notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and (d) furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this agreement, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) a copy of an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a copy of a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any. 2.5 Indemnification. (a) The Company will indemnify and hold harmless each Holder of Registrable Securities, each of its officers, directors, partners, agents and representatives, and each person controlling such Holder, with respect to which such registration, qualification or compliance has been effected pursuant to this agreement, and each underwriter, if any, and each person who controls any underwriter of the Registrable Securities held by or issuable to such Holder, against all claims, losses, expenses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any preliminary or final prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation or alleged violation by the Company relating to action or inaction required of the Company in connection with any rule or regulation promulgated under the Securities Act or any blue sky or other state securities law applicable to the Company and will reimburse (promptly after the incurrence of such expense) each such Holder, each of its officers, directors, partners, agents and representatives and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, -7- 8 for any reasonable legal and any other expenses incurred in connection with investigating, defending or settling any such claim, loss, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage or liability arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by an instrument duly executed by such Holder or underwriter specifically for use therein; provided further, however, that the agreement of the Company to indemnify any underwriter and any person who controls such underwriter contained herein with respect to any such preliminary prospectus shall not inure to the benefit of any underwriter from whom the person asserting any such claim, loss, damage, liability or action purchased the stock which is the subject thereof, if at or prior to the written confirmation of the sale of such stock, a copy of the prospectus (or the prospectus as amended or supplemented) was not sent or delivered to such person, excluding the documents incorporated therein by reference, and the untrue statement or omission of a material fact contained in such preliminary prospectus was corrected in the prospectus (or the prospectus as amended or supplemented). (b) Each Holder will, if Registrable Securities held by or issuable to such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify and hold harmless the Company, each of its directors and officers, agents and representatives, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company within the meaning of the Securities Act, and each other such Holder, each of its officers, directors and partners, agents and representatives, and each person controlling such Holder, against all claims, losses, expenses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any preliminary or final prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse (promptly after the incurrence of such expense) the Company, such Holder, such directors, officers, partners, persons or underwriters for any reasonable legal or any other expenses incurred in connection with investigating, defending or settling any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder specifically for use therein; provided, however, that the agreement of the Holder to indemnify any underwriter and any person who controls such underwriter contained herein with respect to any such preliminary prospectus shall not inure to the benefit of any underwriter from whom the person asserting any such claim, loss, damage, liability or action purchased the stock which is the subject thereof, if at or prior to the written confirmation of the sale of such stock, a copy of the prospectus (or the prospectus as amended or supplemented) was not sent or delivered to such person, excluding the documents incorporated therein by reference, and the untrue statement or omission of a material fact contained in such preliminary prospectus was corrected in the prospectus (or the prospectus as amended or supplemented); provided further, however, that in no event shall the indemnification provided by any Holder hereunder exceed the net proceeds received by such Holder for the sale of such Holder's Registrable Securities pursuant to such registration. -8- 9 (c) Each party entitled to indemnification under this Section 2.5 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, however, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party's expense; provided further, however, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations hereunder, unless such failure is materially prejudicial to an Indemnifying Party's ability to defend such action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 2.6 Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall promptly furnish to the Company such information regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to herein. 2.7 Rule 144 Reporting. With a view to making available to Holders of Registrable Securities the benefits of certain rules and regulations of the Securities and Exchange Commission (the "Commission") that may permit the sale of the Registrable Securities to the public without registration, the Company agrees at all times hereafter to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 promulgated under the Securities Act; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (c) so long as a Holder holds Registrable Securities, furnish to such Holder copies of all of the Company's periodic and other reports, proxy materials and other documents made available to the Company's stockholders generally; and (d) so long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon such Holder's request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act, and such other reports and documents filed by the Company as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration. -9- 10 2.8 Transfer of Registration Rights. The rights to cause the Company to register Registrable Securities of a Holder and keep information available, granted to a Holder by the Company under Sections 2.1, 2.2 and 2.7 may be assigned by any Holder to a transferee or assignee reasonably acceptable to the Company representing in aggregate at least 3% of the then-outstanding Common Stock of the Company; provided, however, that (i) the Company is given written notice by the Holder at the time of or within a reasonable time after said transfer, stating the name and address of said transferee or assignee and identifying the securities with respect to which such registration rights are being assigned, and (ii) any such transferee or assignee shall agree in writing to become subject to the obligations of the transferring Holder hereunder. 2.9 Termination. All rights of each Holder under Sections 2.1 and 2.2 will terminate on the earlier of (i) the fifth anniversary of the date of this agreement, and (ii) with respect to such Holder when such Holder holds Registrable Securities representing less than 1% of the then-outstanding Common Stock of the Company and such Holder's Registrable Securities are freely saleable under Rule 144 promulgated under the Securities Act. SECTION 3 Company Right of First Refusal as to Sales by Synopsys 3.1 The Right. If at any time Synopsys proposes to offer to sell any Shares ("Offered Shares") to one or more third parties in a transaction not registered under the Securities Act in reliance upon a claimed exemption thereunder (other than a transaction pursuant to Rule 144 promulgated under the Securities Act) and the Company's Common Stock is then quoted on the Nasdaq National Market (or any national securities exchange), then Synopsys will (i) prepare in good faith and deliver to the Company a list of the third party or parties to whom Synopsys proposes to offer to sell the Offered Shares and the number of Offered Shares proposed to be offered, and (ii) grant to the Company the right, on the terms and subject to the conditions of this Section 3, to purchase up to all of the Offered Shares at a per-share price equal to the Market Price of the Offered Shares on the date of such notice. The date the Company is deemed to have received such notice (as determined pursuant to Section 9.4) is referred to as the "Synopsys Notice Date". Within five business days after receiving such notice, the Company will notify Synopsys of the number of Offered Shares, if any, that it wishes to purchase pursuant to this Section 3. If the Company gives Synopsys notice that it desires to purchase a portion of the Offered Shares, then within 15 business days after the Synopsys Notice Date Synopsys will sell and deliver such portion of the Offered Shares to the Company against payment therefor in cash, by check or wire transfer, at a place agreed upon between the parties and at the time of the scheduled closing therefor. 3.2 Failure to Exercise. If the Company has not elected to purchase all of the Offered Shares or if the Company has failed to close the purchase of any Offered Shares that it has elected to purchase within 15 business days of the Synopsys Notice Date through no fault of Synopsys, then Synopsys may thereafter sell or enter into a binding agreement to sell any remaining Offered Shares to one or more of the third parties named in the foregoing list within 90 days of the Synopsys Notice -10- 11 Date. In the event that Synopsys has not sold such Offered Shares or entered into a binding agreement to sell such Offered Shares within 90 days of the Synopsys Notice Date, Synopsys may not thereafter sell such Offered Shares without again first offering such Offered Shares to the Company in accordance with this Section 3. SECTION 4 Right of Participation 4.1 The Right. Synopsys has the right of first refusal to purchase up to Synopsys' Pro Rata Share of any New Securities that the Company may from time to time issue after the date of this agreement (the "Right of Participation"); provided, however, that Synopsys shall not have the Right of Participation with respect to any issuance of New Securities that, when cumulated with all prior issuances of New Securities as to which Synopsys would have had a Right of Participation but for this proviso, would result in less than a 10% reduction in Synopsys' Pro Rata Share. 4.2 Procedures. In the event that the Company proposes to undertak an issuance of New Securities (in a single transaction or a series of related transactions) that would result in a 10% or greater reduction in Synopsys' Pro Rata Share, the Company will give to Synopsys written notice of its intention to issue New Securities (the "Participation Notice"), describing the amount and the type of New Securities and the price and the general terms upon which the Company proposes to issue such New Securities. Synopsys will have five business days from the date of receipt of any such Participation Notice to agree in writing to purchase Synopsys' Pro Rata Share of such New Securities upon the terms and subject to the conditions specified in the Participation Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to exceed Synopsys' Pro Rata Share); provided, however, that the per share purchase price for such New Securities will not exceed $15.00 (as adjusted for stock splits, stock dividends and the like) during the period from the date of this agreement until the earlier of (i) the first anniversary of the date of this agreement, and (ii) such time as the total number of shares of Common Stock purchased by Synopsys (as adjusted for stock splits, stock dividends and the like) pursuant to the Right of Participation and the Right of Maintenance exceeds 242,390. If Synopsys fails to so agree in writing within such five-business-day period to purchase Synopsys' full Pro Rata Share of an offering of New Securities, then Synopsys shall forfeit the right under this Section 4 to purchase that part of its Pro Rata Share of such New Securities that it did not so agree to purchase. Synopsys shall purchase the portion elected by Synopsys concurrently with the closing of the transaction triggering the Right of Participation. 4.3 Failure to Exercise. Upon the expiration of such five-business- day period, the Company will have 120 days thereafter to sell the New Securities described in the Participation Notice (with respect to which Synopsys' right of first refusal hereunder was not exercised) at the same or higher price and upon non-price terms not materially more favorable to the purchasers thereof than specified in the Participation Notice. In the event that the Company has not issued and sold such New Securities within such 120-day period, then the Company shall not thereafter issue or sell any New Securities without again first offering such New Securities to Synopsys pursuant to this Section 4. -11- 12 SECTION 5 Right of Maintenance 5.1 General. Synopsys will, on the terms and subject to the conditions of this Section 5, have the right to purchase shares of Voting Stock ("Maintenance Securities") from the Company at the per share Purchase Price (as defined in Section 5.2) following the issuance by the Company of Dilutive Securities after the date of this agreement, solely in order to maintain Synopsys' Prior Percentage Interest in the Company (the "Right of Maintenance"). Each right to purchase Maintenance Securities pursuant to this Section 5 shall be on the same terms (other than price to the extent provided in Section 5.2 below) as the issuance of the Dilutive Securities that gave rise to the right to purchase such Maintenance Securities. 5.2 Purchase Price. (a) Employee Stock. To the extent that the Right of Maintenance arises out of the issuance of Dilutive Securities to employees, officers, directors, contractors, advisors or consultants of the Company pursuant to incentive agreements or incentive plans approved by the Board of Directors of the Company ("Employee Stock"), the per share "Purchase Price" of the Maintenance Securities shall equal the Market Price of such Maintenance Securities on the date on which Synopsys purchases such Maintenance Securities. (b) Other Dilutive Securities. To the extent that the Right of Maintenance arises out of any issuance of Dilutive Securities other than Employee Stock, the per share "Purchase Price" of the Maintenance Securities shall equal the per share price at which such Dilutive Securities were issued, unless the issuance of such other Dilutive Securities occurred upon the exercise, conversion or exchange of other securities ("Exchangeable Securities"), in which case, the per share "Purchase Price" of the Maintenance Securities shall equal the sum of (i) the per share amounts paid upon each such exercise, conversion or exchange, and (ii) the per share amount previously paid for the Exchangeable Securities (adjusted for any stock split, stock dividends or other similar events). (c) Consideration Other than Cash. In the event that Dilutive Securities or Exchangeable Securities were issued for consideration other than cash, the per share amounts paid for such Dilutive Securities or Exchangeable Securities shall be determined jointly by the Company and Synopsys. (d) Appraiser. If the Company and Synopsys are unable to reach agreement within a reasonable period of time with respect to (i) the Market Price of Maintenance Securities not quoted on the Nasdaq National Market (or, if applicable, a national securities exchange), or (ii) the per share amounts paid for Dilutive Securities or Exchangeable Securities issued for consideration other than cash, such Market Price or per share amounts paid, as the case may be, shall be determined by an appraiser jointly selected by the Company and Synopsys. The fees and expenses of such appraiser shall be paid for by the Company, provided that such fees and expenses shall be paid for by Synopsys -12- 13 in the event that the appraiser's determination of the Market Price or the per share amounts paid, as the case may be, is higher than, or not more that 5% lower than, the last amount previously offered by the Company. (e) Purchase Price Cap. Notwithstanding the foregoing, the per share Purchase Price will not exceed $15.00 per share (as adjusted for any stock splits, stock dividends or other similar events) during the period from the Closing until the earlier of (i) the first anniversary of the Closing Date, and (ii) such time as the total number of shares of Common Stock purchased by Synopsys (as adjusted for stock splits, stock dividends and the like) pursuant to the Right of Participation and the Right of Maintenance exceeds 242,390. 5.3 Maintenance Amount. Synopsys' "Maintenance Amount" with respect to any Maintenance Notice shall equal such number of Maintenance Securities as is obtained by multiplying the number of Dilutive Securities specified in such Maintenance Notice by Synopsys' Prior Percentage Interest, rounded to the nearest whole share, plus, with respect to the first Maintenance Notice only, 5,409 shares of Common Stock. 5.4 Notice of Issuance. Within 15 business days of (x) March 24, 1997, (y) the end of each of the Company's fiscal years commencing with its 1997 fiscal year, and (z) any of the Company's fiscal quarters in which there was an issuance of Dilutive Securities which when cumulated with all prior issuance of Dilutive Securities since the later of (i) the date of this agreement, or (ii) the date of the last Maintenance Notice (subsequent to which Synopsys has had an opportunity to purchase Maintenance Securities), results in a 10% reduction in Synopsys' Prior Percentage Interest, the Company shall give to Synopsys written notice (the "Maintenance Notice") describing the number of Dilutive Securities issued since the date of the prior Maintenance Notice and the non-price terms upon which the Company issued such Dilutive Securities, and the Maintenance Amount of Maintenance Securities that Synopsys is entitled to purchase. 5.5 Purchase of Maintenance Securities. Synopsys will have 15 business days from the receipt of a Maintenance Notice to elect to purchase up to Synopsys' Maintenance Amount of such Maintenance Securities at the Purchase Price and upon the terms and subject to the conditions specified in the Maintenance Notice. The closing of such purchase shall occur within five business days after such election to purchase or at such later date as the parties may agree. If Synopsys fails to elect to purchase Synopsys' full Maintenance Amount of Maintenance Securities within such 15-business-day period, then Synopsys shall forfeit the right under this Section 5 to purchase that part of Synopsys' Maintenance Amount that it did not so elect to purchase. SECTION 6 Standstill Agreement 6.1 Prohibition. Synopsys (which, for purposes of this Section 6 includes Synopsys and all of its subsidiaries) will not, directly or indirectly, acquire, or enter into discussions, negotiations, arrangements or understandings with any third party to acquire prior to the expiration of this Section 6 (including, without limitation, the lapse of the negative covenants of this Section 6.1 upon -13- 14 the occurrence of any of the events described in Section 6.1(a) through (c)), beneficial ownership of any Voting Stock, any securities convertible into or exchangeable for Voting Stock, or any other right to acquire Voting Stock (except, in any case, by way of stock dividends or other distributions or offerings made available to the holders of Voting Stock generally) without the written consent of the Company, if the effect of such acquisition would be to increase the Voting Power of all Voting Stock then owned by Synopsys or which Synopsys has a right to acquire to more than 9.9% of the total Voting Power of all Voting Stock then outstanding; provided, however, that Synopsys may acquire Voting Stock without regard to the foregoing limitation: (a) if any person or group (other than Messrs. Cooper and Chyan and their family members) not affiliated with Synopsys and then owning Voting Stock representing at least 5% of the Voting Power of all Voting Stock then outstanding provides written notice to the Company or files any document with the Commission that contains terms that put the Company reasonably on notice of the likelihood that such person or group has acquired or is proposing to acquire any shares of Voting Stock or the right to acquire shares of Voting Stock having aggregate Voting Power of more than 50% of the total Voting Power of all shares of Voting Stock then outstanding and, in the case of a proposal to acquire such shares, the proposal and any related offers to purchase shares are not withdrawn or terminated prior to Synopsys making an offer to acquire Voting Stock or acquiring Voting Stock in response thereto; provided, however, that the negative covenants of this Section 6.1 will resume following the withdrawal of any proposal or offer to purchase shares made in accordance with this Section 6.1(a); (b) if it is publicly disclosed or Synopsys otherwise learns that the Company has entered into any letter of intent or agreement with a person or group that, if consummated, would result in such person or group owning or having the right to acquire shares of Voting Stock having aggregate Voting Power of more than 50% of the total Voting Power of all shares of Voting Stock then outstanding; (c) after the fifth anniversary of the date of this agreement. 6.2 Exceptions. Synopsys will not be obligated to dispose of Voting Stock if the aggregate percentage of the total Voting Power of all Voting Stock then outstanding represented by Voting Stock owned by Synopsys or which Synopsys has the right to acquire is increased as a result of a recapitalization of the Company, a repurchase of securities by the Company or any other action taken by the Company or any of its affiliates, and, in any of such events, the percentage set forth in the first paragraph of Section 6.1 thereafter will be deemed increased to the percentage of Voting Stock owned by Synopsys immediately following such event. 6.3 Percentage Adjustment. In the event Synopsys purchases or otherwise acquires any shares of Voting Stock in a transaction permitted by Section 6.1(a) before the resumption of the negative covenants of Section 6.1, the percentage set forth in the first paragraph of Section 6.1 thereafter will be deemed increased to the percentage of Voting Stock owned by Synopsys after such purchase or acquisition. -14- 15 6.4 Excluded Shares. For purposes of this agreement, Synopsys will not be deemed to have beneficial ownership of any Voting Stock held by a Synopsys pension plan or other employee benefit program if Synopsys does not have the power to control the investment decisions of such plan or program. SECTION 7 Change of Control 7.1 Notice of Acquisition Offer. The Company or the Selling Stockholders shall give Synopsys at least five business days' notice prior to: (a) the Company or any of the Selling Stockholders accepting any offer from any entity or group to acquire any shares of Voting Stock which would result in such person or group owning or having the right to acquire (i) more than 50% of the Voting Stock of the Company then outstanding, or (ii) all or substantially all of the assets of the Company; or (b) the Company's board of directors approving any merger or consolidation of the Company with or into any other entity in which the Company's stockholder's prior to any such transaction do not hold more than 50% of the voting power in the surviving entity. 7.2 Notice of Counterproposal. If within such five-day period following the notice referred to above, Synopsys shall make a counterproposal and such proposal results in a further proposal from any party, then the Company or the Selling Stockholder, as the case may be, will give Synopsys at least three business days' notice of such further proposal prior to accepting the same. 7.3 Reduction of Notice Period. The notice periods referred to in this Section 7 may be reduced or eliminated by resolution of the Company's Board of Directors to the extent (and only to the extent) that it specifically determines, based upon the advice of counsel, that providing such notice would constitute a violation of its fiduciary obligations. SECTION 8 Additional Rights; Termination of Certain Rights 8.1 Pro Rata Repurchase. In the event that the Company repurchases shares of its Voting Stock from a third party, the Company will make lawful provision to offer to, and have the legal right to, repurchase shares of Voting Stock from Synopsys to the extent necessary so that the Voting Power of all Voting Stock then owned by Synopsys or which Synopsys then has a right to acquire does not exceed 10% of the total Voting Power of all Voting Stock then outstanding. 8.2 Limitation on Sale of Shares. Prior to the first date on which Synopsys may exercise its registration rights under Section 2, none of the Selling Stockholders may sell (including, without limitation, any short sale), offer to sell, contract to sell, pledge or otherwise dispose of any of the -15- 16 Common Stock, or any options or warrants to purchase any of the Common Stock, or any securities convertible into or exchangeable for any of the Common Stock, owned directly by such Selling Stockholder, or with respect to which such Selling Stockholder has the power of disposition, in any such case whether now owned or hereafter acquired; provided, however, that a Selling Stockholder may sell or transfer such securities (i) to members of such Selling Stockholder's family, and (ii) in a registered public offering with respect to which Synopsys has registration rights pursuant to Section 2.2. 8.3 Termination of Certain Rights. The rights and obligations of the parties under Sections 3, 4, 5, 6 and 7 will terminate upon the earlier to occur of (i) the fifth anniversary of the Closing Date, (ii) the first date that Synopsys holds less than 50% of the number of Shares purchased by Synopsys at the Closing pursuant to the Purchase Agreement (such number to be proportionately adjusted for stock splits, stock dividends and similar events), (iii) the expiration of or any termination of either the Joint Marketing Agreement or the Cooperative Development Agreement, each dated the date of this agreement between the Company and Synopsys (collectively, the "Ancillary Agreements"), in accordance with their respective terms for any reason (except, at Synopsys' option, for a termination by Synopsys due to an uncured breach by the Company of one of the Company's material obligations under either of such agreements), (iv) at the option of the Company, upon any failure by Synopsys to perform its Golden Flow Obligations, as such term is defined in the Ancillary Agreements, under either of the Ancillary Agreements permitting the Company to terminate either of the Ancillary Agreements in accordance with its respective terms, (v) at Synopsys' option, upon any failure by the Company to perform its Golden Flow Obligations under either of the Ancillary Agreements permitting Synopsys to terminate either of the Ancillary Agreements in accordance with its respective terms, or (vi) immediately prior to the closing of any Acquisition. SECTION 9 Miscellaneous 9.1 Amendment and Waiver. Any term of this agreement may be amended and the observance of any such term may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and Holders holding at least a majority of the outstanding Registrable Securities. 9.2 Governing Law. This agreement shall be governed in all respects by the laws of the State of California, as such laws are applied to agreements among California residents entered into and to be performed entirely within California. 9.3 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 9.4 Entire Agreement. The Transaction Documents (as defined in the Purchase Agreement) and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with respect to the subjects thereof. -16- 17 9.5 Notices, etc. All notices and other communications required or permitted hereunder shall be in writing and shall be sent by facsimile, overnight courier or mailed by certified or registered mail, postage prepaid, return receipt requested, to the facsimile number or address as follows: Company: Cooper & Chyan Technology, Inc. 1601 South De Anza Boulevard Cupertino, California 95014 Telephone: (408) 342-5518 Facsimile: (408) 342-5650 Attention: Mr. John R. Harding, President with a copy (which will not constitute notice) to: Fenwick & West Two Palo Alto Square, Suite 800 Palo Alto, California 94306 Telephone: (415) 494-0600 Facsimile: (415) 857-0361 Attention: Gordon Davidson, Esq. Synopsys: Synopsys, Inc. 700 East Middlefield Road Mountain View, California 94043-4033 Telephone: (415) 962-5000 Facsimile: (415) 694-4087 Attention: Paul Lippe, Vice President, Legal with a copy (which will not constitute notice) to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304-1050 Telephone: (415) 493-9300 Facsimile: (415) 493-6811 Attention: Thomas C. DeFilipps, Esq. Selling c/o Cooper & Chyan Technology, Inc. Stockholders: 1601 South De Anza Boulevard Cupertino, California 95014 Telephone: (408) 342-5518 Facsimile: (408) 342-5650 or to such other facsimile number or address provided to the parties to this agreement in accordance with this Section 9.5. Such notices or other communications shall be deemed delivered upon receipt, in the case of overnight delivery or facsimile transmission (as evidenced by the confirmation thereof), or 3 days after deposit in the mails (as determined by reference to the postmark). -17- 18 9.6 Assignment. Rights under Section 2 may be assigned only in accordance with the provisions of Section 2.8. Rights of Synopsys under Sections 4, 5, and 7 may not be assigned (whether by operation of law or otherwise) without the prior written consent of the Company; provided, however, that, in the event Synopsys is acquired by consolidation, merger, purchase of assets, or other reorganization in which such third party acquires, in a single transaction or series of related transactions, substantially all of Synopsys' assets or 50% or more of the voting power of Synopsys or 50% or more of the equity ownership of Synopsys, such consent will not be unreasonably withheld. Rights of the Company under Section 3 may not be assigned (whether by operation of law or otherwise) without the prior written consent of Synopsys; provided, however, that, in the event of an Acquisition, such consent will not be unreasonably withheld. 9.7 Severability. In case any provision of this agreement shall be declared invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 9.8 Counterparts. This agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 9.9 Delays or Omissions. No delay or omission to exercise any remedy accruing to a party upon any breach or default of another party under this agreement shall impair any such remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on a party's part of any breach or default under this agreement or any waiver on such party's part of any provisions or conditions of this agreement must be in writing and will be effective only to the extent specifically set forth in such writing, and all remedies, either under this agreement, or by law or otherwise afforded to the parties, will be cumulative and not alternative. -18- 19 IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as of the date first above written. COOPER & CHYAN TECHNOLOGY, INC. By: /s/ John R. Harding -------------------------------- Name: John R. Harding Title: SYNOPSYS, INC. By: /s/ Paul Lippe -------------------------------- Name: Paul Lippe Title: VP, Business Development Executed Solely for Purposes of Sections 7.1, 7.2 and 9: /s/ John F. Cooper - - - ---------------------------------- John F. Cooper /s/ David Chyan - - - ---------------------------------- David Chyan /s/ John R. Harding - - - ---------------------------------- John R. Harding /s/ William Portelli - - - ---------------------------------- William Portelli /s/ Robert D. Selvi - - - ---------------------------------- Robert D. Selvi -19- EX-11.01 4 STATEMENT OF COMPUTATION OF NET INCOME PER SHARE 1 Exhibit 11.01 Statement of Computation of Net Income Per Share COOPER & CHYAN TECHNOLOGY, INC. STATEMENT OF COMPUTATION OF NET INCOME PER SHARE
QUARTER ENDED QUARTER ENDED MARCH 31 MARCH 31 1996 1995 ---- ---- Net Income $ 956,817 $ 32,000 Weighted average common shares outstanding 11,994,435 6,958,253 Weighted average common share equivalents 1,765,030 1,570,587 related to stock options (using the Treasury stock method) Shares relating to SAB No 64 and 83 -- 1,374,160 Convertible preferred stock -- 1,480,000 ----------- ----------- Shares used in per share computation 13,759,465 11,383,000 ----------- ----------- ----------- ----------- Net income per share $ 0.07 $ 0.00 =========== ===========
EX-27.01 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 MAR-31-1996 3,059,791 23,522,407 5,613,735 392,484 0 33,340,760 4,404,179 1,736,746 36,256,901 6,269,609 0 0 0 120,757 0 36,256,901 6,440,251 6,440,251 402,102 4,842,340 5,637 62,539 260,243 1,450,415 493,598 956,817 0 0 0 956,817 0.07 0.07
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