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In a surprise twist to a contentious legal fight, Synopsys Inc. and Monolithic System Technology Inc. said Friday that the chip industry rivals had ended litigation over their failed $400 million merger. “Both companies fully recognize that it was better to settle and move on than to do any of the other things we could have done, including a trial,” said Rex S. Jackson, vice president and general counsel with Synopsys. The companies resolved the dispute following the second day of a six-day trial in the Delaware Court of Chancery. Jackson declined to say which side initiated settlement talks or elaborate on why they opted to reach agreement. MoSys will retain a $10 million termination fee stemming from the aborted deal. “Settlements occur anywhere along the line, well in advance of trial, on the steps of the courthouse prior to trial, during or immediately following,” Jackson said. “It’s not that unusual. They happen when they happen.” In April, Monolithic sued Synopsys to enforce their merger agreement, which Synopsys had ended after striking the deal in February. Mountain View, Calif.-based Synopsys attributed its decision to pull the plug on the acquisition partly to a March 21 patent infringement suit filed against MoSys by Santa Clara, Calif.-based UniRAM Technology Inc. Both companies design and market software used in the production of semiconductors. Synopsys lawyer Stephen Neal of Cooley Godward said MoSys failed to prove its claims that Synopsys halted the deal because the company believed the price tag was too high. “They had alleged it was broken up because of ‘buyer’s remorse,’ but they were never able to come forward with any evidence to support the allegation,” Neal said. “What the evidence showed is that there were a number of reasons that the board considered when it made the decision to terminate.” Those factors included UniRAM’s suit, fears that MoSys could lose a major sales contract with Sony Corp. and concerns that MoSys co-founder and chief technology officer Wing-Yu Leung planned to leave the company, he added. Monolithic Systems did not return calls seeking comment. MoSys attorney William Bates III of Bingham McCutchen could not be reached for comment. MoSys feared it was losing the case and opted to settle to avoid having to pay Synopsys’ legal fees, which was a stipulation in the original merger agreement, said one source involved in the case on condition of anonymity. “They became convinced that they were cutting their losses,” the source said. The abrupt conclusion to the case prompted speculation that another bidder could surface for MoSys. Erach Desai, analyst with American Technology Research, said stiff competition among the top chip equipment companies could drive players such as Cadence Design Systems Inc. of San Jose, Calif., or Artisan Components Inc. of Sunnyvale, Calif., to step in with an offer. “At some point a lot of these small companies are going to realize it’s hard to go at it on their own,” he said. “Scale definitely matters, and the smaller players are going to be pressured to make deals. There are going to be challenges for them to survive on their own.” Shares of Sunnyvale, Calif.-based MoSys fell 9 percent on news of the settlement. Synopsys was up 3 percent midday Friday. Copyright �2004 TDD, LLC. All rights reserved.

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