<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 3, 1996
CADENCE DESIGN SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-10606 77-0148231
(Commission File No.) (IRS Employer Identification No.)
2655 SEELY ROAD
BUILDING 5
SAN JOSE, CALIFORNIA 95134
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (408) 943-1234
-----------------------------
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Item 5. Other Events.
On October 3, 1996, Cadence Design Systems, Inc., a Delaware corporation
(the "Company"), announced the execution of an Agreement and Plan of Merger and
Reorganization dated as of October 3, 1996, among the Company, Harbor
Acquisition Sub, Inc., a Delaware corporation ("Harbor Sub"), and High Level
Design Systems, Inc., a Delaware corporation ("HLDS") (the "HLDS Reorganization
Agreement"), a copy of which is attached hereto as Exhibit 2.1. The HLDS
Reorganization Agreement contemplates that, subject to the satisfaction of
certain conditions set forth therein, including the adoption of the HLDS
Reorganization Agreement and the approval of the transactions contemplated
thereby by the HLDS stockholders, Harbor Sub will be merged into HLDS (the "HLDS
Merger"), and HLDS will become a wholly-owned subsidiary of the Company.
Pursuant to the HLDS Reorganization Agreement, each outstanding share of HLDS
stock will be exchanged for 0.22 shares of common stock of the Company. In
connection with the HLDS Merger, the Company expects to issue approximately
2,562,000 shares of its common stock and to assume employee stock options to
purchase approximately 600,000 shares of its common stock. The HLDS Merger is
expected to be a tax-free reorganization under the Internal Revenue Code and
will be accounted for as a purchase.
The Company, concurrently with the execution of the HLDS Reorganization
Agreement, entered into Voting Agreements (in substantially the form attached
hereto as Exhibit 99.1) with certain directors and officers of HLDS who in the
aggregate hold approximately 29% of the outstanding shares of HLDS capital
stock. Pursuant to the Voting Agreements, such directors and officers have
agreed, among other things, to vote their shares in favor of the HLDS Merger.
In addition, the Company, concurrently with the execution of the HLDS
Reorganization Agreement, entered into an Option Agreement (a copy of which is
attached hereto as Exhibit 99.2) with J. George Janac. Pursuant to the Option
Agreement, Mr. Janac has granted to the Company an option, which is exercisable
upon the occurrence of certain events described in the Option Agreement, to
purchase approximately 15.5% of the outstanding shares of HLDS common and
preferred stock.
HLDS develops, markets and supports EDA software for the design of high-
density, high performance ICs. HLDS's products are designed to solve the
problems inherent in deep submicron (less than 0.5 micron) IC design and to
offer improved time to market, enhanced IC performance and reduced development
and manufacturing costs when compared to previous generations of EDA software.
On October 28, 1996, the Company announced the execution of an Agreement
and Plan of Merger and Reorganization dated as of October 28, 1996, among the
Company, Wyoming Acquisition Sub, Inc., a Delaware corporation ("Wyoming Sub"),
and Cooper & Chyan Technology, Inc., a Delaware corporation ("CCT") (the "CCT
Reorganization Agreement"), a copy of which is attached hereto as Exhibit 2.2.
The CCT Reorganization Agreement contemplates that, subject to the satisfaction
of certain conditions set forth therein, including the adoption of the CCT
Reorganization Agreement and the approval of transactions contemplated thereby
by the CCT stockholders and the receipt of regulatory approval, Wyoming Sub will
be merged into CCT (the "CCT Merger"), and CCT will become a wholly-owned
subsidiary of the Company. Pursuant to the CCT
2.
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Reorganization Agreement, each outstanding share of CCT stock will be
exchanged for 0.85 shares of common stock of the Company. In connection with
the CCT Merger, the Company expects to issue approximately 11.0 million
shares of its common stock and to assume employee stock options to purchase
approximately 1,846,000 shares of its common stock. The CCT Merger is
expected to be a tax-free reorganization under the Internal Revenue Code and
is expected to be accounted for as a pooling of interests.
The Company, concurrently with the execution of the CCT Reorganization
Agreement, entered into Voting Agreements (in substantially the form attached
hereto as Exhibit 99.3) with certain directors and officers of CCT who in the
aggregate hold approximately 37.6% of the outstanding shares of CCT common
stock. Pursuant to the Voting Agreements, such directors and officers have
agreed, among other things, to vote their shares in favor of the CCT Merger.
In addition, on November 2, 1996, in connection with the CCT Merger, the
Company entered into Option Agreements (copies of which are attached hereto
as Exhibits 99.4 and 99.5) with John F. Cooper and David Chyan. Pursuant to
the Option Agreements, Mr. Cooper and Mr. Chyan each have granted to the
Company an option, which is exercisable upon the occurrence of certain events
described in the Option Agreements, to purchase an aggregate of approximately
37.5% of the outstanding shares of CCT common stock.
CCT develops, markets and supports software tools that help designers
route the wires that interconnect the electric devices on high performance
PCBs and ICs.
In addition to the shares expected to be issued in connection with the
HLDS Merger and the CCT Merger, the Company expects to issue approximately
5,000,000 shares of its common stock (plus up to 750,000 shares pursuant to
an over-allotment option expected to be offered to the underwriters of such
shares) through a public offering registered under the Securities Act of 1933.
Any public offering of such shares will be made only by means of a prospectus.
3.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
c. Exhibits
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger and Reorganization dated as of
October 3, 1996, by and among Cadence Design Systems, Inc., a
Delaware corporation, Harbor Acquisition Sub, Inc., a Delaware
corporation, and High Level Design Systems, Inc., a Delaware
corporation
2.2 Agreement and Plan of Merger and Reorganization dated as of
October 28, 1996, by and among Cadence Design Systems, Inc., a
Delaware corporation, Wyoming Acquisition Sub, Inc., a Delaware
corporation, and Cooper & Chyan Technology, Inc., a Delaware
corporation
99.1 Form of Voting Agreement dated as of October 3, 1996, by and
between Cadence Design Systems, Inc., a Delaware corporation, and
each of J. George Janac, Dennis DeCoste, Robert P. Wiederhold and
Peter S. Teshima
99.2 Option Agreement, dated as of October 3, 1996, by and between
Cadence Design Systems, Inc., a Delaware corporation, and
J. George Janac
99.3 Form of Voting Agreement dated as of October 28, 1996, by and
between Cadence Design Systems, Inc., a Delaware corporation, and
each of John F. Cooper, David Chyan, John R. Harding, Robert D.
Selvi, and William J. Portelli
99.4 Option Agreement dated as of November 2, 1996, by and between
Cadence Design Systems, Inc., a Delaware corporation, and John F.
Cooper
99.5 Option Agreement dated as of November 2, 1996, by and between
Cadence Design Systems, Inc., a Delaware corporation, and David
Chyan
4.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CADENCE DESIGN SYSTEMS, INC.
Dated: November 7, 1996 By: /s/ R.L. Smith McKeithen
------------------------------------
R.L. Smith McKeithen,
Vice President and General Counsel
5.
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EXHIBIT 2.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
CADENCE DESIGN SYSTEMS, INC.,
a Delaware corporation;
HARBOR ACQUISITION SUB, INC.,
a Delaware corporation; and
HIGH LEVEL DESIGN SYSTEMS, INC.,
a Delaware corporation
-------------------------
Dated as of October 3, 1996
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION. . . . . . . . . . . . . . . . . 2
1.1 Merger of Merger Sub into the Company . . . . . . . . . . . 2
1.2 Effect of the Merger. . . . . . . . . . . . . . . . . . . . 2
1.3 Closing; Effective Time . . . . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation and Bylaws; Directors and
Officers. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Conversion of Shares. . . . . . . . . . . . . . . . . . . . 3
1.6 Closing of the Company's Transfer Books . . . . . . . . . . 4
1.7 Exchange of Certificates. . . . . . . . . . . . . . . . . . 4
1.8 Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . 5
1.9 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . 6
1.10 Further Action. . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . 7
2.1 Due Organization; Subsidiary; Etc.. . . . . . . . . . . . . 7
2.2 Certificate of Incorporation and Bylaws; Records. . . . . . 7
2.3 Capitalization, Etc.. . . . . . . . . . . . . . . . . . . . 8
2.4 VSE/BCSC Filings; Financial Statements. . . . . . . . . . . 9
2.5 Absence of Changes. . . . . . . . . . . . . . . . . . . . . 10
2.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Receivables, Loans and Advances.. . . . . . . . . . . . . . 12
2.8 Equipment; Leasehold. . . . . . . . . . . . . . . . . . . . 13
2.9 Proprietary Assets. . . . . . . . . . . . . . . . . . . . . 13
2.10 Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . 15
2.11 Liabilities.. . . . . . . . . . . . . . . . . . . . . . . . 16
2.12 Compliance with Legal Requirements. . . . . . . . . . . . . 16
2.13 Certain Business Practices. . . . . . . . . . . . . . . . . 16
2.14 Governmental Authorizations.. . . . . . . . . . . . . . . . 16
2.15 Tax Matters.. . . . . . . . . . . . . . . . . . . . . . . . 17
2.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . 18
2.17 Environmental Matters.. . . . . . . . . . . . . . . . . . . 18
2.18 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . 19
2.19 Related Party Transactions. . . . . . . . . . . . . . . . . 19
2.20 Legal Proceedings; Orders.. . . . . . . . . . . . . . . . . 19
2.21 Authority; Inapplicability of Anti-takeover Statutes; Binding
Nature of Agreement.. . . . . . . . . . . . . . . . . . . . 20
2.22 DGCL Section 203. . . . . . . . . . . . . . . . . . . . . . 20
2.23 Inapplicability of Hart-Scott-Rodino Act. . . . . . . . . . 20
2.24 Vote Required . . . . . . . . . . . . . . . . . . . . . . . 20
2.25 Non-Contravention; Consents . . . . . . . . . . . . . . . . 21
2.26 Fairness Opinion. . . . . . . . . . . . . . . . . . . . . . 22
2.27 Financial Advisor . . . . . . . . . . . . . . . . . . . . . 22
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TABLE OF CONTENTS
(CONTINUED)
PAGE
2.28 Full Disclosure.. . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB . . 23
3.1 Organization, Standing and Power. . . . . . . . . . . . . . 23
3.2 SEC Filings; Financial Statements.. . . . . . . . . . . . . 23
3.3 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 24
3.4 Absence of Certain Changes or Events. . . . . . . . . . . . 24
3.5 Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . 24
3.6 Authority; Binding Nature of Agreement. . . . . . . . . . . 24
3.7 Valid Issuance. . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4. CERTAIN COVENANTS OF THE COMPANY. . . . . . . . . . . . . . 24
4.1 Access and Investigation. . . . . . . . . . . . . . . . . . 24
4.2 Operation of the Company's Business.. . . . . . . . . . . . 25
4.3 No Solicitation.. . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . 28
5.1 Registration Statement; Prospectus/Proxy Statement. . . . . 28
5.2 Company Stockholders' Meeting.. . . . . . . . . . . . . . . 29
5.3 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . 30
5.4 Stock Options.. . . . . . . . . . . . . . . . . . . . . . . 30
5.5 Indemnification of Officers and Directors.. . . . . . . . . 31
5.6 Additional Agreements.. . . . . . . . . . . . . . . . . . . 32
5.7 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8 Affiliate Agreements. . . . . . . . . . . . . . . . . . . . 33
5.9 Tax Matters.. . . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Resignation of Officers and Directors.. . . . . . . . . . . 33
5.11 Employee Benefits.. . . . . . . . . . . . . . . . . . . . . 33
5.12 FIRPTA Matters. . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB 34
6.1 Accuracy of Representations.. . . . . . . . . . . . . . . . 34
6.2 Performance of Covenants. . . . . . . . . . . . . . . . . . 34
6.3 Effectiveness of Registration Statement . . . . . . . . . . 34
6.4 Stockholder Approval. . . . . . . . . . . . . . . . . . . . 34
6.5 Agreements and Documents. . . . . . . . . . . . . . . . . . 34
6.6 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 No Material Adverse Change. . . . . . . . . . . . . . . . . 35
6.8 No Restraints . . . . . . . . . . . . . . . . . . . . . . . 35
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.9 No Governmental Litigation. . . . . . . . . . . . . . . . . 35
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. . . . . 35
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . 36
7.2 Performance of Covenants. . . . . . . . . . . . . . . . . . 36
7.3 Effectiveness of Registration Statement . . . . . . . . . . 36
7.4 Documents . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 No Restraints . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 No Material Adverse Change. . . . . . . . . . . . . . . . . 36
SECTION 8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 38
8.3 Transactions and Expenses; Termination Fee. . . . . . . . . 38
SECTION 9. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . 39
9.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3 No Survival of Representations and Warranties . . . . . . . 39
9.4 Entire Agreement; Counterparts; Applicable Law. . . . . . . 39
9.5 Disclosure Schedule . . . . . . . . . . . . . . . . . . . . 39
9.6 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . 39
9.7 Assignability . . . . . . . . . . . . . . . . . . . . . . . 40
9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.9 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 42
9.10 Certain Terms.. . . . . . . . . . . . . . . . . . . . . . . 42
9.11 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
iii
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EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Form of Certificate of Incorporation of Surviving Corporation
Exhibit C - Certain employees
Exhibit D - Certain additional employees
iv
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of October 3, 1996, by and among: CADENCE DESIGN SYSTEMS,
INC., a Delaware corporation ("Parent"); HARBOR ACQUISITION SUB, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
HIGH LEVEL DESIGN SYSTEMS, INC., a Delaware corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the Delaware General
Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly owned subsidiary of
Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. The respective boards of directors of Parent, Merger Sub and the
Company have approved this Agreement and the Merger.
1
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AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement and in accordance with the provisions
of applicable law, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with and into the Company, and the separate existence of Merger
Sub shall cease. The Company will continue as the surviving corporation in the
Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law (the "DGCL").
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo Alto,
California, at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which (subject to the satisfaction or waiver of the conditions set forth
in Sections 6 and 7) shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Sections 6.3,
6.4 and 7.5. Contemporaneously with or as promptly as practicable after the
Closing, a properly executed certificate of merger conforming to the
requirements of the DGCL (the "Certificate of Merger") shall be filed with the
Secretary of State of the State of Delaware. The Merger shall take effect at
the time the Certificate of Merger is filed with the Secretary of State of the
State of Delaware (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to
Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals
who are directors and officers of Merger Sub immediately prior to the
Effective Time.
2
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1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.5(d) and 1.8, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any stockholder of the Company:
(i) any shares of Company Capital Stock then held by the Company
or any subsidiary of the Company (or held in the Company's treasury) shall
be canceled;
(ii) any shares of Company Capital Stock then held by Parent,
Merger Sub or any other subsidiary of Parent shall be canceled;
(iii) except as provided in clauses "(i)" and "(ii)" above
and subject to Section 1.5(b), (A) each share of Company Common Stock then
outstanding shall be converted into the right to receive twenty-two
hundredths (0.22) of a share of Parent Common Stock, and (B) each share of
Company Preferred Stock then outstanding shall be converted into the right
to receive twenty-two hundredths (0.22) of a share of Parent Common Stock,
in each case upon surrender of the certificate representing such share of
Company Common Stock or Company Preferred Stock (as the case may be) in the
manner provided in Section 1.7 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if
required) in the manner provided in Section 1.7); and
(iv) each share of the common stock, par value $.001 per share,
of Merger Sub then outstanding shall be converted into one share of common
stock of the Surviving Corporation.
(b) The fraction of a share of Parent Common Stock into which each
outstanding share of Company Common Stock is to be converted pursuant to Section
1.5(a)(iii)(A) (as such fraction may be adjusted in accordance with this Section
1.5(b)) is referred to as the "Common Stock Exchange Ratio," and the fraction of
a share of Parent Common Stock into which each outstanding share of Company
Preferred Stock is to be converted pursuant to Section 1.5(a)(iii)(B) (as such
fraction may be adjusted in accordance with this Section 1.5(b)) is referred to
as the "Preferred Stock Exchange Ratio". If, between the date of this Agreement
and the Effective Time, the outstanding shares of Company Common Stock, Company
Preferred Stock or Parent Common Stock are changed into a different number or
class of shares by reason of any stock split, stock dividend, reverse stock
split, reclassification, recapitalization or other similar transaction, then the
Common Stock Exchange Ratio and/or the Preferred Stock Exchange Ratio shall be
appropriately adjusted.
(c) If any shares of Company Capital Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Capital Stock
will also be unvested and subject to the same repurchase option, risk of
3
<PAGE>
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock purchase agreement
or other agreement.
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of Company
Capital Stock who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
closing price of a share of Parent Common Stock on the NYSE on the date the
Merger becomes effective.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time: (a)
all shares of Company Capital Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Capital
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as stockholders of the Company; and (b) the stock transfer
books of the Company shall be closed with respect to all shares of Company
Capital Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of Company Capital Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of Company Capital Stock
(a "Company Stock Certificate") is presented to the Exchange Agent or to the
Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) Prior to the Closing Date, Parent shall select a reputable bank
or trust company to act as exchange agent in the Merger (the "Exchange Agent").
Promptly after the Effective Time, Parent shall deposit with the Exchange Agent
(i) certificates representing the shares of Parent Common Stock issuable
pursuant to this Section 1 and (ii) cash sufficient to make payments in lieu of
fractional shares in accordance with Section 1.5(d). The shares of Parent
Common Stock and cash amounts so deposited with the Exchange Agent, together
with any dividends or distributions received by the Exchange Agent with respect
to such shares, are referred to collectively as the "Exchange Fund."
(b) As soon as practicable after the Effective Time, the Exchange
Agent will mail to the holders of Company Stock Certificates (i) a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify (including a provision confirming that delivery of Company
Stock Certificates shall be effected, and risk of loss and title to Company
Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates
4
<PAGE>
to the Exchange Agent), and (ii) instructions for use in effecting the surrender
of Company Stock Certificates in exchange for certificates representing Parent
Common Stock. Subject to Section 1.5(d), upon surrender of a Company Stock
Certificate to the Exchange Agent for exchange, together with a duly executed
letter of transmittal and such other documents as may be reasonably required by
the Exchange Agent or Parent, (1) the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate representing the
number of shares of Parent Common Stock that such holder has the right to
receive pursuant to the provisions of Section 1.5(a)(iii), and (2) the Company
Stock Certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.7, each Company Stock Certificate shall be
deemed, from and after the Effective Time, to represent only the right to
receive shares of Parent Common Stock (and cash in lieu of any fractional share
of Parent Common Stock) as contemplated by this Section 1. If any Company Stock
Certificate shall have been lost, stolen or destroyed, Parent may, in its
discretion and as a condition precedent to the issuance of any certificate
representing Parent Common Stock, require the owner of such lost, stolen or
destroyed Company Stock Certificate to provide an appropriate affidavit and to
deliver a bond (in such sum as Parent may reasonably direct) as indemnity
against any claim that may be made against the Exchange Agent, Parent or the
Surviving Corporation with respect to such Company Stock Certificate.
(c) Any portion of the Exchange Fund that remains undistributed to
former stockholders of the Company as of the date 180 days after the date on
which the Merger becomes effective shall be delivered to Parent upon demand, and
any former stockholders of the Company who have not theretofore surrendered
their Company Stock Certificates in accordance with this Section 1.7 shall
thereafter look only to Parent for payment of their claims for Parent Common
Stock, cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.
(d) Each of the Exchange Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder or former holder
of Company Capital Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of Company Common Stock for any shares of Parent
Common Stock (or dividends or distributions with respect thereto), or for any
cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.8 APPRAISAL RIGHTS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, Appraisal Shares (as defined in Section 1.8(c)) shall not be
converted into or represent the right to receive Parent Common Stock in
accordance with Section 1.5(a) (or cash in lieu of fractional
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shares in accordance with Section 1.5(d)), and each holder of Appraisal Shares
shall be entitled only to such rights with respect to such Appraisal Shares as
may be granted to such holder in Section 262 of the DGCL and (if the Company is
subject to Section 2115 of the California Corporations Code) such rights as may
be granted to such holder in Chapter 13 of the California General Corporation
Law. From and after the Effective Time, a holder of Appraisal Shares shall not
have and shall not be entitled to exercise any of the voting rights or other
rights of a stockholder of the Surviving Corporation. If any holder of
Appraisal Shares shall fail to perfect or shall waive, rescind, withdraw or
otherwise lose such holder's right of appraisal under Section 262 of the DGCL
and such holder's rights (if any) under Chapter 13 of the California General
Corporation Law, then (i) any right of such holder to require the Company to
purchase the Appraisal Shares for cash shall be extinguished and (ii) such
shares shall automatically be converted into and shall represent only the right
to receive (upon the surrender of the certificate or certificates representing
such shares) Parent Common Stock in accordance with Section 1.5(a) (and cash in
lieu of any fractional share in accordance with Section 1.5(d)).
(b) The Company (i) shall give Parent prompt written notice of any
demand by any stockholder of the Company for appraisal of such stockholder's
shares of Company Capital Stock pursuant to the DGCL and of any other notice,
demand or instrument delivered to the Company pursuant to the DGCL or the
California General Corporation Law, and (ii) shall give Parent's Representatives
the opportunity to participate in all negotiations and proceedings with respect
to any such notice, demand or instrument. The Company shall not make any
payment or settlement offer with respect to any such notice or demand unless
Parent shall have consented in writing to such payment or settlement offer.
(c) For purposes of this Agreement, "Appraisal Shares" shall refer to
any shares of Company Capital Stock outstanding immediately prior to the
Effective Time that (i) are held by stockholders who are entitled to demand and
who properly demand appraisal of such shares pursuant to, and who comply with
the applicable provisions of, Section 262 of the DGCL or (ii) are or may become
"dissenting shares" within the meaning of Chapter 13 of the California General
Corporation Law. Notwithstanding anything to the contrary contained in this
Agreement, no holder of any shares of Company Capital Stock shall be entitled to
exercise any rights under Chapter 13 of the California General Corporation Law
unless the Company is subject to Section 2115 of the California Corporations
Code.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.10 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession of and to all rights and property of Merger Sub and the
Company, the officers and directors of the Surviving Corporation
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and Parent shall be fully authorized (in the name of Merger Sub, in the name of
the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except
as set forth in the disclosure schedule delivered by the Company to Parent on
the date of this Agreement and signed by the President of the Company (the
"Company Disclosure Schedule"):
2.1 DUE ORGANIZATION; SUBSIDIARY; ETC.
(a) The Company owns no shares of capital stock of, or equity
interest of any nature in, any Entity, other than High Level Design Systems
Limited, a corporation organized under the laws of England (the "Subsidiary").
(The Company and the Subsidiary are referred to collectively in this Agreement
as the "Acquired Corporations"). Neither of the Acquired Corporations has
agreed or is obligated to make any future investment in or capital contribution
to any Entity. Neither of the Acquired Corporations has, at any time, been a
general partner of any general partnership, limited partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and authority: (i)
to conduct its business in the manner in which its business is currently being
conducted;(ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) Each of the Acquired Corporations is qualified to do business as
a foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify would have a Material Adverse Effect on the
Acquired Corporations.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of the certificate of
incorporation, bylaws and other charter and organizational documents of the
respective Acquired Corporations, including all amendments thereto. The Company
has made available to Parent accurate and complete copies in all material
respects of the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a meeting)
of the stockholders of each of the Acquired Corporations, the boards of
directors of each of the Acquired Corporations and all committees of the boards
of directors of each of the Acquired Corporations. There have been no formal
meetings or other proceedings of the stockholders of either of the Acquired
Corporations, the board of directors of either of the Acquired Corporations or
any committee of the board of directors of either of the Acquired Corporations
that are not fully reflected in such minutes or other records. The books of
account, stock records, minute books and other records of each of
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the Acquired Corporations are accurate, up-to-date and complete in all material
respects, and have been maintained in accordance with prudent business
practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
35,000,000 shares of Company Common Stock, of which 11,333,956 shares (less
300,000 shares of Company Common Stock held in treasury) have been issued and
are outstanding as of the date of this Agreement; and (ii) 5,000,000 shares of
Company Preferred Stock, 800,000 of which have been designated "Series A
Preferred Stock," of which 600,000 shares have been issued and are outstanding
as of the date of this Agreement. Each outstanding share of Series A Preferred
Stock is convertible into one share of Company Common Stock. All of the
outstanding shares of Company Capital Stock have been duly authorized and
validly issued, and are fully paid and non-assessable. Part 2.3(a)(i) of the
Company Disclosure Schedule sets forth a listing of the record stockholders of
the Company as of the most recent practicable date and the number of shares of
Company Capital Stock held by each such stockholder. Part 2.3(a)(ii) of the
Company Disclosure Schedule identifies each Contract pursuant to which the
Company has the right to repurchase, redeem or otherwise reacquire shares of
Company Capital Stock, and, with respect to each such Contract, sets forth: (i)
the effective date of such Contract; (ii) the number of shares of Company
Capital Stock subject to such Contract; and (iii) the terms of each repurchase
option contained in such Contract. Upon consummation of the Merger, the shares
of Parent Common Stock issued in exchange for the shares of Company Capital
Stock subject to a Contract that is, or is required to be, identified in Part
2.3(a)(ii) of the Company Disclosure Schedule will, without any further act of
Parent, the Company or any other Person, become subject to the restrictions,
conditions and other provisions contained in such Contract. The Company has
delivered to Parent an accurate and complete copy of each Contract identified in
Part 2.3(a)(ii) of the Company Disclosure Schedule.
(b) As of the date of this Agreement: (i) 2,929,107 shares of Company
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding under the Company's 1993 Stock Option Plan; and (ii) 300,000
shares of Company Common Stock are reserved for future issuance pursuant to
stock options granted and outstanding under the Company's 1995 Special
Nonstatutory Stock Option Plan. (Stock options granted by the Company pursuant
to its stock option plans are referred to in this Agreement as "Company
Options.") Part 2.3(b)(i) of the Company Disclosure Schedule sets forth the
following information with respect to each Company Option outstanding as of the
date of this Agreement: (i) the particular plan pursuant to which such Company
Option was granted; (ii) the name of the optionee; (iii) the number of shares of
Company Common Stock subject to such Company Option; (iv) the exercise price of
such Company Option; (v) the date on which such Company Option was granted; (vi)
the extent to which such Company Option is vested as of September 18, 1996; and
(vii) the date on which such Company Option expires. No Company Option has ever
been granted under the Company's Incentive Stock Option Plan, and the Company
has received from each potential beneficiary under the Incentive Stock Option
Plan a clarification confirming that the Company has not granted any option or
other right to acquire any shares of Company Capital Stock under the
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Incentive Stock Option Plan. The Incentive Stock Option Plan has been (or will
be within ten days after the date of this Agreement) validly terminated and is,
or within ten days after the date of this Agreement will be, no longer in
effect. Neither the "1995 Director Option Plan" nor the "1995 Employee
Qualified Stock Purchase Plan" referred to in the footnotes to the Company's
audited financial statements as of and for the year ended December 31, 1995 ever
became effective, and no option or right to purchase shares of Company Common
Stock has ever been granted or issued pursuant to either of such plans. The
Company has delivered to Parent accurate and complete copies of all stock option
plans pursuant to which the Company has ever granted stock options.
(c) Except as set forth in Part 2.3(b) of the Company Disclosure
Schedule there is no:(i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company;(ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company (except
for the 600,000 shares of Company Preferred Stock outstanding as of the date of
this Agreement, which are convertible into 600,000 shares of Company Common
Stock);(iii) Contract under which the Company is or may become obligated to sell
or otherwise issue any shares of its capital stock or any other securities; or
(iv) to the best of the knowledge of the Company, condition or circumstance that
may give rise to or provide a basis for the assertion of a claim by any Person
to the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of the Company.
(d) All outstanding shares of Company Capital Stock, all outstanding
Company Options, and all outstanding shares of capital stock of the Subsidiary
have been issued and granted in material compliance with (i) all applicable
securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of the Subsidiary
are validly issued, fully paid and nonassessable and are owned beneficially and
of record by the Company, free and clear of any Encumbrances.
2.4 VSE/BCSC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent a complete and accurate copy
of each report, schedule, registration statement, information circular,
definitive proxy statement or similar document filed by the Company with the
BCSC or the VSE on or after January 1, 1993 (the "Company Reports"), which are
all the forms, reports and documents required to be filed by the Company with
the BCSC or the VSE since January 1, 1993. The Company Reports (i) complied in
all material respects with the requirements of applicable Canadian securities
laws and regulations and applicable regulations of the BCSC and the VSE at and
as of the times they were filed (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) and (ii) did not
at and as of the time they were filed (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
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any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) the audited consolidated balance sheets of the Company as of
December 31, 1995 and 1994, and the related audited consolidated income
statements, statements of stockholders' equity and statements of cash flows
of the Company for the years ended December 31, 1995, 1994 and 1993,
together with the notes thereto and the unqualified report and opinion of
Arthur Andersen LLP relating thereto; and
(ii) the unaudited consolidated balance sheet of the Company as
of June 30, 1996 (the "Unaudited Interim Balance Sheet"), and the related
unaudited consolidated income statement and statement of cash flows of the
Company for the six months then ended.
(c) The Company Financial Statements present fairly the consolidated
financial position of the Acquired Corporations as of the respective dates
thereof and the consolidated results of operations and cash flows of the
Acquired Corporations for the periods covered thereby. The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except
that the financial statements referred to in Section 2.4(b)(ii) do not contain
footnotes and are subject to normal and recurring year-end audit adjustments,
which will not, individually or in the aggregate, be material in magnitude).
2.5 ABSENCE OF CHANGES. Between June 30, 1996 and the date of this
Agreement:
(a) there has not been any material adverse change in the business,
condition, assets, liabilities, operations or financial performance of
either of the Acquired Corporations, and no event has occurred that could
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the assets of either of
the Acquired Corporations (whether or not covered by insurance);
(c) neither of the Acquired Corporations has (i) declared, accrued,
set aside or paid any dividend or made any other distribution in respect of
any shares of capital stock, or (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities (except pursuant
to rights of repurchase of any such shares under any employee or consultant
stock plan or arrangement applicable to either of the Acquired
Corporations);
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(d) neither of the Acquired Corporations has sold, issued or
authorized the issuance of (i) any capital stock or other security (except
for Company Common Stock issued upon the exercise of outstanding Company
Options), (ii) any option or right to acquire any capital stock or any
other security (except for Company Options granted under the Company's 1993
Stock Option Plan consistent with past practices), or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any of
the Company's stock option plans, (ii) any provision of any agreement
evidencing any outstanding Company Option, or (iii) any restricted stock
purchase agreement;
(f) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of either of the
Acquired Corporations, and neither of the Acquired Corporations has
effected or been a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction or received any
Acquisition Proposal;
(g) neither of the Acquired Corporations has formed any subsidiary or
acquired any equity interest or other interest in any other Entity;
(h) neither of the Acquired Corporations has made any capital
expenditure which, when added to all other capital expenditures made on
behalf of the Acquired Corporations since June 30, 1996, exceeds $100,000
in the aggregate;
(i) except as disclosed in Part 2.10 of the Company Disclosure
Schedule, neither of the Acquired Corporations has (i) entered into or
permitted any of the material assets owned or used by it to become bound by
any Material Contract, or (ii) amended or prematurely terminated, or waived
any material right or remedy under, any Material Contract;
(j) neither of the Acquired Corporations has (i) acquired, leased or
licensed any right or other asset from any other Person, (ii) sold or
otherwise disposed of, or leased or licensed, any right or other asset to
any other Person, or (iii) waived or relinquished any right, except for
immaterial rights or other immaterial assets acquired, leased, licensed or
disposed of in the ordinary course of business and consistent with past
practices;
(k) neither of the Acquired Corporations has written off as
uncollectible, or established any extraordinary reserve with respect to,
any account receivable or other indebtedness;
(l) neither of the Acquired Corporations has made any pledge of any
of its assets or otherwise permitted any of its material assets to become
subject to any
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Encumbrance, except for (i) any lien for current taxes not yet due and
payable, and (ii) minor liens that have arisen in the ordinary course of
business and that do not (individually or in the aggregate) materially
detract from the value of the assets subject thereto or materially impair
the operations of either of the Acquired Corporations;
(m) neither of the Acquired Corporations has (i) lent money to any
Person, or (ii) incurred or guaranteed any indebtedness for borrowed money;
(n) neither of the Acquired Corporations has (i) established or
adopted any Plan, (ii) caused or permitted any Plan to be amended in any
material respect, or (iii) paid any bonus or made any profit-sharing or
similar payment to or for the benefit of any of its directors, officers or
employees in excess of $5,000 in any single case or $25,000 in the
aggregate, or materially increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable
to any of its directors or officers or employees;
(o) neither of the Acquired Corporations has changed any of its
methods of accounting or accounting practices in any respect;
(p) neither of the Acquired Corporations has made any material Tax
election;
(q) neither of the Acquired Corporations has commenced any Legal
Proceeding or settled any Legal Proceeding involving payments in excess of
$10,000 or involving any material asset of either of the Acquired
Corporations;
(r) neither of the Acquired Corporations has entered into any
material transaction or taken any other material action outside the
ordinary course of business or inconsistent with its past practices; and
(s) neither of the Acquired Corporations has agreed or committed to
take any of the actions referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS. The Acquired Corporations own, and have good, valid
and marketable title to, all assets purported to be owned by them and which are
material to either of the Acquired Corporations or to the conduct of their
business, including: (i) all assets owned by either of the Acquired Corporations
and reflected on the Unaudited Interim Balance Sheet; and (ii) all assets
referred to in Parts 2.7(b), 2.8 and 2.9 of the Company Disclosure Schedule and
all rights under the Contracts identified in Part 2.10 of the Company Disclosure
Schedule. All of said assets are owned by the Acquired Corporations free and
clear of any Encumbrances, except for (x) any lien for current taxes not yet due
and payable, and (y) minor liens that have arisen in the ordinary course of
business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of either of the Acquired Corporations.
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2.7 RECEIVABLES, LOANS AND ADVANCES.
(a) All existing accounts receivable of the Acquired Corporations
(including those accounts receivable reflected on the Unaudited Interim Balance
Sheet that have not yet been collected and those accounts receivable that have
arisen since June 30, 1996 and have not yet been collected) (i) represent valid
obligations of customers of the Acquired Corporations arising from bona fide
transactions entered into in the ordinary course of business, (ii) are current
and will be collected in full when due, without any counterclaim or set off (net
of an allowance for doubtful accounts not to exceed $50,000 in the aggregate).
(b) Part 2.7(b) of the Company Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of all loans and
advances made by, and note receivables and other receivables of, either of the
Acquired Corporations, including loans and advances made by either of the
Acquired Corporations to any employee, director, consultant or independent
contractor of such Acquired Corporation, other than trade receivables in excess
of $25,000 that have arisen in the ordinary course of business consistent with
past practices or routine travel advances made to employees in the ordinary
course of business.
2.8 EQUIPMENT; LEASEHOLD. Part 2.8 of the Company Disclosure Schedule
accurately identifies all material items of equipment leased by the Acquired
Corporations. All material items of equipment and other tangible assets owned
by or leased to the Acquired Corporations are adequate for the uses to which
they are being put, are in good condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the business of the Acquired
Corporations in the manner in which such business is currently being conducted.
Neither of the Acquired Corporations owns any real property or any interest in
real property, except for the leaseholds created under the real property leases
identified in Part 2.8 of the Company Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Proprietary Asset owned by the Acquired Corporations and
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such Proprietary Asset,
and (ii) the names of the jurisdictions covered by the applicable registration
or application. Part 2.9(a)(ii) of the Company Disclosure Schedule identifies
and provides a brief description of all other Proprietary Assets owned by the
Acquired Corporations that are material to the business of the Acquired
Corporations. Part 2.9(a)(iii) of the Company Disclosure Schedule identifies
and provides a brief description of each Proprietary Asset that is licensed or
otherwise made available to the Acquired Corporations by any Person and is
material to the business of the Acquired Corporations (except for any
Proprietary Asset that is licensed to the Acquired Corporations under any third
party software license generally available to the public), identifies the
Contract under which such Proprietary Asset is being licensed or otherwise made
available to such Acquired Corporation. The Acquired Corporations have good,
valid and marketable title to all of the Acquired Corporation Proprietary Assets
identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the Company Disclosure Schedule,
free and clear of all Encumbrances,
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except for (i) any lien for current taxes not yet due and payable, and (ii)
minor liens that have arisen in the ordinary course of business and that do not
(individually or in the aggregate) materially detract from the value of the
assets subject thereto or materially impair the operations of either of the
Acquired Corporations. The Acquired Corporations have a valid right to use,
license and otherwise exploit all Proprietary Assets identified in Part
2.9(a)(iii) of the Company Disclosure Schedule. Except as set forth in Part
2.9(a)(iv) of the Company Disclosure Schedule, neither of the Acquired
Corporations has developed jointly with any other Person any Acquired
Corporation Proprietary Asset that is material to the business of the Acquired
Corporations with respect to which such other Person has any rights. Except as
set forth in Part 2.9(a)(v) of the Company Disclosure Schedule, there is no
Acquired Corporation Contract (with the exception of end user license agreements
in the form previously delivered by the Company to Parent) pursuant to which any
Person has any right (whether or not currently exercisable) to use, license or
otherwise exploit any Acquired Corporation Proprietary Asset. Without limiting
the generality of the foregoing, no Person has any right or license to use,
sell, manufacture or cause to be manufactured any product embodying any
invention or discovery made, conceived or actually reduced to practice in
connection with the performance of any Contract, except that the distributors of
the Acquired Corporations have the non-exclusive right to sell products
manufactured by the Acquired Corporations pursuant to their distribution
agreements with the Acquired Corporations.
(b) The Acquired Corporations have taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all material Acquired Corporation Proprietary Assets (except Acquired
Corporation Proprietary Assets whose value would be unimpaired by public
disclosure). No current or former officer, director, stockholder, employee,
consultant or independent contractor has any right, claim or interest in or with
respect to any Acquired Corporation Proprietary Asset.
(c) To the best of the knowledge of the Company, all patents,
trademarks, service marks and copyrights that are registered with any
Governmental Body and held by either of the Acquired Corporations are valid and
subsisting. To the best of the knowledge of the Company, none of the Acquired
Corporation Proprietary Assets and no Proprietary Asset that is currently being
developed by either of the Acquired Corporations (either by itself or with any
other Person) infringes, misappropriates or conflicts with any Proprietary Asset
owned or used by any other Person. To the best of the knowledge of the Company,
none of the products that are or have been designed, created, developed,
assembled, manufactured or sold by either of the Acquired Corporations is
infringing, misappropriating or making any unlawful or unauthorized use of, and
none of such products has at any time infringed, misappropriated or made any
unlawful or unauthorized use of, and neither of the Acquired Corporations has
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful or unauthorized use of, any Proprietary Asset owned or used by any
other Person. To the best of the knowledge of the Company, no other Person is
infringing, misappropriating or making any unlawful or unauthorized use of, and
no Proprietary Asset owned or used by any other Person infringes or conflicts
with, any material Acquired Corporation Proprietary Asset.
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(d) The Acquired Corporation Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Acquired Corporations to conduct
their business in the manner in which such business has been and is being
conducted. Neither of the Acquired Corporations has (i) licensed any of the
Acquired Corporation Proprietary Assets to any Person on an exclusive basis, or
(ii) entered into any covenant not to compete or Contract limiting its ability
to exploit fully any material Acquired Corporation Proprietary Assets or to
transact business in any market or geographical area or with any Person.
(e) Except as set forth in Part 2.9(e) of the Company Disclosure
Schedule, neither of the Acquired Corporations has (other than pursuant to
license or escrow agreements identified in Part 2.10 of the Company Disclosure
Schedule) disclosed or delivered to any Person, or permitted the disclosure or
delivery to any escrow agent or other Person, of the source code, or any portion
or aspect of the source code, or any proprietary information or algorithm
contained in any source code, of any material Acquired Corporation Proprietary
Asset. No event has occurred, and no circumstance or condition exists, that
(with or without notice or lapse of time) will, or could reasonably be expected
to, result in the disclosure or delivery to any other Person of the source code,
or any portion or aspect of the source code, or any proprietary information or
algorithm contained in any source code, of any material Acquired Corporation
Proprietary Asset. Part 2.9(e) of the Company Disclosure Schedule identifies
each Contract pursuant to which the Company has deposited or is required to
deposit with an escrowholder or any other Person the source code, or any portion
or aspect of the source code, or any proprietary information or algorithm
contained in or relating to any source code, of any material Acquired
Corporation Proprietary Asset.
2.10 CONTRACTS.
(a) Part 2.10 of the Company Disclosure Schedule identifies each
Acquired Corporation Contract that constitutes a Material Contract.
(b) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10 of the Company Disclosure
Schedule, including all amendments thereto. Each Contract identified in Part
2.10 of the Company Disclosure Schedule is valid and in full force and effect,
and is enforceable by the Company in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Company Disclosure
Schedule:
(i) neither of the Acquired Corporations has violated or
breached, or committed any default under, any Acquired Corporation
Contract, and, to the best of the knowledge of the Company, no other Person
has violated or breached, or committed any default under, any Company
Contract, except where such violations, breaches or defaults,
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individually or in the aggregate, have not had and will not have a Material
Adverse Effect on the Acquired Corporations;
(ii) to the best of the knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will, or could reasonably be expected to, (A)
result in a material violation or breach of any of the provisions of any
Acquired Corporation Contract, (B) give any Person the right to declare a
material default or exercise any material remedy under any Acquired
Corporation Contract, (C) give any Person the right to a material rebate,
chargeback, penalty or change in delivery schedule under any Acquired
Corporation Contract, (D) give any Person the right to accelerate the
maturity or performance of any Acquired Corporation Contract, or (E) give
any Person the right to cancel, terminate or modify any Acquired
Corporation Contract;
(iii) since December 31, 1993, neither of the Acquired
Corporations has received any notice or other communication regarding any
actual or possible violation or breach of, or default under, any Acquired
Corporation Contract; and
(iv) neither of the Acquired Corporations has waived any of its
material rights under any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Acquired Corporation Contract to renegotiate, any amount paid or payable
to any Acquired Corporation under any Material Contract or any other material
term or provision of any Material Contract.
2.11 LIABILITIES. Neither of the Acquired Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured (of
the type required to be reflected in a balance sheet of the Acquired
Corporations prepared in accordance with generally accepted accounting
principles, except for: (a) liabilities identified as such in the "liabilities"
column of the Unaudited Interim Balance Sheet; and (b) liabilities that have
been incurred by the Acquired Corporations since June 30, 1996 in the ordinary
course of business and consistent with past practices.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquired Corporations
is, and has at all times since December 31, 1993 been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and will not have a Material Adverse Effect on
the Acquired Corporations. Since December 31, 1993, except as disclosed in Part
2.15 of the Company Disclosure Schedule, neither of the Acquired Corporations
has received any notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement.
2.13 CERTAIN BUSINESS PRACTICES. Neither of the Acquired Corporations nor
any director, officer, agent or employee of either of the Acquired Corporations
has (i) used any funds
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for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
2.14 GOVERNMENTAL AUTHORIZATIONS. The Acquired Corporations hold all
material Governmental Authorizations necessary to enable the Acquired
Corporations to conduct their respective businesses in the manner in which such
businesses are currently being conducted. All such Governmental Authorizations
are valid and in full force and effect. Each Acquired Corporation is, and at
all times since December 31, 1993 has been, in substantial compliance with the
terms and requirements of such Governmental Authorizations. Since December 31,
1993, neither of the Acquired Corporations has received any notice or other
communication from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any material
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization.
2.15 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
respective Acquired Corporations with any Governmental Body with respect to any
taxable period ending on or before the Closing Date (the "Acquired Corporation
Returns") (i) have been or will be filed on or before the applicable due date
(including any extensions of such due date), and (ii) have been, or will be when
filed, prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Acquired Corporation Returns to be due
on or before the Closing Date have been or will be paid on or before the Closing
Date.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. Each
Acquired Corporation will establish, in the ordinary course of business and
consistent with its past practices, reserves adequate for the payment of all
Taxes for the period from June 30, 1996 through the Closing Date. As of
December 31, 1995, the Company had a net operating loss carryforward for federal
income tax purposes in the amount of $2,000,000.
(c) No Acquired Corporation Return relating to income Taxes has ever
been examined or audited by any Governmental Body. There have been no
examinations or audits of any Acquired Corporation Return. No extension or
waiver of the limitation period applicable to any of the Acquired Corporation
Returns has been granted (by the Company or any other Person), and no such
extension or waiver has been requested from any Acquired Corporation.
(d) No claim or Legal Proceeding is pending or, to the best of the
knowledge of the Company, has been threatened against or with respect to any
Acquired Corporation in respect of any material Tax. There are no unsatisfied
liabilities for material Taxes (including
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liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document received
by any Acquired Corporation with respect to any material Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by the Acquired Corporations
and with respect to which adequate reserves for payment have been established).
There are no liens for material Taxes upon any of the assets of either of the
Acquired Corporations except liens for current Taxes not yet due and payable.
Neither of the Acquired Corporations has entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. Neither of the
Acquired Corporations has been, and neither of the Acquired Corporations will
be, required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of either of the Acquired Corporations that, considered
individually or collectively with any other such Contracts, will, or could
reasonably be expected to, give rise directly or indirectly to the payment of
any amount that would not be deductible pursuant to Section 280G or Section 162
of the Code. Neither of the Acquired Corporations is, or has ever been, a party
to or bound by any tax indemnity agreement, tax sharing agreement, tax
allocation agreement or similar Contract.
2.16 EMPLOYEE BENEFIT PLANS
(a) With respect to each material employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") maintained or contributed to by the Acquired
Corporations (the "Plans"), the Acquired Corporations have made available to
Parent an accurate and complete copy of, to the extent applicable, (i) such
Plan, (ii) the most recent annual report (Form 5500) for such Plan, (iii) each
trust agreement related to such Plan, (iv) the most recent summary plan
description for such Plan, and (v) the most recent Internal Revenue Service (the
"IRS") determination letter issued with respect to such Plan.
(b) Each Plan which is intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the IRS covering the
provisions of the Tax Reform Act of 1986 stating that such Plan is so qualified
and nothing has occurred since the date of such letter that could reasonably be
expected to affect the qualified status of such Plan. Each Plan has been
operated in all material respects in accordance with its terms and the
requirements of applicable law. Neither of the Acquired Corporations has
incurred or is reasonably expected to incur any material liability under Title
IV of ERISA in connection with any Plan.
2.17 ENVIRONMENTAL MATTERS. Each of the Acquired Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the Acquired Corporations of
all permits and other Governmental Authori-
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zations required under applicable Environmental Laws, and compliance with the
terms and conditions thereof. Neither of the Acquired Corporations has received
any notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that
either of the Acquired Corporations is not in compliance with any Environmental
Law, and, to the best of the knowledge of the Company, there are no
circumstances that may prevent or interfere with the compliance by either of the
Acquired Corporations with any Environmental Law in the future. To the best of
the knowledge of the Company, no current or prior owner of any property leased
or controlled by either of the Acquired Corporations has received any notice or
other communication (in writing or otherwise), whether from a Government Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or either of the Acquired Corporations is not in compliance with any
Environmental Law. (For purposes of this Section 2.17: (i) "Environmental Law"
means any federal, state, local or foreign Legal Requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.)
2.18 INSURANCE. The Company has delivered to Parent a copy of each
material insurance policy and each material self insurance program relating to
the business, assets or operations of either of the Acquired Corporations. Each
such insurance policy is in full force and effect. Since December 31, 1993,
neither of the Acquired Corporations has received any notice or other
communication regarding any actual or possible (a) cancellation or invalidation
of any insurance policy, (b) refusal of any coverage or rejection of any
material claim under any insurance policy, or (c) material adjustment in the
amount of the premiums payable with respect to any insurance policy. There is
no pending material claim (including any workers' compensation claim) under or
based upon any insurance policy of either of the Acquired Corporations; and, to
the best of the knowledge of the Company, no event has occurred and no condition
or circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for any such claim.
2.19 RELATED PARTY TRANSACTIONS. No Related Party has any direct or
indirect interest in any material asset used in or otherwise relating to the
business of either of the Acquired Corporations. No Related Party has any
direct or indirect financial interest in, any material Contract, transaction or
business dealing involving either of the Acquired Corporations. No Related
Party is competing directly or indirectly with either of the Acquired
Corporations. No Related Party has any claim or right against either of the
Acquired Corporations (other than rights under Company Options and rights to
receive compensation for services performed as an employee of an Acquired
Corporation). (For purposes of this Section 2.19 each of the following shall be
deemed to be a "Related Party": (i) each individual who is an officer or
director of
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either of the Acquired Corporations; (ii) each member of the immediate family
of each of the individuals referred to in clause "(i)" above; and (iii) any
trust or other Entity (other than an Acquired Corporation) in which any one of
the individuals referred to in clauses "(i)" and "(ii)" above holds (or in which
more than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.)
2.20 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and (to the best of the
knowledge of the Company) no Person has threatened to commence any Legal
Proceeding: (i) that involves either of the Acquired Corporations or any of the
assets owned or used by either of the Acquired Corporations; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement. To the best of the knowledge of the Company, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to or
serve as a basis for the commencement of any such Legal Proceeding. Without
limiting the generality of the foregoing, to the best of the knowledge of the
Company, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, cause
or provide a basis for a director, officer or other Representative of either of
the Acquired Corporations to seek indemnification from, or commence a Legal
Proceeding against or involving, either of the Acquired Corporations.
(b) There is no order, writ, injunction, judgment or decree to which
either of the Acquired Corporations, or any of the assets owned or used by
either of the Acquired Corporations, is subject. To the best of the knowledge
of the Company, no officer or other employee of either of the Acquired
Corporations is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the business of either of the Acquired
Corporations.
2.21 AUTHORITY; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES; BINDING NATURE
OF AGREEMENT. The Company has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement.
The board of directors of the Company (at a meeting duly called and held) has
(a) unanimously determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders, (b) unanimously approved the
execution, delivery and performance of this Agreement by the Company and has
unanimously approved the Merger, (c) unanimously recommended the adoption and
approval of this Agreement and the Merger by the holders of Company Capital
Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company's stockholders at the Company Stockholders' Meeting
(as defined in Section 5.2), and (d) adopted a resolution having the effect of
causing the Company not to be subject to any state takeover law or similar Legal
Requirement that might otherwise apply to the Merger or any of the other
transactions contepplated by this Agreement. This Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (i) laws of general
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application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.22 DGCL SECTION 203. As of the date hereof and at all times on or prior
to the Effective Date, Section 203 of the DGCL is, and will be, inapplicable to
the Merger and the other transactions contemplated by this Agreement.
2.23 INAPPLICABILITY OF HART-SCOTT-RODINO ACT. No stockholder of the
Company directly or indirectly beneficially owns or has the right to vote 50% or
more of the outstanding voting securities of the Company, or, directly or
indirectly, has the right (whether by Contract or otherwise) to elect 50% or
more of the members of the Board of Directors of the Company. Accordingly, the
Company is the "ultimate parent entity" of the Acquired Corporations for
purposes of the HSR Act. The total assets (within the meaning of the HSR Act)
of the Acquired Corporations are less than $10,000,000 in the aggregate, and
accordingly no notification form or other document is required to be filed under
the HSR Act with respect to the Merger or any of the other transactions
contemplated by this Agreement.
2.24 VOTE REQUIRED. The Required Vote (as hereinafter defined) is the only
vote of the holders of any class or series of the Company's capital stock
necessary to adopt and approve this Agreement, the Merger and the other
transactions contemplated by this Agreement. For purposes of this Agreement,
"Required Vote" shall mean the affirmative vote of the holders of a majority of
the outstanding shares of Company Capital Stock (voting together as a single
class); PROVIDED, HOWEVER, that if the Company is subject to Section 2115 of the
California Corporations Code, then "Required Vote" shall mean the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock and the holders of a majority of the outstanding shares of Company
Preferred Stock.
2.25 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the certificate of incorporation, bylaws or other charter
or organizational documents of either of the Acquired Corporations, or (ii)
any resolution adopted by the stockholders, the board of directors or any
committee of the board of directors of either of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person
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the right to challenge the Merger or any of the other transactions
contemplated by this Agreement or to exercise any remedy or obtain any
relief under, any Legal Requirement or any order, writ, injunction,
judgment or decree to which either of the Acquired Corporations, or any
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of the assets owned or used by either of the Acquired Corporations, is
subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any material
Governmental Authorization that is held by either of the Acquired
Corporations or that otherwise relates to the business of either of the
Acquired Corporations or to any of the assets owned or used by either of
the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Acquired Corporation
Contract that is or would constitute a Material Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any
such Acquired Corporation Contract, (ii) a rebate, chargeback, penalty or
change in delivery schedule under any such Acquired Corporation Contract,
(iii) accelerate the maturity or performance of any such Acquired
Corporation Contract, or (iv) cancel, terminate or modify any term of such
Acquired Corporation Contract, except for any such violations, breaches,
defaults or other occurrences that would not have a Material Adverse Effect
on the Acquired Corporations;
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by either of the Acquired
Corporations (except for minor liens that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto
or materially impair the operations of either of the Acquired
Corporations); or
(f) result in, or increase the likelihood of, the disclosure or
delivery to any escrowholder or other Person (other than Parent or Merger
Sub) of the source code, or any portion or aspect of the source code, or
any proprietary information or algorithm contained in or relating to any
source code, of any material Acquired Corporation Proprietary Asset, or the
transfer of any material asset of either of the Acquired Corporations to
any Person (other than Parent or Merger Sub).
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Except as may be required by the DGCL, neither of the Acquired Corporations is
or will be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement. The Company does not know of any
reason why any required Consent will not be obtained.
2.26 FAIRNESS OPINION. The Company has received the written opinion of DMG
Technology Group, financial advisor to the Company, dated the date of this
Agreement, to the effect that the consideration to be received by the Company's
stockholders in the Merger is fair to the stockholders of the Company from a
financial point of view.
2.27 FINANCIAL ADVISOR. Except for DMG Technology Group, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
either of the Acquired Corporations. The total of all fees, commissions and
other amounts that have been paid and that may become payable to DMG Technology
Group by the Company if the Merger is consummated will not exceed that amount
disclosed in writing to Parent on or before the date of this Agreement.
2.28 FULL DISCLOSURE.
(a) This Agreement (including the Company Disclosure Schedule) does
not, and the certificate referred to in Section 6.7(j) will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
(b) None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the registration statement on
Form S-4 to be filed with the SEC by Parent in connection with the issuance of
Parent Common Stock in the Merger (the "S-4 Registration Statement") will, at
the time the S-4 Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the Prospectus/Proxy Statement
filed as part of the S-4 Registration Statement (the "Prospectus/Proxy
Statement"), will, at the time the Prospectus/Proxy Statement is mailed to the
stockholders of the Company, at the time of the Company Stockholders' Meeting or
as of the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
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which they are made, not misleading. The Prospectus/Proxy Statement will comply
as to form in all material respects with the provisions of applicable Legal
Requirements.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that, except as
set forth in the Parent SEC Documents (as defined in Section 3.2(a)):
3.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of Parent and Merger Sub to
consummate the transactions contemplated hereby.
3.2 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by Parent with the SEC
between January 1, 1996 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and (iii)
fairly present the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Parent and its subsidiaries for the periods covered thereby.
3.3 DISCLOSURE. None of the information to be supplied by Parent for
inclusion in the S-4 Registration Statement will, at the time the S-4
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
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required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. None of the information to be supplied by Parent for inclusion in
the Prospectus/Proxy Statement will, at the time the Prospectus/Proxy Statement
is mailed to the stockholders of the Company, at the time of the Company
Stockholders' Meeting or as of the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Between June 30, 1996 and the
date of this Agreement, there has not been: (i) any event that had a Material
Adverse Effect on Parent; or (ii) any material change by Parent in its
accounting methods, principles or practices, except as required by changes in
generally accepted accounting principles.
3.5 LEGAL PROCEEDINGS. There is no pending Legal Proceeding and (to the
best of the knowledge of Parent) no Person has threatened to commence any Legal
Proceeding that involves Parent or any of the assets owned or used by Parent and
would have a Material Adverse Effect on Parent.
3.6 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement (including the contemplated issuance of
Parent Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
their respective boards of directors. This Agreement constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable against them
in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
3.7 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives and the Subsidiary's Representatives
to: (a) provide Parent and Parent's Representatives with reasonable access to
the Acquired Corporations' Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations; and (b) provide Parent and
Parent's Representatives with such copies of the existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Corporations, and with such additional
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financial, operating and other data and information regarding the Acquired
Corporations, as Parent may reasonably request. Without limiting the generality
of the foregoing, during the Pre-Closing Period, the Company shall promptly
provide Parent with copies of:
(i) all material operating and financial reports prepared by the
Company for its senior management, including copies of the unaudited
monthly consolidated balance sheets of the Acquired Corporations and the
related unaudited monthly consolidated income statements, statements of
changes in stockholders' equity and statements of cash flows;
(ii) any written materials or communications sent by the Company to
its stockholders; and
(iii) any notice, report or other document filed with or sent to
any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement.
4.2 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the Pre-Closing Period: (i) the Company shall ensure that
each of the Acquired Corporations conducts its business and operations (A) in
the ordinary course and in accordance with prudent business practices and (B) in
compliance with all applicable Legal Requirements and the requirements of all
Material Contracts; (ii) the Company shall use reasonable efforts to ensure that
each of the Acquired Corporations preserves intact its current business
organization, keeps available the services of its current officers and employees
and maintains its relations and goodwill with all suppliers, customers,
landlords, creditors, licensors, licensees, employees and other Persons having
business relationships with the respective Acquired Corporations; (iii) the
Company shall keep in full force all insurance policies referred to in Section
2.18; (iv) the Company shall provide all notices, assurances and support
required by any Acquired Corporation Contract relating to any Proprietary Asset
in order to ensure that no condition under such Acquired Corporation Contract
occurs which could result in, or could increase the likelihood of, a release
from any escrow of any source code materials or other Proprietary Assets which
have been deposited or are required to be deposited in escrow under the terms
of such Acquired Corporation Contract; and (v) the Company shall (to the extent
requested by Parent) cause its officers to report regularly to Parent concerning
the status of the Company's business.
(b) During the Pre-Closing Period, the Company shall not (without
the prior written consent of Parent), and shall not permit the Subsidiary to:
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other
securities;
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(ii) sell, issue, grant or authorize the issuance or grant of (i) any
capital stock or other security, (ii) any option, call, warrant or right to
acquire, or relating to, any capital stock or other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security (except that the Company may (1) issue up to 600,000 shares of
Company Common Stock upon the valid conversion of shares of outstanding
Company Preferred Stock, and (2) issue Company Common Stock upon the valid
exercise of Company Options outstanding as of the date of this Agreement);
(iii) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company's stock option plans,
any provision of any agreement evidencing any outstanding stock option or
any restricted stock purchase agreement, or otherwise modify any of the
terms of any outstanding option, warrant or other security or any related
Contract;
(iv) amend or permit the adoption of any amendment to its certificate
of incorporation or bylaws or other charter or organizational documents, or
effect or become a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(v) form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(vi) make any capital expenditure (except that the Acquired
Corporations may make capital expenditures that, when added to all other
capital expenditures made on behalf of the Acquired Corporations during the
Pre-Closing Period, do not exceed $100,000 in the aggregate);
(vii) enter into or become bound by, or permit any of the assets
owned or used by it to become bound by, any Material Contract, or amend or
prematurely terminate, or waive any material right or remedy under, any
Material Contract;
(viii) acquire, lease or license any right or other asset from any
other Person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person (except in each case for assets
acquired, leased, licensed or disposed of by the Company in the ordinary
course of business and consistent with prudent business practices), or
waive or relinquish any material right;
(ix) lend money to any Person, or incur or guarantee any indebtedness
(except that the Company may make routine borrowings in the ordinary course
of business and in accordance with prudent business practices under its
line of credit with Coast Commercial Bank);
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(x) establish, adopt or amend any employee benefit plan, pay any
bonus or make any profit-sharing or similar payment (except pursuant to
existing plans or programs consistent with past practices) to, or increase
by more than 5% the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its
directors, officers or employees;
(xi) hire any new employees, or engage any consultant or independent
contractor for a period exceeding 30 days;
(xii) change any of its methods of accounting or accounting
practices in any respect;
(xiii) make any material Tax election;
(xiv) commence any Legal Proceeding, or enter into any settlement
of any Legal Proceeding involving payments in excess of $10,000 or
involving any material asset of either of the Acquired Corporations;
(xv) enter into any material transaction or take any other material
action outside the ordinary course of business or inconsistent with prudent
business practices; or
(xvi) agree or commit to take any of the actions described in
clauses "(i)" through "(xv)" of this Section 4.2(b).
Parent agrees that it will not unreasonably withhold its consent to any proposal
by the Company to repurchase shares of Company Common Stock pursuant to rights
of repurchase existing as of the date of this Agreement under any employee or
consultant stock plan or arrangement.
(c) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of: (i) the discovery by the Company of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement, which
inaccuracy or breach, considered together with all other such inaccuracies and
breaches, would have a Material Adverse Effect on the Acquired Corporations;
(ii) any event, condition, fact or circumstance that occurs, arises or exists
after the date of this Agreement, that (together with all other such events,
conditions, facts and circumstances) would have a Material Adverse Effect on the
Acquired Corporations and that would cause or constitute an inaccuracy in or
breach of any representation or warranty made by the Company in this Agreement
if (A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any material
breach of any covenant or obligation of the Company; and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
of the conditions set forth in Section 6 or Section 7
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impossible or unlikely or that has had or could reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations.
4.3 NO SOLICITATION.
(a) The Company shall not directly or indirectly, and shall instruct
its Representatives and the Subsidiary's Representatives not to, directly or
indirectly, (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal or take any action that could
reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any
information regarding the Company or the Subsidiary to any Person in connection
with or in response to an Acquisition Proposal, (iii) negotiate or engage in
discussions with any Person with respect to any Acquisition Proposal, (iv)
approve, endorse or recommend any Acquisition Proposal or (v) enter into any
letter of intent or Contract contemplating or otherwise relating to any
Acquisition Proposal; PROVIDED, HOWEVER, that this Section 4.3(a) shall not
prohibit the Company or its Board of Directors from furnishing nonpublic
information regarding the Acquired Corporations to, or entering into discussions
with, any Person in response to an unsolicited bona fide written Acquisition
Proposal submitted by such Person if (1) the Board of Directors of the Company
concludes in good faith, based upon the advice of its financial advisor, that
such Acquisition Proposal could result in a transaction that is more favorable
to the Company's stockholders from a financial point of view than the Merger,
(2) the Board of Directors of the Company concludes in good faith, based upon
the advice of its outside legal counsel, that such action is required in order
for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company's stockholders under applicable law, and (3) prior to
furnishing such nonpublic information to, or entering into discussions with,
such Person, the Board of Directors of the Company receives from such Person an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all written and oral information furnished to such Person on
behalf of the Company.
(b) The Company shall promptly advise Parent orally and in writing of
any Acquisition Proposal that is made or submitted by any Person during the
Pre-Closing Period.
(c) The Company shall immediately cease and cause to be terminated
any existing discussions or negotiations with any Person that relate to any
Acquisition Proposal.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; PROSPECTUS/PROXY STATEMENT.
(a) As promptly as practicable after the date of this Agreement, the
Company and Parent shall prepare and cause to be filed with the SEC the S-4
Registration Statement, together with the Prospectus/Proxy Statement and any
other documents required by the Securities Act or the Exchange Act in connection
with the Merger. Each of Parent and the Company shall use all reasonable
efforts to cause the S-4 Registration Statement to comply with the rules and
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regulations promulgated by the SEC, to respond promptly to any comments of the
SEC or its staff and to have the S-4 Registration Statement declared effective
under the Securities Act as promptly as practicable after it is filed with the
SEC. Each of Parent and the Company shall promptly furnish to the other all
information that may be required or reasonably requested in connection with any
action contemplated by this Section 5.1. If any event relating to either of the
Acquired Corporations or relating to Parent occurs, or if the Company or Parent
discovers any information, that should be set forth in an amendment or
supplement to the S-4 Registration Statement or the Prospectus/Proxy Statement,
then the Company or Parent (as the case may be) shall promptly inform the other
thereof and shall cooperate with the other in filing such amendment or
supplement with the SEC and, if appropriate, in mailing such amendment or
supplement to stockholders of the Company. Each of the Company and Parent shall
(after consulting with the other) use all reasonable efforts to ensure that any
applicable rules, regulations or requirements of the VSE or the BCSC relating to
the S-4 Registration Statement or the Prospectus/Proxy Statement are complied
with in all respects.
(b) Prior to the Effective Time, Parent shall use reasonable efforts
to obtain all regulatory approvals needed to ensure that the Parent Common Stock
to be issued in the Merger will be qualified under the securities law of every
jurisdiction of the United States and Canada in which any registered holder of
Company Capital Stock has an address of record on the record date for
determining the stockholders entitled to notice of and to vote on the Merger.
5.2 COMPANY STOCKHOLDERS' MEETING.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of, convene and hold a meeting of the
holders of Company Capital Stock (the "Company Stockholders' Meeting") to
consider, act upon and vote upon the adoption of this Agreement and approval of
the Merger. The Company Stockholders' Meeting will be held as promptly as
practicable and (subject to all applicable laws and regulations) in any event
within 45 days after the S-4 Registration Statement is declared effective by the
SEC. The Company shall ensure that the Company Stockholders' Meeting is called,
noticed, convened, held and conducted, and that all proxies solicited in
connection with the Company Stockholders' Meeting are solicited, in compliance
with all applicable Legal Requirements (including any applicable regulations of
the VSE). The Company's obligation to call, give notice of, convene and hold
the Company Stockholders' Meeting in accordance with this Section 5.2(a) shall
not be limited or otherwise affected by the commencement, disclosure,
announcement or submission to the Company of any Acquisition Proposal.
(b) Subject to Section 5.2(c): (i) the Board of Directors of the
Company shall recommend that the Company's stockholders vote in favor of and
adopt and approve this Agreement and the Merger at the Company Stockholders'
Meeting; (ii) the Prospectus/Proxy Statement shall include a statement to the
effect that the Board of Directors of the Company has recommended that the
Company's stockholders vote in favor of and adopt and approve this Agreement and
the Merger at the Company Stockholders' Meeting; and (iii) neither the Board of
Directors of the Company nor any committee thereof shall withdraw, amend or
modify, or
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propose or resolve to withdraw, amend or modify, in a manner adverse to Parent,
the recommendation of the Board of Directors of the Company that the Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger.
(c) Nothing in this Agreement shall prevent the Board of Directors of
the Company from withdrawing, amending or modifying its recommendation in favor
of the Merger if (i) the Company shall not have violated any of the restrictions
set forth in Section 4.3, and (ii) the Board of Directors of the Company
concludes in good faith, based upon the advice of its outside counsel, that the
withdrawal, amendment or modification of such recommendation is required in
order for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company's stockholders under applicable law. Nothing
contained in this Section 5.2 shall limit the Company's obligation to hold and
convene the Company Stockholders' Meeting (regardless of whether the
recommendation of the Board of Directors of the Company shall have been
withdrawn, amended or modified).
5.3 REGULATORY APPROVALS. The Company and Parent shall use all reasonable
efforts to file as soon as practicable after the date of this Agreement all
notices, reports and other documents required by law to be filed with any
Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement and to submit promptly any additional information
requested by any such Governmental Body. Each of the Company and Parent shall
(i) give the other party prompt notice of the commencement of any material Legal
Proceeding by or before any court or other Governmental Body with respect to the
Merger or any of the other transactions contemplated by this Agreement, (ii)
keep the other party informed as to the status of any such Legal Proceeding and
(iii) except as may be prohibited by any Governmental Body or by any Legal
Requirement, permit the other party to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document filed with or provided to any Governmental Body in
connection with any such Legal Proceeding.
5.4 STOCK OPTIONS.
(a) As soon as practicable after the date of this Agreement, the
Company shall (after consulting with Parent) make arrangements to cause each
outstanding Company Option with a per share exercise price exceeding the
Specified Price (as defined below) to be modified by reducing such exercise
price to an amount equal to the Specified Price. The "Specified Price" shall be
determined by multiplying the Common Stock Exchange Ratio by the closing price
of a share of Parent Common Stock on the NYSE on the second trading day
following the date of this Agreement. The Company shall not be permitted to
implement such arrangements unless Parent shall have notified the Company in
writing that all documentation to be used for the purpose of implementing such
arrangements is satisfactory to Parent.
(b) Subject to Section 5.4(c), at the Effective Time, all rights with
respect to Company Common Stock under each Company Option then outstanding shall
be converted into and become rights with respect to Parent Common Stock, and
Parent shall assume each such
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Company Option in accordance with the terms (as in effect as of the date of this
Agreement) of the stock option plan under which it was issued and the stock
option agreement by which it is evidenced. From and after the Effective Time,
(i) each Company Option assumed by Parent may be exercised solely for shares of
Parent Common Stock, (ii) the number of shares of Parent Common Stock subject to
each such Company Option shall be equal to the number of shares of Company
Common Stock subject to such Company Option immediately prior to the Effective
Time multiplied by the Common Stock Exchange Ratio, rounding down to the nearest
whole share (with cash, less the applicable exercise price (as adjusted as set
forth in clause "(iii)" of this sentence), being payable for any fraction of a
share), (iii) the per share exercise price under each such Company Option shall
be adjusted by dividing the per share exercise price under such Company Option
by the Common Stock Exchange Ratio and rounding up to the nearest cent and (iv)
any restriction on the exercise of any such Company Option shall continue in
full force and effect and the term, exercisability, vesting schedule and other
provisions of such Company Option shall otherwise remain unchanged; PROVIDED,
HOWEVER, that each such Company Option shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction subsequent to the Effective Time. After the Effective Time,
Parent will deliver to each holder of an outstanding Company Option a notice
describing the assumption of such Company Option. It is the intention of the
parties that Company Stock Options assumed by Parent qualify as incentive stock
options as defined in Section 422 of the Code to the extent that they qualified
as incentive stock options immediately prior to the Effective Time. Parent
agrees to file with the SEC a Registration Statement on Form S-8 relating to the
shares of Parent Common Stock issuable with respect to the assumed Company
Options no later than ten business days after the Closing Date.
(c) Notwithstanding anything to the contrary contained in this
Section 5.4, in lieu of assuming outstanding Company Options in accordance with
Section 5.4(b), Parent may, at its election, cause such outstanding Company
Options to be replaced by issuing reasonably equivalent replacement stock
options in substitution therefor.
(d) The Company shall take all action that may be necessary (under
the plans pursuant to which Company Options are outstanding and otherwise) to
effectuate the provisions of this Section 5.4 and to ensure that, from and after
the Effective Time, holders of Company Options have no rights with respect
thereto other than those specifically provided in this Section 5.4.
5.5 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) All rights to indemnification existing in favor of the present
directors and officers of the Company for acts and omissions occurring prior to
the Effective Time, as provided in the Company's Certificate of Incorporation
(as in effect on the date of this Agreement) and the Company's Bylaws (as in
effect as of the date of this Agreement), shall survive the Merger and shall be
observed by the Surviving Corporation for a period of not less than six years
from the Effective Time.
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(b) Commencing as of the Effective Time, for a period of six years
from the Effective Time, Parent shall, and shall cause the Surviving Corporation
to, to the fullest extent permitted under applicable law, indemnify and hold
harmless each of the present directors and officers of the Company
(collectively, the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees, judgments, fines, losses, damages,
liabilities and amounts paid in settlement) incurred by him in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative (a "Third Party Action"), to the extent such
Third Party Action arises out of or pertains to any action or omission in his
capacity as a director or officer of the Company arising out of or pertaining to
the transactions contemplated by this Agreement. In the event of any such Third
Party Action (whether commenced before or after the Effective Time), (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time must be reasonably satisfactory to the Surviving Corporation and Parent,
(ii) after the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, pay the reasonable fees and expenses of such counsel related to
the defense of such Third Party Action, promptly after statements therefor are
received, and (iii) Parent shall, and shall cause the Surviving Corporation to,
cooperate in the defense of such Third Party Action; PROVIDED, HOWEVER, that
neither Parent nor the Surviving Corporation will be liable for any settlement
effected without the written consent of Parent and the Surviving Corporation
(which consent will not be unreasonably withheld); and PROVIDED, FURTHER, that
in the event any claim for indemnification is asserted or made hereunder by an
Indemnified Party against Parent or the Surviving Corporation within such
six-year period, all rights of such Indemnified Party to indemnification in
respect of such claim will continue until the disposition of such claim. Parent
and the Surviving Corporation shall be entitled to participate in (but not
control) the defense of any such Third Party Action, and shall be entitled to
receive full information with respect to any such Third Party Action. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to any Third Party Action unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(c) This Section 5.5 is intended to benefit the Indemnified Parties
commencing as of the Effective Time, and will be binding on the successors of
Parent and the Surviving Corporation after the Effective Time.
5.6 ADDITIONAL AGREEMENTS.
(a) Subject to Section 5.6(b), Parent and the Company shall use all
reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, but subject
to Section 5.6(b), each party to this Agreement (i) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, (ii) shall use all reasonable efforts to obtain each Consent (if any)
required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement, and (iii) shall use all
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reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. The Company shall promptly deliver to Parent a copy of each such filing
made, each such notice given and each such Consent obtained by the Company
during the Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in Section
5.6(a) or elsewhere in this Agreement, Parent shall not have any obligation
under this Agreement to (i) dispose or cause any of its subsidiaries to dispose
of any assets, (ii) discontinue offering any product or make any other change 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 any of its subsidiaries, or the future operations of the Surviving
Corporation or the Subsidiary (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).
5.7 DISCLOSURE. Parent and the Company shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger or any of the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the Company shall
not, and shall not permit any of its Representatives to, make any disclosure
regarding the Merger or any of the other transactions contemplated by this
Agreement unless (a) Parent shall have approved such disclosure or (b) the
Company shall have been advised by its outside legal counsel that such
disclosure is required by applicable law.
5.8 AFFILIATE AGREEMENTS. The Company shall deliver to Parent, within ten
days after the date of this Agreement, a letter from the Company identifying all
Persons who may be "affiliates" of the Company as that term is used in Rule 145
under the Securities Act. The Company shall use all reasonable efforts to cause
each Person identified in such letter and each other Person who is or becomes an
"affiliate" of the Company to execute and deliver to Parent, prior to the date
of the mailing of the Prospectus/Proxy Statement, an Affiliate Agreement in a
form reasonably satisfactory to Parent.
5.9 TAX MATTERS. At or prior to the Closing, the Company and Parent shall
execute and deliver to Cooley Godward LLP and to Wilson, Sonsini, Goodrich &
Rosati, P.C. appropriate tax representation letters (which will be used in
connection with the legal opinions contemplated by Sections 6.5(b) and 7.4(b)).
5.10 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall use all
reasonable efforts to obtain and deliver to Parent prior to the Closing the
resignation of each officer and director of the Company.
5.11 EMPLOYEE BENEFITS. Parent agrees that, immediately following the
Effective Time, it will make available to each employee of the Company who
continues as an employee of the Surviving Corporation or Parent, employee
benefit plans and policies of Parent that are at least as favorable as the plans
and policies of Parent in effect immediately prior to the Effective Time,
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and will provide each such employee with credit (for purposes of participation
in Parent's employee benefit plans and policies) for service as an employee of
the Company prior to the Effective Time.
5.12 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
the Company contained in this Agreement shall have been accurate in all respects
as of the date of this Agreement and shall be accurate in all respects as of the
Closing Date as if made on and as of the Closing Date, except that any
inaccuracies in such representations and warranties will be disregarded if the
circumstances giving rise to all such inaccuracies (considered collectively) do
not constitute, and could not reasonably be expected to result in, a Material
Adverse Effect on the Acquired Corporations (it being understood that, for
purposes of determining the accuracy of such representations and warranties, (i)
all "Material Adverse Effect" qualifications and other materiality
qualifications contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the Company Disclosure
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that the
Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
6.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted and
the Merger shall have been duly approved by the Required Vote.
6.5 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have received
the following documents, each of which shall be in full force and effect:
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(a) a legal opinion of Wilson, Sonsini, Goodrich & Rosati, P.C.,
dated as of the Closing Date, in a form reasonably satisfactory to Parent;
(b) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within
the meaning of Section 368 of the Code (it being understood that, in
rendering such opinion, Cooley Godward LLP may rely upon the tax
representation letters referred to in Section 5.9);
(c) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 6.1,
6.2, 6.4, 6.6, 6.7, 6.8 and 6.9 have been duly satisfied; and
(d) the written resignations of all officers and directors of the
Company, effective as of the Effective Time.
6.6 EMPLOYEES.
(a) None of the individuals identified on Exhibit C shall have ceased
to be employed by the Company, or shall have expressed a bona fide intention to
terminate his employment with the Company or (provided that Parent has offered
to employ such individual on terms substantially similar to, or at least as
favorable on an overall basis as, the terms set forth in the employment letter
executed by Parent and such individual) a bona fide intention to decline to
accept employment with Parent.
(b) Not more than one of the individuals identified on Exhibit D
shall have ceased to be employed by the Company, or shall have expressed a bona
fide intention to terminate his employment with the Company or (provided that
Parent has offered to employ such individual on terms substantially similar to,
or at least as favorable on an overall basis as, the terms set forth in the
employment letter executed by Parent and such individual) a bona fide intention
to decline to accept employment with Parent.
6.7 NO MATERIAL ADVERSE CHANGE. Except for adverse changes that result
directly from the public announcement of the Merger or from general economic
conditions or conditions affecting the Company's industry generally, there shall
have been no material adverse change in the Company's business since the date of
this Agreement (it being understood that a downturn in the Company's financial
performance shall not, in and of itself, constitute a "material adverse change"
in the Company's business for purposes of this Section 6.7).
6.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any U.S. or Canadian federal, state or provincial
law or regulation enacted or deemed applicable to the Merger that makes
consummation of the Merger illegal.
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6.9 NO GOVERNMENTAL LITIGATION. There shall not be pending any litigation
or administrative action or proceeding in which a U.S. or Canadian federal,
state or provincial Governmental Body is a party: (a) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (b) relating to the Merger and
seeking to obtain from Parent or any of its subsidiaries any damages that may be
material to Parent; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would materially and adversely affect the right of
Parent, the Surviving Corporation or any subsidiary of Parent to own the assets
or operate the business of the Company.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement is subject to the satisfaction,
at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been accurate in
all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date, except
that any inaccuracies in such representations and warranties will be disregarded
if the circumstances giving rise to all such inaccuracies (considered
collectively) do not constitute, and could not reasonably be expected to result
in, a Material Adverse Effect on Parent (it being understood that, for purposes
of determining the accuracy of such representations and warranties, all
"Material Adverse Effect" and other materiality qualifications contained in such
representations and warranties shall be disregarded).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
7.4 DOCUMENTS. The Company shall have received the following documents,
each of which shall be in full force and effect:
(a) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, in a form reasonably satisfactory to the Company;
(b) a legal opinion of Wilson, Sonsini, Goodrich & Rosati, P.C.,
dated as of the Closing Date, to the effect that the Merger will constitute
a reorganization within the
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meaning of Section 368 of the Code (it being understood that, in rendering
such opinion, Wilson, Sonsini, Goodrich & Rosati, P.C. may rely upon the
tax representation letters referred to in Section 5.9); and
(c) a certificate executed on behalf of Parent by an executive
officer of Parent confirming that the conditions set forth in Sections 7.1,
7.2, 7.5, 7.6 and 7.7 have been duly satisfied.
7.5 LISTING. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on the
NYSE.
7.6 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
the Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any U.S. or Canadian federal, state or
provincial law or regulation enacted or deemed applicable to the Merger that
makes consummation of the Merger by the Company illegal.
7.7 NO MATERIAL ADVERSE CHANGE. Except for adverse changes that result
directly from the public announcement of the Merger or from general economic
conditions or conditions affecting Parent's industry generally, there shall have
been no material adverse change in Parent's business since the date of this
Agreement (it being understood that a decline in Parent's stock price shall not,
in and of itself, constitute a "material adverse change" in Parent's business
for purposes of this Section 7.7).
SECTION 8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by April 30, 1997 (unless the failure to consummate the Merger
is attributable to a failure on the part of the party seeking to terminate
this Agreement to perform any material obligation required to be performed
by such party at or prior to the Effective Time);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
39
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(d) by Parent upon the occurrence of a Material Adverse Effect on the
Acquired Corporations;
(e) by the Company upon the occurrence of a Material Adverse Effect
on Parent;
(f) by either Parent or the Company if (i) the Company Stockholders'
Meeting shall have been held and (ii) this Agreement and the Merger shall
not have been adopted and approved at such meeting by the Required Vote;
(g) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the Required Vote) if a Triggering Event shall
have occurred;
(h) by Parent, following a breach of any representation, warranty or
covenant of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become inaccurate, in
either case such that the condition set forth in Section 6.1 or Section 6.2
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become inaccurate, PROVIDED, that if
such breach or the inaccuracy in such representation or warranty is curable
by the Company through the exercise of reasonable efforts within 45 days
after the time of such breach or the time such representation or warranty
shall have become inaccurate, then Parent may not terminate this Agreement
under this Section 8.1(h) during such 45-day period provided the Company
continues to exercise such reasonable efforts; or
(i) by the Company, following a breach of any representation,
warranty or covenant of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become inaccurate, in
either case such that the condition set forth in Section 7.1 or Section 7.2
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become inaccurate, PROVIDED that if
such breach or the inaccuracy in such representation or warranty is curable
by Parent through the exercise of reasonable efforts within 45 days after
the time of such breach or the time such representation or warranty shall
have become inaccurate, then the Company may not terminate this Agreement
under this Section 8.1(i) during such 45-day period provided Parent
continues to exercise such reasonable efforts.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; PROVIDED, HOWEVER, that (i) this Section 8.2, Section 8.3 and
Section 9 shall survive the termination of this Agreement and shall remain in
full force and effect, and (ii) the termination of this Agreement shall not
relieve any party from any liability for any willful and knowing breach of this
Agreement.
8.3 TRANSACTIONS AND EXPENSES; TERMINATION FEE.
40
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(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Merger is consummated; PROVIDED, HOWEVER, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' and
accountants' fees, incurred in connection with the printing and filing of the
S-4 Registration Statement and the Prospectus/Proxy Statement and any amendments
or supplements thereto.
(b) The Company shall pay to Parent, in immediately available funds,
a nonrefundable fee in the amount of $2,500,000 (the "Termination Amount") if
either: (i) an Acquisition Proposal is publicly announced (and not publicly
withdrawn) prior to the Company Stockholders' Meeting and this Agreement is
terminated by Parent or the Company pursuant to Section 8.1(f); or (ii) this
Agreement is terminated by Parent pursuant to Section 8.1(g). If payable, the
Termination Amount shall be paid by the Company to Parent within five business
days after the termination of this Agreement. For purposes of this Section
8.3(b), an Acquisition Proposal shall be deemed to have been "publicly
withdrawn" only if: (1) acting in good faith, the Person who made such
Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (2) it is not reasonably expected that such Acquisition Proposal
will be resubmitted or that such Person will make, submit or announce any other
Acquisition Proposal.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and Parent at any time before or
after approval of this Agreement by the stockholders of the Company; PROVIDED,
HOWEVER, that after any such stockholder approval, no amendment shall be made
which by law requires further approval of the stockholders of the Company
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
9.2 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) Subject to Section 8.2, no party shall be deemed to have waived
any claim arising out of this Agreement, or any power, right, privilege or
remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a
41
<PAGE>
written instrument duly executed and delivered on behalf of such party; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
9.4 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and
the other agreements referred to herein and the letter agreement dated as of
September 12, 1996 between Parent and the Company constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among or between any of the parties with respect to the subject matter
hereof and thereof. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument, and shall be governed in all respects by the laws of
the State of Delaware as applied to contracts entered into and to be performed
entirely within Delaware.
9.5 DISCLOSURE SCHEDULE. The Company Disclosure Schedule shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Section 2, and the disclosure in any numbered or lettered part
shall be deemed to relate to and to qualify only the particular representation
or warranty set forth in the corresponding numbered or lettered section in
Section 2, and not any other representation or warranty.
9.6 ATTORNEYS' FEES. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a reasonable sum for
its attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.7 ASSIGNABILITY. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that neither this
Agreement nor any of the Company's rights hereunder may be assigned by the
Company without the prior written consent of Parent, and any attempted
assignment by the Company of this Agreement or any of such rights without such
consent shall be void and of no effect. Except as set forth in Section 5.5 with
respect to directors and officers of the Company and as otherwise provided in
this Agreement, nothing in this Agreement is intended to or shall confer upon
any Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
9.8 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
To Parent:
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Cadence Design Systems, Inc.
2655 Seely Avenue
San Jose, CA 95134
Attention: General Counsel
Telephone: (408) 944-7748
Fax: (408) 944-0215
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Alan C. Mendelson
Telephone: (415) 843-5000
Fax: (415) 857-0663
To Merger Sub:
Harbor Acquisition Sub, Inc.
c/o Cadence Design Systems, Inc.
2655 Seely Avenue
San Jose, CA 95134
Attention: General Counsel
Telephone: (408) 944-7748
Fax: (408) 944-0215
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Alan C. Mendelson
Telephone: (415) 843-5000
Fax: (415) 857-0663
43
<PAGE>
To the Company:
High Level Design Systems, Inc.
3945 Freedom Circle
Fourth Floor
Santa Clara, CA 95054
Attention: J. George Janac
Telephone: (408) 748-3464
Fax: (408) 748-3499
with a copy to:
Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94306
Attention: Douglas H. Collom
Telephone: (415) 493-9300
Fax: (415) 493-6811
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized, overnight courier, on the business day following dispatch
and (d) in the case of mailing, on the fifth business day following such
mailing.
9.9 COOPERATION. Each of the Company and Parent agrees to cooperate
fully with the other party and to execute and deliver such further documents,
certificates, agreements and instruments and to take such other actions as may
be reasonably requested by the other party to evidence or reflect the
transactions contemplated by this Agreement and to carry out the intent and
purposes of this Agreement.
9.10 CERTAIN TERMS. As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
9.11 TITLES. The titles and captions of the Sections of this Agreement
are included for convenience of reference only and shall have no effect on the
construction or meaning of this Agreement.
9.12 SECTIONS AND EXHIBITS. Except as otherwise indicated, all references
in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections
of this Agreement and Exhibits to this Agreement.
44
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
CADENCE DESIGN SYSTEMS, INC.
BY: /s/ H. Raymond Bingham
------------------------------------------
H. Raymond Bingham,
Executive Vice President and
Chief Financial Officer
HARBOR ACQUISITION SUB, INC.
By: /s/ H. Raymond Bingham
------------------------------------------
H. Raymond Bingham,
Executive Vice President and
Chief Financial Officer
HIGH LEVEL DESIGN SYSTEMS, INC.
By: /s/ Robert P. Wiederhold
------------------------------------------
Robert P. Wiederhold,
Executive Vice President and
Chief Operating Officer
45
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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED CORPORATION CONTRACT. "Acquired Corporation Contract" shall mean
any Contract: (a) to which either of the Acquired Corporations is a party; (b)
by which either of the Acquired Corporations or any asset of either of the
Acquired Corporations is or may become bound or under which either of the
Acquired Corporations has, or may become subject to, any obligation; or (c)
under which either of the Acquired Corporations has or may acquire any right or
interest.
ACQUIRED CORPORATION PROPRIETARY ASSET. "Acquired Corporation Proprietary
Asset" shall mean any Proprietary Asset owned by or licensed to either of the
Acquired Corporations or otherwise used by either of the Acquired Corporations.
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer or
proposal (other than an offer or proposal by Parent) regarding: (i) any merger,
consolidation, share exchange, business combination or other similar transaction
or series of related transactions involving the Company or any subsidiary of the
Company; (ii) any sale, lease, exchange, transfer, license or disposition of a
substantial portion of the assets of the Company or any subsidiary of the
Company in any one transaction or in a series of related transactions (other
than sales of products in the ordinary course of business); or (iii) any
acquisition (by tender offer or otherwise), in any one transaction or in a
series of related transactions, of record or beneficial ownership of more than
30% of the outstanding securities of any class of voting securities of the
Company or any subsidiary of the Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
BCSC. "BCSC" shall mean the British Columbia Securities Commission.
COMPANY CAPITAL STOCK. "Company Capital Stock" shall mean Company Common
Stock and Company Preferred Stock.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the Common Stock,
$.001 par value per share, of the Company.
COMPANY PREFERRED STOCK. "Company Preferred Stock" shall mean the
Preferred Stock, $.001 par value per share, of the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
A-1
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CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal). The VSE shall be deemed to be a "Governmental Body" for
purposes of this Agreement.
HSR ACT. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
A-2
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LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter (or group of matters) will be deemed to have a "Material Adverse
Effect" on the Acquired Corporations if such event, violation, inaccuracy,
circumstance or other matter (or group of matters) would have a material adverse
effect on the business, condition, assets, liabilities, operations or financial
performance of the Acquired Corporations taken as a whole; PROVIDED, HOWEVER,
that (i) any event, violation, inaccuracy, circumstance or other matter
occurring after the date of the Agreement that results directly from the public
announcement of the Merger or from general economic conditions or conditions
affecting the Company's industry generally shall not, in and of itself,
constitute a "Material Adverse Effect" on the Acquired Corporations, and (ii) a
downturn in the Company's financial performance following the date of the
Agreement shall not, in and of itself, constitute a "Material Adverse Effect" on
the Acquired Corporations (it being understood that a downturn in the Company's
financial performance resulting from circumstances that would otherwise cause
any representation or warranty of the Company to be inaccurate may nevertheless
constitute a "Material Adverse Effect" on the Acquired Corporations). An event,
violation, inaccuracy, circumstance or other matter (or group of matters) will
be deemed to have a "Material Adverse Effect" on Parent if such event,
violation, inaccuracy, circumstance or other matter (or group of matters) would
have a material adverse effect on the business, condition, assets, liabilities,
operations or financial performance of Parent and its subsidiaries taken as a
whole; PROVIDED, HOWEVER, that (1) any event, violation, inaccuracy,
circumstance or other matter occurring after the date of the Agreement that
results directly from the public announcement of the Merger or from general
economic conditions or conditions affecting the Company's industry generally
shall not, in an of itself, constitute a "Material Adverse Effect" on Parent and
(2) a decline in Parent's stock price at any time after the date of the
Agreement shall not, in and of itself, constitute a "Material Adverse Effect" on
Parent.
MATERIAL CONTRACT. "Material Contract" shall mean any Acquired Corporation
Contract that is or would be material to either of the Acquired Corporations, to
the business, condition, capitalization or operations of either of the Acquired
Corporations or to any of the transactions contemplated by the Agreement.
NYSE. "NYSE" shall mean the New York Stock Exchange.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock,
$.01 par value per share, of Parent. Unless the context otherwise requires, all
references in the Agreement to Parent Common Stock shall be deemed to refer also
to the associated rights under Parent's Rights Agreement dated as of February 9,
1996 between Parent and Harris Trust and Savings Bank.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
A-3
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PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, algorithm, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
TRIGGERING EVENT. A "Triggering Event" shall be deemed to have occurred
if: (i) the Board of Directors of the Company shall have failed to recommend,
or shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its recommendation in favor of, the Merger or approval
or adoption of this Agreement following the making, submission or announcement
of an Acquisition Proposal; (ii) the Company shall have failed to include in the
Prospectus/Proxy Statement the recommendation of the Board of Directors of the
Company in favor of approval and adoption of this Agreement and the Merger;
(iii) the Board of Directors of the Company shall have approved, endorsed or
recommended any Acquisition Proposal; (iv) the Company shall have entered into
any letter of intent or Contract relating to any Acquisition Proposal; (v) the
Company shall have willfully failed to hold the Company Stockholders' Meeting as
promptly as practicable after the S-4 Registration Statement is declared
effective; or (vi) a tender or exchange offer constituting an Acquisition
Proposal relating to securities of the Company shall have been commenced and the
Company shall not have sent to its securityholders, within ten business days
after the commencement of such tender or exchange
A-4
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offer, a statement disclosing that the Company recommends rejection of such
tender or exchange offer.
VSE. "VSE" shall mean the Vancouver Stock Exchange.
A-5
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
CADENCE DESIGN SYSTEMS, INC.,
a Delaware corporation;
WYOMING ACQUISITION SUB, INC.,
a Delaware corporation;
and
COOPER & CHYAN TECHNOLOGY, INC.,
a Delaware corporation
----------------------------
Dated as of October 28, 1996
----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION....................................... 2
1.1 Merger of Merger Sub into the Company............................ 2
1.2 Effect of the Merger............................................. 2
1.3 Closing; Effective Time.......................................... 2
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.. 2
1.5 Conversion of Shares............................................. 3
1.6 Closing of the Company's Transfer Books.......................... 4
1.7 Exchange of Company Stock Certificates........................... 4
1.8 Tax Consequences................................................. 5
1.9 Accounting Consequences.......................................... 5
1.10 Further Action................................................... 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... 6
2.1 Due Organization; Subsidiaries; Etc.............................. 6
2.2 Certificate of Incorporation and Bylaws. ........................ 6
2.3 Capitalization, Etc.............................................. 7
2.4 SEC Filings; Financial Statements................................ 8
2.5 Absence of Changes............................................... 9
2.6 Title to Assets.................................................. 11
2.7 Equipment; Leaseholds............................................ 11
2.8 Proprietary Assets............................................... 12
2.9 Contracts........................................................ 14
2.10 Liabilities...................................................... 16
2.11 Compliance with Legal Requirements............................... 16
2.12 Certain Business Practices....................................... 16
2.13 Governmental Authorizations...................................... 16
2.14 Tax Matters...................................................... 17
2.15 Employee and Labor Matters; Benefit Plans........................ 18
2.16 Environmental Matters............................................ 20
2.17 Insurance........................................................ 20
2.18 Transactions with Affiliates..................................... 21
2.19 Legal Proceedings; Orders........................................ 21
2.20 Authority; Inapplicability of Anti-takeover Statutes; Binding
Nature of Agreement.............................................. 21
2.21 Section 203 of the DGCL Not Applicable........................... 22
2.22 No Existing Discussions.......................................... 22
2.23 Accounting Matters............................................... 22
2.24 Vote Required.................................................... 22
2.25 Non-Contravention; Consents...................................... 22
2.26 Fairness Opinion................................................. 23
2.27 Financial Advisor................................................ 23
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TABLE OF CONTENTS
(CONTINUED)
PAGE
2.28 Full Disclosure.................................................. 24
SECTION 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......... 24
3.1 Organization, Standing and Power................................. 24
3.2 Capitalization, Etc.............................................. 25
3.3 SEC Filings; Financial Statements................................ 26
3.4 Absence of Certain Changes or Events............................. 27
3.5 Title to Assets.................................................. 27
3.6 Proprietary Assets............................................... 27
3.7 Liabilities...................................................... 28
3.8 Compliance with Legal Requirements............................... 28
3.9 Governmental Authorizations...................................... 28
3.10 Legal Proceedings; Orders........................................ 29
3.11 Vote Required.................................................... 29
3.12 Authority; Binding Nature of Agreement........................... 29
3.13 Non-Contravention; Consents...................................... 29
3.14 Valid Issuance................................................... 30
3.15 Accounting Matters............................................... 30
3.16 Full Disclosure.................................................. 30
SECTION 4. CERTAIN COVENANTS OF THE PARTIES................................. 31
4.1 Access and Investigation......................................... 31
4.2 Operation of the Company's Business. ............................ 32
4.3 No Solicitation.................................................. 35
4.4 Notification by Parent........................................... 36
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES.............................. 36
5.1 Registration Statement; Prospectus/Proxy Statement............... 36
5.2 Company Stockholders' Meeting.................................... 37
5.3 Regulatory Approvals............................................. 38
5.4 Stock Options.................................................... 39
5.5 Indemnification of Officers and Directors........................ 40
5.6 Pooling of Interests............................................. 41
5.7 Additional Agreements............................................ 42
5.8 Disclosure....................................................... 42
5.9 Affiliate Agreements............................................. 43
5.10 Tax Matters...................................................... 43
5.11 Letter of the Company's Accountants.............................. 44
5.12 Employment Matters............................................... 44
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.13 Parent Plans and Benefit Arrangements............................ 44
5.14 NYSE Listing..................................................... 44
5.15 Resignation of Officers and Directors............................ 45
5.16 FIRPTA Matters................................................... 45
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB..... 45
6.1 Accuracy of Representations...................................... 45
6.2 Performance of Covenants......................................... 45
6.3 Effectiveness of Registration Statement.......................... 46
6.4 Stockholder Approval............................................. 46
6.5 Consents......................................................... 46
6.6 Agreements and Documents......................................... 46
6.7 Employees........................................................ 47
6.8 No Material Adverse Change....................................... 47
6.9 FIRPTA Compliance................................................ 47
6.10 HSR Act.......................................................... 47
6.11 Listing.......................................................... 47
6.12 No Restraints.................................................... 48
6.13 No Governmental Litigation....................................... 48
6.14 No Other Litigation.............................................. 48
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY................ 48
7.1 Accuracy of Representations...................................... 48
7.2 Performance of Covenants......................................... 49
7.3 Effectiveness of Registration Statement.......................... 49
7.4 Documents........................................................ 49
7.5 No Material Adverse Change....................................... 49
7.6 HSR Act.......................................................... 49
7.7 Listing.......................................................... 49
7.8 No Restraints.................................................... 50
SECTION 8. TERMINATION...................................................... 50
8.1 Termination...................................................... 50
8.2 Effect of Termination............................................ 51
8.3 Expenses; Termination Fees....................................... 52
SECTION 9. MISCELLANEOUS PROVISIONS......................................... 53
9.1 Amendment........................................................ 53
9.2 Waiver........................................................... 53
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TABLE OF CONTENTS
(CONTINUED)
PAGE
9.3 No Survival of Representations and Warranties.................... 53
9.4 Entire Agreement; Counterparts; Applicable Law................... 54
9.5 Disclosure Schedule.............................................. 54
9.6 Attorneys' Fees.................................................. 54
9.7 Assignability.................................................... 54
9.8 Notices.......................................................... 54
9.9 Cooperation...................................................... 55
9.10 Construction..................................................... 55
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EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Form of Certificate of Incorporation of Surviving Corporation
Exhibit C - Form of Affiliate Agreement
Exhibit D - Form of Continuity of Interest Certificate
Exhibit E - Form of Employment Agreement
Exhibit F - Form of Option Agreement
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of October 28, 1996, by and among: CADENCE DESIGN SYSTEMS,
INC., a Delaware corporation ("Parent"); WYOMING ACQUISITION SUB, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
COOPER & CHYAN TECHNOLOGY, INC., a Delaware corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the Delaware General
Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly owned subsidiary of
Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
be treated as a "pooling of interests."
C. The respective boards of directors of Parent, Merger Sub and the
Company have approved this Agreement and the Merger.
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AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law (the "DGCL").
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo Alto,
California, at 10:00 a.m. on a date to be designated by Parent (the "Closing
Date"), which (subject to the satisfaction or waiver of the conditions set forth
in Sections 6 and 7) shall be no later than the fifteenth business day after
satisfaction of the latest to occur of the conditions set forth in Sections 6.4,
6.10 and 6.11. Contemporaneously with or as promptly as practicable after the
Closing, a properly executed certificate of merger conforming to the
requirements of the DGCL (the "Certificate of Merger") shall be filed with the
Secretary of State of the State of Delaware. The Merger shall take effect at
the time the Certificate of Merger is filed 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").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to
Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals
who are directors and officers of Merger Sub immediately prior to the
Effective Time.
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1.5 CONVERSION OF SHARES.
(a) Subject to Section 1.5(d), at the Effective Time, by virtue of
the Merger and without any further action on the part of Parent, Merger Sub, the
Company or any stockholder of the Company:
(I) any shares of Company Common Stock then held by the Company
or any subsidiary of the Company (or held in the Company's treasury) shall
be canceled;
(II) any shares of Company Common Stock then held by Parent,
Merger Sub or any other subsidiary of Parent shall be canceled;
(III) except as provided in clauses "(i)" and "(ii)" above
and subject to Section 1.5(b), each share of Company Common Stock then
outstanding shall be converted into the right to receive eighty-five
hundredths (0.85) of a share of Parent Common Stock; and
(IV) each share of the common stock, par value $0.001 per share,
of Merger Sub then outstanding shall be converted into one share of common
stock of the Surviving Corporation.
(b) The fraction of a share of Parent Common Stock into which each
outstanding share of Company Common Stock is to be converted pursuant to
Section 1.5(a)(iii) (as such fraction may be adjusted in accordance with this
Section 1.5(b)) is referred to as the "Exchange Ratio." If, between the date of
this Agreement and the Effective Time, the outstanding shares of Company Common
Stock or Parent Common Stock are changed into a different number or class of
shares by reason of any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction, then the
Exchange Ratio shall be appropriately adjusted.
(c) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock purchase agreement
or other agreement.
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of Company
Common Stock who would otherwise be entitled to receive a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of
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Parent Common Stock issuable to such holder) shall, upon surrender of such
holder's Company Stock Certificate(s) (as defined in Section 1.6), be paid in
cash the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of a share of
Parent Common Stock on the NYSE on the date the Merger becomes effective.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time: (a)
all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and shall cease to exist, and all
holders of certificates representing shares of Company Common Stock that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of the Company; and (b) the stock transfer books of the
Company shall be closed with respect to all shares of Company Common Stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of Company Common Stock shall be made on such stock transfer books
after the Effective Time. If, after the Effective Time, a valid certificate
previously representing any of such shares of Company Common Stock (a "Company
Stock Certificate") is presented to the Exchange Agent (as defined in Section
1.7) or to the Surviving Corporation or Parent, such Company Stock Certificate
shall be canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF COMPANY STOCK CERTIFICATES.
(a) Prior to the Closing Date, Parent shall select a reputable bank
or trust company to act as exchange agent in the Merger (the "Exchange Agent").
Promptly after the Effective Time, Parent shall deposit with the Exchange Agent
(i) certificates representing the shares of Parent Common Stock issuable
pursuant to this Section 1 and (ii) cash sufficient to make payments in lieu of
fractional shares in accordance with Section 1.5(d). The shares of Parent
Common Stock and cash amounts so deposited with the Exchange Agent, together
with any dividends or distributions received by the Exchange Agent with respect
to such shares, are referred to collectively as the "Exchange Fund."
(b) As soon as practicable after the Effective Time, the Exchange
Agent will mail to the registered holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as Parent
may reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Subject to Section 1.5(d), upon surrender of
a Company Stock Certificate to the Exchange Agent for exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by the Exchange Agent or Parent, (1) the holder of such
Company Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of shares of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of Section
1.5(a)(iii), and (2) the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.7(b), each
Company Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive shares of Parent Common Stock (and cash in
lieu of any fractional share of Parent Common Stock) as contemplated
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by Section 1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock, require the owner
of such lost, stolen or destroyed Company Stock Certificate to provide an
appropriate affidavit and to deliver a bond (in such sum as Parent may
reasonably direct) as indemnity against any claim that may be made against the
Exchange Agent, Parent or the Surviving Corporation with respect to such Company
Stock Certificate.
(c) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, until such holder surrenders
such Company Stock Certificate in accordance with this Section 1.7 (at which
time such holder shall be entitled to receive all such dividends and
distributions, without interest).
(d) Any portion of the Exchange Fund that remains undistributed to
holders of Company Stock Certificates on the first anniversary of the date on
which the Merger becomes effective shall be delivered to Parent upon demand, and
any holders of Company Stock Certificates who have not theretofore surrendered
their Company Stock Certificates in accordance with Section 1.7(b) shall
thereafter look only to Parent for satisfaction of their claims for Parent
Common Stock, cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.
(e) Each of the Exchange Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder or former holder
of Company Common Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of Company Common Stock with respect to any shares
of Parent Common Stock (or dividends or distributions with respect thereto), or
for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.9 ACCOUNTING CONSEQUENCES. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.10 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or
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to vest the Surviving Corporation with full right, title and possession of and
to all rights and property of Merger Sub and the Company, the officers and
directors of the Surviving Corporation and Parent shall be fully authorized (in
the name of Merger Sub, in the name of the Company and otherwise) to take such
action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except
as set forth in the Company SEC Documents (as defined in Section 2.4(a)),
excluding the exhibits thereto, or in the disclosure schedule that has been
prepared by the Company in accordance with the requirements of Section 9.5 and
that has been delivered by the Company to Parent on the date of this Agreement
and signed by the President of the Company (the "Company Disclosure Schedule"):
2.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) Part 2.1 of the Company Disclosure Schedule identifies each
Entity in which the Company owns any shares of capital stock, or in which the
Company owns any equity interest of any nature, together with the number of
shares owned by and the percentage ownership held by the Company. (The Company
and each of its direct and indirect majority-owned subsidiaries are referred to
collectively in this Agreement as the "Acquired Corporations"). None of the
Acquired Corporations has agreed or is obligated to make any future investment
in or capital contribution to any Entity. None of the Acquired Corporations
has, at any time, been a general partner of any general partnership, limited
partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and authority: (i)
to conduct its business in the manner in which its business is currently being
conducted;(ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) Each of the Acquired Corporations is qualified to do business as
a foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify would have a Material Adverse Effect on the
Acquired Corporations.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has delivered to
Parent accurate and complete copies of the certificate of incorporation, bylaws
and other charter and organizational documents of the respective Acquired
Corporations, including all amendments thereto.
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2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
30,000,000 shares of Company Common Stock, of which 12,986,056 shares have been
issued and are outstanding as of the date of this Agreement; and (ii) 5,000,000
shares of preferred stock, $0.01 par value per share, of which no shares are
outstanding as of the date of this Agreement. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully
paid and nonassessable. As of the date of this Agreement, there are no shares
of Company Common Stock held in treasury by the Company or held by any of the
subsidiaries of the Company. Except as set forth in Part 2.3(b) of the Company
Disclosure Schedule: (i) none of the outstanding shares of Company Common Stock
is entitled or subject to any preemptive right, right of participation, right of
maintenance or any similar right; (ii) none of the outstanding shares of Company
Common Stock is subject to any right of first refusal in favor of the Company;
and (iii) there is no Acquired Corporation Contract relating to the voting or
registration of, or restricting any Person from purchasing, selling, pledging or
otherwise disposing of (or granting any option or similar right with respect
to), any shares of Company Common Stock. Upon consummation of the Merger, (A)
the shares of Parent Common Stock issued in exchange for any shares of Company
Common Stock that are subject to a Contract pursuant to which the Company has
the right to repurchase, redeem or otherwise reacquire any shares of Company
Common Stock will, without any further act of Parent, the Company or any other
Person, become subject to the restrictions, conditions and other provisions
contained in such Contract, and (B) Parent will automatically succeed to and
become entitled to exercise the Company's rights and remedies under any such
Contract. The Company is under no obligation to repurchase, redeem or otherwise
acquire any outstanding shares of Company Common Stock.
(b) As of the date of this Agreement: (i) 47,711 shares of Company
Common Stock are reserved for future issuance pursuant to stock options granted
and currently outstanding under the Company's 1989 Stock Option Plan; (ii)
2,073,660 shares of Company Common Stock are reserved for future issuance
pursuant to stock options granted and currently outstanding under the Company's
1993 Equity Incentive Plan; (iii) 50,000 shares of Company Common Stock are
reserved for future issuance pursuant to stock options granted and currently
outstanding under the Company's 1995 Directors Stock Option Plan; and (iv)
150,000 shares of Company Common Stock are reserved for future issuance under
the Company's 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan").
(Stock options granted by the Company pursuant to the 1989 Stock Option Plan,
the 1993 Equity Incentive Plan and the 1995 Directors Stock Option Plan are
referred to in this Agreement as "Company Options.") Part 2.3(b) of the
Company Disclosure Schedule sets forth the following information with respect to
each Company Option outstanding as of the date of this Agreement: (i) the
particular plan pursuant to which such Company Option was granted; (ii) the name
of the optionee; (iii) the number of shares of Company Common Stock subject to
such Company Option; (iv) the exercise price of such Company Option; (v) the
date on which such Company Option was granted; (vi) the extent to which such
Company Option is vested as of the date of this Agreement; and (vii) the date on
which such Company Option expires. The Company has delivered to Parent accurate
and complete copies of all stock option plans pursuant to which the Company has
ever granted stock options.
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(C) Except as set forth in Part 2.3 of the Company Disclosure
Schedule there is no:(i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company;(ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company;(iii)
stockholder rights plan (or similar plan commonly referred to as a "poison
pill") or Contract under which the Company is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities; or (iv)
to the best of the knowledge of the Company, condition or circumstance that may
give rise to or provide a basis for the assertion of a claim by any Person to
the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of the Company.
(d) All outstanding shares of Company Common Stock, all outstanding
Company Options, and, to the best of the knowledge of the Company, all
outstanding shares of capital stock of each of the subsidiaries of the Company
have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of each of the
subsidiaries of the Company are validly issued, fully paid and nonassessable and
are owned beneficially and of record by the Company, free and clear of any
Encumbrances.
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent accurate and complete copies
of each report, registration statement (on a form other than Form S-8) and
definitive proxy statement (excluding copies of exhibits) filed by the Company
with the SEC since October 30, 1995 (the "Company SEC Documents"), including the
Company's Registration Statement on Form S-1 filed with the SEC on October 30,
1995, and the Company's prospectus contained therein. As of the time it was
filed with the SEC (or, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing): (i) each of the Company
SEC Documents complied in all material respects with the applicable requirements
of the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The financial statements (including any related notes) contained
in the Company SEC Documents: (i) complied as to form in all material respects
with the published rules and regulations of the SEC applicable thereto; (ii)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC, and except that the unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end adjustments which will not, individually or in the aggregate,
be material in amount), and (iii)
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fairly present the consolidated financial position of the Company and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows of the Company and its subsidiaries for the periods
covered thereby.
(c) The Company has delivered to Parent an unaudited consolidated
balance sheet of the Company and its subsidiaries as of September 30, 1996 (the
"Company Unaudited Interim Balance Sheet"), and the related unaudited
consolidated income statement, statement of stockholders' equity and statement
of cash flows of the Company for the nine months then ended. The financial
statements referred to in this Section 2.4(c): (i) were prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
the basis on which the financial statements referred to in Section 2.4(b) were
prepared (except that the financial statements referred to in this Section
2.4(c) do not contain footnotes and are subject to normal and recurring year-end
adjustments which will not, individually or in the aggregate, be material in
amount), and (ii) fairly present the consolidated financial position of the
Company and its subsidiaries as of September 30, 1996 and the consolidated
results of operations and cash flows of the Company and its subsidiaries for the
period covered thereby.
2.5 ABSENCE OF CHANGES. Between September 30, 1996 and the date of this
Agreement:
(a) there has not been any material adverse change in the business,
condition, assets, liabilities, operations or financial performance of the
Acquired Corporations taken as a whole, and no event has occurred that
would reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations;
(b) there has not been any loss, damage or destruction to, or any
interruption in the use of, any of the assets of any of the Acquired
Corporations (whether or not covered by insurance) that has had or would
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations;
(c) none of the Acquired Corporations has (i) declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(d) none of the Acquired Corporations has sold, issued, granted or
authorized the issuance or grant of (i) any capital stock or other security
(except for Company Common Stock issued upon the exercise of outstanding
Company Options), (ii) any option, call, warrant or right to acquire any
capital stock or any other security (except for Company Options described
in Part 2.3(b) of the Company Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any of
the Company's
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stock option plans, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase
agreement;
(f) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of any of the Acquired
Corporations, and none of the Acquired Corporations has effected or been a
party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(g) none of the Acquired Corporations has (i) received any
Acquisition Proposal, or (ii) solicited, initiated, encouraged or induced,
or provided any nonpublic information to or entered into any discussions
with any Person for the purpose of soliciting, initiating, encouraging or
inducing, the making or submission of any Acquisition Proposal;
(h) none of the Acquired Corporations has formed any subsidiary or
acquired any equity interest or other interest in any other Entity;
(i) none of the Acquired Corporations has made any capital
expenditure in any calendar month which, when added to all other capital
expenditures made on behalf of the Acquired Corporations in such calendar
month results in such capital expenditures exceeding $100,000 in the
aggregate;
(j) none of the Acquired Corporations has amended or prematurely
terminated, or waived any right or remedy under, any Material Contract (as
defined in Section 2.9), except for amendments, terminations or waivers
that have not had and could not reasonably be expected to have a Material
Adverse Effect on the Acquired Corporations;
(k) none of the Acquired Corporations has (i) acquired, leased or
licensed any material right or other asset from any other Person, except in
ordinary course of business and consistent with past practices, (ii) sold
or otherwise disposed of, or leased or licensed, any material right or
other asset to any other Person, except in the ordinary course of business
and consistent with past practices, or (iii) waived or relinquished any
material right;
(l) none of the Acquired Corporations has written off as
uncollectible, or established any extraordinary reserve with respect to,
any material amount of accounts receivable or other indebtedness;
(m) none of the Acquired Corporations has made any pledge of any of
its assets or otherwise permitted any of its assets to become subject to
any Encumbrance, except for Encumbrances of assets made in the ordinary
course of business and consistent with past practices;
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(n) none of the Acquired Corporations has (i) lent, or made any
advance of, more than $10,000 to any one Person or more than $100,000 to
all Persons to whom any of the Acquired Corporations has lent money or
otherwise made advances, or (ii) incurred or guaranteed any indebtedness
for borrowed money;
(o) none of the Acquired Corporations has (i) established or adopted
any employee benefit plan, (ii) caused or permitted any employee benefit
plan to be amended in any material respect, or (iii) except for bonus,
profit-sharing and similar payments made in the ordinary course of business
and consistent with past practices, paid any bonus or made any
profit-sharing or similar payment to, materially increased the amount of
commissions payable to, or materially increased the amount of the wages,
salary, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees;
(p) none of the Acquired Corporations has changed any of its methods
of accounting or accounting practices in any material respect;
(q) none of the Acquired Corporations has made any material Tax
election;
(r) none of the Acquired Corporations has commenced or settled any
Legal Proceeding;
(S) none of the Acquired Corporations has entered into any material
transaction or taken any other material action that has had, or would
reasonably be expected to have, a Material Adverse Effect on the Acquired
Corporations; and
(t) none of the Acquired Corporations has agreed or committed to take
any of the actions referred to in clauses "(c)" through "(s)" above.
2.6 TITLE TO ASSETS. The Acquired Corporations own, and have good, valid
and marketable title to, all assets purported to be owned by them, including:
(i) all assets reflected on the Company Unaudited Interim Balance Sheet (except
for assets sold or otherwise disposed of since the date of the Company Unaudited
Interim Balance Sheet); and (ii) all other assets reflected in the books and
records of the Acquired Corporations as being owned by the Acquired
Corporations. All of said assets are owned by the Acquired Corporations free
and clear of any Encumbrances, except for (x) any Encumbrance for current taxes
not yet due and payable, (y) minor Encumbrances that have arisen in the ordinary
course of business, and (z) Encumbrances that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of any of the Acquired Corporations.
2.7 EQUIPMENT; LEASEHOLDS. All material items of equipment and other
tangible assets owned by or leased to the Acquired Corporations are adequate for
the uses to which they are being put, are in good condition and repair (ordinary
wear and tear excepted) and are adequate for the conduct of the business of the
Acquired Corporations in the manner in which such business is currently being
conducted. None of the Acquired Corporations own any real property or any
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interest in real property, except for the leaseholds created under the real
property leases identified in Part 2.7 of the Company Disclosure Schedule.
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2.8 PROPRIETARY ASSETS.
(a) Part 2.8(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Proprietary Asset owned by the Acquired Corporations and
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such Proprietary Asset,
and (ii) the names of the jurisdictions covered by the applicable registration
or application. Part 2.8(a)(ii) of the Company Disclosure Schedule identifies
and provides a brief description of all other Proprietary Assets owned by the
Acquired Corporations that are material to the business of the Acquired
Corporations. The Acquired Corporations have good, valid and marketable title
to all of the Proprietary Assets identified in Parts 2.8(a)(i) and 2.8(a)(ii) of
the Company Disclosure Schedule, free and clear of all liens, pledges, security
interests or hypothecations, except for (i) any lien for current taxes not yet
due and payable, (ii) immaterial liens, pledges, security interests or
hypothecations that have arisen in the ordinary course of business, and (iii)
liens, pledges, security interests or hypothecations that do not (individually
or in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of either of the Acquired
Corporations. The Acquired Corporations have a valid right to use all
Proprietary Assets being used by the Acquired Corporations. None of the
Acquired Corporations has developed jointly with any other Person any
Proprietary Asset that is embodied in or related to any of the Company's
products identified in Part 2.8(a)(ii) of the Company Disclosure Schedule with
respect to which such other Person has any rights (except that such other Person
may have rights to certain Proprietary Assets embodied in translators or
interfaces that are part of the products identified in Part 2.8(a)(ii) of the
Company Disclosure Schedule, which rights do not materially detract from the
value to the Company of any Proprietary Asset owned by any of the Acquired
Corporations or materially impair the business or operations of any of the
Acquired Corporations).
(b) The Acquired Corporations have taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all material Proprietary Assets owned by or licensed to any of the Acquired
Corporations (except for any such Proprietary Assets whose value would be
unimpaired by disclosure). Without limiting the generality of the foregoing,
except as set forth in Part 2.8 of the Company Disclosure Schedule, all current
and former employees, consultants and independent contractors of the Acquired
Corporations who are or were involved in, or who have contributed to, the
creation or development of any material Proprietary Asset owned by or licensed
to any of the Acquired Corporations have executed and delivered to the Acquired
Corporations an agreement that is substantially similar to the form of Invention
Assignment and Proprietary Information Agreement previously delivered by the
Company to Parent, except for current or former employees, consultants or
independent contractors whose failure to execute and deliver such an Employee
Information Assignment and Proprietary Information Agreement has not had and
would not reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations. To the best of the knowledge of the Company, no current
or former employee, officer, director, consultant (who is or was involved in, or
who has contributed to, the creation or development of any material Proprietary
Asset owned by any of the Acquired Corporations) or independent contractor (who
is or was involved in, or who has contributed to, the creation or development
of any material Proprietary Asset
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owned by any of the Acquired Corporations) has any right, claim or interest
in or with respect to any material Proprietary Asset onwed by any of the
Acquired Corporations.
(c) To the best of the knowledge of the Company: (i) all patents,
trademarks, service marks and copyrights owned by any of the Acquired
Corporations and material to the business of any of the Acquired Corporations
are valid, enforceable and subsisting; (ii) none of the Proprietary Assets owned
by any of the Acquired Corporations and no Proprietary Asset that is currently
being developed by any of the Acquired Corporations (either by itself or with
any other Person) infringes or misappropriates any Proprietary Asset owned by
any other Person, except where any liability, or any restriction on sale, use,
development or licensing of a Proprietary Asset, arising from such infringement,
misappropriation or unlawful use has not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations; (iii)
none of the Acquired Corporations is infringing, misappropriating or making any
unlawful use of any Proprietary Asset owned by any other Person, except where
any liability, or any restriction on sale, use, development or licensing of a
Proprietary Asset, arising from such infringement, misappropriation or unlawful
use has not had and would not reasonably be expected to have a Material Adverse
Effect on the Acquired Corporations; (iv) none of the products that are or have
been designed, created, developed, assembled, manufactured or sold by any of the
Acquired Corporations is infringing, misappropriating or making any unlawful or
unauthorized use of any Proprietary Asset owned or used by any other Person, and
none of such products has at any time infringed, misappropriated or made any
unlawful or unauthorized use of, any Proprietary Asset of any other Person,
except where any liability, or any restriction on sale, use, development or
licensing of a Proprietary Asset, arising from such infringement,
misappropriation or unlawful use has not had and would not reasonable be
expected to have a Material Adverse Effect on the Acquired Corporations; (v)
since September 30, 1995, none of the Acquired Corporations has received any
notice or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful or unauthorized
use of, any Proprietary Asset owned or used by any other Person; (vi) no other
Person is infringing, misappropriating or making any unlawful or unauthorized
use of, and no Proprietary Asset owned or used by any other Person infringes any
material Proprietary Asset owned by any of the Acquired Corporations, except
where such infringement, misappropriation or unlawful use has not had and would
not reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations.
(d) The Proprietary Assets owned by or licensed to the Acquired
Corporations constitute all the Proprietary Assets necessary to enable the
Acquired Corporations to conduct their business substantially in the manner in
which such business has been and is being conducted.
(e) Except as set forth in Part 2.8(e) of the Company Disclosure
Schedule, none of the Acquired Corporations has disclosed or delivered to any
Person, or permitted the disclosure or delivery to any escrow agent or other
Person of, the source code, or any material portion or aspect of the source
code, or any material proprietary information or algorithm contained in any
source code, of any material Proprietary Asset owned by any of the Acquired
Corporations. No event has occurred, and no circumstance or condition exists,
that (with or
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without notice or mere lapse of time) will, or would reasonably be expected to,
result in the disclosure or delivery to any Person of the source code, or any
material portion or aspect of the source code, or any material proprietary
information or algorithm contained in any source code, of any material
Proprietary Asset owned by or licensed to any of the Acquired Corporations.
Part 2.8(e) of the Company Disclosure Schedule identifies each Contract pursuant
to which the Company has deposited or is required to deposit with an
escrowholder or any other Person the source code, or any material portion or
aspect of the source code, or any material proprietary information or algorithm
contained in or relating to any source code, of any material Proprietary Asset
owned by any of the Acquired Corporations, and further describes whether the
execution of this Agreement or the consummation of any of the transactions
contemplated hereby, in and of itself, would reasonably be expected to result in
the release from escrow of the source code, or any material portion or aspect of
the source code, or any material proprietary information or algorithm contained
in or relating to any source code, of any material Proprietary Asset owned by
any of the Acquired Corporations.
2.9 CONTRACTS.
(a) Part 2.9(a) of the Company Disclosure Schedule identifies each
Acquired Corporation Contract that constitutes a "Material Contract." (For
purposes of this Agreement, each of the following shall be deemed to constitute
a "Material Contract":
(i) any Contract providing for the employment of, or the
performance of services by, any employee or consultant (to the extent such
consultant may not be terminated without penalty on no more than 30 days
notice), and any Contract pursuant to which any of the Acquired
Corporations is required to make any severance, termination or similar
payment, relocation payment or any other payment (including any bonus
payment, but excluding payments in respect of salary or commissions earned
by employees of the Company in the ordinary course of business and
consistent with past practices) in excess of $25,000, to any current or
former employee or director of any of the Acquired Corporations;
(ii) any Contract (A) relating to the acquisition, transfer,
development, sharing, license (to or by any of the Acquired Corporations),
use or other exploitation of any Proprietary Asset (except for any Contract
pursuant to which (1) any Proprietary Asset is licensed to the Acquired
Corporations under any third party software license generally available to
the public, and (2) any Proprietary Asset is licensed by any of the
Acquired Corporations to any Person on a non-exclusive basis); or (B) of
the type referred to in Section 2.8(e);
(iii) any Contract which provides for indemnification of any
officer, director, employee or agent of any of the Acquired Corporations;
(iv) any Contract imposing any restriction on the right or
ability of any Acquired Corporation (A) to compete with any other Person,
(B) to acquire any product or other asset or any services from any other
Person, to sell any product or other asset to
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or perform any services for any other Person or to transact business or
deal in any other manner with any other Person, or (C) develop or
distribute any technology;
(v) any Contract (A) relating to the acquisition, issuance,
voting, registration, sale or transfer of any securities, (B) providing any
Person with any preemptive right, right of participation, right of
maintenance or any similar right with respect to any securities, or (C)
providing the Company with any right of first refusal with respect to, or
right to repurchase or redeem, any securities;
(vi) any Contract requiring that the Company give any notice or
provide any information to any Person prior to accepting any Acquisition
Proposal;
(vii) any Contract (A) that contemplates or involves the
payment or delivery of cash or other consideration in an amount or having a
value in excess of $25,000 in the aggregate, or contemplates or involves
the performance of services having a value in excess of $25,000 in the
aggregate, and (B) that has a term of more than 90 days and that may not be
terminated by such Acquired Corporation (other than for breach of any such
Contract and, in any event, without penalty) within 90 days after the
delivery of a termination notice by such Acquired Corporation; and
(viii) any Contract (not otherwise identified in clauses
"(i)" through "(vii)" of this sentence) that is or would be material to any
of the Acquired Corporations, to the business, condition, capitalization or
operations of any of the Acquired Corporations or to any of the
transactions contemplated by this Agreement.
There is no Acquired Corporation Contract to which any Governmental Body is a
party or under which any Governmental Body has any rights or obligations.
(b) Each Material Contract is valid and in full force and effect, and
is enforceable by an Acquired Corporation in accordance with its terms, subject
to (i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) (i) none of the Acquired Corporations has violated or breached,
or committed any default under, any Acquired Corporation Contract, except for
defaults that have not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations; and, to the best of the
knowledge of the Company, no other Person has violated or breached, or committed
any default under, any Company Contract, except for defaults that have not had
and would not reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations; (ii) to the best of the knowledge of the Company, no
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or would reasonably be expected to,
(A) result in a violation or breach of any of the provisions of any Acquired
Corporation Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Acquired Corporation Contract, (C) give any Person
the right to a rebate, chargeback, penalty or change in delivery schedule under
any Acquired Corporation Contract,
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(D) give any Person the right to accelerate the maturity or performance of any
Acquired Corporation Contract, or (E) give any Person the right to cancel,
terminate or modify any Acquired Corporation Contract, except in each such case
for defaults, acceleration rights, termination rights and other rights that have
not had and would not reasonably be expected to have a Material Adverse Effect
on the Acquired Corporations; and (iii) since December 31, 1995, none of the
Acquired Corporations has received any notice or other communication regarding
any actual or possible violation or breach of, or default under, any Acquired
Corporation Contract, except in each such case for defaults, acceleration
rights, termination rights and other rights that have not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations.
2.10 LIABILITIES. None of the Acquired Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured (of
the type required to be reflected in a balance sheet of the Acquired
Corporations prepared in accordance with generally accepted principles), except
for: (a) liabilities identified as such in the "liabilities" column of the
Company Unaudited Interim Balance Sheet; (b) normal and recurring liabilities
that have been incurred by the Acquired Corporations since September 30, 1996 in
the ordinary course of business and consistent with past practices; and (c)
liabilities that have not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations.
2.11 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquired Corporations
is, and has at all times since September 30, 1995 been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations. Since September 30, 1995,
none of the Acquired Corporations has received any notice or other communication
from any Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirement.
2.12 CERTAIN BUSINESS PRACTICES. None of the Acquired Corporations nor any
director, officer, agent or employee of any of the Acquired Corporations has (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
2.13 GOVERNMENTAL AUTHORIZATIONS. The Acquired Corporations hold all
Governmental Authorizations necessary to enable the Acquired Corporations to
conduct their respective businesses in the manner in which such businesses are
currently being conducted, except where the failure to hold such Governmental
Authorizations has not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations. All such Governmental
Authorizations are valid and in full force and effect. Each Acquired
Corporation is, and at all times since September 30, 1995 has been, in
compliance with the terms and requirements of such Governmental Authorizations,
except where the failure to be in compliance with the terms and requirements of
such Governmental Authorizations has not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations. Since
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September 30, 1995, none of the Acquired Corporations has received any notice or
other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
material Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization.
2.14 TAX MATTERS.
(a) All material Tax Returns required to be filed by or on behalf of
the respective Acquired Corporations with any Governmental Body with respect to
any taxable period ending on or before the Closing Date (the "Acquired
Corporation Returns") (i) have been or will be filed on or before the applicable
due date (including any extensions of such due date), and (ii) have been, or
will be when filed, prepared in all material respects in compliance with all
applicable Legal Requirements. All amounts shown on the Acquired Corporation
Returns to be due on or before the Closing Date have been or will be paid on or
before the Closing Date.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles, except
where the failure to accrue such liabilities has not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations. Each Acquired Corporation will establish, in the ordinary course
of business and consistent with its past practices, reserves adequate for the
payment of all Taxes for the period from September 30, 1996 through the Closing
Date.
(c) No Acquired Corporation Return has been examined or audited by
any Governmental Body since December 31, 1994. No extension or waiver of the
limitation period applicable to any of the Acquired Corporation Returns has been
granted (by the Company or any other Person), and no such extension or waiver
has been requested from any Acquired Corporation.
(d) No claim or Legal Proceeding is pending or, to the best of the
knowledge of the Company, has been threatened against or with respect to any
Acquired Corporation in respect of any material Tax. There are no unsatisfied
liabilities for material Taxes (including liabilities for interest, additions to
tax and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by any Acquired Corporation with respect
to any material Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document which are being contested in good faith
by the Acquired Corporations and with respect to which adequate reserves for
payment have been established). There are no liens for material Taxes upon any
of the assets of any of the Acquired Corporations except liens for current Taxes
not yet due and payable. None of the Acquired Corporations has entered into or
become bound by any agreement or consent pursuant to Section 341(f) of the Code.
None of the Acquired Corporations has been, and none of the Acquired
Corporations will be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 or 263A of the Code
or any comparable provision under state or foreign Tax laws as
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a result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any of the Acquired Corporations that, considered
individually or considered collectively with any other such Contracts, will, or
would reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G or
Section 162 of the Code. None of the Acquired Corporations is, or has ever
been, a party to or bound by any tax indemnity agreement, tax sharing agreement,
tax allocation agreement or similar Contract.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by any of the
Acquired Corporations for the benefit of any current or former employee of any
of the Acquired Corporations.
(b) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, none of the Acquired Corporations maintains, sponsors or contributes
to, and none of the Acquired Corporations has at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of employees or former
employees of any of the Acquired Corporations (a "Pension Plan").
(c) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, none of the Acquired Corporations maintains, sponsors or contributes
to any: (i) employee welfare benefit plan (as defined in Section 3(1) of ERISA,
whether or not excluded from coverage under specific Titles or Merger Subtitles
of ERISA) for the benefit of any employees or former employees of any of the
Acquired Corporations (a "Welfare Plan"), or (ii) self-funded medical, dental or
other similar Plan. None of the Plans identified in the Company Disclosure
Schedule is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) None of the Acquired Corporations is or has ever been required to
be treated as a single employer with any other Person under Section 4001(b)(1)
of ERISA or Section 414(b), (c), (m) or (o) of the Code. None of the Acquired
Corporations has ever been a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code. None of the Acquired Corporations has
ever made a complete or partial withdrawal from a multiemployer plan, as such
term is defined in Section 3(37) of ERISA, resulting in "withdrawal liability,"
as
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such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA).
(e) None of the Acquired Corporations has any plan or commitment to
create any Welfare Plan or any additional Pension Plan, or to modify or change
any existing Pension Plan (other than to comply with applicable law) in a manner
that would affect any employee of any of the Acquired Corporations.
(f) Except as set forth in Part 2.15 of the Company Disclosure
Schedule, no Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former employee of any of the Acquired
Corporations after any such employee's termination of service (other than
(i) benefit coverage mandated by applicable law, including coverage provided
pursuant to Section 4980B of the Code, (ii) benefits accrued as liabilities on
the Company Unaudited Interim Balance Sheet, and (iii) benefits the full cost of
which are borne by current or former employees of any of the Acquired
Corporations (or the employees' beneficiaries)).
(g) With respect to any Plan constituting a group health plan within
the meaning of Section 4980B(g)(2) of the Code, the provisions of Section 4980B
of the Code ("COBRA") have been complied with in all material respects. None of
the Acquired Corporations has any obligation or liability as of the date of this
Agreement under any of the provisions of COBRA which would reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations.
(h) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(i) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service, and the Company is not aware of any reason why any such determination
letter should be revoked.
(j) Neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions contemplated
by this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former employee or director of
any of the Acquired Corporations (whether or not under any Plan), or materially
increase the benefits payable under any Plan, or result in any acceleration of
the time of payment or vesting of any such benefits.
(k) Part 2.15(k) of the Company Disclosure Schedule contains a list
of all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. None of the Acquired Corporations is a party to any collective
bargaining contract or other Contract with a labor union involving any of its
employees. Except
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as set forth in Part 2.15 of the Company Disclosure Schedule, all of the
employees of the Acquired Corporations are "at will" employees.
(l) To the best of the knowledge of the Company, there is no employee
of the Company who is not fully available to perform work because of disability
or other leave.
(m) Each of the Acquired Corporations is in compliance in all
material respects with all applicable Legal Requirements and Contracts relating
to employment, employment practices, wages, bonuses and terms and conditions of
employment, including employee compensation matters, except with respect to any
back payment that might be required to be made by the Company because of the
possible characterization of independent contractors as employees of the
Company.
(n) Each of the Acquired Corporations has good labor relations, and
none of the Acquired Corporations has any knowledge of any facts indicating that
(i) the consummation of the Merger or any of the other transactions contemplated
by this Agreement will have a material adverse effect on the labor relations of
any of the Acquired Corporations, or (ii) any of the employees of any of the
Acquired Corporations intends to terminate his or her employment with the
Acquired Corporation with which such employee is employed.
2.16 ENVIRONMENTAL MATTERS. To the best of the knowledge of the Company,
each of the Acquired Corporations is in compliance in all respects with all
applicable Environmental Laws (as defined in this Section 2.16) (which
compliance includes the possession by each of the Acquired Corporations of all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except where the failure to comply has not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations. None
of the Acquired Corporations has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that any of the Acquired Corporations is not
in compliance with any Environmental Law, and, to the best of the knowledge of
the Company, there are no circumstances that may prevent or interfere with the
compliance by any of the Acquired Corporations with any Environmental Law in the
future. To the best of the knowledge of the Company, no current or prior owner
of any property leased or controlled by any of the Acquired Corporations has
received any notice or other communication (in writing or otherwise), whether
from a Government Body, citizens group, employee or otherwise, that alleges that
such current or prior owner or any of the Acquired Corporations is not in
compliance with any Environmental Law. To the best of the knowledge of the
Company, all property that is leased to, controlled by or used by the Company,
and all surface water, groundwater and soil associated with or adjacent to such
property is in clean and healthful condition and is free of any material
environmental contamination of any nature. (For purposes of this Section 2.16:
(i) "Environmental Law" means any federal, state, local or foreign Legal
Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal,
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transport or handling of Materials of Environmental Concern; and (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.)
2.17 INSURANCE. The Company has delivered to Parent a copy of each
material insurance policy and each material self insurance program relating to
the business, assets or operations of any of the Acquired Corporations. Each
such insurance policy is in full force and effect. Since December 31, 1993,
none of the Acquired Corporations has received any notice or other communication
regarding any actual or possible (a) cancellation or invalidation of any
insurance policy, (b) refusal of any coverage or rejection of any material claim
under any insurance policy, or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy. There is no pending
claim (including any workers' compensation claim) under or based upon any
insurance policy of any of the Acquired Corporations; and no event has occurred,
and no condition or circumstance exists, that might (with or without notice or
lapse of time) directly or indirectly give rise to or serve as a basis for any
such claim, except where such claim has not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations.
2.18 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Company SEC
Documents, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred that would be required to be reported by the Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC. Part 2.18 of the
Company Disclosure Schedule identifies each person who is an "affiliate" (as
that term is used in Rule 145 promulgated under the Securities Act) of the
Company as of the date of this Agreement.
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) There is no material pending Legal Proceeding, and, to the best
of the knowledge of the Company, no Person has since September 30, 1995
threatened to commence any material Legal Proceeding that involves any of the
Acquired Corporations or any of the assets owned or used by any of the Acquired
Corporations. Without limiting the generality of the foregoing, to the best of
the knowledge of the Company, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that would reasonably be expected to
cause or provide a basis for a director, officer or other Representative of any
of the Acquired Corporations to seek indemnification from, or commence a Legal
Proceeding against or involving, any of the Acquired Corporations.
(b) There is no order, writ, injunction, judgment or decree to which
any of the Acquired Corporations, or any of the assets owned or used by any of
the Acquired Corporations, is subject, except for any orders, writs,
injunctions, judgments or decrees which have not had and would not be reasonably
expected to have a Material Adverse Effect on the Acquired Corporations. To the
best of the knowledge of the Company, no officer or other employee of any of the
Acquired Corporations is subject to any order, writ, injunction, judgment or
decree that
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prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the business of any of the Acquired
Corporations.
2.20 AUTHORITY; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES; BINDING NATURE
OF AGREEMENT. The Company has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement.
The Board of Directors of the Company (at a meeting duly called and held) has
(a) unanimously determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders, (b) unanimously approved the
execution, delivery and performance of this Agreement by the Company and has
unanimously approved the Merger, and (c) unanimously recommended the adoption
and approval of this Agreement and the Merger by the holders of Company Common
Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company's stockholders at the Company Stockholders' Meeting
(as defined in Section 5.2). This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
2.21 SECTION 203 OF THE DGCL NOT APPLICABLE. As of the date hereof and at
all times on or prior to the Effective Time, the restrictions applicable to
business combinations contained in Section 203 of the DGCL are, and will be,
inapplicable to the execution, delivery and performance of this Agreement and to
the consummation of the Merger and the other transactions contemplated by this
Agreement. Prior to the execution of those certain Voting Agreements of even
date herewith between Parent and each of John F. Cooper, David Chyan, John R.
Harding, William Portelli and Robert D. Selvi, the Board of Directors of the
Company approved: (a) said Voting Agreements and the transactions contemplated
thereby; and (b) the Option Agreements (in the form of Exhibit F) which may be
executed by Parent and each of John F. Cooper and David Chyan, and the
transactions contemplated thereby.
2.22 NO EXISTING DISCUSSIONS. None of the Acquired Corporations, and no
Representative of any of the Acquired Corporations, is engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating to
any Acquisition Proposal.
2.23 ACCOUNTING MATTERS. To the best of the knowledge of the Company,
neither the Company nor any of its affiliates has taken or agreed to, or plans
to, take any action that would prevent Parent from accounting for the Merger as
a "pooling of interests." Ernst & Young LLP has confirmed in a letter the date
of this Agreement and addressed to the Company, Parent and Arthur Andersen LLP,
an executed copy of which has been delivered to Parent, that Ernst & Young LLP
is not aware of any fact concerning the Company that would preclude Parent from
accounting for the Merger as a "pooling of interests."
2.24 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date for the
Company Stockholders' Meeting (the "Required Vote") is the only vote of the
holders of any class or series of the Company's
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capital stock necessary to adopt and approve this Agreement, the Merger and the
other transactions contemplated by this Agreement.
2.25 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance by the Company of this Agreement, nor (2) the consummation by the
Company of the Merger, will directly or indirectly (with or without notice or
lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the certificate of incorporation, bylaws or other charter
or organizational documents of any of the Acquired Corporations, or (ii)any
resolution adopted by the stockholders, the board of directors or any
committee of the board of directors of any of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of any Legal
Requirement or any order, writ, injunction, judgment or decree to which any
of the Acquired Corporations, or any of the assets owned or used by any of
the Acquired Corporations, is subject (it being understood that no
representation or warranty is being made by the Company regarding
compliance with any federal or state antitrust or fair trade law or any
other similar Legal Requirement);
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by any of the Acquired Corporations or that
otherwise relates to the business of any of the Acquired Corporations or to
any of the assets owned or used by any of the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Acquired Corporation
Contract that is or would constitute a Material Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any
such Acquired Corporation Contract, (ii) a rebate, chargeback, penalty or
change in delivery schedule under any such Acquired Corporation Contract,
(iii) accelerate the maturity or performance of any such Acquired
Corporation Contract, or (iv) cancel, terminate or modify any term of such
Acquired Corporation Contract, except for any default, remedy, rebate,
chargeback, penalty, change in delivery schedule, acceleration,
cancellation, termination or modification which has not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations;
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by any of the Acquired Corporations
(except for minor Encumbrances that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto
or materially impair the operations of any of the Acquired Corporations);
or
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(f) result in, or increase the likelihood of, the disclosure or
delivery to any escrowholder or other Person (other than Parent or Merger
Sub) of the source code, or any portion or aspect of the source code, or
any proprietary information or algorithm contained in or relating to any
source code, of any material Proprietary Asset owned by or licensed to any
of the Acquired Corporations, or the transfer of any material asset of any
of the Acquired Corporations to any Person (other than Parent or Merger
Sub).
Except as may be required by the Exchange Act, the DGCL, the HSR Act and the
Bylaws of the National Association of Securities Dealers, Inc. (the "NASD") (as
they relate to the S-4 Registration Statement and the Prospectus/Proxy
Statement, as defined in Section 2.28(b)), none of the Acquired Corporations
was, is or will be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with the execution, delivery
or performance of this Agreement, or the consummation of the Merger.
2.26 FAIRNESS OPINION. The Company's Board of Directors has received the
written opinion of Alex. Brown & Sons Incorporated, financial advisor to the
Company, dated the date of this Agreement, to the effect that the Exchange Ratio
is fair to the stockholders of the Company from a financial point of view.
2.27 FINANCIAL ADVISOR. Except for Alex. Brown & Sons Incorporated, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or any of the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Acquired Corporations. The total of all fees,
commissions and other amounts that have been paid by the Company to Alex. Brown
& Sons Incorporated and all fees, commissions and other amounts that may become
payable to Alex. Brown & Sons Incorporated by the Company if the Merger is
consummated will not exceed the amount described in that certain letter
agreement dated September 16, 1996, between the Company and Alex. Brown & Sons
Incorporated, an accurate and complete copy of which has been delivered to
Parent prior to the date of this Agreement.
2.28 FULL DISCLOSURE.
(a) This Agreement (including the Company Disclosure Schedule) does
not, and the certificate referred to in Section 6.6(k) will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
(b) None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of Parent Common Stock in the Merger (the "S-4
Registration Statement") will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit
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to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. None of the information supplied or to be
supplied by or on behalf of the Company for inclusion or incorporation by
reference in the Prospectus/Proxy Statement to be filed with the SEC as part of
the S-4 Registration Statement (the "Prospectus/Proxy Statement"), will, at the
time the Prospectus/Proxy Statement is mailed to the stockholders of the
Company, at the time of the Company Stockholders' Meeting or as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that, except as
set forth in the Parent SEC Documents (as defined in Section 3.3(a)), excluding
the exhibits thereto:
3.1 ORGANIZATION, STANDING AND POWER. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary power and authority: (a) to
conduct its business in the manner in which its business is currently being
conducted; (b) to own and use its assets in the manner in which its assets are
currently owned and used; and (c) to perform its obligations under all Contracts
by which it is bound. Each of Parent and Merger Sub is duly qualified to do
business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification
and where the failure to be so qualified would have a Material Adverse Effect on
Parent. Parent has delivered to the Company accurate and complete copies of the
certificate of incorporation and bylaws of Parent, including all amendments
thereto.
3.2 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of: (a)
150,000,000 shares of Parent Common Stock, of which 77,637,647 shares (excluding
shares of Parent Common Stock held in treasury) were outstanding as of October
15, 1996; and (b) 2,000,000 shares of Preferred Stock, $0.01 par value per
share, of which no shares are outstanding as of the date of this Agreement. All
of the outstanding shares of Parent Common Stock have been duly authorized and
validly issued, and are fully paid and nonassessable. As of October 15, 1996:
(i) 9,562,052 shares of Parent Common Stock were reserved for future issuance
pursuant to stock options granted and outstanding under Parent's 1987 Stock
Option Plan, as amended; (ii) 9,374,978 shares of Parent Common Stock were
reserved for future issuance pursuant to stock options granted and outstanding
under Parent's 1993 Nonstatutory Stock Option Plan; (iii) 123,750 shares of
Parent Common Stock were reserved for future issuance pursuant to stock options
granted and outstanding under Parent's 1988 Directors Stock Option Plan; (iv)
191,250 shares of Parent
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Common Stock were reserved for future issuance pursuant to stock options granted
and outstanding under Parent's 1993 Directors Stock Option Plan; (v) 315,000
shares of Parent Common Stock were reserved for future issuance pursuant to
stock options granted and outstanding under Parent's 1995 Directors Stock Option
Plan; (vi) 128,028 shares of Parent Common Stock were reserved for future
issuance pursuant to stock options granted and outstanding other than under the
stock option plans referred to in clauses "(i)" through "(v)" of this Section
3.2; (vii) 1,347,149 shares of Parent Common Stock were reserved for future
issuance under Parent's 1990 Employee Stock Purchase Plan; (viii) 120,000 shares
of Parent Common Stock were reserved for future issuance pursuant to outstanding
warrants to purchase shares of Parent Common Stock held by Comdisco Systems,
Inc.; and (ix) 2,433,002 shares of Parent Common Stock were reserved for future
issuance pursuant to certain outstanding put warrants and call options. All
outstanding shares of Parent Common Stock, all outstanding options to purchase
shares of Parent Common Stock, and all outstanding shares of capital stock of
each subsidiary of Parent have been issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements, and (ii)
all requirements set forth in applicable Contracts.
(b) Between October 15, 1996 and the date of this Agreement, there
has been: (i) no material change in the number of outstanding shares of Parent
Common Stock (other than as a result of the exercise of options referred to in
Section 3.2(a)); and (ii) no change in the number of shares of Parent Common
Stock reserved for future issuance under the stock option plans or the stock
purchase plan referred to in Section 3.2(a).
(c) As of the date of this Agreement: (i) there are no outstanding
options or rights to purchase shares of Parent Common Stock, other than the
options, warrants and other rights referred to in Section 3.2(a), certain
options granted between October 15, 1996 and the date of this Agreement under
the stock option plans referred to in Section 3.2(a) and the rights outstanding
under that certain Rights Agreement dated as of February 9, 1996 between Parent
and Harris Trust and Savings Bank; and (ii) Parent is not obligated to issue any
shares of Parent Common Stock or any rights to acquire shares of Parent Common
Stock, other than pursuant to (A) the options, warrants and rights referred to
in Section 3.2(a) and certain options granted between October 15, 1996 and the
date of this Agreement under the stock option plans referred to in Section
3.2(a), (B) the rights outstanding under that certain Rights Agreement dated as
of February 9, 1996 between Parent and Harris Trust and Savings Bank, (C) the
terms of this Agreement or any other agreement referred to in this Agreement,
and (D) that certain Agreement and Plan of Merger and Reorganization dated as
of October 3, 1996, among Parent, Harbor Acquisition Sub, Inc. and High Level
Design Systems, Inc.
3.3 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete copies
of each report, registration statement (on a form other than Form S-8) and
definitive proxy statement (excluding copies of exhibits) filed by Parent with
the SEC between January 1, 1996 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with the
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applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including any related
notes) contained in the Parent SEC Documents: (i) complied as to form in all
material respects with the published rules and regulations of the SEC applicable
thereto; (ii) were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except
as may be indicated in the notes to such financial statements and, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
normal and recurring year-end audit adjustments which will not, individually or
in the aggregate, be material in amount); and (iii) fairly present the
consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows of Parent and its subsidiaries for the periods covered thereby.
(c) Parent has delivered to the Company an unaudited consolidated
balance sheet of Parent and its subsidiaries as of September 28, 1996 (the
"Parent Unaudited Interim Balance Sheet"), and the related consolidated
unaudited income statement and statement of cash flows of Parent and its
subsidiaries for the nine months then ended. The financial statements referred
to in this Section 3.3(c): (i) were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the basis on
which the financial statements referred to in Section 3.3(b) were prepared
(except that the financial statements referred to in this Section 3.3(c) do not
contain footnotes and are subject to normal and recurring year-end adjustments
which will not, individually or in the aggregate, be material in amount), and
(ii) fairly present the consolidated financial position of Parent and its
subsidiaries as of September 28, 1996 and the consolidated results of operations
and cash flows of Parent and its subsidiaries for the period covered thereby.
3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Between September 28, 1996 and
the date of this Agreement: (a) there has not been any material adverse change
in the business, condition, assets, liabilities, operations or financial
performance of Parent and its subsidiaries taken as a whole, and no event has
occurred that would reasonably be expected to have a Material Adverse Effect on
Parent; (b) Parent has not declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital stock, or
repurchased, redeemed or otherwise reacquired any shares of capital stock or
other securities; (c) there has not been any loss, damage or destruction to, or
any interruption in the use of, any of the assets of Parent (whether or not
covered by insurance), except for any loss, damage, destruction or interruption
that has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent; (d) Parent has not entered into any material transaction or
taken any other material action that has had, or would reasonably be expected to
have, a Material Adverse Effect on Parent; (e) Parent has not amended its
certificate of incorporation or bylaws; (f) Parent has not effected or been a
party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction; (g) Parent has not
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changed any of its methods of accounting or accounting practices in any material
respect; and (h) Parent has not agreed or committed to take any of the actions
referred to in clauses "(a)" through "(g)" of this Section 3.4, except that
Parent has entered into an Agreement and Plan of Merger and Reorganization dated
as of October 3, 1996, contemplating a merger of a subsidiary of Parent with
High Level Design Systems, Inc.
3.5 TITLE TO ASSETS. Parent or its subsidiaries own, and have good, valid
and marketable title to, all assets purported to be owned by them, including:
(i) all assets reflected on the Parent Unaudited Interim Balance Sheet (except
for assets sold or otherwise disposed of since the date of the Parent Unaudited
Interim Balance Sheet); and (ii) all other assets reflected in the books and
records of Parent or its subsidiaries as being owned by Parent or its
subsidiaries. All of said assets are owned by Parent or its subsidiaries free
and clear of any Encumbrances, except for (x) any Encumbrance for current taxes
not yet due and payable, (y) minor Encumbrances that have arisen in the ordinary
course of business, and (z) Encumbrances that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of Parent or any of its subsidiaries.
3.6 PROPRIETARY ASSETS.
(a) To the best of the knowledge of Parent: (i) all patents,
trademarks, service marks and copyrights held by Parent and material to the
business of Parent are valid, enforceable and subsisting; (ii) no Proprietary
Asset owned by Parent and no Proprietary Asset that is currently being developed
by Parent (either by itself or with any other Person) infringes or
misappropriates any Proprietary Asset owned by any other Person, except where
any liability, or any restriction on sale, use, development or licensing of a
Proprietary Asset, arising from such infringement, misappropriation or unlawful
use has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent; (iii) Parent is not infringing, misappropriating or making any
unlawful use of any Proprietary Asset owned by any other Person, except where
any liability, or any restriction on sale, use, development or licensing of a
Proprietary Asset, arising from such infringement, misappropriation or unlawful
use has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent; (iv) none of the products that are or have been designed,
created, developed, assembled, manufactured or sold by Parent is infringing,
misappropriating or making any unlawful or unauthorized use of any Proprietary
Asset owned by any other Person, and none of such products has at any time
infringed, misappropriated or made any unlawful or unauthorized use of, any
Proprietary Asset of any other Person, except where any liability, or any
restriction on sale, use, development or licensing of a Proprietary Asset,
arising from such infringement, misappropriation or unlawful use has not had and
would not reasonably be expected to have a Material Adverse Effect on Parent;
(v) since December 31, 1995, Parent has not received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful or unauthorized use of, any
Proprietary Asset owned or used by any other Person; (vi) no other Person is
infringing, misappropriating or making any unlawful or unauthorized use of any
Proprietary Asset owned by Parent, and no Proprietary Asset owned or used by any
other Person infringes any material Proprietary Asset owned by Parent, except
where such infringement, misappropriation or unlawful
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use has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent.
(b) The Proprietary Assets owned by or licensed to Parent constitute
all the Proprietary Assets necessary to enable Parent to conduct its business
substantially in the manner in which such business has been and is being
conducted.
3.7 LIABILITIES. Parent has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (of the type required to be reflected
in a balance sheet of Parent prepared in accordance with generally accepted
principles), except for: (a) liabilities identified as such in the "liabilities"
column of the Parent Unaudited Interim Balance Sheet; (b) normal and recurring
liabilities that have been incurred by Parent since September 28, 1996 in the
ordinary course of business and consistent with past practices; and (c)
liabilities that have not had and would not reasonably be expected to have a
Material Adverse Effect on Parent.
3.8 COMPLIANCE WITH LEGAL REQUIREMENTS. Parent is, and has at all times
since December 31, 1995 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent. Since December 31, 1995, Parent has not received any notice
or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement.
3.9 GOVERNMENTAL AUTHORIZATIONS. Parent holds all Governmental
Authorizations necessary to enable Parent to conduct its business in the manner
in which such business is currently being conducted, except where the failure to
hold such Governmental Authorizations has not had and would not reasonably be
expected to have a Material Adverse Effect on Parent. All such Governmental
Authorizations are valid and in full force and effect. Parent is, and at all
times since December 31, 1995 has been, in compliance with the terms and
requirements of such Governmental Authorizations, except where the failure to be
in compliance with the terms and requirements of such Governmental
Authorizations has not had and would not reasonably be expected to have a
Material Adverse Effect on Parent. Since December 31, 1995, Parent has not
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any material Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any material Governmental Authorization.
3.10 LEGAL PROCEEDINGS; ORDERS. There is no material pending Legal
Proceeding, and, to the best of the knowledge of Parent, no Person has since
December 31, 1995 threatened to commence any material Legal Proceeding, that
involves Parent or any of the assets owned or used by Parent. There is no
order, writ, injunction, judgment or decree to which Parent, or any of the
assets owned or used by Parent, is subject, except for any orders, writs,
injunctions, judgments or decrees which have not had and would not reasonably be
expected to have a Material Adverse Effect on Parent.
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3.11 VOTE REQUIRED. No vote of the holders of Parent Common Stock is
required to authorize the Merger.
3.12 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to enter into and to
perform their obligations under this Agreement. The board of directors of
Parent (at a meeting duly called and held) has unanimously approved the
execution, delivery and performance of this Agreement by Parent and unanimously
approved the Merger. The board of directors of Merger Sub (by written consent)
has unanimously approved the execution, delivery and performance of this
Agreement by Merger Sub and unanimously approved the Merger. This Agreement
constitutes the legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.13 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance by Parent of this Agreement, nor (2) the consummation by Parent and
Merger Sub of the Merger will directly or indirectly (with or without notice or
lapse of time) (a) contravene, conflict with or result in a violation of (i) any
of the provisions of the certificate of incorporation or bylaws of Parent or
Merger Sub, or (ii) any resolution adopted by the stockholders, the board of
directors or any committee of the board of directors of Parent or Merger Sub;
(b) contravene, conflict with or result in a violation of any Legal Requirement
or any order, writ, injunction, judgment or decree to which Parent, or any of
the assets owned or used by Parent, is subject (it being understood that no
representation or warranty is being made by Parent or Merger Sub regarding
compliance with any federal or state antitrust or fair trade law or any other
similar Legal Requirement); (c) contravene, conflict with or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by Parent or that otherwise relates to
the business of Parent or to any of the assets owned or used by Parent; (d)
contravene, conflict with or result in a violation or breach by Parent or Merger
Sub of, or result in a default by Parent or Merger Sub under, any provision of
any material Contract to which Parent or Merger Sub is a party, or give any
Person the right to (i) declare a default or exercise any remedy under any such
material Contract, (ii) accelerate the maturity or performance of any such
material Contract, or (iii) cancel, terminate or modify any term of such
material Contract, except for any default, acceleration, cancellation,
termination or modification which has not had and would not reasonably be
expected to have a Material Adverse Effect on Parent; or (e) result in the
imposition or creation of any Encumbrance upon or with respect to any asset
owned or used by Parent (except for minor Encumbrances that would not, in any
case or in the aggregate, materially detract from the value of the assets
subject thereto or materially impair the operations of Parent). Except as may
be required by the Securities Act, the Exchange Act, state securities or "blue
sky" laws, the DGCL, the HSR Act, the NASD Bylaws (as they relate to the S-4
Registration Statement and the Prospectus/Proxy Statement) and the rules and
regulations of the NYSE (as they relate to the S-4 Registration Statement and
the Prospectus/Proxy Statement), Parent is not and will not be required to make
any filing with or give any notice to, or to obtain any Consent from, any Person
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in connection with the execution, delivery or performance of this Agreement or
the consummation of the Merger.
3.14 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger,
when issued in accordance with the provisions of this Agreement: (a) will be
validly issued, fully paid and nonassessable; and (b) will not be subject to any
restrictions on resale under the Securities Act, other than restrictions imposed
by Rule 145 promulgated under the Securities Act.
3.15 ACCOUNTING MATTERS. To the best of the knowledge of Parent, neither
Parent nor any of its affiliates has taken or agreed to, or plans to, take any
action that would prevent Parent from accounting for the Merger as a "pooling of
interests." Parent has received a letter dated the date of this Agreement, from
Arthur Andersen LLP, a copy of which has been delivered to the Company,
regarding Arthur Andersen's belief (subject to the qualifications contained in
such letter) that the Merger should be treated as a "pooling of interests" in
conformity with generally accepted accounting principles, as described in
Accounting Principles Board Opinion No. 16 and the applicable rules and
regulations of the SEC.
3.16 FULL DISCLOSURE.
(a) This Agreement does not, and the certificate referred to in
Section 7.4(c) will not, (i) contain any representation, warranty or information
that is false or misleading with respect to any material fact, or (ii) omit to
state any material fact necessary in order to make the representations,
warranties and information contained and to be contained herein and therein (in
the light of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
(b) None of the information supplied or to be supplied by or on
behalf of Parent for inclusion or incorporation by reference in the S-4
Registration Statement will, at the time the S-4 Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the
information supplied or to be supplied by or on behalf of Parent for inclusion
or incorporation by reference in the Prospectus/Proxy Statement will, at the
time the Prospectus/Proxy Statement is mailed to the stockholders of the
Company, at the time of the Company Stockholders' Meeting or as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. The S-4 Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations promulgated by the SEC thereunder.
SECTION 4. CERTAIN COVENANTS OF THE PARTIES
4.1 ACCESS AND INVESTIGATION.
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(a) During the period from the date of this Agreement through the
Effective Time (the "Pre-Closing Period"), the Company shall, and shall cause
the respective Representatives of the Acquired Corporations to: (i) provide
Parent and Parent's Representatives with reasonable access to the Acquired
Corporations' Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to the Acquired Corporations; and (ii) provide Parent and Parent's
Representatives with such copies of the existing books, records, Tax Returns,
work papers and other documents and information relating to the Acquired
Corporations, and with such additional financial, operating and other data and
information regarding the Acquired Corporations, as Parent may reasonably
request. Without limiting the generality of the foregoing, promptly after the
execution of this Agreement, the Company shall deliver to Parent with respect to
each Plan sponsored, maintained, contributed to or required to be contributed to
by any of the Acquired Corporations for any current or former employee of any of
the Acquired Corporations: (1) an accurate and complete copy of such Plan
(including all amendments thereto); (2) an accurate and complete copy of the
annual report, if required under ERISA, with respect to such Plan for each of
the last two years; (3) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan; (4) if such Plan is funded
through a trust or any third party funding vehicle, an accurate and complete
copy of the trust or other funding agreement (including all amendments thereto)
and accurate and complete copies the most recent financial statements thereof;
and (5) an accurate and complete copy of the most recent determination letter
received from the Internal Revenue Service with respect to such Plan (if such
Plan is intended to be qualified under Section 401(a) of the Code).
(b) Without limiting the generality of anything contained in Section
4.1(a), during the Pre-Closing Period, the Company shall promptly provide Parent
with copies of:
(i) all material operating and financial reports prepared by the
Company for its senior management, including (A) copies of the unaudited
monthly consolidated balance sheets of the Acquired Corporations and the
related unaudited monthly consolidated income statements, statements of
changes in stockholders' equity and statements of cash flows and (B) copies
of any sales forecasts, marketing plans, development plans, discount
reports, write-off reports, hiring reports and capital expenditure reports
prepared for the Company's senior management;
(ii) any written materials or communications sent by or on behalf of
the Company to its stockholders;
(iii) any material notice, document or other communication sent by
or on behalf of any of the Acquired Corporations to any party to any
Material Contract or sent to any of the Acquired Corporations by any party
to any Material Contract (other than any communication that relates solely
to commercial transactions between the Company and the other party to any
such Material Contract and that is of the type sent in the ordinary course
of business and consistent with past practices);
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(iv) any notice, report or other document filed with or sent to any
Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement; and
(v) any material notice, report or other document received by any of
the Acquired Corporations from any Governmental Body.
(c) Notwithstanding anything to the contrary contained in this
Section 4.1, the Company shall not be required under this Section 4.1 to take
any action that would cause the Company to violate the HSR Act.
4.2 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the Pre-Closing Period: (i) the Company shall ensure that
each of the Acquired Corporations conducts its business and operations (A) in
the ordinary course and in accordance with past practices and (B) in compliance
with all applicable Legal Requirements and the requirements of all Material
Contracts;(ii) the Company shall use reasonable efforts to ensure that each of
the Acquired Corporations preserves intact its current business organization,
keeps available the services of its current officers and employees and maintains
its relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the respective Acquired Corporations;(iii) the Company shall keep in full
force all insurance policies referred to in Section 2.17;(iv) the Company shall
provide all reasonable notices, assurances and support required by any Acquired
Corporation Contract relating to any Proprietary Asset in order to ensure that
no condition under such Acquired Corporation Contract occurs which would result
in (A) any transfer or disclosure by any Acquired Corporation of any source code
materials or other Proprietary Asset, or (B) a release from any escrow of any
source code materials or other Proprietary Asset which have been deposited or
are required to be deposited in escrow under the terms of such Acquired
Corporation Contract; (v) the Company shall comply with Parent's reasonable
directions with respect to exercising any rights or remedies under any Material
Contract of the type referred to in clause "(v)" of Section 2.9(a); and (vi) the
Company shall (to the extent reasonably requested by Parent) cause its officers
to report regularly to Parent concerning the status of the Company's business.
(b) During the Pre-Closing Period, the Company shall not (without the
prior written consent of Parent), and shall not permit any of the other Acquired
Corporations to:
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other
securities;
(ii) sell, issue, grant or authorize the issuance or grant of (i) any
capital stock or other security, (ii) any option, call, warrant or right to
acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security
(except that (A) the Company may issue Company Common Stock upon the valid
exercise of Company Options outstanding as of the date of this Agreement,
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(B) the Company may issue Company Common Stock upon the valid exercise of
"options" outstanding under the 1995 Purchase Plan as of the date of this
Agreement, and (C) the Company may, in the ordinary course of business and
consistent with past practices, grant options under its 1995 Equity Incentive
Plan to purchase no more than 250,000 shares of Company Common Stock to
employees of the Company);
(iii) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company's stock option plans,
any provision of any agreement evidencing any outstanding stock option or
any restricted stock purchase agreement, or otherwise modify any of the
terms of any outstanding option, warrant or other security or any related
Contract;
(iv) amend or permit the adoption of any amendment to its certificate
of incorporation or bylaws or other charter or organizational documents, or
effect or become a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(v) form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(vi) make any capital expenditure in any calendar month which, when
added to all other capital expenditures made on behalf of the Acquired
Corporations in such calendar month results in such capital expenditures
exceeding $100,000 in the aggregate;
(vii) enter into or become bound by, or permit any of the assets
owned or used by it to become bound by, any Material Contract, or amend or
prematurely terminate, or waive or exercise any material right or remedy
(including any right to repurchase shares of Company Common Stock) under,
any Material Contract;
(viii) acquire, lease or license any right or other asset from any
other Person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person (except in each case for assets
acquired, leased, licensed or disposed of by the Company in the ordinary
course of business and consistent with past practices), or waive or
relinquish any material right;
(ix) lend money to any Person, or incur or guarantee any indebtedness;
(x) (A) establish, adopt or amend any employee benefit plan, or (B)
except for bonus, profit-sharing and similar payments made in the ordinary
course of business consistent with past practices, pay any bonus or make
any profit-sharing or similar payment to, or materially increase the amount
of commissions payable to, any of its directors, officers or employees, or
(C) materially increase the amount of the wages, salary, fringe benefits or
other compensation or remuneration payable to, any of its directors,
officers or employees;
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(xi) (A) hire any new employee having an annual salary in excess of
$75,000, or (B) engage any consultant or independent contractor who (1) is
entitled to receive annual compensation in excess of $75,000, and (2) may
not be terminated by the Company (without penalty) on no more than 30 days
notice;
(xii) change any of its methods of accounting or accounting
practices in any material respect;
(xiii) make any material Tax election;
(xiv) commence or settle any material Legal Proceeding;
(xv) enter into any material transaction or take any other material
action outside the ordinary course of business or inconsistent with past
practices; or
(xvi) agree or commit to take any of the actions described in
clauses "(i)" through "(xv)" of this Section 4.2(b).
Parent agrees that it will not unreasonably withhold its consent to: (1) the
taking of any action described in clauses "(vi)" through "(xi)" or clause
"(xiii)" or "(xiv)" of this Section 4.2(b); or (2) the repurchase by the Company
of shares of Company Common Stock in accordance with the terms of certain
Contracts (in existence as of, and disclosed to Parent prior to, the execution
of this Agreement) pursuant to which the Company has the right to repurchase
shares of Company Common Stock.
(c) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of the discovery by the Company of: (i) any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material inaccuracy
in any representation or warranty made by the Company in this Agreement if
(A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any material
breach of any covenant or obligation of the Company; and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
of the conditions set forth in Section 6 impossible or unlikely or that has had
or would reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations.
(d) Notwithstanding anything to the contrary contained in this
Section 4.2, the Company shall not be required under this Section 4.2 to take
any action that would cause the Company to violate the HSR Act.
4.3 NO SOLICITATION.
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(a) The Company shall not directly or indirectly, and shall not
authorize or permit any subsidiary of the Company or any Representative of any
of the Acquired Corporations directly or indirectly to,(i) solicit, initiate,
encourage or induce the making, submission or announcement of any Acquisition
Proposal or take any action that could reasonably be expected to lead to an
Acquisition Proposal,(ii) furnish any nonpublic information regarding any of the
Acquired Corporations to any Person in connection with or in response to an
Acquisition Proposal,(iii) engage in discussions with any Person with respect to
any Acquisition Proposal,(iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
Contract contemplating or otherwise relating to any Acquisition Transaction;
PROVIDED, HOWEVER, that this Section 4.3(a) shall not prohibit the Company from
furnishing nonpublic information regarding the Acquired Corporations to, or
entering into discussions with, any Person in response to an unsolicited bona
fide written Acquisition Proposal submitted (and not withdrawn) by such Person
if (1) the Board of Directors of the Company concludes in good faith, 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 Company's stockholders than the Merger, (2) the
Board of Directors of the Company concludes in good faith, after consultation
with outside legal counsel, that such action is required in order for the Board
of Directors of the Company to comply with its fiduciary obligations to the
Company's stockholders under applicable law, (3) prior to furnishing any such
nonpublic information to, or entering into discussions with, such Person, the
Company gives Parent written notice of the identity of such Person and of the
Company's intention to furnish nonpublic information to, or enter into
discussions with, such Person, and the Company receives from such Person an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all nonpublic written and oral information furnished to such
Person by or on behalf of the Company, and (4) prior to furnishing any such
nonpublic information to such Person, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Without limiting the
generality of the foregoing, the Company acknowledges and agrees that any
violation of any of the restrictions set forth in the preceding sentence by any
Representative of any of the Acquired Corporations, whether or not such
Representative is purporting to act on behalf of any of the Acquired
Corporations, shall be deemed to constitute a breach of this Section 4.3 by the
Company.
(b) The Company shall promptly advise Parent orally and in writing of
any Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period.
(c) As of the date of this Agreement, the Company shall immediately
cease and cause to be terminated any existing discussions with any Person that
relate to any Acquisition Proposal.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Company may give a copy of this Section 4.3 and Section 5.2(c) to
any Person who submits an unsolicited bona fide written Acquisition Proposal to
the Company if, prior to giving a copy of
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this Section 4.3 and Section 5.2(c) to such Person, the Company gives Parent
written notice that the Company intends to give a copy of this Section 4.3 and
Section 5.2(c) to such Person.
4.4 NOTIFICATION BY PARENT. During the Pre-Closing Period, Parent shall
promptly notify the Company in writing of the discovery by Parent of: (i) any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes a material inaccuracy
in any representation or warranty made by Parent in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material inaccuracy
in any representation or warranty made by Parent in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or
(B) such event, condition, fact or circumstance had occurred, arisen or existed
on or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of Parent; and (iv) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions
set forth in Section 7 impossible or unlikely or that has had or would
reasonably be expected to have a Material Adverse Effect on Parent.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; PROSPECTUS/PROXY STATEMENT.
(a) As promptly as practicable after the date of this Agreement, the
Company and Parent shall prepare and cause to be filed with the SEC the S-4
Registration Statement, together with the Prospectus/Proxy Statement and any
other documents required by the Securities Act or the Exchange Act in connection
with the Merger. Each of Parent and the Company shall use reasonable efforts to
cause the S-4 Registration Statement (including the Prospectus/Proxy Statement)
to comply with the rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after it is filed with the SEC. The Company shall promptly
furnish to Parent all information concerning the Acquired Corporations and the
Company's stockholders that may be required or reasonably requested in
connection with any action contemplated by this Section 5.1. If any event
relating to any of the Acquired Corporations occurs, or if the Company becomes
aware of any information, that should be set forth in an amendment or supplement
to the S-4 Registration Statement or the Prospectus/Proxy Statement, then the
Company shall promptly inform Parent thereof and shall cooperate with Parent in
filing such amendment or supplement with the SEC and, if appropriate, in mailing
such amendment or supplement to the stockholders of the Company.
(b) Prior to the Effective Time, Parent shall use reasonable efforts
to obtain all regulatory approvals needed to ensure that the Parent Common Stock
to be issued in the Merger will be registered or qualified under the securities
law of every jurisdiction of the United States in which any registered holder of
Company Common Stock has an address of record on the record date for determining
the stockholders entitled to notice of and to vote at the Company Stockholders'
Meeting.
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5.2 COMPANY STOCKHOLDERS' MEETING.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of, hold and convene a meeting of the
holders of Company Common Stock to consider, act upon and vote upon the adoption
of this Agreement and approval of the Merger (the "Company Stockholders'
Meeting"). The Company Stockholders' Meeting will be held as promptly as
practicable and in any event within 60 days after the S-4 Registration Statement
is declared effective by the SEC. The Company shall ensure that the Company
Stockholders' Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited in connection with the Company Stockholders' Meeting are
solicited, in compliance with all applicable Legal Requirements. The Company's
obligation to call, give notice of, hold and convene the Company Stockholders'
Meeting in accordance with this Section 5.2(a) shall not be limited or otherwise
affected by the commencement, disclosure, announcement or submission to the
Company of any Acquisition Proposal.
(b) Subject to Section 5.2(c): (i) the Board of Directors of the
Company shall unanimously recommend that the Company's stockholders vote in
favor of and adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting; (ii) the Prospectus/Proxy Statement shall include a
statement to the effect that the Board of Directors of the Company has
unanimously recommended that the Company's stockholders vote in favor of and
adopt and approve this Agreement and the Merger at the Company Stockholders'
Meeting; and (iii) neither the Board of Directors of the Company nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify, in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of the Company that the Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.
(c) Nothing in clause "(iv)" of the first sentence of Section 4.3(a)
or in Section 5.2(b) shall prevent the Board of Directors of the Company from
withdrawing, amending or modifying its unanimous recommendation in favor of the
Merger if (i) an unsolicited bona fide written Acquisition Proposal is submitted
to the Company and is not withdrawn, (ii) the Board of Directors of the Company
concludes in good faith, 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
Company's stockholders than the Merger, (iii) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in Section
4.3, and (iv) the Board of Directors of the Company concludes in good faith,
after consultation with its outside legal counsel, that the withdrawal,
amendment or modification of such recommendation is required in order for the
Board of Directors of the Company to comply with its fiduciary obligations to
the Company's stockholders under applicable law. Nothing in clause "(iv)" of
the first sentence of Section 4.3(a) or in Section 5.2(b) shall prevent the
Board of Directors of the Company from recommending that its stockholders accept
an unsolicited tender offer or exchange offer commenced by a third party with
respect to shares of Company Common Stock if (1) such tender offer or exchange
offer constitutes an Acquisition Proposal, (2) the Board
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of Directors of the Company shall have withdrawn its recommendation in favor of
the Merger in accordance with and as permitted by the preceding sentence, (3)
the Board of Directors of the Company shall have concluded in good faith, based
upon the advice of its financial advisor, that such tender offer or exchange
offer is more favorable from a financial point of view to the Company's
stockholders than the Merger, (4) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in Section
4.3, and (5) the Board of Directors of the Company shall have concluded in good
faith, after consultation with its outside legal counsel, that the
recommendation in favor of acceptance of such tender offer or exchange offer is
required in order for the Board of Directors of the Company to comply with its
fiduciary obligations to the Company's stockholders under applicable law.
Nothing contained in this Section 5.2 shall limit the Company's obligation to
hold and convene the Company Stockholders' Meeting (regardless of whether the
unanimous recommendation of the Board of Directors of the Company shall have
been withdrawn, amended or modified and regardless of whether the Board of
Directors of the Company shall have recommended acceptance of a tender offer or
exchange offer commenced by a third party), it being understood that the Company
shall be required to hold and convene the Company Stockholders' Meeting in
accordance with this Section 5.2 unless the holding of such meeting would
constitute a violation of any applicable court order or statute. The Company
shall use all reasonable efforts to ensure that the holding of the Company
Stockholders' Meeting will not constitute a violation of any applicable court
order or statute.
5.3 REGULATORY APPROVALS. The Company and Parent shall use reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed with any Governmental
Body with respect to the Merger and the other transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. Without limiting the generality of the foregoing, the
Company and Parent shall, promptly after the date of this Agreement, prepare and
file the notifications required under the HSR Act in connection with the Merger.
The Company and Parent shall respond as promptly as practicable to (i) any
inquiries or requests received from the Federal Trade Commission or the
Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general or other
Governmental Body in connection with antitrust or related matters. Each of the
Company and Parent shall (1) give the other party prompt notice of the
commencement of any Legal Proceeding by or before any Governmental Body with
respect to the Merger or any of the other transactions contemplated by this
Agreement, (2) keep the other party informed as to the status of any such Legal
Proceeding, and (3) promptly inform the other party of any communication to or
from the Federal Trade Commission, the Department of Justice or any other
Governmental Body regarding the Merger. The Company and Parent will consult and
cooperate with one another, and will consider in good faith the views of one
another, in connection with any analysis, appearance, presentation, memorandum,
brief, argument, opinion or proposal made or submitted in connection with any
Legal Proceeding under or relating to the HSR Act or any other federal or state
antitrust or fair trade law. In addition, except as may be prohibited by any
Governmental Body or by any Legal Requirement, in connection with any Legal
Proceeding under or relating to the HSR Act or any other federal or state
antitrust or fair trade law or any other similar Legal Proceeding, each of the
Company and Parent agrees to permit authorized Representatives of the other
party to be present at each meeting or conference relating to any such Legal
Proceeding and to have access
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to and be consulted in connection with any document, opinion or proposal made or
submitted to any Governmental Body in connection with any such Legal Proceeding.
5.4 STOCK OPTIONS.
(a) Subject to Section 5.4(b), at the Effective Time, all rights with
respect to Company Common Stock under each Company Option then outstanding shall
be converted into and become rights with respect to Parent Common Stock, and
Parent shall assume each such Company Option in accordance with the terms (as in
effect as of the date of this Agreement) of the stock option plan under which it
was issued and the stock option agreement by which it is evidenced. From and
after the Effective Time, (i) each Company Option assumed by Parent may be
exercised solely for shares of Parent Common Stock, (ii) the number of shares of
Parent Common Stock subject to each such Company Option shall be equal to the
number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole share (with cash, less the applicable exercise
price, being payable for any fraction of a share), (iii) the per share exercise
price under each such Company Option shall be adjusted by dividing the per share
exercise price under such Company Option by the Exchange Ratio and rounding up
to the nearest cent and (iv) any restriction on the exercise of any such Company
Option shall continue in full force and effect and the term, exercisability,
vesting schedule and other provisions of such Company Option shall otherwise
remain unchanged; PROVIDED, HOWEVER, that (A) in accordance with the terms of
the Employment Agreement between John R. Harding and the Company dated December
1, 1994, all unvested Company Options granted to John R. Harding pursuant to
said Employment Agreement shall become immediately exercisable as of the
Effective Time, (B) in accordance with the terms of that certain Employment
Agreement between Robert D. Selvi and the Company dated April 24, 1995, and that
certain Employment Agreement between William Portelli and the Company dated
March 3, 1995, certain unvested Company Options granted to Messrs. Selvi and
Portelli pursuant to said Employment Agreements shall become immediately
exercisable as of the Effective Time, (C) in accordance with the terms of the
Company's 1995 Directors Stock Option Plan, unvested Company Options granted to
outside directors of the Company pursuant to such plan shall become immediately
exercisable as of the Effective Time, and (D) each Company Option assumed by
Parent in accordance with this Section 5.4(a) shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, reverse stock split, reclassification, recapitalization
or other similar transaction subsequent to the Effective Time. Parent shall
file with the SEC, no later than five business days after the date on which the
Merger becomes effective, a Registration Statement on Form S-8 relating to the
shares of Parent Common Stock issuable with respect to the Company Options
assumed by Parent in accordance with this Section 5.4(a).
(b) Notwithstanding anything to the contrary contained in this
Section 5.4, in lieu of assuming outstanding Company Options in accordance with
Section 5.4(a), Parent may, at its election, cause such outstanding Company
Options to be replaced by issuing substantially equivalent replacement stock
options in substitution therefor. Parent shall use reasonable efforts to
attempt to ensure that any such replacement stock options issued in substitution
for Company Options that, immediately prior to the Effective Time, qualified as
incentive stock options (as
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defined in Section 422 of the Code) continue to qualify as incentive stock
options immediately after the Effective Time.
(c) The Company shall take all action that may be necessary (under
the plans pursuant to which Company Options are outstanding and otherwise) to
effectuate the provisions of this Section 5.4 and to ensure that, from and after
the Effective Time, holders of Company Options have no rights with respect
thereto other than those specifically provided in this Section 5.4.
(d) The Company shall terminate the 1995 Purchase Plan and all
outstanding "options" thereunder prior to the Effective Time, and shall take
such actions as may be necessary to ensure that: (i) all outstanding "options"
under the 1995 Purchase Plan terminate on the last trading day preceding the
date on which the Merger becomes effective; (ii) the price per share of the
Company Common Stock purchased pursuant to all such "options" is determined as
if the "Purchase Date" under Section 8 of the 1995 Purchase Plan were the last
trading day preceding the date on which the Merger becomes effective; (iii) any
shares of Company Common Stock purchased pursuant to such "options" are
automatically converted as of the Effective Time into the right to receive
Parent Common Stock on the same basis as all other outstanding shares of Company
Common Stock; and (iv) the 1995 Purchase Plan terminates immediately following
the purchase of shares of Company Common Stock pursuant to such "options."
5.5 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) All rights to indemnification existing in favor of the current
directors and officers of the Company for acts and omissions occurring prior to
the Effective Time, as provided in the Company's Bylaws (as in effect as of the
date of this Agreement) and as provided in the indemnification agreements
between the Company and said directors and officers (as in effect as of the date
of this Agreement), shall survive the Merger and shall be maintained by the
Surviving Corporation for a period of not less than six years from the Effective
Time; PROVIDED, HOWEVER, that the Surviving Corporation's indemnification
obligations will be reduced to the extent of any insurance proceeds paid under
the insurance policy or policies referred to in Section 5.5(d). From and after
the Effective Time, Parent will, to the fullest extent permitted by law, perform
all indemnification obligations of the Surviving Corporation under this Section
5.5(a) (without giving effect to the limitations on the Surviving Corporation's
indemnification obligations imposed by Section 145(b) of the DGCL); PROVIDED,
HOWEVER, that Parent's indemnification obligations shall be reduced (i) to the
extent that the Surviving Corporation performs such obligations, and (ii) to the
extent of any insurance proceeds paid under the insurance policy or policies
referred to in Section 5.5(d).
(b) If (i) on the Closing Date, a Legal Proceeding described in
Section 6.13 or 6.14 is pending before any court of competent jurisdiction, (ii)
any current director or officer of the Company is named as a defendant in such
Legal Proceeding by virtue of any action taken by him prior to the Closing Date
in his capacity as a director or officer of the Company, (iii) the Company has
disclosed to Parent, prior to the Closing Date, the pendency of such Legal
Proceeding, and (iv) Parent waives in writing the condition specified in Section
6.13 or Section
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6.14 (as the case may be) as it applies to such Legal Proceeding and elects to
proceed with the Closing, then, from and after the Effective Time, Parent shall
hold harmless and indemnify such director or officer from and against all losses
and expenses incurred by such director or officer in connection with such Legal
Proceeding.
(c) Parent shall have (i) the exclusive right, at its election, to
assume and control the defense (with counsel selected by Parent and reasonably
satisfactory to the indemnified parties) of any claim or Legal Proceeding with
respect to which Parent or the Surviving Corporation has any indemnification
obligation under this Section 5.5, and (ii) the right, at its election, to
settle, adjust or compromise any such claim or Legal Proceeding without the
consent of any indemnified party (if the agreement relating to the settlement of
such claim contains a customary release of such indemnified party and other
customary terms).
(d) From the Effective Time until the sixth anniversary of the date
on which the Merger becomes effective, the Surviving Corporation shall maintain
in effect, for the benefit of the current directors and officers of the Company
with respect to acts or omissions occurring prior to the Effective Time, the
directors' and officers' liability insurance policy described in Part 5.5(d) of
the Company Disclosure Schedule (the "Specified Policy"); PROVIDED, HOWEVER,
that (i) the Surviving Corporation may substitute for the Specified Policy a
policy or policies of comparable coverage, and (ii) the Surviving Corporation
shall not be required to pay an annual premium for the Specified Policy (or for
any substitute policy or policies) in excess of $260,000. In the event any
future annual premium for the Specified Policy (or any substitute policy or
policies) exceeds $260,000, the Surviving Corporation shall be entitled to
reduce the amount of coverage of the Specified Policy (or any substitute policy
or policies) to the amount of coverage that can be obtained for an annual
premium equal to $260,000; PROVIDED, HOWEVER, that if the amount of any such
future annual premium payable prior to such sixth anniversary for the Specified
Policy (or for any substitute policy or policies) exceeds $260,000, then: (1)
Parent shall notify John R. Harding of that fact a reasonable time before such
future annual premium becomes due; and (2) in the event that, a reasonable time
before such future annual premium becomes due, the current directors and
officers of the Company pay to Parent, in cash, the amount by which the amount
of such future annual premium exceeds $260,000, Parent shall use the amount
received from such directors and officers to pay such premium in order to avoid
a reduction in the amount of coverage of the Specified Policy (or any substitute
policy or policies).
5.6 POOLING OF INTERESTS.
(a) Each of the Company and Parent agrees (i) not to take any action
during the Pre-Closing Period that would adversely affect the ability of Parent
to account for the Merger as a "pooling of interests," and (ii) to use
reasonable efforts to attempt to ensure that none of its "affiliates" (as that
term is used in Rule 145 promulgated under the Securities Act) takes any action
that could adversely affect the ability of Parent to account for the Merger as a
"pooling of interests."
(b) The parties acknowledge that, in order to permit Parent to
account for the Merger as a "pooling of interests," it may be necessary, in
light of the condition specified in
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paragraph 47d of Accounting Principles Board Opinion No. 16 (said condition
being referred to as the "Paragraph 47d Condition"), for Parent to issue shares
of Parent Common Stock at or prior to the Effective Time (in addition to the
shares of Parent Common Stock to be issued in the Merger). Subject to Section
5.6(c), Parent agrees that, at or prior to the Closing Date (as designated by
Parent in accordance with Section 1.3), it will issue a number of shares of
Parent Common Stock that is sufficient to cause the Paragraph 47d Condition to
be satisfied (it being understood that the timing of the offering and issuance
of such shares by Parent will be determined by Parent in its sole discretion).
(c) Notwithstanding anything to the contrary contained in Section
5.6(b) or elsewhere in this Agreement (but subject to Section 8.3(e)), Parent
shall not have any obligation under this Agreement to offer or to issue shares
of Parent Common stock if (i) Parent's financial advisor, Goldman, Sachs & Co.,
shall have advised Parent in writing that, in light of prevailing market
conditions as they relate to Parent, it would be detrimental for Parent to
proceed with the offering or issuance of a sufficient number of shares of Parent
Common Stock to enable Parent to satisfy the Paragraph 47d Condition, and (ii) a
second financial advisor (comparable in stature to Goldman, Sachs & Co.) jointly
selected by Parent and the Company is unwilling to commit to offer and sell such
shares on behalf of Parent on terms that are reasonably determined by Parent to
be acceptable.
5.7 ADDITIONAL AGREEMENTS.
(a) Each party to this Agreement (i) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (ii) shall use reasonable efforts to obtain each Consent (if any)
required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement. The Company shall
promptly deliver to Parent a copy of each such filing made, each such notice
given and each such Consent obtained by the Company during the Pre-Closing
Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose or cause any of its subsidiaries to dispose of any assets, or to commit
to cause any of the Acquired Corporations to dispose of any assets; (ii) to
discontinue or cause any of its subsidiaries to discontinue offering any
product, or to commit to cause any of the Acquired Corporations to discontinue
offering any product; (iii) to license or otherwise make available, or cause any
of its subsidiaries to license or otherwise make available, to any Person, any
technology, software or other Proprietary Asset, or to commit to cause any of
the Acquired Corporations to license or otherwise make available to any Person
any technology, software or other Proprietary Asset; (iv) to hold separate or
cause any of its subsidiaries to hold separate any assets or operations (either
before or after the Closing Date), or to commit to cause any of the Acquired
Corporations to hold separate any assets or operations; or (v) to make or cause
any of its subsidiaries make any commitment (to any Governmental Body or
otherwise) regarding its future operations or the future operations of any of
the Acquired Corporations.
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5.8 DISCLOSURE.
(a) The Company shall not, and shall not permit any of its
Representatives to, issue any press release or otherwise publicly disseminate
any document or other written material relating to the Merger or any of the
other transactions contemplated by this Agreement unless (i) Parent shall have
approved such press release or written material (it being understood that Parent
shall not unreasonably withhold its approval of any such press release or
written material), or (ii) the Company shall have been advised by its outside
legal counsel that the issuance of such press release or the dissemination of
such written material is required by any applicable law or regulation, and the
Company shall have consulted with Parent prior to issuing such press release or
disseminating such written material; PROVIDED, HOWEVER, that the Company shall
be entitled to file with the SEC, after the execution and delivery of this
Agreement, a Report on Form 8-K (including a description of the possible sale of
up to 50,000 shares of Company Common Stock by John R. Harding), together with a
copy of this Agreement (including the exhibits hereto) and the press release
(which shall have been approved by Parent) announcing this Agreement. The
Company shall use reasonable efforts to ensure that none of its Representatives
makes any public statement that is materially inconsistent with any press
release issued or any written material publicly disseminated by the Company with
respect to the Merger or with respect to any of the other transactions
contemplated by this Agreement.
(b) Parent shall not, and shall not permit any of its Representatives
to, issue any press release or otherwise publicly disseminate any document or
other written material relating to the Merger or any of the other transactions
contemplated by this Agreement unless (i) the Company shall have approved such
press release or written material (it being understood that the Company shall
not unreasonably withhold its approval of any such press release or written
material), or (ii) Parent shall have been advised by its outside legal counsel
that the issuance of such press release or the dissemination of such written
material is required by any applicable law or regulation, and Parent shall have
consulted with the Company prior to issuing such press release or disseminating
such written material; PROVIDED, HOWEVER, that (1) notwithstanding anything to
the contrary contained in this Section 5.8, Parent may, without the approval of
the Company, issue any press release or otherwise disseminate any written
material relating to any offering or issuance of shares of Parent Common Stock
contemplated by Section 5.6(b), and (2) Parent shall be entitled to file with
the SEC, after the execution and delivery of this Agreement, a Report on Form
8-K, together with a copy of this Agreement (including the exhibits hereto) and
the press release (which shall have been approved by the Company) announcing
this Agreement. Parent shall use reasonable efforts to ensure that none of its
Representatives makes any public statement that is materially inconsistent with
any press release issued or any written material publicly disseminated by Parent
with respect to the Merger or with respect to any of the other transactions
contemplated by this Agreement.
5.9 AFFILIATE AGREEMENTS. The Company shall use reasonable efforts to
cause each Person identified in Part 2.18 of the Company Disclosure Schedule and
each other Person who is or becomes an "affiliate" (as that term is used in Rule
145 promulgated under the Securities Act) of the Company to execute and deliver
to Parent, prior to the date of the mailing of the Prospectus/Proxy Statement to
the Company's stockholders, an Affiliate Agreement in the form
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of Exhibit C. Parent shall use reasonable efforts to cause each of Parent's
"affiliates" (as that term is used in Rule 145 promulgated under the Securities
Act) to execute and deliver to Parent, at least 30 days prior to the date on
which the Merger becomes effective, an "affiliate letter" in customary form
relating to "pooling of interests" accounting requirements.
5.10 TAX MATTERS. The Company shall use reasonable efforts to obtain and
deliver to Parent, as soon as practicable after the date of this Agreement,
Continuity of Interest Certificates in the form of Exhibit D signed by John F.
Cooper and David Chyan. At or prior to the Closing, the Company and Parent
shall execute and deliver to Cooley Godward LLP and to Fenwick & West LLP tax
representation letters in customary form. Parent and the Company shall use
reasonable efforts to cause the Merger to qualify as a tax free reorganization
under Section 368(a)(1) of the Code.
5.11 LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall use reasonable
efforts to cause to be delivered to Parent a letter of Ernst & Young LLP, dated
no more than two business days before the date on which the S-4 Registration
Statement becomes effective (and reasonably satisfactory in form and substance
to Parent), that is customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4 Registration Statement.
5.12 EMPLOYMENT MATTERS. The employees of the Company identified in Part
5.12A of the Company Disclosure Schedule have executed Employment Agreements
with Parent (which will become effective on the date the Merger becomes
effective). The employees of the Company identified in Part 5.12B of the
Company Disclosure Schedule have executed Noncompetition Agreements in favor of
the Company and Parent (which will become effective on the date the Merger
becomes effective). The Company shall use reasonable efforts to cause each of
the additional employees of the Company identified in Part 5.12C of the Company
Disclosure Schedule to execute and deliver to Parent an employment agreement in
the form of Exhibit E.
5.13 PARENT PLANS AND BENEFIT ARRANGEMENTS. Those Plans identified in Part
2.15(a) of the Company Disclosure Schedule that provide non-discretionary,
non-cash benefits to employees of the Company and that are substantially similar
to benefit plans and benefit arrangements currently maintained by Parent shall,
to the extent practicable, be maintained in effect by the Surviving Corporation
until the Continuing Employees (as defined in this Section 5.13) are allowed to
participate in such similar benefit plans or benefit arrangements maintained by
Parent. Parent shall use reasonable efforts to attempt to ensure that: (a) as
soon as practicable after the Effective Time, Parent's benefit plans and benefit
arrangements will provide benefits to the Continuing Employees that are
comparable to the non-discretionary, non-cash benefits provided to similarly
situated employees of Parent; (b) to the extent practicable, any pre-existing
condition limitations contained in Parent's health plans and health benefit
arrangements for any Continuing Employee who would be deemed under Parent's
health plans and health benefit arrangements to have a disqualifying
pre-existing condition are waived, to the extent such condition was covered by a
Plan immediately prior to the Effective Time (provided that, in the case of
Parent's disability and life insurance plans, such Continuing Employee is
actively at work and is not hospitalized or on disability leave as of the
Effective Time); and (c) to the extent
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practicable, Parent's benefit plans and benefit arrangements give full credit to
each Continuing Employee for such Continuing Employee's period of service with
the Company prior to the Effective Time for all purposes for which such service
was recognized under the Plans prior to the Effective Time. For purposes of
this Section 5.13, "Continuing Employee" shall mean any employee of the Company
who continues as an employee of the Surviving Corporation or Parent after the
Effective Time.
5.14 NYSE LISTING. Parent shall use reasonable efforts to cause the shares
of Parent Common Stock being issued in the Merger to be approved for listing
(subject to notice of issuance) on the NYSE.
5.15 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall use
reasonable efforts to obtain and deliver to Parent prior to the Closing the
resignation of each officer and director of the Company.
5.16 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS.
(a) The representations and warranties of the Company contained in
this Agreement shall have been accurate in all respects as of the date of this
Agreement, except that any inaccuracies in such representations and warranties
will be disregarded if the circumstances giving rise to all such inaccuracies
(considered collectively) do not constitute, and are not reasonably expected to
result in, a Material Adverse Effect on the Acquired Corporations (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect" qualifications
and other materiality qualifications contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Disclosure Schedule made or purported to have been made after the date
of this Agreement shall be disregarded).
(b) The representations and warranties of the Company contained in
this Agreement shall be accurate in all respects as of the Closing Date as if
made on and as of the Closing Date, except that any inaccuracies in such
representations and warranties will be disregarded if the circumstances giving
rise to all such inaccuracies (considered collectively) do
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not constitute, and are not reasonably expected to result in, a Material Adverse
Effect on the Acquired Corporations (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other materiality qualifications
contained in such representations and warranties shall be disregarded and (ii)
any update of or modification to the Company Disclosure Schedule made or
purported to have been made after the date of this Agreement shall be
disregarded).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that the
Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
6.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted and
the Merger shall have been duly approved by the Required Vote.
6.5 CONSENTS. All material Consents required to be obtained in connection
with the Merger and the other transactions contemplated by this Agreement shall
have been obtained and shall be in full force and effect.
6.6 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) Affiliate Agreements in the form of Exhibit C, executed by each
Person who is reasonably determined by the Company to be an "affiliate" of
the Company (as that term is used in Rule 145 promulgated under the
Securities Act);
(b) Continuity of Interest Certificates in the form of Exhibit D,
executed by John F. Cooper and David Chyan;
(c) the Employment Agreements referred to in the second sentence of
Section 5.12, executed by the individuals identified in Part 5.12A of the
Company Disclosure Schedule;
(d) the Noncompetition Agreements referred to in the first sentence
of Section 5.12, executed by the individuals identified in Part 5.12B of
the Company Disclosure Schedule;
(e) a letter from Ernst & Young LLP, dated as of the Closing Date and
addressed to Parent, reasonably satisfactory in form and substance to
Parent, updating the letter referred to in Section 5.11;
(f) the statement referred to in Section 5.16(a), executed by the
Company;
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(g) a letter from Ernst & Young LLP, dated as of the Closing Date and
addressed to Parent, the Company and Arthur Andersen LLP, reasonably
satisfactory in form and substance to Parent and Arthur Andersen LLP, to
the effect that, after reasonable investigation, Ernst & Young LLP is not
aware of any fact concerning the Company or any of the Company's
stockholders or affiliates that could preclude Parent from accounting for
the Merger as a "pooling of interests" in accordance with generally
accepted accounting principles, Accounting Principles Board Opinion No. 16
and all published rules, regulations and policies of the SEC;
(h) a letter from Arthur Andersen LLP, dated as of the Closing Date
and addressed to Parent, reasonably satisfactory in form and substance to
Parent, to the effect that Parent may account for the Merger as a "pooling
of interests" in accordance with generally accepted accounting principles,
Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC;
(i) a legal opinion of Fenwick & West LLP, dated as of the Closing
Date, reasonably satisfactory in form and substance to Parent;
(j) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date and addressed to Parent, to the effect that the Merger will constitute
a reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, Cooley Godward LLP may rely
upon the Continuity of Interest Certificates and tax representation letters
referred to in Section 5.10);
(k) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 6.1,
6.2, 6.4, 6.5, 6.7, 6.8 and 6.9 have been duly satisfied; and
(l) the written resignations of all officers and directors of the
Company, effective as of the Effective Time.
6.7 EMPLOYEES. None of the individuals identified in Part 5.12B of the
Company Disclosure Schedule shall have ceased to be employed by the Company, or
shall have expressed an intention to terminate his or her employment with the
Company or to decline to accept employment with Parent; and not more than 50% of
the individuals identified in Part 5.12C of the Company Disclosure Schedule
shall have ceased to be employed by the Company or shall have expressed an
intention to terminate their employment with the Company or to decline to accept
employment with Parent.
6.8 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the business, condition, assets, liabilities, operations or financial
performance of the Acquired Corporations since the date of this Agreement,
except for (a) any such material adverse change that is demonstrated to have
resulted directly from changes that occurred after the date of this Agreement in
general business conditions in the electronic design automation industry, and
(b) any material adverse change in the Company's financial performance that is
temporary in nature and
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is demonstrated to have resulted directly from the public announcement or the
pendency of the Merger.
6.9 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.16(b).
6.10 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
6.11 LISTING. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on the
NYSE.
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6.12 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.13 NO GOVERNMENTAL LITIGATION. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (b) relating to the Merger and seeking to obtain
from Parent or any of its subsidiaries any damages that may be material to
Parent; (c) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation; or (d)
which would materially and adversely affect the right of Parent, the Surviving
Corporation or any subsidiary of Parent to own the assets or operate the
business of the Company.
6.14 NO OTHER LITIGATION. There shall not be pending any Legal Proceeding
in which there is a reasonable possibility of an outcome that would have a
Material Adverse Effect on the Acquired Corporations or on Parent:
(a) challenging or seeking to restrain or prohibit the consummation of the
Merger or any of the other transactions contemplated by this Agreement;
(b) relating to the Merger and seeking to obtain from Parent or any of its
subsidiaries any damages that may be material to Parent; (c) seeking to prohibit
or limit in any material respect Parent's ability to vote, receive dividends
with respect to or otherwise exercise ownership rights with respect to the stock
of the Surviving Corporation; or (d) which would affect adversely the right of
Parent, the Surviving Corporation or any subsidiary of Parent to own the assets
or operate the business of the Company.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS.
(a) The representations and warranties of Parent and Merger Sub
contained in this Agreement shall have been accurate in all respects as of the
date of this Agreement, except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and are not reasonably
expected to result in, a Material Adverse Effect on Parent (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, all materiality qualifications contained in such representations and
warranties shall be disregarded).
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(b) The representations and warranties of Parent and Merger Sub
contained in this Agreement shall be accurate in all respects as of the Closing
Date as if made on and as of the Closing Date, except that any inaccuracies in
such representations and warranties will be disregarded if the circumstances
giving rise to all such inaccuracies (considered collectively) do not
constitute, and are not reasonably expected to result in, a Material Adverse
Effect on Parent (it being understood that, for purposes of determining the
accuracy of such representations and warranties, all materiality qualifications
contained in such representations and warranties shall be disregarded).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
7.4 DOCUMENTS. The Company shall have received the following documents:
(a) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, reasonably satisfactory in form and substance to the Company;
(b) a legal opinion of Fenwick & West LLP, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within
the meaning of Section 368 of the Code (it being understood that, in
rendering such opinion, Fenwick & West LLP may rely upon the Continuity of
Interest Certificates and tax representation letters referred to in
Section 5.10); and
(c) a certificate executed on behalf of Parent by an executive
officer of Parent, confirming that conditions set forth in Sections 7.1,
7.2 and 7.5 have been duly satisfied.
7.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in Parent's business, condition, assets, liabilities, operations or
financial performance since the date of this Agreement, except for (a) any such
material adverse change that is demonstrated to have resulted directly from
changes that occurred after the date of this Agreement in general business
conditions in the electronic design automation industry, and (b) any material
adverse change in Parent's financial performance that is temporary in nature and
is demonstrated to have resulted directly from the public announcement or the
pendency of the Merger.
7.6 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
7.7 LISTING. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on the
NYSE.
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7.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
the Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger by the Company
illegal.
SECTION 8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by 5:00 p.m. (Pacific Time) on May 7, 1997 (unless the failure
to consummate the Merger is attributable to a failure on the part of the
party seeking to terminate this Agreement to perform any material
obligation required to be performed by such party at or prior to the
Effective Time);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
(d) by either Parent or the Company if (i) the Company Stockholders'
Meeting shall have been held and (ii) this Agreement and the Merger shall
not have been adopted and approved at such meeting by the Required Vote;
PROVIDED, HOWEVER, that (1) Parent shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(d) if the failure of the Company's
stockholders to adopt and approve this Agreement and the Merger at the
Company Stockholders' Meeting is attributable to a failure on the part of
Parent to perform any material obligation required to have been performed
by Parent under this Agreement, (2) the Company shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(d) if the failure of
the Company's stockholders to adopt and approve this Agreement and the
Merger at the Company Stockholders' Meeting is attributable to a failure on
the part of the Company to perform any material obligation required to have
been performed by the Company under this Agreement, and (3) the Company
shall not be permitted to terminate this Agreement pursuant to this Section
8.1(d) unless the Company shall have paid the fee referred to in clause
"(i)" of Section 8.3(b);
(e) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the Required Vote) if a Triggering Event shall
have occurred;
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(f) by Parent if any of the Company's representations and warranties
contained in this Agreement shall be or shall have become materially
inaccurate, or if any of the Company's material covenants contained in this
Agreement shall have been breached in any material respect; PROVIDED,
HOWEVER, that if an inaccuracy in the Company's representations and
warranties or a breach of a covenant by the Company is curable by the
Company and the Company is continuing to exercise reasonable efforts to
cure such inaccuracy or breach, then Parent may not terminate this
Agreement under this Section 8.1(f) on account of such inaccuracy or
breach;
(g) by the Company if any of Parent's representations and warranties
contained in this Agreement shall be or shall have become materially
inaccurate, or if any of Parent's material covenants contained in this
Agreement shall have been breached in any material respect; PROVIDED,
HOWEVER, that if an inaccuracy in Parent's representations and warranties
or a breach of a covenant by Parent is curable by Parent and Parent is
continuing to exercise reasonable efforts to cure such inaccuracy or
breach, then the Company may not terminate this Agreement under this
Section 8.1(g) on account of such inaccuracy or breach;
(h) by either Parent or the Company at 5:00 p.m. (Pacific Time) on
the scheduled Closing Date (as designated by Parent in accordance with
Section 1.3) if (i) Parent shall have failed to issue shares of Parent
Common Stock on or prior to the scheduled Closing Date for the purpose of
satisfying the Paragraph 47d Condition, (ii) Arthur Andersen LLP is unable
to provide, on the scheduled Closing Date, the letter referred to in
Section 6.6(h) solely as a result of Parent's failure to issue shares of
Parent Common Stock in order to satisfy the Paragraph 47d Condition, and
(iii) all of the conditions set forth in Section 6 have otherwise been
fully satisfied (except for any conditions in Section 6 that have not been
satisfied as a result of Parent's failure to perform any material
obligation required to have been performed by Parent under this Agreement);
PROVIDED, HOWEVER, that (1) Parent shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(h) if Parent's failure to issue
shares of Parent Common Stock for the purpose of satisfying the Paragraph
47d Condition is attributable to a failure on the part of Parent to perform
any material obligation required to have been performed by Parent under
this Agreement, and (2) the Company shall not be permitted to terminate
this Agreement pursuant to this Section 8.1(h) if Parent's failure to issue
shares of Parent Common Stock for the purpose of satisfying the Paragraph
47d Condition is attributable to a failure on the part of the Company to
perform any material obligation required to have been performed by the
Company under this Agreement; or
(i) by Parent at any time on or after November 2, 1996 if John F.
Cooper and David Chyan shall not have executed and delivered to Parent
Option Agreements in the form of Exhibit F.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; PROVIDED, HOWEVER, that (i) this Section 8.2, Section 8.3 and
Section 9 shall survive the termination of this Agreement
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and shall remain in full force and effect, and (ii) the termination of this
Agreement shall not relieve any party from any liability for any breach of this
Agreement.
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8.3 EXPENSES; TERMINATION FEES.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Merger is consummated; PROVIDED, HOWEVER, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' fees, incurred
in connection with the printing and filing of the S-4 Registration Statement and
the Prospectus/Proxy Statement and any amendments or supplements thereto.
(b) If this Agreement is terminated by Parent or the Company pursuant
to Section 8.1(d), or if this Agreement is terminated by Parent pursuant to
Section 8.1(e), then:
(i) the Company shall pay to Parent, in cash (at the time
specified in Section 8.3(c)), a nonrefundable fee in the amount of
$5,000,000; and
(ii) in the event an Acquisition Transaction is consummated at
any time on or prior to the first anniversary of the date on which this
Agreement is terminated, the Company shall pay to Parent, in cash,
contemporaneously with the consummation of such Acquisition Transaction, an
additional nonrefundable fee in an amount equal to the Designated Amount
(as defined in Section 8.3(d)).
(c) In the case of termination of this Agreement by the Company
pursuant to Section 8.1(d), the fee referred to in clause "(i)" of Section
8.3(b) shall be paid by the Company prior to such termination, and in the case
of termination of this Agreement by Parent pursuant to Section 8.1(d) or Section
8.1(e), the fee referred to in clause "(i)" of Section 8.3(b) shall be paid by
the Company within three business days after such termination.
(d) The "Designated Amount" shall be $10,000,000; PROVIDED, HOWEVER,
that if (i) the Acquisition Transaction referred to in clause "(ii)" of Section
8.3(b) is required to be accounted for as a "pooling of interests," (ii) prior
to the consummation of such Acquisition Transaction, the Company delivers to
Parent reasonable written evidence of a determination by the SEC that relates
specifically to such Acquisition Transaction and that states that the SEC will
not permit such Acquisition Transaction to be accounted for as a "pooling of
interests" in the event, and solely because, a fee in the amount of $10,000,000
is paid by the Company to Parent in accordance with clause "(ii)" of Section
8.3(b), (iii) Parent shall have been given a reasonable opportunity, both prior
to and after such determination by the SEC, to persuade the appropriate official
at the SEC to appropriately modify the SEC's position on the accounting
treatment of such Acquisition Transaction (so that such Acquisition Transaction
can be accounted for as a "pooling of interests" notwithstanding the payment by
the Company of a fee in the amount of $10,000,000 in accordance with clause
"(ii)" of Section 8.3(b)), (iv) the Company shall have promptly advised Parent
of all material communications between the Company or any of its Representatives
and the SEC regarding the accounting treatment of such Acquisition Transaction,
(v) the Company shall have cooperated with Parent, both prior to and after such
determination by the SEC, in Parent's efforts to persuade the appropriate
official at the SEC to appropriately modify the SEC's position on the accounting
treatment of such Acquisition Transaction, (vi) the Company shall not have
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taken any action or position, either prior to or after such determination by the
SEC, in opposition to or inconsistent with Parent's efforts to persuade the
appropriate official at the SEC to appropriately modify the SEC's position on
the accounting treatment of such Acquisition Transaction, and (vii) the position
reflected in such determination by the SEC shall not have been reversed,
withdrawn or otherwise appropriately altered, then the "Designated Amount" shall
be the lesser of $10,000,000 or the maximum dollar amount that would not
preclude such Acquisition Transaction from being accounted for as a "pooling of
interests."
(e) If this Agreement is validly terminated pursuant to Section
8.1(h), then Parent shall pay to the Company, in cash, a nonrefundable fee in
the amount of $10,000,000. If this Agreement is validly terminated by Parent
pursuant to Section 8.1(h), then such fee shall be paid to the Company on the
date Parent terminates this Agreement. If this Agreement is validly terminated
by the Company pursuant to Section 8.1(h), then such fee shall be paid to the
Company within three business days after the date on which the Company
terminates this Agreement.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and Parent at any time before or
after adoption and approval of this Agreement and the Merger by the stockholders
of the Company; PROVIDED, HOWEVER, that after any such adoption and approval of
this Agreement and the Merger by the Company's stockholders, no amendment shall
be made which by law requires further approval of the stockholders of the
Company without the further approval of such stockholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
9.2 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
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9.4 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and
the other agreements referred to herein and the letter agreements dated as of
September 26, 1996 between Parent and the Company constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among or between any of the parties with respect to the subject matter
hereof and thereof. This Agreement may be executed in several counterparts, each
of which shall be deemed an original and all of which shall constitute one and
the same instrument, and shall be governed in all respects by the laws of the
State of Delaware as applied to contracts entered into and to be performed
entirely within the State of Delaware. The parties hereto waive trial by jury
in any action at law or suit in equity based upon, or arising out of, this
Agreement or the subject matter hereof.
9.5 DISCLOSURE SCHEDULE. The Company Disclosure Schedule shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Section 2, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
section in Section 2, and shall not be deemed to relate to or to qualify any
other representation or warranty (unless it is reasonably apparent to Parent
that such information qualifies another representation or warranty).
9.6 ATTORNEYS' FEES. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a reasonable sum for
its attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.7 ASSIGNABILITY. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that neither this
Agreement nor any of the Company's rights hereunder may be assigned by the
Company without the prior written consent of Parent, and any attempted
assignment of this Agreement or any of such rights by the Company without such
consent shall be void and of no effect. Except as set forth in Section 5.5 with
respect to the current directors and officers of the Company, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
9.8 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
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IF TO PARENT:
Cadence Design Systems, Inc.
2655 Seely Avenue
San Jose, California 95135
Attention: General Counsel
Facsimile: (408) 944-0215
IF TO MERGER SUB:
Wyoming Acquisition Sub, Inc.
Cadence Design Systems, Inc.
2655 Seely Avenue
San Jose, California 95135
Attention: General Counsel
Facsimile: (408) 944-0215
IF TO THE COMPANY:
Cooper & Chyan Technology, Inc.
1601 South DeAnza Boulevard
Cupertino, California 95014
Attention: President and Chief Financial Officer
Facsimile: (408) 342-5650
9.9 COOPERATION. The Company agrees to cooperate fully with Parent and
to execute and deliver such further documents, certificates, agreements and
instruments and to take such other actions as may be reasonably requested by
Parent to evidence or reflect the transactions contemplated by this Agreement
and to carry out the intent and purposes of this Agreement.
9.10 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
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(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
CADENCE DESIGN SYSTEMS, INC.
By:/s/ R.L. Smith McKeithen
------------------------------------------
R.L. Smith McKeithen,
Vice President and General Counsel
WYOMING ACQUISITION SUB, INC.
By:/s/ R.L. Smith McKeithen
------------------------------------------
R.L. Smith McKeithen,
Vice President and Secretary
COOPER & CHYAN TECHNOLOGY, INC.
By:/s/ Robert D. Selvi
------------------------------------------
Robert D. Selvi,
Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED CORPORATION CONTRACT. "Acquired Corporation Contract" shall mean
any Contract: (a) to which any of the Acquired Corporations is a party; (b) by
which any of the Acquired Corporations or any asset of any of the Acquired
Corporations is or may become bound or under which any of the Acquired
Corporations has, or may become subject to, any obligation; or (c) under which
any of the Acquired Corporations has or may acquire any right or interest.
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer or
proposal (other than an offer or proposal by Parent) contemplating or otherwise
relating to any Acquisition Transaction.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction or series of related transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange
offer or other similar transaction (i) in which the Company is a
constituent corporation, (ii) in which a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons directly
or indirectly acquires the Company or more than 50% of the Company'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 the Company, or (iii) in which the
Company issues securities representing more than 40% of the outstanding
securities of any class of voting securities of the Company; or
(b) 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 the
Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the Common Stock,
$0.01 par value per share, of the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license,
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sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR ACT. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, audit or active
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
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MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Corporations if such event, violation, inaccuracy, circumstance or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in Section 2 of the Agreement but
for the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) would have a material adverse effect on the business, condition,
assets, liabilities, operations or financial performance of the Acquired
Corporations taken as a whole; PROVIDED, HOWEVER, that in the event the
Company's representations and warranties are inaccurate as of the Closing Date
as if made on and as of the Closing Date, the circumstances giving rise to the
inaccuracies in such representations and warranties will not be deemed to
constitute a Material Adverse Effect on the Acquired Corporations for purposes
of Section 6.1(b) if such circumstances (i) are demonstrated to have resulted
directly from changes that occurred after the date of this Agreement in general
business conditions in the electronic design automation industry, or (ii) are
demonstrated to have resulted directly from the public announcement or the
pendency of the Merger and would reasonably be expected to have only a temporary
effect on the Acquired Corporations and the Acquired Corporations' business and
financial condition. An event, violation, inaccuracy, circumstance or other
matter will be deemed to have a "Material Adverse Effect" on Parent if such
event, violation, inaccuracy, circumstance or other matter (considered together
with all other matters that would constitute exceptions to the representations
and warranties set forth in Section 3 of the Agreement but for the presence of
"Material Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the business, condition, assets, liabilities, operations or
financial performance of Parent and its subsidiaries taken as a whole; PROVIDED,
HOWEVER, that in the event Parent's representations and warranties are
inaccurate as of the Closing Date as if made on and as of the Closing Date, the
circumstances giving rise to the inaccuracies in such representations and
warranties will not be deemed to constitute a Material Adverse Effect on Parent
for purposes of Section 7.1(b) if such circumstances (i) are demonstrated to
have resulted directly from changes that occurred after the date of this
Agreement in general business conditions in the electronic design automation
industry, or (ii) are demonstrated to have resulted directly from the public
announcement or the pendency of the Merger and would reasonably be expected to
have only a temporary effect on Parent and Parent's business and financial
condition.
NYSE. "NYSE" shall mean the New York Stock Exchange.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock,
$.01 par value per share, of Parent. Unless the context otherwise requires, all
references in the Agreement to Parent Common Stock shall be deemed to refer also
to the associated rights under Parent's Rights Agreement dated as of February 9,
1996 between Parent and Harris Trust and Savings Bank.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious
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business name, service mark (whether registered or unregistered), service mark
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, customer
list, franchise, system, computer software, computer program, source code,
algorithm, invention, design, blueprint, engineering drawing, proprietary
product, technology, proprietary right or other intellectual property right or
intangible asset.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
TRIGGERING EVENT. A "Triggering Event" shall be deemed to have occurred
if: (i) the Board of Directors of the Company shall have failed to recommend,
or shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of, the Merger or
approval or adoption of this Agreement; (ii) the Company shall have failed to
include in the Prospectus/Proxy Statement the unanimous recommendation of the
Board of Directors of the Company in favor of approval and adoption of this
Agreement and the Merger; (iii) the Board of Directors of the Company shall have
approved, endorsed or recommended any Acquisition Proposal; (iv) the Company
shall have entered into any letter of intent or similar document or any Contract
relating to any Acquisition Proposal; (v) the Company shall have failed to hold
the Company Stockholders' Meeting as promptly as practicable and in any event
within 60 days after the S-4 Registration Statement is declared effective; (vi)
a tender or exchange offer relating to securities of the Company shall have been
commenced and the Company shall not have sent to its securityholders, within ten
business days after the commencement of such tender or exchange offer, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer; or (vii) an Acquisition Proposal is publicly announced, and the
Company (A) fails to issue a press release announcing its opposition
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to such Acquisition Proposal within five business days after such Acquisition
Proposal is announced or (B) otherwise fails to actively oppose such Acquisition
Proposal.
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FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of October 3, 1996 by and
between CADENCE DESIGN SYSTEMS, INC., a Delaware corporation ("Parent"), and
__________________ ("Stockholder").
RECITALS
A. Parent, HARBOR ACQUISITION SUB, INC., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and HIGH LEVEL DESIGN SYSTEMS,
INC., a Delaware corporation (the "Company"), are entering into an Agreement and
Plan of Merger and Reorganization of even date herewith (as amended from time to
time, the "Reorganization Agreement"; capitalized terms used but not otherwise
defined in this Voting Agreement have the meanings assigned to such terms in the
Reorganization Agreement), which provides (subject to the conditions set forth
therein) for the merger of Merger Sub into the Company (the "Merger").
B. As of the date hereof, Stockholder owns, of record and
beneficially, the number of shares of Company Common Stock set forth below
Stockholder's name on the signature page hereof (all such shares, together with
any shares of Company Capital Stock that may hereafter be acquired by
Stockholder, being referred to herein as the "Subject Shares").
C. As a condition to the willingness of Parent and Merger Sub to
enter into the Reorganization Agreement, Parent and Merger Sub have required
that Stockholder agree, and in order to induce Parent and Merger Sub to enter
into the Reorganization Agreement Stockholder has agreed, to enter into this
Voting Agreement.
AGREEMENT
The parties to this Voting Agreement, intending to be legally bound,
agree as follows:
SECTION 1. TRANSFER OF SUBJECT SHARES
1.1 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES.
(a) Except as provided in Section 1.1(b) below, Stockholder
hereby covenants and agrees that, prior to the earlier to occur of the valid
termination of the Reorganization Agreement or the Effective Time, Stockholder
will not, directly or indirectly, (i) offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise dispose or transfer (or
announce any offer, sale, offer of sale, contract of sale or grant of any option
to purchase or other disposition or transfer) any Subject Shares to any Person
other than Parent or Parent's designee, (ii) create or permit to exist any
Encumbrance on any of the Subject Shares or (iii) reduce his beneficial
ownership of, interest in, or risk relating to the Subject Shares.
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(b) Notwithstanding Section 1.1(a), the _________ of the
Subject Shares that Stockholder has pledged to ________________ pursuant to the
______________________ (the "____________ Agreement") may remain subject to the
terms of the ________ Agreement as in effect on the date hereof.
1.2 TRANSFER OF VOTING RIGHTS. Stockholder covenants and agrees that,
prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time, Stockholder will not deposit any Subject Shares
into a voting trust or grant a proxy or enter into a voting agreement with
respect to any Subject Shares.
SECTION 2. VOTING OF SUBJECT SHARES
2.1 PRE-TERMINATION VOTING AGREEMENT. Stockholder hereby agrees that,
prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time, at any meeting of the stockholders of the
Company, however called, and in any written action by consent of stockholders of
the Company, Stockholder shall vote the Subject Shares:
(i) in favor of the Merger, the execution and delivery
by the Company of the Reorganization Agreement and the approval of the
terms thereof and each of the other actions contemplated by the
Reorganization Agreement and any action required in furtherance hereof
and thereof;
(ii) against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Reorganization
Agreement; and
(iii) except as otherwise agreed to in writing in advance
by Parent, against the following actions (other than the Merger and the
transactions contemplated by the Reorganization Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any subsidiary of the
Company; (B) a sale, lease or transfer of a material amount of assets of
the Company or any subsidiary of the Company or a reorganization,
recapitalization, dissolution or liquidation of the Company or any
subsidiary of the Company; (C) (1) any change in a majority of the board
of directors of the Company; (2) any amendment of the Company's
Certificate of Incorporation; (3) any other material change in the
present capitalization of the Company or any amendment of the Company's
corporate structure; or (4) any other action which is intended, or could
reasonably be expected to impede, interfere with, delay, postpone,
discourage or adversely affect the contemplated economic benefits to
Parent of the Merger or any of the other transactions contemplated by the
Reorganization Agreement or this Voting Agreement.
Stockholder shall not enter to any agreement or understanding with any Person
prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time to vote or give instructions in any manner
inconsistent with clause "(i)", "(ii)" or "(iii)" of the preceding sentence.
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2.2 POST-TERMINATION VOTING AGREEMENT. If an Acquisition Proposal is
made and publicly announced at any time prior to the Company Stockholders'
Meeting and such Acquisition Proposal is not publicly withdrawn prior to such
Company Stockholders' Meeting, and if the Reorganization Agreement and the
Merger are not approved at such meeting by the Required Vote, then prior to the
date that is 180 days after the valid termination of the Reorganization
Agreement, at any meeting of the stockholders of the Company, however called,
and in any written action by consent of stockholders of the Company, unless
otherwise directed in writing by Parent, Stockholder shall vote the Subject
Shares:
(i) against any Acquisition Proposal (including any
Acquisition Proposal that is different from any Acquisition Proposal that
is made and publicly announced at any time prior to the Company
Stockholders' Meeting) and any related transaction or agreement; and
(ii) against any action which is intended, or is likely,
to facilitate the consummation of any transaction contemplated by any
Acquisition Proposal (including any Acquisition Proposal that is
different from any Acquisition Proposal that is made and publicly
announced at any time prior to the Company Stockholders' Meeting).
Stockholder shall not enter into any agreement or understanding with any Person
prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time to vote or give instructions in any manner
inconsistent with clause "(i)" or "(ii)" of the preceding sentence. For
purposes of this Section 2.2, an Acquisition Proposal shall be deemed to have
been "publicly withdrawn" only if (i) acting in good faith, the Person who made
such Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (ii) it is not reasonably expected that such Acquisition Proposal
will be resubmitted or that such Person will make, submit or announce any other
Acquisition Proposal.
2.3 PROXY; FURTHER ASSURANCES.
(a) Contemporaneously with the execution of this Voting
Agreement, Stockholder shall deliver to Parent a proxy in the form attached
hereto as Exhibit A, which shall be irrevocable to the fullest extent permitted
by law, with respect to the Subject Shares (the "Proxy").
(b) Stockholder shall perform such further acts and execute
such further documents and instruments as may reasonably be required to vest in
Merger Sub and Parent the power to carry out and give effect to the provisions
of this Voting Agreement.
SECTION 3. WAIVER OF APPRAISAL RIGHTS.
Stockholder hereby waives any rights of appraisal and any rights to
dissent from the Merger that Stockholder may have.
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SECTION 4. NO SOLICITATION
Stockholder covenants and agrees that during the period commencing on the
date of this Voting Agreement and ending on the earlier to occur of the valid
termination of the Reorganization Agreement or the Effective Time, Stockholder
shall not, directly or indirectly, and shall not authorize or permit any
Representative of Stockholder, directly or indirectly, to:(i) solicit, initiate,
encourage or induce the making, submission or announcement of any Acquisition
Proposal or take any action that could reasonably be expected to lead to an
Acquisition Proposal;(ii) furnish any information regarding the Company or the
Subsidiary to any Person in connection with or in response to an Acquisition
Proposal or potential Acquisition Proposal;(iii) negotiate or engage in
discussions with any Person with respect to any Acquisition Proposal;(iv)
approve, endorse or recommend any Acquisition Proposal; or (v) enter into any
letter of intent or Contract contemplating or otherwise relating to any
Acquisition Proposal. Without limiting the generality of the foregoing,
Stockholder acknowledges and agrees that any violation of any of the
restrictions set forth in the preceding sentence by any Representative of
Stockholder, where such Representative is authorized to act on behalf of
Stockholder, shall be deemed to constitute a breach of this Section 4 by
Stockholder. If Stockholder is also a director of the Company, the foregoing
provision shall not prevent Stockholder from acting in accordance with
Stockholder's fiduciary duties as a director of the Company, provided
Stockholder complies with the provisions of Section 4.3 of the Reorganization
Agreement. Stockholder shall immediately cease any existing discussions or
negotiations with any Person that relate to any Acquisition Proposal.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
5.1 DUE ORGANIZATION, AUTHORIZATION, ETC. Stockholder (if it is a
corporation, partnership or other legal entity) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Stockholder has all requisite power (corporate
or otherwise) to execute and deliver this Voting Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Voting
Agreement, the execution and delivery of the Proxy and the consummation of the
other transactions contemplated hereby have been duly authorized by all
necessary action (corporate or otherwise) on the part of Stockholder. This
Voting Agreement has been duly executed and delivered by or on behalf of
Stockholder and, assuming its due authorization, execution and delivery by
Parent, constitutes a legal, valid and binding obligation of Stockholder,
enforceable against Stockholder in accordance with its terms except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors' rights from time
to time in effect and subject to general equity principles and to limitations on
the availability of equitable relief.
5.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
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(a) The execution and delivery of this Voting Agreement by
Stockholder do not, and the performance of this Voting Agreement by Stockholder
will not: (i) conflict with or violate the Certificate of Incorporation by
Bylaws or other similar organizational documents of Stockholder (if Stockholder
is a corporation, partnership or other legal entity); (ii) conflict with or
violate any Legal Requirement, order, decree or judgment applicable to
Stockholder or by which it or any of its properties is bound or affected; or
(iii) result in any breach of or constitute a default (with notice or lapse of
time, or both) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on the Subject Shares, pursuant to, any indenture or other loan
document provisions or other Contract, license, franchise, permit or other
instrument or obligation to which such Stockholder is a party or by which
Stockholder or any of its properties is bound or affected.
(b) The execution and delivery of this Voting Agreement by
Stockholder do not, and the performance of this Voting Agreement by Stockholder
will not, require any Consent of any Person.
5.3 TITLE TO SUBJECT SHARES. Except as set forth on Schedule 5.3
hereto, Stockholder owns of record and beneficially the Subject Shares set forth
under Stockholder's name on the signature page hereof and does not directly or
indirectly own, either beneficially or of record, any shares of Company Capital
Stock, or rights to acquire any shares of Company Capital Stock, other than the
Subject Shares set forth below Stockholder's name on the signature page hereof
and Company Capital Stock issuable upon exercise of options granted under the
Company's 1993 Stock Option Plan and 1995 Special Nonstatutory Stock Option
Plan.
5.4 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will be accurate in all respects at all times through
the consummation of the Merger and will be accurate in all respects as of the
date of the consummation of the Merger as if made on that date.
SECTION 6. COVENANTS OF STOCKHOLDER
6.1 FURTHER ASSURANCES. From time to time and without additional
consideration, Stockholder will execute and deliver, or cause to be executed and
delivered, such additional or further transfers, assignments, endorsements,
consents and other instruments as Parent may reasonably request for the purpose
of effectively carrying out the transactions contemplated by this Voting
Agreement.
6.2 LEGENDS.
(a) Stockholder shall instruct the Company to cause each
certificate of Stockholder evidencing the Subject Shares to bear a legend in the
following form:
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THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THE VOTING AGREEMENT DATED AS OF
OCTOBER 3, 1996, AS IT MAY BE AMENDED, BETWEEN THE
ISSUER AND THE REGISTERED HOLDER OF THIS
CERTIFICATE, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
(b) In the event that the Subject Shares shall cease to be
subject to the restrictions on transfer set forth in this Voting Agreement, the
Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Subject Shares without the legend
required by Section 6.2(a).
SECTION 7. MISCELLANEOUS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by Stockholder in this Voting
Agreement shall survive the consummation of the Merger and shall survive any
termination of the Reorganization Agreement.
7.2 INDEMNIFICATION.
(a) Without in any way limiting any of the rights or remedies
otherwise available to Parent, Stockholder shall hold harmless and indemnify
Parent from and against, and shall compensate and reimburse Parent for, any
Damages which are directly or indirectly suffered or incurred at any time by
Parent, or to which Parent otherwise becomes subject (regardless of whether or
not such Damages relate to a third-party claim), and that arise from or are
directly or indirectly connected with any breach of any representation,
warranty, covenant or obligation of Stockholder contained herein.
(b) Without in any way limiting any of the rights or remedies
otherwise available to Stockholder, Parent shall hold harmless and indemnify
Stockholder from and against, and shall compensate and reimburse Stockholder
for, any Damages which are directly or indirectly suffered or incurred at any
time by Stockholder, or to which Stockholder otherwise becomes subject
(regardless of whether or not such Damages relate to a third-party claim), and
that arise from or are directly or indirectly connected with any breach of any
representation, warranty, covenant or obligation of Parent contained herein.
7.3 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Voting Agreement shall be paid by the party incurring such costs and expenses.
7.4 NOTICES. All notices or other communications under this Voting
Agreement shall be in writing and shall be given by delivery in person, by
facsimile, cable, telegram, telex or
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other standard form of telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows (or such other
address for a party as shall be specified in a notice given in accordance with
this Section 7.4) and shall be deemed to have been given one business day after
transmission by facsimile, cable, telegram, telex of other standard form of
telecommunications or four days after deposit in the U.S. mail:
If to Stockholder, at the address or facsimile number of Stockholder set
forth on the signature page hereto, with a copy to:
c/o High Level Design Systems, Inc.
3945 Freedom Circle
Fourth Floor
Santa Clara, CA 94054
Attention: Chief Executive Officer
Facsimile No.:(408) 748-3499
and
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Douglas H. Collom, Esq.
Facsimile: (415) 496-4086
If to Parent or Merger Sub:
Cadence Design Systems, Inc.
555 River Oaks Parkway
San Jose, CA 95134
Attention: General Counsel
Facsimile No.: (408) 944-0215
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Alan C. Mendelson, Esq.
Facsimile No.: (415) 857-0663
7.5 SEVERABILITY. Any term or provision of this Voting Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Voting Agreement or affecting the validity or
enforceability of any
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of the terms or provisions of this Voting Agreement in any other jurisdiction.
If any provision of this Voting Agreement is so broad as to be unenforceable,
the provision shall be interpreted to be only so broad as is enforceable.
7.6 ENTIRE AGREEMENT. This Voting Agreement and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Voting Agreement shall be
binding upon any party hereto unless made in writing and signed by all parties
hereto.
7.7 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither
this Voting Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties, except that
Parent or Merger Sub may assign all or any of their rights and obligations
hereunder to any affiliate of Parent, provided that no such assignment shall
relieve Parent or Merger Sub of its obligations hereunder if such assignee does
not perform such obligations. Subject to the preceding sentence, this Voting
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Voting Agreement to the contrary, nothing in this Voting
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Voting
Agreement.
7.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Voting
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Voting Agreement and
to enforce specifically the terms and provisions hereof in any Delaware Court,
this being in addition to any other remedy to which they are entitled at law or
in equity.
7.9 GOVERNING LAW. This Voting Agreement shall be governed in all
respects by the laws of the State of Delaware, as applied to contracts entered
into and to be performed entirely within the State of Delaware.
7.10 HEADINGS. Headings of the Sections of this Voting Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
7.11 COUNTERPARTS. This Voting Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by all
of the parties hereto.
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IN WITNESS WHEREOF, Parent and Stockholder have caused this Voting
Agreement to be executed as of the date first written above.
CADENCE DESIGN SYSTEMS, INC.
By:
--------------------------------
Name: R.L. Smith McKeithen
Title: Vice President and
General Counsel
-----------------------------------
Name:
-----------------------------
Address:
-------------------
-------------------
Number of Shares of Company
Common Stock:
---------------
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EXHIBIT A
FORM OF IRREVOCABLE PROXY
IRREVOCABLE PROXY
The undersigned stockholder of High Level Design Systems, Inc., a
Delaware corporation (the "Company"), hereby irrevocably (to the fullest extent
permitted by law) appoints and constitutes Joseph B. Costello, H. Raymond
Bingham and R.L. Smith McKeithen and Cadence Design Systems, Inc., a Delaware
corporation ("Parent"), and each of them, the attorneys and proxies of the
undersigned with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to the shares of capital stock
of the Company beneficially owned by the undersigned, which shares are listed on
the final page of this Proxy (the "Shares"), and any and all other shares or
securities issued or issuable with respect thereof on or after the date hereof,
until the earlier to occur of (i) the valid termination of the Agreement and
Plan of Merger and Reorganization, dated as of the date hereof (the
"Reorganization Agreement"; capitalized terms used but not otherwise defined in
this Proxy have the meanings assigned to such terms in the Reorganization
Agreement), among Parent, Harbor Acquisition Sub, Inc., a Delaware corporation
and wholly owned subsidiary of Parent, and the Company, or (ii) the Effective
Time. Upon the execution hereof, all prior proxies given by the undersigned
with respect to the Shares and any and all other shares or securities issued or
issuable in respect thereof on or after the date hereof are hereby revoked and
no subsequent proxies will be given.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof (the "Voting
Agreement"), between Parent and the undersigned, and is granted in consideration
of Parent entering into the Reorganization Agreement and Parent's interest in
the Option Agreement of even date herewith by and between Parent and
____________.
The attorneys and proxies named above will be empowered, and may exercise
this proxy, to vote the Shares subject hereto at any time until the earlier to
occur of the valid termination of the Reorganization Agreement or the Effective
Time, at any meeting of the stockholders of the Company, however called, or in
any written action by consent of stockholders of the Company:
(i) in favor of the Merger, the execution and delivery by the
Company of the Reorganization Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Reorganization
Agreement and any action required in furtherance of the Reorganization
Agreement and the Voting Agreement;
(ii) against any action or agreement that would result in a breach
of any covenant, representation or warranty and or any other obligation
or agreement of the Company under the Reorganization Agreement; and
A-1
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(iii) against the following actions (other than the Merger and the
transactions contemplated by the Reorganization Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any subsidiary of the
Company; (B) a sale, lease or transfer of a material amount of assets of
the Company or any subsidiary of the Company or a reorganization,
recapitalization, dissolution or liquidation of the Company or any
subsidiary of the Company; (C) (1) any change in the majority of the
board of directors of the Company; (2) any amendment of the Company's
Certificate of Incorporation; (3) any other material change in the
present capitalization of the Company or any amendment of the Company's
corporate structure; or (4) any other action; which is intended, or could
reasonably be expected to impede, interfere with, delay, postpone,
discourage or adversely affect the contemplated economic benefits to
Parent of the Merger or the transactions contemplated by the
Reorganization Agreement or the Voting Agreement.
If an Acquisition Proposal is made and publicly announced at any time
prior to the Company Stockholders' Meeting and such Acquisition Proposal is not
publicly withdrawn prior to such Company Stockholders' Meeting, and if the
Reorganization Agreement and the Merger are not approved at such meeting by the
Required Vote, then prior to the date that is 180 days after the valid
termination of the Reorganization Agreement, at any meeting of the stockholders
of the Company, however called, and in any written action by consent of
stockholders of the Company, the attorneys and proxies named above will be
empowered, and may exercise this proxy, to vote the Shares subject hereto:
(i) with respect to any Acquisition Proposal (including any
Acquisition Proposal that is different from any Acquisition Proposals
that is made and publicly announced at any time prior to the Company
Stockholders' Meeting) and any related transaction or agreement; and
(ii) with respect to any action which is intended, or is
likely, to facilitate the consummation of any transaction contemplated by
any Acquisition Proposal (including any Acquisition Proposal that is
different from any Acquisition Proposals that is made, and publicly
announced at any time prior to the Company Stockholders' Meeting).
For purposes of this Proxy, an Acquisition Proposal shall be deemed to have been
"publicly withdrawn" only if (i) acting in good faith, the Person who made such
Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (ii) it is not reasonably expected that such Acquisition Proposal
will be resubmitted or that such Person will make, submit or announce any other
Acquisition Proposal.
The undersigned stockholder may vote the Shares on all other matters.
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Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This proxy is irrevocable.
Dated: October 3, 1996
-----------------------------------
Name:
-----------------------------
Number of Shares of Company
Common Stock:
---------------------
A-3
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OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into as of October 3, 1996 by and
between CADENCE DESIGN SYSTEMS, INC., a Delaware corporation ("Parent"), and J.
GEORGE JANAC ("Stockholder").
RECITALS
A. Parent, HARBOR ACQUISITION SUB, INC., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and HIGH LEVEL DESIGN SYSTEMS,
INC., a Delaware corporation (the "Company"), are entering into an Agreement and
Plan of Merger and Reorganization of even date herewith (as amended from time to
time, the "Reorganization Agreement"; capitalized terms used but not otherwise
defined in this Option Agreement have the meanings assigned to such terms in the
Reorganization Agreement), which provides (subject to the conditions set forth
therein) for the merger of Merger Sub into the Company (the "Merger").
B. As of the date hereof, Stockholder owns, of record and
beneficially, the number of shares of Company Common Stock set forth below
Stockholder's name on the signature page hereof (all such shares being referred
to herein as the "Subject Shares").
C. As a condition to the willingness of Parent and Merger Sub to
enter into the Reorganization Agreement, Parent and Merger Sub have required
that Stockholder agree, and in order to induce Parent and Merger Sub to enter
into the Reorganization Agreement Stockholder has agreed, to enter into this
Option Agreement as well as the Voting Agreement of even date herewith by and
between Parent and Stockholder.
AGREEMENT
The parties to this Option Agreement, intending to be legally bound,
agree as follows:
SECTION 1. GRANT OF OPTION AND EXERCISE
1.1 GRANT OF OPTION. Stockholder hereby grants to Parent an
irrevocable option (the "Option") to purchase, on the terms and subject to the
provisions set forth herein, all, but not less than all, the Subject Shares at a
price per Subject Share equal to $8.15, subject to appropriate adjustment if
between the date of this Option Agreement and the Closing Date (as defined in
Section 1.3), the outstanding shares of Company Common Stock are changed into a
different number or class of shares by reason of any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction (the "Purchase Price").
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1.2 EXERCISE OF OPTION.
(a) Parent may exercise the Option with respect to the Subject
Shares at any time following the occurrence of a Purchase Event (as defined in
Section 1.2(b)) and prior to the Termination Date (as defined in Section
1.2(c)). Parent's right to purchase Subject Shares with respect to which it has
exercised the Option shall not terminate on the Termination Date; accordingly,
if Parent exercises the Option on or prior to the Termination Date, then Parent
shall be entitled to purchase the Subject Shares.
(b) For purposes of this Agreement, a "Purchase Event" shall be
deemed to have occurred upon the earlier of the following:
(i) the date of the Company Stockholders' Meeting, if
(A) an Acquisition Proposal shall have been publicly announced (and not
publicly withdrawn) prior to the Company Stockholders' Agreement and (B)
the Reorganization Agreement and the Merger shall not have been adopted
and approved at such meeting by the Required Vote; or
(ii) the occurrence of a Triggering Event.
; provided in each case that the Reorganization Agreement is terminated.
(c) For purposes of this Agreement, "Termination Date" shall
mean the earliest of the following:
(i) the date on which the Merger becomes effective;
(ii) 180 days after the date on which Parent receives
written notice from Stockholder or the Company of the occurrence of a
Purchase Event; or
(iii) the date on which the Reorganization Agreement is
validly terminated pursuant to Section 8.1 thereof, if a Purchase Event
shall not have occurred on or prior to such date;
PROVIDED, HOWEVER, that with respect to clause "(ii)" above, if the Option
cannot be exercised prior to the end of such 180-day period by reason of any
applicable judgment, decree, order, material Legal Requirement or other material
legal impediment, then the Termination Date shall be extended until the date 30
days after the date on which such impediment is removed.
1.3 CLOSING. In the event Parent wishes to exercise the Option,
Parent shall send to Stockholder a written notice (the date of which being
herein referred to as the "Notice Date") specifying (a) the place at which the
Subject Shares are to be purchased and (b) the date on which the Subject Shares
are to be purchased, which shall not be earlier than one business day nor later
than ten business days after the Notice Date. The closing of the purchase of
such Subject Shares (the "Closing") shall take place at the place specified in
such written notice and
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on the date specified in such written notice (the "Closing Date"); PROVIDED,
HOWEVER, that: (i) if such purchase cannot be consummated by reason of any
applicable judgment, decree, order, material Legal Requirement or other material
legal impediment, the Closing Date may be extended by Parent to a date not more
than 30 days after the date on which such impediment is removed; and (ii) if
prior notification to or approval of any Governmental Body is required in
connection with such purchase, Stockholder shall promptly cause to be filed the
required notice or application for approval and shall expeditiously process the
same (and Stockholder shall cooperate with Parent in the filing of any such
notice or application required to be filed by Parent and the obtaining of any
such approval required to be obtained by Parent), and the Closing Date may be
extended by Parent to a date not more than 30 days after the later of (A) the
date on which any required notification or waiting period has expired or been
validly terminated or (B) the date on which any required approval has been
obtained.
1.4 PAYMENT AND DELIVERY OF CERTIFICATES. On the Closing Date, (i)
Parent will deliver to Stockholder the Purchase Price payable for the Subject
Shares and (ii) Stockholder shall deliver to Parent certificates representing
the Subject Shares, duly endorsed in blank or accompanied by stock powers duly
executed by Stockholder in blank, in proper form for transfer, with appropriate
signature guarantees.
1.5 DISTRIBUTIONS. Any dividends or other distributions (whether
payable in cash, stock or otherwise) by the Company with respect to the Subject
Shares purchased pursuant to the Option with a record date on or after the
Notice Date will belong to Parent. If any such dividend or distribution
belonging to Parent is paid by the Company to Stockholder, Stockholder shall
hold such dividend or distribution in trust for the benefit of Parent and shall
promptly remit such dividend or distribution to Parent in exactly the form
received, accompanied by appropriate instruments of transfer.
1.6 VOTING AGREEMENT.
(a) Subject to Section 1.6(b), upon any exercise of the Option
by Parent, Parent shall enter into a voting agreement pursuant to which Parent
shall agree that until the tenth anniversary of the Closing Date, at any meeting
of the stockholders of the Company, however called, and in any written action by
consent of stockholders of the Company, Parent shall vote the Subject Shares as
directed in writing by Stockholder.
(b) Notwithstanding the foregoing, if an Acquisition Proposal
is made and publicly announced at any time prior to the Company Stockholders'
Meeting and such Acquisition Proposal is not publicly withdrawn prior to such
Company Stockholders' Meeting, and if the Reorganization Agreement and the
Merger are not approved at such meeting by the Required Vote, then prior to the
date that is 180 days after the valid termination of the Reorganization
Agreement, at any meeting of the stockholders of the Company, however called,
and in any written action by consent of stockholders of the Company, Parent
shall be entitled to vote the Subject Shares:
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(i) against any Acquisition Proposal (including any
Acquisition Proposal that is different from any Acquisition Proposal that
is made and publicly announced at any time prior to the Company
Stockholders' Meeting) and any related transaction or agreement; and
(ii) against any action which is intended, or is likely,
to facilitate the consummation of any transaction contemplated by any
Acquisition Proposal (including any Acquisition Proposal that is
different from any Acquisition Proposal that is made and publicly
announced at any time prior to the Company Stockholders' Meeting).
Stockholder shall not enter into any agreement or understanding with any Person
prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time to vote or give instructions in any manner
inconsistent with clause "(i)" or "(ii)" of the preceding sentence. For
purposes of this Section 1.6, an Acquisition Proposal shall be deemed to have
been "publicly withdrawn" only if (i) acting in good faith, the Person who made
such Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (ii) it is not reasonably expected that such Acquisition Proposal
will be resubmitted or that such Person will make, submit or announce any other
Acquisition Proposal.
1.7 SALE OF SUBJECT SHARES. In the event Parent tenders, sells or
otherwise transfers any of the Subject Shares prior to the tenth anniversary of
the Closing Date, Parent shall remit to Stockholder 50% of the net proceeds, if
any, received by Parent on each Subject Share in excess of $8.15 per Subject
Share (subject to appropriate adjustments if between the date of this Option
Agreement and the date of such sale, the outstanding shares of Company Common
Stock are changed into a different number or class of shares by reason of any
stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction).
SECTION 2. TRANSFER OF SUBJECT SHARES
2.1 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES. Stockholder
hereby covenants and agrees that, from the date hereof to the Termination Date,
Stockholder will not, directly or indirectly, (a) offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise dispose or
transfer (or announce any offer, sale, offer of sale, contract of sale or grant
of any option to purchase or other disposition or transfer) any Subject Shares
to any Person other than Parent or Parent's designee, (b) create or permit to
exist any Encumbrance of any of the Subject Shares or (c) reduce his beneficial
ownership of, interest in, or risk relating to the Subject Shares.
2.2 TRANSFER OF VOTING RIGHTS. Stockholder covenants and agrees that,
during the period from the date hereof through the Termination Date, Stockholder
will not deposit any Subject Shares into a voting trust or grant a proxy or
enter into a voting agreement with respect to any Subject Shares.
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
3.1 DUE AUTHORIZATION. Stockholder has all requisite power to execute
and deliver this Option Agreement, to grant the Option and to consummate the
transactions contemplated hereby. This Option Agreement has been duly executed
and delivered by or on behalf of Stockholder and, assuming its due
authorization, execution and delivery by Parent, constitutes a legal, valid and
binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
creditors' rights from time to time in effect and subject to general equity
principles and to limitations on the availability of equitable relief.
3.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Option Agreement by
Stockholder do not, and the performance of this Option Agreement by Stockholder
will not: (i) conflict with or violate any current Legal Requirement, order,
decree or judgment applicable to Stockholder or by which it or any of its
properties is bound or affected; or (ii) result in any breach of or constitute a
default (with notice or lapse of time, or both) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of an Encumbrance on the Subject Shares, pursuant to any indenture
or other loan document provisions or other Contract, license, franchise, permit
or other instrument or obligation to which such Stockholder is a party or by
which Stockholder or any of his properties is bound or affected.
(b) The execution and delivery of this Option Agreement by
Stockholder do not, and the performance of this Option Agreement by Stockholder
will not, require any Consent of any Person except for any Governmental
Authorization required under any law not currently in effect.
3.3 TITLE TO SUBJECT SHARES. Stockholder owns of record and
beneficially the Subject Shares set forth under Stockholder's name on the
signature page hereof and does not directly or indirectly own, either
beneficially or of record, any shares of Company Capital Stock, or rights to
acquire any shares of Company Capital Stock, other than the Subject Shares set
forth below Stockholder's name on the signature page hereof and Company Capital
Stock issuable upon exercise of options granted under the Company's 1993 Stock
Option Plan and 1995 Special Nonstatutory Stock Option Plan. Stockholder has,
and the transfer by Stockholder of the Subject Shares hereunder will pass, good
and marketable title to the Subject Shares free and clear of any Encumbrance.
3.4 NO BROKERS. Except for Deutsche Morgan Grenfel and Goldman, Sachs
& Co., no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or
5
<PAGE>
commission in connection with the transactions contemplated by this Option
Agreement based upon arrangements made by or on behalf of Stockholder.
3.5 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Option Agreement are accurate in all material respects as of
the date of this Option Agreement, will be accurate in all material respects at
all times through the Closing Date and will be accurate in all material respects
as of the Closing Date as if made on that date.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Stockholder that Parent has the
absolute and unrestricted right, power and authority to perform its obligations
under this Option Agreement; and the execution, delivery and performance by
Parent of this Option Agreement have been duly authorized by all necessary
action on the part of Parent and its board of directors. This Option Agreement
constitutes the legal, valid and binding obligation of Parent, enforceable
against it in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
SECTION 5. COVENANTS OF STOCKHOLDER
5.1 FURTHER ASSURANCES. If Parent shall exercise the Option in
accordance with the terms of this Option Agreement, from time to time and
without additional consideration, Stockholder will execute and deliver, or cause
to be executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as Parent may reasonably request
for the purpose of effectively carrying out the transactions contemplated by
this Option Agreement, including the transfer of the Subject Shares to Parent
and the release of any and all Encumbrances with respect thereto.
5.2 LEGENDS.
(a) Stockholder shall instruct the Company to cause each
certificate of Stockholder evidencing the Subject Shares to bear a legend in the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THE OPTION AGREEMENT DATED AS OF
OCTOBER 3, 1996, AS IT MAY BE AMENDED, BETWEEN THE
ISSUER AND THE REGISTERED HOLDER OF THIS
CERTIFICATE, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
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<PAGE>
(b) In the event that the Subject Shares shall cease to be
subject to the restrictions on transfer set forth in this Option Agreement, the
Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Subject Shares without the legend
required by Section 5.2(a).
SECTION 6. MISCELLANEOUS
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by Stockholder and the Company
in this Option Agreement shall survive the Closing Date.
6.2 INDEMNIFICATION.
(a) Without in any way limiting any of the rights or remedies
otherwise available to Parent, Stockholder shall hold harmless and indemnify
Parent from and against, and shall compensate and reimburse Parent for, any
Damages which are directly or indirectly suffered or incurred at any time by
Parent, or to which Parent otherwise becomes subject (regardless of whether or
not such Damages relate to a third-party claim), and that arise from or are
directly or indirectly connected with any breach of any representation,
warranty, covenant or obligation of Stockholder contained herein.
(b) Without in any way limiting any of the rights or remedies
otherwise available to Stockholder, Parent shall hold harmless and indemnify
Stockholder from and against, and shall compensate and reimburse Stockholder
for, any Damages which are directly or indirectly suffered or incurred at any
time by Stockholder, or to which Stockholder otherwise becomes subject
(regardless of whether or not such Damages relate to a third-party claim), and
that arise from or are directly or indirectly connected with any breach of any
covenant or obligation of Parent contained herein.
6.3 RELATIONSHIP TO VOTING AGREEMENT. Nothing in this Option
Agreement is intended to limit or otherwise impact the provisions of the Voting
Agreement of even date herewith by and between Parent and Stockholder.
6.4 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Option Agreement shall be paid by the party incurring such costs and expenses.
6.5 NOTICES. All notices or other communications under this Option
Agreement shall be in writing and shall be given by delivery in person, by
facsimile, cable, telegram, telex or other standard form of telecommunications,
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows (or such other address for a party as shall be specified in
a notice given in accordance with this Section 6.5) and shall be deemed to have
been given one business day after transmission by facsimile, cable, telegram,
telex of other standard form of telecommunications or four days after deposit in
the U.S. mail:
7
<PAGE>
If to Stockholder, at the address or facsimile number of Stockholder set
forth on the signature page hereto, with a copy to:
c/o High Level Design Systems, Inc.
3945 Freedom Circle
Fourth Floor
Santa Clara, CA 94054
Attention: Chief Executive Officer
Facsimile No.:(408) 748-3499
and
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Douglas H. Collom, Esq.
Facsimile: (415) 496-4086
If to Parent or Merger Sub:
Cadence Design Systems, Inc.
555 River Oaks Parkway
San Jose, CA 95134
Attention: General Counsel
Facsimile No.: (408) 944-0215
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Alan C. Mendelson, Esq.
Facsimile No.: (415) 857-0663
6.6 SEVERABILITY. Any term or provision of this Option Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Option Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Option Agreement in any
other jurisdiction. If any provision of this Option Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
6.7 ENTIRE AGREEMENT. This Option Agreement and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to
8
<PAGE>
the subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto. No addition to or modification of any
provision of this Option Agreement shall be binding upon any party hereto unless
made in writing and signed by all parties hereto.
6.8 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither
this Option Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties, except that
Parent or Merger Sub may assign all or any of their rights and obligations
hereunder to any affiliate of Parent, provided that no such assignment shall
relieve Parent or Merger Sub of its obligations hereunder if such assignee does
not perform such obligations. Subject to the preceding sentence, this Option
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Option Agreement to the contrary, nothing in this Option
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Option
Agreement.
6.9 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Option
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Option Agreement and
to enforce specifically the terms and provisions hereof in any Delaware Court,
this being in addition to any other remedy to which they are entitled at law or
in equity.
6.10 GOVERNING LAW. This Option Agreement shall be governed in all
respects by the laws of the State of Delaware, as applied to contracts entered
into and to be performed entirely within the State of Delaware.
6.11 HEADINGS. Headings of the Sections of this Option Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
6.12 COUNTERPARTS. This Option Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by all
of the parties hereto.
9
<PAGE>
IN WITNESS WHEREOF, Parent and Stockholder have caused this Option
Agreement to be executed, as of the date first written above.
CADENCE DESIGN SYSTEMS, INC.
By: /s/ R.L. Smith McKeithen
---------------------------
Name: R.L. Smith McKeithen
Title: Vice President and
General Counsel
/s/ J. George Janac
--------------------------------------
J. George Janac
Address: 11674 Seven Springs Drive
Cupertino, CA 95014
Number of Shares of Company
Common Stock: 1,800,000
-----------------
10
<PAGE>
FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of October 28, 1996 by and between
CADENCE DESIGN SYSTEMS, INC., a Delaware corporation ("Parent"), and __________
("Stockholder").
RECITALS
A. Parent, Wyoming Acquisition Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Cooper & Chyan Technology,
Inc., a Delaware corporation (the "Company"), are entering into an Agreement and
Plan of Merger and Reorganization of even date herewith (as amended from time to
time, the "Reorganization Agreement"; capitalized terms used but not otherwise
defined in this Voting Agreement have the meanings ascribed to such terms in the
Reorganization Agreement), which provides (subject to the conditions set forth
therein) for the merger of Merger Sub into the Company (the "Merger").
B. As of the date hereof, Stockholder owns in aggregate (including shares
held both beneficially and of record and other shares held either beneficially
or of record) the number of shares of Company Common Stock set forth below
Stockholder's name on the signature page hereof (all such shares, together with
any shares of Company Common Stock or other shares of capital stock of the
Company that may hereafter be acquired by Stockholder, being referred to herein
as the "Subject Shares").
C. As a condition to the willingness of Parent and Merger Sub to enter
into the Reorganization Agreement, Parent and Merger Sub have required that
Stockholder agree, and in order to induce Parent and Merger Sub to enter into
the Reorganization Agreement Stockholder has agreed, to enter into this Voting
Agreement.
AGREEMENT
The parties to this Voting Agreement, intending to be legally bound, agree
as follows:
SECTION 1. TRANSFER OF SUBJECT SHARES
1.1 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES.
(a) Stockholder hereby covenants and agrees that, prior to the
Expiration Date (as defined below), Stockholder will not, directly or
indirectly, (i) offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of or transfer (or announce any offer,
sale, offer of sale, contract of sale or grant of any option to purchase or
other disposition or transfer of) any of the Subject Shares to any Person other
than Parent, (ii) create or permit to exist any Encumbrance on any of the
Subject Shares or (iii) reduce his beneficial
1.
<PAGE>
ownership of, interest in or risk relating to any of the Subject Shares;
PROVIDED, HOWEVER, that Stockholder may transfer (free of the restrictions on
transfer set forth in this Section 1.1) without consideration, by way of gift to
members of Stockholder's immediate family and to organizations qualified under
Section 501(c)(3) of the Internal Revenue Code of 1986, up to _______ shares of
Company Common Stock in the aggregate. The foregoing number of shares shall be
appropriately adjusted if, between the date of this Voting Agreement and the
Expiration Date, the outstanding shares of Company Common Stock are changed into
a different number or class of shares by reason of any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction.
(b) As used in this Voting Agreement, the term "Expiration Date"
shall mean the earlier of the date upon which the Reorganization Agreement is
validly terminated or the date upon which the Merger becomes effective;
PROVIDED, HOWEVER, that the "Expiration Date" shall be the date 180 days
following the date on which the Reorganization Agreement is validly terminated,
if an Identified Termination occurs. For purposes of this Voting Agreement, an
"Identified Termination" shall occur if:
(i) the Reorganization Agreement is validly terminated by Parent
or the Company pursuant to Section 8.1(d) of the Reorganization
Agreement at any time after (A) an Acquisition Proposal has been made,
submitted or announced (provided such Acquisition Proposal was not
"publicly withdrawn" prior to the Company Stockholders' Meeting) or
(B) the occurrence of a Triggering Event (provided, if such Triggering
Event is the result of an Acquisition Proposal, such Acquisition
Proposal was not "publicly withdrawn" prior to the Company
Stockholders' Meeting); or
(ii) the Reorganization Agreement is validly terminated by
Parent pursuant to Section 8.1(e) of the Reorganization Agreement.
For purposes of this Voting Agreement, an Acquisition Proposal shall be deemed
to have been "publicly withdrawn" only if (1) the Person who made such
Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (2) there shall not have been any public announcement, or any
direct or indirect communication to any of the stockholders of the Company,
stating or suggesting the possibility that such Acquisition Proposal might be
resubmitted or that such Person or any of such Person's affiliates might make,
submit or announce any other Acquisition Proposal.
(c) Notwithstanding anything to the contrary in this Section 1.1,
Stockholder may transfer (free of the restrictions on transfer set forth in this
Section 1.1) up to 50,000 shares of Company Common Stock prior to the earlier of
December 1, 1996 or the date 30 days prior to the date on which the Company
Stockholders' Meeting is scheduled to be held. Such shares are in addition to
shares that may be transferred pursuant to the proviso to Section 1.1(a). The
foregoing number of shares shall be appropriately adjusted if, between the date
of this Voting Agreement and the Expiration Date, the outstanding shares of
Company Common Stock are
2.
<PAGE>
changed into a different number or class of shares by reason of any stock split,
stock dividend, reverse stock split, reclassification, recapitalization or other
similar transaction.
1.2 TRANSFER OF VOTING RIGHTS. Stockholder covenants and agrees that,
prior to the Expiration Date, Stockholder will not deposit any of the Subject
Shares into a voting trust or grant a proxy or enter into a voting agreement
with respect to any of the Subject Shares.
SECTION 2. VOTING OF SUBJECT SHARES
2.1 PRE-TERMINATION VOTING AGREEMENT. Stockholder hereby agrees that,
prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time, at any meeting of the stockholders of the
Company, however called, and in any written action by consent of stockholders of
the Company, unless otherwise directed in writing by Parent, Stockholder shall
vote the Subject Shares:
(i) in favor of the Merger, the execution and delivery by the
Company of the Reorganization Agreement and the adoption and approval of
the terms thereof and in favor of each of the other actions contemplated by
the Reorganization Agreement and any action required in furtherance hereof
and thereof;
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of the
Company in the Reorganization Agreement; and
(iii) against the following actions (other than the Merger and
the transactions contemplated by the Reorganization Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any subsidiary of the
Company; (B) any sale, lease or transfer of a material amount of assets of
the Company or any subsidiary of the Company (other than in the ordinary
course of business); (C) any reorganization, recapitalization, dissolution
or liquidation of the Company or any subsidiary of the Company; (D) any
change in a majority of the board of directors of the Company; (E) any
amendment to the Company's certificate of incorporation; (F) any material
change in the capitalization of the Company or the Company's corporate
structure; or (G) any other action which is intended, or could reasonably
be expected to, impede, interfere with, delay, postpone, discourage or
adversely affect the Merger or any of the other transactions contemplated
by the Reorganization Agreement or this Voting Agreement.
Prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time, Stockholder shall not enter into any agreement
or understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(i)", "(ii)" or "(iii)" of the preceding sentence.
3.
<PAGE>
2.2 POST-TERMINATION VOTING AGREEMENT. If an Identified Termination
occurs, then, prior to the Expiration Date, at any meeting of the stockholders
of the Company, however called, and in any written action by consent of
stockholders of the Company, unless otherwise directed in writing by Parent,
Stockholder shall vote the Subject Shares (i) against any Acquisition Proposal
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. Stockholder shall not enter into any agreement or
understanding with any Person prior to the Expiration Date to vote or give
instructions in any manner inconsistent with clause "(i)" or "(ii)" of the
preceding sentence.
2.3 PROXY; FURTHER ASSURANCES.
(a) Contemporaneously with the execution of this Voting
Agreement, Stockholder shall deliver to Parent a proxy in the form attached
hereto as Exhibit A, which shall be irrevocable to the fullest extent permitted
by law, with respect to the Subject Shares (the "Proxy").
(b) Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in
Parent the power to carry out and give effect to the provisions of this Voting
Agreement.
SECTION 3. WAIVER OF APPRAISAL RIGHTS.
Stockholder hereby waives any rights of appraisal and any dissenters'
rights that Stockholder may have in connection with the Merger.
SECTION 4. NO SOLICITATION
Stockholder covenants and agrees that, during the period commencing on the
date of this Voting Agreement and ending on the Expiration Date, Stockholder
shall not, directly or indirectly, and shall not authorize or permit any
Representative of Stockholder, directly or indirectly, to: (i) solicit,
initiate, encourage or induce the making, submission or announcement of any
Acquisition Proposal or take any action that could reasonably be expected to
lead to an Acquisition Proposal; (ii) furnish any nonpublic information
regarding any of the Acquired Corporations to any Person in connection with or
in response to an Acquisition Proposal or potential Acquisition Proposal; (iii)
engage in discussions with any Person with respect to any Acquisition Proposal;
(iv) approve, endorse or recommend any Acquisition Proposal; or (v) enter into
any letter of intent or other similar document or any Contract contemplating or
otherwise relating to any Acquisition Transaction. The foregoing provision
shall not prevent Stockholder from acting in accordance with Stockholder's
fiduciary duties as a director or officer of the Company, provided Stockholder
complies with the provisions of Sections 4.3 and 5.2(c) of the Reorganization
Agreement. Stockholder shall immediately cease any existing discussions with
any Person that relate to any Acquisition Proposal.
4.
<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
5.1 DUE ORGANIZATION, AUTHORIZATION, ETC. Stockholder has all requisite
power and capacity to execute and deliver this Voting Agreement and to perform
his obligations hereunder. This Voting Agreement has been duly executed and
delivered by Stockholder and constitutes a legal, valid and binding obligation
of Stockholder, enforceable against Stockholder in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
5.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Voting Agreement by
Stockholder do not, and the performance of this Voting Agreement by Stockholder
will not: (i) conflict with or violate any order, decree or judgment applicable
to Stockholder or by which he or any of his properties is bound or affected; or
(ii) result in any breach of or constitute a default (with notice or lapse of
time, or both) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
the Subject Shares pursuant to, any Contract to which Stockholder is a party or
by which Stockholder or any of his properties is bound or affected.
(b) The execution and delivery of this Voting Agreement by
Stockholder do not, and the performance of this Voting Agreement by Stockholder
will not, require any Consent of any Person.
5.3 TITLE TO SUBJECT SHARES. Stockholder owns of record and
beneficially the Subject Shares set forth under Stockholder's name on the
signature page hereof and does not directly or indirectly own, either
beneficially or of record, any shares of capital stock of the Company, or rights
to acquire any shares of capital stock of the Company, other than the Subject
Shares set forth below Stockholder's name on the signature page hereof.
5.4 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will be accurate in all respects at all times through
the Expiration Date and will be accurate in all respects as of the date of the
consummation of the Merger as if made on that date.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Stockholder as follows:
5.
<PAGE>
6.1 DUE AUTHORIZATION. Parent has all requisite power and authority to
perform its obligations under this Voting Agreement, and the execution, delivery
and performance by Parent of this Voting Agreement have been duly authorized by
all necessary action on the part of Parent and its board of directors. This
Voting Agreement constitutes the legal, valid and binding obligation of Parent,
enforceable against it in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
6.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Voting Agreement by Parent
do not, and the performance of this Voting Agreement by Parent will not: (i)
conflict with or violate any order, decree or judgment applicable to Parent or
by which it or any of its properties is bound or affected; or (ii) result in any
breach of or constitute a default (with notice or lapse of time, or both) under
any Contract to which Parent is a party or by which Parent is bound or affected.
(b) The execution and delivery of this Voting Agreement by Parent
do not, and the performance of the Voting Agreement by Parent will not, require
any Consent of any Person.
6.3 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Parent contained in this Voting Agreement are accurate in all material respects
as of the date of this Voting Agreement, will be accurate in all material
respects at all times through the Expiration Date and will be accurate in all
material respects as of the date of consummation of the Merger as if made on
that date.
SECTION 7. COVENANTS OF STOCKHOLDER
7.1 FURTHER ASSURANCES. From time to time and without additional
consideration, Stockholder will execute and deliver, or cause to be executed and
delivered, such additional or further transfers, assignments, endorsements,
proxies, consents and other instruments as Parent may reasonably request for the
purpose of effectively carrying out and furthering the intent of this Voting
Agreement.
7.2 LEGEND. Immediately after the execution of this Voting Agreement,
Stockholder shall instruct the Company to cause each certificate of Stockholder
evidencing the Subject Shares to bear a legend in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED
OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
TERMS AND CONDITIONS OF THE VOTING AGREEMENT DATED AS OF OCTOBER 28,
1996, AS IT MAY BE AMENDED, BETWEEN THE ISSUER AND THE REGISTERED
HOLDER OF
6.
<PAGE>
THIS CERTIFICATE, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE ISSUER.
SECTION 8. MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by Stockholder and Parent in
this Voting Agreement shall survive (i) the consummation of the Merger, (ii) any
termination of the Reorganization Agreement, and (iii) the Expiration Date.
8.2 INDEMNIFICATION.
(a) Each party hereto shall hold harmless and indemnify the other
party hereto from and against any Damages (regardless of whether or not such
Damages relate to a third-party claim) which are incurred by such other party
and that arise from any breach of any representation, warranty, covenant or
obligation of such party contained herein.
(b) If the Merger is consummated, then, from and after the
Effective Time, Parent shall, to the fullest extent permitted by law, hold
harmless and indemnify Stockholder from and against any Damages which are
incurred by Stockholder and that arise from any claim against Stockholder by any
third party asserting that Stockholder's entering into this Voting Agreement or
the grant by Stockholder of the voting rights set forth in Section 2 violates
any applicable Legal Requirement.
(c) In the event of the assertion or commencement by any Person
of any claim or Legal Proceeding with respect to which Parent may become
obligated to hold harmless and indemnify Stockholder under this Section 8.2, (i)
Stockholder shall immediately notify Parent of such claim or Legal Proceeding,
and (ii) Parent shall have (A) the exclusive right, at its election, to assume
and control the defense of such claim or Legal Proceeding (with counsel selected
by Parent and reasonably satisfactory to Stockholder) and (B) the right, at its
election, to settle, adjust or compromise such claim or Legal Proceeding without
the consent of Stockholder. At Parent's reasonable request, Stockholder shall
execute a customary agreement in settlement of any such claim or Legal
Proceeding which contains a customary release and other customary terms.
8.3 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses.
8.4 NOTICES. Any notice or other communication required or permitted to
be delivered to either party under this Voting Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other party hereto):
7.
<PAGE>
if to Stockholder:
at the address set forth below Stockholder's signature on the
signature page hereto;
if to Parent:
Cadence Design Systems, Inc.
2655 Seely Avenue
San Jose, CA 95134
Attn: General Counsel
Facsimile: 408-944-0215
8.5 SEVERABILITY. Any term or provision of this Voting Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Voting Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Voting Agreement in any other jurisdiction. If any
provision of this Voting Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
8.6 ENTIRE AGREEMENT. This Voting Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings between the parties with respect
thereto. No addition to or modification of any provision of this Voting
Agreement shall be binding upon either party hereto unless made in writing and
signed by both parties hereto. The parties hereto waive trial by jury in any
action at law or suit in equity based upon, or arising out of, this Voting
Agreement or the subject matter hereof.
8.7 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither this
Voting Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except that
Parent may assign all or any of its rights hereunder to any wholly-owned
subsidiary of Parent. Subject to the preceding sentence, this Voting Agreement
shall be binding upon and shall inure to the benefit of (i) Stockholder and his
heirs, successors and assigns and (ii) Parent and its successors and assigns.
Notwithstanding anything contained in this Voting Agreement to the contrary,
nothing in this Voting Agreement, expressed or implied, is intended to confer on
any Person other than the parties hereto or their respective heirs, successors
and assigns any rights, remedies, obligations or liabilities under or by reason
of this Voting Agreement.
8.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Voting
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that Parent
8.
<PAGE>
shall be entitled to an injunction or injunctions to prevent breaches of this
Voting Agreement and to enforce specifically the terms and provisions hereof in
any Delaware court or other court of proper jurisdiction, this being in addition
to any other remedy to which Parent is entitled at law or in equity.
8.9 OTHER AGREEMENTS. Nothing in this Voting Agreement shall limit any
of the rights or remedies of Parent or any of the obligations of Stockholder
under any Affiliate Agreement between Parent and Stockholder or any other
agreement.
8.10 GOVERNING LAW. This Voting Agreement shall be governed in all
respects by the laws of the State of Delaware, as applied to contracts entered
into and to be performed entirely within the State of Delaware.
8.11 COUNTERPARTS. This Voting Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
8.12 CONSTRUCTION.
(a) Headings of the Sections of this Voting Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
(b) For purposes of this Voting Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(c) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Voting Agreement.
(d) As used in this Voting Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(e) Except as otherwise indicated, all references in this Voting
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Voting Agreement and Exhibits to this Voting Agreement.
9.
<PAGE>
IN WITNESS WHEREOF, Parent and Stockholder have caused this Voting
Agreement to be executed as of the date first written above.
CADENCE DESIGN SYSTEMS, INC.
By:
------------------------------
Name: R.L. Smith McKeithen
Title: Vice President and General Counsel
-----------------------------------------
Name:
---------------
Number of Shares of Company
Common Stock owned as of
the date of this Voting Agreement:
-----------
10.
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EXHIBIT A
FORM OF IRREVOCABLE PROXY
IRREVOCABLE PROXY
The undersigned stockholder of Cooper & Chyan Technology, Inc., a Delaware
corporation (the "Company"), hereby irrevocably (to the fullest extent permitted
by law) appoints and constitutes Joseph B. Costello, H. Raymond Bingham, R.L.
Smith McKeithen and Cadence Design Systems, Inc., a Delaware corporation
("Parent"), and each of them, the attorneys and proxies of the undersigned with
full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to (i) the shares of capital stock of the
Company owned by the undersigned as of the date of this proxy, which shares are
specified on the final page of this proxy and (ii) any and all other shares of
capital stock of the Company which the undersigned may acquire after the date
hereof. (The shares of the capital stock of the Company referred to in clauses
(i) and (ii) of the immediately preceding sentence are collectively referred to
as the "Shares.") Upon the execution hereof, all prior proxies given by the
undersigned with respect to any of the Shares are hereby revoked, and no
subsequent proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof, between
Parent and the undersigned (the "Voting Agreement"), and is granted in
consideration of Parent entering into the Agreement and Plan of Merger and
Reorganization, dated as of the date hereof, among Parent, Wyoming Acquisition
Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent, and the
Company (the "Reorganization Agreement"). Capitalized terms used but not
otherwise defined in this proxy have the meanings ascribed to such terms in the
Reorganization Agreement. The undersigned acknowledges that, if and when the
undersigned executes for the benefit of Parent an Option Agreement substantially
in the form attached to the Reorganization Agreement as Exhibit F, Parent's
interest in such Option Agreement shall be coupled to this proxy.
The attorneys and proxies named above will be empowered, and may exercise
this proxy, to vote the Shares at any time until the earlier to occur of the
valid termination of the Reorganization Agreement or the Effective Time at any
meeting of the stockholders of the Company, however called, or in any written
action by consent of stockholders of the Company:
(i) in favor of the Merger, the execution and delivery by
the Company of the Reorganization Agreement and the adoption and approval
of the terms thereof and in favor of each of the other actions contemplated
by the Reorganization Agreement and any action required in furtherance
hereof and thereof;
A-1
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(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of the
Company in the Reorganization Agreement; and
(iii) in their discretion, with respect to the following
actions (other than the Merger and the transactions contemplated by the
Reorganization Agreement): (A) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination involving the
Company or any subsidiary of the Company; (B) any sale, lease or transfer
of a material amount of assets of the Company or any subsidiary of the
Company (other than in the ordinary course of business); (C) any
reorganization, recapitalization, dissolution or liquidation of the Company
or any subsidiary of the Company; (D) any change in a majority of the board
of directors of the Company; (E) any amendment to the Company's certificate
of incorporation; (F) any material change in the capitalization of the
Company or the Company's corporate structure; or (G) any other action which
is intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the Merger or any of the
other transactions contemplated by the Reorganization Agreement or the
Voting Agreement.
If an Identified Termination occurs, then, prior to the Expiration Date (as
such term is defined in the Voting Agreement; such term is used hereafter with
the same definition), at any meeting of the stockholders of the Company, however
called, and in any written action by consent of stockholders of the Company, the
attorneys and proxies named above will be empowered, and may exercise this
proxy, to vote the Shares in their discretion with respect to (i) any
Acquisition Proposal and any related transaction or agreement and (ii) any
action which is intended, or could reasonably be expected, to facilitate the
consummation of any Acquisition Transaction.
The undersigned stockholder may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, successors and assigns of the
undersigned (including any transferee of any of the Shares).
A-2
<PAGE>
Any obligation of the undersigned hereunder shall be binding upon the
heirs, successors and assigns of the undersigned (including any transferee of
any of the Shares).
This proxy shall terminate upon the Expiration Date.
Dated: October 28, 1996
------------------------------
Name:
Number of Shares of Company
Common Stock:
A-3
<PAGE>
OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into as of November 2, 1996 by and between
CADENCE DESIGN SYSTEMS, INC., a Delaware corporation ("Parent"), and JOHN F.
COOPER ("Stockholder").
RECITALS
A. Parent, Wyoming Acquisition Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Cooper & Chyan Technology,
Inc., a Delaware corporation (the "Company"), have entered into an Agreement and
Plan of Merger and Reorganization dated as of October 28, 1996 (as amended from
time to time, the "Reorganization Agreement"; capitalized terms used but not
otherwise defined in this Option Agreement have the meanings assigned to such
terms in the Reorganization Agreement), which provides (subject to the
conditions set forth therein) for the merger of Merger Sub into the Company (the
"Merger").
B. As of the date hereof, Stockholder owns in aggregate (including shares
held both beneficially and of record and other shares held either beneficially
or of record) the number of shares of Company Common Stock set forth below
Stockholder's name on the signature page hereof (all such shares together with
any other shares of capital stock of the Company acquired after the date hereof
by Stockholder being referred to herein as the "Subject Shares").
AGREEMENT
The parties to this Option Agreement, intending to be legally bound, agree
as follows:
SECTION 1. GRANT OF OPTION AND EXERCISE
1.1 GRANT OF OPTION. Stockholder hereby grants to Parent an irrevocable
option (the "Option") to purchase, on the terms and subject to the provisions
set forth herein, any or all of the Subject Shares at a price per Subject Share
equal to $32.30 (the "Purchase Price"). The Purchase Price shall be
appropriately adjusted if, between the date of this Option Agreement and any
Closing Date (as defined in Section 1.3), the outstanding shares of Company
Common Stock are changed into a different number or class of shares by reason of
any stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction.
<PAGE>
1.2 EXERCISE OF OPTION.
(a) Parent may exercise the Option with respect to any or all of the
Subject Shares at any time or from time to time following the occurrence of a
Purchase Event (as defined in Section 1.2(b)) and on or prior to the Termination
Date (as defined in Section 1.2(c)). Parent's right to purchase Subject Shares
with respect to which it has exercised the Option shall not terminate on the
Termination Date; accordingly, if Parent exercises the Option with respect to
any Subject Shares on or prior to the Termination Date, then Parent shall be
entitled to purchase such Subject Shares after the Termination Date.
(b) For purposes of this Option Agreement, a "Purchase Event" shall
be deemed to have occurred if an Identified Termination occurs. For purposes of
this Option Agreement, an "Identified Termination" shall occur if:
(i) the Reorganization Agreement is validly terminated by Parent
or the Company pursuant to Section 8.1(d) of the Reorganization
Agreement at any time after (A) an Acquisition Proposal has been made,
submitted or announced (provided such Acquisition Proposal was not
"publicly withdrawn" prior to the Company Stockholders' Meeting) or
(B) the occurrence of a Triggering Event (provided, if such Triggering
Event is the result of an Acquisition Proposal, such Acquisition
Proposal was not "publicly withdrawn" prior to the Company
Stockholders' Meeting); or
(ii) the Reorganization Agreement is validly terminated by Parent
pursuant to Section 8.1(e) of the Reorganization Agreement.
For purposes of this Option Agreement, an Acquisition Proposal shall be deemed
to have been "publicly withdrawn" only if (1) the Person who made such
Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (2) there shall not have been any public announcement, or any
direct or indirect communication to any of the stockholders of the Company,
stating or suggesting the possibility that such Acquisition Proposal might be
resubmitted or that such Person or any of such Person's affiliates might make,
submit or announce any other Acquisition Proposal.
(c) For purposes of this Agreement, "Termination Date" shall mean the
earliest of the following:
(i) the date upon which the Merger becomes effective;
(ii) the date 180 days after the date upon which a Purchase Event
occurs; or
(iii) the date upon which the Reorganization Agreement is validly
terminated other than by virtue of an Identified Termination;
2
<PAGE>
PROVIDED, HOWEVER, that, if the Option cannot be exercised prior to the end of
such 180-day period by reason of any applicable judgment, decree, order, Legal
Requirement or other legal impediment, then the Termination Date shall be
extended until the date 30 days after the date on which such impediment is
removed (but in no event shall the Termination Date be extended to a date more
than 180 days after the end of such 180-day period).
1.3 CLOSINGS. Whenever Parent wishes to exercise the Option with respect
to any Subject Shares, Parent shall deliver to Stockholder a written notice (the
date of which being herein referred to as the "Notice Date") specifying (a) the
place at which such Subject Shares are to be purchased, (b) the number of
Subject Shares to be purchased (the "Exercised Shares") and (c) the date on
which such Exercised Shares are to be purchased, which shall not be earlier than
three business days nor later than ten business days after the Notice Date. The
closing of the purchase of such Exercised Shares (a "Closing") shall occur at
the place specified in such written notice and on the date specified in such
written notice (the "Closing Date"); PROVIDED, HOWEVER, that: (i) if such
purchase cannot be consummated by reason of any applicable judgment, decree,
order, Legal Requirement or other legal impediment, such Closing Date may be
extended by Parent to a date not more than 30 days after the date on which such
impediment is removed; and (ii) if prior notification to or approval of any
Governmental Body is required in connection with such purchase, Stockholder
shall promptly cause to be filed, and shall expeditiously process, the required
notice or application for approval (and Stockholder shall cooperate with Parent
in the filing of any such notice or application required to be filed by Parent
and the obtaining of any such approval required to be obtained by Parent), and
such Closing Date may be extended by Parent to a date not more than 30 days
after the later of (A) the date on which any required notification or waiting
period has expired or been validly terminated or (B) the date on which any
required approval has been obtained (but in no event shall the Termination Date
be extended to a date more than 180 days after the original date for closing
specified in the written notice of Parent for the purchase of such Exercised
Shares).
1.4 PAYMENT AND DELIVERY OF CERTIFICATES. On a Closing Date, (i) Parent
will deliver to Stockholder the aggregate Purchase Price then payable for the
Exercised Shares in cash (by wire transfer of immediately available funds to a
bank account designated by Stockholder or by certified check) and (ii)
Stockholder shall deliver to Parent certificates representing such Exercised
Shares, duly endorsed in blank or accompanied by stock powers duly executed by
Stockholder in blank, in proper form for transfer, with appropriate signature
guarantees.
1.5 DISTRIBUTIONS. Any dividends or other distributions (whether payable
in cash, stock or otherwise) by the Company with respect to Exercised Shares
with a record date on or after a Notice Date therefor will belong to Parent. If
any such dividend or distribution belonging to Parent is paid by the Company to
Stockholder, Stockholder shall hold such dividend or distribution in trust for
the benefit of Parent and shall promptly remit such dividend or distribution to
Parent in exactly the form received, accompanied by appropriate instruments of
transfer.
3
<PAGE>
SECTION 2. TRANSFER OF SUBJECT SHARES
2.1 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES. Stockholder hereby
covenants and agrees that, on or prior to the Termination Date, Stockholder will
not, directly or indirectly, (a) offer, sell, offer to sell, contract to sell,
pledge, grant any option to purchase or otherwise dispose of or transfer (or
announce any offer, sale, offer of sale, contract of sale or grant of any option
to purchase or other disposition or transfer of) any of the Subject Shares to
any Person other than Parent, (b) create or permit to exist any Encumbrance on
any of the Subject Shares or (c) reduce his beneficial ownership of, interest in
or risk relating to any of the Subject Shares; PROVIDED, HOWEVER, that
Stockholder may transfer (free of the restrictions on transfer set forth in this
Section 2.1) without consideration, by way of gift to members of Stockholder's
immediate family and to organizations qualified under Section 501(c)(3) of the
Internal Revenue Code of 1986, up to 100,000 shares of Company Common Stock in
the aggregate. The foregoing number of shares shall be appropriately adjusted
if, between the date of this Option Agreement and the Expiration Date, the
outstanding shares of Company Common Stock are changed into a different number
or class of shares by reason of any stock split, stock dividend, reverse stock
split, reclassification, recapitalization or other similar transaction.
2.2 TRANSFER OF VOTING RIGHTS. Stockholder covenants and agrees that, on
or prior to the Termination Date, Stockholder will not deposit any of the
Subject Shares into a voting trust or grant a proxy or enter into a voting
agreement with respect to any of the Subject Shares.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
3.1 DUE AUTHORIZATION. Stockholder has all requisite power and capacity
to execute and deliver this Option Agreement, to grant the Option and to perform
his obligations hereunder. This Option Agreement has been duly executed and
delivered by Stockholder and constitutes a legal, valid and binding obligation
of Stockholder, enforceable against Stockholder in accordance with its terms,
subject to (i) the laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Option Agreement by
Stockholder do not, and the performance of this Option Agreement by Stockholder
will not: (i) conflict with or violate any order, decree or judgment applicable
to Stockholder or by which he or any of his properties is bound or affected; or
(ii) result in any breach of or constitute a default (with notice or lapse of
time, or both) under, or result in the creation of an Encumbrance on any of the
Subject Shares pursuant to, any Contract to which Stockholder is a party or by
which Stockholder or any of his properties is bound or affected.
4
<PAGE>
(b) The execution and delivery of this Option Agreement by
Stockholder do not, and the performance of this Option Agreement by Stockholder
will not, require any Consent of any Person.
3.3 TITLE TO SUBJECT SHARES. Stockholder owns of record and beneficially
the Subject Shares set forth under Stockholder's name on the signature page
hereof and does not directly or indirectly own, either beneficially or of
record, any shares of capital stock of the Company, or rights to acquire any
shares of capital stock of the Company, other than the Subject Shares set forth
below Stockholder's name on the signature page hereof. Stockholder has good and
marketable title to the Subject Shares free and clear of any Encumbrance, and
the transfer by Stockholder of any Exercised Shares hereunder will pass good and
marketable title to such Exercised Shares free and clear of any Encumbrance.
3.4 NO BROKERS. Except for Alex. Brown & Sons Incorporated, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Option
Agreement based upon arrangements made by or on behalf of Stockholder.
3.5 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Stockholder contained in this Option Agreement are accurate in all respects as
of the date of this Option Agreement, will be accurate in all respects at all
times through each Closing Date and will be accurate in all respects as of each
Closing Date as if made on that date.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Stockholder as follows:
4.1 DUE AUTHORIZATION. Parent has all requisite power and authority to
perform its obligations under this Option Agreement, and the execution, delivery
and performance by Parent of this Option Agreement have been duly authorized by
all necessary action on the part of Parent and its board of directors. This
Option Agreement constitutes the legal, valid and binding obligation of Parent,
enforceable against it in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
4.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Option Agreement by Parent do
not, and the performance of this Option Agreement by Parent will not: (i)
conflict with or violate any order, decree or judgment applicable to Parent or
by which it or any of its properties is bound or affected; or (ii) subject to
receipt by Parent of all Consents necessary to perform its obligations upon an
exercise of the Option, result in any breach of or constitute a default (with
notice or lapse of time, or both) under, any Contract to which such Parent is a
party or by which Parent or any of its properties is bound or affected.
5
<PAGE>
(b) The execution and delivery of this Option Agreement by Parent do
not require any Consent of any Person.
4.3 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Parent contained in this Option Agreement are accurate in all respects as of the
date of this Option Agreement, will be accurate in all respects at all times
through each Closing Date and will be accurate in all respects as of each
Closing Date as if made on that date.
SECTION 5. CERTAIN COVENANTS
5.1 FURTHER ASSURANCES. If Parent shall exercise the Option in accordance
with the terms of this Option Agreement, from time to time and without
additional consideration, Stockholder will execute and deliver, or cause to be
executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as Parent may reasonably request
for the purpose of effectively carrying out and furthering the intent of this
Option Agreement, including the transfer of Exercised Shares to Parent and the
release of any and all Encumbrances with respect thereto.
5.2 LEGENDS. Immediately after the execution of this Option Agreement,
Stockholder shall instruct the Company to cause each certificate of Stockholder
evidencing the Subject Shares to bear a legend in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE OPTION AGREEMENT
DATED AS OF NOVEMBER 2, 1996, AS IT MAY BE AMENDED, BETWEEN THE
ISSUER AND THE REGISTERED HOLDER OF THIS CERTIFICATE, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
ISSUER.
5.3 NO EXERCISE OF APPRAISAL RIGHTS. If (a) Parent purchases any
Exercised Shares pursuant to the Option, (b) the Board of Directors of the
Company recommends to the stockholders of the Company that they vote in favor of
an Acquisition Proposal for a merger of the Company that is to be accounted for
as a "pooling of interests," (c) such merger is voted upon by the Company's
stockholders within 180 days after Parent's purchase of such Exercised Shares
and (d) the recommendation of the Board of Directors of the Company in favor of
such merger has not been withdrawn and remains in effect as of the time of the
vote by the Company's stockholders upon such merger, then Parent shall not
exercise any statutory appraisal rights with respect to such Exercised Shares in
connection with such merger. Nothing contained in this Section 5.3 or elsewhere
in this Option Agreement shall require Parent to vote any shares of Company
Common Stock in favor of any such merger, and nothing in this Section 5.3 or
elsewhere in this Option Agreement shall preclude Parent from voting any shares
of Company Common Stock against such merger.
6
<PAGE>
SECTION 6. MISCELLANEOUS
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties, covenants and obligations of Stockholder and Parent
in this Option Agreement shall survive (i) the Merger, (ii) any termination of
the Reorganization Agreement and (iii) any Closing Date.
6.2 INDEMNIFICATION.
(a) Each party hereto shall hold harmless and indemnify the other
party hereto from and against any Damages (regardless of whether or not such
Damages relate to a third-party claim) which are incurred by such other party
and that arise from any breach of any representation, warranty, covenant or
obligation of such party contained herein.
(b) If the Merger is consummated, then, from and after the Effective
Time, Parent shall, to the fullest extent permitted by law, hold harmless and
indemnify Stockholder from and against any Damages which are incurred by
Stockholder and that arise from any claim against Stockholder by any third party
asserting that Stockholder's entering into this Option Agreement or the grant by
Stockholder of the Option hereunder violates any applicable Legal Requirement.
(c) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding with respect to which Parent may become obligated
to hold harmless and indemnify Stockholder under this Section 6.2, (i)
Stockholder shall immediately notify Parent of such claim or Legal Proceeding,
and (ii) Parent shall have (A) the exclusive right, at its election, to assume
and control the defense of such claim or Legal Proceeding (with counsel selected
by Parent and reasonably satisfactory to Stockholder) and (B) the right, at its
election, to settle, adjust or compromise such claim or Legal Proceeding without
the consent of Stockholder. At Parent's reasonable request, Stockholder shall
execute a customary agreement in settlement of any such claim or Legal
Proceeding which contains a customary release and other customary terms.
6.3 RELATIONSHIP TO VOTING AGREEMENT. Nothing in this Option Agreement is
intended to limit or otherwise affect the provisions of the Voting Agreement
dated as of October 28, 1996 between Parent and Stockholder.
6.4 EXPENSES. Except as otherwise provided herein, all costs and expenses
incurred in connection with the transactions contemplated by this Option
Agreement shall be paid by the party incurring such costs and expenses. Any
transfer taxes payable in connection with the purchase of Exercised Shares
hereunder will be paid by Parent.
6.5 NOTICES. Any notice or other communication required or permitted to
be delivered to either party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other party hereto):
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if to Stockholder:
P.O. Box 3818
Carefree, AZ 85377
Facsimile: 408-252-0537
if to Parent:
Cadence Design Systems, Inc.
2655 Seely Avenue
San Jose, CA 95134
Attn: General Counsel
Facsimile: 408-944-0215
6.6 SEVERABILITY. Any term or provision of this Option Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Option Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Option Agreement in any other jurisdiction. If any
provision of this Option Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
6.7 ENTIRE AGREEMENT. This Option Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings between the parties with respect
thereto. No addition to or modification of any provision of this Option
Agreement shall be binding upon either party hereto unless made in writing and
signed by both parties hereto. The parties hereto waive trial by jury in any
action at law or suit in equity based upon, or arising out of, this Agreement or
the subject matter hereof.
6.8 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither this
Option Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except that (i)
Parent may assign all or any of its rights and obligations hereunder to any
wholly-owned subsidiary of Parent, and (ii) Parent may designate any other
Person to receive any Exercised Shares purchased hereunder. Subject to the
preceding sentence, this Option Agreement shall be binding upon and shall inure
to the benefit of (i) Stockholder and his heirs, successors and assigns and (ii)
Parent and its successors and assigns. Notwithstanding anything contained in
this Option Agreement to the contrary, nothing in this Option Agreement,
expressed or implied, is intended to confer on any Person other than the parties
hereto or their respective heirs, successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Option Agreement.
6.9 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage to Parent would occur in the event that any of the provisions of this
Option Agreement was not performed
8
<PAGE>
by Stockholder in accordance with its specific terms or was otherwise breached,
and that irreparable damage to Stockholder would occur in the event that Section
5.3 of this Option Agreement was not performed by Parent in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that Parent
shall be entitled to an injunction or injunctions to prevent breaches of this
Option Agreement and to enforce specifically the terms and provisions hereof,
and that Stockholder shall be entitled to an injunction or injunctions to
prevent breaches of Section 5.3 and to enforce specifically the terms and
provisions of Section 5.3. Any such equitable remedy may be sought in any
Delaware court or other court of proper jurisdiction, and shall be in addition
to any other remedy at law or in equity. The parties hereto agree that (other
than with respect to Section 5.3) equitable remedies are not appropriate or
necessary for any breach of any provision of this Agreement by Parent. It is
accordingly agreed that the sole and exclusive remedy of Stockholder for any
breach by Parent of a representation, warranty, covenant or obligation (other
than of Section 5.3) shall be an action for damages. Without limiting the
generality of the foregoing, no breach by Parent of a representation, warranty,
covenant or obligation shall give Stockholder any right to terminate this Option
Agreement.
6.10 OTHER AGREEMENTS. Nothing in this Option Agreement shall limit any of
the rights or remedies of Parent or any of the obligations of Stockholder under
any Affiliate Agreement or other agreement between Parent and Stockholder.
6.11 GOVERNING LAW. This Option Agreement shall be governed in all
respects by the laws of the State of Delaware, as applied to contracts entered
into and to be performed entirely within the State of Delaware.
6.12 COUNTERPARTS. This Option Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
6.13 CONSTRUCTION.
(a) Headings of the Sections of this Option Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
(b) For purposes of this Option Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
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(c) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Option Agreement.
(d) As used in this Option Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(e) Except as otherwise indicated, all references in this Option
Agreement to "Sections" are intended to refer to Sections of this Option
Agreement.
IN WITNESS WHEREOF, Parent and Stockholder have caused this Option
Agreement to be executed as of the date first written above.
CADENCE DESIGN SYSTEMS, INC.
By: /s/ R.L. Smith McKeithen
------------------------------------
R.L. Smith McKeithen,
Vice President and General Counsel
/s/ John F. Cooper
---------------------------------------
JOHN F. COOPER
Address: P.O. Box 3818
Carefree, AZ 85377
Number of Shares of Company
Common Stock owned as of the date
of this Option Agreement: 2,354,356
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OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into as of November 2, 1996 by and between
CADENCE DESIGN SYSTEMS, INC., a Delaware corporation ("Parent"), and DAVID CHYAN
("Stockholder").
RECITALS
A. Parent, Wyoming Acquisition Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Cooper & Chyan Technology,
Inc., a Delaware corporation (the "Company"), have entered into an Agreement and
Plan of Merger and Reorganization dated as of October 28, 1996 (as amended from
time to time, the "Reorganization Agreement"; capitalized terms used but not
otherwise defined in this Option Agreement have the meanings assigned to such
terms in the Reorganization Agreement), which provides (subject to the
conditions set forth therein) for the merger of Merger Sub into the Company (the
"Merger").
B. As of the date hereof, Stockholder owns in aggregate (including shares
held both beneficially and of record and other shares held either beneficially
or of record) the number of shares of Company Common Stock set forth below
Stockholder's name on the signature page hereof (all such shares together with
any other shares of capital stock of the Company acquired after the date hereof
by Stockholder being referred to herein as the "Subject Shares").
AGREEMENT
The parties to this Option Agreement, intending to be legally bound, agree
as follows:
SECTION 1. GRANT OF OPTION AND EXERCISE
1.1 GRANT OF OPTION. Stockholder hereby grants to Parent an irrevocable
option (the "Option") to purchase, on the terms and subject to the provisions
set forth herein, any or all of the Subject Shares at a price per Subject Share
equal to $32.30 (the "Purchase Price"). The Purchase Price shall be
appropriately adjusted if, between the date of this Option Agreement and any
Closing Date (as defined in Section 1.3), the outstanding shares of Company
Common Stock are changed into a different number or class of shares by reason of
any stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction.
<PAGE>
1.2 EXERCISE OF OPTION.
(a) Parent may exercise the Option with respect to any or all of the
Subject Shares at any time or from time to time following the occurrence of a
Purchase Event (as defined in Section 1.2(b)) and on or prior to the Termination
Date (as defined in Section 1.2(c)). Parent's right to purchase Subject Shares
with respect to which it has exercised the Option shall not terminate on the
Termination Date; accordingly, if Parent exercises the Option with respect to
any Subject Shares on or prior to the Termination Date, then Parent shall be
entitled to purchase such Subject Shares after the Termination Date.
(b) For purposes of this Option Agreement, a "Purchase Event" shall
be deemed to have occurred if an Identified Termination occurs. For purposes of
this Option Agreement, an "Identified Termination" shall occur if:
(i) the Reorganization Agreement is validly terminated by Parent
or the Company pursuant to Section 8.1(d) of the Reorganization
Agreement at any time after (A) an Acquisition Proposal has been made,
submitted or announced (provided such Acquisition Proposal was not
"publicly withdrawn" prior to the Company Stockholders' Meeting) or
(B) the occurrence of a Triggering Event (provided, if such Triggering
Event is the result of an Acquisition Proposal, such Acquisition
Proposal was not "publicly withdrawn" prior to the Company
Stockholders' Meeting); or
(ii) the Reorganization Agreement is validly terminated by Parent
pursuant to Section 8.1(e) of the Reorganization Agreement.
For purposes of this Option Agreement, an Acquisition Proposal shall be deemed
to have been "publicly withdrawn" only if (1) the Person who made such
Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (2) there shall not have been any public announcement, or any
direct or indirect communication to any of the stockholders of the Company,
stating or suggesting the possibility that such Acquisition Proposal might be
resubmitted or that such Person or any of such Person's affiliates might make,
submit or announce any other Acquisition Proposal.
(c) For purposes of this Agreement, "Termination Date" shall mean the
earliest of the following:
(i) the date upon which the Merger becomes effective;
(ii) the date 180 days after the date upon which a Purchase Event
occurs; or
(iii) the date upon which the Reorganization Agreement is validly
terminated other than by virtue of an Identified Termination;
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<PAGE>
PROVIDED, HOWEVER, that, if the Option cannot be exercised prior to the end of
such 180-day period by reason of any applicable judgment, decree, order, Legal
Requirement or other legal impediment, then the Termination Date shall be
extended until the date 30 days after the date on which such impediment is
removed (but in no event shall the Termination Date be extended to a date more
than 180 days after the end of such 180-day period).
1.3 CLOSINGS. Whenever Parent wishes to exercise the Option with respect
to any Subject Shares, Parent shall deliver to Stockholder a written notice (the
date of which being herein referred to as the "Notice Date") specifying (a) the
place at which such Subject Shares are to be purchased, (b) the number of
Subject Shares to be purchased (the "Exercised Shares") and (c) the date on
which such Exercised Shares are to be purchased, which shall not be earlier than
three business days nor later than ten business days after the Notice Date. The
closing of the purchase of such Exercised Shares (a "Closing") shall occur at
the place specified in such written notice and on the date specified in such
written notice (the "Closing Date"); PROVIDED, HOWEVER, that: (i) if such
purchase cannot be consummated by reason of any applicable judgment, decree,
order, Legal Requirement or other legal impediment, such Closing Date may be
extended by Parent to a date not more than 30 days after the date on which such
impediment is removed; and (ii) if prior notification to or approval of any
Governmental Body is required in connection with such purchase, Stockholder
shall promptly cause to be filed, and shall expeditiously process, the required
notice or application for approval (and Stockholder shall cooperate with Parent
in the filing of any such notice or application required to be filed by Parent
and the obtaining of any such approval required to be obtained by Parent), and
such Closing Date may be extended by Parent to a date not more than 30 days
after the later of (A) the date on which any required notification or waiting
period has expired or been validly terminated or (B) the date on which any
required approval has been obtained (but in no event shall the Termination Date
be extended to a date more than 180 days after the original date for closing
specified in the written notice of Parent for the purchase of such Exercised
Shares).
1.4 PAYMENT AND DELIVERY OF CERTIFICATES. On a Closing Date, (i) Parent
will deliver to Stockholder the aggregate Purchase Price then payable for the
Exercised Shares in cash (by wire transfer of immediately available funds to a
bank account designated by Stockholder or by certified check) and (ii)
Stockholder shall deliver to Parent certificates representing such Exercised
Shares, duly endorsed in blank or accompanied by stock powers duly executed by
Stockholder in blank, in proper form for transfer, with appropriate signature
guarantees.
1.5 DISTRIBUTIONS. Any dividends or other distributions (whether payable
in cash, stock or otherwise) by the Company with respect to Exercised Shares
with a record date on or after a Notice Date therefor will belong to Parent. If
any such dividend or distribution belonging to Parent is paid by the Company to
Stockholder, Stockholder shall hold such dividend or distribution in trust for
the benefit of Parent and shall promptly remit such dividend or distribution to
Parent in exactly the form received, accompanied by appropriate instruments of
transfer.
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SECTION 2. TRANSFER OF SUBJECT SHARES
2.1 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES. Stockholder hereby
covenants and agrees that, on or prior to the Termination Date, Stockholder will
not, directly or indirectly, (a) offer, sell, offer to sell, contract to sell,
pledge, grant any option to purchase or otherwise dispose of or transfer (or
announce any offer, sale, offer of sale, contract of sale or grant of any option
to purchase or other disposition or transfer of) any of the Subject Shares to
any Person other than Parent, (b) create or permit to exist any Encumbrance on
any of the Subject Shares or (c) reduce his beneficial ownership of, interest in
or risk relating to any of the Subject Shares; PROVIDED, HOWEVER, that
Stockholder may transfer (free of the restrictions on transfer set forth in this
Section 2.1) without consideration, by way of gift to members of Stockholder's
immediate family and to organizations qualified under Section 501(c)(3) of the
Internal Revenue Code of 1986, up to 100,000 shares of Company Common Stock in
the aggregate. The foregoing number of shares shall be appropriately adjusted
if, between the date of this Option Agreement and the Expiration Date, the
outstanding shares of Company Common Stock are changed into a different number
or class of shares by reason of any stock split, stock dividend, reverse stock
split, reclassification, recapitalization or other similar transaction.
2.2 TRANSFER OF VOTING RIGHTS. Stockholder covenants and agrees that, on
or prior to the Termination Date, Stockholder will not deposit any of the
Subject Shares into a voting trust or grant a proxy or enter into a voting
agreement with respect to any of the Subject Shares.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
3.1 DUE AUTHORIZATION. Stockholder has all requisite power and capacity
to execute and deliver this Option Agreement, to grant the Option and to perform
his obligations hereunder. This Option Agreement has been duly executed and
delivered by Stockholder and constitutes a legal, valid and binding obligation
of Stockholder, enforceable against Stockholder in accordance with its terms,
subject to (i) the laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Option Agreement by
Stockholder do not, and the performance of this Option Agreement by Stockholder
will not: (i) conflict with or violate any order, decree or judgment applicable
to Stockholder or by which he or any of his properties is bound or affected; or
(ii) result in any breach of or constitute a default (with notice or lapse of
time, or both) under, or result in the creation of an Encumbrance on any of the
Subject Shares pursuant to, any Contract to which Stockholder is a party or by
which Stockholder or any of his properties is bound or affected.
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<PAGE>
(b) The execution and delivery of this Option Agreement by
Stockholder do not, and the performance of this Option Agreement by Stockholder
will not, require any Consent of any Person.
3.3 TITLE TO SUBJECT SHARES. Stockholder owns of record and beneficially
the Subject Shares set forth under Stockholder's name on the signature page
hereof and does not directly or indirectly own, either beneficially or of
record, any shares of capital stock of the Company, or rights to acquire any
shares of capital stock of the Company, other than the Subject Shares set forth
below Stockholder's name on the signature page hereof. Stockholder has good and
marketable title to the Subject Shares free and clear of any Encumbrance, and
the transfer by Stockholder of any Exercised Shares hereunder will pass good and
marketable title to such Exercised Shares free and clear of any Encumbrance.
3.4 NO BROKERS. Except for Alex. Brown & Sons Incorporated, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Option
Agreement based upon arrangements made by or on behalf of Stockholder.
3.5 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Stockholder contained in this Option Agreement are accurate in all respects as
of the date of this Option Agreement, will be accurate in all respects at all
times through each Closing Date and will be accurate in all respects as of each
Closing Date as if made on that date.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Stockholder as follows:
4.1 DUE AUTHORIZATION. Parent has all requisite power and authority to
perform its obligations under this Option Agreement, and the execution, delivery
and performance by Parent of this Option Agreement have been duly authorized by
all necessary action on the part of Parent and its board of directors. This
Option Agreement constitutes the legal, valid and binding obligation of Parent,
enforceable against it in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
4.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Option Agreement by Parent do
not, and the performance of this Option Agreement by Parent will not: (i)
conflict with or violate any order, decree or judgment applicable to Parent or
by which it or any of its properties is bound or affected; or (ii) subject to
receipt by Parent of all Consents necessary to perform its obligations upon an
exercise of the Option, result in any breach of or constitute a default (with
notice or lapse of time, or both) under, any Contract to which such Parent is a
party or by which Parent or any of its properties is bound or affected.
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<PAGE>
(b) The execution and delivery of this Option Agreement by Parent do
not require any Consent of any Person.
4.3 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Parent contained in this Option Agreement are accurate in all respects as of the
date of this Option Agreement, will be accurate in all respects at all times
through each Closing Date and will be accurate in all respects as of each
Closing Date as if made on that date.
SECTION 5. CERTAIN COVENANTS
5.1 FURTHER ASSURANCES. If Parent shall exercise the Option in accordance
with the terms of this Option Agreement, from time to time and without
additional consideration, Stockholder will execute and deliver, or cause to be
executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as Parent may reasonably request
for the purpose of effectively carrying out and furthering the intent of this
Option Agreement, including the transfer of Exercised Shares to Parent and the
release of any and all Encumbrances with respect thereto.
5.2 LEGENDS. Immediately after the execution of this Option Agreement,
Stockholder shall instruct the Company to cause each certificate of Stockholder
evidencing the Subject Shares to bear a legend in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE OPTION AGREEMENT
DATED AS OF NOVEMBER 2, 1996, AS IT MAY BE AMENDED, BETWEEN THE
ISSUER AND THE REGISTERED HOLDER OF THIS CERTIFICATE, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
ISSUER.
5.3 NO EXERCISE OF APPRAISAL RIGHTS. If (a) Parent purchases any
Exercised Shares pursuant to the Option, (b) the Board of Directors of the
Company recommends to the stockholders of the Company that they vote in favor of
an Acquisition Proposal for a merger of the Company that is to be accounted for
as a "pooling of interests," (c) such merger is voted upon by the Company's
stockholders within 180 days after Parent's purchase of such Exercised Shares
and (d) the recommendation of the Board of Directors of the Company in favor of
such merger has not been withdrawn and remains in effect as of the time of the
vote by the Company's stockholders upon such merger, then Parent shall not
exercise any statutory appraisal rights with respect to such Exercised Shares in
connection with such merger. Nothing contained in this Section 5.3 or elsewhere
in this Option Agreement shall require Parent to vote any shares of Company
Common Stock in favor of any such merger, and nothing in this Section 5.3 or
elsewhere in this Option Agreement shall preclude Parent from voting any shares
of Company Common Stock against such merger.
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SECTION 6. MISCELLANEOUS
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties, covenants and obligations of Stockholder and Parent
in this Option Agreement shall survive (i) the Merger, (ii) any termination of
the Reorganization Agreement and (iii) any Closing Date.
6.2 INDEMNIFICATION.
(a) Each party hereto shall hold harmless and indemnify the other
party hereto from and against any Damages (regardless of whether or not such
Damages relate to a third-party claim) which are incurred by such other party
and that arise from any breach of any representation, warranty, covenant or
obligation of such party contained herein.
(b) If the Merger is consummated, then, from and after the Effective
Time, Parent shall, to the fullest extent permitted by law, hold harmless and
indemnify Stockholder from and against any Damages which are incurred by
Stockholder and that arise from any claim against Stockholder by any third party
asserting that Stockholder's entering into this Option Agreement or the grant by
Stockholder of the Option hereunder violates any applicable Legal Requirement.
(c) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding with respect to which Parent may become obligated
to hold harmless and indemnify Stockholder under this Section 6.2, (i)
Stockholder shall immediately notify Parent of such claim or Legal Proceeding,
and (ii) Parent shall have (A) the exclusive right, at its election, to assume
and control the defense of such claim or Legal Proceeding (with counsel selected
by Parent and reasonably satisfactory to Stockholder) and (B) the right, at its
election, to settle, adjust or compromise such claim or Legal Proceeding without
the consent of Stockholder. At Parent's reasonable request, Stockholder shall
execute a customary agreement in settlement of any such claim or Legal
Proceeding which contains a customary release and other customary terms.
6.3 RELATIONSHIP TO VOTING AGREEMENT. Nothing in this Option Agreement is
intended to limit or otherwise affect the provisions of the Voting Agreement
dated as of October 28, 1996 between Parent and Stockholder.
6.4 EXPENSES. Except as otherwise provided herein, all costs and expenses
incurred in connection with the transactions contemplated by this Option
Agreement shall be paid by the party incurring such costs and expenses. Any
transfer taxes payable in connection with the purchase of Exercised Shares
hereunder will be paid by Parent.
6.5 NOTICES. Any notice or other communication required or permitted to
be delivered to either party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other party hereto):
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if to Stockholder:
20767 Sevilla Lane
Saratoga, CA 9507
Facsimile: 408-342-5650
if to Parent:
Cadence Design Systems, Inc.
2655 Seely Avenue
San Jose, CA 95134
Attn: General Counsel
Facsimile: 408-944-0215
6.6 SEVERABILITY. Any term or provision of this Option Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Option Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Option Agreement in any other jurisdiction. If any
provision of this Option Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
6.7 ENTIRE AGREEMENT. This Option Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings between the parties with respect
thereto. No addition to or modification of any provision of this Option
Agreement shall be binding upon either party hereto unless made in writing and
signed by both parties hereto. The parties hereto waive trial by jury in any
action at law or suit in equity based upon, or arising out of, this Agreement or
the subject matter hereof.
6.8 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither this
Option Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except that (i)
Parent may assign all or any of its rights and obligations hereunder to any
wholly-owned subsidiary of Parent, and (ii) Parent may designate any other
Person to receive any Exercised Shares purchased hereunder. Subject to the
preceding sentence, this Option Agreement shall be binding upon and shall inure
to the benefit of (i) Stockholder and his heirs, successors and assigns and (ii)
Parent and its successors and assigns. Notwithstanding anything contained in
this Option Agreement to the contrary, nothing in this Option Agreement,
expressed or implied, is intended to confer on any Person other than the parties
hereto or their respective heirs, successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Option Agreement.
6.9 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage to Parent would occur in the event that any of the provisions of this
Option Agreement was not performed
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by Stockholder in accordance with its specific terms or was otherwise breached,
and that irreparable damage to Stockholder would occur in the event that Section
5.3 of this Option Agreement was not performed by Parent in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that Parent
shall be entitled to an injunction or injunctions to prevent breaches of this
Option Agreement and to enforce specifically the terms and provisions hereof,
and that Stockholder shall be entitled to an injunction or injunctions to
prevent breaches of Section 5.3 and to enforce specifically the terms and
provisions of Section 5.3. Any such equitable remedy may be sought in any
Delaware court or other court of proper jurisdiction, and shall be in addition
to any other remedy at law or in equity. The parties hereto agree that (other
than with respect to Section 5.3) equitable remedies are not appropriate or
necessary for any breach of any provision of this Agreement by Parent. It is
accordingly agreed that the sole and exclusive remedy of Stockholder for any
breach by Parent of a representation, warranty, covenant or obligation (other
than of Section 5.3) shall be an action for damages. Without limiting the
generality of the foregoing, no breach by Parent of a representation, warranty,
covenant or obligation shall give Stockholder any right to terminate this Option
Agreement.
6.10 OTHER AGREEMENTS. Nothing in this Option Agreement shall limit any of
the rights or remedies of Parent or any of the obligations of Stockholder under
any Affiliate Agreement or other agreement between Parent and Stockholder.
6.11 GOVERNING LAW. This Option Agreement shall be governed in all
respects by the laws of the State of Delaware, as applied to contracts entered
into and to be performed entirely within the State of Delaware.
6.12 COUNTERPARTS. This Option Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
6.13 CONSTRUCTION.
(a) Headings of the Sections of this Option Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
(b) For purposes of this Option Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
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(c) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Option Agreement.
(d) As used in this Option Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(e) Except as otherwise indicated, all references in this Option
Agreement to "Sections" are intended to refer to Sections of this Option
Agreement.
IN WITNESS WHEREOF, Parent and Stockholder have caused this Option
Agreement to be executed as of the date first written above.
CADENCE DESIGN SYSTEMS, INC.
By: /s/ R.L. Smith McKeithen
--------------------------------------
R.L. Smith McKeithen,
Vice President and General Counsel
/s/ David Chyan
----------------------------------------
DAVID CHYAN
Address: 20767 Sevilla Lane
Saratogo, CA 95070
Number of Shares of Company
Common Stock owned as of the date
of this Option Agreement: 2,517,944
10
