<PAGE>
 
                                 UNITED STATES
                      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 DECEMBER 31, 1996 OR

 
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934.
     FOR THE TRANSITION PERIOD FROM _______TO_________

COMMISSION FILE NUMBER: 0-26750

                        COOPER & CHYAN TECHNOLOGY, INC.
            (Exact name of registrant as specified in its charter)
 
             DELAWARE                              77-0206252
   (State or other jurisdiction                 (I.R.S. Employer
of incorporation or organization)               Identification No.)
   1601 SOUTH DE ANZA BOULEVARD
       CUPERTINO, CALIFORNIA                          95014
(Address of principal executive offices)            (Zip code)

                                (408) 366-6966
             (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:
                                     NONE

          Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $0.01 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 
                                               ---    ---   

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 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 as of March 17, 1997, was approximately $229 million.

As of March 17, 1997, Registrant had outstanding 13,197,399 shares of Common
Stock.


See Exhibit Index on page 59.                               Page 1 of 74
<PAGE>
 
                        COOPER & CHYAN TECHNOLOGY, INC.
                               ANNUAL REPORT ON
                                   FORM 10-K
                     FOR THE YEAR ENDED DECEMBER 31, 1996
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
 
 
       FORM 10-K                            NAME OF ITEM                    PAGE
       ITEM NO.                             ------------                    ----
       ---------
<S>                  <C>                                                     <C>
       PART I
        Item 1.      Business..............................................    3
        Item 2.      Properties............................................   18
       PART II
        Item 5.      Market for the Registrant's Common Equity and
                     Related Stockholder Matters...........................   19
        Item 6.      Selected Consolidated Financial Data..................   20
        Item 7.      Management's Discussion and Analysis of
                     Financial Condition and Results of Operations.........   22
        Item 8.      Financial Statements and Supplementary Data...........   29
       PART III
        Item 10.     Directors and Executive Officers of the Registrant....   46
        Item 11.     Executive Compensation................................   48
        Item 12.     Security Ownership of Certain Beneficial
                     Owners and Management.................................   51
        Item 13.     Certain Relationships and Related Transactions........   53
       PART IV
        Item 14.     Exhibits, Financial Statement Schedules and Reports 
                     on Form 8-K...........................................   53
                     Signatures............................................   56
</TABLE>
                                    ______________________

     ShapeBased, UniCAD, SyntheSolve and IC Craftsman in combination with
"Inspector," "Apprentice," "Journeyman," "Master" or "Global/Power Router" and
SPECCTRA in combination with "AutoRoute," "EditRoute" or "AutoPlace," are
trademarks of the Company.  SPECCTRA, IC Craftsman, and UniSolve are registered
trademarks of the Company.

                                       2
<PAGE>
 
                                    PART I

 
ITEM 1.  BUSINESS

     Except for the historical information contained herein, the matters
discussed in this Form 10-K are forward-looking statements that involve risks
and uncertainties, including the timely availability and acceptance of new
products, the impact of competitive products and pricing, the management of
growth and the other risks detailed herein, including, without limitation, the
risks described in this Item 1, "Business," and in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."  The
actual results that the Company achieves may differ materially from any forward-
looking statements due to such risks and uncertainties.

GENERAL

     Cooper & Chyan Technology, Inc. ("CCT" or the "Company") develops, markets
and supports software tools that help designers route the wires that
interconnect the electronic devices on high performance printed circuit boards
("PCBs") and integrated circuits ("ICs"). CCT's products are differentiated by
CCT's proprietary ShapeBased technology, which CCT believes offers significant
advantages over traditional grid-based routing tools for complex PCB and IC
design applications. CCT initially developed ShapeBased routing products for the
PCB market and introduced its first product, SPECCTRA, in December 1989. In
early 1995, CCT entered the IC layout market by leveraging its ShapeBased
routing technology to develop its IC Craftsman product line. IC Craftsman is
designed to solve the interconnect problems inherent in deep submicron IC
design. In addition, CCT's wholly owned subsidiary, UniCAD, Inc. ("UniCAD")
acquired by CCT on August 28, 1996, develops, markets and supports a number of
additional electronic design software tools incorporating design layout,
manufacturing and analysis capabilities.

     CCT has established a broad base of customers for its SPECCTRA product line
including AT&T Corp., Hewlett-Packard Company, IBM, Motorola, Inc., NEC Corp.,
Northern Telecom Limited, Siemens AG and Toshiba Corporation.  In addition, CCT
has licensed its IC Craftsman products to a number of customers including
Applied Micro Circuits Corporation, Advanced Micro Devices, Analog Devices,
Inc., Lucent Technologies, Matsushita, Motorola, Inc., Sharp Electronics,
Silicon Graphics, Inc., Sun Microsystems, Inc., Texas Instruments, Inc. and
Toshiba Corporation.

     On October 28, 1996, CCT entered into an Agreement and Plan of Merger and
Reorganization (the "Reorganization Agreement") with Cadence Design Systems,
Inc., a Delaware corporation ("Cadence"), pursuant to which, upon fulfillment or
waiver of certain conditions, CCT will become a wholly owned subsidiary of
Cadence in a stock-for-stock merger that is expected to be tax free and
accounted for as a pooling of interests (the "Merger").  On January 24, 1997, at
a special meeting of the stockholders of the Company, the stockholders approved
and adopted the Reorganization Agreement and approved the Merger.  Upon
consummation of the proposed Merger, each outstanding share of Common Stock of
the Company will be converted into the right to receive eighty-five hundredths
(0.85) of a share of common stock of Cadence.  The Merger is subject to certain
conditions, including the expiration or termination of the waiting period
applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act").  There can be no assurance that such
conditions will be satisfied or waived and, accordingly, there can be no
assurance that the Merger will be consummated.  On January 3, 1997, CCT and
Cadence announced that they each had received requests for additional
information from the United States Federal Trade Commission (the "FTC") with
respect to the Merger. The FTC action has the effect of extending the waiting
period under the HSR Act applicable to the Merger. Both Cadence and CCT have
provided such additional information to the FTC and the FTC is continuing to
evaluate the Merger. See Item 1, "Business--Merger with Cadence Design Systems,
Inc."

                                       3
<PAGE>
 
INDUSTRY BACKGROUND

     There has been substantial growth in the market for more sophisticated,
miniaturized electronic products such as cellular telephones and laptop
computers.  These products have been enabled, in significant part, by
improvements in design and manufacturing technology, which have made possible
increasingly complex, high performance PCBs and ICs.  In the 1970s, a typical
PCB consisted of a few hundred components integrated on a double-sided board,
and a typical IC consisted of a few thousand transistors implemented in five
micron technology.  Today, designers are creating PCBs consisting of ten or more
layers and over 1,000 components, and ICs consisting of millions of transistors
implemented in 0.5 micron or smaller ("deep submicron") geometries.  In
addition, PCBs and ICs are now capable of operating at frequencies above 50 MHz
("fast circuits").  While these devices provide much higher performance, they
also exhibit physical phenomena such as electromagnetic emissions ("EMI"),
cross-talk and thermal characteristics that are not easily predictable and that
present additional challenges for the design of fast circuit PCBs and ICs.  At
the same time, competitive pressures are forcing designers to shorten
development cycles in order to bring products to market more rapidly.  These
trends have introduced new challenges into the design process.

     Electronic design automation ("EDA") software has been an important
enabling technology to help designers achieve advances in high performance PCBs
and ICs by bringing greater efficiency and productivity to electronic design.
Routing, a critical phase of the physical design process, defines the electrical
interconnections by "wires" and vias among the various electronic components
(such as ICs on a PCB, or transistors on an IC). Routing must satisfy the
engineer's design requirements and obey design constraints such as electrical
signal timing and physical spacing.  Routing affects manufacturability, die size
for ICs and the number of layers for PCBs and, therefore, can directly impact
performance, time-to-market and design and production costs.  If a routing tool
fails to obey design constraints, additional iterations between the functional
and physical design stages may be required, increasing the cost and time
required to complete a design.

     Accordingly, there is growing demand for routing tools that automate the
interconnection of fast circuits while obeying design constraints and without
wasting valuable PCB or IC space.  Furthermore, optimal tools will consider,
analyze and verify fast-circuit physical phenomena as the routing proceeds and
make adjustments as necessary.

THE CCT SOLUTION

     CCT has pioneered the development of ShapeBased autorouting tools to meet
the interconnect requirements of fast circuit PCBs and ICs.  CCT's ShapeBased
technology models the physical components on the circuit layers as a set of
exact shapes (e.g., circles, rectangles, paths and polygons). Unlike grid-based
systems, each shape retains the key electrical characteristics of the component
it represents. Because electrical properties of the components are known, this
allows CCT's autorouter to more effectively obey design and space constraints
while completing the interconnect.

     CCT believes its products offer the following benefits:

     .    Improve Design Completion Rates.  CCT's ability to optimize component
          placement and interconnection can result in fewer design iterations
          and higher design completion rates than traditional grid-based
          solutions.

     .    Reduce Design Costs; Faster Time-to-Market.  On large complex designs,
          manual routing can take several days and may take several weeks,
          especially when fast circuit rules must be obeyed.  Using CCT's
          autorouter, routing can often be completed overnight, resulting in
          significant labor savings.  Further, developers are often able to
          complete the physical design process more quickly than with grid-based
          or manual routing by minimizing iterations between the logical,
          physical and manufacturing stages.

                                       4
<PAGE>
 
     .    Control Noise and Crosstalk.  CCT's proprietary software is designed
          to control noise and crosstalk during the autorouting process, thus
          producing a correct circuit for input to the analysis and verification
          step of the physical design process.  Without automatic crosstalk
          prevention, designers are required to manually repair crosstalk
          problems, increasing design time.

     .    Manage Interconnect Timing.  CCT's software shortens or lengthens the
          interconnections to manage the interconnect signal delay between
          components.  The autorouter obeys rules specified by the designer
          resulting in precise interconnect timing.

     .    Reduce Production Costs.  When compared to grid-based solutions, CCT's
          technology optimizes space and, in many instances, reduces the number
          of interconnect layers on a PCB, thereby reducing production costs.
          For an IC, the ability of CCT's software to obey fast circuit
          constraints can enable routing completion without increasing IC die
          size.

     .    Integrate with Design Environments and Leading Analysis Tools.  The
          open architecture of CCT products "plugs-in" to all major CAD systems,
          supports third party interfaces such as signal analysis tools and
          facilitates integration with other EDA vendor tools.  Customers can
          preserve their existing investment in tools, models and design
          databases while taking advantage of CCT's leading-edge technology.

     In addition, on August 28, 1996, CCT acquired UniCAD.  UniCAD, now a wholly
owned subsidiary of CCT, develops, markets and supports a broad range of
electronic design software tools incorporating design layout, manufacturing and
analysis capabilities.  Of particular interest to CCT are UniCAD's analysis
products, which allow designers to measure and evaluate the critical performance
characteristics of PCBs including the effects of various physical phenomena.
CCT believes that the planned integration of UniCAD's analysis tools with its
SPECCTRA routing products will offer designers the ability to concurrently route
and analyze the interconnect of PCBs.  CCT believes such concurrent analysis of
physical phenomena during the routing process should further improve the
efficiency and effectiveness of the design process for fast circuit PCBs by
reducing the need for inefficient design constraints and/or the iterative design
process traditionally used to address the effects of such physical phenomena.

PRODUCTS

     CCT has developed the SPECCTRA product line for PCBs and the IC Craftsman
product line for ICs.  CCT's products are designed to be compatible with all of
the commonly used EDA environments and integration pathways, and can be
installed readily into a wide variety of CAD environments.  The product lines
consist of various base products with optional features that can be customized
for major platforms and operating systems.  CCT's products are written in C and
C++, and support industry standards such as Motif, X-Windows, GDSII Stream
format and EDIF.

     SPECCTRA

     The SPECCTRA product line, introduced in 1990, is an advanced place and
route system for the design of high   density, fast circuit PCBs.  Since its
introduction, CCT has released new versions of its SPECCTRA product line
approximately once each year. SPECCTRA products are offered in the form of three
base products: AutoRoute, EditRoute, and AutoPlace.  Customers can choose the
combination of base products and options to fit their design needs.

     .    AutoRoute.  AutoRoute provides automatic routing of high density
          multi-layer PCBs and achieves 100% completion on most designs.  An
          option is provided for routing PCBs with fast circuits that includes
          features to control crosstalk, manage interconnect timing and route
          fast circuit signals such as differential pairs and shielded nets.  A
          design for manufacturability option provides automatic wire spreading
          to improve yield and automatic test point generation that assigns in-
          circuit test vias for each test signal.

                                       5
<PAGE>
 
     .    EditRoute.  EditRoute is a manual routing tool that provides designers
          with interactive control of the interconnect wires and vias.
          EditRoute is compatible with AutoRoute and uses many of the same
          algorithms.  For example, when new wire is added manually, EditRoute
          can automatically shove aside an entire bus of wires if needed to make
          room for the new wire.

     .    AutoPlace.  AutoPlace provides ShapeBased automatic placement of
          components on PCBs without the need to specify a grid.  Comprehensive
          floorplanning and autoclustering features support power and height
          constraints and also provide for the separation of analog and digital
          circuits.  AutoPlace is compatible with AutoRoute and also provides an
          extensive set of interactive placement features.

     IC Craftsman

     The IC Craftsman product line delivers place and route solutions for high
speed digital, analog and deep submicron integrated circuit designs.  IC
Craftsman is built upon the proven ShapeBased technology of SPECCTRA but is
enhanced to meet the needs of IC designers.  Fast circuit capabilities are
included in all IC Craftsman products to satisfy timing and control crosstalk.
CCT offers a base product, Inspector, and four additional premium models,
Apprentice, Journeyman, Master and Global Power/Router, that add additional
features.

     .    Inspector.  Inspector employs a Motif-based graphical user interface
          ("GUI") to check design rule compliance for many high speed digital
          and analog IC layout requirements.  Inspector checks for placement
          violations, clearance violations, timing violations and crosstalk
          violations.  Detected violations are displayed graphically and
          characterized textually in reports.

     .    Apprentice.  Apprentice contains all the capabilities found in
          Inspector, while adding a complete place and route editing
          environment.  Apprentice's ShapeBased wire editing supports wire push,
          shove, copy and move functions that improve the layout designer's
          productivity when compared to polygon layout editors.  During wire
          editing, the wire plowing feature automatically pushes existing routes
          aside and routes around layer obstructions.  Using the shove
          capability, the designer can quickly move a route that in turn will
          shove existing routes, even over pins, vias and other obstructions.

     .    Journeyman.  Journeyman adds ShapeBased autorouting to all of the
          capabilities of Apprentice.  It uses timing constraints derived from
          popular timing analysis tools to meet signal or path timing
          requirements.  Journeyman also includes the autorouting of variable
          width and spacing wires, and automatic design clean-up to remove
          unnecessary wire bends and vias to improve manufacturability.

     .    Master.  Master includes all of Journeyman's features and provides
          timing-controlled routing capabilities by enforcing interconnect delay
          rules and handles crosstalk by managing the spacing of parallel
          interconnects.  Master supports topology sensitive routing by
          providing functions for automatic differential pair routing, automatic
          net shielding and design rules by area.

     .    Global/Power Router.  The Global/Power router option is used primarily
          for top level chip assembly applications.  It provides control
          features to minimize wire length and congestion, dynamically changes
          layer direction to improve routability while observing wire width,
          spacing and other fast circuit rules, and routes pins to power trunks
          and power pins to input/output paths in ring configurations.

                                       6
<PAGE>
 
     UniCAD Products

     In addition to the SPECCTRA and IC Craftsman product lines offered by CCT,
CCT's wholly owned subsidiary, UniCAD, offers a broad range of electronic design
software tools incorporating design layout, manufacturing and analysis
capabilities.  UniCAD was founded in 1993 to commercialize and support certain
computer aided analysis and design tools that originated within the Bell-
Northern Research Laboratories, a wholly-owned subsidiary of Northern Telecom
Limited ("Nortel").  These tools have been developed over a period of several
years for the express purpose of supporting the large number of engineers,
designers and manufacturing needs within Nortel.  Nortel has licensed these
tools and the underlying technology supporting these tools to UniCAD and Nortel
is restricted from further licensing such technology to others for use in
computer aided analysis and design.  From this technology, UniCAD has developed
an integrated set of software tools that create a "virtual or computer
prototype" of a PCB design at various points in the design process.  CCT
believes that, as the percentage of high-speed PCB designs increases, the demand
for such integrated tool sets will also increase.  UniCAD is actively engaged in
continued development and support of products based on such underlying
technology for Nortel and other commercial customers.  UniCAD's products, among
others, include:

     .    UniSolve.  UniSolve provides computer-aided analysis and prediction
          tools in an environment that enables the transparent exploration of
          interdependencies among various types of electrical integrity and
          performance issues such as EMI, digital and analog signal integrity,
          RF/IF, thermal budgeting and component reliability.

     .    SyntheSolve.  SyntheSolve provides concurrent analysis and layout of
          high-speed PCBs and multi-chip modules ("MCMs").  SyntheSolve combines
          SPECCTRA's ShapeBased placement and routing with the UniSolve analysis
          tool suite.  This gives engineers a comprehensive tool for fast-
          circuit PCB design that reduces design iterations.  The impact of
          design decisions made in one area are automatically considered in
          other areas.  For example, while analyzing the effect that a placement
          change has on compliance with EMI constraints, SyntheSolve will
          automatically indicate changed thermal conditions and their effect on
          signal integrity.

     CCT's products are generally licensed to customers under perpetual, non-
exclusive license agreements. License agreements generally limit use of products
to a certain number of users at any one time. The selling prices for SPECCTRA
configurations range from $1,000 to $65,000, depending on options, capacity and
platform.  IC Craftsman prices range from $10,000 to $150,000.  UniCAD product
configurations generally range from $5,000 to $40,000, also depending on
options, capacity and platform.  In connection with the licensing of CCT's
products, most of CCT's customers also enter into maintenance agreements that
entitle them to technical support and periodic upgrades.  Service revenue from
such maintenance agreements and other training and consulting services provided
by CCT, accounted for approximately 39%, 33% and 28% of CCT's total revenue in
1994, 1995 and 1996, respectively.

     The SPECCTRA product line accounted for approximately 70%, 60% and 47% of
CCT's total revenue in  1994, 1995 and 1996, respectively.  The IC Craftsman
product line, introduced in early 1995, accounted for approximately 15% of CCT's
total revenue in 1995 and 38% of CCT's total revenue in 1996.  UniCAD products
have accounted for approximately 30%, 25% and 15% of CCT's total revenue in
1994, 1995 and 1996, respectively.

SALES AND MARKETING

     CCT markets its products worldwide through an extensive distribution
network.  Direct and third party sales channels are used for all products and
geographic areas.  The PCB CAD layout industry is fragmented into many small
segments serving specialized product niches, platforms and nationalities.  As a
result, CCT supplements its direct sales effort in the PCB segments by offering
its products through OEMs that bundle CCT's products with their CAD systems and
through distributors.  Since the IC market is composed of a well known group of
large companies, CCT's IC product line is sold primarily by CCT's direct sales
force.

                                       7
<PAGE>
 
     Sales Through OEMs and Distributors

     CCT has built a substantial network of OEMs and distributors.  CCT
maintains contractual relationships with its OEMs that provide for non-exclusive
licenses of CCT's products to the OEM and the payment of royalties and
maintenance fees to CCT.  These contractual relationships generally do not
require any set amount of purchases from an OEM.  CCT's major OEMs are Mentor
Graphics Corporation ("Mentor Graphics"), Accel Technologies, Inc. ("Accel") and
PADS Software, Inc. ("PADS").  CCT uses a network of distributors to supplement
its OEM activities outside the United States.

     A significant portion of CCT's domestic and international license and
service revenue comes from OEMs, which incorporate CCT's products into their CAD
systems, and distributors.  During 1994, 1995 and 1996, revenue from
distributors and OEMs accounted for approximately 50%, 36% and 28%,
respectively, of CCT's total revenue.  In particular, CCT has been, and to a
lesser extent continues to be, dependent upon one of its OEMs, Mentor Graphics.
During 1994, 1995  and 1996, sales of licenses to Mentor Graphics accounted for
approximately 20%, 11%, and 9%, respectively, of CCT's total revenue.

     CCT is dependent upon the continued viability and financial stability of
its distributors and OEMs.  Since CCT's products are used by highly skilled
professional engineers, an effective distributor or OEM representative must
possess sufficient technical, marketing and sales resources and must devote
these resources to a lengthy sales cycle, customer training and product service
and support.  In addition, CCT's distributors and OEMs generally offer products
of several different companies, including in some cases products that are
competitive with CCT's products.  Although CCT is not aware of any financial
difficulties being experienced by any of its major OEMs or distributors there
can be no assurance that Mentor Graphics or any of CCT's distributors or other
OEMs will be able to continue to market, service and support CCT's products
effectively, that economic conditions or industry demand will not adversely
affect these distributors and OEMs, that Mentor Graphics or any distributor or
other OEM that licenses CCT's products will choose to continue to license such
products or that any of these distributors and OEMs will not devote greater
resources to marketing and supporting other products of other companies.  The
current OEM agreement with Mentor Graphics will expire on March 31, 1998.  There
can be no assurance that CCT will reach a subsequent agreement with Mentor
Graphics.  Should CCT fail to reach a subsequent agreement with Mentor Graphics,
there can be no assurance that CCT would be successful in either securing
alternative channels of distribution for its products or expanding its own
direct sales to replace Mentor Graphics.  The loss of, or a significant
reduction in revenue from, Mentor Graphics or any of CCT's distributors or other
OEMs could have a material adverse effect on CCT's business, financial condition
and results of operations, at least to the extent such loss is not offset by a
corresponding increase in CCT's direct sales.

     Direct Sales

     CCT maintains domestic sales and support offices in Cupertino, California;
Nashua, New Hampshire; and Austin, Texas; as well as a telesales group operating
from its headquarters.  CCT also has sales support personnel located in
Massachusetts, Pennsylvania and Florida.  CCT's international sales and support
offices are located in Munich, Germany; Paris, France; Tokyo, Japan; and
Bracknell, United Kingdom.  As of December 31, 1996, CCT employed 21 sales
representatives, including field managers, and 19 application engineers.

     Over the past two years CCT has significantly increased its sales and
marketing personnel.  The increase in sales and marketing personnel was begun in
anticipation of the introduction of the IC Craftsman product line and was
continued in order to expand worldwide distribution, principally in Europe and
Japan.  While CCT anticipates an increase in revenues as the IC Craftsman
product line gains commercial acceptance and international sales increase, there
can be no assurance that CCT will continue to achieve revenue levels that
justify the increased expenses.  CCT has relatively little experience in direct
sales in the IC market.  There can be no assurance that expansion of CCT's
direct sales efforts will succeed or that such expansion will result in
increased sales.   Although the success of this direct channel has reduced CCT's
dependence on the OEM channel, there can be no assurance that the expansion of
this channel will not have an adverse effect on existing distributor and OEM
relationships.

                                       8
<PAGE>
 
     International Sales

     During 1994, 1995 and 1996, CCT derived 51%, 48% and 40%, respectively, of
its total revenue from the licensing and support of its software products
outside the United States.  CCT expects that international license and service
revenue will continue to account for a significant portion of its revenues in
the future and that CCT's continued growth and profitability will require
expansion of its sales in foreign markets.  Mentor Graphics, Marubeni Hytech
Corporation ("Marubeni") and Zuken, Inc. distribute CCT's products in Japan.
Mentor Graphics and a number of other companies distribute CCT's products
throughout Asia.  In Europe, CCT's PCB products are distributed through Mentor
Graphics, PADS, Accel and a number of other companies.

     CCT's international revenue involves a number of risks, including the
impact of possible recessionary environments in economies outside the United
States, longer receivables collection periods and greater difficulty in accounts
receivable collection, unexpected changes in regulatory requirements, reduced
protection for intellectual property rights in some countries, tariffs and other
trade barriers, foreign currency exchange rate fluctuations, difficulties in
staffing and managing foreign operations, the burdens of complying with a
variety of foreign laws, potentially adverse tax consequences and political and
economic instability.  There can be no assurance that the foregoing factors will
not have a material adverse effect on CCT's future international license and
service revenue, and, consequently, on CCT's business, financial condition and
results of operations.

     CCT has expanded its sales and support organizations in Europe and Asia,
which has resulted in an increase in sales and marketing expenses.  CCT intends
to further expand these organizations, resulting in additional increases in
sales and marketing expenses.  However, CCT expects the growth rate of such
expenses to be lower than in the past.  There can be no assurance that CCT will
be able to sustain or increase revenue derived from international licensing and
service.  Any failure to expand sales in foreign markets would have a material
adverse effect on CCT's business, financial condition and results of operations.

COMPETITION

     The EDA software industry is highly competitive and is characterized by
continued advances in technology.  CCT must continue to enhance its current
products and develop and introduce new products which address the rapidly
changing requirements of the marketplace.  CCT believes that a number of factors
will be necessary for its products to continue to achieve broad market
acceptance.  These factors include performance, price, interoperability with
existing systems and the customer's assessment of CCT's technical, managerial,
service and support expertise and capability.

     CCT faces intense competition in both the PCB and IC markets.  Certain of
CCT's competitors, including Mentor Graphics, also have OEM arrangements with
CCT and bundle the SPECCTRA product line with their own products.  There can be
no assurance that CCT's participation in the IC market will not be viewed
unfavorably by CCT's OEMs and have an adverse effect on SPECCTRA OEM sales.  CCT
also competes with the internal design groups of its existing and potential
customers, who may be reluctant to purchase products offered by independent
vendors.

     CCT expects that it will face increasing pricing pressures from its current
competitors and new market entrants.  There can be no assurance that CCT's
competitors will not engage in pricing practices that are detrimental to CCT.
In addition, CCT believes that the amount of design work done by the users of
CCT's products on Windows-based personal computers is increasing relative to
UNIX-based workstations.  This trend has led to a decrease in the average
selling prices of CCT's products.  If this trend continues, it may continue to
negatively impact CCT's average selling prices.  There can be no assurance that
such decreases in average selling price will be offset by an increase in the
volume of sales.

     Many of CCT's current and potential competitors have longer operating
histories, significantly greater financial, technical, product development and
marketing resources, greater name recognition and larger customer bases than
CCT.  There can be no assurance that CCT's competition will not be able to
develop products 

                                       9
<PAGE>
 
comparable or superior to those developed by CCT, adapt more quickly to new
technologies, evolving industry trends or customer requirements than CCT, or
devote greater resources to the development, promotion and sale of their
products than CCT. In addition, current competitors of CCT have established and
may establish cooperative relationships among themselves or with third parties
to increase the ability of their products to address the needs of CCT's existing
and prospective customers. Such alliances among competitors could present
increased competition to CCT. Moreover, the EDA industry has become increasingly
concentrated in recent years as the result of numerous mergers and acquisitions.
CCT expects that competition may increase as a result of this increased
concentration. There can be no assurance that CCT will be able to compete
successfully against current and future competitors or that competitive
pressures faced by CCT will not have a material adverse effect on its business,
financial condition and results of operations.

     In addition, the introduction or announcement by CCT or one or more of its
competitors of products embodying new technologies or features could render
CCT's existing products obsolete or unmarketable.  There can be no assurance
that the introduction or announcement of new product offerings by CCT or one or
more of its competitors will not cause customers to defer purchases of existing
Company products.  Such deferral of purchases could have a material adverse
effect on CCT's business, financial condition and results of operations.

PROPRIETARY RIGHTS

     CCT's success is heavily dependent upon its proprietary software
technology.  CCT does not currently have any patents and relies principally on
trade secret, copyright and trademark laws, nondisclosure and other contractual
agreements and technical measures to protect its technology, including its
ShapeBased technology. CCT generally enters into confidentiality and/or license
agreements with its employees, distributors and customers, and limits access to
and distribution of its software, documentation and other proprietary
information.  CCT's software is shipped with a software security lock which
limits software access to authorized users.  In addition, CCT does not license
or release its source code, except in connection with source code escrow
arrangements.  However, effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries.  There also can be no
assurance that the additional steps taken by CCT will prevent misappropriation
of its technology.  Any failure by or inability of CCT to protect its
proprietary technology could have a material adverse effect on CCT's business,
financial condition and results of operations.  Furthermore, such protections do
not preclude competitors from developing products with functionality or features
similar to CCT's products, and there can be no assurance that third parties will
not independently develop competing technologies that are substantially
equivalent or superior to CCT's technologies.  However, CCT believes that, due
to the rapid pace of innovation within the EDA industry, factors such as the
technological and creative skills of its personnel, new product developments,
frequent product enhancements, name recognition and reliable product maintenance
are more important to establishing and maintaining a technology leadership
position than are the various legal protections of its technology.

     CCT does not believe its products infringe the proprietary rights of any
third parties.  However, there can be no assurance that infringement claims will
not be asserted against CCT or its customers.  As the number of software
products in the industry increases and the functionality of these products
further overlaps, CCT believes that software developers may become increasingly
subject to infringement claims. Any such claims, with or without merit, can be
time consuming and expensive to defend and could adversely affect CCT's
business, financial condition and results of operations. Parties making claims
against CCT could secure substantial damages, as well as injunctive or other
equitable relief, which could effectively block CCT's ability to license its
products in the United States or abroad. Such a judgment could have a material
adverse effect on CCT's business, financial condition and results of operations.
If it appears necessary or desirable, CCT may seek licenses to intellectual
property that it is allegedly infringing. CCT is not currently seeking any such
license. There can be no assurance, however, that licenses could be obtained on
commercially reasonable terms, if at all, or that the terms of any offered
license would be acceptable to CCT. The failure to obtain the necessary licenses
or other rights could have a material adverse effect on CCT's business,
financial condition and results of operations. As the number of software
products in the industry increases and the functionality of these products
further overlaps, CCT believes that software developers may become increasingly
subject to infringement

                                       10
<PAGE>
 
claims. Any such claims, with or without merit, can be time consuming and
expensive to defend and could adversely affect CCT's business, financial
condition and results of operations.

EMPLOYEES

     As of December 31, 1996, CCT had a total of 168 regular employees,
including 70 in research and development, 63 in sales and marketing, 19 in
general and administrative functions and 16 in operations.  Of these employees,
119 were located in the United States, 34 in Canada, 9 in Europe and 6 in Japan.

     CCT's future depends in large part on the continued service of its key
technical personnel, in particular its founders, and its ability to continue to
attract and retain such personnel, many of whom are highly skilled.  The
competition for such personnel in the software industry in general, and the EDA
industry in particular, is intense, and there can be no assurance that CCT will
retain its key technical personnel or continue to attract such personnel in the
future.  There are only a limited number of qualified EDA engineers, and
competition for such individuals is especially intense.  CCT has at times
experienced and continues to experience difficulty in recruiting qualified
technical personnel.  Although such difficulties have not had a material impact
on CCT's business to date, there can be no assurance that such difficulties will
not do so in the future.  Generally, CCT's employees are not bound by employment
or noncompetition agreements or covered by key man life insurance policies.  In
addition, competitors may attempt to recruit CCT's key employees.  The loss of
any key technical, management or marketing personnel or the failure to recruit
such personnel successfully in the future could have a material adverse effect
on CCT's business, financial condition and results of operations.

MERGER WITH CADENCE DESIGN SYSTEMS, INC.

     General

     On October 28, 1996, CCT entered into an Agreement and Plan of Merger and
Reorganization (the "Reorganization Agreement") with Cadence Design Systems,
Inc., a Delaware corporation ("Cadence"), pursuant to which, upon fulfillment or
waiver of certain conditions, CCT will become a wholly owned subsidiary of
Cadence in a stock-for-stock merger that is expected to be tax free and
accounted for as a pooling of interests (the "Merger").  On January 24, 1997, at
a special meeting of the stockholders of the Company, the stockholders approved
and adopted the Reorganization Agreement and approved the Merger.  Upon
consummation of the proposed Merger, each outstanding share of Common Stock of
the Company will be converted into the right to receive eighty-five hundredths
(0.85) of a share of common stock of Cadence.  The Merger is subject to certain
conditions, including the expiration or termination of the waiting period
applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act").  There can be no assurance that such
conditions will be satisfied or waived and, accordingly, there can be no
assurance that the Merger will be consummated.  On January 3, 1997, CCT and
Cadence announced that they each had received requests for additional
information from the United States Federal Trade Commission (the "FTC") with
respect to the Merger.  The FTC action has the effect of extending the waiting
period under the HSR Act applicable to the Merger. Both Cadence and CCT have 
provided such additional information to the FTC and the FTC is continuing to 
evaluate the Merger. See "--Regulatory Matters," below. 

     The anticipated benefits of the Merger with Cadence will not be achieved
unless Cadence and CCT are successfully combined in an efficient and timely
manner.  Failure to promptly consummate the Merger could have a material adverse
effect on employee morale and focus, which could cause an interruption of, or a
loss of momentum in, the activities of CCT's business, which, in turn, could
have a material adverse effect on CCT's business, financial condition and
results of operations, at least in the near term.  Failure to promptly
consummate the Merger could also have a material adverse effect on the ability
of CCT to retain the key personnel who are critical to CCT's future operations
and could cause customers or potential customers to delay or cancel orders for
products as a result of uncertainty over the integration and support of CCT's
products, either of which could have a material adverse effect on CCT's
business, financial condition and results of operations. Also, pursuant to the
Reorganization Agreement, CCT has made certain covenants to Cadence regarding,
among other things, capital expenditures and the hiring of new employees. See
"--Conduct of Business" below. Consistent with these


                                       11
<PAGE>
 
covenants, CCT has delayed the hiring of a number of new employees and has
delayed certain capital expenditures required to enhance and upgrade its
operational and internal management systems. There can be no assurance that such
delays will not have a material adverse effect on CCT's business, financial
condition and results of operations.

     Conversion of CCT Securities

     Subject to the terms and conditions of the Reorganization Agreement, at the
Effective Time (as defined below), a wholly owned subsidiary of Cadence
("Cadence Merger Sub") will merge with and into CCT, the separate existence of
Cadence Merger Sub will cease and CCT will become a wholly owned subsidiary of
Cadence.  At the Effective Time, by virtue of the Merger and without any action
on the part of Cadence, Cadence Merger Sub, CCT or any holder of shares of CCT
Common Stock, the following will occur:

     .    Conversion of CCT Common Stock.  At the Effective Time, each share of
          CCT Common Stock then outstanding (except for any such shares held by
          CCT as treasury stock and any such shares held by Cadence or any
          subsidiary of Cadence or CCT) will be converted into the right to
          receive eighty-five hundredths (0.85) of a share of Cadence Common
          Stock (the "Exchange Ratio"), including, with respect to each whole
          share of Cadence Common Stock to be received, the right to receive one
          preferred share purchase right under Cadence's Rights Agreement dated
          as of February 9, 1996 (the "Rights Plan").

     .    CCT Stock Options.  At the Effective Time, at the election of Cadence,
          either (i) all rights with respect to CCT Common Stock under each
          option granted under CCT's 1989 Stock Option Plan, 1993 Equity
          Incentive Plan or 1995 Directors' Stock Option Plan or under the Stock
          Option Plan of UniCAD that has been assumed by CCT (each, a "CCT
          Option") then outstanding shall be converted into and become rights
          with respect to Cadence Common Stock, and Cadence shall assume each
          such CCT Option in accordance with the terms (as in effect as of
          October 28, 1996) of the Stock Option Plan under which it was issued
          and the stock option agreement by which it is evidenced, or (ii)
          Cadence shall replace each such outstanding CCT Option by issuing a
          substantially equivalent replacement stock option in substitution
          therefor (in either case with appropriate adjustments based upon the
          Exchange Ratio).  Cadence has agreed to file with the Securities and
          Exchange Commission (the "Commission") a Registration Statement on
          Form S-8 relating to the shares of Cadence Common Stock issuable with
          respect to the assumed CCT Options no later than five business days
          after the Effective Time.

     Non-Solicitation

     Pursuant to the Reorganization Agreement, CCT has agreed that it will not
directly or indirectly, and will not authorize or permit its subsidiaries,
officers, directors, employees, agents, attorneys, accountants, advisors and
representatives directly or indirectly to, take certain actions that may
encourage or facilitate an Acquisition Proposal (as defined below under "--
Option Agreements") unless, in addition to other conditions, the CCT Board of
Directors concludes in good faith (i) based upon the advice of its financial
advisor, that such Acquisition Proposal could reasonably be expected to result
in a transaction that is more favorable from a financial point of view to the
CCT stockholders than the Merger and (ii) after consultation with outside legal
counsel, that such action is required in order for the CCT Board of Directors to
comply with its fiduciary obligations to CCT's stockholders under applicable
law.

     Conduct of Business

     Pursuant to the Reorganization Agreement, CCT has made certain covenants
regarding the conduct of CCT's business during the period from the date of the
execution of the Reorganization Agreement through the Effective Time, including,
without limitation, covenants to:  (i) conduct its business and operations (a)
in the ordinary course and in accordance with past practices and (b) in
compliance with legal requirements and material contracts; (ii) use reasonable
efforts to preserve its business organization and the services of its current
officers 

                                       12
<PAGE>
 
and employees and maintain its relations and good will with suppliers,
customers, landlords, creditors, licensors, licensees, employees and other
persons; (iii) maintain insurance policies; (iv) provide all reasonable notices,
assurances and support required by any material contract relating to proprietary
assets; (v) comply with Cadence's reasonable directions with respect to
exercising any rights or remedies under certain material contracts; and (vi)
cause its officers to report regularly to Cadence concerning the status of the
business of CCT. In addition, CCT has agreed not to take or to agree to take
certain actions relating to (i) dividends or distributions; (ii) the sale or
issuance of securities; (iii) the amendment of stock option plans; (iv) the
amendment of charter documents; (v) the formation of subsidiaries or acquisition
of equity interests; (vi) capital expenditures; (vii) material contracts; (viii)
the acquisition, lease or license of or sale or disposal of assets; (ix) the
loaning of money; (x) the establishment or adoption of employee benefit plans;
(xi) the hiring of new employees and consultants; (xii) material changes in
accounting; (xiii) material tax elections; (xiv) commencement or settlement of
material legal proceedings; and (xv) material transactions.

     Conditions of the Merger

     The obligations of Cadence and Cadence Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by the Reorganization
Agreement are subject to the satisfaction of certain conditions relating to,
among other things (i) the accuracy of the representations and warranties of CCT
contained in the Reorganization Agreement; (ii) the performance by CCT of
covenants and obligations contained in the Reorganization Agreement; (iii) the
approval and adoption of the Reorganization Agreement and approval of the Merger
by the CCT stockholders (which condition was satisfied on January 24, 1997);
(iv) receipt of certain consents; (v) receipt of certain agreements, letters,
certificates, legal opinions and resignations (including letters relating to the
appropriateness of pooling-of-interests accounting treatment); (vi) continued
employment of certain employees of CCT; (vii) subject to certain exceptions, the
absence of any material adverse change in CCT's business; (viii) compliance with
U.S. Treasury regulations; (ix) the expiration or termination of the waiting
period applicable to the Merger under the HSR Act; (x) the listing of the
Cadence Common Stock to be issued in the Merger on the NYSE; (xi) the absence of
certain litigation or administrative actions or proceedings; and (xii) the
absence of restraining orders, injunctions and other legal impediments to the
Merger.
 
     The obligation of CCT to effect the Merger and otherwise consummate the
transactions contemplated by the Reorganization Agreement is subject to the
satisfaction of certain conditions relating to (i) the accuracy of the
representations and warranties of Cadence contained in the Reorganization
Agreement; (ii) the performance by Cadence of covenants and obligations
contained in the Reorganization Agreement; (iii) the receipt of legal opinions;
(iv) subject to certain exceptions, the absence of any material adverse change
in Cadence's business; (v) the expiration or termination of the waiting period
applicable to the Merger under the HSR Act; (vi) the listing of the Cadence
Common Stock to be issued in the Merger on the NYSE; and (vii) the absence of
restraining orders, injunctions and other legal impediments to the Merger.

     There can be no assurance that the conditions to Cadence's or CCT's
obligations will be satisfied or waived and, accordingly, there can be no
assurance that the Merger will be consummated.

     Regulatory Matters

     Under the HSR Act and the rules promulgated thereunder by the FTC, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the FTC and the Antitrust Division and
specified waiting period requirements have been satisfied.  Cadence and CCT
filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on December 5, 1996.  These filings commenced a 30-day
waiting period under the HSR Act.  Prior to the expiration of such period, the
FTC requested additional information and documentary material under the HSR Act
with respect to the Merger.  The FTC action has the effect of extending the
waiting period under the HSR Act applicable to the Merger.  Both Cadence and CCT
have provided such additional information to the FTC and the FTC is continuing 
to evaluate the Merger.

                                       13
<PAGE>
 
     The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger.  At any time before or
after the consummation of the Merger, the FTC, the Antitrust Division, state
attorneys general or others could take action under antitrust laws with respect
to the Merger, including seeking to enjoin consummation of the Merger, seeking
to cause the divestiture of significant assets of Cadence or CCT or their
subsidiaries or seeking to impose conditions on Cadence with respect to the
business operations of the combined companies.  In addition, the review of the
Merger by the FTC pursuant to the HSR Act may substantially delay or proscribe
consummation of the Merger.  There can be no assurance that a challenge to the
Merger on antitrust grounds will not be made, or if such challenge is made, that
Cadence would prevail or would not be required to terminate the Reorganization
Agreement, to divest certain assets, to license certain proprietary technology
to third parties or to accept certain conditions in order to consummate the
Merger.  Cadence does not have any obligation under the Reorganization Agreement
to (i) dispose or cause any of its subsidiaries to dispose of any assets, (ii)
discontinue or make any changes to its operations or proposed operations or to
the operations or proposed operations of any of its subsidiaries, or (iii) make
any commitment (to any governmental body or otherwise) regarding its future
operations, or the future operations of its subsidiaries, or the future
operations of CCT or its subsidiaries, even though the disposition of such
assets or the making of such change or commitment might facilitate the obtaining
of a required governmental authorization or might otherwise facilitate the
consummation of the Merger.

     Termination

     The Reorganization Agreement may be terminated prior to the Effective Time;
(i) by mutual written consent of Cadence and CCT; (ii) subject to certain
exceptions, by either Cadence or CCT if the Merger shall not have been
consummated by 5:00 p.m. (Pacific Time) on May 7, 1997; (iii) by either Cadence
or CCT in connection with certain legal or governmental actions having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; (iv) in certain circumstances and subject to certain limitations, by
Cadence following the material breach of any representation, warranty or
covenant of CCT contained in the Reorganization Agreement; or (v) in certain
circumstances and subject to certain limitations, by CCT following the material
breach of any representation, warranty or covenant of Cadence contained in the
Reorganization Agreement.

     Expenses

     Pursuant to the Reorganization Agreement, and with certain limited
exceptions, all fees and expenses incurred in connection with the Reorganization
Agreement and the transactions contemplated by the Reorganization Agreement
shall be paid by the party incurring such expenses, whether or not the Merger is
consummated.  See Item 7, "Management's Analysis and Discussion of Financial
Condition and Results of Operations."

     Effective Time of the Merger; Closing Date

     The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware or at such later time as
may be specified in the Certificate of Merger (the "Effective Time").  The
consummation of the transactions contemplated by the Reorganization Agreement
shall take place on a date to be designated by Cadence (the "Closing Date"),
which (subject to the satisfaction or waiver of all of the conditions to closing
set forth in the Reorganization Agreement) shall be no later than the fifteenth
business day after satisfaction of the latest to occur of the conditions related
to (i) expiration or termination of the waiting period applicable to the Merger
under the HSR Act and (ii) approval for listing on the NYSE of the shares of
Cadence Common Stock to be issued in the Merger.

     Voting Agreements

     Pursuant to Voting Agreements dated October 28, 1996 (the "Cadence Voting
Agreements"), David Chyan, a director and the Executive Vice President, Product
Development of CCT; John F. Cooper, the Chairman of the Board and Chief
Technical Officer of CCT; John R. Harding, a director and the President and
Chief 

                                       14
<PAGE>
 
Executive Officer of CCT; Robert D. Selvi, the Vice President and Chief
Financial Officer of CCT; and William J. Portelli, the Vice President, Marketing
of CCT (who collectively beneficially owned, in the aggregate, approximately
37.7% of the outstanding CCT Common Stock (the "Subject Shares") as of December
17, 1996 and are collectively referred to as the "Subject Stockholders") have
agreed that, prior to the earlier to occur of the valid termination of the
Reorganization Agreement or the Effective Time, they will vote their shares in
favor of the adoption and approval of the Reorganization Agreement and approval
of the Merger and against (i) any actions that would result in a breach of any
representation, warranty, covenant or obligation under the Reorganization
Agreement and (ii) certain transactions which are intended to, or could
reasonably be expected to, impede, interfere with, delay or adversely affect the
Merger or the other transactions contemplated by the Reorganization Agreement or
the Cadence Voting Agreements.
 
     The Cadence Voting Agreements also provide that in the event of an
Identified Termination (as defined under "--Option Agreements"), then, prior to
180 days following the date on which the Reorganization Agreement is validly
terminated, at any meeting of the stockholders of CCT, however called, and in
any written action by consent of stockholders of CCT, unless otherwise directed
in writing by Cadence, the Subject Stockholders will vote the Subject Shares (i)
against any Acquisition Proposal (as defined under "--Option Agreements") and
any related transaction or agreement and (ii) against any action which is
intended, or could reasonably be expected, to facilitate the consummation of any
Acquisition Transaction; and the Subject Stockholders will not enter into any
agreement or understanding with any third party to vote or give instructions in
any manner inconsistent with the foregoing.

     Pursuant to the Cadence Voting Agreements, the Subject Stockholders also
delivered to Cadence irrevocable proxies with respect to matters covered by the
Cadence Voting Agreements.  In addition, subject to certain exceptions, the
Subject Stockholders have agreed not to sell, transfer, dispose of, encumber or
otherwise reduce beneficial ownership of or risk relating to the Subject Shares
or any CCT Common Stock subsequently acquired by them until the Effective Time
or the valid termination of the Reorganization Agreement (except in the event of
an Identified Termination (as defined under "--Option Agreements"), in which
case the restrictions continue until 180 days following the date on which the
Reorganization Agreement is validly terminated).  The Subject Stockholders have
also agreed that they will not, directly or indirectly (i) solicit, initiate or
encourage the making or announcement of an Acquisition Proposal or take any
action that could reasonably be expected to lead to an Acquisition Proposal;
(ii) furnish any nonpublic information regarding CCT to any person in connection
with an actual or potential Acquisition Proposal; (iii) engage in discussions
with any person regarding an Acquisition Proposal; (iv) approve or recommend any
Acquisition Proposal; or (v) enter into any letter of intent or other similar
document or contract contemplating or relating to an Acquisition Proposal.  The
foregoing will not prevent a Subject Stockholder from acting in accordance with
the Subject Stockholder's fiduciary duties as a director or officer, provided
that the Subject Stockholder complies with certain provisions of the
Reorganization Agreement.

     Each Cadence Voting Agreement also provides that (i) each party thereto
will hold harmless and indemnify the other party thereto from and against any
damages which are incurred by such other party and that arise from any breach of
any representation, warranty, covenant or obligation of such party contained
therein and (ii) if the Merger is consummated, then, from and after the
Effective Time, Cadence will hold harmless and indemnify each Subject
Stockholder from and against any damages which are incurred by such stockholder
and that arise from any claim against such stockholder by any third party
asserting that such stockholder's entering into the Voting Agreement or the
grant by such stockholder of the voting rights set forth therein violates any
applicable legal requirement.

     Option Agreements

     Pursuant to Option Agreements dated as of November 2, 1996 between Cadence
and each of John F. Cooper and David Chyan (the "Option Agreements"), Messrs.
Cooper and Chyan have granted to Cadence options (the "Cadence Options") to
purchase for cash any or all of their shares of CCT Common Stock at a price of
$32.30 per share (subject to adjustment under the Reorganization Agreement).
Any or all of the Cadence Options are exerciseable at any time or from time to
time upon the occurrence of either of the following events 

                                       15
<PAGE>
 
(each an "Identified Termination"): (i) Cadence or CCT validly terminates the
Reorganization Agreement subsequent to the failure of CCT's stockholders to
adopt and approve the Reorganization Agreement and approve the Merger at the CCT
Special Meeting any time after (a) an Acquisition Proposal (as defined below)
has been made, submitted or announced and not Publicly Withdrawn (as defined
below) prior to the CCT Special Meeting or (b) the occurrence of a Triggering
Event (as defined below) (provided, if such Triggering Event is the result of an
Acquisition Proposal such proposal was not Publicly Withdrawn prior to the CCT
Special Meeting) or (ii) the Reorganization Agreement is validly terminated by
Cadence (at any time prior to the adoption and approval of the Reorganization
Agreement and the Merger by the stockholders of CCT) after the occurrence of a
Triggering Event. Pursuant to each Option Agreement, the Cadence Options will
terminate, to the extent not previously exercised, on the earliest of (i) the
date upon which the Effective Time occurs, (ii) 180 days after the occurrence of
an Identified Termination (subject to extension in the event a legal impediment
precludes exercise) or (iii) the date upon which the Reorganization Agreement is
validly terminated other than by virtue of an Identified Termination.

     A "Triggering Event" is deemed to have occurred if:  (i) the CCT Board of
Directors fails to recommend, or for any reason withdraws or amends or modifies
in a manner adverse to Cadence, its unanimous recommendation in favor of the
Merger or approval or adoption of the Reorganization Agreement; (ii) the CCT
Board of Directors approves, endorses or recommends any Acquisition Proposal;
(iii) CCT enters into any letter of intent or any similar document or any
contract relating to any Acquisition Proposal; (iv) CCT fails to hold the CCT
Special Meeting as promptly as practicable and in any event within 60 days after
the Registration Statement is declared effective; (v) a tender or exchange offer
relating to securities of CCT shall have been commenced and CCT shall not have
sent to its security holders, within ten (10) business days after the
commencement of such tender or exchange offer, a statement disclosing that CCT
recommends rejection of such tender or exchange offer; or (vi) an Acquisition
Proposal is publicly announced, and CCT (a) fails to issue a press release
announcing its opposition to such Acquisition Proposal or (b) otherwise fails to
actively oppose such Acquisition Proposal.

     An "Acquisition Proposal" is any offer or proposal (other than an offer or
proposal by Cadence) contemplating or otherwise relating to any transaction or
series of transactions involving:  (i) any merger, consolidation, share
exchange, business combination, issuance of securities, acquisition of
securities, tender offer, exchange offer or other similar transaction (a) in
which CCT is a constituent corporation; (b) in which an individual or entity or
"group" (as defined in the Exchange Act and the rules promulgated thereunder) of
individuals or entities directly or indirectly acquires CCT or more than 50% of
CCT's business or directly or indirectly acquires beneficial or record ownership
of securities representing more than 40% of the outstanding securities of any
class of voting securities of CCT, or (c) in which CCT issues securities
representing more than 40% of the outstanding securities of any class of voting
securities of CCT; or (ii) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 50% of the assets of CCT.  An
Acquisition Proposal shall be deemed to have been "Publicly Withdrawn" only if
(i) the party who made such Acquisition Proposal publicly announces the
withdrawal of such Acquisition Proposal; and (ii) there shall not have been any
public announcement, or any direct or indirect communication to any of the
stockholders of CCT, stating or suggesting the possibility that such Acquisition
Proposal might be resubmitted or that such party might make, submit or announce
any other Acquisition Proposal.

     Each Option Agreement also provides that (i) each party thereto will hold
harmless and indemnify the other party thereto from and against any damages
which are incurred by such other party and that arise from any breach of any
representation, warranty, covenant or obligation of such party contained therein
and (ii) if the Merger is consummated, then, from and after the Effective Time,
Cadence will hold harmless and indemnify Messrs. Cooper and Chyan from and
against any damages which are incurred by such stockholder and that arise from
any claim against such stockholder by any third party asserting that such
stockholder's entering into the Option Agreement or the grant by such
stockholder of the option set forth therein violates any applicable legal
requirement.

                                       16
<PAGE>
 
     Affiliate Agreements

     It is a condition to consummation of the Merger that each person who is
reasonably determined to be an "affiliate," as such term is defined in Rule 145
promulgated under the Act, of CCT execute an agreement that prohibits (i) the
sale, transfer or other disposition of Cadence Common Stock received by such
person in connection with the Merger unless:  (a) such sale, transfer or other
disposition is effected pursuant to an effective registration statement under
the Act; (b) such sale, transfer or other disposition is made in conformity with
the requirements of Rule 145 promulgated under the Act, as evidenced by a
broker's letter and a representation letter executed by such stockholder
(satisfactory in form and content to Cadence) stating that such requirements
have been met; (c) counsel reasonably satisfactory to Cadence shall have advised
Cadence in a written opinion letter (satisfactory in form and content to
Cadence), upon which Cadence may rely, that such sale, transfer or other
disposition will be exempt from registration under the Act or (d) an authorized
representative of the Commission shall have rendered written advice to such
stockholder to the effect that the Commission would take no action, or that the
staff of the Commission would not recommend that the Commission take action,
with respect to such sale, transfer or other disposition, and a copy of such
written advice and other related communications with the Commission are
delivered to Cadence and (ii) the sale, transfer or other disposition of CCT
Common Stock, Cadence Common Stock or options or other rights to purchase such
stock during the period commencing 30 days prior to the consummation of the
Merger through the date on which financial results covering at least 30 days'
combined operations of Cadence and CCT are published by Cadence, unless at such
time (a) such transfer is a bona fide gift (subject to certain limitations) of
CCT Common Stock to members of such person's immediate family and/or certain
non-profit charitable organization or (b) such sale, transfer or other
disposition does not exceed an aggregate of 1,500 shares of CCT Common Stock.
Each person deemed to be an affiliate of CCT has signed such an agreement.

     Employment Agreements

     Cadence has entered into employment agreements (each, an "Employment
Agreement" and collectively, the "Employment Agreements"), dated as of October
28, 1996, with certain key employees of CCT, including David Chyan, John R.
Harding, Robert D. Selvi and William J. Portelli.  All Employment Agreements
become effective upon the effectiveness of the Merger and provide for the full-
time employment of such persons for a period of time (the "Employment Period")
and with compensation as set forth in the individual agreements.

     Mr. Chyan's Employment Agreement specifies an Employment Period of three
years and salary of $158,400 per year.  Mr. Harding's Employment Agreement
specifies a Employment Period of one year, salary of $227,300 per year and a
target bonus of $160,400 for fiscal year 1997.  Mr. Selvi's Employment Agreement
specifies an Employment Period of two years, salary of $167,200 per year and a
minimum bonus of $23,950 for each quarter during which he is a full-time
employee at the end of such quarter.  Mr. Portelli's Employment Agreement
specifies an Employment Period of two years, salary of $165,300 per year (plus
any reasonable raise granted prior to the Merger) and a minimum bonus of $24,250
for each quarter during which he is a full-time employee at the end of such
quarter.  The Employment Agreements of Messrs. Selvi and Portelli also provide
for part-time employment for up to five hours per month for twelve months beyond
the period of full-time employment at a salary of approximately $417.00 per
month.

     If Cadence terminates an employee's Employment Agreement without cause (as
defined below) during the Employment Period, then Cadence will pay such employee
salary and other compensation (but not any bonuses or other cash compensation)
for the greater of six months or the remaining portion of such employee's
Employment Period.  If such employee is terminated by Cadence for Cause, Cadence
shall have no further obligations to pay any salary or other compensation to
such employee.

     Pursuant to the Employment Agreements, the employee's employment with
Cadence will be deemed to have been terminated for "Cause" if his employment is
terminated for:  (i) any gross misconduct or fraud on the part of such employee
in the performance of his employment; (ii) subject to certain exceptions, the
conviction of such employee of, or the entry by such employee of a guilty plea
with respect to, any felony; and (iii) subject to certain limitations, the
material breach by such employee of his employment agreement.  In the case of
Mr. 

                                       17
<PAGE>
 
Chyan, "Cause" also includes (i) any bad faith by Mr. Chyan in the performance
of his employment or (ii) Mr. Chyan's repeated failure to perform reasonable
duties assigned to him by Cadence despite the delivery to him of written notice
of such failure.

     Noncompetition Agreements

     Certain key employees of CCT, including John F. Cooper, David Chyan, John
R. Harding, Robert D. Selvi and William J. Portelli (the "Noncompete
Employees"), each have entered into a Noncompetition Agreement with Cadence and
CCT, dated as of October 28, 1996 (each, a "Noncompetition Agreement").  The
Noncompetition Agreements contain provisions restricting such employees, for a
specified period following the Effective Time (the "Restriction Period") (four
years for Messrs. Cooper and Chyan; two years for Mr. Harding and two years for
Mr. Portelli (subject to certain modifications); and one year for Mr. Selvi)
from (i) engaging in, (ii) owning a substantial interest or otherwise
participating in a business involving or (iii) providing any service, support,
product or technology to any person or entity involving or relating to, software
development in the areas of routing for PCBs, ICs or multichip modules.  In
addition, the Noncompetition Agreements restrict such employees from:  (i)
soliciting employees of CCT, Cadence or any subsidiary of Cadence to leave his
or her employment with such companies; or (ii) interfering or attempting to
interfere with any commercial relationship or prospective commercial
relationship of CCT, Cadence or any subsidiary of Cadence.  The Noncompetition
Agreement of Mr. Harding also provides for him to receive payments from of up to
approximately $25,000 per month during the final year of his Restriction Period,
subject to Cadence's right to terminate his Noncompetition Agreement and such
payments during such final year.

     Interests of Certain Persons in the Merger

     Certain members of CCT's management and Board of Directors may be deemed to
have certain interests in the Merger that are in addition to their interests as
stockholders of CCT generally.  See above under "--Employment Agreements," "--
Noncompetition Agreements," "--Voting Agreements" and "--Option Agreements."
Unvested stock options granted to James R. Fiebiger and Yoshikazu Hori under
CCT's 1995 Directors' Stock Option Plan become immediately exerciseable as of
the Effective Time.  See Item 12, "Security Ownership of Certain Beneficial
Owners and Management."  The existing employment agreements between CCT and each
of Messrs. Harding, Selvi and Portelli provide that the unvested stock options
granted to such individuals to acquire approximately 206,667, 5,500 and 3,000
shares of CCT Common Stock, respectively, become immediately exerciseable as of
the Effective Time.  Cadence has also agreed, subject to certain limitations, to
indemnify each person serving as an officer or director of CCT as of the date of
the Reorganization Agreement from and after the Effective Time for acts or
omissions occurring prior to the Effective Time as provided in CCT's bylaws and
indemnification agreements between such officers and directors and CCT.

ITEM 2.  PROPERTIES

     The Company's principal administrative, sales, marketing and research and
development facility occupies approximately 31,925 square feet for at a rental
rate of $50,647 per month increasing over the term of the lease to $51,349 per
month, triple net, in Cupertino, California pursuant to a lease which expires
June 30, 2000.  In addition, the Company leases and supports offices in Ottowa,
Canada; Chicago, Illinois; Nashua, New Hampshire; Austin, Texas; Munich,
Germany; Paris, France; Bracknell, United Kingdom; and Tokyo, Japan.  None of
these facilities are leased at a rental rate in excess of $6,000 per month or
are leased for terms longer than 40 months from the date hereof, except for the
facility in Ottowa, Canada which is leased at a rental rate of $11,825 per
month.  The Company believes that its existing facilities are adequate for its
current needs but that it may need to seek additional space in the future.  The
Company believes that suitable additional or alternative space will be available
in the future on commercially reasonable terms as needed.

                                       18
<PAGE>
 
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

     The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "CCTI." The following table lists the high and low closing prices
since the Company's Common Stock began trading on the Nasdaq National Market on
October 31, 1995.
<TABLE>
<CAPTION>
 
                                             HIGH       LOW
                                           --------   --------
<S>                                        <C>        <C>
       Fiscal 1995:
         Fourth Quarter (beginning         $15.8750   $10.7500
          October 31, 1995).............
       Fiscal 1996:
         First Quarter..................   $15.7500   $11.1875
         Second Quarter.................   $25.8750   $13.2500
         Third Quarter..................   $26.3750   $18.2500
         Fourth Quarter.................   $33.2500   $23.7500
</TABLE>

     There were approximately 106 holders of record of the Company's Common
Stock as of March 17, 1997.  This number does not separately count beneficial
owners of the Company's Common Stock who hold their Common Stock in street or
nominee name.  Beneficial owners of the Company's  Common Stock number at least
400.

DIVIDEND POLICY

     The Company has never declared or paid any cash dividends on its Common
Stock.  The Company currently anticipates that it will retain all future
earnings for use in its business and does not anticipate paying any cash
dividends in the foreseeable future.  The payment of any future dividends will
be at the discretion of the Company's Board of Directors and will depend upon,
among other things, future earnings, operations, capital requirements, the
general financial condition of the Company, general business conditions and
contractual restrictions on payment of dividends.  Pursuant to the
Reorganization Agreement, the Company has agreed not to pay dividends without
the consent of Cadence.  See Item 1, "Business--Merger with Cadence Design
Systems, Inc."

                                       19
<PAGE>
 
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Form 10-K.  The consolidated statement
of income data for each of the three years in the period ended December 31, 1996
and the consolidated balance sheet data at December 31, 1995 and 1996 are
derived from consolidated financial statements of the Company which have been
audited by Ernst & Young LLP, independent auditors, and are included elsewhere
in this Form 10-K.  The consolidated statement of income data for each of the
two years in the period ended December 31, 1993 and the consolidated balance
sheet data at December 31, 1993 and 1994 are derived from audited consolidated
financial statements which are not included in this Form 10-K.  The consolidated
balance sheet data at December 31, 1992 are derived from unaudited financial
statements.  See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
 
                                                       YEAR ENDED DECEMBER 31,
                                           -------------------------------------------------
                                            1992      1993       1994       1995       1996
                                           ------   -------    -------    -------    -------   
                                                  (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                        <C>      <C>        <C>        <C>        <C>
STATEMENT OF INCOME DATA:
Revenue:
     License............................   $3,629   $ 6,263    $ 9,525    $15,661    $27,234
     Service............................      348     1,031      6,020      7,781     10,371
                                           ------   -------    -------    -------    -------   
       Total revenue....................    3,977     7,294     15,545     23,442     37,605
                                           ------   -------    -------    -------    -------  
Costs and expenses:
     Costs of license revenue...........       88       259        851      1,157      2,015
     Cost of service revenue............       36        93        775        846        941
     Research and development...........    2,115     3,298      5,575      5,893      7,764
     Sales and marketing................      922     1,490      4,899     10,200     14,244
     General and administrative.........      362       488      1,908      3,526      5,662
     Write-offs related to investee                                                          
      company...........................       --        --        434        ---         -- 
                                           ------   -------    -------    -------    -------  
       Total costs and expenses.........    3,523     5,628     14,442     21,622     30,626
                                           ------   -------    -------    -------    -------  
Income from operations..................      454     1,666      1,103      1,820      6,979
Interest income.........................       20        16         14        231      1,112
Interest expense........................       --        (5)        (5)       (18)       (27)
Equity in losses of investee company....       --       (32)       (87)       ---         --
Other income (loss).....................       38        --        (22)       (38)       (77)
                                           ------   -------    -------    -------    -------  
Income before provision for income taxes      512     1,645      1,003      1,995      7,987
Provision for income taxes..............      162       603        359        666      2,715
                                           ------   -------    -------    -------    -------  
 
Net income..............................   $  350   $ 1,042    $   644    $ 1,329    $ 5,272
                                           ======   =======    =======    =======    =======   
Net income per share (1)................   $ 0.04   $  0.10    $  0.06    $  0.11    $  0.36
                                           ======   =======    =======    =======    =======   
Shares used in computing per share                                                           
 amounts (1)............................    9,792    10,135     10,989     12,272     14,503 
                                           ======   =======    =======    =======    =======   
 
<CAPTION> 
                                                              DECEMBER 31,
                                           -------------------------------------------------
                                            1992      1993       1994       1995       1996
                                           ------   -------    -------    -------    -------   
                                                             (IN THOUSANDS)
BALANCE SHEET DATA:
Cash, cash equivalents and short term      
 investments............................   $  331   $ 1,312    $ 2,468    $26,989    $32,846 
Working capital.........................      644     1,113      1,123     26,579     36,070
Total assets............................    2,459     4,987      8,357     37,489     52,172
Total stockholders' equity..............    1,297     2,295      2,947     29,414     40,491
---------
</TABLE>

(l) For an explanation of the determination of the number of shares used in
    computing per share amounts, see Note l of Notes to    Consolidated
    Financial Statements.

                                       20
<PAGE>
 
QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth certain unaudited quarterly financial data
for each quarter of 1995 and 1996 which has been restated to give retroactive 
effect to the acquisition by the Company of UniCAD on August 28, 1996, which 
has been accounted for using the pooling of interests method. See "Notes to 
Consolidated Financial Statements." Also shown is the quarterly financial data 
previously reported by the Company for the quarters prior to the pooling with 
UniCAD. 

     In the opinion of the Company's management, this unaudited information
has been prepared on the same basis as the audited consolidated financial
statements contained herein and includes all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the information set
forth therein. The operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
 
                                                                                 QUARTER ENDED
                                            ----------------------------------------------------------------------------------------
                                            MAR. 31,    JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                              1995        1995       1995        1995       1996       1996       1996        1996
                                            --------    --------   ---------   --------   --------   --------   ---------   --------
                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                         <C>         <C>        <C>         <C>        <C>        <C>        <C>         <C>
Total revenue:
 As restated for pooling..............        $ 4,764    $ 5,094     $ 6,162    $ 7,422    $ 7,997    $ 8,246     $ 9,437    $11,925
 As previously reported...............          3,222      3,656       4,843      5,997      6,440      6,981         ---        ---

Gross profit:
 As restated for pooling..............        $ 4,282    $ 4,652     $ 5,735    $ 6,769    $ 7,374    $ 7,647     $ 8,770    $10,858
 As previously reported...............          3,030      3,455       4,624      5,599      6,038      6,642         ---       ---

Income from operations: 
 As restated for pooling..............        $   503    $   273     $   475    $   573    $ 1,207    $ 1,454     $ 1,501    $ 2,818
 As previously reported...............             51          1         440        783      1,196      1,555         ---      ---  
                                             
Net income:        
 As restated for pooling..............        $   322    $   191     $   311    $   505    $   978    $ 1,106     $ 1,179    $ 2,009
 As previously reported...............             32         13         289        642        957      1,198         ---        ---
                                              =======    =======     =======    =======    =======    =======      ======     ======
Net income per share:
 As restated for pooling...............         $0.03      $0.01       $0.03      $0.04      $0.07      $0.08       $0.08      $0.13
 As previously reported................          0.00       0.00        0.03       0.05       0.07       0.09         ---       ---
                                              =======    =======     =======    =======    =======    =======     =======    ======

Shares used in per share computation:
 As restated for pooling...............        11,755     11,931      11,991     13,438     14,214     14,345      14,698     14,756
 As previously reported................        11,383     11,559      11,513     12,961     13,759     13,894         ---        ---
                                              =======    =======     =======    =======    =======    =======     =======    =======
</TABLE>


                                       21
<PAGE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

     Except for the historical information contained herein, the matters
discussed in this Form 10-K are forward-looking statements that involve risks
and uncertainties, including the timely availability and acceptance of new
products, the impact of competitive products and pricing, the management of
growth and the other risks detailed herein, including, without limitation, the
risk described in Item 1, "Business," and this Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations."  The actual
results that the Company achieves may differ materially from any forward-looking
statements due to such risks and uncertainties.

OVERVIEW

     CCT develops, markets and supports software tools that help designers route
the physical wiring interconnections within high performance PCBs and ICs.  CCT
was founded in 1989 and licensed its first product, SPECCTRA, for the PCB market
in December 1989.  CCT has subsequently developed and released several new
versions of the product.  As of December 31, 1996, SPECCTRA products were
available on a broad number of operating system platforms with several available
option packages.  In 1995, CCT began licensing of its IC Craftsman procust line
for the IC market.  In addition, CCT's recently acquired subsidiary, UniCAD is
engaged in the business of developing, marketing and supporting a broad range of
electronic design software tools incorporating design layout, manufacturing and
analysis capabilities.  UniCAD began its business in 1994.  The SPECCTRA product
line accounted for approximately 70%, 60% and 47% of CCT's total revenue in
1994, 1995 and 1996, respectively.  The IC Craftsman product line, introduced in
early 1995, accounted for approximately 15% of CCT's total revenue in 1995 and
38% of CCT's total revenue in 1996.  UniCAD products have accounted for
approximately 30%, 25% and 15% of CCT's total revenue in 1994, 1995 and 1996,
respectively.

     Revenue consists primarily of fees for licenses of CCT's software products,
maintenance and customer support.  CCT recognizes revenue from software licenses
after shipment of the products, fulfillment of acceptance terms, if any, the
absence of significant outstanding contractual obligations and collection of
monies owed is probable.  After delivering the software, CCT determines the
significance of remaining contractual obligations, if any, based on an estimate
of the costs and difficulty to fulfill the obligations in comparison to the
overall contract.  When CCT receives payment prior to shipment and fulfillment
of significant vendor obligations, such payments are recorded as deferred
revenue and are recognized as revenue upon shipment and fulfillment of
significant vendor obligations.

     CCT also derives service revenue primarily from maintenance agreements that
provide customers access to product enhancements and customer support.  In
particular, a significant proportion of CCT's service revenue is earned by
UniCAD.  Most of CCT's customers have purchased annual maintenance contracts on
initial licenses and have renewed such contracts upon their expiration.
Maintenance revenue is deferred and recognized ratably over the term of the
maintenance agreement, which is typically one year.  Revenue from customer
training, support and other services is recognized as the service is performed.

     Recently, CCT has significantly increased its research and development and
sales and marketing personnel.  The increase in research and development
personnel was primarily to support the development of the IC Craftsman product
line.  The increase in sales and marketing personnel was begun in anticipation
of the introduction of the IC Craftsman product line and was continued in order
to expand worldwide distribution, principally in Europe and Japan.  While CCT
anticipates an increase in revenues as the IC Craftsman product line gains
further commercial acceptance and international sales increase, there can be no
assurance that CCT will achieve revenue levels that justify the increased
expenses.

     CCT's revenues and results of operations are affected by seasonal trends
that may include higher revenues in CCT's second and fourth fiscal quarters and
lower revenues in its first and third fiscal quarters as a result of many
customers' purchasing and budgetary practices, and lower revenues in the summer
months 

                                       22
<PAGE>
 
(particularly in Europe) when many businesses make fewer purchases. CCT's
expense levels are based, in part, on its expectations as to future revenue. If
revenue levels are below expectations due to delays associated with customers'
acceptance and evaluation procedures or for any other reason, operating results
are likely to be materially adversely affected. Net income, if any, may be
disproportionately affected by a reduction in revenue because only a small
portion of CCT's expenses varies with its revenue.

     Although CCT has recently experienced significant revenue growth, such
growth should not be considered to be indicative of future revenue growth, if
any, or of future operating results.  CCT's recent revenue growth is a result of
increased unit volume and new product introductions.  There can be no assurance
that CCT's revenue will grow or be sustained in future periods or that CCT will
remain profitable in any future period.  In addition, the rapid growth and
expansion CCT has experienced, including the acquisition of UniCAD, has placed
and continues to place a significant strain upon its management, and operational
and financial resources.  CCT has grown from 115 permanent full time employees
at December 31, 1994 to 168 permanent full time employees at December 31, 1996.
CCT currently has plans to continue to expand its staff.  However, CCT has
delayed the expansion of its staff in number of areas while the Merger with
Cadence is pending.  See Item 1, "Business--Merger with Cadence Design Systems,
Inc.--Conduct of Business."

     To accommodate this recent growth, CCT must continue to enhance its
operational and financial systems, procedures and controls, including its
general ledger accounting and other internal management systems, its customer
database and its transaction processing systems. There can be no assurance that
CCT will be able to continue to enhance these systems, procedures and controls
successfully. The failure of CCT to respond to and manage its growth and
changing business conditions, or to adapt its operational, management and
financial control systems to accommodate its growth, could have a material
adverse effect on CCT's business, financial condition and results of operations.

     The increase in the number of CCT's employees and CCT's market
diversification and product development activities have resulted in increased
responsibilities for CCT's management.  CCT's ability to operate successfully
will require such personnel to work together effectively.  Failure to do so
could have a material adverse effect upon CCT's business, financial condition
and results of operations.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain
statement of operations data of CCT expressed as a percentage of total revenue.
<TABLE>
<CAPTION>
 
 
 
                                          YEAR ENDED DECEMBER 31,
                                          -----------------------
                                           1994    1995    1996
                                          ------  ------  -------
<S>                                       <C>     <C>     <C>
Revenue:
   License..............................    61%     67%     72%
   Service..............................    39      33      28
                                           ---     ---     --- 
     Total revenue......................   100     100     100
                                           ---     ---     --- 
Cost and expenses:
   Cost of license revenue..............     5       4       5
   Cost of service revenue..............     5       4       3
   Research and development.............    36      25      21
   Sales and marketing..................    32      44      38
   General and administrative...........    12      15      15
                                           ---     ---     --- 
   Write-offs related to investee            3      --     ---
    company.............................
                                           ---     ---     --- 
     Total costs and expenses...........    93      92      81
                                           ---     ---     --- 
Income from operations..................     7       8      19
Other income (expense), net.............    (1)      1       2
                                           ---     ---     --- 
Income before provision for income taxes     6       9      21
Provision for income taxes..............     2       3       7
                                           ---     ---     --- 
Net income..............................     4%      6%     14
                                           ===     ===     ===
</TABLE>

                                       23
<PAGE>
 
     Revenue

     Total revenue increased by 51% from $15.5 million in 1994 to $23.4 million
in 1995 and increased by  61% to $37.6 in 1996.  The percentage of CCT's total
revenue attributable to license fees was 61% in 1994, 67% in 1995 and 72% 1996.
The increase in license revenue as a percentage of total revenue since 1994 is
primarily attributable to increased licensing of SPECCTRA and IC Craftsman.

     License revenue increased by 65% from $9.5 million in 1994 to $15.7 million
in 1995 and by 73% to $27.2 million in 1996.  These increases in license revenue
were primarily attributable to increased licensing of CCT's IC Craftsman
products, which were introduced in January 1995, and, to a lesser extent, were
attributable to increased licensing of CCT's SPECCTRA products.

     Service revenue primarily consists of maintenance revenue and revenue from
customer support and training.  Service revenue increased by 30% from $6.0
million in 1994 to $7.8 million in 1995 and increased by 33% to $10.4 million in
1996.  The increases in service revenue in each period were attributable to
increased revenue from maintenance contracts in connection with the continued
growth of the installed base of customers licensing CCT's products.  The
percentage of CCT's total revenue attributable to service revenue was 39% in
1994, 33% in 1995 and 28% in 1996.

     International license and service revenue accounted for $7.9 million, $11.3
million and $15.2 million and represented 51%, 48% and 40% of CCT's total
revenue in 1994, 1995 and 1996 respectively.  The increases in international
revenue are primarily attributable to increased licensing of CCT's products
internationally.  Because a majority of CCT's European revenue is denominated in
U.S. dollars, CCT has not engaged in European currency hedging activities there.
However, in Japan, where CCT's revenue is denominated in local currency, CCT has
in the past, and may again in the future, entered into foreign exchange
contracts to hedge certain of its foreign currency exposures.  Transaction gains
and losses from foreign exchange hedging activities have not been significant.
CCT expects that international license and service revenue will continue to
account for a significant portion of its revenue in the short term, and as a
result, foreign currency exposure may increase.

     In 1994, 1995 and 1996, sales to Mentor Graphics accounted for 20%, 11% and
9%, respectively, of CCT's total revenue.  No other direct customer, OEM or
distributor accounted for more than 10% of total revenue during any of these
historical periods.

     Cost of Revenue

     Cost of license revenue includes personnel and related operating costs
associated with order processing, documentation and other production costs
related to the licensing of CCT's products.  Cost of license revenue increased
by 36% from $851,000 in 1994 to $1.16 million in 1995 and increased by 72% to
$2.0 million in 1996.  The increases in cost of license revenue in each period
were primarily attributable to an increase in licenses of CCT's products.  Cost
of license revenue was 5%, 4% and 5% of total revenue for , 1994, 1995 and
1996, respectively.

     Cost of service revenue includes personnel and related costs allocated to
maintenance and other customer support activities.  Cost of service revenue
increased by 9% from $775,000 in 1994 to $846,000 in 1995 and increased by 11%
to $940,000 in 1996.  The increases in cost of service revenue in each period is
primarily attributable to an increase in service personnel hired to support the
growth of the installed base of customers licensing CCT's products.  Cost of
service revenue was 5%, 4%, and 3% of total revenue in 1994, 1995 and  1996,
respectively.

                                       24
<PAGE>
 
     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 5% from $5.6 million in 1994 to $5.9 million
in 1995 and increased by 23% to $7.8 million in 1996.  These expenses were 36%,
25% and 21% of total revenue in 1994, 1995 and  1996, respectively.  The
increase in expenses in each period resulted principally from growth in the
number of research and development personnel from 51 at the end of 1994 to 64
and 70 at the end of  1995 and 1996, respectively  At least for the short term,
CCT expects research and development expenses to increase in absolute dollars
but to stay flat or decrease slightly as a percentage of total revenue, to the
extent revenue increases.  However, there can be no assurance that there will be
a corresponding increase in revenue to justify the increase in expenditure.

     Sales and Marketing

     Sales and marketing expenses consist of salaries, commissions paid to
internal sales and marketing personnel and certain third parties, promotional
costs and related operating expenses.  Sales and marketing expenses increased by
108% from $4.9 million in 1994 to $10.2 million in 1995 and increased by 39% to
$14.2 million in 1996.  These expenses were 32%, 44%, and 38% of total revenue
in 1994, 1995 and 1996, respectively.  The increases in sales and marketing
expenses in each period consist principally of the cost of additional sales and
marketing personnel related to the expansion of CCT's direct sales capability in
the PCB market, to support CCT's entry into the IC market and to expand
worldwide distribution, principally in Europe and Japan, and increases in
variable sales compensation due to increased revenue.  The number of sales and
marketing personnel increased from 38 at the end of 1994 to 60 and 63 at the end
of 1995 and 1996, respectively.  At least for the short term, CCT expects sales
and marketing expenses to increase in absolute dollars, but to stay flat or
decrease slightly as a percentage of total revenue, to the extent revenue
increases.  This is due to the continuing focus on direct sales.  However, there
can be no assurance that there will be a corresponding increase in revenue to
justify the increase in expenditure.

     General and Administrative

     General and administrative expenses increased 84% from $1.9 million in 1994
to $3.5 million in 1995 and increased by 62% to  $5.7 million in 1996.  These
expenses were 12%, 15%, and 15% of total revenue in 1994, 1995 and 1996,
respectively.  The increases in general and administrative expenses from 1994 to
1995, were primarily attributable to the addition of new management and
administrative personnel.  The increase from  1995 to 1996 was primarily
attributable to two non- recurring items.  First, professional fees associated
with the settling of the Company's lawsuit with Cadence amounted to
approximately $350,000 in the third quarter of 1996.  Second, expenses
associated with the acquisition of UniCAD amounted to approximately $400,000 in
the same quarter.  The number of general and administrative personnel increased
from 15 at the end of 1994 to 18 and 19 at the end of 1995 and 1996,
respectively.  Excluding the non-recurring items described above and below,
CCT expects general and administrative expenses to increase in absolute dollars
but to stay flat or decrease slightly as a percentage of total revenue, to the
extent revenue increases.  However, there can be no assurance that there will be
a corresponding increase in revenue to justify the increase in expenditure.

     At December 31, 1996, the Company had incurred and capitalized non-
recurring transaction expenses in the amount of $861,989 in connection with the
Merger with Cadence. The Company has also incurred and accrued significant
additional transaction expenses since December 31, 1996. All of such expenses
will be paid by the Company whether or not the Merger is consummated. See Item
1, "Business--Merger with Cadence Design Systems, Inc.--Expenses."

     Write-Offs Related to Investee Company

     During the fourth quarter of 1994, CCT settled a legal dispute relating to
the termination of its relationship with its former European distributor.  CCT
had previously written off its investment and various accounts receivable from
the distributor.  The net cost of the settlement and the write-offs was
$434,000.

                                       25
<PAGE>
 
     Income Taxes

     The provision for income taxes as a percentage of pre-tax income was 35.8%,
33.4%, and 34% for 1994, 1995 and 1996, respectively.  These percentages are
less than the federal and state combined statutory rate of approximately 40% due
primarily to the utilization of research and development credits in all
aforementioned periods.

LIQUIDITY AND CAPITAL RESOURCES

     CCT has financed its operations to date with cash from operations and
through private and public sales of equity securities.  Private sales of equity
securities have yielded approximately $4.7 million including the sale of shares
of Common Stock to Synopsys in May 1996, the proceeds of which were
approximately $2.2 million.  In addition, in October 1995, CCT completed its
initial public offering, raising approximately $22.4 million.

     Net cash provided by operating activities was $2.2 million $1.9 million and
$1.8 million for 1994, 1995 and 1996, respectively.  From 1994 to 1995, the cash
generated resulted principally from net income, with increases in accounts
payable, accrued liabilities and deferred revenue more than offsetting increases
in receivables and prepayments.  Accrued liabilities increased by approximately
$1.5 million between December 31, 1994 and December 31, 1995 primarily due to
increases in foreign and domestic sales taxes and accruals of various operating
expenses as a result of increases in the level of operations.  Deferred revenue
increased by approximately $232,000 from December 31, 1994 to December 31, 1995
as a result of an increase in the number of maintenance contracts, the revenue
from which is deferred and recognized ratably over the term of the contract.
From 1995 to 1996, cash generated resulted primarily from net income of $5.3
million, with increases in receivables, prepayments and other assets more than
offsetting increases in accrued salary and employee benefits, other accrued
liabilities and deferred revenue.  Accounts receivable increased by $6.0 million
from December 31, 1995 to December 31, 1996 primarily as a result of significant
revenue billings that took place towards the end of the fourth quarter of 1996.
Deferred revenue increased by approximately $2.4 million from December 31, 1995
to December 31, 1996 as a result of an increase in the number of maintenance
contracts, the revenue from which is deferred and recognized ratably over the
term of the contract, plus the receipt of prepayments from certain OEMs and
distributors.

     Cash used in investing activities resulted primarily from additions to
property and equipment and purchases of available for sale securities.
Purchases of property and equipment, consisting primarily of computer equipment,
were $1.5 million, $1.9 million and $1.6 million in 1994, 1995 and 1996,
respectively. Capital spending was lower than expected during late 1996 due to
the delay of headcount growth during that period associated with the pending
Merger with Cadence.

     As of December 31, 1996, CCT had working capital of  $36.1 million
including cash, cash equivalents and short term investments of  $32.8 million.
As of December 31, 1996, CCT had no bank indebtedness and no significant long-
term commitments other than operating lease obligations.  CCT believes that
existing cash balances and funds generated from operations will provide CCT with
sufficient funds to finance its operations in the near future.  Thereafter, CCT
may require additional funds to support its working capital requirements and for
other purposes and may seek to raise such additional funds through public or
private equity financings or from other sources.  No assurance can be given that
additional financing will be available or that, if available, such financing
will be obtainable on terms favorable to CCT or its stockholders.

OTHER FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

     The EDA industry is characterized by extremely rapid technological change,
frequent new product introductions and enhancements, evolving industry standards
and rapidly changing customer requirements.  Customers in the EDA industry
require software products that allow them to minimize their time-to-market,
differentiate their products, maximize their engineering productivity and reduce
design time and costs.  CCT's future success will depend upon its ability to
continually enhance its current products and develop and introduce new products
that keep pace with technological advancements and address the increasingly
sophisticated needs of 

                                       26
<PAGE>
 
its customers. There can be no assurance that CCT 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 CCT will not experience difficulties that could delay or
prevent the successful development, introduction and marketing of these products
or product enhancements or that its new products and product enhancements will
adequately meet the requirements of the marketplace and achieve any significant
degree of market acceptance. Failure of CCT, for technological or other reasons,
to develop and introduce new products and product enhancements in a timely and
cost-effective manner would have a material adverse effect on CCT's business,
financial condition and results of operations. Any failure by CCT to anticipate
or to respond adequately to changing market conditions, or any significant
delays in product development or introduction, could cause customers to delay or
decide against purchases of CCT's products and would have a material adverse
effect on CCT's business, financial condition and results of operations.

     Software products as complex as those offered by CCT may contain defects or
failures when introduced or when new versions are released.  CCT has in the past
discovered software defects in certain of its products and may experience delays
or lost revenue correcting such defects in the future.  Although CCT has
corrected known material defects and has not experienced material adverse
effects resulting from any such defects to date, there can be no assurance that,
despite testing by CCT, errors will not be found in new products or releases
after commencement of commercial shipments.  Any such occurrence could result in
loss of market share or failure to achieve market acceptance and could have a
material adverse effect upon CCT's business, financial condition and results of
operations.

     CCT's future operating results are significantly dependent upon continued
enhancement and market penetration of its SPECCTRA and IC Craftsman product
lines, both of which are based on a single set of core software technologies.
There can be no assurance that the these product lines will continue to be
adequately enhanced to achieve continued market penetration or that CCT will be
successful in marketing any other new or enhanced products.  In particular, CCT
believes that its future operating results are significantly dependent upon
market acceptance in Japan of CCT's IC Craftsman products.  CCT believes that a
number of factors will be necessary for its IC Craftsman products to achieve,
and its SPECCTRA products to continue to achieve, broad market penetration.
These factors include performance, price, interoperability with existing systems
and the customer's assessment of CCT's technical, managerial, service and
support expertise and capability.  Failure to succeed with respect to any of
these factors could result in CCT's failing to achieve market acceptance of its
products, which would have a material adverse effect on CCT's business,
financial condition and results of operations.  A decline in demand for any of
CCT's products as a result of competition, technological change or other factors
would have a material adverse effect on CCT's business, financial condition and
results of operations.  In addition, factors adversely affecting the EDA market
generally could have a material adverse effect on CCT's business, financial
condition and results of operations.

     The sales cycle for CCT's products is relatively lengthy.  In particular,
orders for licenses of CCT's IC Craftsman products in a given quarter are
typically made by relatively fewer customers and in larger amounts as compared
to orders for licenses of CCT's SPECCTRA products.  Accordingly, because IC
Craftsman revenues have increased as a percentage of CCT's total revenues, such
licenses ordered by a single customer can account for a significant portion of a
quarter's revenues.  Because CCT's expenses are relatively fixed in the short
term, the loss or delay of such orders by a single customer or multiple
customers could have a material adverse effect on CCT's business, financial
condition and results of operations.

     In addition, CCT believes that its quarterly and annual operating results
have in the past and may in the future vary significantly depending on factors
such as variations in product development or operating expenditures, increased
competition, the purchasing patterns of its customers, the timing of customer
design and development projects, the timing of customer evaluation and
acceptance, the timing of expenditures by CCT in anticipation of product
releases or increased revenue, the timing of product enhancements and product
introductions by CCT and its competitors, market acceptance of new and enhanced
versions of CCT's products, the size, timing and structure of significant
licenses, changes in pricing policies of CCT and its competitors, variations in
the mix of products CCT licenses, delays in processing orders, the mix of direct
and indirect sales, changes in Company strategy, personnel changes and general
economic factors.  Any unfavorable changes in 

                                       27
<PAGE>
 
these or other factors could have a material adverse effect on CCT's business,
financial condition and results of operations.

     The anticipated benefits of the recently completed acquisition of UniCAD
will not be achieved unless UniCAD and CCT are successfully combined in an
efficient and timely manner.  It is possible that the process of combining the
two organizations, integrating their product offerings and coordinating their
research and development, production, administrative and sales and marketing
efforts, will cause an interruption of, or a loss of momentum in, the activities
of either or both of the companies' businesses, which could have a material
adverse effect on CCT's business, financial condition and results of operations,
at least in the near term.  The difficulties of integration may be increased by
the necessity of coordinating geographically separated organizations and
integrating personnel with disparate business backgrounds.  Furthermore, the
process of combining the companies could have a material adverse effect on
employee morale and on the ability of CCT to retain the key management,
technical and sales and marketing personnel who are critical to CCT's future
operations.  In addition, the consummation of the acquisition could cause
customers or potential customers to delay or cancel orders for products as a
result of uncertainty over the integration and support of CCT's products.  There
can be no assurances that CCT's current management will be capable of managing
the combined operations, or UniCAD's existing strategic relationships with its
customers, effectively.  In addition, it is possible that the business and
management changes brought by the acquisition may cause key employees to leave
UniCAD or cause CCT to terminate key employees of UniCAD.  Any failure by UniCAD
or CCT to retain and attract key employees could have a material adverse effect
on CCT's business, financial condition and results of operations.

                                       28
<PAGE>
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


     Quarterly supplementary data is included as part of Item 6, "Selected
Financial Data."  The Company's consolidated financial statements required by
this item are set forth below.

                        COOPER & CHYAN TECHNOLOGY, INC.
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                                               PAGE
                                                                                                                               ----
<S>                                                                                                                            <C>
Report of Ernst & Young LLP with respect to Cooper & Chyan Technology, Inc....................................................  30
Report of Deloitte & Touche with respect to UniCAD, Inc.......................................................................  31
Consolidated Balance Sheets as of December 31, 1995 and 1996..................................................................  32
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996........................................  33
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and 1996..........................  34
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996....................................  35
Notes to Consolidated Financial Statements....................................................................................  36

</TABLE>

                                       29
<PAGE>
 
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Cooper & Chyan Technology, Inc.

We have audited the accompanying consolidated balance sheets of Cooper & Chyan
Technology, Inc. as of December 31, 1995 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996. Our audits also included the
financial statement schedule listed in the index of Item 14(a).  These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. In August 1996, the Company merged with UniCAD,
Inc. in a transaction accounted for as a pooling of interest. We did not audit
the financial statements of UniCAD, Inc. for 1994 or 1995, which statements
reflect total assets constituting 7% for 1995 of the related consolidated
financial statements totals, and which reflect net income constituting 44% for
1994 and 27% for 1995 of the related consolidated financial statement totals.
The 1994 and 1995 statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to data included
for UniCAD, Inc., is based solely on the report of other auditors.

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 statements presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Cooper & Chyan Technology, Inc. at
December 31, 1995 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles. Also, in our
opinion, the related 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.


                              ERNST & YOUNG LLP

Palo Alto, California
January 21, 1997

                                       30
<PAGE>
 
                                AUDITOR'S REPORT

To the Board of Directors
UniCAD, Inc.

We have audited the consolidated balance sheets of UniCAD, Inc. and subsidiary
as of September 30, 1995 and 1994, and the related consolidated statements of
income, stockholders' equity, and cash flows for the years then ended (not
separately presented herein).  These financial statements are the responsibility
of the Company's management.  Our responsibility is to express an opinion on
these financial statements based upon our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform an audit to obtain
reasonable assurance 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 the companies as of September 1995
and 1994, and the results of their operations and their cash flows for the years
then ended in conformity with United States generally accepted accounting
principles.

                                                               Deloitte & Touche

Chartered Accountants
Ottawa, Canada
September 20, 1996

                                       31
<PAGE>
 
                        COOPER & CHYAN TECHNOLOGY, INC.

                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
 
                                                    December 31,
                                            ---------------------------
                                               1995            1996
                                            -----------    ------------ 
<S>                                        <C>             <C>
ASSETS
Current assets
        Cash and cash equivalents.......    $ 3,586,998     $ 4,605,682
        Short-term investments..........     23,402,236      28,240,549
        Accounts receivable (net of
         allowance of $329,945 and                                      
         $798,426 at December 31, 1995
         and 1996)......................      5,599,419      11,614,112 
        Income taxes receivable.........             --         375,188
        Deferred income taxes...........        373,525         653,432
        Prepaid expenses and other                                      
         current assets.................      1,133,917       2,134,348 
                                            -----------     -----------    
 
Total current assets....................     34,096,095      47,623,311
 
Property and equipment, net.............      3,008,270       3,230,149
Other assets............................        385,174       1,318,387
                                            -----------     -----------   
                                            $37,489,539     $52,171,847
                                            ===========     =========== 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Trade accounts payable..........        882,074         401,377
        Accrued salary and employee                                     
         benefits.......................      1,178,947       3,302,217 
        Other accrued liabilities.......      2,180,027       2,417,892
        Income taxes payable............        242,566             ---
        Deferred revenue................      3,033,293       5,431,926
                                            -----------     -----------    
 
Total current liabilities...............      7,516,907      11,553,412
 
Deferred income taxes...................        238,851          68,062
Other long term liabilities.............        319,459          59,790
Commitments
Stockholders' equity
        Common stock, $0.01 par value,
         30,000,000 shares authorized,
         11,940,798 issued and                  
         outstanding at December 31,
         1995; 13,110,655 issued and 
         outstanding at December
         31, 1996.......................        123,217         131,106 
 
        Additional paid-in capital......     25,732,758      31,423,832
        Notes receivable from                   
         stockholders...................        (39,010)            --- 
        Deferred compensation...........       (404,626)       (309,420)
        Retained earnings...............      4,001,983       9,245,065
                                            -----------     -----------    
 
Total stockholders' equity..............     29,414,322      40,490,583
                                            -----------     -----------    
 
                                            $37,489,539     $52,171,847
                                            ===========     ===========
</TABLE>

                            See accompanying notes.

                                       32
<PAGE>
 
                        COOPER & CHYAN TECHNOLOGY, INC.

                       CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
 
 
                                                   YEARS ENDED DECEMBER 31,
                                           -------------------------------------------
                                               1994            1995           1996
                                           -----------    ------------    ------------
<S>                                        <C>            <C>             <C>
Revenue:
       License..........................   $ 9,525,076     $15,660,859     $27,233,811
       Service..........................     6,020,059       7,780,879      10,371,103
                                           -----------     -----------     -----------
Total Revenue...........................    15,545,135      23,441,738      37,604,914
 
Costs and expenses:
          Cost of license revenue.......       850,677       1,157,101       2,015,443
          Cost of service revenue.......       774,805         845,946         940,496
          Research and development......     5,576,019       5,892,932       7,763,695
          Sales and marketing...........     4,898,583      10,200,510      14,243,608
          General and administrative....     1,907,826       3,525,581       5,662,234
          Write-offs related to                
           investee company.............       434,490              --              --
                                           -----------     -----------     -----------
Total costs and expenses................    14,442,400      21,622,070      30,625,476
                                           -----------     -----------     ----------- 
 
Income from operations..................     1,102,735       1,819,668       6,979,438
Interest income.........................        14,373         230,594       1,112,162
Interest expense........................        (5,134)        (17,925)        (26,765)
Equity in losses of investee company....       (87,100)             --              --
Other expense...........................       (22,336)        (37,663)        (77,474)
                                           -----------     -----------     -----------
 
Income before provision for income taxes     1,002,538       1,994,674       7,987,361
Provision for income taxes..............       359,333         665,787       2,715,702
                                           -----------     -----------     -----------
Net income..............................   $   643,205     $ 1,328,887     $ 5,271,659
                                           ===========     ===========     ===========
 
Net income per share....................   $      0.06     $      0.11     $      0.36
                                           ===========     ===========     ===========
 
Shares used in computing per share          
 amounts................................    10,989,405      12,271,502      14,503,199 
                                           ===========     ===========     ===========
 
</TABLE>

                            See accompanying notes.

                                       33
<PAGE>
 
                        COOPER & CHYAN TECHNOLOGY, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                    CONVERTIBLE                                               NOTES        
                                  PREFERRED STOCK         COMMON STOCK        ADDITIONAL    RECEIVABLE                         
                                  ---------------         ------------         PAID-IN         FROM       DEFERRED    RETAINED 
                                SHARES        AMOUNT      SHARES    AMOUNT     CAPITAL     STOCKHOLDERS COMPENSATION  EARNINGS 
                              -----------  ------------ ---------- --------- ------------ ------------- ------------ -------------
<S>                           <C>          <C>          <C>        <C>       <C>          <C>           <C>          <C>       
Balances at December 31, 1993...1,480,000   $   185,000  6,411,800 $  47,228          --         --          --    $ 2,063,026
Issuance of common stock
 (UniCAD inception).............                           372,157     3,722       3,778
Exercise of common
 stock options..................       --            --    537,392    56,888          --         --          --            --
Cash dividends ($0.045
 per preferred share)...........       --            --         --        --          --         --          --        (66,600)
Adjustment for
 unrealized gains
 (losses) on available-
 for-sale securities............       --            --         --        --          --         --          --         (3,895)
Currency translation
 adjustment.....................       --            --         --        --          --         --          --         15,098
Net income......................       --            --         --        --          --         --          --        643,205
                              -----------  -----------------------  -------- -----------   --------   ---------   -  ---------
Balances at December 31, 1994...1,480,000       185,000  7,321,349   107,838       3,778         --          --      2,650,834
Deferred compensation
 related to grant of
 stock options..................       --            --         --        --     580,100         --    (580,100)            --
Amortization of deferred
 compensation...................       --            --         --        --          --         --      66,197             --
Cancellation of deferred
 compensation...................       --            --         --        --    (109,277)        --     109,277             --
Issuance of Series A
 convertible preferred
 stock..........................  416,666     2,499,981         --        --          --         --          --             --
Reincorporation in the
 State of Delaware..............       --    (2,666,014)        --  (138,841)  2,804,855         --          --             --
Conversion of preferred
 stock to
 common stock..................(1,896,666)      (18,967) 1,896,666    18,967          --         --          --             --
Proceeds of initial
 public offering,...............                                                                 --          --             --
 net of issuance costs..........       --            --  2,273,000    22,730  22,411,004
Exercise of common
 stock options,
 net of notes
 receivable from
 stockholders...................       --            --    830,723   112,524      42,298    (39,010)         --             --
Adjustment for
 unrealized gains
 (losses) on
 available-for-sale
 securities.....................       --            --         --        --          --         --          --         19,179
Currency translation
 adjustment.....................       --            --         --        --          --         --          --          3,083
Net income......................       --            --         --        --          --         --          --      1,328,887
                              -----------  -----------------------  -------- -----------   --------   ---------   -  ---------
Balances at December 31, 1995...       --            -- 12,321,737   123,217  25,732,758    (39,010)   (404,626)     4,001,983
UniCAD activity for the
 three months ended
 December 31, 1995..............       --            --        139         1           2         --          --        (14,039)
Exercise of Common Stock
 options........................       --            --    539,339     5,394     572,911         --          --             --
Repayment of notes
 receivable from
 Shareholders...................       --            --         --        --          --     39,010          --             --
Shares issued under the ESPP
 Plan...........................       --            --     89,148       891     855,793         --          --             --
Shares issued to Synopsys
 for cash (net of offering
 costs of $60,263)..............       --            --    160,292     1,603   2,262,368         --          --             --
Adjustment for unrealized
 gains/(losses) on available
 for sale securities............       --            --         --        --          --         --          --         15,672
Tax benefit from exercise of
 stock options..................       --            --         --        --   2,000,000         --          --             --
Amortization of deferred
 compensation...................       --            --         --        --          --         --      95,206             --
Currency translation
 adjustment.....................       --            --         --        --          --         --          --        (30,210)
Net income......................       --            --         --        --          --         --          --       5,271,659
                              -----------  ------------  ---------- --------- -----------   --------   ---------     ----------
Balances at December 31, 1996...       __  $         --  13,110,655 $ 131,106 $31,423,832   $     --   $(309,420)    $9,245,065
                              ===========  ============  ========== ========= ===========   ========   =========     ==========
 
</TABLE>



<TABLE>
<CAPTION>
                              
                                             TOTAL     
                                          STOCKHOLDERS 
                                            EQUITY     
                                        --------------
<S>                                     <C> 
                                          
Balances at December 31, 1993             $ 2,295,254        
     Issuance of common stock                                     
     (UniCAD inception)                         7,500         
     Exercise of common                                           
      stock options                            56,888         
     Cash dividends ($0.045                                       
      per preferred share)                    (66,600)        
     Adjustment for                                           
      unrealized gains                                        
      (losses) on available-                                      
      for-sale securities                      (3,895)        
     Currency translation                                         
      adjustment                               15,098             
     Net income                               643,205         
                                          -----------         
Balances at December 31, 1994               2,947,450         
     Deferred compensation                                    
      related to grant of                                           
      stock options                                --         
     Amortization of deferred                               
      compensation                             66,197        
     Cancellation of deferred                               
      compensation                                 --        
     Issuance of Series A                                     
      convertible preferred                                 
      stock                                 2,499,981        
     Reincorporation in the                                 
      State of Delaware                            --        
     Conversion of preferred                                  
      stock to                                              
      common stock                                 --        
     Proceeds of initial                                      
      public offering,                                      
      net of issuance costs                22,433,734        
     Exercise of common                                       
      stock options,                                          
      net of notes                                            
      receivable from                                       
      stockholders                            115,812        
     Adjustment for                                           
      unrealized gains                                        
      (losses) on                                             
      available-for-sale                                    
      securities                               19,179        
     Currency translation                                   
      adjustment                                3,083      
     Net income                             1,328,887      
                                          -----------      
Balances at December 31, 1995              29,414,322        
UniCAD activity for the                                       
 three months ended                                         
 December 31, 1995                            (14,036)       
Exercise of Common Stock                                    
 options                                      578,305        
Repayment of notes                                            
 receivable from                                            
 Shareholders                                  39,010        
Shares issued under the ESPP                                
 Plan                                         856,684        
Shares issued to Synopsys                                     
 for cash (net of offering                                  
 costs of $60,263)                          2,263,971        
Adjustment for unrealized                                     
 gains/(losses) on available                                
 for sale securities                           15,672        
Tax benefit from exercise of                                
 stock options                              2,000,000        
Amortization of deferred                                    
 compensation                                  95,206        
Currency translation                                        
 adjustment                                   (30,210)     
Net income                                  5,271,659      
                                          -----------      
Balances at December 31, 1996             $40,490,583      
                                          ===========          
                                             
</TABLE> 
                            See accompanying notes.

                                       34  
                                             
<PAGE>
 
                        COOPER & CHYAN TECHNOLOGY, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                     INCREASE IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>


                                                                          DECEMBER 31,
                                                           -------------------------------------------
                                                                1994          1995            1996
                                                           ------------   ------------    ------------
<S>                                                        <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $   643,205    $  1,328,887    $  5,271,659
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Depreciation and amortization...........................     667,703         978,295       1,471,958
  Equity in losses of investee company....................      87,100              --              --
  Write-off of investment in investee company.............      80,854              --              --
  Deferred income taxes  .................................    (251,772)       (237,497)       (450,696)
  Other...................................................      12,089           3,470          15,672
Changes in assets and liabilities:
  Accounts receivable.....................................  (1,297,456)     (2,280,428)     (6,014,693)
  Income taxes receivable.................................     (99,130)         99,130        (375,188)
  Prepaid expenses and other
   current assets.........................................     (23,999)       (843,943)     (1,000,431)
  Other assets............................................     (41,145)       (221,977)       (933,213)
  Trade accounts payable..................................     233,450         604,464        (480,697)
  Accrued salary and employee benefits....................     357,459         394,275       2,123,270
  Other accrued liabilities...............................     629,436       1,550,591         237,865
  Income taxes payable....................................    (400,068)        242,566        (242,566)
  Deferred revenue........................................   1,336,291         231,774       2,398,633
  Other long term liabilities.............................     313,819           5,640        (259,669)
Total adjustments.........................................   1,604,631         526,380      (3,509,754)
                                                           -----------    ------------    ------------
Net cash provided by operating activities.................   2,247,836       1,855,267       1,761,905
                                                           -----------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment........................  (1,456,013)     (1,902,232)     (1,598,632)
Purchase of available-for-sale securities.................    (784,046)    (23,478,433)    (31,778,494)
Proceeds from sale of available-for-sale
 securities...............................................     417,274         442,695      26,940,181
Acquisition of subsidiary, net of cash
 acquired.................................................    (133,063)             --              --
                                                           -----------    ------------    ------------
Net cash used in investing activities.....................  (1,955,848)    (24,937,970)     (6,436,945)
                                                           -----------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Payment on notes receivable from
 shareholders.............................................          --              --          39,010
Proceeds (repayment) bank credit facility.................     500,000        (500,000)             --
Proceeds from issuance of convertible
 preferred stock..........................................          --       2,499,981              --
Proceeds from issuance of common stock....................      64,388      22,549,545       3,698,963
Tax benefit from employee stock transactions..............          --              --       2,000,000
Dividends paid............................................     (66,600)             --              --
                                                           -----------    ------------    ------------
Net cash provided by financing activities.................     497,788      24,549,526       5,737,973
                                                           -----------    ------------    ------------

Net increase in cash and cash equivalents.................     789,776       1,466,823       1,062,933
Effect of exchange rates on foreign
 currency cash balances...................................      15,098           3,083         (30,210)
UniCAD activity for the three months ended
December 31, 1995.........................................          --              --         (14,039)
Cash and cash equivalents at beginning
 of period................................................   1,312,218       2,117,092       3,586,998
                                                           -----------    ------------    ------------
Cash and cash equivalents at end of period................ $ 2,117,092    $  3,586,998    $  4,605,682
                                                           ===========    ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for taxes..................... $ 1,261,534    $    531,068    $  1,676,101
                                                           ===========    ============    ============
</TABLE>
                            The accompanying notes.
                              

                                       35
<PAGE>
 
                        COOPER & CHYAN TECHNOLOGY, INC.
                              
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              
1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
                              
Organization and Basis of Presentation
                              
     Cooper & Chyan Technology, Inc. (the "Company") was incorporated in January
1989.  The Company develops, markets and supports software tools that help
designers route the interconnections among the electronic devices on high
performance printed circuit boards ("PCBs") and integrated circuits ("ICs").
                              
     As more fully described in Note 2, on August 28, 1996, the Company entered
into a business combination with UniCAD.  The business combination has been
accounted for as a pooling of interests and the historical consolidated
financial statements of the company for all years prior to the business
combination have been restated in the accompanying Consolidated Financial
Statements to include the financial positions, results of operations and cash
flows of UniCAD.              
                              
     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after the elimination of significant
intercompany transactions and balances.
                              
Cash and Cash Equivalents     
                              
     Cash and cash equivalents consist of cash on deposit with banks and money
market and debt instruments with original maturities of 90 days or less.

Concentration of Credit Risk and Major Customers

     The Company's major market is the electronic design automation ("EDA")
industry which is very volatile.  Any significant downturn in the EDA industry
could have a material affect on the Company's operating results.

     The Company's revenue consists principally of revenue based on three
distinct product lines, the SPECCTRA product line and the UniCAD product line
for the PCB market, and the IC Craftsman product line for the IC market.  In
1996, SPECCTRA product revenues accounted for 47% of total revenue, IC Craftsman
product revenue accounted for 38% of total revenue and UniCAD accounted for 15%
of total revenue.

     One customer accounted for approximately 20%, 11% and 9% of revenues for
the years ended December 31, 1994, 1995 and 1996, respectively.  The loss of, or
a significant reduction in revenue from, any of the Company's distributors or
OEMs could have a material adverse effect on the Company's business, financial
condition and results of operations, at least to the extent such loss is not
offset by a corresponding increase in the Company's direct sales.

     In 1996, 40% of the Company's revenue was earned overseas.  Overseas
operations entail a number of risks associated with exchange rate fluctuations,
longer receivables collection periods, the general economic situation of foreign
countries, reduced protection of intellectual property rights, tariffs and other
trade barriers.

     Financial instruments that potentially subject the Company to a
concentration of credit risk primarily consist of cash and cash equivalents,
short-term investments and trade receivables.  The Company's cash and cash
equivalents are on deposit with major financial institutions.

     The Company invests its excess cash balances in a variety of short term
municipal bond funds and money market funds.  The Company has not experienced
any material losses from any of these instruments.

                                       36
<PAGE>
 
     The Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral.  In the year ended December 31,
1996, the Company provided total bad debt provisions of $740,526.

Equity Investments

     The Company accounts for investments using the equity method when the
Company owns a 20% to 50% equity interest.  Under this method, the Company's
original investment is adjusted by its share of earnings or losses, net of any
dividends received.

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 amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.

Property and Equipment

     Property and equipment are stated at cost and depreciated over estimated
useful lives of three to seven years.

     Leasehold improvements are amortized using the straight-line method over
the shorter of the estimated useful lives of the assets or the remaining term of
the lease.

Net Income Per Share

     Net income per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins
and staff policy, such computations include all common and common equivalent
shares issued within 12 months of the Company's initial public offering in
October 1995 as if they were outstanding for all periods presented using the
treasury stock method.  Common equivalent shares consist of the incremental
common shares issuable upon the conversion of the convertible preferred stock
(using the if-converted method) and shares issuable upon the exercise of stock
options (using the treasury stock method).

Software Development Costs

     Under Statement of Financial Accounting Standards No. 86 ("SFAS 86"),
software development costs are capitalized beginning when a product's
technological feasibility has been established and ending when a product is
available for general release to customers.  Generally, the establishment of
technological feasibility of the Company's products and general release have
coincided.  As a result, the Company has not capitalized any software
development costs because any costs meeting the requirements of SFAS 86 have not
been significant.

Revenue Recognition

     Revenues primarily include revenue from software product shipments and
revenue from maintenance contracts.  The Company recognizes revenue from
software licenses after shipment of the products and fulfillment of acceptance
terms, if any, and when no significant contractual obligations remain
outstanding and collection of the resulting receivable is deemed probable.  When
the Company receives payment prior to shipment and fulfillment of significant
vendor obligations, such payments are recorded as deferred revenue. Revenue from
maintenance contracts is recognized ratably over the related contractual period,
generally 12 months.  Revenue from customer training, support and other services
is recognized as the service is performed.

                                       37
<PAGE>
 
Foreign Currency Translation

     The Company translates assets and liabilities of its foreign subsidiaries
into U.S. dollars at the rates of exchange in effect at the end of the period.
Income and expense items are translated on a quarterly basis at the average
rates of exchange prevailing during the quarter.  Gains and losses from this
translation are credited or charged to stockholders' equity.  Foreign currency
transaction gains and losses, which have been immaterial, are included in the
results of operations.

2. BUSINESS COMBINATIONS

     On August 28, 1996, the Company completed its acquisition of UniCAD, a
leading PCB CAD software developer and distributor. The Company exchanged an
aggregate of 460,735 shares of CCT common stock and options for all of the
outstanding capital stock and assumption of all of the outstanding stock options
of UniCAD, a privately held company.  The business combination was treated as a
pooling of interests for accounting purposes, and accordingly, the historical
financial statements of the Company have been restated as if the transaction
occurred at the beginning of the earliest period presented.  In connection with
the business combination, the Company incurred direct transaction costs of
approximately $400,000 which consist of fees for investment banking, legal and
accounting services and other related expenses incurred in conjunction with the
business combination.

     Prior to its merger with CCT, UniCAD reported on a fiscal year ending
September 30. In the accompanying consolidated financial statements and the
notes thereto, UniCAD's financial position and operating results as of and for
the years ended September 30, 1994 and 1995 were combined with CCT's financial
position and operating results as of and for the years ending December 31, 1994
and 1995 respectively. UniCAD's financial position and operating results for
1996, which were restated to a December 31, 1996 year end, were combined with
CCT's financial position and operating results as of and for the year ended
December 31, 1996. Accordingly, UniCAD's operating results for the three months
ended December 31, 1995 were omitted from the statement of operations. UniCAD's
revenue and net loss for that three month period were $1,300,977 and $11,407
respectively. Consolidated stockholders' equity has been reduced by $14,039,
which represents the UniCAD's net stockholders activity during that period.

The table below sets forth the combined net revenues and net income for the
periods indicated.
<TABLE>
<CAPTION>
 
                                                                                                    
                                                                           COMBINED        
                                                                         SUBSEQUENT TO                        
                                             CCT         UNICAD             MERGER            COMBINED  
                                         -----------   -----------       -------------       -----------
<S>                                      <C>           <C>               <C>                 <C>
     Year ended December 31, 1994                                                         
          Net revenues................   $10,832,256   $4,712,879         $        __        $15,545,135
          Net income..................       359,603      283,602                  __            643,205
     Year ended December 31, 1995 
          Net revenues................   $17,718,073   $5,723,665         $        __        $23,441,738
          Net income..................       975,433      353,454                  __          1,328,887
     Year ended December 31, 1996 
          Net revenues................   $16,297,210   $3,852,367         $17,455,337        $37,604,914
          Net income (loss)(1)........     1,762,885     (196,321)          3,705,096          5,271,660

</TABLE>
     --------------
     (1)  After the deduction of transaction costs of $400,000.

                                       38
<PAGE>
 
3. SHORT-TERM INVESTMENTS

     Management determines the appropriate classification of equity securities
at the time of purchase and reevaluates such designations as of each balance
sheet date.

     The Company has classified its municipal funds and money market securities
as available-for-sale. Available-for-sale securities are carried at fair value
with unrealized holding gains and losses being reported in stockholders' equity.
Realized gains and losses on available-for-sale securities are included in
interest income.

     The following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>


                                       GROSS UNREALIZED     GROSS UNREALIZED        ESTIMATED FAIR
                            COST            GAINS                LOSSES                 VALUE
                       -----------     ----------------     ---------------         --------------
<S>                    <C>             <C>                  <C>                     <C>
DECEMBER 31, 1995
Money Market           $ 1,412,238         $    --                $   --             $   l,412,238
Municipal Funds         22,047,716          19,179                    --                22,066,895
                       -----------         -------                ------             -------------
                       $23,459,954         $19,179                $   --             $  23,479,133
                       ===========         =======                ======             =============

DECEMBER 31, 1996
Money Market           $   890,196         $    --                $   --             $     890,196
Municipal Funds         28,209,594          30,955                    --                28,240,549
                       -----------         -------                ------             -------------
                       $29,099,790         $30,955                $   --             $  29,130,745
                       ===========         =======                ======             =============
</TABLE>

Of the $23,479,133 and $29,130,745, $76,897 and $890,196, respectively, have
been included in cash and cash equivalents in the accompanying balance sheets.


4. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:
<TABLE>
<CAPTION>
 
                                                   DECEMBER 31,
                                           --------------------------
                                               1995           1996
                                           -----------    -----------
<S>                                        <C>            <C>
Office and computer equipment...........   $ 3,552,048    $ 4,724,747
Furniture and fixtures..................       374,133        409,177
Purchased software......................       495,563        875,161
Leasehold improvements..................       378,511        389,801
                                           -----------    -----------
                                             4,800,254      6,398,886
 
Accumulated depreciation and                                           
 amortization...........................    (1,791,985)    (3,168,737) 
                                           -----------    -----------
                                           $ 3,008,270    $ 3,230,149
                                           ===========    ===========
</TABLE>

5. INVESTMENT IN EQUITY INVESTEE

     The Company held an investment of 32% in CAD Connection International, Inc.
("CCI"), a company based in Munich, Germany.  The Company accounted for the
investment using the equity method and because of net losses and write-offs, the
investment balance at December 31, 1994 was zero.  During 1994, the Company
wrote off $435,000 pertaining to its investment, related accounts receivable and
the settlement of a related legal dispute.  During the year ended December 31,
1994, the Company made sales of $164,592 to CCI.  The Company

                                       39
<PAGE>
 
made no sales to CCI in the years ended December 31, 1995 and 1996.  
 
6. ACCRUED LIABILITIES

Accrued liabilities consists of:
<TABLE> 
<CAPTION> 
                                              DECEMBER 31,
                                       -------------------------
                                           1995           1996
                                       ----------     ----------
<S>                                    <C>            <C> 
     Accrued Value Added Tax.......    $  411,231     $  544,322
     Other.........................     1,768,796      1,873,570
                                       ----------     ----------
                                       $2,180,027     $2,417,892
                                       ==========     ==========
 
</TABLE>

7. INCOME TAXES

     The components of the provisions for income taxes consist of the following:

<TABLE>
<CAPTION>
 
                                  YEARS ENDED DECEMBER 31,
                              ------------------------------------ 
                                 1994         1995         1996
                              ---------    ---------    ----------
<S>                           <C>          <C>          <C>
  Current:
      Federal..............   $ 581,467    $ 913,241    $2,528,606
      State................     112,708       65,373       613,520
      Foreign..............          --       16,870        24,272
                              ---------    ---------    ---------- 
                                694,175      995,484     3,166,398
 
  Deferred:
      Federal..............    (269,391)    (262,058)     (390,909)
      State................     (65,451)     (67,639)      (59,787)
                              ---------    ---------    ---------- 
                               (334,842)    (329,697)     (450,696)
                              ---------    ---------    ---------- 
                              $ 359,333    $ 665,787    $2,715,702
                              =========    =========    ==========
</TABLE>

                                       40
<PAGE>
 
     The provisions for income taxes differ from the amount computed by applying
the statutory federal income tax rate to income before income taxes.  The source
and tax effects of the differences are as follows:
<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,          
                                                      -------------------------------------- 
                                                          1994         1995          1996    
                                                      ----------    ----------    ---------- 
<S>                                                   <C>           <C>           <C>        
Income before provision for income taxes...........   $1,002,538    $1,994,674    $7,987,361 
                                                      ==========    ==========    ========== 
Income tax at statutory federal rate                                                                             
(34%, 34% and 35%).................................   $  340,863    $  698,136    $2,795,576 
State income tax, net of federal benefit...........       31,190        (1,473)      359,484
Research and development tax credits...............     (108,500)     (101,786)     (145,155) 
FSC benefit........................................          ---           ---      (142,020)
Foreign losses not benefited.......................          ---        24,783        21,821 
Other..............................................       95,780        46,127      (174,004)
                                                      ----------    ----------    ---------- 
                                                      $  359,333    $  665,787    $2,715,702 
                                                      ==========    ==========    ==========  
</TABLE>

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.  Significant components
of the Company's deferred tax assets and liabilities computed in accordance with
FAS 109 are as follows:
<TABLE>
<CAPTION>
 
                                                                  DECEMBER 31,            
                                                      ------------------------------------
                                                         1994         1995          1996  
                                                      ---------    ----------    ---------
<S>                                                   <C>          <C>           <C>      
Deferred tax assets:             
   Nondeductible reserves and accruals.............   $ 215,647     $  412,680   $ 724,633 
   Other -- net....................................      72,093            ---      34,583    
   Foreign investment tax credits..................      80,836        209,760     370,000
                                                      ---------     ----------   ---------
   Deferred tax assets.............................     368,576        622,440   1,129,216
   Less, valuation allowance.......................      77,449        209,760     370,000
                                                      ---------     ----------   ---------  
                                                        291,127        412,680     759,216
                                                       
Deferred tax liabilities:                                                                 
   Cash to accrual.................................    (145,375)     (102,400)    (100,640)
   Depreciation....................................    (110,448)     (170,585)     (68,296)
   Other -- net....................................     (55,057)       (5,021)      (4,910)
                                                      ---------     ---------    --------- 
Total deferred tax liabilities.....................    (310,880)     (278,006)    (173,846)
                                                      ---------     ---------    ---------  
Net deferred tax assets (liabilities)..............   $ (19,753)    $(134,674)   $ 585,370 
                                                      =========     =========    ========= 
</TABLE>

     The company's Canadian subsidiary has investment tax credits of
approximately $370,000 which expire in 2004 through 2006. A valuation allowance
has been provided to reduce the deferred tax assets to an amount management
believes is more likely than not to be realized. During 1996, the valuation
allowance was increased by $160,240 as a result of additional investment tax
credits being generated by the Canadian subsidiary.

8. PREFERRED STOCK

     In May 1995, the Company sold 250,000 shares of Series A preferred stock to
Mentor Graphics Corporation for $1,500,000 and 166,666 shares of Series A
preferred stock for $999,981 to Marubeni Hytech Corporation, a Japanese
corporation.

     In October 1995, the Company completed the initial public offering of its
common stock.  In connection with this offering, all outstanding shares of
Series A convertible preferred stock were automatically converted 

                                       41
<PAGE>
 
into common stock. At December 31, 1996, the Company is authorized to issue
5,000,000 shares of undesignated preferred stock.

9. EQUITY PLANS

Stock Option Plans

     In 1989, the Company adopted the 1989 Stock Option Plan (the "1989 Plan")
which provides for the issuance of up to 2,000,000 shares of the Company's
common stock.  Options may be granted under the 1989 Plan to employees, officers
and directors of the Company.  In 1993, the Company adopted the 1993 Equity
Incentive Plan (the "1993 Plan") which provides for the issuance of up to
2,200,000 shares of the Company's common stock.  The 1993 Plan authorizes the
award of options, stock bonuses and opportunities to purchase restricted stock.
The 1989 Plan was terminated upon the adoption of the 1993 Plan.  Incentive
stock options may be granted at a price not less than the fair market value of
the stock (110% of the fair market value for options granted to stockholders
owning 10% or more of the voting stock) at the date of the grant.  Restricted
stock may be granted at not less than 85% of the fair market value of the common
stock at the date of grant.  Options expire ten years from the date of grant
(five years for options issued to owners of 10% or more of the voting stock) and
vest over a five-year period.

     In August 1995, the Company's board of directors authorized an increase in
the number of shares available for grant under the 1993 Plan by 2,000,000
shares.  In addition, the Company's board of directors adopted the 1995
Directors Stock Option Plan which authorized the issuance of 150,000 shares.
This Plan provides for each outside director to be granted an option to purchase
20,000 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 5,000 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 4 years. Through December 31, 1996, 50,000 shares have
been granted under this plan.


     Incentive and nonqualified stock option activity under the above-mentioned
Plans is as follows:
<TABLE>
<CAPTION>
                                                                    SHARES UNDER OUTSTANDING OPTIONS
                                                  SHARES AVAILABLE  --------------------------------
                                                     FOR GRANT        SHARES               PRICE
                                                  ----------------  ---------         -------------
<S>                                               <C>               <C>               <C>
  Balance at December 31, 1993....................     435,080      1,581,400          $0.01-$ 0.26
     Additional shares authorized for grant.......   1,376,682             --
     Options granted..............................  (1,056,962)     1,056,962          $ 0.01-$1.25
     Options exercised............................          --       (537,392)         $ 0.01-$0.26
     Options canceled.............................      14,808        (14,808)             $0.24
                                                    ----------      ---------          ------------
  Balance at December 31, 1994....................     769,608      2,086,162          $0.01-$ 1.25
     Additional shares authorized for grant.......   2,243,285             --
     Options granted..............................  (1,266,459)     1,266,459          $0.01-$14.00
     Options exercised............................          --       (822,838)         $0.01-$ 1.25
     Options canceled.............................     261,521       (261,521)         $0.01-$ 4.50
                                                    ----------      ---------          ------------
  Balance at December 31, 1995....................   2,007,955      2,268,262          $0.01-$14.00
     Options granted..............................    (845,016)       845,016          $0.03-$31.50
     Options exercised............................          --       (541,597)         $0.03-$ 7.20
     Options canceled.............................     157,531       (159,760)         $0.13-$ 7.20
                                                    ----------      ---------          ------------
  Balance at December 31, 1996....................   1,320,470      2,411,921          $0.03-$31.50
                                                    ==========      =========          ============
</TABLE>
 
    At December 31, 1996, options to acquire 416,762 shares were exerciseable
(December 31, 1995, 333,016).
 

                                       42
<PAGE>
 
    The following table summarizes information about fixed options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
                                  Options Outstanding                                         Options Exerciseable
----------------------------------------------------------------------------------  ----------------------------------------------

                             Number         Weighted Average    Weighted Average
              Range of     Outstanding         Remaining           Exercise              Number        Weighted
              Exercise      December 31,
               Prices         1996          Contractual Life        Price             Exerciseable      Average
<S>           <C>          <C>              <C>                 <C>                   <C>              <C>
 $   0.03 -    $ 1.25       859,168               7.37              $ 0.70                  252,380     $       0.47
 $   1.38 -    $ 5.50       499,099               8.34              $ 2.37                  120,873     $       2.44
 $   6.50 -    $14.13       492,354               8.91              $10.86                   43,509     $       8.24
 $  15.25 -    $31.25       561,300               9.74              $25.70                        -     $          -
                        -----------      -------------              ------                ---------     ------------
 $   0.03 -    $31.25     2,411,921               8.44              $ 8.93                  416,762     $       1.86
                        -----------      -------------              ------                ---------     ------------
</TABLE>

Employee Stock Purchase Plan

     In August 1995, the Company's board of directors adopted the 1995 Employee
Stock Purchase Plan (the "Purchase Plan") which authorizes the issuance of
150,000 shares of common stock.  Shares may be purchased under the Purchase Plan
at 85% of the lesser of the fair market value of the common stock on the date of
grant or the purchase date.  There were no shares issued under the Purchase Plan
during 1995 and 89,148 shares were issued under the Purchase Plan during 1996.

Deferred Compensation

     The Company has recorded deferred compensation expense of $580,100 for the
difference between the grant price and the deemed fair market value of certain
of the Company's common stock options granted in 1995.  In 1995, $109,277 of
deferred compensation was canceled due to employee terminations.  This amount is
being amortized over the vesting period of the individual options, generally
five years.  Compensation expense recognized in 1996 totaled $95,206.  At
December 31, 1996 deferred compensation totaled $309,420.

Stock-Based Compensation

     As permitted under FASB Statement No. 123, "Accounting for Stock-Based
Compensation' (FASB 123), the company has elected to follow Accounting
Principles Board Opinion N0. 25, "Accounting for Stock Issued to Employees" (APB
25) in accounting for stock-based awards to employees. Under APB 25, the Company
generally recognizes no compensation expense with respect to such awards.
 
     Pro forma information regarding net income and earnings per share is
required by FASB 123 for awards granted after December 31, 1994 as if  the
Company had accounted for its stock-based awards to employees under the fair
value method of FASB 123. The fair value of the Company's stock-based awards to
employees was estimated using a Black-Scholes option pricing model. The Black-
Scholes option valuation model was developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. In addition, the Black-Scholes model requires the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock-based awards to employees have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock-based awards to employees. The fair value
of the Company's stock-based awards to employees was estimated assuming no
expected dividends and the following weighted-average assumptions:

                                       43
<PAGE>
 
<TABLE>
<CAPTION>
 
                                  OPTIONS       ESPP
                          ----------------   ----------- 
                          1995      1996     1995   1996
                          ----    --------   ----   ----
<S>                       <C>     <C>        <C>    <C>
Expected life (years)      3.8        3.8     0.5    0.5
Expected volatility       0.58       0.58     0.68   0.68
Risk-free interest rate   6.29%      6.09%    6.09%  5.23%
 
</TABLE>

     For pro forma purposes, the estimated fair value of the Company's stock-
based awards to employees is amortized over the options' vesting period (for
options) and the six month purchase period (for stock purchases under the ESPP).
The Company's pro forma information follows (in thousands except for earnings
per share information):
<TABLE>
<CAPTION>
 
                                              1995          1996
                                            ----------    ----------
 
<S>                          <C>           <C>           <C>
Net income                   As reported    $1,328,887    $5,271,660
                                            ==========    ==========
 
                             Pro forma      $1,086,482    $4,006,209
                                            ==========    ==========
 
Primary earnings per share   As reported    $     0.11    $     0.36
                                            ==========    ==========
 
                             Pro forma      $     0.09    $     0.27
                                            ==========    ==========
</TABLE>

     Because FASB 123 is applicable only to awards granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
approximately 1999.

     The weighted average fair value of options granted during 1996 was $22.01
per share.

     The weighted average fair value of the employees stock purchase rights
granted during 1996 was $26.32 per share.

10. COMMITMENTS

FACILITY LEASES

     The Company leases office facilities under noncancelable operating leases.
In addition to monthly rent, the Company is responsible for the payment of
certain operating costs.  Rent expense was approximately $439,615, $704,253 and
$1,053,963 for the years ended December 31, 1994, 1995 and 1996, respectively.

     Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
 
              YEAR ENDING
              DECEMBER 31
              -----------
<S>         <C> 
 1997.....    $  840,927
 1998.....       744,177
 1999.....       670,002
 2000.....       326,366
              ----------
              $2,581,472
              ==========
 
</TABLE>

                                       44
<PAGE>

11. EXPORT SALES

     The Company markets its products in the United States and in foreign
countries through its sales personnel and distributors.  The Company's export
sales are as follows:
<TABLE>
<CAPTION>
 
 
                            YEARS ENDED DECEMBER 31,
                    -----------------------------------------
                        1994           1995           1996
                    -----------   ------------   ------------
<S>                 <C>           <C>            <C>
     Europe......    $2,075,822    $ 3,952,658    $ 6,557,912
     Asia........     2,101,585      3,600,552      4,895,815
     Canada......     3,628,349      3,700,686      3,764,581
     Other.......       108,967         52,267            ---
                     ----------    -----------    -----------
         Total...    $7,914,723    $11,306,163    $15,218,308
                     ==========    ===========    ===========
 
</TABLE>

12. EMPLOYEE BENEFIT PLAN

     The Company has a deferred contribution plan which covers substantially all
employees over the age of 21 completing at least one year of service.  Company
contributions to the Plan are determined annually at the discretion of the board
of directors and vest over six years of service.  Employee contributions are
fully vested at all times.  Employer contributions for 1994 were $285,000.  No
employer contributions were made in 1995 or 1996.

13. PURCHASE RIGHTS

     The Company has included purchase right provisions in certain of its OEM
agreements.  Generally, pursuant to these provisions, the Company must notify
such OEMs whenever the Company intends to accept certain third-party offers to
acquire an interest in the Company, whereupon the OEM has the opportunity to
enter a competing bid.

     In May 1996, in connection with certain marketing and development
agreements entered into by the Company with Synopsys, Inc. ("Synopsys"),
Synopsys purchased 1,206,542 shares of the Company's Common Stock from the
Company and certain of its stockholders. In connection with the marketing and
development agreements with, and the equity investment by, Synopsys, the
Company also granted Synopsys certain rights to maintain its percentage
ownership interest in the Company.

14. CADENCE MERGER

     On October 28, 1996, CCT entered into an Agreement and Plan of Merger and
Reorganization (the "Reorganization Agreement") with Cadence Design Systems,
Inc., a Delaware corporation and a leading supplier of business solutions for
the design of electronic components and systems ("Cadence"), pursuant to which,
upon fulfillment or waiver of certain conditions, CCT will become a wholly owned
subsidiary of Cadence in a stock-for-stock merger that is expected to be tax
free and accounted for as a pooling of interests (the "Merger").  On January 24,
1997, at a special meeting of the stockholders of the Company, the stockholders
approved and 

                                       45
<PAGE>
 
adopted the Reorganization Agreement and approved the Merger. Upon consummation
of the proposed Merger, each outstanding share of Common Stock of the Company
will be converted into the right to receive eighty-five hundredths (0.85) of a
share of common stock of Cadence. In accordance with the same conversion ratio,
each option to purchase shares of CCT common stock will be assumed by Cadence
and will be converted into an option to purchase that number of shares of
Cadence common stock. Based on the number of outstanding shares of CCT common
stock and CCT options on October 28, 1996, it is anticipated that Cadence will
issue approximately 11.0 million shares of Cadence common stock and assume
employee stock options to purchase approximately 1.9 million shares of Cadence
common stock.

     Pursuant to the Reorganization Agreement, the Company has agreed not to pay
dividends without the consent of Cadence.  The Merger is subject to certain
conditions, including the expiration or termination of the waiting period
applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act").  There can be no assurance that such
conditions will be satisfied or waived and, accordingly, there can be no
assurance that the Merger will be consummated.  On January 3, 1997, CCT and
Cadence announced that they each had received requests for additional
information from the United States Federal Trade Commission (the "FTC") with
respect to the Merger.  The FTC action has the effect of extending the waiting
period under the HSR Act applicable to the Merger.  Both Cadence and CCT have 
provided such additional information to the FTC and the FTC is continuing to 
evaluate the Merger. 






                                       46
<PAGE>
 
                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers and directors of the Company, and their ages as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
 
NAME                            AGE                 POSITION
----                            ---                 --------
<S>                             <C>   <C>
John R. Harding                  41     President, Chief Executive Officer and Director
John F. Cooper                   57     Chief Technical Officer and Chairman of the Board
David Chyan                      43     Executive Vice President, Product Development and Director
Robert D. Selvi                  40     Vice President and Chief Financial Officer
William J. Portelli              39     Vice President, Marketing
Mary I. Cooper                   55     Secretary and Director
James R. Fiebiger (1)(2)         55     Director
Yoshikazu Hori (1)(2)            59     Director

</TABLE>

-----------------
(1)  Member of the Audit Committee.
(2)  Member of the Compensation Committee.

     Mr. Harding has served as President and Chief Executive Officer of the
Company since he joined the Company in December 1994 and as a director since
September 1995.  Before joining the Company, Mr. Harding was with Zycad
Corporation ("Zycad"), an EDA company, as Executive Vice President, Worldwide
Sales and Marketing, from January 1992 to October 1994, as President, Protocol
Services Division from January 1990 to December 1991, and in various other
management positions from January 1984 to January 1990.  Prior to January 1984,
Mr. Harding was employed by TXL Corporation, an equipment financing company, and
by IBM.  Mr. Harding received a Bachelor of Arts in Chemistry and Economics from
Drew University in 1977.

     Mr. Cooper founded the Company together with Mr. Chyan in January 1989 and
serves the Company as Chairman of the Board and Chief Technical Officer.  From
January 1989 to December 1994, Mr. Cooper was President of the Company.  He has
served as a director since 1989.  Mr. Cooper was an Engineering Director at
Mentor Graphics from December 1983 to December 1988, where he initiated
development of the BOARDSTATION product line and, with Mr. Chyan, developed the
BOARDSTATION autorouter.  Mr. Cooper also worked for IBM in various engineering
positions from June 1961 to December 1983.  Mr. Cooper received a Bachelor of
Science in Electrical Engineering from Clarkson University in 1961.  Mr. Cooper
is the husband of Mary Cooper.

     Mr. Chyan, the Company's Executive Vice President, Product Development,
founded the Company together with Mr. Cooper in January 1989.  He has served as
a director since 1989.  Mr. Chyan was a member of the senior technical staff at
Mentor Graphics from October 1983 to December 1988, where he was employed in the
IC division as a developer of ASIC place and route products and then, with Mr.
Cooper, developed the BOARDSTATION autorouter.  From January 1979 to October
1983, Mr. Chyan worked for Xerox Corporation in various engineering positions.
Mr. Chyan received a Bachelor of Science in Electrical Engineering from National
Taiwan University in 1975 and a Master of Science in Computer Science from the
University of Southern California in 1979.

     Mr. Selvi joined the Company as Vice President and Chief Financial Officer
in April 1995.  Prior to joining the Company, Mr. Selvi was Senior Vice
President, Operations and Finance and Chief Financial Officer of Claris
Corporation, a software subsidiary of Apple Computer, Inc. ("Apple") from
February 1992 to April 1995.  Mr. Selvi was employed by Apple from October 1982
to February 1992, where he served in a variety of managerial capacities,
including, among others, Senior Manager of Corporate Development, Assistant
Treasurer and Manager of Financial Services.  Prior to that time, Mr. Selvi held
management positions with Diasonics, Inc., 

                                       47
<PAGE>
 
a medical equipment company, and Memorex Corporation. Mr. Selvi received a
Bachelor of Science in Finance in 1978 and a Master of Business Administration
in 1981, each from Santa Clara University.

     Mr. Portelli joined the Company in March 1995 as Vice President, Sales and
Marketing.  Prior to joining the Company, Mr. Portelli was with Zycad as Vice
President, Sales and Marketing from January 1992 to March 1995 serving
concurrently as Vice President and General Manager of the Rapid Prototyping
Services Division and the Protocol Services Division of Zycad from June 1993 to
March 1995, and in various technical and sales positions from October 1983 to
December 1991.  Prior to that time, Mr. Portelli worked for General Instruments
in various design and design engineering management positions.  Mr. Portelli
received a Bachelor of Science in Electrical Engineering from Rutgers University
in 1979.

     Ms. Cooper has served as the Company's Secretary since January 1989.  In
addition, form April 1995 to December 1995, Ms. Cooper served as the Company's
Vice President, Administration, and from January 1989 to April 1995, Ms. Cooper
served as the Company's Chief Financial Officer.  She has served as a director
of the Company since January 1989.  Ms. Cooper is the wife of John Cooper.

     Dr. Fiebiger has served as a director of the Company since September 1995.
Dr. Fiebiger has served as the Chairman of the Board and Managing Director of
Thunderbird Technology, Inc., a technology licensing company, since August 1994.
Previously, he served as a consultant to and President and Chief Operating
Officer of VLSI Logic, Inc., an integrated circuit design company.  Dr. Fiebiger
is also a director of Zycad and Mentor Graphics, both of which are EDA
companies.  Dr. Fiebiger received a Bachelor of Science, a Master of Science and
a Doctor of Science in Electrical Engineering in 1964, 1966 and 1970,
respectively, all from the University of California at Berkeley.

     Mr. Hori has served as a director of the Company since October 1995.  Mr.
Hori has been president of Cray Research Japan Ltd., a supercomputer
manufacturer, since 1987.  Upon the recent acquistion of Cray by Silicon
Graphics Inc., he became Chairman of Nihon Silicon Graphics-Cray K.K.  Previous
positions include senior managing director for Nippon Fairchild KK and board
member and general manager of sales and marketing of Molex Japan Inc.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

      Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock ("10% Stockholders"), to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership on a Form 3 and reports
of changes in ownership of Common Stock and other equity securities of the
Company on a Form 4 or Form 5.  Officers, directors and 10% Stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.  Based solely on its review of the copies of such forms
furnished to the Company and written representations from the executive officers
and directors, the Company believes that all Section 16(a) filing requirements
were met.

                                       48
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION

   The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities to the Company and its subsidiaries during
each of fiscal 1994, 1995 and 1996 to the Chief Executive Officer and the four
highest compensated executive officers other than the chief executive officer
(collectively the "Named Executive Officers").  This information includes the
dollar values of base salaries, bonus awards, the number of stock options
granted and certain other compensation, if any, whether paid or deferred.

                          SUMMARY COMPENSATION TABLE
<TABLE> 
<CAPTION> 

                                                                                  LONG-TERM              ALL OTHER                 
                                                                                COMPENSATION            COMPENSATION  
                                               ANNUAL COMPENSATION                 AWARDS                    ($)            
                                     ----------------------------------------   ------------   ----------------------------
                                                                 OTHER ANNUAL    SECURITIES        401(K)          LIFE   
NAME AND PRINCIPAL                                     BONUS     COMPENSATION    UNDERLYING    CONTRIBUTIONS     INSURANCE
POSITION (1)                   YEAR       SALARY ($)    ($)          ($)           OPTIONS          (2)         PREMIUMS (3)
----------------------------------------------------------------------------------------------------------------------------
<S>                            <C>    <C>             <C>        <C>             <C>          <C>               <C>
John R. Harding                1996        239,180    207,926        --                  --            --              --
President and                  1995        158,400    100,000        --                  --            --              --
Chief Executive Officer        1994         19,450         --        --             400,000            --              --
                                                                                                               
John F. Cooper                 1996        166,929    129,630        --                  --            --          68,060
Chief Technical Officer        1995        158,400    100,000        --                  --            --          69,830
                               1994        547,114         --        --                  --        14,838          84,045 
                                                                                                                          
David Chyan                    1996        174,849    129,630        --                  --            --          25,227
Executive Vice President,      1995        158,400    100,000        --                  --            --          25,902
Product Development            1994        596,152         --        --                  --        16,830          31,912 
                                                                                                               
Robert D. Selvi                1996        174,123    124,185        --              30,000            --              --
Vice President and             1995         93,750     33,335        --             150,000            --              --
Chief Financial Officer        1994             --         --        --                  --            --              -- 
                                                                                                               
William J. Portelli (4)        1996        207,342    129,815        --              30,000            --              --
Vice President,                1995        132,623     60,000        --             150,000            --              --
Marketing                      1994             --         --        --                  --            --              --
                                                
</TABLE>

--------------
(1)  Messrs. Harding, Selvi and Portelli, were hired by the Company in December
     1994, April 1995 and March 1995, respectively.

(2)  Amounts in this column represent matching contributions made by the Company
     to the executive officer's 401(k) account.  Amounts deferred pursuant to
     the Company's 401(k) plan at the election of an executive officer are
     included in such executive officer's salary.

(3)  Amounts in this column represent the dollar value of life insurance
     premiums paid by the Company for both term life insurance and split-dollar
     life insurance.  The full dollar value of the premiums paid by the Company
     is included for split-dollar life insurance.  The premiums reported paid on
     behalf of Mr. Cooper include premiums for a split-dollar last-survivor life
     insurance policy for both Mr. Cooper and Ms. Cooper.  Ms. Cooper is
     Secretary and a Director of the Company, and is Mr. Cooper's spouse.

(4)  Mr. Portelli's salary includes cost of living adjustments associated with
     his relocation to California of $9,000 and $34,500 for 1995 and 1996,
     respectively.

                                       49
<PAGE>
 
STOCK OPTIONS AND OPTION GRANTS IN FISCAL 1996

     The following table sets forth further information concerning option grants
during the fiscal year ended December 31, 1996 to each of the Named Executive
Officers.


                         OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
                                                                                   POTENTIAL REALIZABLE VALUE
                                                                                   AT ASSUMED ANNUAL RATES OF
                                                                                    STOCK PRICE APPRECIATION
                                             INDIVIDUAL GRANTS                        FOR OPTION TERM (1)
                              ------------------------------------------------     ---------------------------
                                          % of Total                                               
                                           Options                                                 
                              Options     Granted to    Exercise                                   
                              Granted    Employees in    Price      Expiration                     
  Name                          (#)      Fiscal Year     ($/Sh)        Date           5% ($)          10% ($)
  ----                          --       -----------     ------        ----           ------          -------
<S>                        <C>         <C>               <C>         <C>            <C>               <C>
John R. Harding                   --         --             --            --           --              --
John F. Cooper                    --         --             --            --           --              --
David Chyan                       --         --             --            --           --              --
Robert D. Selvi               30,000          4%         $13.375      04/12/06     $252,344          $639,489
William J. Portelli           30,000          4%         $13.375      04/12/06     $252,344          $639,489
</TABLE>
----------
(1)  The 5% and 10% assumed annual rates of compounded stock appreciation are
     mandated by the rules of the Securities and Exchange Commission.  There can
     be no assurance provided to any executive officer or any other holder of
     the Company's securities that the actual stock price appreciation over the
     option term will be at the assumed 5% and 10% levels or at any other
     defined level.  Unless the market price of the Common Stock appreciates
     over the option term, no value will be realized from the option grants made
     to the executive officers.


AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

     The following table sets forth information regarding the exercise of
options by each of the Named Executive Officers during fiscal 1996, including
the aggregate amount of gains on the date of exercise.  In addition, the table
includes the number of shares covered by both the exerciseable and
unexerciseable stock options as of December 31, 1996.



  AGGREGATE OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
                                                                                                         VALUE OF UNEXERCISED
                                                                    NUMBER OF UNEXERCISED                IN-THE-MONEY OPTIONS
                                                                     OPTIONS AT 12/31/96                  AT 12/31/96 ($)(2)
                         SHARES ACQUIRED    AGGREGATE VALUE   EXERCISEABLE       UNEXERCISEABLE   EXERCISEABLE       UNEXERCISEABLE
   NAME                  ON EXERCISE (#)    REALIZED ($)(1)   ---------------------------------   ----------------------------------
   ----
<S>                      <C>              <C>                 <C>               <C>               <C>               <C>
John R. Harding                  108,350       $2,448,022              31,650           240,000          $996,975         $7,560,000

John F. Cooper                        --               --                  --                --                --                 --

David Chyan                           --               --                  --                --                --                 --

Robert D. Selvi                   22,500       $  345,938              27,500           130,000          $859,375         $3,706,250

William J. Portelli               22,500       $  345,938              30,000           127,500          $937,500         $3,628,125
</TABLE>

-------------
(1)  Based on the fair market value of the shares on the exercise date less the
     exercise price paid for the shares.

(2)  Based on the fair market value of the option shares at fiscal-year end less
     the exercise price.

                                       50
<PAGE>
 
DIRECTORS' COMPENSATION

     The Company reimburses the members of its Board for reasonable expenses
associated with their attendance at Board meetings.    In August 1995, the
Company adopted the 1995 Directors Stock Option Plan (the "Directors Plan") and
reserved a total of 150,000 shares of the Company's Common Stock for issuance
thereunder.  The Company's stockholders approved the Directors Plan in September
1995.  Members of the Board who are not employees of the Company or any parent,
subsidiary or affiliate of the Company are eligible to participate in the
Directors Plan.  Each eligible director who becomes a member of the Board will
automatically be granted an option for 20,000 shares on the date such director
first becomes a director.  Also at each annual meeting of the Company, each
director who remains on the Board and has continuously served as a member of the
Board since the date of such director's initial grant will automatically be
granted a subsequent option for 5,000 shares.  All options granted under the
Directors Plan will have an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and will vest as to 25% of the
shares on each of the first four anniversaries of the grant date.

EMPLOYMENT AGREEMENT

     On December 1, 1994, the Company entered into an employment agreement with
John R. Harding pursuant to which he serves as its President and Chief Executive
Officer.  The agreement will expire on November 30, 2005, with an automatic
extension for an additional year unless either party gives notice 30 days prior
to that date of an intent to terminate the agreement.  The agreement provides
for a base salary of $158,400 and eligibility for an annual performance-based
bonus targeted at $100,000.  In addition, pursuant to the agreement, Mr. Harding
received options to purchase 400,000 shares of the Company's Common Stock at an
exercise price of $1.25 per share (the then-current fair market value of the
Company's Common Stock) that vest as to 20% after the first year and then as to
one-sixtieth of the shares each month thereafter.  At the Effective Time of the
Merger with Cadence, or in the event of any other change in control of the
Company, the options will become 100% vested and exerciseable and, pursuant to
the agreement, on the effective date of the Company's initial public offering,
20,000 shares became exerciseable from among the shares that would have vested
after the first year.  The agreement also includes a noncompetition covenant
effective until one year after Mr. Harding's employment with the Company is
terminated, pursuant to which Mr. Harding has agreed not to solicit the
Company's customers or employees.  Mr. Harding may terminate his employment with
the Company upon one month's written notice, in which case he will be paid all
compensation (including base salary and prorated bonus) due him to the date of
termination.  The Company may terminate Mr. Harding's employment with cause upon
three days written notice and without cause upon one month's written notice, in
which case Mr. Harding will be paid all compensation (including base salary and
prorated bonus) due him to the date of termination and will receive base salary
for a period of twelve months after the date of termination.  See also Item 1,
"Business--Merger with Cadence Design Systems, Inc.--Employment Agreements," and
"--Noncompetition Agreements."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Compensation Committee  of the Board of Directors (the "Committee")
consists of Messrs. Fiebiger and Hori, neither of whom has been or is an officer
or an employee of the Company.  No member of the Compensation Committee has a
relationship that would constitute an interlocking relationship with executive
officers or directors of another entity.

                                       51
<PAGE>
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information, as of March 17, 1997,
known to the Company regarding beneficial ownership of the Company's Common
Stock by (i) each person known by the Company to be the beneficial owner of more
than 5% of the Company's Common Stock, (ii) each of the Company's directors,
(iii) the Company's executive officers and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
 
                                                             
                                                             
                                                             
                                         AMOUNT AND NATURE   
 NAME AND ADDRESS                          OF BENEFICIAL     
OF BENEFICIAL OWNER                         OWNERSHIP(1)       PERCENT OF CLASS
-------------------                     --------------------   -----------------
<S>                                     <C>                    <C>
Cadence Design Systems, Inc. (2).....           4,870,909            36.9% 
2655 Seely Road, Building 5                                                
San Jose, California 95134                                                 
John F. and Mary I. Cooper (3).......           2,352,750            17.8% 
1601 South De Anza Boulevard                                               
Cupertino, California 95014                                                
David Chyan (4)......................           2,496,000            18.9% 
1601 South De Anza Boulevard                                               
Cupertino, California 95014                                                
Synopsys, Inc........................             988,361             7.5% 
700 Middlefield Road                                                       
Mountain View, California 94043                                            
John R. Harding (5)..................              68,487              *   
Robert D. Selvi (6)..................              46,508              *   
William J. Portelli (7)..............              49,526              *   
Yoshikazu Hori (8)...................               5,000              *   
James R. Fiebiger (9)................               5,000              *   
All current officers and directors                                         
as a group (8 persons)...............           5,023,271            37.6% 
---------------------
</TABLE>

*Less than 1%.
(1)  Unless otherwise indicated below, the persons and entities named in the
     table have sole voting and sole investment power with respect to all shares
     beneficially owned, subject to community property laws where applicable.
     Shares of Common Stock subject to options that are currently exerciseable
     or exerciseable within 60 days of March 17, 1997 are deemed to be
     outstanding and to be beneficially owned by the person holding such option
     for the purpose of computing the percentage ownership of such person but
     are not treated as outstanding for the purpose of computing the percentage
     ownership of any other person.

(2)  Represents shares subject to the Cadence Voting Agreements between Cadence
     and each of Messrs. Cooper, Chyan, Harding, Selvi and Portelli whereby each
     agreed, among other things, to vote his shares of Common Stock in favor of
     the Merger.  Also represents shares subject to the Cadence Option
     Agreements between Cadence and each of Messrs. Cooper and Chyan granting to
     Cadence an irrevocable option to purchase any and all of the Common Stock
     that each beneficially owns upon the occurrence of certain events.  See
     Item 1, "Business--Merger with Cadence Design Systems, Inc."

(3)  Mr. and Ms. Cooper are husband and wife.  Mr. Cooper, the Chairman of the
     Board of Directors and the Chief Technical Officer of the Company, is
     record owner of 2,297,750 shares of Common Stock.  Ms. Cooper, a director
     and Secretary of the Company, is the record owner of 55,000 shares of
     Common Stock.

                                       52
<PAGE>
 
(4)  Includes 80,000 shares of Common Stock held by Janet Chyan, Mr. Chyan's
     wife.  Mr. Chyan is a director and Executive Vice President, Product
     Development of the Company.

(5)  Includes 64,983 shares of Common Stock that Mr. Harding may acquire upon
     the exercise of options exerciseable within 60 days of March 17, 1997.
     Does not include options held by Mr. Harding to acquire an additional
     206,667 shares of Common Stock that will become immediately exerciseable as
     of the Effective Time of the Merger with Cadence but that would not
     otherwise be exerciseable within 60 days of March 17, 1997.  Mr. Harding is
     a director and is President and Chief Executive Officer of the Company.

(6)  Includes 44,000 shares of Common Stock that Mr. Selvi may acquire upon the
     exercise of options exerciseable within 60 days of March 17, 1997.  Does
     not include options held by Mr. Selvi to acquire an additional 5,500 shares
     of Common Stock that will become immediately exerciseable as of the
     Effective Time of the Merger with Cadence but that would not otherwise be
     exerciseable within 60 days of March 17, 1997.  Mr. Selvi is a Vice
     President and the Chief Financial Officer of the Company.

(7)  Includes 46,500 shares of Common Stock that Mr. Portelli may acquire upon
     the exercise of options exerciseable within 60 days of March 17, 1997.
     Does not include options held by Mr. Portelli to acquire an additional
     3,000 shares of Common Stock that will become immediately exerciseable as
     of the Effective Time of the Merger with Cadence but that would not
     otherwise be exerciseable within 60 days of March 17, 1997.  Mr. Portelli
     is Vice President, Sales and Marketing of the Company.

(8)  Represents 5,000 shares of Common Stock that Mr. Hori may acquire upon the
     exercise of options exerciseable within 60 days of March 17, 1997.  Does
     not include options held by Mr. Hori to acquire an additional 20,000 shares
     of Common Stock that, pursuant to the Company's 1995 Directors' Stock
     Option Plan, will become immediately exerciseable as of the Effective Time
     of the Merger with Cadence, but that would not otherwise be exerciseable
     within 60 days of March 17, 1997.  Mr. Hori is a director of the Company.

(9)  Represents 5,000 shares of Common Stock that Mr. Fiebiger may acquire upon
     the exercise of options exerciseable within 60 days of March 17, 1997.
     Does not include options held by Mr. Fiebiger to acquire an additional
     20,000 shares of Common Stock that, pursuant to the Company's 1995
     Directors' Stock Option Plan, will become immediately exerciseable as of
     the Effective Time of the Merger with Cadence but that would not otherwise
     be exerciseable within 60 days of March 17, 1997.  Mr. Fiebiger is a
     director of the Company.

                                       53
<PAGE>
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Since January 1, 1996, there has not been, nor is there currently proposed,
any transaction or series of transactions to which the Company (or any of its
predecessor corporations) was or is to be a party in which the amount involved
exceeds $60,000 and in which any director, executive officer, or holder of more
than 5% of the Company's Common Stock had or will have a direct or indirect
material interest other than (i) compensation arrangements, which are described
under Item 11, "Executive Compensation" above, (ii) the transactions described
in Item 1, "Business--Merger with Cadence Design Systems, Inc." above, and (iii)
the transactions described below.

     On May 6, 1996, in connection with certain marketing and development
agreements entered into by the Company with Synopsys, Inc. ("Synopsys"),
Synopsys purchased 1,206,542 shares of the Common Stock of the Company
(representing approximately 9.9% of the then outstanding Common Stock of the
Company) at a purchase price of $14.50 per share (the average closing price of
the Company's Common Stock over an agreed upon 30-day period).  Of these shares,
160,292 were purchased from the Company.  The remaining 1,046,250 shares were
purchased from the Named Executive Officers as follows: 648,250 were purchased
from John F. Cooper, 296,000 were purchased from David Chyan, 57,000 were
purchased from John R. Harding, 22,500 were purchased from William Portelli, and
22,500 were purchased from Robert D. Selvi.  In connection with the marketing
and development agreements with, and the equity investment by, Synopsys, the
Company also granted Synopsys certain rights to maintain its percentage
ownership interest in the Company by purchasing a pro-rata portion of certain
securities issued by the Company from time to time at fair market value.
However, until May 6, 1997, Synopsys' purchase price per share of Common Stock
of the Company will not exceed $15.00 with respect to up to 242,390 shares of
Common Stock purchased pursuant to such rights to maintain its percentage
ownership interest.  


                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     The following financial statements and schedules are filed as part of this
report:
<TABLE>
<CAPTION>
 
                                                        PAGE
                                                        ----
<S>                                                     <C>
      (a)(1)   Financial Statements
               See index in Part II, Item 8............. 29
                                               
      (a)(2)   Financial Statement Schedules
               II - Valuation and Qualifying Accounts... 57
 
   (a)(3) and (c) Exhibits.
                  --------
 
</TABLE> 

        The following exhibits are filed herewith or incorporated by reference:
 
<TABLE> 
<CAPTION> 

EXHIBIT                                                                      
NUMBER          EXHIBIT TITLE
-------         -------------
<C>             <S>                                                          
  2.01     __   Form of Agreement and Plan of Merger between the Company and 
                Cooper & Chyan Technology, Inc., a California corporation.(1) 

  2.02     __   Agreement and Plan of Reorganization dated as of July 22, 1996
                by and between Registrant, CCT Acquisition Corp. and
                UniCAD.(6)**

  2.03     __   Agreement of Merger dated as of August 28, 1996 by and among
                Registrant, CCT Acquisition Corp. and UniCAD.(6)
</TABLE>

                                       54
<PAGE>
 
<TABLE>
<CAPTION>

EXHIBIT
NUMBER          EXHIBIT TITLE
-------         -------------
<C>             <S> 
 
   2.04   --    Agreement and Plan of Merger and Reorganization dated as of
                October 28, 1996 by and among Registrant, Cadence, and Merger
                Sub.(7)

   3.01   --    Certificate of Incorporation.(1)

   3.02   --    Certificate of Designation.(1)

   3.03   --    Bylaws.(1)

   3.04   --    Certificate of Elimination of Series A Preferred Stock.(2)

   4.01   --    Form of Specimen Certificate for Registrant's Common Stock.(1)

   4.02   --    Rights Agreement dated May 11, 1995.(1)

   4.03   --    Stock Purchase Agreement dated as of May 11, 1995 between the
                Company and Mentor Graphics Corporation.(1)

   4.04   --    Stock Purchase Agreement dated as of May 23, 1995 between the
                Company and Marubeni Hytech Corp.(1)

   4.05   --    Stock Purchase Agreement dated as of May 6, 1996 among Synopsys,
                Inc., the Company, John F. Cooper, David Chyan, John R. Harding,
                William Portelli and Robert D. Selvi.(3)

   4.06   --    Investor Rights Agreement dated as of May 6, 1996 among
                Synopsys, Inc., the Company, John F. Cooper, David Chyan, John
                R. Harding, William Portelli and Robert D. Selvi.(3)

  10.01   --    1989 Stock Option Plan and related documents.(1)

  10.02   --    1993 Equity Incentive Plan, as amended, and related
                documents.(1)

  10.03   --    1995 Directors Stock Option Plan and related documents.(1)

  10.04   --    1995 Employee Stock Purchase Plan and related documents.(1)

  10.05   --    401(k) Plan.(1)

  10.06   --    Employment Agreement dated as of December 1, 1994 between the
                Company and John Harding.(1)

  10.07   --    Form of Indemnification Agreement entered into by the Company
                with each of its directors and executive officers.(1)

  10.08   --    Building Lease dated as of July 14, 1993 between the Company and
                South Bay/Copley Joint Venture, as amended.(1)

  10.09   --    OEM Remarketer Agreement dated as of January 27, 1992, between
                the Company and Mentor Graphics Corporation, as amended.(1)**

  10.10   --    Promissory Note dated August 8, 1995 evidencing loan to John
                Harding from the Company and schedule of all such notes
                outstanding.(1)

  10.11   --    Common Stock Purchase Agreements dated December 24, 1993,
                between the Company and the David and Janet Chyan Living Trust
                and the John and Mary Cooper Living Trust.(1)

  10.12   --    CBDS License Agreement dated as of July 22, 1996 among Cooper &
                Chyan Technology, Inc., UniCAD, Inc., and Northern Telecom
                Limited.(5)**

  10.13   --    UniCAD, Inc. Stock Option Plan assumed by the Company in
                connection with the acquisition of UniCAD.(4)

  10.14   --    Form of Stock Option Grant for use in connection with UniCAD,
                Inc. Stock Option Plan.(4)

  10.15   --    Form of Shareholders' Agreement for use in connection with
                UniCAD, Inc. Stock Option Plan.(4)
</TABLE>

                                       55
<PAGE>
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER          EXHIBIT TITLE
-------         -------------
<C>             <S>          
 
  10.16   --    Form of Cooper & Chyan Technology, Inc. Stock Option Grant for
                assumed UniCAD options.(4)
                
  10.17   --    Amendment No. 4 to OEM Remarketing Agreement dated as of October
                11, 1996, between the Company and Mentor Graphics
                Corporation.(8)++

  11.01   --    Statement regarding computation of per share earnings.(8)
                
  21.01   --    Subsidiaries of the Company.(8)
                
  23.01   --    Consent of Ernst & Young LLP, Independent Auditors.(8)
                
  23.02   --    Consent of Deloitte & Touche, Independent Auditors.(8)
                
  24.01   --    Power of Attorney (see page 56 of this Form 10-K).
                
  27.01   --    Financial Data Schedule, which is submitted electronically to
                the Securities and Exchange Commission for information only and
                is not filed.
                
  99.01   --    Form of Voting Agreement dated as of October 28, 1996 by and
                between Cadence and each of John F. Cooper, David Chyan, John R.
                Harding, Robert D. Selvi, and William J. Portelli.(7)
                
  99.02   --    Option Agreement dated as of November 2, 1996 by and between
                Cadence and John F. Cooper.(7)
                
  99.03   --    Option Agreement dated as of November 2, 1996 by and between
                Cadence and David Chyan.(7)
</TABLE> 
--------------------

(1)  Incorporated by reference to the Company's Form S-1 Registration Statement
     declared effective October 30, 1995 (File No. 33-96640).

(2)  Incorporated by reference to the Company's Form 10-K for the fiscal year
     ended December 31, 1995.

(3)  Incorporated by reference to the Company's Form 10-Q for the quarterly
     period ended March 31, 1996.

(4)  Incorporated by reference to the Company's Form S-8 Registration Statement
     filed September 2, 1996 (File No. 333-11279).

(5)  Incorporated by reference to Exhibit I of Exhibit 2.01 of the Company's
     Form 8-K/A filed with the Securities and Exchange Commission on November
     12, 1996.

(6)  Incorporated by reference to the Company's Form 8-K/A filed with the
     Securities and Exchange Commission on November 12, 1996.

(7)  Incorporated by reference to the Company's Form 8-K filed with the
     Securities and Exchange Commission on November 12, 1996.

(8)  Filed herewith.

**   Confidential treatment was received with respect to certain portions of
     these exhibits.  Such portions have been filed separately with the
     Securities and Exchange Commission.

++   Confidential treatment has been requested with respect to certain portions
     of this exhibit.  Such portions have been omitted from this filing and have
     been filed separately with the Securities and Exchange Commission.


(b)  Reports on Form 8-K.
     ------------------- 

     The Company filed a report on Form 8-K on September 12, 1996 to report the
Company's acquisition of UniCAD and filed an amendment to such report on Form 8-
K/A on November 12, 1996 to include the required financial statements of UniCAD
and the required pro-forma financial information.

     The Company filed a report on Form 8-K on November 12, 1996 to report that
the Company had signed a definitive agreement to be acquired by Cadence.

                                       56
<PAGE>
 
                                  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, in the
City of Cupertino, State of California, on the 28th day of March 1997.

                              COOPER & CHYAN TECHNOLOGY, INC.


                              By:  /s/ John R. Harding
                                  --------------------
                                  John R. Harding
                                  President, Chief Executive Officer and 
                                  Director

     Each person whose signature appears below constitutes and appoints John R.
Harding, and Robert D. Selvi, jointly and severally, his true and lawful
attorneys-in-fact, each with the power of substitution, for him in any and all
capacities, to sign amendments to this 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, hereby ratifying and conforming all
that said attorneys-in-fact, or his or her substitute or substitutes, may do or
cause to be done by virtue thereof.

     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>
NAME                                              TITLE                       DATE
----                                              -----                       ----
<S>                                 <C>                                  <C>
PRINCIPAL EXECUTIVE OFFICER:  
 
/s/ John R. Harding                 President, Chief Executive Officer   March 28, 1997
---------------------------------   and Director 
John R. Harding                                  

PRINCIPAL FINANCIAL AND
PRINCIPAL ACCOUNTING OFFICER:
 
 
/s/ Robert D. Selvi                 Vice President and                   March 28, 1997
---------------------------------   Chief Financial Officer 
Robert D. Selvi                                             

ADDITIONAL DIRECTORS:
 
 
/s/ David Chyan                     Executive Vice President, Product    March 28, 1997
---------------------------------   Development and Director 
David Chyan                                                  
 
 
/s/ John F. Cooper                  Chairman of the Board and            March 28, 1997
---------------------------------   Chief Technical Officer 
John F. Cooper                                              
 
 
/s/ Mary I. Cooper                  Secretary and Director               March 28, 1997
--------------------------------- 
Mary I. Cooper

/s/ James R. Fiebiger                Director                            March 28, 1997
---------------------------------  
James R. Fiebiger

/s/ Yoshikazu Hori                   Director                            March 28, 1997
---------------------------------  
Yoshikazu Hori

</TABLE> 

                                       57
<PAGE>
 
                                  SCHEDULE II
                                  -----------


                        COOPER & CHYAN TECHNOLOGY INC.

                       VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
 
 
                                         
                                                                                  
                                 Balance      Charged                             
 Allowance for Uncollectible        at       to Costs                    Balance  
 Amounts for the Fiscal         Beginning       and      Deductions      at End  
 Years Ended December 31        of Period    Expenses   (write-offs)    of Period 
---------------------------------------------------------------------------------
<S>                             <C>          <C>        <C>             <C> 
            1994                 $ --          $ --       $ --            $ --
            1995                 $ --          $329,945   $ --            $329,945
            1996                 $329,945      $740,526   $(272,045)      $798,426
</TABLE>

                                       58
<PAGE>
 


                                 EXHIBIT INDEX
<TABLE>  
<CAPTION> 
EXHIBIT                                                                                PAGE  
NUMBER        EXHIBIT TITLE                                                           NUMBER
-------       -------------                                                           ------ 
<C>           <S>                                                                     <C> 
   2.01   --  Form of Agreement and Plan of Merger between the Company and
              Cooper & Chyan Technology, Inc., a California corporation.(1)
              
   2.02   --  Agreement and Plan of Reorganization dated as of July 22, 1996 by
              and between Registrant, CCT Acquisition Corp. and UniCAD.(6)**
              
   2.03   --  Agreement of Merger dated as of August 28, 1996 by and among
              Registrant, CCT Acquisition Corp. and UniCAD.(6)
              
   2.04   --  Agreement and Plan of Merger and Reorganization dated as of
              October 28, 1996 by and among Registrant, Cadence, and Merger
              Sub.(7)
              
   3.01   --  Certificate of Incorporation.(1)
              
   3.02   --  Certificate of Designation.(1)
              
   3.03   --  Bylaws.(1)
              
   3.04   --  Certificate of Elimination of Series A Preferred Stock.(2)
              
   4.01   --  Form of Specimen Certificate for Registrant's Common Stock.(1)
              
   4.02   --  Rights Agreement dated May 11, 1995.(1)
              
   4.03   --  Stock Purchase Agreement dated as of May 11, 1995 between the
              Company and Mentor Graphics Corporation.(1)

   4.04   --  Stock Purchase Agreement dated as of May 23, 1995 between the
              Company and Marubeni Hytech Corp.(1)

   4.05   --  Stock Purchase Agreement dated as of May 6, 1996 among Synopsys,
              Inc., the Company, John F. Cooper, David Chyan, John R. Harding,
              William Portelli and Robert D. Selvi.(3)

   4.06   --  Investor Rights Agreement dated as of May 6, 1996 among Synopsys,
              Inc., the Company, John F. Cooper, David Chyan, John R. Harding,
              William Portelli and Robert D. Selvi.(3)

  10.01   --  1989 Stock Option Plan and related documents.(1)
              
  10.02   --  1993 Equity Incentive Plan, as amended, and related documents.(1)
              
  10.03   --  1995 Directors Stock Option Plan and related documents.(1)
              
  10.04   --  1995 Employee Stock Purchase Plan and related documents.(1)
              
  10.05   --  401(k) Plan.(1)
              
  10.06   --  Employment Agreement dated as of December 1, 1994 between the
              Company and John Harding.(1)
              
  10.07   --  Form of Indemnification Agreement entered into by the Company with
              each of its directors and executive officers.(1)
              
  10.08   --  Building Lease dated as of July 14, 1993 between the Company and
              South Bay/Copley Joint Venture, as amended.(1)
              
  10.09   --  OEM Remarketer Agreement dated as of January 27, 1992, between the
              Company and Mentor Graphics Corporation, as amended.(1)**
              
  10.10   --  Promissory Note dated August 8, 1995 evidencing loan to John
              Harding from the Company and schedule of all such notes
              outstanding.(1)

</TABLE> 
<PAGE>
 
<TABLE> 
<CAPTION> 
 
EXHIBIT                                                                                   PAGE
NUMBER    EXHIBIT TITLE                                                                   NUMBER
-------   -------------                                                                   ------
<C>       <S>                                                                             <C> 
  10.11   --  Common Stock Purchase Agreements dated December 24, 1993, between            
              the Company and the David and Janet Chyan Living Trust and the
              John and Mary Cooper Living Trust.(1)

  10.12   --  CBDS License Agreement dated as of July 22, 1996 among Cooper &
              Chyan Technology, Inc., UniCAD, Inc., and Northern Telecom
              Limited.(5)**
              
  10.13   --  UniCAD, Inc. Stock Option Plan assumed by the Company in
              connection with the acquisition of UniCAD.(4)
              
  10.14   --  Form of Stock Option Grant for use in connection with UniCAD, Inc.
              Stock Option Plan.(4)
              
  10.15   --  Form of Shareholders' Agreement for use in connection with UniCAD,
              Inc. Stock Option Plan.(4)
              
  10.16   --  Form of Cooper & Chyan Technology, Inc. Stock Option Grant
              evidencing assumed UniCAD options.(4)
              
  10.17   --  Amendment No. 4 to OEM Remarketing Agreement dated as of October
              11, 1996, between the Company and Mentor Graphics
              Corporation.(8)++....................................................        62
              
  11.01   --  Statement regarding computation of per share earnings.(8)............        71
              
  21.01   --  Subsidiaries of the Company.(8)......................................        72
              
  23.01   --  Consent of Ernst & Young LLP, Independent Auditors.(8)...............        73
              
  23.02   --  Consent of Deloitte & Touche, Independent Auditors.(8)...............        74
              
  24.01   --  Power of Attorney (see page 56 of this Form 10-K).
              
  27.01   --  Financial Data Schedule, which is submitted electronically to the
              Securities and Exchange Commission for information only and is not
              filed.
              
  99.01   --  Form of Voting Agreement dated as of October 28, 1996 by and
              between Cadence and each of John F. Cooper, David Chyan, John R.
              Harding, Robert D. Selvi, and William J. Portelli.(7)
              
  99.02   --  Option Agreement dated as of November 2, 1996 by and between
              Cadence and John F. Cooper.(7)

  99.03   --  Option Agreement dated as of November 2, 1996 by and between
              Cadence and David Chyan.(7)

</TABLE>
---------------
(1)  Incorporated by reference to the Company's Form S-1 Registration Statement
     declared effective October 30, 1995 (File No. 33-96640).

(2)  Incorporated by reference to the Company's Form 10-K for the fiscal year
     ended December 31, 1995.

(3)  Incorporated by reference to the Company's Form 10-Q for the quarterly
     period ended March 31, 1996.

(4)  Incorporated by reference to the Company's Form S-8 Registration Statement
     filed September 2, 1996 (File No. 333-11279)

(5)  Incorporated by reference to Exhibit I of Exhibit 2.01 of the Company's
     Form 8-K/A filed with the Securities and Exchange Commission on November
     12, 1996.

(6)  Incorporated by reference to the Company's Form 8-K/A filed with the
     Securities and Exchange Commission on November 12, 1996.
<PAGE>
 
(7)  Incorporated by reference to the Company's Form 8-K filed with the
     Securities and Exchange Commission on November 12, 1996.

(8)  Filed herewith.

**   Confidential treatment was received with respect to certain portions of
     these exhibits.  Such portions have been filed separately with the
     Securities and Exchange Commission.

++   Confidential treatment has been requested with respect to certain portions
     of this exhibit.  Such portions have been omitted from this filing and have
     been filed separately with the Securities and Exchange Commission.