<PAGE> 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
<PAGE> 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
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYNOPSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ ------------
<S> <C> <C>
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
============ ============
</TABLE>
See accompanying notes
3
<PAGE> 4
SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
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
============ ============
</TABLE>
See accompanying notes
4
<PAGE> 5
SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
1997 1996
--------- ---------
<S> <C> <C>
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
========= =========
</TABLE>
See accompanying notes
5
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Income Shares Per-Share
(in thousands) (Numerator) (Denominator) Amount
------------ ------------ ------------
<S> <C> <C> <C>
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)
============ ============ ============
</TABLE>
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:
<TABLE>
<CAPTION>
(in thousands) Synopsys Viewlogic Combined
-------- --------- --------
<S> <C> <C> <C>
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)
</TABLE>
7
<PAGE> 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:
<TABLE>
<CAPTION>
Noncash 12/31/97
Writedown Reserve
(in thousands) Total Charge Amounts Paid of Assets Balance
------------ ------------ --------- --------
<S> <C> <C> <C> <C>
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
======== ========= ========= ========
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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")
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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.
<TABLE>
<CAPTION>
Name Title Annualized Base Salry
- ---- ----- ---------------------
<S> <C> <C>
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
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 107,287
<SECURITIES> 341,711
<RECEIVABLES> 140,798
<ALLOWANCES> 9,463
<INVENTORY> 0
<CURRENT-ASSETS> 615,494
<PP&E> 169,707
<DEPRECIATION> 83,216
<TOTAL-ASSETS> 777,514
<CURRENT-LIABILITIES> 254,802
<BONDS> 5,270
0
0
<COMMON> 648
<OTHER-SE> 511,594
<TOTAL-LIABILITY-AND-EQUITY> 777,514
<SALES> 174,212
<TOTAL-REVENUES> 174,212
<CGS> 23,492
<TOTAL-COSTS> 23,492
<OTHER-EXPENSES> 159,856
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 417
<INCOME-PRETAX> (4,195)
<INCOME-TAX> 4,074
<INCOME-CONTINUING> (8,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,869
<CHANGES> 0
<NET-INCOME> (6,400)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
