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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended September 30, 1996 or
/ / Transition report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________________
to _______________.
COMMISSION FILE NUMBER: 0-24756
EPIC DESIGN TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0135608
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
310 NORTH MARY AVENUE, SUNNYVALE, CALIFORNIA 94086
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: (408) 733-8080
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, no par value
(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the closing sale price of the Common Stock on
November 15, 1996 as reported on the Nasdaq National Market System, was
approximately $201,224,952.00. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of November 15, 1996, registrant had outstanding 13,666,752 shares
of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant has incorporated by reference into Part III of this Form
10-K portions of its Proxy Statement for Registrant's Annual Meeting of
Shareholders to be held February 12, 1997.
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PART I.
ITEM 1. BUSINESS
Certain statements in this Annual Report on Form 10-K (the "Report")
are forward-looking statements based on current expectations, and entail various
risks and uncertainties that could cause actual results to differ materially
from those expressed in such forward-looking statements. Such risks and
uncertainties are set forth in the second and fourth paragraphs under "--Sales,
Marketing and Customers," "--Product Development," "--Competition,"
"--Proprietary Technology," "--Employees," "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview," "--Factors
Affecting Future Operating Results" "--Liquidity and Capital Resources" and
elsewhere in this Report.
OVERVIEW
EPIC Design Technology, Inc. ("EPIC" or the "Company") develops,
markets and supports a family of simulation, analysis, extraction and physical
verification software tools that help integrated circuit (IC) designers better
manage the timing, power and reliability characteristics of IC designs. The
Company also develops, markets, and supports a set of technical services
intended for the characterization of transistors and interconnects fabricated on
silicon wafers. The Company's tools and services can be used by designers at
different stages of IC development to help identify flaws, enhance speed, reduce
power consumption and detect the causes of reliability failure. The Company
believes that by using EPIC products, IC designers can reduce development time,
lower the risk of design failure, avoid lengthy refabrication cycles and improve
an IC's performance and value. The Company's tools and services are particularly
focused on meeting deep submicron and nanometer IC designers' requirements for
(i) static and dynamic timing simulation, analysis, optimization and
verification, (ii) power simulation, analysis, optimization and verification,
(iii) physical layout extraction, analysis and verification and (iv) simulation,
analysis and correction of potential causes of reliability failure in complex
ICs.
EPIC(R) , PathMill(R) and TimeMill(R) are registered trademarks of the
Company and AMPS(TM), Arcadia(TM), PowerMill(TM), and Vertue(TM) are trademarks
of the Company. This Report also includes trade names and trademarks of
companies other than EPIC.
INDUSTRY BACKGROUND
There has been substantial growth in the market for sophisticated,
portable electronic products such as cellular telephones, laptop computers,
camcorders and pagers. Rapid growth in the Internet and multimedia arenas has
also fueled growth in the electronic systems necessary to support them. These
products have been enabled, in significant part, by improvements in silicon
process technologies which have made possible the design and manufacture of
increasingly complex, high performance and highly integrated ICs. In the 1970s,
a typical IC consisted of a few thousand transistors implemented in five-micron
technology. Today, designers are creating ICs consisting of millions of
transistors implemented in less than 0.6 micron (deep submicron) technology, and
the most advanced designers are creating ICs consisting of tens of millions of
transistors implemented in less than 0.35 micron (nanometer) technology. The
trends toward portability, multimedia and increased utilization of nanometer
technology have placed increasing demands on IC designers to develop ICs that
are low cost, low power, high speed and highly reliable. At the same time,
competitive pressures are forcing designers to shorten development cycles in
order to bring products to market more rapidly.
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Since the early 1970s, designers have used electronic design automation
(EDA) tools to assist in the IC development process. EDA vendors have provided
designers with methods, tools and services to develop, simulate and verify ICs.
As shown in the diagram below, the IC development cycle has five
stages:
- Architectural Design. Exploration of design alternatives;
- Functional Design. Specification of the desired functionality
of the IC;
- Logic Implementation. Development of gate and transistor level
descriptions that implement this functionality;
- Layout and Verification. Geometric layout of the individual
components that implement the logic design and verification of
the correctness of the design; and
- Production. Fabrication of the IC.
IC DEVELOPMENT PROCESS
Chart depicting the various stages of the IC development
process from Architectural Design to Functional Design to
Logic Implementation to Layout and Verification and to Production.
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While EDA products have brought greater efficiency and productivity to
the IC development process, advances in EDA software technology have not kept
pace with advances in semiconductor process technology. For example, an IC can
be described at different levels of detail or hierarchy, ranging from
transistors, to gates (which are comprised of several transistors), to
functional (i.e., behavioral) blocks (which can represent a large number of
gates). Existing EDA tools are primarily focused on providing simulation and
analysis capabilities at the gate or behavioral levels and generally do not
extend these capabilities down to the transistor level. However, deep submicron
and nanometer technologies each introduce new classes of problems in modeling
speed, power and other physical circuit behavior along with new problems in
managing the integration characteristics of an IC. These problems cannot be
addressed as efficiently or effectively at the gate and behavioral levels.
- Speed. Advanced technology enables an IC to operate at high speed,
but also introduces new challenges in modeling its behavior. At deep submicron
and nanometer levels, the physics of silicon leads to complicated electrical
phenomena (e.g., short channel effect, mobility saturation and cross-coupling)
that make transistor and interconnect behavior difficult to predict. These
phenomena cause significant problems in accurately modeling the timing delays
inherent in the interconnections between transistors (interconnect delay) and
the non-digital behavior of individual transistors on an IC.
- Power. Market demands for portability, higher speed and increased
levels of integration have placed greater importance on minimizing the power
consumed by an IC. Portable applications, which represent a significant market
for advanced silicon technology, require that IC power consumption be minimized
in order to increase battery life and decrease the cost, size and weight of the
system. Reducing power also contributes to increased life and reliability for an
IC.
- Integration. The dramatic increase in the number of transistors and
complexity of IC designs, along with the pressure to reduce design time, create
new problems in tracking the interaction between elements. For example, a design
group will generally work concurrently on different blocks at different levels
of hierarchy, after which the various blocks must be integrated. This
integration is more difficult in advanced IC design because of the large number
of blocks, gates and transistors and because interconnect delay has a greater
impact on the performance of the IC. Highly integrated, advanced silicon ICs
also create new problems in ensuring both their manufacturability and their
reliability. For example, constraints imposed by the physics involved in
characterizing and fabricating nanometer ICs require new solutions to achieve
satisfactory chip yields at process corners and to build in dependability by
identifying and correcting possible points of metal failure.
These design challenges have exposed certain limitations in established
EDA methods and tools. For example, traditional design tools do not accurately
analyze the power consumption characteristics of an IC prior to fabrication.
Therefore, while the designer may have certain power utilization objectives, the
power behavior of an IC is not accurately known until after fabrication. This
uncertainty may require redesign and refabrication, thereby increasing costs and
delaying time-to-market. Furthermore, existing gate level and circuit level
(e.g., SPICE) simulators have been used by designers to model the functionality
and timing characteristics of an IC. Gate level simulators are fast and have the
capacity to simulate an IC with a large number of gates, while SPICE provides
accurate results for small transistor level blocks. However, gate level
simulators cannot accurately simulate the non-digital behavior and complex
interconnect timing inherent in advanced silicon circuits, and SPICE cannot meet
the simulation speed and capacity requirements of most IC designers. Finally,
existing gate and circuit level EDA design tools do not allow designers to track
and manage effectively the interaction between blocks of complex ICs.
Consequently, designers need solutions that enable them to optimize speed and
power and manage integration in an efficient and accurate manner.
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EPIC SOLUTIONS
EPIC provides IC designers with a family of characterization, simulation,
analysis, extraction and physical verification software tools and services to
assist in meeting the design challenges created by deep submicron and nanometer
technology. The Company's six principal products -- AMPS, Arcadia, PathMill,
PowerMill, RailMill and TimeMill--utilize the Company's core technologies to
enable a designer to address timing, power and reliability requirements of an
IC. In addition, Vertue, a seventh product, enables PowerMill or TimeMill to
co-simulate with Verilog-XL, a widely used gate and behavioral level simulation
tool in the EDA industry.
The Company believes that its products can provide the following
benefits:
- Shorten time-to-market. The Company's tools have been shown to
provide accuracy to within five percent of the accuracy of
SPICE, to be significantly faster than SPICE in modeling ICs
and to possess the capacity to model circuits in excess of
four million transistors. These attributes of accuracy, speed
and capacity can shorten time-to-market by reducing the risk
of redesign and allowing designers to complete their tasks
more rapidly.
- Reduce power consumption. The Company believes that PowerMill
is uniquely able to detect and highlight design elements that
cause excessive power dissipation, thereby permitting
designers to modify the circuit to reduce overall power
consumption. The Company also believes that AMPS enables
designers to produce lower power ICs by handling the complex
tradeoffs between power, speed and area in advanced circuits.
- Increase levels of design integration. The Company believes
that the accuracy of its tools reduces design risk in
developing more highly integrated ICs. PathMill provides both
critical path analysis and full chip static timing
verification. Arcadia provides the capacitance and resistance
information necessary to model interconnect between blocks and
between individual elements. The ability for PowerMill and
TimeMill to simulate with Verilog-XL enables a designer to
track the interaction between blocks of a complex IC and to
manage them more effectively.
- Extend product life and enhance reliability. The Company
believes that the analysis capabilities of its products allow
designers to detect more causes of circuit failure than
existing gate level tools, resulting in improved IC
reliability. RailMill enables the designer to detect the
potential causes of voltage drop and electromigration (metal
migration) which can lead to unreliable operation and early
device failure.
- Reduce development costs. In addition to development cost
savings that may result from decreased design time and fewer
prototype iterations, the Company believes that interfaces
developed to run between the Company's products and the
frameworks from EDA suppliers can streamline the design flow
and potentially reduce the complexity and cost of IC design.
EPIC STRATEGY
The Company's strategy is to become the leading supplier of timing,
power and reliability management tools for the design of deep submicron and
nanometer ICs. The key elements of this strategy are to:
Capitalize On and Maintain Technological Leadership in Advanced IC
Design Analysis. The Company intends to continue to invest significant resources
to expand its set of core technologies and to enhance and support
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its products. During fiscal 1996, the Company unveiled several new capabilities
reflecting this strategy. The Company introduced AMPS which enables designers to
optimize circuit performance by automating the complex simultaneous tradeoff of
power, delay and area in the design space. The Company announced Synchronous
Matrix Solver technology, a third-generation dynamic simulation technology
targeted to provide the underlying "nanometer-ready" capability for all of
EPIC's next-generation dynamic simulation tools. The Company also announced
Direct Silicon Access, a service that generates technology files (characterized
transistor and interconnect data) directly from laboratory measurements of a
silicon test chip, enabling the EPIC tools to provide results closer to actual
silicon than when SPICE is used. In September 1996, the Company also acquired
CIDA Technology, Inc. ("CIDA"). The Company believes that technology from this
acquisition will form the foundation of the Company's next-generation
hierarchical physical verification tools. In addition, the Company plans to
develop new technologies to address future generations of silicon process
technology.
Provide Comprehensive Tools for Low Power Design. The Company expects
increasing demand for portable electronic products to require designers to
minimize IC power consumption. The Company has devoted significant effort to
meet the requirements of low power IC design. PowerMill provides power analysis
and diagnostics enabling designers to identify and reduce IC power consumption.
AMPS enables the development of circuits that are optimized for low power
performance. The Company intends to enhance its PowerMill and AMPS technology
base and to continue to develop tools targeted at the low power IC design
market.
Provide Open Architecture Design Tools and Support Industry Standards.
The Company has entered into major EDA supplier programs to provide more
integrated design solutions. The Company is a member of Cadence Design Systems'
Connections Program, Synopsys' in-Sync Program and Mentor Graphics Corporation's
OpenDoor program. The Company offers interfaces to these and other vendor
environments and designs its products to support various widely used EDA formats
such as SDF (Standard Delay Format), SPF (Standard Parasitic Format),
Verilog" and EDIF (Electronic Data Interchange Format). The Company believes
that this strategy will facilitate integration of EPIC tools into designers'
preferred development environments.
Establish Long-Term Customer Relationships with Major Accounts. The
Company will continue to focus its sales and marketing efforts on key accounts
worldwide in the consumer electronics, computer, communications and
semiconductor industries. The Company provides direct interaction of certain key
personnel with these key accounts to ensure successful adoption of the Company's
products. These strategic relationships act as highly visible references and
provide ongoing technical input into the development of future products and
enhancements to existing products.
Provide Products which Address the Needs of ASIC Designers. ASIC
designers have traditionally used gate level tools to meet their design needs.
The Company believes that existing gate level tools, particularly with respect
to power consumption and timing calculation, will become increasingly inadequate
as IC designs are implemented in nanometer technology and will need to be
supplemented with more accurate tools. The Company is currently developing
tools, expected to be introduced prior to the end of fiscal 1997, that it
believes will provide accurate power analysis and diagnostics and also delay
calculation for ASIC designs. Although the ASIC design market is highly
competitive, the Company believes that it presents a significant opportunity for
the Company.
Provide Products which Address the Requirements of Physical
Verification. Once a design is completed, it must be verified to assure that no
design rules have been broken. This process is called physical verification and
includes several procedures, including Design Rule Checking (DRC), Electrical
Rule Checking (ERC), Layout Versus Schematic (LVS) which determines whether the
circuit laid out actually matches the netlist (schematic), and Layout Parasitic
Extraction (LPE) to provide resistance, capacitance and inductance data. The
Company believes that existing physical verification tools will become
increasingly inadequate as IC designs are implemented in nanometer
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technology and will need to more fully accommodate hierarchical design methods.
Based on the CIDA technology, the Company is presently developing tools,
expected to be introduced prior to the end of fiscal 1997, that it believes will
provide faster operation, true hierarchy and lower memory requirements for
physical verification. Although the physical verification market is highly
competitive, the Company believes that it presents a significant opportunity for
the Company.
TECHNOLOGY AND PRODUCTS
The Company's AMPS, PathMill, PowerMill, RailMill and TimeMill products
all use the same input files, including netlist, control and technology files.
Arcadia uses compatible netlist and back annotation formats but has its own
technology file. These technology files can be generated based on data measured
directly from silicon using the Direct Silicon Access Laboratory, a new service
laboratory established by the Company in fiscal 1996. The Company's products
provide a breadth of timing, power and reliability analysis capabilities and are
enhanced by the availability of optional features for such specialty needs as
analog blocks.
Technology
The Company's products are based upon the following internally
developed and acquired proprietary technologies and innovative software
algorithms.
- Event driven transistor level simulation. The Company has
developed innovative algorithms that effectively partition the
design and accurately simulate the non-digital behavior of
transistor level circuits common in advanced IC designs.
- Mixed transistor models. The Company's products use complex
algorithms that analyze a circuit and automatically select the
appropriate transistor model in each instance in order to
maximize performance of the simulation while maintaining the
desired accuracy.
- Efficient creation, storage and retrieval of table look-up
MOSFET models. This proprietary method utilizes Direct Silicon
Access Laboratory data (or the output of SPICE) with
user-defined MOSFET models to efficiently create, store and
retrieve tabular device characteristics that are referenced
during the simulation process.
- Synchronous matrix solver and high-performance sparse matrix
circuit solver. The Company has developed innovative methods
for solving circuit equations to provide detailed and
numerically reliable circuit behavior modeling in complex ICs.
- Optimum transistor width solver. The Company has developed a
unique approach for determining optimum transistor widths in
order to meet power, delay and area constraints.
- Quasi-3D capacitance analysis. The Company has acquired
innovative topology analysis for parasitic capacitance
analysis that provides enhanced accuracy with minimized
performance degradation.
- Accurate resistance topology analysis. The Company has
acquired a unique approach to breaking down polygons to ensure
accurate parasitic resistance calculation.
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- Interconnect and transistor characterization from silicon. The
Company has invested in a laboratory furnished with
state-of-the-art measurement and test equipment which is
combined with advanced software technologies to create a
semi-automated characterization process.
Products
The Company's products can be utilized at various stages of the advanced silicon
IC development process and provide designers with the following functions and
capabilities to address speed, power and integration requirements:
Chart depicting the various stages of the IC development
process in relation to the Company's products.
<TABLE>
<CAPTION>
SPEED POWER INTEGRATION
<S> <C> <C>
Vertue enables TimeMill
and Verilog-XL
co-simulation to explore
architecture options
PathMill identifies critical PowerMill or PowerMill PathMill ensures
timing paths that drive the with Vertue explores low timing budgets for each
design planning power alternatives for key block are consistent
design blocks with initial goals
PathMill and TimeMill PowerMill verifies that PathMill and TimeMill
analyze and improve timing pre-layout power meets power help designers optimize
constraints goals transistor level blocks
Arcadia provides accurate PowerMill prioritizes PathMill enables
post layout parasitics to critical power areas designers to perform full
help ensure the accuracy of chip static timing
analysis results verification
PathMill prioritizes AMPS obtains lowest power PathMill and TimeMill
critical timing areas while maintaining timing verify post-layout timing
specifications
PathMill and TimeMill PowerMill verifies and helps Vertue enables PowerMill
validate post-layout timing designers minimize power or TimeMill and
consumption Verilog-XL co-simulation
to verify the completed IC
</TABLE>
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<TABLE>
<CAPTION>
SPEED POWER INTEGRATION
<S> <C> <C>
RailMill identifies voltage RailMill identifies high Arcadia provides
drop problems that reduce currents that cause selective net extraction
performance electromigration problems. that increases accuracy
It can help designers select and reduces runtime to
the best network strategy improve the design
for optimized performance validation cycle
</TABLE>
AMPS. AMPS simultaneously optimizes power, delay and area in digital
CMOS circuits. AMPS automatically resizes transistors, making them larger and/or
smaller to find the combination that will best meet user-defined power, speed
and area goals without changing the functionality of the design. The Company
believes that AMPS helps a designer manage the complex relationships between
power, speed and area in such a way as to meet or exceed design goals and
thereby add value to the design. AMPS can be used on full custom and standard
cell designs, and it runs on blocks of 100 to 30,000 transistors. At the back
end, AMPS serves as a verification tool, using parasitics extracted from layout
to determine whether design performance goals have actually been met and
allowing the designer to make further improvements if necessary. AMPS also
enables a designer to reuse blocks by automatically resizing the circuits to
make them run faster, consume less power and/or minimize area. AMPS carries a
list price in the United States of $90,000 for a floating license and was first
shipped to customers in January 1996. A floating license allows one use of the
product at any given time on any one computer on the customer's network.
ARCADIA. Arcadia provides full chip and net-by-net RC extraction. The
Company believes that Arcadia achieves a greater combination of accuracy and
fast run time than other existing tools. Arcadia is also easy to use and
supports a variety of formats that enable simple integration into existing
design flows. Arcadia provides the user with multiple extraction modes and
allows net-by-net extraction, so that designers can invest analysis time on
critical paths and spend less time on the segments that do not require in-depth
analysis. Arcadia is specifically designed for the advanced silicon designer
working on complex, high-performance custom, structured custom or ASIC projects.
Arcadia carries a list price in the United States ranging from $30,500 to
$109,500 for a floating license depending on features and functionality and was
first shipped to customers in March 1995.
PATHMILL. PathMill is a static timing tool that provides a detailed
critical path analysis and static timing verification capability. The Company
believes that PathMill provides accurate and flexible modeling for mixed level
static timing analysis. PathMill's behavioral, gate and transistor level models
allow accurate analysis at each level of the design hierarchy, allowing the user
to mix top-down design and bottom-up implementation. PathMill has the capability
of generating netlists of selected paths for several versions of SPICE. The user
can use the netlists directly to run SPICE simulations on the critical paths to
fine tune the paths or to verify the results from PathMill. PathMill carries a
list price in the United States ranging from $45,500 to $96,750 for a floating
license depending on features and was first shipped to customers in June 1989.
POWERMILL. PowerMill simulates block and full chip current and power
behavior, providing fast and accurate current and power analysis and power
diagnostics. PowerMill offers static and dynamic diagnostics to identify design
flaws that cause unnecessary power consumption. PowerMill also allows the
designer to accurately predict the power consumption of a block and explore
different alternatives for minimizing the power consumed by the block. In
addition, PowerMill helps to ensure that power problems are caught early in the
design cycle and to verify the design
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prior to layout. The results can then be used to help modify the layout to
facilitate minimum power dissipation and optimal power bus sizing. After layout,
PowerMill helps designers confirm that power consumption is acceptable before
committing the design to silicon. PowerMill carries a list price in the United
States ranging from $75,100 to $101,350 for a floating license depending on
features and was first shipped to customers in March 1992.
RAILMILL. RailMill is an IC reliability analysis tool to detect
electromigration and voltage drop problems before silicon. Leveraging the
Company's expertise in power and extraction, RailMill addresses problems related
to reliability in IC design and verification. RailMill is used during the
physical design phase and allows designers to detect and eliminate the causes of
intermittent failure and reduced lifetime due to voltage drop and
electromigration problems. RailMill brings reliability detection into the design
phase, eliminating silicon turns and reducing very expensive and time-consuming
post-silicon analysis. RailMill carries a list price in the United States
ranging from $166,000 to $236,250 for a floating license depending on features
and was first shipped to customers in May 1995.
TIMEMILL. TimeMill is a transistor level simulator and dynamic timing
analyzer that provides results significantly faster and with greater capacity
than SPICE and with more accuracy than gate level simulators. Used interactively
in the pre-layout phase, TimeMill helps designers optimize the performance of
transistor level blocks, memories and datapaths. TimeMill allows the designer to
quickly explore changes in voltage levels, temperature or process parameters to
improve design quality. After layout, TimeMill detects problems such as charge
sharing and race conditions which are more prevalent in advanced silicon IC
design. These problems may be missed by a logic simulator and are generally
impractical to find with SPICE. TimeMill provides an extra level of verification
which can detect errors or insufficient detail in the gate level library.
TimeMill's dynamic timing checks allow designers to specify design margin and
automatically flag violations which can be used to check the impact of layout on
the critical timing areas. TimeMill carries a list price in the United States
ranging from $55,800 to $103,050 for a floating license depending on features
and was first shipped to customers in August 1987.
VERTUE. Vertue uses technology developed by the Company with SimMatrix
developed by Precedence Incorporated ("Precedence") to enable co-simulation of
TimeMill or PowerMill with Verilog-XL. The Company has been granted a license to
use, market and distribute the interface developed by Precedence in return for
certain development fees and royalties. Vertue enables the concurrent use of
Verilog-XL and TimeMill or PowerMill allowing the designer to mix behavioral,
gate and transistor level blocks as needed. With the use of top-down design, the
creation of test sets ("test benches") and system level simulation vectors is
performed at the top level. Vertue enables the designer to use the Verilog test
benches to drive TimeMill or PowerMill directly, and therefore reduces the need
to create additional test vectors. Vertue extends the value of the Verilog
environment by enabling accurate timing, non-digital behavior and power to be
simulated from within the Verilog environment. Vertue carries a list price in
the United States of $24,000 for a floating license and was first shipped to
customers in March 1994.
OPTIONS. The Company offers a variety of product options. PowerMill and
TimeMill have extensions (MSX and BCX) that allow designers to directly simulate
mixed-signal and BiCMOS ICs. PathMill has options for dynamic analysis of clock
trees (DSX), writing custom routines for tailoring PathMill results directly
(PFX), and for writing and reading constraints and models within a Synopsys
design flow (SFX). BDC (Block Delay Calculator) works with TimeMill and extracts
the timing and drive loading information necessary for pin-to-pin block timing
characterization. SNX (Signal Net eXtension) works with RailMill to provide
signal net analysis in addition to power and ground nets. Arcadia has a range of
configuration options that allow the designer flexibility in using the tool at
various places in the design flow.
INTERFACES. The Company supports certain platforms available from Sun
Microsystems, Inc., Hewlett-Packard Company and IBM. The Company has developed
graphical interfaces for Arcadia, PathMill, PowerMill and RailMill and intends
to develop other interfaces during fiscal 1997. The Company's OEMs support
several products
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that ease the integration of the Company's products to other environments. The
following tables list the interfaces and tools supported by the Company:
Interfaces
<TABLE>
<CAPTION>
CADENCE DESIGN VIEWLOGIC MENTOR GRAPHICS
SYSTEMS, INC. SYSTEMS, INC. CORPORATION
<S> <C> <C> <C>
Framework Integration X X X
Schematic Capture Interface X X X
Waveform Display X X X
Co-simulation with Verilog-XL X
</TABLE>
Tools
- -----
<TABLE>
<CAPTION>
Netlist integration Vector integration Waveform integration
- ------------------- ------------------ --------------------
<S> <C> <C>
SPICE SPICE TurboWave
EDIF Verilog SimWave
LSIM Proprietary formats
Verilog
</TABLE>
SALES, MARKETING AND CUSTOMERS
The Company markets its products in North America and Europe primarily
through a direct sales organization. EPIC uses a team of sales personnel and
field applications engineers working together from the Company's sales and
support offices to provide commercial and technical solutions for each customer.
Additionally, the Company has a team of product experts based at the Company's
headquarters to assist the applications engineers in certain situations where an
advanced level of product expertise is required. The Company has domestic sales
and support offices in Sunnyvale and Irvine, California, Austin and Dallas,
Texas, Framingham, Massachusetts, Upper Saddle River, New Jersey, Research
Triangle, North Carolina, Arvada, Colorado, Phoenix, Arizona, Vancouver,
Washington and Baltimore, Maryland. Internationally, the Company has sales and
support offices in Taipei, Taiwan, Grenoble, France and London, England. As of
September 30, 1996, the Company employed 34 sales personnel and 43 applications
engineers. The Company participates in industry trade shows and organizes
seminars to promote and further expand the adoption of its products and
technologies.
In Asia, EPIC markets its products primarily through a limited number
of independent distributors who license and service the Company's products in
this market. The Company also supports these distributors and their customers
with technical, sales and management personnel. Marubeni is the Company's
exclusive distributor in
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Japan. C&G Technology distributed the Company's products on a nonexclusive basis
in Korea until June 30, 1996. Beginning July 1, 1996, EPIC Associates, Inc.
became the Company's nonexclusive distributor in Korea. The Company is currently
negotiating with C&G Technology for a new nonexclusive distributor agreement
intended to be effective January 1, 1997 and intends to employ some of the
employees of EPIC Associates, Inc. to directly support the Company's Korean
customers starting January 1, 1997. Future Techno Design distributes the
Company's products on a nonexclusive basis in the ASEAN countries (Singapore,
Malaysia, Indonesia, Thailand and the Philippines) and in India. The Company has
no direct sales force and relies on a single distributor for licensing and
support of its products in each of Japan, Korea and the ASEAN countries and
India. Accordingly, the Company is dependent upon the continued viability and
financial stability of its distributors, and in particular, of Marubeni. Since
the Company's products are used by highly skilled professional engineers,
effective distributors must possess sufficient technical, marketing and sales
resources and must devote these resources to a lengthy sales cycle, customer
training and product service and support. Only a limited number of distributors
possess these resources. In addition, the Company's distributors generally offer
products of several different companies, including in some cases products that
are competitive with the Company's products. There can be no assurance that the
Company's current distributors will be able to continue to market or service and
support the Company's products effectively, that economic conditions or industry
demand will not adversely affect these or other distributors, that any
distributor that licenses the Company's products will choose to continue to
license such products or that these distributors will not devote greater
resources to licensing products of other companies. The loss of, or a
significant reduction in revenue from, one of the Company's distributors could
have a material adverse effect on the Company's business, financial condition
and results of operations.
In June 1996, the Company entered into a nonexclusive OEM agreement
with Cascade Design Automation Corp. ("Cascade"). Under such agreement, Cascade
is granted the nonexclusive right of distributing the Company's Arcadia product
by bundling it with Cascade's own product.
International license and service revenue accounted for 39.7%, 44.3%
and 48.5% of the total revenue in fiscal 1996, 1995 and 1994, respectively. The
Company expects that international license and service revenue will continue to
account for a significant portion of its revenues in the future. These revenues
involve a number of inherent risks, including the impact of recessionary
environments in economies outside the United States, generally longer receivable
collection periods, unexpected changes in regulatory requirements, reduced
protection for intellectual property rights in some countries, and tariffs and
other trade barriers. There can be no assurance that such factors will not have
a material adverse effect on the Company's future international license and
service revenue and, consequently, on the Company's business, financial
condition and results of operations. Although the Company has attempted to
reduce the risk of fluctuations in exchange rates associated with international
revenues by licensing its products for United States currency, the Company pays
the expenses of its international operations in local currencies and does not
engage in hedging transactions with respect to such obligations. Currency
exchange fluctuations in countries in which the Company licenses its products
could have a material adverse effect on the Company by resulting in pricing that
is not competitive with prices denominated in local currencies.
In fiscal 1996, 1995 and 1994, licensing and service revenue from
Marubeni accounted for 21.9%, 16.6% and 15.6%, respectively, of total revenue.
Advanced Micro Devices, Inc. accounted for 10.7% of licensing and service
revenue in fiscal 1996. Licensing and service revenue from the C&G Technology,
the Company's distributor in Korea, accounted for 11.0% of total revenue in
fiscal 1995. No other customer of the Company accounted for greater than 10% of
total revenue during fiscal 1996, 1995 or 1994.
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<PAGE> 13
CUSTOMER SERVICE AND SUPPORT
The Company provides its customers with a wide range of support
services, including a support hot-line, on-site support and on-site and in-house
training for all products. The Company's customer service and support is
provided by application engineers who understand the design methodologies of the
Company's customers and generally have IC design backgrounds. Pre-sales support
is supplied in executing benchmarks, training and providing integration analysis
as needed. Post-sales support is provided pursuant to renewable annual
maintenance contracts. In addition, customers with maintenance agreements have
access to a hot-line and receive periodic product enhancement releases at no
additional cost. Initial training is currently included in the license fees,
however, customers are charged for specialist consulting or on-site training.
Most of the Company's customers currently have maintenance agreements.
PRODUCT DEVELOPMENT
The Company's future success is dependent in part upon its ability to
enhance its current products and to develop and introduce new products on a
timely and a cost-effective basis that keep pace with technological developments
and evolving industry standards, as well as address the increasingly
sophisticated needs of the Company's customers. The Company's research and
development staff focuses on the development, enhancement and support of a
particular product of the Company or the development and support of product
integration and graphical user interfaces. These groups also focus on releasing
improved versions of the Company's existing products and developing new products
and product options.
The Company's product development efforts are currently focused on
several new products that the Company currently expects to introduce in fiscal
1997 in the timing, power and reliability areas. With its recent acquisition of
CIDA, the Company is continuing the development efforts in the layout
verification area. In addition, the Company is modifying its products for the
ASIC design market segment. The Company is working with ASIC vendors and
designers to develop a tool designed to provide accurate power analysis and
diagnostics for ASIC applications. The EDA industry is characterized by
extremely rapid technological change, frequent new product introductions,
evolving industry standards and changing customer requirements. The Company's
future success will depend upon its ability to enhance its current products and
to develop and introduce new products on a timely and a cost-effective basis
that keep pace with technological developments and evolving industry standards
and methodologies, as well as address the increasingly sophisticated needs of
the Company's customers. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new products that
respond to technological change, evolving industry standards and changing
customer requirements, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
these products, or that its new products and product enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance. Failure of the Company, for technological or other reasons, to
develop and introduce new products and product enhancements in a timely and
cost-efficient manner would have a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION
The EDA industry is highly competitive. In general, competition in the
EDA industry comes from major EDA vendors, each of which has a longer operating
history, significantly greater financial, technical and marketing resources,
greater name recognition and larger installed customer bases than the Company.
These companies also have established relationships with current and potential
customers of the Company. Market acceptance of the Company's products will
require that IC designers adopt modified methods of design simulation and
analysis, for example simulating and analyzing at the transistor level as
opposed to the gate level. Designers have historically
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<PAGE> 14
relied on other methodologies implemented through products supplied by the major
EDA vendors, and there can be no assurance that they will be willing to change
these established methods of design simulation and analysis. If the market for
the Company's products develops, the Company expects competition from the major
EDA vendors to increase. In addition, a variety of small companies develop and
bring new products to the market, and any of these companies could become a
significant competitor in the EDA market in the future. The Company also
competes with the internal design groups of its existing and potential
customers, many of whom design and develop customized simulation and analysis
tools for their particular needs and therefore may be reluctant to purchase
products offered by independent vendors. In addition, increased competition
could result from vendors of SPICE simulation products which increase the
performance of their existing products to match that of the Company's products.
Each of the Company's products addresses a different aspect of IC
performance optimization and has different competitors. AMPS competes with a
tool that Cadence has licensed from Lucent Technology, Inc. Arcadia competes
with extraction tools offered by Cadence, Avant! Corp. ("Avant!") and High Level
Design Systems, Inc. ("HLDS"). PathMill competes with a static timing analysis
product offered by Cadence at the transistor level and there are several gate
level analyzers which have historically been used for static timing analysis.
Among the leading EDA vendors that currently offer gate level static timing
analyzers are Viewlogic, Synopsys, Cadence and Mentor Graphics Corporation
("Mentor"). In addition, the Company is aware of certain transistor level
products competitive with PathMill which are offered by smaller EDA companies.
PowerMill competes with transistor level products offered by Mentor and Avant!
and gate level products offered by Synopsys. TimeMill experiences competition
from product offerings of Avant!, Mentor and certain smaller EDA companies. To
date, the Company has faced little direct competition for RailMill and Vertue.
The Company has also recently established a silicon characterization service
laboratory which is competing with a similar service laboratory at Avant!. With
the Company entering into the market of physical verification through its
acquisition of CIDA, the Company will also be competing with layout verification
tools from Cadence, Mentor and Avant!.
Several recent consolidations in the EDA industry involving medium to
large EDA companies acquiring small technology companies have provided the
additional sales distribution channels and customer base access to these smaller
companies that otherwise would not have had such resources. For example, as a
result of Avant!'s acquisitions of Anagram, Inc., Meta-Software, Inc. and
Frontline Design Automation and Cadence's recent announcements of agreements to
acquire HLDS and Cooper & Chyan Technology, Inc., the Company believes that its
competitive environment has moved toward a small number of competitors with
increased competition coming from larger, more diversified EDA companies that
possess significantly greater financial, technical and marketing resources and
greater name recognition and larger installed customer bases than the Company.
The Company competes on the basis of certain factors, including
first-to-market product capabilities, product performance, price, support of
industry standards, ease of use and customer technical support and service. The
Company believes that it currently competes favorably overall with respect to
these factors, particularly time-to-market product features, technical support
and customer service. However, there can be no assurance that the Company will
be able to continue to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, financial condition and results of
operations. In particular, increased competition could result in price
reductions, reduced margins and loss of market share, all of which could
materially adversely affect the Company. In addition, there can be no assurance
that current competitors or other entities will not develop similar products
that have significant advantages over the Company's core technology which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
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<PAGE> 15
PROPRIETARY TECHNOLOGY
The Company relies primarily upon a combination of copyright and
trademark laws to establish and protect proprietary rights in its products. The
Company seeks to protect the source code for its products as an unpublished
copyrighted work. The Company generally enters into proprietary information and
confidentiality agreements with its employees and distributors, and limits
access to and distribution of its software, documentation and other proprietary
information. The Company does not license or release the source code for its
proprietary software to its customers, except in connection with source code
escrow arrangements. Despite these precautions, it may be possible for a third
party to copy or otherwise obtain and use the Company's products or technology
without authorization, or to develop similar technology independently. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. Because the EDA industry is characterized
by rapid technological change, the Company believes that factors such as the
technological and creative skills of its personnel, new product developments,
frequent product enhancements, name recognition and reliable product maintenance
are also important to establishing and maintaining a technology leadership
position. The Company does not hold any patents and does not anticipate that it
will rely in the future on patents to protect its proprietary rights.
Although the Company does not believe its products infringe the
proprietary rights of any third parties, there can be no assurance that
infringement claims will not be asserted against the Company or its customers in
the future. Although there are no such pending lawsuits against the Company or
notices that the Company is infringing intellectual property rights of others,
there can be no assurance that litigation or infringement claims will not occur
in the future. The Company could incur substantial costs and diversion of
management resources in defending itself and its customers against any such
claims. Furthermore, parties making such claims could secure substantial
damages, as well as injunctive or other equitable relief which could effectively
block the Company's ability to sell its products in the United States and
abroad. Such a judgment could have a material adverse effect on the Company's
business, financial condition and results of operations. If it appears necessary
or desirable, the Company may seek licenses under intellectual property that it
is allegedly infringing. There can be no assurance, however, that licenses could
be obtained on commercially reasonable terms, if at all, or that the terms of
any offered licenses will be acceptable to the Company. The failure to obtain
the necessary licenses or other rights could have a material adverse effect on
the Company's business, financial condition and results of operations.
EMPLOYEES
As of September 30, 1996, the Company had a total of 195 employees,
including 92 in research and development, 84 in sales, marketing and related
customer support services, and 19 in administration. Thirty-four of the
Company's employees hold Ph.D. degrees. None of the Company's employees is
represented by a collective bargaining agreement, nor has the Company
experienced any work stoppage. The Company considers its relations with its
employees to be good. The Company is highly dependent upon the continued service
of, and on its ability to attract and retain, qualified technical, sales,
marketing and managerial personnel. The competition for qualified personnel is
intense, and the loss of any such persons, as well as the failure to recruit
additional key personnel in a timely manner, would have a material adverse
effect on the Company's business, financial condition and results of operations.
In particular, there are only a limited number of qualified EDA engineers, and
the competition for such individuals is especially intense. There can be no
assurance that the Company will be able to continue to attract and retain the
qualified technical and other personnel necessary for the development of its
business.
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<PAGE> 16
ITEM 2. PROPERTIES
In December 1995, the Company relocated its principal administration,
sales, marketing and research and development operations to a facility occupying
approximately 53,000 square feet in Sunnyvale, California. The facility is
leased through November 2000, at which time the Company has two options to
extend the lease for additional periods of two and one-half years each. The
Company's lease on its former principal facility expired in February 1996. In
addition, the Company also leases sales offices in Irvine, California, Austin
and Dallas, Texas, Framingham, Massachusetts, Upper Saddle River, New Jersey,
Vancouver, Washington, Taipei, Taiwan, Grenoble, France and London, England. The
Company also leases an approximately 3,000 square feet facility in Santa Clara,
California, pursuant to a lease assumed in connection with the acquisition of
Archer. The Company subleases this facility to a third-party. Additionally,
pursuant to a lease assumed in connection with the acquisition of CIDA, the
Company leases approximately 2,500 square feet facility in Sunnyvale, California
and such lease expires on December 31, 1996. The Company believes that its
existing facilities are adequate to meet its current needs and that suitable
additional or alternative space will be available in the future on commercially
reasonable terms as needed.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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<PAGE> 17
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages as of November 15,
1996 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Sang S. Wang, Ph.D. .............. 51 Chief Executive Officer and Chairman of the Board of
Directors
Bernard Aronson .................. 65 President and Director
Gary A. Larsen ................... 63 Vice President, Worldwide Sales
Tammy S. Liu ..................... 40 Chief Financial Officer and Secretary
</TABLE>
Dr. Wang, a co-founder of the Company, has served as Chief Executive
Officer since August 1991 and as Chairman of the Board of Directors since
September 1993. From the Company's inception in October 1986, he served as
President until August 1991 and as Chief Financial Officer until March 1993.
Prior to founding the Company, Dr. Wang was a Manager of Computer Aided Design
at AMD, a manufacturer of integrated circuits, responsible for the development
of AMD's internal bipolar circuit simulation environment.
Mr. Aronson has served as President of the Company since August 1991
and as a Director since March 1992. From March 1990 to August 1991, Mr. Aronson
served as Executive Vice President of Zoran Corporation, a semiconductor
company. From 1987 to January 1990, he served as President of ICI Array
Technology, Inc., a contract assembly company. From 1976 to 1987, Mr. Aronson
served as President of Pico Design, Inc., a semiconductor chip design company
that he founded and which became a wholly-owned subsidiary of Motorola in 1979.
Mr. Larsen has served as Vice President, Worldwide Sales since joining
the Company in August 1994. From 1984 to April 1994, he served in a variety of
managerial positions at Cadence, most recently as Vice President of the ASIC
Solution Group.
Ms. Liu has served as Chief Financial Officer since joining the Company
in January 1994 and as Secretary since August 1994. From January 1990 to
September 1993, she served as Chief Financial Officer at PiE Design Systems,
Inc., a manufacturer of system level verification tools. From 1988 to December
1989, she served as Corporate Controller of Plexus Computers, Inc., a
manufacturer of image processing computers. Prior to that time, she served in a
variety of financial management positions at Cadence and Finnigan Corporation, a
manufacturer of mass spectrometers.
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<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company has been traded on the Nasdaq National
Market under the symbol EPIC since the Company's initial public offering on
October 26, 1994. Prior to that time, there was no public market for the
Company's Common Stock. The following table sets forth for the periods indicated
the high and low sale prices on the Common Stock.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, 1996 HIGH LOW
------- -------
<S> <C> <C>
Fourth Quarter $ 26.75 $ 17.50
Third Quarter $ 36.00 $ 24.00
Second Quarter $ 36.75 $ 20.50
First Quarter $ 24.25 $ 19.00
FISCAL YEAR ENDED SEPTEMBER 30, 1995 HIGH LOW
------- -------
Fourth Quarter $ 24.25 $ 15.75
Third Quarter $ 18.12 $ 12.63
Second Quarter $ 13.62 $ 9.00
First Quarter (From October 26, 1994) $ 12.37 $ 9.37
</TABLE>
As of November 15, 1996, there were approximately 84 holders of record
of the Common Stock.
The Company has never paid cash dividends on its capital stock. The
Company currently expects that it will retain its future earnings for use in the
operation of its business and does not anticipate paying any cash dividends in
the foreseeable future.
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<PAGE> 19
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company are
qualified by reference to and shall be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the consolidated financial statement, related notes and other financial
information included elsewhere in this Report.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenue:
License $ 34,548 $20,732 $ 9,694 $4,808 $ 2,250
Service 9,371 4,271 1,645 724 452
-------- ------- ------- ------ -------
Total revenue 43,919 25,003 11,339 5,532 2,702
-------- ------- ------- ------ -------
Cost and expenses:
Cost of license 1,671 1,315 572 161 68
Cost of service 1,681 987 454 235 94
Sales and marketing 13,285 8,771 4,548 2,114 899
Research and development 10,566 5,886 2,908 1,668 1,252
General and administrative 3,380 2,325 1,027 545 362
Purchased in-process technology 18,806 3,261 -- -- --
-------- ------- ------- ------ -------
Total operating expenses 49,389 22,545 9,509 4,723 2,675
-------- ------- ------- ------ -------
Income (loss) from operations (5,470) 2,458 1,830 809 27
Interest income, net 1,153 822 82 24 13
-------- ------- ------- ------ -------
Income (loss) before income taxes (4,317) 3,280 1,912 833 40
Provision for income taxes 5,361 2,290 674 230 65
-------- ------- ------- ------ -------
Net income (loss) $ (9,678) $ 990 $ 1,238 $ 603 $ (25)
======== ======= ======= ====== =======
Net income (loss) per share (1) $ (0.77) $ 0.08 $ 0.13 $ 0.06 $ (0.01)
======== ======= ======= ====== =======
Shares used in per share computation(1) 12,625 13,198 9,864 9,520 4,922
======== ======= ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and short term
investments $ 39,527 $27,918 $ 3,974 $ 872 $ 965
Working capital 30,763 23,584 1,862 1,521 1,335
Total assets 54,791 35,781 7,907 3,345 2,257
Total shareholders' equity 37,054 26,925 3,637 2,163 1,545
</TABLE>
- -----------------------
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing net income (loss) per share.
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<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CERTAIN FORWARD-LOOKING INFORMATION
Certain statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this Report are
forward-looking statements based on current expectations, and entail various
risks and uncertainties that could cause actual results to differ materially
from those expressed in such forward-looking statements. Such risks and
uncertainties are set forth below in the second paragraph under "Overview,"
"Factors Affecting Future Operating Results" and "Liquidity and Capital
Resources." These forward-looking statements include the last sentence of the
first paragraph under "Overview," the statement relating to future international
license and service revenue in the fourth paragraph under "Research and
Development," the last sentence of the second paragraph under "Liquidity and
Capital Resources" and the statement relating to the period of time through
which the Company's resources will be adequate to finance its operations in the
last paragraph under "Liquidity and Capital Resources."
OVERVIEW
The Company develops, markets and supports a family of simulation and
analysis software tools that helps IC designers better manage the timing,
reliability and power characteristics of IC designs. The Company was founded in
1986 and licensed its first product, TimeMill, in August 1987. The Company began
licensing PathMill in June 1989, PowerMill in March 1992, Vertue in March 1994,
RailMill in May 1995 and its latest product, AMPS, in January 1996. With the
acquisition of Archer Systems, Inc. ("Archer"), the Company also began licensing
Arcadia in November 1995. Substantially all of the Company's license revenue to
date has been derived from the licensing of Arcadia, PathMill, PowerMill and
TimeMill. The Company also derives service revenue primarily from maintenance
agreements which provide customers access to product enhancements, training and
customer support. Most of the Company's customers have purchased annual
maintenance contracts on initial licenses and have renewed such contracts upon
expiration. The Company has recently acquired CIDA Technology, Inc. ("CIDA")
which is developing a new technology in the area of layout verification. The
Company does not expect to generate any substantial revenue from these products
until they are formally released and receive market acceptance.
Most of the Company's products are based upon a single set of core
software technologies, and the licensing and support of all products are
expected to account for substantially all of the Company's revenue for the
foreseeable future. Market acceptance of the Company's products by existing and
new customers and the competitiveness of the products in an ever increasing
competitive environment are critical to the Company's future success. There can
be no assurance that the markets for which the Company's products are best
suited will develop or, if such markets do develop, that the Company's products
will achieve the market acceptance required to maintain revenue growth and
continued profitability in the future.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
statement of operations data of the Company expressed as a percentage of total
revenue.
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<PAGE> 21
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenue:
License 78.7% 82.9% 85.5%
Service 21.3 17.1 14.5
----- ----- -----
Total revenue 100.0 100.0 100.0
----- ----- -----
Costs and expenses:
Cost of license 3.8 5.3 5.0
Cost of service 3.8 3.9 4.1
Sales and marketing 30.2 35.1 40.1
Research and development 24.1 23.6 25.6
General and administrative 7.7 9.3 9.1
Purchased in-process technology 42.8 13.0 --
----- ----- -----
Total operating expenses 112.4 90.2 83.9
----- ----- -----
Income (loss) from operations (12.4) 9.8 16.1
Interest income, net 2.6 3.3 0.8
----- ----- -----
Income (loss) before income taxes (9.8) 13.1 16.9
Provision for income taxes 12.2 9.1 6.0
----- ----- -----
Net income (loss) (22.0)% 4.0% 10.9%
===== ===== =====
</TABLE>
Revenue. Revenue consists primarily of fees for licenses of the
Company's software products, maintenance and customer support. The Company
recognizes revenue from software licenses after shipment of the products and
fulfillment of acceptance terms, if any, and when no significant contractual
obligations remain outstanding. When the Company receives payment prior to
shipment or fulfillment of significant vendor obligations, such payments are
recorded as deferred revenue and customer deposits and are recognized as revenue
upon shipment or fulfillment of significant vendor obligations. Costs related to
insignificant vendor obligations for post-contract customer support are accrued
upon recognition of the license revenue. Maintenance revenue is deferred and
recognized ratably over the term of the maintenance agreement, which is
typically one year. Revenue from customer training, support and other services
is recognized as the service is performed. Total revenue increased by 75.7% to
$43.9 million in fiscal 1996 from $25.0 million in fiscal 1995 and increased by
120.5% in fiscal 1995 from $11.3 million in fiscal 1994. The percentage of the
Company's total revenue attributable to license fees decreased to 78.7% in
fiscal 1996 from 82.9% and 85.5% in fiscal 1995 and 1994, respectively.
License revenue increased by 66.6% to $34.5 million in fiscal 1996 from
$20.7 million in fiscal 1995 and increased by 113.9% in fiscal 1995 from $9.7
million in fiscal 1994. The increase in revenue in fiscal 1996 was primarily due
to increases in number of licenses of Arcadia, PathMill, PowerMill, RailMill and
various options for such products. The increase in revenue in fiscal 1995 was
primarily due to increases in number of licenses of PathMill, PowerMill,
TimeMill and to a lesser extent, various options and third party software
products. In May 1995, the Company began licensing its reliability product,
RailMill. In July 1995, with the acquisition of Archer, the Company started
licensing Arcadia. To date, price increases have not been a material factor in
the Company's revenue growth.
Service revenue increased by 119.4% to $9.4 million in fiscal 1996 from
$4.3 million in fiscal 1995 and increased by 159.6% in fiscal 1995 from $1.6
million in fiscal 1994. The increases in service revenue in each fiscal year
were primarily attributable to maintenance contracts in connection with the
continued growth of the installed base of customers licensing the Company's
products. Most of the Company's customers have purchased annual
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<PAGE> 22
maintenance contracts on initial licenses and have renewed such contracts upon
expiration. The percentage of the Company's total revenue attributable to
service revenue increased to 21.3% in fiscal 1996 from 17.1% in fiscal 1995 and
from 14.5% in fiscal 1994. Service revenue as a percentage of total revenue
increased in fiscal 1996 as a result of the Company generating $1.8 million or
19.1% of service revenue from consulting and training revenues, which had
historically been minimal. Service revenue as a percentage of total revenue
increased in fiscal 1995 primarily due to the faster growth of maintenance
customer base compared to the growth rate of total revenue.
International license and service revenue accounted for 39.7%, 44.3%
and 48.5% of total revenue in fiscal 1996, 1995 and 1994, respectively. The
decreases of international license and service revenue as a percentage of total
revenue were primarily due to the increases of volume purchase agreements with
major domestic customers. The Company expects that international license and
service revenues will continue to account for a significant portion of its
revenues in the future. License and service revenue from Marubeni, the Company's
exclusive distributor in Japan, accounted for 21.9%, 16.6% and 15.6% of total
revenue in fiscal 1996, 1995 and 1994, respectively. License and service revenue
from Advanced Micro Devices, Inc. accounted for 10.7% of total revenue in fiscal
1996. License and service revenue from C&G Technology, the Company's distributor
in Korea, accounted for 11.0% of total revenue in fiscal 1995. No other customer
or distributor accounted for more than 10% of total revenue during any of these
periods.
Cost of Revenue. Cost of license revenue includes third party software
license royalties, documentation and other production costs related to the
licensing of the Company's products. Cost of license revenue as a percentage of
total revenue decreased to 3.8% in fiscal 1996 from 5.3% in fiscal 1995 and from
5.0% in fiscal 1994. The decreases in cost of license revenue as a percentage of
total revenue were primarily due to the cost of license revenue increasing at a
slower rate than the growth in total revenue.
Cost of service revenue includes personnel and related operating costs
allocated to maintenance and other customer support services. Cost of service
revenue as a percentage of total revenue remained relatively constant at 3.8%,
3.9% and 4.1% in fiscal 1996, 1995 and 1994, respectively.
Sales and Marketing. Sales and marketing expenses consist of salaries,
commissions paid to internal sales and marketing personnel and certain
distributors, promotional costs and related operating expenses. Sales and
marketing expenses increased by 51.5% to $13.3 million in fiscal 1996 from $8.8
million in fiscal 1995 and increased by 92.9% in fiscal 1995 from $4.5 million
in fiscal 1994. Sales and marketing expenses increased in each period due to the
expansion of the Company's worldwide direct sales and marketing organization,
increased commissions associated with increased revenue and, to a lesser extent,
participation in domestic and international conferences and trade shows. During
the periods, the Company established direct sales and support offices in the
United States, Europe and Asia. The number of sales and marketing personnel also
increased to 84 persons at the end of fiscal 1996 from 57 and 34 persons at the
end of fiscal 1995 and 1994, respectively. As a percentage of total revenue,
sales and marketing expenses were 30.2%, 35.1% and 40.1% of total revenue in
fiscal 1996, 1995 and 1994, respectively. The decrease of sales and marketing
expenses as a percentage of total revenue in fiscal 1996 from fiscal 1995 and
1994 was primarily due to total revenues increasing at a rate faster than the
increases in sales and marketing expenses.
Research and Development. Research and development expenses include all
costs associated with the development of new products and enhancements to
existing products. Research and development expenses increased by 79.5% to $10.6
million in fiscal 1996 from $5.9 million in fiscal 1995 and increased by 102.4%
in fiscal 1995 from $2.9 million in fiscal 1994. The increases in research and
development expenses in each period resulted primarily from the continued
investment in the number of research and development personnel, which grew to 92
persons at the end of fiscal 1996 from 58 and 33 persons at the end of fiscal
1995 and 1994, respectively, for the continued development of new software
products, as well as enhancements to existing products. As a percentage of
-22-
<PAGE> 23
total revenue, these expenses were 24.1%, 23.6% and 25.6% of total revenues in
fiscal 1996, 1995 and 1994, respectively. To maintain a competitive position in
the EDA market, the Company expects to increase its investment in research and
development, although such expenses as a percentage of total revenue may
fluctuate.
General and Administrative. General and administrative expenses
increased by 45.4% to $3.4 million in fiscal 1996 from $2.3 million in fiscal
1995 and increased by 126.4% in fiscal 1995 from $1.0 million in fiscal 1994.
The increases were primarily attributable to costs associated with new
administrative personnel, professional fees such as legal and accounting, and
increases in operating expenses associated with being a public company. As a
percentage of total revenue, general and administrative expenses were 7.7%, 9.3%
and 9.1% of total revenues in fiscal 1996, 1995 and 1994, respectively. The
decrease of general and administrative expenses as a percentage of total revenue
in fiscal 1996 was a result of total revenue increasing at a rate faster than
the increases in general and administrative expenses.
Purchased In-Process Technology. As of September 30, 1996, the Company
substantially completed its acquisition of CIDA, through a merger of CIDA with
and into a wholly-owned subsidiary of EPIC. The Company exchanged a total of
729,454 shares of Common Stock, options to purchase 101,000 shares of Common
Stock and cash of $3.4 million for all of the outstanding shares of the common
stock and options to purchase common stock of CIDA. The acquisition was
accounted for as a purchase. The purchase price of $17.9 million, as well as
costs directly attributable to the acquisition, have been allocated to the
assets acquired and liabilities assumed. Approximately $18.8 million of the
total purchase price represented the value of in-process technology that had not
reached technological feasibility and that had no alternative future use and was
charged to the Company's operations in the fourth quarter of fiscal 1996.
As of June 30, 1995, the Company substantially completed its
acquisition of Archer, through a merger of Archer with and into a wholly-owned
subsidiary of EPIC. The Company exchanged a total of 260,484 shares of its
common stock and options to purchase common stock of EPIC for all of the
outstanding shares of the common stock and options to purchase common stock of
Archer. The acquisition was accounted for as a purchase. The purchase price of
$3.6 million, as well as costs directly attributable to the acquisition, have
been allocated to the assets acquired and liabilities assumed. Approximately
$3.3 million of the total purchase price represented the value of in-process
technology that had not reached technological feasibility and that had no
alternative future use and was charged to the Company's operations in the third
quarter of fiscal 1995.
Income Taxes. The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The provision of income taxes as a percentage of pre-tax income,
excluding purchased in-process technology which is not tax deductible since the
mergers with CIDA and Archer were tax-free reorganizations was 37.0%, 35.0% and
35.3% for fiscal 1996, 1995 and 1994, respectively. These percentages are less
than the federal and state combined statutory rate of approximately 40.0% due
primarily to tax exempt interest income, the utilization of research and
experimentation credits and the establishment of a Foreign Sales Corporation
(FSC). See Note 9 of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date through private and
public sales of equity securities and with cash from operations. Private sales
of equity securities have yielded approximately $2.1 million. In addition, in
October 1994, the Company completed its initial public offering raising
approximately $17.4 million of cash, net of expenses. Net cash provided by
operating activities was $13.3 million, $7.6 million and $4.4 million in fiscal
1996, 1995 and 1994, respectively, and resulted primarily from net income,
adjusted by non-cash activities, and increases in accrued liabilities and income
taxes payable. Accrued liabilities increased by approximately $6.8 million
-23-
<PAGE> 24
as of September 30, 1996 from the previous fiscal year end primarily due to
costs associated with the mergers of Archer and CIDA, increases in accrued
compensation and accruals of various operating expenses as a result of increased
level of operations. Deferred revenue and customer deposits increased to $3.8
million at September 30, 1996 from $3.0 million at September 30, 1995 as a
result of an increase in the number of maintenance and service contracts, the
revenue from which is deferred and recognized ratably over the term of the
contract.
Cash used in investing activities resulted primarily from the net
purchases of short-term investments, additions to property and equipment and
increases in other assets. Purchases of short-term investments, net of proceeds
from maturity of short term investments, were $9.6 million and $15.4 million in
fiscal 1996 and 1995, respectively, and additions to property and equipment,
consisting primarily of computer equipment, were $3.9 million, $1.8 million and
$1.1 million in fiscal 1996, 1995 and 1994, respectively. As a result of the
acquisition of CIDA and Archer, which were accounted for as purchases, the
Company recorded a total of $1.1 million and $1.0 million, respectively, in
other assets for technology and goodwill which are being amortized over the
estimated useful lives of the assets ranging from three to five years. The
Company expects to make capital expenditures of approximately $8.0 million in
fiscal 1997.
Although the Company does not believe its products infringe the
proprietary rights of any third parties, there can be no assurance that
infringement claims will not be asserted against the Company or its customers in
the future. The Company could incur substantial costs and diversion of
management resources with respect to the defense of such claims and parties
making such claims could secure substantial damages, each of which could have a
material adverse effect on the Company's financial condition and results of
operations.
As of September 30, 1996, the Company had working capital of $30.8
million including cash, cash equivalents and short-term investments of $39.5
million. As of September 30, 1996, the Company had no bank indebtedness and no
long term commitments other than minimum capital and operating lease
obligations. The Company believes that the existing cash, cash equivalents and
short-term investments and funds generated from operations will provide the
Company with sufficient funds to finance its operations through at least the
next 12 months. Thereafter, the Company may require additional funds to support
its working capital requirements or for other purposes and may seek to raise
such additional funds through public or private equity financing or from other
sources. No assurance can be given that additional financing will be available
or that, if available, such financing will be obtainable on terms favorable to
the Company or its shareholders.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Quarterly Operating Results May Fluctuate; Dependence on Semiconductor
Industry. The Company's quarterly results may in the future vary significantly
due to a number of factors, including the timing of customer design and
development projects; the timing of significant orders; the timing of
expenditures in anticipation of product releases or increased revenue; the
timing of new product announcements by the Company and its competitors;
competition and pricing in the semiconductor industry; market acceptance of new
and enhanced versions of the Company's products; variations in the mix of
products the Company licenses; and variations in product development or
operating expenditures. Any unfavorable changes in these or other factors could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's expense levels are based, in part, on
its expectations of future revenues. As a result, if anticipated revenue in any
quarter does not occur or is delayed, expenditure levels could be
disproportionately high as a percentage of revenues, and the Company's operating
results for that quarter would be adversely affected.
The Company is dependent upon the semiconductor industry and, in
particular, new IC design projects. The semiconductor industry is highly
volatile due to rapid technological change, short product life cycles,
fluctuations in
-24-
<PAGE> 25
manufacturing capacity, and pricing and gross margin pressures. The
semiconductor industry periodically has experienced significant downturns, often
in connection with, or in anticipation of, declines in general economic
conditions during which the number of new design projects often decreases. The
Company's business, financial condition and results of operations may in the
future reflect substantial fluctuations from period-to-period as a consequence
of semiconductor industry patterns and general economic conditions.
Market for Company's Products is Highly Competitive. The EDA industry
is highly competitive. In general, competition in the EDA industry comes from
major EDA vendors, each of which has a longer operating history, significantly
greater financial, technical and marketing resources, greater name recognition
and larger installed customer bases than the Company. In addition, a variety of
small companies develop and bring new products to the market, and any of these
companies could become a significant competitor in the EDA market in the future.
The Company also competes with the internal design groups of its existing and
potential customers, many of whom design and develop customized simulation and
analysis tools for their particular needs and therefore may be reluctant to
purchase products offered by independent vendors. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, financial condition and results of
operations. In particular, increased competition could result in price
reductions, reduced margins and loss of market share, all of which could
materially adversely affect the Company. In addition, there can be no assurance
that current competitors or other entities will not develop similar products
that have significant advantages over the Company's core technology which could
have a material adverse affect on the Company's business, financial condition
and results of operations.
Company's Markets are Subject to Rapid Technological Change. The EDA
industry is characterized by extremely rapid technological change, frequent new
product introductions, evolving industry standards and changing customer
requirements. The Company's future success will depend upon its ability to
enhance its current products and to develop and introduce new products on a
timely and a cost-effective basis that keep pace with technological development
and evolving industry standards and methodologies, as well as address the
increasingly sophisticated needs of the Company's customers. There can be no
assurance that the Company will be successful in developing and marketing
product enhancements or new products that respond to technological change,
evolving industry standards and changing customer requirements, that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products, or that its new
products and product enhancements will adequately meet the requirements of the
marketplace and achieve market acceptance. Failure of the Company, for
technological or other reasons, to develop and introduce new products and
product enhancements in a timely and cost-efficient manner, would have a
material and adverse effect on the Company's business, financial conditions and
results of operations.
Reliance Upon International Distributors. A substantial portion of the
Company's international license and service revenue results from a limited
number of distributors. The Company has no direct sales force, and relies on a
single distributor for licensing and support of its products, in each of Japan,
Korea and the ASEAN countries in India. Accordingly, the Company is dependent
upon the continued viability and financial stability of its distributors and in
particular of Marubeni. Since the Company's products are used by highly skilled
professional engineers, effective distributors must possess sufficient
technical, marketing and sales resources and must devote these resources to a
lengthy sales cycle, customer training and product service and support. Only a
limited member of distributors possess these resources. In addition, the
Company's distributors generally offer products of several different companies,
including in some cases products that are competitive with the Company's
product. There can be no assurance that the Company's current distributors will
be able to continue to market or service and support the Company's products
effectively, that economic conditions or industry demand will not adversely
affect these or other distributors, that any distributor that licenses the
Company's products will choose to continue to license such products or that
these distributors will not devote greater resources to licensing products of
other companies. The loss of, or
-25-
<PAGE> 26
a significant reduction in revenue from, one of the Company's distributors could
have a material adverse effect on the Company's business, financial conditions
and results of operations.
Risks Associated with International Licensing. International license
and service revenue accounted for 39.7% of total revenue in fiscal 1996. The
Company expects that international license and service revenue will continue to
account for a significant portion of its revenues in the future. These revenues
involve a number of inherit risks, including the impact of recessionary
environments in economies outside the United States, generally longer receivable
collection periods, unexpected changes in regulatory requirements, reduced
protection of intellectual property rights in some countries, and tariffs and
other trade barriers. There can be no assurance that such factors will not have
a material adverse affect on the Company's future international license and
service revenue and, consequently, on the Company's business, financial
conditions and results of operations.
Company is Dependent Upon Proprietary Technology. Despite precautions
by the Company, it may be possible for a third party to copy or otherwise obtain
and use the Company's products or technology without authorization, or to
develop similar technology independently. In addition, effective intellectual
property protection may be unavailable or limited in certain foreign countries.
In addition, although the Company does not believe its products infringe the
proprietary rights of any third parties, there can be no assurance that
infringement claims will not be asserted against the Company or its customers in
the future. The Company could incur substantial costs and diversion of
management resources with respect to the defense of such claims which could have
a material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, parties making such claims could secure
substantial damages, as well as injunctive or other equitable relief which could
effectively block the Company's ability to license its products in the United
States or abroad. Such a judgment could have a material adverse affect upon the
Company's business, financial condition and results of operations.
Future Acquisitions. During each fiscal 1996 and 1995, Company
completed acquisitions of other companies. The Company's management frequently
evaluates the strategic opportunities available to it and may in the near-term
or long-term pursue acquisitions of complimentary businesses, products or
technologies. Future acquisitions by the Company may result in the diversion of
management's attention from the day-to-day operation of the Company's business
and may include numerous other risks, including difficulties in the integration
of the operations, products and personnel of the acquired companies. Future
acquisitions by the Company have the potential to result in dilutive issuances
of equity securities, the incurrence of additional debt and amortization
expenses related to goodwill and other intangible assets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and the report of
independent auditors appear on pages F-1 through F-16 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-26-
<PAGE> 27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning the Company's
directors is incorporated by reference from the section captioned "Election of
Directors" contained in the Company's Proxy Statement related to the Annual
Meeting of Shareholders to be held February 12, 1997, to be filed by the Company
with the Securities and Exchange Commission within 120 days of the end of the
Company's fiscal year pursuant to General Instruction G(3) of Form 10-K (the
"Proxy Statement"). The information required by this item concerning executive
officers is set forth in Part I of this Report. The information required by this
item concerning compliance with Section 16(a) of the Exchange Act is
incorporated by reference from the section captioned "Section 16(a) Beneficial
Ownership Reporting Compliance" contained in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
the section captioned "Executive Compensation and Other Matters" contained in
the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from
the section captioned "Record Date and Principal Share Ownership" contained in
the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from
the sections captioned "Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions With Management" contained in the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
The financial statements are filed as part of this Report:
<TABLE>
<CAPTION>
<S> <C>
Index to Consolidated Financial Statements ............................ F-1
Independent Auditors' Report .......................................... F-2
Consolidated Balance Sheets at September 30, 1996 and 1995 ............ F-3
Consolidated Statements of Operations for the years ended September
30, 1996, 1995 and 1994 ........................................ F-4
Consolidated Statement of Shareholders' Equity for the years ended
September 30, 1996, 1995 and 1994 ............................. F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995 and 1994 ............................. F-6
Notes to Consolidated Financial Statements ............................ F-7
</TABLE>
-27-
<PAGE> 28
(a)(2) Financial Statement Schedules
<TABLE>
<CAPTION>
<S> <C>
Valuation and Qualifying Accounts ...................................... S-1
</TABLE>
Additional schedules are not required under the related schedule
instructions or are inapplicable, and therefore have been omitted.
(a)(3) Exhibits
<TABLE>
<CAPTION>
<S> <C>
3.1(2) Restated Articles of Incorporation of the Registrant, as amended.
3.2(1) Bylaws of the Registrant.
10.1(1) Form of Indemnification Agreement between the Registrant and its officers and directors.
10.2(1) 1990 Stock Option Plan and forms of agreement thereunder.
10.3(1) 1994 Employee Stock Purchase Plan and agreement thereunder.
10.4(1) 1994 Director Stock Option Plan and form of agreement thereunder.
10.5(1) Amended and Restated Registration Rights Agreement dated as of December 20, 1991 by and among
Registrant and certain individuals and entities named therein as amended by Amendment No. 1
thereto dated as of August 26, 1994.
10.6(2) Triple Net Lease Agreement between Registrant and ARGOSystems, Inc. dated September 21, 1995.
10.7(1) Exclusive Distributor Agreement between Registrant and Marubeni Hytech co. Ltd. dated January 25,
1988 and Amendments thereof.
10.8*(1) Motorola Corporate Agreement between Registrant and Motorola Semiconductor Products Sector dated
August 6, 1993 and related Motorola Software End-User License Agreement dated September 23,
1994 and Amendments thereof.
10.9 1995 Equity Incentive Plan of CIDA Technology, Inc. and form of agreement thereunder.
10.10*(1) Interface Development Agreement between Registrant and Precedence Incorporated dated as of
December 11, 1992.
10.11* AMD Volume Purchase Agreement between Registrant and Advanced Micro Devices, Inc. dated January 1,
1995 and Amendments thereof.
10.11.01* Addendum No. 1 effective as of March 30, 1996 and Addendum No. 2 effective as of September 30, 1996
to the AMD Volume Purchase Agreement.
11.1 Computation of net income per share.
22.1 List of subsidiaries of the Registrant.
23.1 Independent Auditors' Consent and Report on Schedule.
24.1 Power of Attorney (See Page 30).
27.1 Financial Data Schedule.
</TABLE>
- ------------------
* Confidential treatment has been granted or is requested with respect to
certain portions of this exhibit. Omitted portions have been filed
separately with the Securities and Exchange Commission.
(1) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S-1 (Reg. No. 33-83550) as declared
effective by the Commission on October 26, 1994.
(2) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995 filed
on December 20, 1995.
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<PAGE> 29
(b) Reports on Form 8-K. The Company filed a Current Report on
Form 8-K on November 14, 1996. This Form 8-K was filed to
report the Company's acquisition of CIDA Technology, Inc.
("CIDA") consummated on November 7, 1996. The following
financial statements of CIDA were filed as part of the Form
8-K:
For the period ended September 30, 1995:
Independent Auditors' Report
Balance Sheet
Statement of Operations
Statement of Shareholders' Deficiency
Statement of Cash Flows
Notes to Financial Statements
For the periods ended June 30, 1996 and 1995:
Unaudited Condensed Balance Sheet
Unaudited Condensed Statements of Operations
Unaudited Condensed Statements of Cash Flows
Notes to Unaudited Condensed Financial Statements
The following pro forma financial information was filed as
part of the Form 8-K:
Unaudited Pro Forma Consolidated Balance Sheet
Unaudited Pro Forma Consolidated Statements of Operations
Notes to Pro Forma Consolidated Financial Information
(c) Exhibits. See Item 14(a)(3) above.
(d) Financial Statement Schedules. See Item 14(a)(2) above.
-29-
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
EPIC DESIGN TECHNOLOGY
By: /s/ SANG S. WANG, PH.D.
--------------------------
Sang S. Wang, Ph.D.
Chief Executive Officer and Chairman of the
Board of Directors
Date: November 27, 1996
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Bernard Aronson and Tammy S. Liu, and
each of them, his or her true and lawful attorneys-in-fact and agents, each with
full power of substitution and resubstitution, to sign any and all amendments
(including post-effective amendments) to this Annual Report on Form 10-K and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, or any of
them, shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ SANG S. WANG, PH.D. Chief Executive Officer and Chairman of the Board November 27, 1996
- ----------------------------- of Directors (Principal Executive Officer)
(Sang S. Wang, Ph.D.)
/s/ BERNARD ARONSON President and Director November 27, 1996
- -----------------------------
(Bernard Aronson)
/s/ TAMMY S. LIU Chief Financial Officer and Secretary (Principal November 27, 1996
- ----------------------------- Financial and Accounting Officer)
(Tammy S. Liu)
Director November 27, 1996
- -----------------------------
(Yen-Son Huang, Ph.D.)
</TABLE>
-30-
<PAGE> 31
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HENRI A. JARRAT Director November 27, 1996
- -----------------------------
(Henri A. Jarrat)
/s/ JOSEPH A. PRANG Director November 27, 1996
- -----------------------------
(Joseph A. Prang)
</TABLE>
-31-
<PAGE> 32
EPIC DESIGN TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report......................................................................... F-2
Consolidated Balance Sheets at September 30, 1996 and 1995........................................... F-3
Consolidated Statements of Operations for the Years Ended September 30, 1996, 1995 and 1994.......... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended September 30, 1996,
1995 and 1994..................................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 1996, 1995 and 1994.......... F-6
Notes to Consolidated Financial Statements........................................................... F-7
</TABLE>
F-1
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
EPIC Design Technology, Inc.:
We have audited the accompanying consolidated balance sheets of EPIC Design
Technology, Inc. and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended September 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of EPIC Design Technology, Inc. and
subsidiaries at September 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
San Jose, California
October 11, 1996
F-2
<PAGE> 34
EPIC DESIGN TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Current assets:
Cash and equivalents ....................................................... $ 13,259 $ 11,247
Short-term investments ..................................................... 26,268 16,671
Accounts receivable (net of allowances of $216 in 1996 and $79 in 1995)..... 6,300 2,937
Prepaid expenses and other assets .......................................... 1,026 607
Deferred income taxes ...................................................... 1,647 978
-------- --------
Total current assets .............................................. 48,500 32,440
Property and equipment - net ................................................. 4,496 2,337
Other assets ................................................................. 1,795 1,004
-------- --------
TOTAL ........................................................................ $ 54,791 $ 35,781
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 1,091 $ 878
Income taxes payable ....................................................... 1,538 414
Accrued liabilities ........................................................ 11,336 4,529
Deferred revenue and customer deposits ..................................... 3,772 3,035
-------- --------
Total current liabilities ......................................... 17,737 8,856
-------- --------
Commitments (Note 7)
Shareholders' equity:
Preferred stock, no par value: 10,000 shares authorized; none outstanding - -
Common stock, no par value: 20,000 shares authorized;
shares outstanding: 1996 - 13,642; 1995 - 12,134 ......................... 44,608 24,864
Deferred stock compensation ................................................ (110) (203)
Retained earnings (accumulated deficit) .................................... (7,424) 2,254
Unrealized gain (loss) on investments, net ................................. (20) 10
-------- --------
Total shareholders' equity ........................................ 37,054 26,925
-------- --------
TOTAL ........................................................................ $ 54,791 $ 35,781
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 35
EPIC DESIGN TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------
1996 1995 1994
-------- -------- --------
Revenue:
<S> <C> <C> <C>
License ......................................... $ 34,548 $ 20,732 $ 9,694
Service ......................................... 9,371 4,271 1,645
-------- -------- --------
Total revenue ............................. 43,919 25,003 11,339
-------- -------- --------
Costs and expenses:
Cost of license ................................. 1,671 1,315 572
Cost of service ................................. 1,681 987 454
Sales and marketing ............................. 13,285 8,771 4,548
Research and development ........................ 10,566 5,886 2,908
General and administrative ...................... 3,380 2,325 1,027
Purchased in-process technology ................. 18,806 3,261 -
-------- -------- --------
Total operating expenses .................. 49,389 22,545 9,509
-------- -------- --------
Income (loss) from operations ..................... (5,470) 2,458 1,830
Interest income, net .............................. 1,153 822 82
-------- -------- --------
Income (loss) before income taxes ................. (4,317) 3,280 1,912
Provision for income taxes ........................ 5,361 2,290 674
-------- -------- --------
Net income (loss) ................................. $ (9,678) $ 990 $ 1,238
======== ======== ========
Net income (loss) per common and equivalent share.. $ (0.77) $ 0.08 $ 0.13
======== ======== ========
Shares used in per share computation .............. 12,625 13,198 9,864
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 36
EPIC DESIGN TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
BALANCES, October 1, 1993 .............. 1,992 $ 1,815 3,641 $ 398
Exercise of stock options .............. 902 142
Deferred stock compensation ............ 365
Amortization of deferred stock
compensation..........................
Net income .............................
------ -------- ------ --------
BALANCES, September 30, 1994 ........... 1,992 1,815 4,543 905
Conversion of preferred stock to common
stock ................................ (1,992) (1,815) 3,984 1,815
Initial public offering, net of issuance
costs ................................ 3,000 17,380
Issuance of common stock and stock
options assumed in connection with
acquisition of Archer Systems ........ 184 3,617
Issuance of common stock under stock
purchase plan ........................ 79 436
Exercise of stock options .............. 344 288
Tax benefit from employee stock
transactions ......................... 423
Amortization of deferred stock
compensation .........................
Unrealized gain on investments, net ....
Net income .............................
------ -------- ------ --------
BALANCES, September 30, 1995 ........... - - 12,134 24,864
Issuance of common stock and stock
options assumed in connection with
acquisition of CIDA .................. 729 14,511
Issuance of common stock under stock
purchase plan ........................ 88 863
Exercise of stock options .............. 691 1,204
Tax benefit from employee stock
transactions ......................... 3,166
Amortization of deferred stock
compensation .........................
Unrealized loss on investments, net ....
Net loss ...............................
------ -------- ------ --------
BALANCES, September 30, 1996 ........... - $ - 13,642 $ 44,608
====== ======== ====== ========
<CAPTION>
UNREALIZED
DEFERRED RETAINED GAIN TOTAL
STOCK EARNINGS (LOSS) ON SHAREHOLDERS'
COMPENSATION (DEFICIT) INVESTMENTS EQUITY
------------ --------- ----------- ------
<S> <C> <C> <C> <C>
BALANCES, October 1, 1993 .............. $ (76) $ 26 $ - $ 2,163
Exercise of stock options .............. 142
Deferred stock compensation ............ (365)
Amortization of deferred stock
compensation.......................... 94 94
Net income ............................. 1,238 1,238
-------- -------- ------- --------
BALANCES, September 30, 1994 ........... (347) 1,264 - 3,637
Conversion of preferred stock to common
stock ................................ -
Initial public offering, net of issuance
costs ................................ 17,380
Issuance of common stock and stock
options assumed in connection with
acquisition of Archer Systems ........ 3,617
Issuance of common stock under stock
purchase plan ........................ 436
Exercise of stock options .............. 288
Tax benefit from employee stock
transactions ......................... 423
Amortization of deferred stock
compensation ......................... 144 144
Unrealized gain on investments, net .... 10 10
Net income ............................. 990 990
-------- -------- ------- --------
BALANCES, September 30, 1995 ........... (203) 2,254 10 26,925
Issuance of common stock and stock
options assumed in connection with
acquisition of CIDA .................. 14,511
Issuance of common stock under stock
purchase plan ........................ 863
Exercise of stock options .............. 1,204
Tax benefit from employee stock
transactions ......................... 3,166
Amortization of deferred stock
compensation ......................... 93 93
Unrealized loss on investments, net .... (30) (30)
Net loss ............................... (9,678) - (9,678)
-------- -------- ------- --------
BALANCES, September 30, 1996 ........... $ (110) $ (7,424) $ (20) $ 37,054
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 37
EPIC DESIGN TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ........................................................... $ (9,678) $ 990 $ 1,238
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization ............................................. 2,111 997 358
Write-off of in-process technology ........................................ 18,806 3,261 -
Deferred income taxes ..................................................... (752) (518) (543)
Amortization of deferred stock compensation ............................... 93 144 94
Changes in assets and liabilities:
Accounts receivable ..................................................... (3,363) (1,280) 211
Prepaid expenses and other assets ....................................... (401) (64) (144)
Accounts payable ........................................................ 202 (95) 251
Income taxes payable .................................................... 4,290 (88) 857
Accrued liabilities ..................................................... 2,270 3,259 556
Deferred revenue and customer deposits .................................. (263) 956 1,521
-------- -------- --------
Net cash provided by operating activities .......................... 13,315 7,562 4,399
-------- -------- --------
Cash flows from investing activities:
Purchases of short-term investments ......................................... (42,785) (48,430) (1,245)
Proceeds from maturity of short-term investments ............................ 33,158 33,014 -
Purchases of property and equipment ......................................... (3,896) (1,792) (1,107)
Cash acquired in business acquisition ....................................... 67 64 -
Other assets ................................................................ 86 - (318)
-------- -------- --------
Cash used in investing activities .................................. (13,370) (17,144) (2,670)
-------- -------- --------
Cash flows from financing activities:
Payments of capital lease obligations ....................................... - (4) (14)
Proceeds from sales of common stock ......................................... 2,067 18,104 142
-------- -------- --------
Net cash provided by financing activities ............................... 2,067 18,100 128
-------- -------- --------
Net increase in cash and equivalents .......................................... 2,012 8,518 1,857
Cash and equivalents, beginning of year ....................................... 11,247 2,729 872
-------- -------- --------
Cash and equivalents, end of year ............................................. $ 13,259 $ 11,247 $ 2,729
======== ======== ========
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest .................................................................... $ - $ 1 $ 1
Income taxes ................................................................ $ 806 $ 3,132 $ 345
Supplemental schedule of noncash investing and financing activities:
Conversion of preferred stock to common stock ............................... $ - $ 1,815 $ -
Tax benefit from employee stock transactions ................................ $ 3,166 $ 423 $ -
Unrealized gain (loss) on investments ....................................... $ (30) $ 10 $ -
Effect of acquisitions:
Fair value of assets acquired, including in-process technology ............ $ 20,142 $ 4,573 $ -
Common shares, stock options issued and cash to be paid in the acquisition (17,869) (3,617) -
-------- -------- --------
Liabilities assumed ....................................................... $ 2,273 $ 956 $ -
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 38
EPIC DESIGN TECHNOLOGY, INC.
-----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - EPIC Design Technology, Inc. (the Company) develops,
markets and supports advanced simulation and analysis software tools for the
design of integrated circuits.
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates,
and such differences may be material to the financial statements.
Cash Equivalents and Short-Term Investments - All highly liquid debt
investments purchased with a remaining maturity of three months or less are
classified as cash equivalents. Cash equivalents, consisting primarily of
municipal obligations, money market funds and bank savings accounts, are stated
at cost which approximates fair value. Short-term investments consist primarily
of highly liquid debt instruments purchased with a remaining maturity date of
greater than three months. The Company classifies its short-term investments as
"available-for-sale securities," and the carrying value of such securities is
adjusted to fair market value, with unrealized gains and losses excluded from
earnings and reported as a separate component of shareholders' equity. The fair
values of marketable debt instruments are based on quoted market prices. Cost is
determined by specific identification for purposes of computing realized gains
or losses.
Property and Equipment - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets,
generally three to five years. Leasehold improvements are amortized over their
useful life or the lease term, whichever is shorter.
Other Assets - Other assets, including $2,113,000 and $1,033,000 at
September 30, 1996 and 1995, respectively, of purchased technologies, goodwill
and covenants not to compete acquired through acquisitions, are amortized on a
straight-line basis over a three- to five-year period. Accumulated amortization
equaled $379,000 and $76,000 at September 30, 1996 and 1995, respectively.
Revenue Recognition - Revenue consists primarily of fees for licenses of
the Company's software products, maintenance and customer support.
License Revenue - Revenue from software licenses is recognized after
shipment of the products and fulfillment of acceptance terms, if any, and
when no significant contractual obligations remain outstanding. When the
Company receives payment prior to shipment or fulfillment of significant
vendor obligations, such payments are recorded as deferred revenue and
customer deposits and are recognized as revenue upon shipment or
fulfillment of significant vendor obligations. Costs related to
insignificant vendor obligations for post-contract customer support are
accrued upon recognition of the license revenue.
Service Revenue - Maintenance revenue is deferred and recognized
ratably over the term of the maintenance agreement, which is typically one
year. Revenue from customer training, support and other services is
recognized as the service is performed.
F-7
<PAGE> 39
Software Development Costs - Costs for the development of new software
products and substantial enhancements to existing software products are expensed
as incurred until technological feasibility has been established, at which time
any additional costs to complete the products or enhancements would be
capitalized. Because the Company believes its current process for developing
software is essentially completed concurrently with the establishment of
technological feasibility, no costs have been capitalized to date.
Income Taxes - Income taxes are provided utilizing an asset and liability
approach which requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of temporary differences between the
financial statement carrying amounts and the tax bases of assets and liabilities
and net operating loss and tax credit carryforwards.
Concentration of Credit Risk - Financial instruments which potentially
subject the Company to a concentration of credit risk principally consist of
cash and equivalents, short-term investments and accounts receivable. The
Company licenses products primarily to customers and distributors in the
integrated circuit design industry in North America, Europe and the Far East. To
reduce credit risk, management performs ongoing credit evaluations of its
customers' financial condition. The Company maintains reserves for potential
credit losses, but historically has not experienced significant losses related
to individual customers or groups of customers in any particular geographic
area. The Company invests its excess cash balances in high-grade instruments
which it places for safekeeping with high quality financial institutions. The
Company has not experienced any material losses in any of the instruments it has
used for excess cash balances.
Foreign Currency Translation - The functional currency of the Company's
foreign subsidiaries is the U.S. dollar. All monetary assets and liabilities are
translated at the current exchange rate at the end of the period, nonmonetary
assets and liabilities are translated at historical rates and revenues and
expenses are translated at average exchange rates in effect during the period.
Translation and transaction gains and losses, which are included in the
consolidated statements of operations, have not been material in any of the
periods presented.
Net Income (Loss) Per Share - Net income per share is based on the
weighted average number of common and dilutive common equivalent shares
outstanding during the periods. Common equivalent shares include outstanding
convertible preferred stock and common stock options. All common shares issued
and stock options granted by the Company at a price less than the initial public
offering price subsequent to September 1, 1993 and prior to the initial public
offering (using the treasury stock method for options) have been included in the
computation of common and common equivalent shares outstanding for all periods
presented prior to the initial public offering. Net loss per share is calculated
by dividing net loss by the weighted average number of common shares outstanding
as including common equivalent shares would be anti-dilutive.
Effect of New Accounting Standards - The Company accounts for its stock
option plan and its employee stock purchase plan in accordance with provisions
of the Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for
Stock Issued to Employees. In October 1995, the Financial Accounting Standards
Board released Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation." SFAS 123 provides an alternative
accounting method to APB 25 and its disclosure requirements are effective for
fiscal years beginning after December 15, 1995. The Company expects to continue
to account for its employee stock plans in accordance with the provisions of APB
25. Accordingly, SFAS 123 is not expected to have any impact on the Company's
financial position or results of operations.
2. INVESTMENTS
The following is a summary of available-for-sale securities at September
30 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------------------------ ------------------------------------------
AMORTIZED GROSS UNREALIZED ESTIMATED AMORTIZED GROSS UNREALIZED ESTIMATED
------------------- -------------------
COST GAINS LOSSES FAIR VALUE COST GAINS LOSSES FAIR VALUE
---- ----- ------ ---------- ---- ----- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal
bonds... $26,288 $- $(20) $26,268 $16,661 $10 $- $16,671
</TABLE>
F-8
<PAGE> 40
At September 30, 1996 all available-for-sale securities have maturities
due in two years or less. Realized gains or losses from the sale of securities
were insignificant in fiscal years 1996, 1995 and 1994.
3. ACQUISITIONS
In fiscal 1995, the Company acquired Archer Systems, Inc., a company
engaged in the design, manufacturing and marketing of an integrated circuit
parameter extraction CAD tool. The Company exchanged a total of 184,208 shares
of its common stock and options to acquire 76,276 shares of its common stock for
all the outstanding shares of the common stock and options to purchase common
stock of Archer. The acquisition was accounted for as a purchase. The purchase
price of $3.6 million, as well as costs directly attributable to the
acquisition, have been allocated to the assets acquired and liabilities assumed.
Approximately $3.3 million of the total purchase price represented the value of
in-process technology that had not reached technological feasibility and that
had no alternative future use and was, therefore, charged to the Company's
operations in the third quarter of fiscal 1995.
In fiscal 1996, the Company acquired CIDA Technology, Inc. (CIDA), a
development stage company formed to develop and market IC verification and
extraction tools for use by IC design engineers. The Company exchanged a total
of 729,454 shares of its common stock, options to acquire 101,000 shares of its
common stock and cash of $3.4 million for all the outstanding shares of the
common stock and options to purchase common stock of CIDA. The acquisition was
accounted for as a purchase. The purchase price of $17.9 million, as well as
costs directly attributable to the acquisition, have been allocated to the
assets acquired and liabilities assumed. Approximately $18.8 million of the
total purchase price represented the value of in-process technology that had not
reached technological feasibility and that had no alternative future use and
was, therefore, charged to the Company's operations in the fourth quarter of
fiscal 1996.
The operating results of Archer and CIDA have been included in the
consolidated statements of operations since the dates of acquisition. Pro forma
results of operations, assuming the acquisitions had taken place at the
beginning of fiscal 1996 or 1995, would be as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues ........................................... $ 44,419 $25,483
Net income (loss) .................................. $(11,044) $ 76
Net income (loss) per common and equivalent share... $ (0.83) $ 0.01
</TABLE>
The pro forma results of operations give effect to certain adjustments,
including amortization of purchased intangibles and goodwill as well as the
issuance of common shares as a result of the acquisition. The $18.8 million and
$3.3 million charge for purchased in-process technology from the CIDA and Archer
acquisitions, respectively, have been reflected in the pro forma results for the
years ended September 30, 1996 and 1995, respectively. The pro forma combination
of the companies is for presentation purposes only. Actual statements of
operations of the companies will be combined from the effective date of the
acquisition, with no retroactive restatement.
F-9
<PAGE> 41
4. PROPERTY AND EQUIPMENT
Property and equipment consist of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1996 1995
---- ----
<S> <C> <C>
Computers and related software .................. $7,083 $3,633
Other equipment ................................. 351 137
Furniture and fixtures .......................... 462 159
------ ------
7,896 3,929
Less accumulated depreciation and amortization... (3,400) (1,592)
------ ------
$4,496 $2,337
====== ======
</TABLE>
5. ACCRUED LIABILITIES
Accrued liabilities consist of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------
1996 1995
---- ----
<S> <C> <C>
Accrued merger costs ....................... $ 4,433 $ -
Accrued compensation and related benefits... 2,979 1,583
Other ...................................... 3,924 2,946
------- ------
$11,336 $4,529
======= ======
</TABLE>
6. SHAREHOLDERS' EQUITY
Employee Stock Purchase Plan - In fiscal 1994, the Company adopted the
1994 Employee Stock Purchase Plan, which permits eligible employees to purchase
up to an aggregate of 350,000 shares of common stock of the Company. Under the
Company's Employee Stock Purchase Plan, employees may purchase from the Company
a designated number of shares through payroll deductions at a price per share
equal to 85% of the lesser of the fair value of the Company's common stock as of
the first day of each twelve-month offering period or the last day of each
six-month purchase period. In 1996 and 1995, approximately 88,000 and 79,000
shares, respectively, were issued under this plan. As of September 30, 1996, the
Company has approximately 183,000 shares of common stock available for future
purchases under this Plan.
Stock Option Plan - The Company's 1990 Stock Option Plan (the Plan)
authorizes the issuance of 4,000,000 shares of common stock for the grant of
incentive or nonstatutory stock options to employees, directors, contractors and
consultants. Under the Plan, options are generally granted at fair value at the
date of grant as determined by the Board of Directors. Such options become
exercisable generally over four years and expire up to ten years from the grant
date. Prior to the adoption of the 1990 Stock Option Plan, the Company granted
options to purchase 420,000 shares of common stock.
The Company has reserved 200,000 shares of common stock for issuance under
the 1994 Director Option Plan, which provides for each outside Director to be
granted an option to purchase 20,000 shares of common stock on the date on which
such person first becomes an outside Director following the effective date of
the Director Option Plan and, annually thereafter, an option to purchase 6,666
shares of common stock. The exercise price of such options will be the fair
market value at the date of grant. The initial options vest over four years
while the subsequent grants vest over twelve months from the date of grant.
Through September 30, 1996, approximately 53,000 shares have been granted under
this plan.
F-10
<PAGE> 42
Stock option activity is summarized as follows (in thousands):
<TABLE>
<CAPTION>
SHARES UNDER
OPTION PRICE RANGE
------------ ---------------
<S> <C> <C>
Outstanding, October 1, 1993 .... 1,838 $ .09 - $ .16
Granted ......................... 882 .16 - 5.00
Canceled ........................ (74) .16 - 5.00
Exercised ....................... (902) .09 - .16
-----
Outstanding, September 30, 1994 . 1,744 .16 - 5.00
Granted or assumed .............. 612 .00 - 22.38
Canceled ........................ (42) .16 - 12.22
Exercised ....................... (344) .16 - 12.63
-----
Outstanding, September 30, 1995 . 1,970 .00 - 22.38
Granted or assumed .............. 1,559 1.00 - 36.00
Canceled ........................ (740) .17 - 35.00
Exercised ....................... (691) .00 - 22.75
-----
Outstanding, September 30, 1996 . 2,098 $ .00 - $36.00
=====
</TABLE>
At September 30, 1996, options to purchase 560,000 shares of common stock
were exercisable and options to purchase 163,000 and 147,000 shares of common
stock were available for future grant under the 1990 Stock Option Plan and the
1995 Director Option Plan, respectively.
Deferred Stock Compensation - In connection with the preparation of its
initial public offering, the Company determined that certain stock options
issued prior to the offering contained a compensatory element which should be
recorded for financial reporting purposes. These valuations resulted in a charge
to operations for the years ended September 30, 1996, 1995 and 1994 of $93,000,
$144,000 and $94,000, respectively, and will result in remaining charges in
future periods aggregating $110,000 to be amortized over the vesting period of
the related stock options.
7. LEASE COMMITMENTS
The Company leases facilities under operating lease agreements which
expire through calendar year 2001. Total rent expense for the years ended
September 30, 1996, 1995 and 1994 was approximately $696,000, $531,000,
$213,000, respectively.
Future minimum operating lease commitments as of September 30, 1996 are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
-------------
<S> <C>
1997 .... $ 905
1998 .... 819
1999 .... 661
2000 .... 541
2001 .... 90
------
$3,016
======
</TABLE>
F-11
<PAGE> 43
8. EXPORT SALES AND MAJOR CUSTOMERS
The Company sells its products in North America, Asia and Europe. Export
revenues as a percentage of net revenues for the years ended September 30 are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Asia 29% 33% 41%
Europe 11 11 8
---- ---- ----
40% 44% 49%
==== ==== ====
</TABLE>
Approximately 22%, 17% and 16% of revenues were made through a distributor
in Japan, which sells the Company's products to various end user customers, in
1996, 1995 and 1994, respectively, and another distributor in Korea accounted
for 11% of revenues in 1995. At September 30, 1996, accounts receivable from the
Japanese distributor was $728,000. At September 30, 1995, accounts receivable
from the two distributors were $922,000. One single end user customer accounted
for 11% of revenues in 1996 and had an accounts receivable balance at September
30, 1996 of $1,109,000.
9. INCOME TAXES
The provision for income taxes for the years ended September 30 consists
of (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal ...................... $4,002 $1,623 $ 656
State ........................ 1,067 547 216
Foreign ...................... 1,044 638 345
------ ------ ------
Total current ................. 6,113 2,808 1,217
------ ------ ------
Deferred:
Federal ....................... (582) (415) (451)
State ......................... (170) (103) (92)
------ ------ ------
Total deferred ................. (752) (518) (543)
------ ------ ------
Total provision for income taxes $5,361 $2,290 $ 674
====== ====== ======
</TABLE>
Total income tax expense differs from the amounts computed by applying the
statutory federal income tax rate to income before income taxes as a result of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Provision (benefit) computed at federal statutory rate... $(1,511) $1,148 $669
Change in valuation allowance ........................... 115 67 34
Research and experimentation credit ..................... - (97) (100)
State income taxes, net of federal benefit .............. 580 293 81
Tax-exempt interest income .............................. (368) (261) -
Nondeductible purchased in-process technology ........... 6,582 1,109 -
Other ................................................... (37) 31 (10)
------- ------ ----
Total provision for income taxes ........................ $ 5,361 $2,290 $674
======= ====== ====
</TABLE>
Loss before income taxes attributable to the Company's foreign subsidiary
was $330,000, $192,000 and $96,000 in 1996, 1995 and 1994, respectively.
F-12
<PAGE> 44
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, as well as operating loss
and credit carryforwards. Significant components of the Company's deferred
income tax assets and liabilities as of September 30 are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Conversion to accrual from cash basis ..... $ 421 $ 547
Reserves not recognized for tax purposes... 1,144 486
Net operating loss carryforwards .......... 221 101
State taxes ............................... 40 87
Depreciation and amortization ............. 135 12
Other ..................................... 40 127
Valuation allowance ....................... (216) (101)
------ ------
1,785 1,259
Deferred tax liabilities -
Intangible assets ......................... (138) (281)
------ ------
Net deferred tax asset ...................... $1,647 $ 978
====== ======
</TABLE>
The Company has net operating loss carryforwards as of September 30, 1996
and 1995 of approximately $619,000 and $288,000, respectively, related to its
French subsidiary that may be utilized to offset future taxable income of that
entity. The valuation allowance as of September 30, 1996 and 1995 of $216,000
and $101,000, respectively, related entirely to these net operating loss
carryforwards.
10. EMPLOYEE BENEFIT PLAN
Substantially all full-time employees are entitled to participate in the
Company's retirement savings plan (401(k) Plan). Employer contributions to the
401(k) Plan were $140,000 and $24,000 for the years ended September 30, 1996 and
1995, respectively (none in 1994).
11. RELATED PARTY TRANSACTION
In fiscal 1995 and 1994, the Company received royalties from a shareholder
under an OEM software license agreement. Revenues recognized under this
agreement were $544,000 and $365,000 for the years ended September 30, 1995 and
1994, respectively. During fiscal 1995, the shareholder sold its investment in
the Company and the OEM software license agreement was terminated.
* * * * *
F-13
<PAGE> 45
SCHEDULE II
EPIC DESIGN TECHNOLOGY, INC.
---------------
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
AT CHARGED TO BALANCE
ALLOWANCES FOR ACCOUNTS RECEIVABLE BEGINNING COSTS AND AT END
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, OF PERIOD EXPENSES DEDUCTIONS(1) OF PERIOD
---------------------------------------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
1994 ................................ $ 32 $ 60 $ - $ 92
1995 ................................ 92 49 62 79
1996 ................................ 79 137 - 216
</TABLE>
(1) Write-off of accounts, net of recoveries.
S-1
<PAGE> 46
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
3.1(2) Restated Articles of Incorporation of the Registrant, as amended
3.2(1) Bylaws of the Registrant
10.1(1) Form of Indemnification Agreement between the Registrant and its
officers and directors
10.2(1) 1990 Stock Option Plan and forms of agreement thereunder
10.3(1) 1994 Employee Stock Purchase Plan and agreement thereunder
10.4(1) 1994 Director Stock Option Plan and form of agreement thereunder
10.5(1) Amended and Restated Registration Rights Agreement dated as of
December 20, 1991 by and among Registrant and certain individuals and
entities named therein as amended by Amendment No. 1 thereto dated as
of August 26, 1994
10.6(2) Triple Lease Net Agreement between Registrant and ARGOSystems, Inc.
dated September 21, 1995
10.7(1) Exclusive Distributor Agreement between Registrant and Marubeni
Hytech co. Ltd. dated January 25, 1998 and Amendments thereof
10.8(1) Motorola Corporate Agreement between Registrant and Motorola
Semiconductor Products Sector dated August 6, 1993 and related
Motorola Software End-User License Agreement dated September 23, 1994
and Amendments thereof
10.9 1995 Equity Incentive Plan of CIDA Technology, Inc. and form of
agreement thereunder
10.10*(1) Interface Development Agreement between Registrant and Precedence
Incorporated dated as of December 11, 1992
10.11* AMD Volume Purchase Agreement between Registrant and Advanced
Micro Devices, Inc. dated January 1, 1995 and Amendments thereof
10.11.01* Addendum No. 1 effective as of March 30, 1996 and Addendum No. 2
effective as of September 30, 1996 to the AMD Volume Purchase
Agreement
11.1 Computation of net income per share
22.1 List of subsidiaries of the Registrant
23.1 Independent Auditors' Consent and Report on Schedule
24.1 Power of Attorney (page 30)
27.1 Financial Data Schedule
- --------------
* Confidential treatment has been granted or is requested with respect to
certain portions of this exhibit. Omitted portions have been filed
separately with the Securities and Exchange Commission.
(1) Incorporated by reference to exhibits filed with Registrant's
Registration Statement in Form S-1 (Reg. No. 33-83550) as declared
effective by the Commission on October 26, 1994.
(2) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995 on
December 20, 1995.
<PAGE> 1
Exhibit 10.9
CIDA TECHNOLOGY, INC.
1995 EQUITY INCENTIVE PLAN
As Adopted December 31, 1995
1. PURPOSE. The purpose of the Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options, Restricted Stock and
Stock Bonuses. Capitalized terms not defined in the text are defined in Section
23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and
18, the total number of Shares reserved and available for grant and issuance
pursuant to the Plan shall be ____________ Shares. Subject to Sections 2.2 and
18, Shares shall again be available for grant and issuance in connection with
future Awards under the Plan that: (a) are subject to issuance upon exercise of
an Option but cease to be subject to such Option for any reason other than
exercise of such Option, (b) are subject to an Award granted hereunder but are
forfeited or are repurchased by the Company at the original issue price, or (c)
are subject to an Award that otherwise terminates without Shares being issued.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under the Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards shall be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded up to the
nearest Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company. All other
Awards may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any Parent, Subsidiary or
Affiliate of the Company; provided such consultants, contractors and advisors
render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction. A person may be granted more than
one Award under the Plan.
4. ADMINISTRATION.
4.1 Committee Authority. The Plan shall be administered by
the Committee or the Board acting as the Committee. Subject to the general
purposes, terms and conditions of the Plan, and
<PAGE> 2
to the direction of the Board, the Committee shall have full power to implement
and carry out the Plan. The Committee shall have the authority to:
(a) construe and interpret the Plan, any Award
Agreement and any other agreement or
document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and
regulations relating to the Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other
consideration subject to Awards;
(f) determine whether Awards will be granted
singly, in combination, in tandem with, in
replacement of, or as alternatives to, other
Awards under the Plan or any other incentive
or compensation plan of the Company or any
Parent, Subsidiary or Affiliate of the
Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and
payment of Awards;
(i) correct any defect, supply any omission, or
reconcile any inconsistency in the Plan, any
Award or any Award Agreement;
(j) determine whether an Award has been earned;
and
(k) make all other determinations necessary or
advisable for the administration of the
Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Award shall be made in its sole discretion at the
time of grant of the Award of, unless in contravention of any express term of
the Plan or Award, at any later time, and such determination shall be final and
binding on the Company and all persons having an interest in any Award under the
Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under the Plan to Participants who are not Insiders
of the Company.
4.3 Exchange Act Requirements. If the Company is subject to
the Exchange Act, the Company will take appropriate steps to comply with the
disinterested director requirements of Section 16(b) of the Exchange Act,
including but not limited to, the appointment by the Board of a Committee
consisting of not less than two persons (who are members of the Board), each of
whom is a Disinterested Person.
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<PAGE> 3
5. OPTIONS. The Committee may grant Options to eligible persons
and shall determine whether such Options shall be Incentive Stock Options within
the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under the Plan
shall be evidenced by an Award Agreement which shall expressly identify the
Option as an ISO or NQSO ("Stock Option Agreement"), and be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee shall from time to time approve, and which shall comply with and be
subject to the terms and conditions of the Plan.
5.2 Date of Grant. The date of grant of an Option shall be
the date on which the Committee makes the determination to grant such Option,
unless otherwise specified by the Committee. The Stock Option Agreement and a
copy of the Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.
5.3 Exercise Period. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement; provided, however, that no Option shall be exercisable after
the expiration of ten (10) years from the date the Option is granted, and
provided further that no Option granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("Ten Percent Shareholder") shall be exercisable after the expiration of
five (5) years from the date the Option is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number or percentage as the
Committee determines.
5.4 Exercise Price. The Exercise Price shall be determined
by the Committee when the Option is granted and may be not less than 85% of the
Fair Market Value of the Shares on the date of grant; provided that (i) the
Exercise Price of an ISO shall be not less than 100% of the Fair Market Value of
the Shares on the date of grant and (ii) the Exercise Price of any Option
granted to a Ten Percent Shareholder shall not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of the Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such representations and
agreements regarding Participant's investment intent and access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with payment in full of the
Exercise Price for the number of Shares being purchased.
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<PAGE> 4
5.6 Termination. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option shall always be
subject to the following:
(a) If the Participant is Terminated for
any reason except death or
Disability, then Participant may
exercise such Participant's Options
only to the extent that such Options
would have been exercisable upon the
Termination Date no later than three
(3) months after the Termination
Date (or such shorter time period as
may be specified in the Stock Option
Agreement), but in any event, no
later than the expiration date of
the Options.
(b) If the participant is terminated
because of death or Disability (or
the Participant dies within three
months of such termination), then
Participant's Options may be
exercised only to the extent that
such Options would have been
exercisable by Participant on the
Termination Date and must be
exercised by Participant (or
Participant's legal representative
or authorized assignee) no later
than twelve (12) months after the
Termination Date (or such shorter
time period as may be specified in
the Stock Option Agreement), but in
any event no later than the
expiration date of the Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
the Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) shall not exceed $100,000. If
the Fair Market Value of Shares on the date of grant with respect to which ISOs
are exercisable for the first time by a Participant during any calendar year
exceeds $100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of the Plan to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to ISOs, such different
limit shall be automatically incorporated herein and shall apply to any Options
granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of Participant, impair any of Participant's rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or
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<PAGE> 5
otherwise altered shall be treated in accordance with Section 424(h) of the
Code. The Committee may reduce the Exercise Price of outstanding Options without
the consent of Participants affected by a written notice to them; provided,
however, that the Exercise Price may not be reduced below the minimum Exercise
Price that would be permitted under Section 5.4 of the Plan for Options granted
on the date the action is taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
in the Plan, no term of the Plan relating to ISOs shall be interpreted, amended
or altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee shall determine to whom an offer will be made, the number of
Shares the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares shall be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to the Plan shall be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that all be in such form
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. The offer of Restricted Stock shall be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement along with full payment for the
Shares to the Company within thirty (30) days, then the offer shall terminate,
unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold
pursuant to a Restricted Stock Award shall be determined by the Committee and
shall be at least 85% of the Fair Market Value of the Shares on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Shareholder, in which case the Purchase Price shall be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
the Plan.
6.3 Restrictions. Restricted Stock Awards shall be subject
to such restrictions as the Committee may impose. The Committee may provide for
the lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or part, based on length of service, performance or such
other factors or criteria as the Committee may determine.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may
be awarded for past services already rendered to the Company, or any Parent,
Subsidiary or Affiliate of the Company pursuant to an Award Agreement (the
"Stock Bonus
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<PAGE> 6
Agreement") that shall be in such form (which need not be the same for each
Participant) as the Committee shall from time to time approve, and shall comply
with and be subject to the terms and conditions of the Plan. A Stock Bonus may
be awarded upon satisfaction of such performance goals as are set out in advance
in Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that shall be in such form (which need not be the same for each
Participant) as the Committee shall from time to time approve, and shall comply
with and be subject to the terms and conditions of the Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent, Subsidiary or Affiliate
and/or individual performance factors or upon such other criteria as the
Committee may determine.
7.2 Terms of Stock Bonuses. The Committee shall determine
the number of Shares to be awarded to the Participant and whether such Shares
shall be Restricted Stock. If the Stock Bonus is being earned upon the
satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee shall determine: (a) the nature, length and
starting date of any period during which performance is to be measured (the
"Performance Period") for each Stock Bonus; (b) the performance goals and
criteria to be used to measure the performance, if any; (c) the number of Shares
that may be awarded to the Participant; and (d) the extent to which such Stock
Bonuses have been earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Stock Bonuses that are subject to
different Performance Periods and different performance goals and other
criteria. The number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may
be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash, whole Shares, including Restricted Stock, or a combination
thereof, either in a lump sum payment or in installments, all as the Committee
shall determine.
7.4 Termination During Performance Period. If a Participant
is Terminated during a Performance Period for any reason, then such Participant
shall be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee
shall determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to the
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company
to the Participant;
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<PAGE> 7
(b) by surrender of Shares that either (1) have
been owned by Participant for more than six
(6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares
were purchased from the Company by use of a
promissory note, such note has been fully
paid with respect to such Shares); or (2)
were obtained by Participant in the public
market;
(c) by tender of a full recourse promissory note
having such terms as may be approved by the
Committee and bearing interest at a rate
sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code;
provided, however, that Participants who are
not employees of the Company shall not be
entitled to purchase Shares with a
promissory note unless the note is
adequately secured by collateral other than
the Shares; provided, further, that the
portion of the Purchase Price equal to the
par value of the Shares, if any, must be
paid in cash;
(d) by waiver of compensation due or accrued to
Participant for services rendered;
(e) by tender of property;
(f) with respect only to purchases upon exercise
of an Option, and provided that a public
market for the Company's stock exists:
(1) through a "same day sale" commitment
from Participant and a broker-dealer
that is a member of the National
Association of Securities Dealers
(an "NASD Dealer") whereby the
Participant irrevocably elects to
exercise the Option and to sell a
portion of the Shares so purchased
to pay for the Exercise Price, and
whereby the NASD Dealer irrevocably
commits upon receipt of such Shares
to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from
Participant and an NASD Dealer
whereby Participant irrevocably
elects to exercise the Option and to
pledge the Shares so purchased to
the NASD Dealer in a margin account
as security for a loan from the NASD
Dealer in the amount of the Exercise
Price, and whereby the NASD Dealer
irrevocably commits upon receipt of
such Shares to forward the exercise
price directly to the Company; or
(g) by any combination of the foregoing.
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<PAGE> 8
8.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under the Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued
in satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under the Plan, payments
in satisfaction of Awards are to be made in cash, such payment shall be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be Withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the Committee and
shall be subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, then except as provided below,
the election shall be irrevocable as to the
particular Shares as to which the election
is made;
(c) all elections shall be subject to the
consent or disapproval of the Committee;
(d) if the Participants is an Insider and if the
Company is subject to Section 16(b) of the
Exchange Act: (1) the election may not be
made within six (6) months of the date of
grant of the Award, except as otherwise
permitted by SEC Rule 16b-3(e) under the
Exchange Act, and (2) either (A) the
election to use stock withholding must be
irrevocably made at least six (6) months
prior to the Tax Date (although such
election may be revoked at any time at least
six (6) months prior to the Tax Date) or (B)
the exercise of the Option or election to
use stock withholding must be made in the
ten (10) day period beginning on the third
day following the release of the Company's
quarterly or annual summary statement of
sales or earnings; and
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<PAGE> 9
(e) in the event that the Tax Date is deferred
until six (6) months after the delivery of
Shares under Section 83(b) of the Code, the
Participant shall receive the full number of
Shares with respect to which the exercise
occurs, but such Participant shall be
unconditionally obligated to tender back to
the Company the proper number of Shares on
the Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant shall have any of
the rights of a shareholder with respect to any Shares until the Shares are
issued to the Participant. After Shares are issued to the Participant, the
Participant shall be a shareholder and have all the rights of a shareholder with
respect to such Shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such Shares; provided, that if
such Shares are Restricted Stock, then any new, additional or different
securities the Participant may become entitled to receive with respect to such
Shares by virtue of a stock dividend, stock split or any other change in the
corporate or capital structure of the Company shall be subject to the same
restrictions as the Restricted Stock; provided, further, that the Participant
shall have no right to retain such stock dividends or stock distributions with
respect to Shares that are repurchased at the Participant's original Purchase
Price pursuant to Section 12.
10.2 Financial Statements. The Company shall provide
financial statements to each Participant prior to such Participant's purchase of
Shares under the Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company shall not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under the Plan, and any
interest therein, shall not be transferable or assignable by Participant, and
may not be made subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution or as consistent with
the specific Plan and Award Agreement provisions relating thereto. During the
lifetime of the Participant an Award shall be exercisable only by the
Participant, and any elections with respect to an Award, may be made only by the
Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
(a) a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under the Plan, for cash or cancellation of purchase money indebtedness,
at: (A) with respect to Shares that are "Vested" (as defined in the Award
Agreement), the higher of: (1) Participant's original Purchase Price, or (2) the
Fair Market Value of such Shares on Participant's Termination Date, provided,
such right of repurchase terminates when the Company's securities become
publicly traded; or (B) with respect to Shares that are not "Vested" (as defined
in the Award Agreement), at the Participant's original Purchase Price, provided,
that the right to repurchase at the principal Purchase Price lapses at the rate
of at least 20% per year over 5 years from the date the
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<PAGE> 10
Shares were purchased, and if the right to repurchase is assignable, the
assignee must pay the Company, upon assignment of the right to repurchase, cash
equal to the excess of the Fair Market Value of the Shares over the original
Purchase Price.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under the Plan shall be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company shall have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant shall be required to execute and deliver a written
pledge agreement in such form as the Committee shall from time to time approve.
The Shares purchased with the promissory note may be released from the pledge on
a pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time
or from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant shall agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award
shall not be effective unless such Award is in compliance with all applicable
federal and state securities laws, rules and regulations of any governmental
body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed, as they are in effect on the date of
grant of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in the Plan, the Company shall have no
obligation to issue or deliver certificates for Shares under the Plan prior to
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (b) completion of any registration
or other qualification of such shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company shall be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any
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<PAGE> 11
state securities laws, stock exchange or automated quotation system, and the
Company shall have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award
granted under the Plan shall confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Participant's employment or other relationship at any
time, with or without cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the
event of (a) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company and the Awards granted under the Plan are assumed or replaced by the
successor corporation, which assumption shall be binding on all Participants),
(b) a dissolution or liquidation of the Company, (c) the sale of substantially
all of the assets of the Company, or (d) any other transaction which qualifies
as a "corporate transaction" under Section 424(a) of the Code wherein the
shareholders of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company), any or all outstanding Awards may be assumed
or replaced by the successor corporation (if any), which assumption or
replacement shall be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to shareholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant.
In the event such successor corporation (if any) refuses to
assume or substitute Options, as provided above, pursuant to a transaction
described in this Subsection 18.1, such Options shall expire on such transaction
at such time and on such conditions as the Board shall determine.
18.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.3 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Award under the Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award
granted under the Plan. Such substitution or assumption shall be permissible if
the holder of the substituted or assumed award would
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<PAGE> 12
have been eligible to be granted an Award under the Plan if the other company
had applied the rules of the Plan to such grant. In the event the Company
assumes an award granted by another company, the terms and conditions of such
award shall remain unchanged (except that the exercise price and the number and
nature of Shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the event the Company
elects to grant a new Option rather than assuming an existing option, such new
Option may be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become
effective on the date that it is adopted by the Board (the "Effective Date").
The Plan shall be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Awards pursuant to the Plan; provided, however, that: (a) no Option
may be exercised prior to initial shareholder, approval of the Plan; (b) no
Option granted pursuant to an increase in the number of Shares approved by the
Board shall be exercised prior to the time such increase has been approved by
the shareholders of the Company; and (c) in the event that shareholder approval
is not obtained within the time period provided herein, all Awards granted
hereunder shall be canceled, any Shares issued pursuant to any Award shall be
canceled and any purchase of Shares hereunder shall be rescinded. After the
Company becomes subject to Section 16(b) of the Exchange Act, the Company will
comply with the requirements of Rule 16b-3 (or its successor), as amended, with
respect to shareholder approval.
20. TERM OF PLAN. The Plan will terminate ten (10) years from the
Effective Date or, if earlier, the date of shareholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to the Plan; provided, however, that the Board shall not, without the approval
of the shareholders of the Company, amend the Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in the Plan, the following terms shall
have the following meanings:
"Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where
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<PAGE> 13
"control" (including the terms "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to cause the direction of
the management and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Award" means any award under the Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"Company" means CIDA Technology, Inc., a corporation organized
under the laws of the State of California, or any successor corporation.
"Disability" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of the Code,
as determined by the Committee.
"Disinterested Person" means a director who has not, during
the period that person is a member of the Committee and for one year prior to
service as a member of the Committee, been granted or awarded equity securities
pursuant to the Plan or any other plan of the Company or any Parent, Subsidiary
or Affiliate of the Company, except in accordance with the requirements set
forth in Rule 16b-3(c)(2)(i) (and any successor regulation thereto) as
promulgated by the SEC under Section 16(b) of the Exchange Act, as such rule is
amended from time to time and as interpreted by the SEC.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Price" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its last reported sale price on the
Nasdaq National Market or, if no such reported sale
takes place on such date, the average of the closing
bid and asked prices;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, the last
reported sale price or, if no such reported sale
takes place on
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<PAGE> 14
such date, the average of the closing bid and asked
prices on the principal national securities exchange
on which the Common Stock is listed or admitted to
trading;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on such date, as reported by The Wall Street
Journal, for the over-the-counter market; or
(d) if none of the foregoing is applicable, by the Board
of Directors of the Company in good faith.
"Insider" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"Option" means an award of an option to purchase Shares
pursuant to Section 5.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under the Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"Participant" means a person who receives an Award under the
Plan.
"Plan" means this CIDA Technology, Inc. 1995 Equity Incentive
Plan, as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved
for issuance under the Plan, as adjusted pursuant to Sections 2 and 15, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"Termination" or "Terminated" means, for purposes of the Plan
with respect to a Participant, that the Participant has ceased to provide
services as an employee, director, consultant,
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<PAGE> 15
independent contractor or adviser, to the Company or a Parent, Subsidiary or
Affiliate of the Company, except in the case of sick leave, military leave, or
any other leave of absence approved by the Committee, provided, that such leave
is for a period of not more than ninety (90) days, or reinstatement upon the
expiration of such leave is guaranteed by contract or statute. The Committee
shall have sole discretion to determine whether a Participant has ceased to
provide services and the effective date on which the Participant ceased to
provide services (the "Termination Date").
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<PAGE> 16
CIDA TECHNOLOGY, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered into as
of the date of grant set forth below (the "Date of Grant") by and between CIDA
Technology, Inc., a California corporation (the "Company"), and the participant
named below ("Participant"). Capitalized terms not defined herein shall have the
meaning ascribed to them in the Company's 1995 Equity Incentive Plan (the
"Plan").
Participant: _________________________________
Social Security Number: _________________________________
Address: _________________________________
_________________________________
Total Option Shares: _________________________________
Exercise Price Per Share: _________________________________
Date of Grant: _________________________________
First Vesting Date: _________________________________
Expiration Date: _________________________________
Type of Stock Option
(Check one): [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (the "Option") to purchase the total number of shares of Common Stock of
the Company set forth above (the "Shares") at the Exercise Price Per Share set
forth above (the "Exercise Price"), subject to all of the terms and conditions
of this Agreement and the Plan. If designated as an Incentive Stock Option
above, the Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. EXERCISE PERIOD.
2.1 Exercise Period of Option. Provided Participant
continues to provide services to the Company or any Subsidiary, Parent or
Affiliate of the Company throughout the specified period, the Option shall
become exercisable as to portions of the Shares as follows: (a) This Option
shall not be exercisable with respect to any of the Shares until the last day of
the 12th month after the Date of Grant, which is________________, 199_____(the
"First Vesting Date"); (b) on the First Vesting Date the Option shall become
exercisable as to twenty-five percent (25%) of the Shares; and (c) thereafter at
the end of each full succeeding month the Option shall become exercisable as to
two and one-twelfth percent (2.0833%) of the Shares. If application of the
vesting percentage causes a fractional Share, such Share shall be rounded down
to a whole Share.
<PAGE> 17
2.2 Expiration. The Option shall expire on the Expiration
Date set forth above and must be exercised, if at all, on or before the
Expiration Date.
3. TERMINATION.
3.1 Termination for Any Reason Except Death or Disability.
If Participant is Terminated for any reason, except death or Disability, the
Option, to the extent (and only to the extent) that it would have been
exercisable by Participant on the date of Termination, may be exercised by
Participant no later than three (3) months after the date of Termination, but in
any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If
Participant is Terminated because of death or Disability of Participant, the
Option, to the extent that it is exercisable by Participant on the date of
Termination, may be exercised by Participant (or Participant's legal
representative) no later than twelve (12) months after the date of Termination,
but in any event no later than the Expiration Date.
3.3 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent, Subsidiary or Affiliate of
the Company, or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Participant's employment or
other relationship at any time, with or without cause.
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this
Option, Participant (or in the case of exercise after Participant's death,
Participant's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Company from time to time (the "Exercise Agreement"), which shall set forth,
inter alia, Participant's election to exercise the Option, the number of Shares
being purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Participants investment intent and access to
information as may be required by the Company to comply with applicable
securities laws. If someone other than Participant exercises the Option, then
such person must submit documentation reasonably acceptable to the Company that
such person has the right to exercise the Option.
4.2 LIMITATIONS ON EXERCISE. The Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The Option may
not be exercised as to fewer than 100 Shares unless it is exercised as to all
Shares as to which the Option is then exercisable.
4.3 PARENT. The Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company
to the Participant;
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<PAGE> 18
(b) by waiver of compensation due or accrued to
Participant for services rendered; or
(c) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares
upon exercise of the Option, Participant must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Participant may provide for payment of withholding taxes upon exercise
of the Option by requesting that the Company retain Shares with a Fair Market
Value equal to the minimum amount of taxes required to be withheld. In such
case, the Company shall issue the net number of Shares to the Participant by
deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement
and payment are in form and substance satisfactory to counsel for the Company,
the Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (1) the date two
years after the Date of Grant, and (2) the date one year after transfer of such
Shares to Participant upon exercise of the Option, Participant shall immediately
notify the Company in writing of such disposition. Participant agrees that
Participant may be subject to income tax withholding by the Company on the
compensation income recognized by Participant from the early disposition by
payment in cash or out of the current wages or other compensation payable to
Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the
Option and the issuance and transfer of Shares shall be subject to compliance by
the Company and Participant with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange
on which the Company's Common Stock may be listed at the time of such issuance
or transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant. The terms of the Option shall be binding upon the executors,
administrators successors and assigns of Participant.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of
the Date of Grant of some of the federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
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<PAGE> 19
REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If the Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of the Option, although the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price will be treated as a
tax preference item for federal income tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If the Option
does not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of the Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price. The Company will be required to withhold from
Participant's compensation or conflict from Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
8.3 Disposition of Shares. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of the Option (and, in the case of an ISO, are disposed of more
than two years after the Date of Grant), any gain realized on disposition of the
Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within one
year of exercise or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price. The Company will be
required to withhold from Participant's compensation or collect from Participant
and pay to the applicable taxing authorities an amount equal to a percentage of
this compensation income at the time of exercise.
9. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any
of the rights of a shareholder with respect to any Shares until Participant
exercises the Option and pays the Exercise Price.
10. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
11. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan constitute the entire agreement of the
parties and supersede all prior undertakings and agreements with respect to the
subject matter hereof.
12. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given
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<PAGE> 20
or delivered upon: personal delivery; three (3) days after deposit in the United
States mail by certified or registered mail (return receipt requested); one (1)
business day after deposit with any return receipt express courier (prepaid); or
one (1) business day after transmission by rapifax or telecopier.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as such laws
are applied to agreements between California residents entered into and to be
performed entirely within California.
15. ACCEPTANCE. Participant hereby acknowledges receipt of a copy
of the Plan and this Agreement. Participant has read and understands the terms
and provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
[Remainder of this page left blank intentionally]
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<PAGE> 21
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Participant has
executed this Agreement in duplicate as of the Effective Date.
CIDA TECHNOLOGY, INC. PARTICIPANT
By:------------------------------ --------------------------
(Signature)
- --------------------------------- --------------------------
(Please print name) (Please print name)
- ---------------------------------
(Please print title)
[Signature page to CIDA Technology, Inc. Stock Option Agreement]
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<PAGE> 1
Exhibit 10.11
VOLUME PURCHASE AGREEMENT
This Volume Purchase Agreement (the "VPA") number AMD9598 with an effective Date
of January 1, 1995, is made by and between EPIC Design Technology, Inc. a
company with its principal place of business at 2901 Tasman Drive, Suite 212,
Santa Clara, CA 95054, (EPIC) and Advanced Micro Devices, Inc. ("AMD" or
"Licensee"), a company with its principal place of business at One AMD Place,
Sunnyvale, CA 94088-3453.
EPIC and AMD agree that the provisions contained in this VPA shall govern the
licensing of EPIC Products (defined in Exhibit A) during the term of this VPA.
Software Products are licensed and not sold: any references to the sale or price
of any software products or any copy thereof refers to the license or license
fee.
The following are included by reference and are integral parts of this
VPA
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- Exhibit A Product and Pricing Schedule
- Exhibit B EPIC Software License Agreement and
Maintenance Agreement
- Exhibit C Purchase and Acquisition Schedule
- Exhibit D AMD Maintenance & Total Support Program
</TABLE>
EPIC agrees to offer AMD appropriate discounts for software tools purchased as
defined in Exhibit C. AMD (CTS) agrees to provide a central pool of EPIC
licenses and fund a total agreed to support program which facilitates the
successful use of EPIC tools within the AMD standard methodology.
1.0 DEFINITIONS
1.1 PRODUCTS: means EPIC software and applicable support
listed in Exhibit A, Product and Pricing Schedule.
1.2 DISCOUNT: means the discount as specified later in the
VPA as applied against the applicable Product and
Pricing Schedule (Exhibit A).
1.3 DISCOUNT LEVEL: means the discount levels specified in
Exhibit A and Exhibit C of this VPA. The Discount Level
is valid only during the term and under the conditions
of this VPA.
1.4 LIST PRICE: means the list price for the Products and
Services specified in Exhibit A.
<PAGE> 2
1.5 PEAK DEMAND LICENSES ("PDL"): means a floating license
for specific EPIC software. A PDL license has a limited
duration of one year. Monthly utilization reports will
be provided by the AMD Site Manager. Fees for
utilization of the PDL's licenses will be paid on a
quarterly basis according to the following formula
outlined below.
[*]
[*]
Utilization reports for all products will be produced
[*] and submitted to EPIC [*] monthly by the AMD Site
Manager.
1.6 PURCHASED SW: means the software that AMD will purchase
upon signing this VPA as listed in Exhibit C.
1.7 AMD TOTAL SUPPORT SERVICES PROGRAM: means a set of
services EPIC will provide AMD on a yearly basis. The
particulars of the ATS program are detailed in Exhibit
D.
The AMD Total Support program is based on the software
already owned by AMD, the software acquired under the
VPA and the additional software purchased as described
in Section 1.6.
1.8 THREE YEAR PROGRAM: means the payment, discount and
acquisition schedule referred to as the Three Year
Program in Exhibit C. AMD has the option to acquire Peak
Demand Licenses (defined in section 1.5 and Exhibit C).
AMD has the option to purchase additional software
licenses at any time during the term of this VPA at
prices listed in Exhibit A and at discount levels
described in Exhibit C.
2.0 SCOPE AND LICENSE GRANT
2.1 SCOPE: This VPA sets forth the terms and conditions for
volume discounts for Products and related services off
the List Price. No rights are granted to AMD to resell,
relicense, sub license, or assign any products purchased
under this VPA.
2.2 AGREEMENTS: the Product and all applicable support
services shall be licensed to AMD by EPIC in accordance
with the
- ----------
* Confidential Treatment Requested
-2-
<PAGE> 3
Computer Software End User License Agreement and the
Computer Software Maintenance Agreement, both of which
are attached as Exhibit B.
2.3 EPIC-AMD U.S.A. PRICING: The terms of this VPA apply
only to AMD sites located in the continental United
States of America.
3.0 DISCOUNT LEVELS FOR PRODUCT AND APPLICABLE CONDITIONS
3.1 DISCOUNTS FROM CURRENT LIST PRICE: Discounts and List
Prices during the Effective Term are defined in Exhibit
C and Exhibit A. EPIC agrees that the amounts charged by
it to AMD for product and services purchased hereunder
do not currently exceed amounts normally charged by EPIC
as referenced in Exhibit A.
3.2 REHOSTING AND RECONFIGURATION FEES: Rehosts and
reconfigurations are limited to [*] at [*] and apply
only to purchased licenses.
3.3 INITIAL ORDER: Upon execution of this VPA, AMD will
submit initial purchase orders for amounts as specified
in Exhibit C as well as the AMD Total Support Program
and Peak Demand License (PDL).
3.4 PRODUCT ACQUISITIONS SCHEDULE: EPIC shall provide
product within thirty (30) days after receipt of the
purchase order for the initial order(s).
4.0 PAYMENT TERMS
4.1 SHIPPING AND PAYMENT TERMS: All shipping and payments
terms are contained in the Computer Software End-User
Agreement and Computer Software Maintenance Agreement
between EPIC and AMD.
4.2 U.S.A. CURRENCY: All payments will be made in lawful
currency of the United States of America.
4.3 PAYMENT TERMS FOR AMD TOTAL SUPPORT PROGRAM: Payment for
the Support Services will be made on a quarterly basis
for the term of this VPA.
- ----------
* Confidential Treatment Requested
-3-
<PAGE> 4
4.4 SHIPMENT DESTINATIONS: All media, documentation, and
keys will be shipped to a single designated contact at
both AMD Sites (Texas and California). EPIC will provide
six (6) sets of documentation for each site no later
than thirty days after shipment.
4.5 SHIPMENT PRIORITY: AMD understands that EPIC has
government customers who submit orders that carry
national security rating that by federal law mandate
priority shipment before commercial order can be
shipped. However, AMD shall be on EPIC "first ship" list
for commercial customers for the term of this agreement.
5.0 OTHER PRODUCTS
5.1 EPIC LICENSE PRODUCTS ONLY: It is understood and agreed
that the discounts and services offered to AMD under the
terms of this VPA apply to EPIC Products only, and only
those Products which do not incorporate any third-party
Original Equipment's Manufacturer's (OEM) software,
firmware, and/or hardware. Such OEM Products and any
third-party products sold or sub licensed by EPIC under
another manufacturer's label are not included in the
Discount Level offered to AMD. Such products will be
sold or sub licensed to AMD in accordance with
separately negotiated agreements.
5.2 CURRENT/FUTURE PRODUCTS: This VPA applies only to the
current EPIC products and services listed on Exhibit A.
Future EPIC products and services may be added to this
VPA by a written amendment to this VPA and signed by
both parties.
6.0 RELEASE OF INFORMATION
6.1 NO RELEASE OF INFORMATION: AMD and EPIC shall not
provide, disclose, transfer, or otherwise made available
the details of this VPA to any third party without the
express prior written consent of EPIC and AMD except:
(i) to employees of AMD and EPIC to whom disclosure is
necessary in order to effectuate the purposes set forth
in this VPA, or (ii) in response to a lawful order of a
court of competent jurisdiction.
7.0 ASSIGNMENT
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<PAGE> 5
7.1 ASSIGNMENT: Neither this VPA nor any rights or
obligations of it, in whole or in part, shall be
assignable or otherwise transferable by AMD or EPIC. Any
unauthorized attempt by AMD and EPIC to assign or
transfer this VPA or any rights or obligations of it
shall be null and void except where mergers or
acquisitions may occur.
8.0 TERM AND TERMINATION
8.1 TERM: This VPA is effective for three years from 1
January 1995 through 31 December 1997. This VPA will be
reviewed annually. All orders against the VPA must be
received by EPIC before the end of the first calendar
quarter of each renewed year (i.e., 3/31/96, 3/31/97
respectively). Delivery of the Product must occur within
thirty (30) days from receipt of purchase order(s).
8.2 EXPIRATION: Upon the expiration of this VPA, EPIC and
AMD may elect to (i) enter into negotiation for the
creation of a new VPA, similar in form and content to
this VPA, or (ii) not enter into a future VPA
arrangement.
8.3 TERMINATION: In the event of a material breach by AMD of
the Computer Software End-User License Agreement or the
Computer Software Maintenance Agreement, EPIC may
terminate this VPA in whole or in part.
9.0 AMENDMENT AND TERMS
9.1 MODIFICATION OF AGREEMENT: This VPA may not be modified,
supplemented, qualified, or interpreted by any trade use
or prior dealings which have not been made a part of
this Agreement. This VPA may not be modified or amended
except in writing and executed by duly authorized
representatives of both parties.
9.2 NO OTHER TERMS: The provisions of AMD's purchase order
or business forms shall not supersede the provisions of
this VPA, the Computer Software End User License
Agreement or the Computer Software Maintenance
Agreement.
9.3 PRECEDENCE: In event of a conflict among agreements, the
order of precedence shall be first the Computer Software
End User Agreement and second the Computer Software
Maintenance Agreement and last this Volume Pricing
Agreement.
-5-
<PAGE> 6
Both parties acknowledge that they have read this VPA, understand
it, and agree to be bound by its Terms and Conditions.
EPIC DESIGN TECHNOLOGY, INC. ADVANCED MICRO DEVICES, INC.
/s/ Bernard Aronson /s/ S. Hockenbury for A. Brown
- ----------------------------- ------------------------------
(Signature) (Signature)
Bernard Aronson S. Hockenbury for A.Brown
- ----------------------------- ------------------------------
(Printed Name) (Printed Name)
President Sr. Site Procurement Mgr.
- ----------------------------- ------------------------------
(Title) (Title)
December 6, 1995
- ----------------------------- ------------------------------
(Date) (Date)
-6-
<PAGE> 7
EXHIBIT A
PRODUCT AND PRICING SCHEDULE
<TABLE>
<CAPTION>
GROUP A
Products Description Price
- ---------------------------- --------------------------------- -------------
<S> <C> <C>
PathMill Static Timing Analysis [*]
TimeMill-AVO Dynamic, Event Driven [*]
Timing Simulator
Power Mill Dynamic, Event Driven [*]
Power Simulator
OPTIONS:
PFX Programming and [*]
Formatting Extension
MSX Mixed Signal Extension [*]
BCX BICMOS Extension [*]
BDC Block Delay Calculator [*]
Mentor (Falcon) [*]
Interface
GROUP B
RailMill PowerNet Analysis Tool [*]
GROUP C
OEM PRODUCT
Vertue Co-Simulation [*]
SimWave Waveform display for viewing [*]
simulation vectors
VTRAN Vector-Translator [*]
Multi-User Node Locked
Rehosting Configuration change [*]
</TABLE>
<TABLE>
<CAPTION>
SUPPORT SERVICES
<S> <C>
[*] [*]
[*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
</TABLE>
See Exhibit C, Section IV for AMD Total Support Services Pricing Schedule
- -----------
* Confidential Treatment Requested
<PAGE> 8
EXHIBIT B
COMPUTER END USER LICENSE AGREEMENT
COMPUTER SOFTWARE MAINTENANCE AGREEMENT
COMPUTER SOFTWARE
END-USER LICENSE AGREEMENT
COMPUTER SOFTWARE END-USER LICENSE AGREEMENT ("Agreement") is made
and entered into as of this 15th day of October 1995 by and between EPIC DESIGN
TECHNOLOGY, INC., a California corporation, having as its principal place of
business 2901 Tasman Drive, Suite 212, Santa Clara, California 95054 ("EPIC"),
and Advanced Micro Devices a Delaware Corporation having as its principal place
of business at One AMD Place, Sunnyvale, California 94088-3453 (the "Customer").
WHEREAS, EPIC is the developer and distributor of the computer
software and documentation described in Exhibit A (collectively hereinafter
termed the "Licensed Program"); and
WHEREAS, the Customer desires to license the Licensed Program;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:
1. License. In consideration of the payment of the license fees set
forth herein, EPIC grants Customer a non-exclusive, non-transferable license,
without right of sublicense, to use the package of computer software identified
in Exhibit A in machine-readable form only, along with related user
documentation. The computer software and user documentation together constitute
the "Licensed Program." Customer's use of which is subject to the following
terms and conditions.
2. Scope of Rights. Customer may:
(a) Install the Licensed Program in Customer's own
facility at the locations specified in Exhibit A only;
(b) Use the Licensed Program in the configurations
specified in Exhibit A, but only for purposes of serving the internal needs of
Customer's business; and
(c) Make one (1) copy of the Licensed Program for
nonproductive backup purposes only, provided that all of EPIC's proprietary
notices are included.
-8-
<PAGE> 9
Except as specifically provided herein, EPIC reserves all rights in
and to the Licensed Program. Customer may not use or copy the Licensed program,
or any copy, adaptation, transcription, or merged portion thereof, except as
expressly authorized by this Agreement. Customer may not modify, disassemble or
decompile the Licensed Program without the prior written consent of EPIC;
provided, however, that if Customer's address set forth above is located within
a Member State of the European Community, then such activities shall be
permitted solely to the extent, if any, permitted by Article 6 of the Council
Directive of May 14, 1991 on the legal protection of computer programs, and
implementing legislation thereunder. In addition to the other remedies which may
be available to EPIC at law or in equity, any use of the Licensed Program
outside the scope of the license granted herein shall automatically terminate
the license and this Agreement.
3. Transfer of Rights. Customer's rights to use the Licensed Program
may not be transferred except to a successor in interest of Customer's entire
business who assumes the obligations of this Agreement in writing. Customer
agrees to notify EPIC of any such transfer within thirty (30) days of its
occurrence. Any use of the Licensed Program by a transferee outside the scope of
the license granted herein shall automatically terminate this Agreement and such
license with respect to such transferee.
4. License Fee. In consideration for the rights granted hereunder,
upon the Delivery Date, Customer will pay to EPIC the License fee in Untied
States dollars for the Licensed Program specified in the Volume Purchase
Agreement dated January 1, 1995.
5. Taxes. Customer is solely responsible for payment of any taxes
(including sales or use taxes and intangible taxes but excluding taxes on EPIC's
income) resulting from Customer's acceptance of this license and Customer's
possession and use of the Licensed Program. EPIC reserves the right to have
customer pay any such taxes as they fall due to EPIC for remittances to the
appropriate authority. Customer agrees to hold EPIC harmless from all claims and
liability arising from Customer's failure to report or pay such taxes.
6. Support.
6.1 Support Agreement. The term and conditions of EPIC's
support of the Licensed Program is governed by a separate support agreement
("Maintenance Agreement"). EPIC shall have no duties to provide support or
maintenance services except as explicitly set forth herein and upon payment of
the annual support fees ("Support Fees") set forth in the Maintenance Agreement.
6.2 Operation by Customer. Customer is responsible for
selecting an operator who is qualified to operate the Licensed Program on
Customer's own equipment and is familiar with the information, calculations and
reports that serve as input and output of the Licensed Program. EPIC reserves
the right to refuse support or to charge additional fees if an operator seeks
assistance with respect to such basic background information or any other
-9-
<PAGE> 10
matters not directly related to the operation of the Licensed Program provide
that such fees are communicated in writing in advance and agreed to by Customer.
6.3 Hardware and Software. The Licensed Program is
designed for use with the hardware and accessories specified in Exhibit A.
Except as agreed otherwise in writing, EPIC assumes no responsibility under this
Agreement for obtaining such equipment. Customer is also responsible for
providing a proper environment and proper utilities for the computer system on
which the Licensed Program operates, including an uninterrupted power supply.
6.4 Conversion of Data Files. Customer is responsible
for converting its own data files for use with the Licensed Program.
7. Title and Ownership. EPIC and its licensors shall own all right,
title and interest in and to the Licensed Program and all modifications and
enhancements thereof subject only to the rights and privileges expressly granted
hereunder. This Agreement does not provide Customer with title or ownership of
the Licensed Program but only a right of limited use.
8. Confidentiality.
8.1 Confidentiality. The Licensed Program is a
commercially valuable, proprietary product of EPIC, the design and development
of which reflect the effort of skilled development experts and the investment of
considerable time and money. "Confidential Information" means (i) the Licensed
Program, in object and source code form, and any related technology, idea
algorithm or information contained therein, including without limitation design
techniques, and any trade secrets related to any of the foregoing; (ii) EPIC's
product plans, designs, costs, prices and names; non-published financial
information; marketing plans; business opportunities; personnel; research;
development or know-how; (iii) any information designated by the disclosing
party as confidential at the time of disclosure and reduced to writing and
designated as confidential in writing within thirty (30) days; and (iv) the
terms and conditions of this Agreement; provided, however, that "Confidential
Information" will not include information that: (a) is or becomes generally
known or available by publication, commercial use or to otherwise through no
fault of the receiving party; (b) is known and has been reduced to tangible form
by the receiving party at the time of disclosure and is not subject to
restriction; (c) is independently developed by the receiving party without use
of the disclosing party's Confidential Information; (d) is lawfully obtained
from a third party who has the right to make such disclosure; and (e) is
released for publication by the disclosing party.
Each party will protect the other's Confidential
Information from unauthorized dissemination and use with the same degree of care
that each such party uses to protect its own like information. Neither party
will use the other's Confidential Information for purposes other than those
necessary to directly further the purposes of this Agreement. Neither party will
disclose to third parties the other's Confidential information without the prior
written consent of the other party.
-10-
<PAGE> 11
8.2 Restrictions Against Unauthorized Disclosure.
Customer may not or allow any third party, at any time, to (i) disclose or
disseminate the Licensed Program to any third party, or to any Customer employee
or consultant who does not need to obtain access thereto consistent with
Customer's rights under this Agreement; (ii) decompile, disassemble, reverse
engineer or attempt to reconstruct, identify or discover any source code,
underlying ideas, underlying user interface techniques, or algorithms of the
Licensed Program; (iii) provide, lease, lend, use for timesharing or service
bureau purposes, or otherwise use or allow others to use the Licensed Program
for the benefit of third parties; or (iv) modify, incorporate into or with other
software, or create a derivative work of any part of the Licensed Program.
Customer will devote its reasonable efforts to ensure that all of its employees,
consultants, independent contractors and all other persons afforded access to
the Licensed Program shall protect it against improper use, dissemination or
disclosure.
8.3 Remedies. If either party breaches any of its
obligations with respect to confidentiality and unauthorized use of the Licensed
Program hereunder, either party shall be entitled to equitable relief to protect
its interest therein, including but not limited to injunctive relief, as well as
money damages.
9. Limited Warranty.
9.1 Product Warranty. EPIC warrants that the Licensed
Program shall be in substantial conformance with EPIC's published specifications
for the Licensed Program for a period of ninety (90) days following initial
delivery of the Licensed Program to Customer. EPIC does not warrant that the
Products will meet all of Customer's or Customer's customer's requirements nor
that the use of the Products will be uninterrupted or error free.
9.2 Defects not Covered by Warranty. EPIC's warranty
shall not extend to problems in the Licensed Program that result from: (i)
Customer's failure to implement any updates, enhancements, error corrections or
bug fixes to the Licensed Program which are issued by EPIC during the warranty
period; (ii) changes to the operating system or environment which adversely
affect the Licensed Program; (ii) any alterations of or additions to the
Licensed Program performed by parties other than EPIC; (iv) use of the Licensed
Program in a manner for which it was not designed; (v) accident, negligence, or
misuse of the Licensed Program by any party other than EPIC personnel; or (vi)
operation outside of environmental specifications.
9.3 Exclusive Remedy. EPIC's sole obligation and
Customer's exclusive remedy under the above warranties shall be to use its
reasonable efforts to correct reproducible errors that render the Licensed
Program nonconforming, provided that EPIC shall have no obligation to correct
all errors in the Licensed Program.
9.4 Disclaimer. EXCEPT FOR THE ABOVE EXPRESS LIMITED
WARRANTY, EPIC MAKES AND CUSTOMER RECEIVES NO WARRANTIES ON THE LICENSED
PROGRAM, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER
-11-
<PAGE> 12
PROVISION OF [UNREADABLE] OR COMMUNICATION WITH CUSTOMER, AND EPIC SPECIFICALLY
DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
PURPOSE.
9.5 Patent and Copyright Indemnification. EPIC shall
defend any suit or proceeding brought against Customer so far as based on a
claim that the Licensed Program, or any portion thereof, furnished by EPIC
constitutes an infringement of any patent, trademark, trade secret, copyright or
other third party property rights, if notified promptly in writing and given
authority, information and assistant (at EPIC's expense) for the defense of
same, and EPIC shall pay all damages and costs awarded therein against Customer.
In case said Licensed Program, or any portion, thereof in such suit is held to
constitute an infringement and the use of said Licensed Program or any portion
thereof, is enjoined, EPIC shall at its sole option and own expense, either
procure for Customer the right to continue using said Licensed Program, or
replace same with non-infringing program or modify it so it becomes
non-infringing, or remove said Licensed Program and refund the purchase price
and the transportation costs thereof.
10. Limitation of Liability.
EXCEPT AS SET FORTH IN SECTION 9.5 ABOVE, IN NO EVENT
WILL EPIC'S CUMULATIVE LIABILITY FOR ALL CLAIMS ARISING OUT OF THIS AGREEMENT OR
RELATED TO THE LICENSED PROGRAM, UNDER ANY CAUSE OF ACTION, EXCEED THE TOTAL
AMOUNT OF ALL AMOUNTS FEES PAID BY CUSTOMER TO EPIC HEREUNDER. IN NO EVENT SHALL
EPIC HAVE ANY LIABILITY FOR ANY LOST OPPORTUNITY OR PROFITS, LOSS OF DATA OR
COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY SPECIAL,
INDIRECT, OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT, UNDER ANY
CAUSE OF ACTION AND WHETHER OR NOT EPIC HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING THE FAILURE OF THE
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
11. Term and Termination.
11.1 Term. This Agreement will become effective upon the
Delivery Date and continue until terminated as set forth below.
11.2 Termination for Convenience. Customer may terminate
this Agreement for any reason or no reason upon sixty (60) days written notice
to EPIC.
11.3 Termination for Cause. Either party may terminate
this Agreement for cause upon giving sixty (60) days notice of a material breach
by the other hereunder, provided that such breach will not have been remedied
during such period.
-12-
<PAGE> 13
11.4 Termination for Insolvency. This Agreement will
terminate, without notice, (i) upon the institution by or against either party
of insolvency, receivership or bankruptcy proceedings or any other proceedings
for the settlement of the party's debts, (ii) upon either party's making an
assignment of substantially all of its assets for the benefit of creditors, or
(ii) upon either party's dissolution or cessation of business.
11.5 Obligations Upon Termination. Upon termination of
this Agreement, all licenses granted to Customer will terminate. Promptly upon
termination of this Agreement for any reason or upon discontinuance or
abandonment of Customer's possession or use of the Licensed Program, Customer
must return, or certify the destruction of, all copies of the Licensed Program
in Customer's possession (whether modified or unmodified), and all other
materials pertaining to the Licensed Program (including all copies thereof).
11.6 Survival of Certain Terms. The provisions of
Sections 7, 8, 10, 11, and 12 will survive the expiration or termination of this
Agreement for any reason. In addition, if this Agreement is terminated pursuant
to Section 11.4 above due to EPIC's insolvency, the license granted in Section 1
shall survive such termination. All other rights and obligations of the parties
will cease upon expiration or termination of this Agreement.
12. General.
12.1 Binding Effect. Except as herein otherwise
specifically provided, this agreement shall be binding upon and inure to the
benefit of the parties and their legal representatives, heirs, administrators,
executors, successors and assigns.
12.2 Captions. Captions contained in this agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this agreement or any provision hereof.
12.3 Severability. In the event that any of the terms of
this Agreement is or become or is declared to be invalid or void by any court or
tribunal of competent jurisdiction, such term or terms shall be deemed severed
from this Agreement, the Agreement shall be interpreted to give as much effect
as possible under law to the intention behind such invalid or void term, and all
the remaining terms of this Agreement shall remain in full force and effect.
12.4 Waiver. No failure on the part of either party to
exercise, and no delay in exercising, any right or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by law.
12.5 Notice. Unless otherwise provided, any notice to be
given hereunder shall be Delivered upon dispatch. Such notice shall be sent by
first class mail, postage prepaid and marked for delivery by certified or
registered mail, return receipt requested, addressed to
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<PAGE> 14
the parties listed below at their respective places of business, or at such
other addresses of which notice has been given to the addressing party:
If to EPIC: If to Customer:
EPIC Design Technology, Inc. Barbara Vervenne
2901 Tasman Drive, Suite 212 Advanced Micro Devices
Santa Clara, CA 95054 U.S.A. 5204 East Ben White Blvd.
Attn: CFO Austin, TX 78741
12.6 Force Majeure. Neither party shall be liable by
reason of any failure or delay in the performance of its obligations due to
strikes, riots, fires, explosions, acts of God, war, governmental action or any
other cause which is beyond the reasonable control of such parties. The
performance of such party shall be excused for such reasonable time as may be
required to resume performance following cessation of such cause.
12.7 Language. This Agreement is in the English language
only, which language shall be controlling in all respects, and all versions
hereof in any other language shall not be binding on the parties hereto. All
communications and notices to be made or given pursuant to this Agreement shall
be in the English language.
12.8 U.S. Export Control. Customer understands and
acknowledges that the Licensed Program is subject to regulation by agencies of
the U.S. Government, including, but not limited to, the U.S. Department of
Commerce, which prohibit export or diversion of certain products and technology
to certain countries. Any and all obligations of EPIC to provide the Licensed
program, documentation, or any media in which any of the foregoing is contained,
as well as any other technical assistance shall be subject in all respects to
such United States laws and regulations as shall from time to time govern the
license and deliver of technology and products abroad by persons subject to the
jurisdiction of the United States, including the Export Administration Act of
1979, as amended, any successor legislation, and the Export Administration
Regulations issued by the Department of Commerce, Bureau of Export
Administration. Customer agrees to cooperate with EPIC, including, without
limitation, providing required documentation, in order to obtain export licenses
or exemptions therefrom. Customer warrants that it will comply with the Export
Administration Regulations and other United States laws and regulations
governing exports in effect from time to time.
Without in any way limiting the provisions of this
Agreement, Customer agrees that unless prior written authorization is obtained
from the Bureau of Export Administration or the Export Administration
Regulations explicitly permit the re-export without such written authorization,
it will not export, reexport, or transship, directly or indirectly, the Licensed
Program or any technical data disclosed, or provided to Customer, or the direct
product of such technical data, to country groups Q, S, W, Y, or Z (as defined
in the Export Administration Regulations and which currently consist of Albania,
Bulgaria, Cambodia, Cuba, the Czech Republic, Estonia, Laos, Latvia, Libya,
Lithuania, Mongolian People's Republic, North Korea, Poland, Romania, the
geographic area of the former Union of Soviet Socialist
-14-
<PAGE> 15
Republics, the Slovak Republic and Vietnam), or to the People's Republic of
China (excluding Taiwan), Haiti, Iran, Iraq, Syria, Yugoslavia (Serbia and
Montenegro), or to military or police entities in South Africa, or to any other
country as to which the U.S. Government has placed an embargo against the
shipment of products, which is in effect during the term of this Agreement.
12.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the state of California.
12.10 Jurisdiction. Any dispute arising out of this
Agreement shall be brought in, and the parties consent to personal and exclusive
jurisdiction of and venue in, the state and federal courts within Santa Clara
County, California.
12.11 Amendments. No modification of this Agreement
shall be binding unless it is in writing and is signed by an authorized
representative of the party against whom enforcement of the modification is
sought.
12.12 Assignment. Either party may not assign any rights
or delegate any responsibilities hereunder without the prior written consent of
either party, except to a successor in ownership of all relevant assets of the
assigning party.
12.13 Attorney's Fees. In the event that it become
necessary for either party to institute litigation or arbitration proceedings to
enforce its rights under this Agreement, either party agrees to any reasonable
attorney's fees and other costs.
12.14 Injunctive Relief. EPIC or AMD shall have the
right to seek and obtain injunctive and equitable relief to remedy any
violations of this Agreement due to the fact that damages would not adequately
compensate EPIC or AMD for any resulting loss or injury.
12.15 Third Party Beneficiaries. Customer acknowledges
and agrees that the following entities are third party beneficiaries to this
Agreement to the extent that this Agreement contains provisions that related to
Customer's use of such entities' software licensed hereby, and that such
provisions are made expressly for the benefit of such entities and are
enforceable by such entities in addition to EPIC:
Source III Precedence Incorporated
3958 Cambridge Road, Ste. 247 4675 Stevens Creek Blvd., Ste. 250
Cameron Park, CA 95682 Santa Clara, CA 95051
Data I/O Systems Science
P.O. Box 97046 1860 Embarcadero Road, Ste. 260
Redmond, WA 98073-9746 Palo Alto, CA 94303
Archer Systems, Inc.
-15-
<PAGE> 16
4633 Old Ironside Drive, Suite 240
Santa Clara, CA 95054
12.16 Complete Agreement. THIS AGREEMENT IS THE COMPLETE
AND EXCLUSIVE STATEMENT OF EPIC'S OBLIGATIONS AND RESPONSIBILITIES TO CUSTOMER
AND SUPERSEDES ANY OTHER PROPOSAL, REPRESENTATION OR OTHER PROPOSAL,
REPRESENTATION OR OTHER COMMUNICATION BY OR ON BEHALF OF EPIC RELATING TO THE
SUBJECT MATTER HEREOF. CUSTOMER'S LICENSE OF THE LICENSED PROGRAM WILL NOT
COMMENCE UNTIL CUSTOMER HAS EXECUTED THIS AGREEMENT, WITHIN 90 DAYS OF THE
EXECUTION OF THIS AGREEMENT, EXTENDABLE FOR 90 DAYS, AND AN AUTHORIZED
REPRESENTATIVE OF EPIC HAS RECEIVED, APPROVED, AND EXECUTED A COPY OF IT AS
WELL.
LICENSEE: EPIC DESIGN TECHNOLOGY, INC.
Advanced Micro Devices Bernard Aronson
- ----------------------------- -----------------------------------
Company Name Signature
S. Hockenbury for A. Brown Bernard Aronson, President
- ----------------------------- -----------------------------------
Signature Print Name/Title
S. Hockenbury for A. Brown,
- -----------------------------
Sr. Site Procurement Manager
- -----------------------------
Print Name/Title
-16-
<PAGE> 17
COMPUTER SOFTWARE
MAINTENANCE AGREEMENT
This Computer Software Maintenance Agreement ("Agreement") is made
and entered into as of this 15th day of October 1995 "Effective Date") by and
between EPIC DESIGN TECHNOLOGY, INC., a California corporation having its
principal office at 2901 Tasman Drive, Suite 212, Santa Clara, CA 95054 ("EPIC")
and Advanced Micro Devices, a Delaware Corporation, having its principal office
at One AMD Place, Sunnyvale, California 94088-3453 ("Customer").
RECITALS
A. Customer has obtain a license from EPIC to use EPIC computer
software programs pursuant to a Computer Software End-User
License Agreement dated October 15, 1995 ("License
Agreement"); and
B. Customer desires to obtain certain support services from with
respect to such software; and
C. EPIC desires to offer such support services on the terms and
conditions set forth herein;
In consideration of the mutual covenants and promises contained
herein, the parties hereby agree as follows:
1. License.
1.1 Agreement Term. The initial term of this Agreement is as
described in Exhibit A. Thereafter, the Agreement Term shall be renewed for
successive periods of one (1) year upon agreement of the parties. In no event,
however, shall the Agreement Term or any renewal thereof extend beyond the term
of the License Agreement.
1.2 Equipment. The equipment described in Exhibit B.
1.3 Errors, Malfunctions or Defects. Material deviations of the
Software Products from the functional specifications in the documentation
furnished from time to time by EPIC for such Software Products.
1.4 Normal Working Hours. The hours between 9:00 a.m. and 5:00 p.m.
Pacific Standard (or Daylight, as applicable) Time Monday through Friday,
excluding EPIC's regularly scheduled holidays.
1.5 Release. A software product generally offered and expressly
designated by EPIC in its sole discretion as a revision and new release of a
Software Product.
<PAGE> 18
1.6 Software Product. A software program and associated
documentation that has been licensed by EPIC to Customer pursuant to the License
Agreement and identified in Exhibit B hereto.
1.7 Support Services. The support services described and required to
be performed by EPIC under this Agreement.
2. Scope of Services.
EPIC shall use reasonable efforts to provide the following services
during Normal Working Hours during the Agreement Term:
2.1 [*]
2.2 [*]
2.3 [*]
____________________
* Confidential treatment requested.
-2-
<PAGE> 19
[*]
2.4 Other Services. EPIC may provide other or different Support
Services by describing such services in Exhibit A. Exhibit A shall supersede the
Support Services described in this Section 2 to the extent of any contradictions
or ambiguity between the two.
3. Fees and Charges.
3.1 Support Fees. As consideration for the Support Services provided
hereunder, on or before the Effective Date, Customer shall pay EPIC its fees and
charges based on the rate schedule and the payment terms set forth in Exhibit C
attached hereto. EPIC reserves the right to change its rate schedule from time
to time, provided that no such change will be effective until the beginning of a
renewal term subsequent to the announcement of such change.
3.2 Expenses. Customer shall reimburse EPIC for all expenses
incurred by EPIC in rendering the services to Customer provided that prior
written approval has been obtained from Customer.
3.3 Payment. EPIC shall invoice Customer at the beginning of each
calendar month for all fees and charges accrued and all reimbursable expenses
incurred during the previous month which are in excess of the fees and charges
described in Exhibit C, and Customer shall pay the invoiced amount within thirty
(30) days upon receipt of such invoice. Any amount not paid within thirty (30)
days after the invoice date shall bear interest at the lesser of one and one
half percent (1.5%) per month and the highest rate allowed by applicable law.
4. Customer Responsibilities.
4.1 Interface. Customer shall be responsible for the interface
between Software Products for which Support Services are available and all other
software used by Customer whether or not such software is licensed to Customer
by EPIC or by others, or has been developed by Customer.
4.2 Installation and Operation. Customer is responsible for
installing, managing and operating any Support Service elements delivered under
this Agreement.
4.3 Software License Limitations. Customer agrees that limitations
on the use of a Software product and Customer's responsibilities to prevent the
unauthorized disclosure of EPIC confidential and proprietary information, both
of which are described in the License Agreement, apply equally to all materials
and information supplied to Customer by or on behalf of EPIC hereunder,
including without limitation, corrective code and Updates furnished to Customer
pursuant to this Agreement.
____________________
* Confidential treatment requested.
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<PAGE> 20
4.4 Limitations. In no event shall EPIC have any responsibility to
correct any errors or damage that result from: (i) Customer's failure to
implement all Updates to the Software Products that are made generally available
to other licensees of the same Software Products; (ii) changes to the operating
system or environment which adversely affect the Software Products; (iii) any
alterations of or additions to the Products performed by parties other than
EPIC; (iv) use of the Software Products in a manner for which it was not
designed; (v) accident, negligence, or misuse of the Software Products by any
party other than EPIC personnel; or (vi) operation outside of environmental
specifications.
4.5 Other Customer Responsibilities. Customer shall be responsible
for procuring, installing, and maintaining all equipment, telephone lines,
communications interfaces, and other hardware (other than the hardware
constituting the program control center maintained at EPIC's facilities)
necessary to operate the Software Products and to obtain from EPIC the Support
Services.
5. Disclaimer of Warranty.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, EPIC EXPRESSLY DISCLAIMS ANY
AND ALL WARRANTIES CONCERNING THE SOFTWARE PRODUCTS OR THE SERVICES TO BE
RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6. Limitation of Liability.
IN NO EVENT SHALL EPIC'S CUMULATIVE LIABILITY FOR ANY CLAIMS ARISING IN
CONNECTION WITH THIS AGREEMENT EXCEED THE TOTAL FEES AND CHARGES PAID TO EPIC BY
CUSTOMER PURSUANT TO THIS AGREEMENT WITHIN THE LAST AGREEMENT TERM. IN NO EVENT
SHALL EPIC BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR
INCIDENTAL DAMAGES OF WHATEVER KIND AND HOWEVER CAUSED, INCLUDING, WITHOUT
LIMITATION, LOST PROFITS AND LOSSES STEMMING FROM BUSINESS OPPORTUNITIES
FOREGONE AND EFFECTS OF INCOMPLETE DESIGN EFFORTS, WHETHER OR NOT EPIC HAS BEEN
ADVISED OF OR IS OTHERWISE ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
7. Termination.
7.1 Term. Unless earlier terminated as set forth below, this
Agreement will become effective upon the Effective Date and continue for the
Agreement Term.
7.2 Termination for Cause. Either party may terminate this Agreement
for cause upon giving sixty (60) days notice of a material breach by the other
hereunder, provided that such breach will not have been remedied during such
period.
-4-
<PAGE> 21
7.3 Termination of License Agreement. This Agreement shall
immediately terminate upon the termination of the License Agreement.
7.4 Effect of Agreement. Following termination of this Agreement,
EPIC shall immediately invoice Customer for all accrued fees and charges and all
reimbursable expenses, not in dispute and Customer shall pay the invoiced amount
within thirty (30) days upon receipt of such invoice. Customer may continue to
use any work supplied to Customer by EPIC for the remaining term of the License
Agreement.
7.5 Survival of Certain Terms. The provisions of Sections 5, 6 and 8
will survive the expiration or termination of this Agreement for any reason. All
other rights and obligations of the parties will cease upon expiration or
termination of this Agreement.
8. Notices.
Any notice required or permitted hereunder shall be in writing and
shall be deemed to have been given upon personal delivery, fax transmission, or
three (3) business days after being sent to the other party by U.S. mail return
receipt requested at the addresses as listed above, or as one party may from
time to time give the other in writing.
9. Miscellaneous.
9.1 Each party acknowledges that it has read this Agreement,
understands it, and agrees to be bound by its terms. The parties further agree
that this is the complete and exclusive statement of the agreement of the
parties with respect to the subject matter hereof and that it supersedes and
merges all prior proposals, customer provided brochures and materials,
understandings and agreements, whether oral or written, between the parties with
respect to the subject matter hereof. This Agreement may not be modified except
by a written instrument duly executed by the parties hereto.
9.2 This agreement shall be governed by and construed in accordance
with the laws of the State of California, without reference to conflict of laws
principles.
9.3 Any dispute arising out of this Agreement shall be brought in,
and the parties consent to personal and exclusive jurisdiction of and venue in,
the state and federal courts within Santa Clara County, California.
9.4 In the event that any provision of this Agreement is held
invalid, illegal, or unenforceable, the remaining provisions shall be enforced
to the maximum extent permitted by applicable law.
9.5 The waiver by either party of any term or condition of this
Agreement shall not be deemed to constitute a continuing waiver thereof nor of
any further or additional right that such party may hold under this Agreement.
-5-
<PAGE> 22
9.6 Customer acknowledges that Software Products, Updates or other
information disclosed in connection with the Agreement may be considered
technical data that this subject to compliance with the export control laws and
regulations of the United States. Customer hereby agrees to comply with all such
laws.
9.7 Use, duplication, or disclosure by the United States Government
is subject to restrictions as set forth in subdivisions (b) and (c), Part
252.227-7013 of Title 48 of the United States Code of Federal Regulations
(Rights in Technical Data and Computer Software) and any successor statute
thereto.
9.8 The parties do not intend that any agency or partnership
relationship be created between them by this Agreement.
9.9 Customer may not assign its benefits nor delegate its
obligations under this Agreement without first receiving the written consent
therefor from EPIC. For the purposes of this paragraph, the merger of Customer
with or the sale of Customer or of substantially all the assets of Customer to
another entity except an entity which is a competitor of EPIC's, shall not be
deemed to be an event requiring EPIC's consent.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as set forth below.
LICENSEE: EPIC DESIGN TECHNOLOGY, INC.
Advanced Micro Devices Bernard Aronson
- ----------------------------- -----------------------------------
Company Name Signature
S. Hockenbury for A. Brown Bernard Aronson, President
- ----------------------------- -----------------------------------
Signature Print Name/Title
S. Hockenbury for A. Brown,
- -----------------------------
Sr. Site Procurement Manager
- -----------------------------
Print Name/Title
-6-
<PAGE> 23
EXHIBIT C
PURCHASE AND ACQUISITION SCHEDULE
I. DISCOUNT SCHEDULE
THREE YEAR SCHEDULE
[*]
II. PEAK DEMAND LICENSE REQUIREMENTS
Definition of Peak Demand License (PDL) option:
In the spirit of a multi-year agreement and shared risk between both
AMD and EPIC, EPIC shall agree to provide one [*] for every owned
license of PowerMill TimeMill and PathMill (core product) and the
following options: BDC, BCX, MSX, AVO. AMD agrees to commit to the
net revenue outlined in Table I with the inclusion of [*] for 1995.
The invoicing formula for the Peak Usage Model is defined in Section
1.5 of the VPA. As a condition of the continued use in 1996 and 1997
of the PDL Model, AMD must commit to a minimum purchase of [*] for
those products defined in Exhibit A
Since EPIC has agreed to expand the PDL to include [*] of software
for previously purchased licenses, including product options, the
PDL model will be reviewed as to the continued inclusion of options
in the Peak Demand License Model at the end of 1995.
1995 SOFTWARE PURCHASE FOR VPA
As a condition of the Peak Usage Model, Epic would require a minimum
purchase of [*] and whatever desired combination of core products,
options and OEM products, provided the total revenue commitment for
1995 is a [*] worth of product. If these requirements are met then
EPIC will extend the Peak Usage Model to AMD. The PDL Model is based
upon annual revenue dollars beginning January 1st of each year.
____________________
[*] Confidential Treatment Requested.
<PAGE> 24
1995 Purchase would be as follows:
[*]
PEAK DEMAND LICENCE (PDL) OPTION FOR 1996 & 1997
EPIC will extend the Peak Demand License model to AMD for 1996 and 1997 if the
total gross dollars spent on an annual basis with EPIC meets [*] purchase for
each year. There will be no requirements set forth on [*] of core products for
1996 and 1997.
III. PATHMILL [*] USE OPTION
EPIC will provide [*] of PathMill to AMD with the commitment of the following
criteria: AMD will purchase a [*] and whatever desired combinations of core
products, options and OEM products provided the total revenue commitment for
1995 is a [*] worth of product. To obtain [*] PathMill usage in 1996 and 1997,
the total gross dollars spent on an annual basis on core products, options and
OEM products must meet the same requirements as the PDL model outlined in Table
2. There will be no requirement set forth on [*] in 1996 and 1997. The dollar
figures in the [*] Licenses" below assumes that 1995 licenses will be made
available for [*] . The dollar figures for 1996 and 1997 are for [*]. AMD will
not retain any of the utilized but unpurchased licenses of PathMill on the
unrestricted model.
-2-
<PAGE> 25
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
[*] PATHMILL LICENSE PRICE TERMS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[*]
</TABLE>
IV. AMD SUPPORT SERVICES PRICING SCHEDULE
In Exhibit D, EPIC has outlined the AMD Total support services as (1), [*] as
defined in Table 1, Exhibit C (2), [*], (3) [*] IV and (4) [*]. Pricing is as
follows:
<TABLE>
<CAPTION>
1995 1996 (EST) 1997 (EST)
<S> <C> <C> <C>
[*]
</TABLE>
Additional support can be provided [*] after AMD informs EPIC of desire to
contract for this service.
[*]
Should AMD exceed the set of services in Exhibit D, AMD shall place additional
purchases for services as needed.
The total support dollars above do not include product maintenance dollars for
years 1996 and 1997. The software product maintenance will be charge at a [*]
for all new purchases of Epic written Software after the initial order under the
VPA and [*] for all OEM product in 1996 and 1997.
-3-
<PAGE> 26
IV. AMD TOTAL SUPPORT SERVICES PRICING SCHEDULE (CON'T)
The AMD Total Support Program is based on software already owned by AMD, the
software initially acquired under the VPA as outlined in Exhibit C and the AMD
Support Services as outlined in Exhibit D. The program allows for an additional
[*] of software to be acquired with no increase in the maintenance charge. As
additional software purchases exceed [*], a maintenance charge of [*] will be
added to the ATS program fee due that year. Software added during the middle of
the year would incur support fees prorated from date of purchase for that year.
EPIC will allow AMD to make quarterly payments for ATS if AMD pays the full
prorated amount for incremental purchases of [*] or more on the next quarterly
payment following purchase.
-4-
<PAGE> 27
EXHIBIT D
AMD TOTAL SUPPORT SERVICES PROGRAM
EPIC shall provide AMD product support in the following areas. It is EPICs'
intent to accelerate the successful implementation of EPICs' technology and
products in your project development cycles. We recognize the need to provide
additional services to demonstrate the effective use of these tools.
I. STANDARD MAINTENANCE
Updates to New software releases:
EPIC will provide AMD with all software updates to licensed products
purchased under this VPA. [*] The current EPIC Software Maintenance
Agreement will indicate those products to which the customer is
entitled software updates. [*] all new software updates will
include:
[*]
o All updates will be shipped via electronic mail (email).
II. TECHNICAL SUPPORT
AMD, the CTS Site Manager or a key design team contact may phone, email or fax
the EPIC Technical Support Group for assistance. The EPIC Technical Support
Group is the central entry point for all AMD identified product defect problems
or enhancement requests. EPIC's Technical Support Group engineers provide
guidance and support for all EPIC products. EPIC Technical Support Group will
evaluate the customer's questions and provide an answer or work around if
possible. If necessary, the EPIC Technical Support Group will escalate the call
to the appropriate factory based Technical Specialist or R & D Engineer for
further analysis. The EPIC Technical Support Group will also log the problem in
the EPIC `Scopus System. AMD, CTS Site Manager will provide priority of open
issues if necessary. In the event of a significant product failure, EPIC will
use its best effort to resolve the technical defect.
____________________
* Confidential Treatment Requested.
<PAGE> 28
III. ON-SITE APPLICATIONS ENGINEERING SUPPORT
EPIC will appoint an on-site Applications Engineer for both TX and CA locations.
During the first year of this VPA, the TX AE will be on location [*] and the
CA person [*]. Duties of the AE are as follows:
[*]
IV. TRAINING
As a part of the Total Support Program AMD will be entitled to [*] Standard
Training Classes or AMD Specific Training Classes for [*] persons in each
class. [*] EPIC will provide monthly updates to AMD CTS Site Manager for
registered class students.
V. ON-SITE METHODOLOGY CONSULTANT
The on-site methodology consultant assists the designers to better understand
how to effectively deploy EPIC tools to achieve the best possible results. After
each consulting project, the EPIC consultant will document a report summarizing
any observations, methodology recommendations, design problems and work- around.
An electronic mail (email) copy of this report will go the TX and CA AE, Project
Leader/Manager and the AMD Site Manager.
This AMD Support Program will include [*] weeks per year of the on-site
consultant defined above.
This Methodology Consultant will not however, participate in any AMD actual
design activity outside the scope of the EPIC tools. AMD request design
consulting as required at the cost listed on Exhibit A.
____________________
* Confidential Treatment Requested.
-2-
<PAGE> 1
Exhibit 10.11.01
CHANGES AND/OR ADDITIONS TO THE EXHIBITS OF THE VPA
---------------------------------------------------
EXHIBIT A - PRODUCT AND PRICING SCHEDULE
The following product additions have been made to Group A:
- RailMill
- RailMill Options
- Arcadia
- Arcadia Interactive Analysis II Options
The following production addition has been made to Group B:
- AMPS
Replace Exhibit A, Product & Pricing Schedule, with the following two pages.
<PAGE> 2
EXHIBIT A
PRODUCT AND PRICING SCHEDULE
GROUP A
-------
<TABLE>
<CAPTION>
PRODUCTS DESCRIPTION PRICE
- --------------------------------------- -------------------------------------- ---------
<S> <C> <C>
PathMill Static Timing Analysis [*]
TimeMill-AVO Dynamic, Event Driven Timing Simulator [*]
PowerMill Dynamic, Event Driven Power Simulator [*]
OPTIONS:
PM
PFX Programming and Formatting Extension [*]
DSX Dynamic Simulation Extension [*]
TM (ONLY)
BDC Block Delay Calculator [*]
TM/PWR
MSX Mixed Signal Extension [*]
BCX BICMOS Extension [*]
RAILMILL IC Reliability [*]
RAILMILL OPTIONS
CHV Chip Viewer [*]
MSX Mixed Signal Extension [*]
BCX BICMOS Extension [*]
ARCADIA R/C Extraction/Full Chip [*]
Interactive Analysis II [*]
ARCADIA INTERACTIVE ANALYSIS II OPTIONS
C2X Net by Net quasi 3D emp C [*]
BCX BICMOS Extension [*]
RAPH Raphael Interface [*]
LFDF LEF/DEF Interface [*]
INTERFACES
Mentor Falcon Framework Interface [*]
Powerview Powerview Interface [*]
TRANSLATORS
EDIF EDIF Netlist Reader [*]
LSIM LSIM Netlist Reader [*]
Verilog Verilog Netlist Reader [*]
VCD VCD Vector Reader [*]
</TABLE>
- ----------
* Confidential Treatment Requested
<PAGE> 3
GROUP B
-------
<TABLE>
<CAPTION>
<S> <C> <C>
AMPS Perf./Power Optimizer [*]
GROUP C
-------
OEM PRODUCT:
Vertue Co-Simulation [*]
SimWave Waveform display for viewing simulation vectors [*]
VTRAN Vector-Translator [*]
TurboWave Waveform display for viewing simulation vectors [*]
Rehosting Configuration Change [*]
</TABLE>
<TABLE>
<CAPTION>
SUPPORT SERVICES
<S> <C>
[*] [*]
[*] [*]
[*]
[*] [*]
[*]
[*] [*]
</TABLE>
See Exhibit C, Section IV for AMD Total Support Services Pricing Schedule
- ----------
* Confidential Treatment Requested
-2-
<PAGE> 4
EXHIBIT C - PURCHASE AND ACQUISITION SCHEDULE
II. PEAK DEMAND LICENSE REQUIREMENTS
Definition of Peak Demand License (PDL) Option:
Add the following paragraph after the second paragraph with:
"To further support AMD's design requirements and to establish a pattern of
usage leading to purchase of the Software Options available for each of the EPIC
Core Products, EPIC will provide a Peak Demand License (PDL) for each option of
EPIC software at the rate [*]. These licenses will be charged at [*]. These
licenses will be [*]. These licenses will expire no later than [*]."
1995 SOFTWARE PURCHASE FOR THE VPA
Replace the table title with "1996 SOFTWARE PURCHASE COMMITMENT FOR THE VPA
WOULD BE AS FOLLOWS" with:
1996 SOFTWARE PURCHASE COMMITMENT FOR THE VPA WOULD BE AS FOLLOWS:
<TABLE>
<CAPTION>
PRODUCT/OPTION GROSS PRICE DISCOUNT NET PRICE
<S> <C> <C> <C>
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
Purchase Total [*] [*]
</TABLE>
On or before [*], AMD shall submit to EPIC a purchase order in the total amount
of [*] for these products: Arcadia Full Chip [*], Arcadia Interactive [*],
RailMill [*], and PathMill [*]. Further AMD shall submit to EPIC additional
purchase orders for delivery of additional products as follows:
<TABLE>
<CAPTION>
PO Submittal Date PO Amount Products
- ----------------- --------- --------
<S> <C> <C>
[*] [*] [*]
[*] [*] [*]
</TABLE>
- ----------
* Confidential Treatment Requested
<PAGE> 5
Thirty (30) days prior to any schedule shipment date, AMD may in its sole
discretion, upon written notice to EPIC, reconfigure its order to ensure
delivery of products which meet AMD's current requirements, provided the net
purchase order amounts set forth herein are maintained. Delivery per EPIC normal
delivery schedule.
IV. AMD SUPPORT SERVICES PRICING SCHEDULE
The last sentence of the last paragraph is replaced with the following:
"The software product maintenance will be charged at a rate of [*] for all new
purchases of EPIC written software after the initial order under the VPA with
exception of the following products which will be charged at [*]: RailMill and
RailMill Options, Arcadia, Arcadia Interactive Analysis II Options in Group A
and AMPS in Group B. All OEM products contained in Group C will be charged at
[*]."
- ----------
* Confidential Treatment Requested
-2-
<PAGE> 6
EXHIBIT D - AMD TOTAL SUPPORT SERVICE PROGRAM
III ON-SITE APPLICATIONS ENGINEERING SUPPORT
Replace with the following:
"EPIC will appoint an on-site Applications Engineer for both TX and CA
locations. During 1996 both Applications Engineers will be on location at AMD[*]
days each week. Duties of the AE are as follows:
[*]
[*]
[*]
[*]
[*]
[*]
IV TRAINING
As a part of the Total Support Program, AMD will be entitled to [*] Training
Credits for 1996. EPIC will provide monthly updates to AMD CTS Site Manager (or
designee) according to published schedule.
V ON-SITE METHODOLOGY CONSULTANT
Insert the following two sentences after the first sentence of Paragraph 1:
[*]
Replace the second paragraph with the following:
"The 1996 Support Program will include [*] weeks of the on-site consultant
defined above."
- ----------
* Confidential Treatment Requested
<PAGE> 7
EXHIBIT E - EPIC-AMD SINGAPORE PRICING
Add Exhibit E following Exhibit D. Exhibit E follows this page.
<PAGE> 8
EXHIBIT E
EPIC-AMD SINGAPORE PRICING
AMD has a design center located in Singapore and has a requirement for EPIC
product and services at this design center and is desirous of obtaining a high
caliber of support from EPIC.
EPIC utilizes a distributor in Singapore and has a resident application engineer
who is an EPIC employee. AMD can buy EPIC Software products directly from this
distributor.
This addendum covers the mechanism which will be used for AMD to acquire
software and support from EPIC in a manner consistent with the objective of
obtaining a high quality of support.
1. EPIC will honor the same [*] rates for software purchased in Singapore
as are in effect for the U.S.: [*]. [*]. The list prices for Singapore will
be [*] times the domestic list prices (Standard Singapore distributor list
prices are [*] times domestic U.S. prices).
2. Maintenance will be charged at a rate of [*] of the AMD Singapore list
price with the exception of the following which will be charged at [*]:
RailMill, RailMill Options, Acadia, Arcadia Interactive Analysis II Options
from Group A, and AMPS in Group B. All Group C products will be charged at
[*].
3. On-site AE assistance, training and consulting as defined in the domestic
VPA will be available to AMD Singapore at a rate of [*] times the domestic
prices for use of local Singapore resources.
4. Support, flown from California to Singapore, will also be available at a
rate of [*] times the domestic prices. In addition, AMD will cover the
cost of reasonable travel and per diem.
5. [*]
6. Requests for quotes for software and/or support services should be directed
to EPIC's Asian Director located in Sunnyvale. All POs related to license,
support and maintenance for Singapore should be directed to the EPIC Asian
Sales Director. Currently, this individual is Andy Huang.
- ----------
* Confidential Treatment Requested
<PAGE> 9
Both parties acknowledge that they have read this Addendum to the VPA,
understand it, and agree to be bound by its Terms and Conditions.
EPIC DESIGN TECHNOLOGY, INC. ADVANCED MICRO DEVICES, INC.
/s/Tammy Liu /s/ Pat Guerra
- ----------------------------------- -----------------------------------
Tammy Liu Pat Guerra
- ----------------------------------- -----------------------------------
CFO Director, Corporate Procurement
- ----------------------------------- -----------------------------------
Date: 5/09/96 Date:
------------------------------- -------------------------------
-2-
<PAGE> 10
AMENDMENT NO. 2
TO THE
AMD
VOLUME PURCHASE AGREEMENT
* * * * *
This Amendment No. 2 ("Amendment") by and between EPIC Design Technology, Inc.
("EPIC") and Advanced Micro Devices ("AMD") hereby amends the Volume Purchase
Agreement, No. AMD9598 dated January 1, 1995. This Amendment is effective as of
September 30, 1996 (the "Amendment Effective Date").
Therefore the parties hereby agree to amend the VPA as follows:
CHANGES AND/OR ADDITIONS TO THE EXHIBITS OF THE VPA
EXHIBIT A - PRODUCT AND PRICING SCHEDULE
The following product additions have been made to Group A:
- PathMill Option SFX
- PathMill Option PMGA
- PowerMill Option PWGA
- RailMill Option SNX
Replace Exhibit A, Product & Pricing Schedule, with the following two pages.
<PAGE> 11
EXHIBIT A
PRODUCT AND PRICING SCHEDULE
GROUP A
-------
<TABLE>
<CAPTION>
PRODUCTS DESCRIPTION PRICE
- --------------------------------------- -------------------------------------- -----
<S> <C> <C>
PathMill Static Timing Analysis [*]
TimeMill Dynamic, Event Driven Timing Simulator [*]
PowerMill Dynamic, Event Driven Power Simulator [*]
PATHMILL OPTIONS:
SFX Synopsys Flow extension [*]
PFX Programming and Formatting extension [*]
DSX Dynamic Simulation Extension [*]
PMGA PathMill Graphical Analyst [*]
TIMEMILL OPTIONS
AVO Analog Voltage Output [*]
MSX Mixed Signal extension [*]
BCX BiCMOS extension [*]
BDC Block Delay Calculator [*]
POWERMILL OPTIONS
MSX Mixed Signal extension [*]
BCX BiCMOS extension [*]
PWGA PowerMill Graphical Analyst [*]
RAILMILL IC Reliability [*]
RAILMILL OPTIONS
CHV Chip Viewer [*]
MSX Mixed Signal extension [*]
BCX BiCMOS extension [*]
SNX Signal Net extension [*]
ARCADIA R/C Extraction
Full Chip [*]
Interactive Analysis II [*]
ARCADIA INTERACTIVE ANALYSIS II OPTIONS
C2X Net by Net quasi 3D emp C [*]
BCX BiCMOS Extension [*]
RAPH Raphael Interface [*]
LFDF LEF/DEF Interface [*]
INTERFACES
Mentor Falcon Framework Interface [*]
Powerview Powerview Interface [*]
TRANSLATORS
EDIF EDIF Netlist Reader [*]
LSIM LSIM Netlist Reader [*]
Verilog Verilog Netlist Reader [*]
VCD VCD Vector Reader [*]
</TABLE>
- ----------
* Confidential Treatment Requested
<PAGE> 12
<TABLE>
<CAPTION>
GROUP B
-------
<S> <C> <C>
AMPS Performance/Power Optimizer [*]
GROUP C
-------
OEM PRODUCT:
Vertue Co-Simulation [*]
SimWave Waveform display for viewing simulation vectors [*]
VTRAN Vector-Translator [*]
TurboWave Waveform display for viewing simulation vectors [*]
Rehosting Configuration Change [*]
</TABLE>
<TABLE>
<CAPTION>
SUPPORT SERVICES
<S> <C>
[*] [*]
[*] [*]
[*]
[*] [*]
[*]
[*] [*]
</TABLE>
See Exhibit C, Section IV for AMD Total Support Services Pricing Schedule
- ----------
* Confidential Treatment Requested
-2-
<PAGE> 13
EXHIBIT C - PURCHASE AND ACQUISITION SCHEDULE
II. PEAK DEMAND LICENSE REQUIREMENTS
Definition of Peak Demand License (PDL) option:
Add the following paragraphs:
EPIC will provide [*] PathMill, TimeMill and Arcadia and their associated
options for the K6 and K7 programs exclusively with the following commitment
criteria: AMD will pay a fee of [*] for access [*] and AMD will fund a PDL pool
of licenses for [*]. For a total commitment of [*]. This is the summary of the
commitment:
[*]
[*]
[*]
[*] option fee. This [*] use of the specified products is for
the term from [*] for the K6 or K8 programs (not concurrent) and [*], for
the K7 program. A condition for the [*] option and extension of the
term is [*]. [*] is defined as [*] for the term of the agreement.
K8 has the option of participating, but not concurrently with the K6 program.
This is a detailed list of the products covered under the [*] option.
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
License Ownership. Upon full payment to EPIC, AMD will own EPIC licenses
equivalent [*]. Products may include any EPIC
developed products in Group A of Exhibit A of the VPA. Not included are products
in Group B and Group C and products [*]
- ----------
* Confidential Treatment Requested
<PAGE> 14
[*]
PDL option fee. The PDL option fee will apply to all other groups outside of
those covered under the [*] and for all AMD groups on products
that are not specified in the unrestricted option.
Payment Schedules
[*] option fee. Shipment will consist of [*] of the defined
list of [*] products with a key duration of [*] for the respective
terms described in the "[*] option fee" section. Payment terms are net
30 days.
<TABLE>
<CAPTION>
Payment Date Payment Amount
- ------------ --------------
<S> <C>
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
</TABLE>
PDL option pool. PDL option pool is invoiced monthly based on usage report
submitted by AMD.
Terms and conditions are covered under the AMD VPA Rev 1.8 and subsequent
addendums. This offer expires September 30, 1996 and must be accepted and
executed by AMD by September 30, 1996. [*] discount on cash payments on any part
of the offer made by September 30, 1996.
Both parties acknowledge that they have read this Addendum to the VPA,
understand it, and agree to be bound by its Terms and Conditions.
EPIC DESIGN TECHNOLOGY, INC. ADVANCED MICRO DEVICES, INC.
/s/John Yelinek /s/Pat Guerra
- ----------------------------------- ----------------------------------
John Yelinek Pat Guerra
- ----------------------------------- ----------------------------------
VP Domestic Sales Director, Corporate Procurement
- ----------------------------------- ----------------------------------
Date: 9/27/96 Date: 10/2/96
------------------------------- ------------------------------
- ----------
* Confidential Treatment Requested
-2-
<PAGE> 1
EXHIBIT 11.1
EPIC DESIGN TECHNOLOGY, INC.
---------------
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income (loss) ................................................... $ (9,678) $ 990 $ 1,238
======== ======= =======
Weighted average common shares outstanding .......................... 12,625 11,270 3,660
Weighted average convertible preferred stock ........................ - 274 3,984
Common share equivalents related to stock options ................... - 1,654 904
Common shares issued and options granted (using the treasury stock
method assuming an initial public offering price of $11.00) between
September 1, 1993 and the initial public offering included pursuant
to Securities and Exchange Commission rules ....................... - - 1,316
-------- ------- -------
Shares used in per share computation ................................ 12,625 13,198 9,864
======== ======= =======
Net income (loss) per share ......................................... $ (0.77) $ 0.08 $ 0.13
======== ======= =======
</TABLE>
<PAGE> 1
Exhibit 22.1
LIST OF SUBSIDIARIES
Archer Systems, Inc.
CIDA Technology, Inc.
EPIC International, Inc.
EPIC International, F.S.C.
EurEPIC S.A.R.L.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the incorporation by reference in Registration Statements No.
33-87080 and No. 333-09439 on Form S-8 of our report dated October 11, 1996,
appearing in this Annual Report on Form 10-K of EPIC Design Technology, Inc. for
the year ended September 30, 1996.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of EPIC Design Technology, Inc.,
listed in Item 14(a)(2). This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
San Jose, California
November 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 13,259
<SECURITIES> 26,268
<RECEIVABLES> 6,516
<ALLOWANCES> 216
<INVENTORY> 0
<CURRENT-ASSETS> 48,500
<PP&E> 4,496
<DEPRECIATION> 0
<TOTAL-ASSETS> 54,791
<CURRENT-LIABILITIES> 17,737
<BONDS> 0
0
0
<COMMON> 44,608
<OTHER-SE> (7,554)
<TOTAL-LIABILITY-AND-EQUITY> 54,791
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</TABLE>
