-----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, HPKo+BRAe6OgvnP6ITdAw3PnoHRG8O/B0F4HTCb1crJRxfpmCLj6wqqcCUgZ5yCm yuhy+1LEMgVkvO24nlTgKg== 0000891618-98-000696.txt : 19980218 0000891618-98-000696.hdr.sgml : 19980218 ACCESSION NUMBER: 0000891618-98-000696 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980103 FILED AS OF DATE: 19980213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNOPSYS INC CENTRAL INDEX KEY: 0000883241 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 561546236 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19807 FILM NUMBER: 98537429 BUSINESS ADDRESS: STREET 1: 700 E MIDDLEFIELD RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043-4033 BUSINESS PHONE: 4159625000 MAIL ADDRESS: STREET 1: 700 E MIDDLEFIELD RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043-4033 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED JANUARY 3, 1998 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 January 3, 1998 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: 0-19807 SYNOPSYS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 56-1546236 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 700 East Middlefield Road Mountain View, CA 94043 ------------------------------------------------------------ (Address of principal executive offices, including zip code) Registrant's Telephone No., including area code: (650) 962-5000 ----------------------------- 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 January 31, 1998, there were approximately 64,863,000 shares of the Registrant's Common Stock outstanding. 1 2 SYNOPSYS, INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets- December 31, 1997 and September 30, 1997 3 Condensed Consolidated Statements of Income- Three months ended December 31, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows- Three months ended December 31, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-16 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SYNOPSYS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
DECEMBER 31, SEPTEMBER 30, 1997 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 107,287 $ 126,414 Short-term investments 341,711 308,416 ------------ ------------ Cash and short-term investments 448,998 434,830 ------------ ------------ Accounts receivable, net of allowances of $9,463 and $8,213, respectively 131,335 119,030 Prepaid expenses, deferred taxes and other 35,161 36,580 ------------ ------------ Total current assets 615,494 590,440 ------------ ------------ Property and equipment, net 86,491 92,079 Capitalized software development costs, net of accumulated amortization of $6,427 and $10,888, respectively 4,224 7,297 Long-term investments 52,802 61,056 Other assets 18,503 17,717 ------------ ------------ Total assets $ 777,514 $ 768,589 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 126,690 $ 114,881 Current portion of long-term debt 8,394 8,964 Income taxes payable 12,237 33,282 Deferred revenue 107,481 97,523 ------------ ------------ Total current liabilities 254,802 254,650 ------------ ------------ Long-term debt 5,270 9,191 Deferred compensation 5,200 3,205 Stockholders' equity: Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares outstanding -- -- Common stock, $.01 par value; 100,000,000 shares authorized; 64,751,000 and 63,844,000 shares outstanding, respectively 648 638 Additional paid-in capital 356,880 334,086 Retained earnings 145,264 151,664 Cumulative translation adjustment (2,871) (1,552) Net unrealized gain on investments 12,321 16,707 ------------ ------------ Total stockholders' equity 512,242 501,543 ------------ ------------ Total liabilities and stockholders' equity $ 777,514 $ 768,589 ============ ============
See accompanying notes 3 4 SYNOPSYS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1997 1996 ------------ ------------ Revenue: Product $ 110,425 $ 100,472 Service 63,787 53,431 ------------ ------------ Total revenue 174,212 153,903 ------------ ------------ Cost of revenue: Product 8,811 9,555 Service 14,681 10,009 ------------ ------------ Total cost of revenue 23,492 19,564 ------------ ------------ Gross margin 150,720 134,339 ------------ ------------ Operating expenses: Research and development 40,217 35,853 Sales and marketing 66,161 57,526 General and administrative 13,287 11,114 Merger-related and other costs 36,000 -- In-process research and development 4,191 -- ------------ ------------ Total operating expenses 159,856 104,493 ------------ ------------ Operating income (loss) (9,136) 29,846 Other income 4,941 7,598 ------------ ------------ Income (loss) before income taxes (4,195) 37,444 Income tax provision 4,074 13,112 ------------ ------------ Income (loss) before extraordinary item (8,269) 24,332 Extraordinary item - gain on extinguishment of debt, net of income tax expense of $963 1,869 -- ------------ ------------ Net income (loss) $ (6,400) $ 24,332 ============ ============ Basic earnings (loss) per share: Income (loss) before extraordinary item $ (0.13) $ 0.39 Extraordinary item 0.03 -- ------------ ------------ Net income (loss) $ (0.10) $ 0.39 ============ ============ Weighted average common shares 64,341 61,628 ============ ============ Diluted earnings (loss) per share: Income (loss) before extraordinary item $ (0.13) $ 0.37 Extraordinary item 0.03 -- ------------ ------------ Net income (loss) $ (0.10) $ 0.37 ============ ============ Weighted average common shares and equivalents where dilutive 64,341 64,919 ============ ============
See accompanying notes 4 5 SYNOPSYS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS; UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1997 1996 --------- --------- Cash flows from operating activities: Net income (loss) $ (6,400) $ 24,332 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary gain on extinguishment of debt (1,869) -- Depreciation and amortization 11,378 9,332 Interest accretion on notes payable 100 152 Provision for doubtful accounts and sales returns 1,250 27 Tax benefit associated with stock options 4,300 9,406 Deferred revenue 9,958 (76) Deferred taxes (107) (4,404) Noncash merger-related and other costs 6,306 -- In-process research and development 4,191 -- Gain on sale of long-term investments (2,000) (7,425) Net change in assets and liabilities: Accounts receivable (13,555) (11,248) Prepaid expenses and other 1,966 1,181 Other assets (2,044) (2,173) Accounts payable and accrued liabilities 8,580 (13,087) Income taxes payable (17,816) 1,161 Deferred compensation 1,995 1,584 --------- --------- Net cash provided by operating activities 6,233 8,762 --------- --------- Cash flows from investing activities: Proceeds from sale of long-term investments 4,220 11,126 Purchases of long-term investments (712) (4,604) Purchases and maturities of short-term investments (33,954) 8,597 Purchases of property and equipment (6,597) (12,531) Acquisitions (net of cash acquired) (2,236) -- Capitalization of software development costs (601) (934) --------- --------- Net cash provided (used) in investing activities (39,880) 1,654 --------- --------- Cash flows from financing activities: Principal payments on debt obligation (2,665) (2,633) Proceeds from sale of common stock, net 18,504 12,543 Purchases of treasury stock -- (13,026) --------- --------- Net cash provided (used) by financing activities 15,839 (3,116) --------- --------- Effect of exchange rate changes on cash (1,319) (1,025) Net increase (decrease) in cash and cash equivalents (19,127) 6,275 Cash and cash equivalents, beginning of period 126,414 87,100 --------- --------- Cash and cash equivalents, end of period $ 107,287 $ 93,375 ========= ========= Supplemental Disclosure: Cash paid during the period for: Interest $ 183 $ 223 ========= ========= Income taxes $ 19,880 $ 4,135 ========= =========
See accompanying notes 5 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The unaudited financial information furnished herein reflects all adjustments, consisting only of normal recurring adjustments which in the opinion of management are necessary to fairly state the Company's and its subsidiaries' condensed consolidated financial position, the results of their operations, and their cash flows for the periods presented. This report on Form 10-Q should be read in conjunction with the Company's Annual Report to Stockholders for the year ended September 30, 1997. For financial reporting purposes, the Company reports on a 13-week quarter and a 52 or 53-week year. Due to the fact that fiscal 1998 contains 53 weeks, the first quarter of fiscal 1998 contains 14 weeks, while the first quarter of fiscal 1997 contained 13 weeks. For presentation purposes, the consolidated financial statements refer to the quarter's calendar month end. The consolidated results of operations for the period ended December 31, 1997 are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire fiscal year. 2. Software Revenue Recognition During the first quarter of fiscal 1998, the Company adopted Statement of Position (SOP) 97-2, "Software Revenue Recognition." The provisions of SOP 97-2 have been applied to transactions entered into beginning October 1, 1997. SOP 97-2 generally requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. The revenue allocated to software products, including time-based software licenses, generally is recognized upon delivery of the products. The revenue allocated to postcontract customer support (PCS) is recognized ratably over the term of the support and revenue allocated to service elements is recognized as the services are performed. In connection with the adoption of SOP 97-2, the Company analyzed all of the elements included in its multiple-element arrangements and determined that the Company has sufficient evidence to allocate revenue to the license and PCS components of certain of its time-based product licenses. Accordingly, the portion of the time-based license fee allocated to the license component is recognized upon delivery of the software product and the portion of the fee allocated to PCS is recognized ratably over the term of the support. Prior to the adoption of SOP 97-2, all revenue from time-based product licenses was recognized ratably over the term of the license. Software subscriptions continue to be recognized on a ratable basis. Approximately $7.3 million in revenue related to the license component of time-based product licenses was recognized during the first quarter of fiscal 1998. 3. Earnings Per Share On October 1, 1997, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." In accordance with SFAS No. 128, basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of common stock issuable upon exercise of 6 7 stock options using the treasury stock method. The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the periods presented:
Income Shares Per-Share (in thousands) (Numerator) (Denominator) Amount ------------ ------------ ------------ Three months ending 12/31/96: Basic EPS: Net income $ 24,332 61,628 $ 0.39 Effect of dilutive securities: Stock options outstanding -- 3,291 (0.02) ------------ ------------ ------------ Diluted EPS: Net income $ 24,332 64,919 $ 0.37 ============ ============ ============ Three months ending 12/31/97: Basic and Diluted EPS: Loss before extraordinary item $ (8,269) 64,341 $ (0.13) Extraordinary item 1,869 -- 0.03 ------------ ------------ ------------ Net loss $ (6,400) 64,341 $ (0.10) ============ ============ ============
4. Mergers On December 4, 1997, the Company issued approximately 11.3 million shares of its common stock in exchange for all the outstanding shares of common stock of Viewlogic Systems, Inc. (Viewlogic), a worldwide supplier of electronic design automation (EDA) software. In addition, options to acquire Viewlogic's common stock were exchanged for options to acquire approximately 2.8 million shares of the Company's common stock. The merger was accounted for as a pooling of interests, and accordingly, the Company's condensed consolidated financial statements have been restated to include the financial position and results of Viewlogic for all periods presented. The results of operations previously reported by the separate enterprises and the combined amounts presented in the accompanying consolidated financial statements are summarized below:
(in thousands) Synopsys Viewlogic Combined -------- --------- -------- Three months ending December 31, 1996 Total revenue $ 116,710 $ 37,193 $ 153,903 Net income 19,076 5,256 24,332 Three months ending December 31, 1997 Total revenue 137,094 37,118 174,212 Extraordinary gain 1,869 -- 1,869 Net income (loss) (4,627) (1,773) (6,400)
7 8 Adjustments to conform Viewlogic's method of accounting for sales commissions with that of the Company reduced combined net income by approximately $245,000 for the three months ended December 31, 1996. In the first quarter of fiscal 1998, the Company incurred merger-related and other charges of $36.0 million. The following table presents the components of the first quarter 1998 costs along with charges against these reserves through December 31, 1997:
Noncash 12/31/97 Writedown Reserve (in thousands) Total Charge Amounts Paid of Assets Balance ------------ ------------ --------- -------- Transaction costs 8,967 (6,471) 2,496 Employee termination benefits 9,388 9,388 Writedown of equipment and other assets 6,836 (6,306) 530 Legal settlements 5,086 (1,346) 3,740 Redundant facility and other costs 5,723 (505) 5,218 -------- --------- --------- -------- Total $ 36,000 $ (8,322) $ (6,306) $ 21,372 ======== ========= ========= ========
5. Acquisitions In October 1997, the Company acquired two privately-held companies in the EDA industry. The acquisitions were accounted for by the purchase method of accounting. The purchase price, acquisition costs and net liabilities assumed for these acquisitions totaled approximately $4.2 million, which was allocated to in-process research and development and taken as a one-time charge to operating expenses in the first quarter of fiscal 1998. 6. Extraordinary Item In fiscal 1996, the Company and International Business Machines Corporation ("IBM") entered into a six-year Joint Development and License Agreement Concerning EDA Software and Related Intellectual Property (the "Agreement"). In accordance with the Agreement, the Company issued $30.0 million in notes, which bear interest at 3%, and are payable to IBM upon the earlier of achievement of scheduled milestones or at maturity in 2006. In the first quarter of fiscal 1998, the Company and IBM modified the terms of one of the notes which has been accounted for as an extinguishment of debt. Accordingly, the Company recorded an extraordinary gain of $1.9 million, net of tax, related to the extinguishment of the note. As of December 31, 1997, the notes had a remaining balance of $11.8 million, of which $4.5 million is included in long-term obligations. 8 9 SYNOPSYS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. When used in the following discussion, the words "projects," "expects," "believes," "anticipates" and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those set forth under "Factors That May Affect Future Results." Results of Operations On December 4, 1997, the Company acquired Viewlogic Systems, Inc., a Delaware corporation ("Viewlogic"), by the statutory merger (the "Merger") of a wholly-owned subsidiary of the Company, Post Acquisition Corp., a Delaware corporation ("Sub"), with and into Viewlogic. The Merger was accomplished pursuant to the Agreement and Plan of Merger, dated as of October 14, 1997, among the Company, Sub, and Viewlogic (the "Merger Agreement"). The Merger of Sub with and into Viewlogic occurred following the approval of the Merger Agreement by the stockholders of Viewlogic, and the approval of the issuance of the Company's Common Stock in connection with the Merger by the stockholders of the Company, at stockholders' meetings held on December 4, 1997, and the satisfaction of certain other closing conditions. As a result of the Merger, each outstanding share of Viewlogic Common Stock was converted into 0.6521 shares of the Company's Common Stock (the "Conversion Ratio"), and Viewlogic became a wholly-owned subsidiary of the Company. The terms of the Merger Agreements were the result of arm's-length negotiations among the parties. A total of approximately 11.3 million shares of the Company's Common Stock were issued in connection with the Merger. In addition, the Company assumed all outstanding Viewlogic options to purchase Viewlogic Common Stock, which were converted into options to purchase shares of the Company's Common Stock, subject only to adjustments to reflect the Conversion Ratio. The Company has reserved approximately 2.8 million shares of its Common Stock for issuance upon the exercise of the assumed Viewlogic stock options. Prior to the Merger, Viewlogic supplied electronic design automation software which is used to accelerate and automate the design and verification of advanced application specific integrated circuits, printed circuit boards and electronic systems, and provided related services. Viewlogic's ASIC and system-on-a-chip design products, people and facilities are being merged into the Synopsys organization. Simulation products of both companies have been consolidated under a newly created Simulation Tools Group, and timing products and test products will be grouped together in Synopsys' existing business units. The printed circuit board and systems portions of Viewlogic's business are being continued in a wholly-owned subsidiary of Synopsys, based in Marlboro, Massachusetts, Viewlogic's former headquarters. 9 10 Revenue for the first quarter of fiscal 1998 increased 13% to $174.2 million from $153.9 million in the first quarter of fiscal 1997. This increase in revenue was primarily attributable to increased worldwide licensing and sales of the Company's software products. Product revenue as a percentage of total revenue decreased to 63% in the first quarter of fiscal 1998, compared to 65% in the first quarter of fiscal 1997. This decrease was due in part to relatively faster growth in service revenue from training and consulting services and the renewal of maintenance and support contracts during the first quarter of fiscal 1998. During the first quarter of fiscal 1998, the Company adopted Statement of Position (SOP) 97-2, "Software Revenue Recognition." The provisions of SOP 97-2 have been applied to transactions entered into beginning October 1, 1997. SOP 97-2 generally requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. The revenue allocated to software products, including time-based software licenses, generally is recognized upon delivery of the products. The revenue allocated to postcontract customer support (PCS) is recognized ratably over the term of the support and revenue allocated to service elements is recognized as the services are performed. In connection with the adoption of SOP 97-2, the Company analyzed all of the elements included in its multiple-element arrangements and determined that the Company has sufficient evidence to allocate revenue to the license and PCS components of certain of its time-based product licenses. Accordingly, the portion of the time-based license fee allocated to the license component is recognized upon delivery of the software product and the portion of the fee allocated to PCS is recognized ratably over the term of the support. Prior to the adoption of SOP 97-2, all revenue from time-based product licenses was recognized ratably over the term of the license. Software subscriptions continue to be recognized on a ratable basis. Approximately $7.3 million in revenue related to the license component of time-based product licenses was recognized during the first quarter of fiscal 1998. International revenue as a percentage of total revenue increased slightly to 42% in the first quarter of fiscal 1998 from 41% in the first quarter of fiscal 1997, due primarily to increased revenue in Europe as a percent of total revenue, offset by decreased revenue in Japan, partially related to a decline in the value of the yen versus the dollar. Cost of revenue as a percentage of total revenue was 14% in the first quarter of fiscal 1998 compared to 13% in the first quarter of fiscal 1997. Cost of revenue includes personnel and related costs, production costs, product packaging, documentation, amortization of capitalized software development and purchased software costs, and costs of the Company's system products. Research and development expenses as a percentage of total revenue remained at 23% in the first quarter of fiscal 1998 and fiscal 1997, but increased in absolute dollars to $40.2 million from $35.9 million. Increased research and development expenses were primarily attributable to increases in personnel and personnel-related costs associated with the development of new products and enhancement of existing products. Sales and marketing expenses as a percentage of total revenue increased to 38% in the first quarter of fiscal 1998 from 37% in the first quarter of fiscal 1997, and increased in absolute dollars to $66.2 million from $57.5 million. Total sales and marketing expenses increased as 10 11 a result of continued expansion of the Company's sales and marketing organizations and participation in worldwide conferences and trade shows. General and administrative expenses as a percentage of total revenue increased to 8% in the first quarter of fiscal 1998 from 7% in the first quarter of fiscal 1997, and increased in absolute dollars to $13.3 million from $11.1 million. The increase in total expenses was due principally to increases in personnel and operating expenses associated with the continued growth of the Company. The Company expects that total operating expenses as a percentage of revenue will decrease slightly for the remainder of fiscal year 1998. In the first quarter of fiscal 1998, the Company recorded a charge of $36.0 million related to the merger and integration of Synopsys and Viewlogic, and expects to record a charge between $10.0 million and $15.0 million in the second quarter of fiscal 1998. The first quarter charge included direct transaction fees for investment bankers, attorneys, accountants, and other related costs of $9.0 million, costs for employee termination benefits of $9.4 million, legal settlements of $5.1 million, writedown of equipment and other assets of $6.8 million, and redundant facility and other costs of $5.7 million. As of December 31, 1997, there was a balance of $21.4 million in accrued liabilities for expected future cash expenditures and noncash asset writedowns. The Company also incurred an in-process research and development charge of $4.2 million in the first quarter of fiscal 1998 in connection with the acquisitions of two privately-held companies in the EDA industry. The provision for income taxes in the first quarter of fiscal 1998 resulted from an income tax benefit of 34% of the loss before income taxes and a provision of $5.5 million due to nondeductible expenses for merger-related costs. The income tax provision was 35% of pretax income in the first quarter of fiscal 1997. The decrease in the Company's underlying tax rate of 34% in fiscal 1998 from 35% in fiscal 1997 was primarily due to changes in U.S. federal and California state research tax credits. In the first quarter of fiscal 1998, the Company recorded an extraordinary gain on extinguishment of debt of $1.9 million, net of income tax expense of $1.0 million, related to certain interest bearing notes issued by the Company to IBM. A net loss of $6.4 million was recorded in the first quarter of fiscal 1998, compared to net income of $24.3 million in the first quarter of 1997. In the absence of nonrecurring charges in the first quarter of fiscal 1998, primarily related to the Company's merger with Viewlogic Systems, Inc. and an extraordinary gain on retirement of debt, net income would have been $23.8 million. The Company's book-to-bill ratio for the first quarter of fiscal 1998 was equal to one. The book-to-bill ratio measures the ratio of accepted orders to revenue. Liquidity and Capital Resources For the first three months of fiscal 1998, cash and short-term investments increased $14.2 million to $449.0 million. The increase in cash and short-term investments was due primarily 11 12 to cash generated from operations, proceeds from the sale of common stock, and proceeds from the sale of long-term investments, partially offset by purchases of property and equipment, payments on debt obligations, and acquisitions. The Company believes that the existing cash and short-term investments balance of $449.0 million and anticipated cash flow from operations will be sufficient to meet its currently anticipated liquidity and capital expenditure requirements for at least the next twelve months. Factors That May Affect Future Results On December 4, 1997, the Company completed its merger (the "Merger") with Viewlogic. The Company expects that the Merger will result in cost savings and beneficial product synergy, but there can be no assurance that these will be achieved. A merger of this size is unsettling to customers and disruptive to employees. The Company believes that during the quarter a number of its customers put their purchase decisions on hold until they have the opportunity to learn more about the product plans of the combined company, particularly with respect to timing and test products. In addition, completion of the merger and integration of the two companies has absorbed, and will continue to absorb, a significant amount of management resources, which may distract attention from the day-to-day business of the Company. There can be no assurance that the integration of Viewlogic's business will be accomplished smoothly, expeditiously or successfully, and the failure to do so could have a material adverse effect on the business, financial condition and results of operations of the Company. The EDA industry is highly competitive. The Company's products and services compete with similar products and services from other EDA vendors and with other EDA products and services for a share of the EDA budgets of their customers. The Company's products also compete with customers' internally-developed design tools and design capabilities. The Company's competitors include companies that offer a broad range of products and services, such as Cadence Design Systems, Inc. ("Cadence"), Mentor Graphics, Inc. ("Mentor") and Avant! Corporation ("Avant!"), as well as companies, including numerous start-up companies, that offer products focused on a discrete phase of the integrated circuit ("IC") design process. In order to remain successful against such competition, the Company will have to continue to enhance its current products and to develop and introduce new products on a timely and cost-effective basis that are based on industry-leading technology and that address the increasingly sophisticated needs of its customers. The failure to achieve such product enhancement and development would have a material adverse effect on the Company's business, financial condition and results of operations. Technology advances and customer requirements are fueling a change in the nature of competition among EDA vendors. Advances in semiconductor technology have created a need for tighter integration between logic design and physical design and for technologies which permit systematic reuse of design blocks in multiple ICs. As a result, the Company expects that competition will increasingly center on "design flows" involving a broad range of products (including both logic and physical design tools) and services rather than individual design tools. No single EDA company currently offers its customers industry-leading products for a complete design flow. The Company offers a wide range of logic design tools but currently offers a relatively limited range of physical design tools, a field 12 13 which is dominated by Cadence and Avant! In addition, the Company has less capacity than Cadence to offer design consulting services. Historically, much of the Company's growth has been attributable to the strength of its logic synthesis products. Opportunities for growth in market share in this area are limited and overall growth in the market for such products has slowed. The Company is seeking to add new products to its portfolio through internal development, and where it deems appropriate, through acquisition. Among the most important new products offered by the Company are its Cell-Based Array, PrimeTime timing estimator, Cyclone simulation accelerator, Formality verification and Module Compiler datapath synthesis products. These products have achieved initial customer acceptance, but the Company will only derive significant revenue from these products if they are accepted by a broad range of customers. In addition, the Company is attempting to expand its capacity to offer consulting services. There can be no assurance that the Company will be successful in introducing new products or expanding its services business, and the failure to do so would have a material adverse effect on the Company's business, financial condition and results of operations. The Company's business has benefited from the rapid worldwide growth of the semiconductor industry. Purchases of the Company's products are largely dependent upon the commencement of new design projects by semiconductor manufacturers and their customers. The semiconductor industry experienced moderate growth in 1997 and the outlook for 1998 is uncertain. Slower growth in the semiconductor industry, and/or a reduced number of design starts, could have a material adverse effect on the Company's business, financial condition and results of operations. The Company attempts to manage its business to achieve quarter-to-quarter revenue and earnings growth. In recent years, achieving predictable revenue and earnings growth has become more difficult. Quarterly revenue and earnings are affected by a number of factors, including customer product demand, product license terms, the size of the Company's backlog, and the timing of revenue recognition on products and services sold. In recent years, the Company's orders have become more seasonal, with the first quarter of the Company's fiscal year traditionally being the weakest and with higher volumes in the second and fourth quarters. The Company increasingly receives a disproportionate volume of orders in the last two weeks of the quarter, a trend which has grown more pronounced in recent quarters and is expected to continue. The Company also has become more dependent upon large orders. In addition, an increasing amount of the Company's orders involve products and services which yield revenue over multiple quarters (often extending beyond the current fiscal year) or upon completion of performance rather than at the time of sale, including certain time-based product licenses that include the rights to new technology, consulting services, development contracts and royalties. Because of these trends, the Company's ability to convert orders, particularly those received late in a quarter, or backlog, to revenue in any quarter is less certain, and the Company is more vulnerable to delays in individual large orders, than it historically has been. It is therefore possible for the Company to fall short in its revenue and/or earnings plan for a given quarter even while orders and backlog remain on plan. Ultimately, long-term revenue and earnings growth is dependent upon the successful development and sale of the Company's products and services over a sustained period of time. 13 14 The Company expects that its revenue growth during fiscal year 1998 will be lower than it historically has been. Because of business uncertainties associated with the Company's merger with Viewlogic, weakness in Asian currencies, especially the Japanese yen, and overall weakness in Asia Pacific economies, for the rest of fiscal year 1998 the Company will emphasize earnings growth rather than revenue growth. The Company expects to realize cost savings in connection with the Viewlogic merger and is managing expenses. In addition, the Company, which has a 53-week financial calendar in fiscal 1998, absorbed the additional week of expenses in the first quarter. To the extent that revenue growth exceeds the Company's current expectations, the Company will use the opportunity to build its backlog for future quarters. The Company's operating expenses are based in part on its expectations of future revenue, and expense levels are generally committed in advance of revenue. The Company expects to continue to increase operating expenses in order to generate and support continued growth in revenue. If the Company is unsuccessful in generating such revenue, the Company's business, financial condition and results of operations are likely to be materially adversely affected. Net income in a given quarter or fiscal year may be disproportionately affected by a reduction in revenue growth because only a small portion of the Company's expenses varies with its revenue. In recent years, international revenue has accounted for almost half of the Company's revenue. The Company expects that international revenue will continue to account for a significant portion of its revenue in the future. As a result, changes in foreign currency exchange rates and changes in regional or worldwide economic or political conditions could have a material adverse effect on the Company's business, financial condition and results of operations. In particular, revenue from sales in Japan during fiscal 1997 and the first quarter of fiscal 1998 were adversely affected by the weakness of the yen against the dollar. Continued weakness of the yen could adversely affect revenue from Japan during the remainder of fiscal 1998. In addition, recent significant declines in the value of the currencies of many countries in the Asia Pacific region have affected the Company's sales in the region. This is particularly true in Korea and Taiwan, which are important markets for the Company in the Asia Pacific region. More generally, recent instability in Asian currency and stock market economies could adversely affect the economic health of the entire region and could have an adverse effect on the Company's results of operations. In February 1996, the Company entered into a six-year joint development and license agreement with IBM, pursuant to which the Company and IBM agreed to develop certain new products. Joint development of products is subject to risks and uncertainties over and above those affecting internal development. During fiscal year 1997, the first joint product resulting from the alliance, PrimeTime, was introduced, and the parties agreed to terminate efforts to develop a product in one of the product areas covered by the Agreement. There can be no assurance that the Company's joint development efforts will lead to new products or that such products will be successful. As of December 31, 1997, the Company held approximately 1,236,000 shares of Cadence common stock, which were acquired as a result of the Company's investments in Cooper & Chyan Technology, Inc. ("CCT") in May 1996 and April 1997 and CCT's subsequent acquisition by Cadence. The average basis of these shares is $8.56 per share. Following announcement of the Cadence-CCT merger, the Company commenced a program of selling 14 15 its CCT (now Cadence) shares in an amount per quarter sufficient to generate a profit of $2.0 million per quarter. The price of Cadence stock, and thus the value of the Company's investment, is subject to significant fluctuation. The number of Cadence shares the Company is required to sell in order to generate $2.0 million in profit in any fiscal quarter, the number of quarters that the Company will be able to generate such profits, and the total gain that the Company may be able to realize on sales of its Cadence shares depends upon the price of Cadence common stock at the time of sale. The Company's success is dependent on technical and other contributions of key employees, including individuals who joined the Company in connection with the acquisition of EPIC Design Technology, Inc. ("EPIC") and Viewlogic. In particular, there is a limited number of qualified EDA engineers, and the competition for such individuals is intense. There can be no assurance that the Company can continue to recruit and retain such key personnel. Failure to successfully recruit and retain such personnel could have a material adverse effect on the Company's business, financial condition and results of operations. The Company has adopted a number of provisions that could have antitakeover effects. In September 1997, the Board of Directors adopted a Preferred Shares Rights Plan, commonly referred to as a "poison pill." In addition, the Board of Directors has the authority, without further action by its stockholders, to fix the rights and preferences of, and issue shares of, authorized but undesignated shares of Preferred Stock. This provision and other provisions of the Company's Restated Certificate of Incorporation and Bylaws and the Delaware General Corporation Law may have the effect of deterring hostile takeovers or delaying or preventing changes in control or management of the Company, including transactions in which the stockholders of the Company might otherwise receive a premium for their shares over then current market prices. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the recorded amounts of assets and liabilities, disclosure of those assets and liabilities at the date of the financial statements and the recorded amounts of expenses during the reporting period. A change in the facts and circumstances surrounding these estimates could result in a change to the estimates and impact future operating results. Year 2000 Compliance Recently, there has been significant public discussion about potential inability of computer programs and systems, as a result of the failure of such programs and systems, to adequately process date information after December 31, 1999. The Company has inspected or tested its products to determine whether they will be affected by the change in the century, with the exception of the products acquired in the Company's merger with Viewlogic, which the Company is planning to test. None of the Company's tested products experienced date-related failures. The Company expects to achieve so-called "Year 2000 compliance" with its Viewlogic products and is developing a plan for meeting year 2000 compliance of all products on an ongoing basis. The Company's prior inspecting and testing has not required, and its anticipated inspection and testing is not expected to require the Company to incur any material expense. 15 16 In addition, the Company recently commenced a program, to be completed in 1999, to review the Year 2000 compliance status of the software and systems used in its internal business processes, to obtain appropriate assurances of compliance from the manufacturers of these products, and to modify or replace all non-compliant products. The Company relies on widely-available commercial products rather than proprietary software, and has received Year 2000 assurances from some of its main suppliers. Based on the information available to date, the Company believes that it will be able to complete its Year 2000 compliance review and make any necessary modifications prior to the end of 1999. The Company further believes that such review and modification, if any, will not require the Company to incur any material expense. However, if key systems, or a significant number of systems were to fail as a result of Year 2000 problems, the Company could incur substantial cost and disruption, which would potentially have a material adverse effect on the Company's business. 16 17 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held a special meeting of stockholders on December 4, 1997 in which the following proposal was submitted to the stockholders for vote at the meeting: To approve the issuance of shares of Common Stock, par value $.01 per share, of Synopsys ("Synopsys Common Stock"), pursuant to the Agreement and Plan of Merger, dated as of October 14, 1997, by and among Synopsys, Post Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Synopsys ("Sub"), and Viewlogic Systems, Inc., a Delaware corporation ("Viewlogic"), pursuant to which, among other things (a) Sub will be merged with and into Viewlogic, which will be the surviving corporation, and Viewlogic will become a wholly-owned subsidiary of Synopsys and (b) each outstanding share of Common Stock, $.01 par value per share, of Viewlogic will be converted into the right to receive 0.6521 of a share of Synopsys Common Stock. Of the total shares voting on the foregoing resolution, 41,404,641 voted in favor, 113,379 against and 15,055 abstained. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a.) Exhibits 10.29(a) Form of Executive Employment Agreement dated October 1, 1997 10.29(b) Schedule of Executive Employment Agreements 27 Financial Data Schedule (b.) Reports on Form 8-K The Company filed a report on Form 8-K on December 19, 1997 related to the completion of its merger with Viewlogic Systems, Inc. 17 18 SYNOPSYS, INC. 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. Date: February 13, 1998 SYNOPSYS, INC. (Registrant) By: /s/ DAVID M. SUGISHITA ---------------------------------------- David M. Sugishita Sr. Vice President Chief Financial Officer (Principal Financial and Accounting Officer) 18 19 EXHIBIT INDEX 10.29(a) Form of Executive Employment Agreement dated October 1, 1997 10.29(b) Schedule of Executive Employment Agreements 27 Financial Data Schedule 19 EX-10.29(A) 2 FORM OF EXECUTIVE EMPLOYMENT AGREEMENT 10-1-97 1 Exhibit 10.29(a) EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into effective as of October 1, 1997, by and between [employee] (the "Employee") and Synopsys, Inc., a Delaware corporation (the "Company"). R E C I T A L S A. The Employee is and has been employed by the Company and is currently the Company's [title] . B. The Company and the Employee desire to enter into this Agreement to provide additional financial security and benefits to the Employee and to encourage the Employee to continue his employment with the Company. C. Certain capitalized terms used in the Agreement are defined in Section 7 below. A G R E E M E N T In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of the Employee by the Company, the parties agree as follows: 1. Duties and Scope of Employment. (a) Position. The Company shall employ the Employee in the position of [position] , as such position has been defined in terms of responsibilities and compensation as of the effective date of this Agreement; provided, however, that the Board shall have the right, at any time prior to the occurrence of a Change of Control, to revise such responsibilities and compensation as the Board in its discretion may deem necessary or appropriate. The Employee shall comply with and be bound by the Company's operating policies, procedures and practices from time to time in effect during his employment. During the term of the Employee's employment with the Company, the Employee shall continue to devote his full time, skill and attention to his duties and responsibilities, and shall perform them faithfully, diligently and competently, and the Employee shall use his best efforts to further the business of the Company and its affiliated entities. 2. Base Compensation. The Company shall pay the Employee as compensation for his services a base salary at the annualized rate of $ [base compensation] . Such salary shall be paid periodically in accordance with normal Company payroll practices. The annualized compensation specified in this Section 2, as such compensation may be increased or decreased by the Board or the Compensation Committee of the Board, is referred to in this Agreement as "Base Compensation." 3. Annual Incentive. Beginning with the Company's current fiscal year and for each fiscal year thereafter during the term of this Agreement, the Employee shall be eligible to receive additional cash compensation under the Company's annual incentive plan (the "Annual Incentive") 2 based upon specific financial and/or other targets approved by the compensation committee of the Board (the "Target Incentive"). The Annual Incentive payable hereunder shall be payable in accordance with the Company's normal practices and policies. 4. Employee Benefits. The Employee shall be eligible to participate in the employee benefit plans and executive compensation programs maintained by the Company applicable to other key executives of the Company, including (without limitation) retirement plans, savings or profit-sharing plans, stock option, incentive or other bonus plans, life, disability, health, accident and other insurance programs, paid vacations, and similar plans or programs, subject in each case to the generally applicable terms and conditions of the applicable plan or program in question and to the sole determination of the Board or any committee administering such plan or program. 5. Employment Relationship. The Company and the Employee acknowledge that the Employee's employment is and shall continue to be at-will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. 6. Severance Benefits. (a) Termination Following A Change of Control. Subject to Section 8 below, if the Employee's employment with the Company terminates at any time within twenty-four (24) months after a Change of Control, then the Employee shall be entitled to receive severance benefits as follows: (i) Involuntary Termination. If the Employee's employment terminates as a result of Involuntary Termination other than for Cause, the Employee shall be entitled to receive a severance payment equal to the sum of (x) two times the Employee's Base Compensation for the Company's fiscal year then in effect or if greater, two times the Employee's Base Compensation for the Company's fiscal year immediately preceding the Termination Date, plus (y) two times the Employee's Target Incentive for the fiscal year then in effect (or, if no Target Incentive is in effect for such year, the highest Target Incentive in the three (3) preceding fiscal years); provided, however, that a signed waiver and release of claims must be received by the Company from the Employee prior to and as a condition of receiving a severance payment. Any severance payments to which the Employee is entitled pursuant to this Section 6(a)(i) shall be paid to the Employee (or to the Employee's estate or beneficiary in the event of the Employee's death) in a lump sum within fifteen (15) days of the Employee's Termination Date. (ii) Voluntary Resignation; Termination For Cause. If the Employee voluntarily resigns from the Company (other than as an Involuntary Termination), or if the Company terminates the Employee's employment for Cause, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such resignation or termination. -2- 3 (iii) Disability; Death. If the Company terminates the Employee's employment as a result of the Employee's Disability, or if the Employee's employment terminates due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (b) Options. Subject to Section 8 below, in the event the Employee is entitled to severance benefits pursuant to Section 6(a)(i), then in addition to such severance benefits, the unvested portion of any stock option(s) held by the Employee under the Company's stock option plans shall vest and become exercisable in full, and the Employee shall have the right to exercise such additional vested portion of such stock option(s) at the time the Employee becomes entitled to the benefits under Section 6(a)(i). (c) Termination Apart from a Change of Control. If the Employee's employment with the Company terminates either prior to the occurrence of a Change of Control or after the twenty-four (24) month period following a Change of Control, then the Employee shall be entitled to receive severance benefits as follows: (i) Involuntary Termination. If the Employee's employment terminates as a result of Involuntary Termination other than for Cause, the Employee shall be entitled to receive a severance payment in an amount equal to the Employee's Base Compensation for the Company's fiscal year then in effect or if greater, the Employee's Base Compensation for the Company's fiscal year immediately preceding the Termination Date. Such severance payment shall be paid to the Employee (or to the Employee's estate or beneficiary in the event of the Employee's death) in a lump sum within fifteen (15) days of the date of such termination. In addition, provided the Employee does not engage in Misconduct during the six (6)-month period beginning on the Employee's Termination Date, the Employee shall be entitled to receive an additional payment from the Company in an amount equal to the Employee's Target Incentive for the Company's fiscal year then in effect (or, if no Target Incentive is in effect for such year, the highest Target Incentive in the three (3) preceding fiscal years). Any such additional payment shall be paid to the Employee in a lump sum on the date that is six (6) calendar months after the Employee's Termination Date. (ii) Voluntary Resignation; Termination for Cause. If the Employee voluntarily resigns from the Company (other than a resignation that is an Involuntary Termination), or if the Company terminates the Employee's employment for Cause, then the Employee shall not be entitled to receive severance or other benefits except for those, if any, as may then be established under the Company's then-existing severance and benefits plans and policies at the time of such resignation or termination. (iii) Disability; Death. If the Company terminates the Employee's employment as a result of the Employee's Disability, or if the Employee's employment terminates due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then-existing severance and benefit plans and policies at the time of such Disability or death. -3- 4 (d) Medical Benefits. In the event the Employee is entitled to severance benefits pursuant to Section 6(a)(i) or Section 6(c)(i), then in addition to such severance benefits the Company shall pay the Employee a lump sum payment in an amount equivalent to the reasonably estimated cost the Employee may incur to extend for a period of eighteen (18) months (twelve (12) months in the case of a termination pursuant to Section 6(c)(i)) under the COBRA continuation laws the Employee's group health and dental plan coverage in effect on the Termination Date. The Employee may use this payment, as well as any other payment made under this Section 6, for such continuation coverage or for any other purpose. 7. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings: (a) Cause. "Cause" shall mean (i) any act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) conviction of a felony that is injurious to the Company, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, and (iv) continued violations by the Employee of the Employee's obligations under Section 1 of this Agreement that are demonstrably willful and deliberate on the Employee's part after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties. (b) Change of Control. "Change of Control" shall mean the occurrence of any of the following events: (i) The acquisition by any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of the "beneficial ownership" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) A merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total -4- 5 voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the approval by the stockholders of the Company of a plan of complete liquidation of the Company or of an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (c) Disability. "Disability" shall mean that the Employee has been unable to substantially perform his duties under this Agreement as the result of his incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such Agreement as to acceptability not to be unreasonably withheld). (d) Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (e) Involuntary Termination. "Involuntary Termination" shall mean (i) without the Employee's express written consent, the significant reduction of the Employee's duties, authority or responsibilities relative to the Employee's duties, authority and responsibilities as in effect immediately prior to such reduction or the assignment to the Employee of such reduced duties, authority or responsibilities; (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) without the Employee's express written consent, a reduction by the Company in the Base Compensation of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) the relocation of the Employee to a facility or a location more than 50 miles from the Employee's then present location, without the Employee's express written consent; (vi) any purported termination of the Employee by the Company which is not effected for Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this agreement by any successors contemplated in Section 9 below. (f) Misconduct. "Misconduct" shall mean conduct on the part of the Employee that is inimical, contrary or harmful to the interests of the Company, including, but not limited to: (i) conduct related to the Employee's employment for which criminal or civil penalties against the Employee may be sought, (ii) willful violation of the Company's written policies, (iii) unauthorized disclosure of confidential information or trade secrets of the Company, (iv) engaging (directly or indirectly) in any business activity that is directly competitive with the Company's business; or (v) disparagement, defamation or slander of the Company. (g) Termination Date. "Termination Date" shall mean (i) if the Employee's employment is terminated by the Company for Disability, thirty (30) days after notice of termination is given to the Employee (provided that the Employee shall not have returned to the performance of the Employee's duties on a full-time basis during such thirty (30)-day period), (ii) if the Employee's employment is terminated by the Company for any other reason, the date on which the Company -5- 6 delivers notice of termination to the Company or such later date, not to exceed ninety (90) days, specified in the notice of termination, or (iii) if the Agreement is terminated by the Employee, the date on which the Employee delivers notice of termination to the Company. 8. Certain Business Combinations. In the event it is determined by the Board, upon receipt of a written opinion of the Company's independent public accountants, that the enforcement of any Section or subsection of this Agreement, including, but not limited to, Section 6(b) hereof, which allows for the acceleration of vesting of options to purchase shares of the Company's common stock upon a termination in connection with a Change of Control, would preclude accounting for any proposed business combination of the Company involving a Change of Control as a pooling of interests, and the Board otherwise desires to approve such a proposed business transaction which requires as a condition to the closing of such transaction that it be accounted for as a pooling of interests, then any such Section of this Agreement shall be null and void, but only if the absence of enforcement of such Section would preserve the pooling treatment. For purposes of this Section 8, the Board's determination shall require the unanimous approval of the disinterested Board members. 9. Successors. (a) Company's Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and assets which executes and delivers the assumption agreement described in this Section 9(a) or which becomes bound by the terms of this Agreement by operation of law. (b) Employee's Successors. The terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, devisees and legatees. 10. Notice. (a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company for Cause or by the Employee as a result of an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 10(a) of this Agreement. Such -6- 7 notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the Termination Date (which shall be not more than ninety (90) days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder. 11. Miscellaneous Provisions. (a) No Duty to Mitigate. The Employee shall not be required to mitigate the amount of any payment contemplated by this Agreement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Employee may receive from any other source. (b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (c) Whole Agreement. No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. (d) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. (e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) Arbitration. Any dispute or controversy arising out of, relating to or in connection with this Agreement shall be settled exclusively by binding arbitration in San Jose, California, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The Company and the Employee shall each pay one-half of the costs and expenses of such arbitration, and each shall separately pay its counsel fees and expenses. Punitive damages shall not be awarded. (g) No Assignment of Benefits. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this Section 11(g) shall be void. -7- 8 (h) Employment Taxes. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes. (i) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a section of this Agreement shall mean the corporation that actually employs the Employee. (j) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY: SYNOPSYS, INC. By:______________________________________ Title:___________________________________ EMPLOYEE: _________________________________________ -8- EX-10.29(B) 3 SCHEDULE OF EXECUTIVE EMPLOYMENT AGREEMENTS 1 Exhibit 10.29(b) - Schedule of Executive Employment Agreements The Company has entered into Employment Agreements in the form of Exhibit 10.29(a) with the individuals listed below. Each such agreement is identical except for the references to their names, titles and annualized base salaries, which are shown in the schedule below.
Name Title Annualized Base Salry - ---- ----- --------------------- Aart de Geus Chief Executive Officer $350,000 Chi-Foon Chan Chief Operating Officer $300,000 Dave Sugishita Senior Vice President, Finance $250,000 and Operations, Chief Financial Officer
EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 107,287 341,711 140,798 9,463 0 615,494 169,707 83,216 777,514 254,802 5,270 0 0 648 511,594 777,514 174,212 174,212 23,492 23,492 159,856 0 417 (4,195) 4,074 (8,269) 0 1,869 0 (6,400) (.10) (.10)
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