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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): June 14, 1997
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QUICKTURN DESIGN SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-22738 77-0159619
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
440 CLYDE AVENUE, MOUNTAIN VIEW, CALIFORNIA 94043
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 967-3300
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N/A
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 14, 1997 (the "Closing Date"), pursuant to an Asset Purchase
Agreement (the "Purchase Agreement") among Quickturn Design Systems, Inc.
("Quickturn"), Synopsys, Inc., a Delaware corporation ("Synopsys"), and Arkos
Design, Inc., a California corporation and wholly-owned subsidiary of
Synopsys ("Arkos"), Quickturn purchased from Synopsys certain assets relating
to Synopsys' emulation business, including all of the outstanding capital
stock of Arkos. As a result of these transactions, Arkos became a
wholly-owned subsidiary of Quickturn. Quickturn is a leading provider of
cycle-based simulation and reprogrammable emulation products for design
verification of complex ICs and electronic systems.
In addition to the Arkos stock, the assets acquired by Quickturn pursuant
to the Purchase Agreement (the "Acquired Assets") include, among other
things: (i) certain US, European and Japanese patent applications, (ii)
certain US trademarks and trademark applications, (iii) licenses to use
certain intellectual property owned by third parties (iv) tangible
intellectual property assets owned by Synopsys, including the Arkos System
Software and (v) certain fixed assets and inventory. Certain of the Acquired
Assets constitute physical property, and were used by Synopsys and/or Arkos
in the conduct of their integrated circuit emulation businesses. Quickturn
presently intends to continue to use certain such assets for similar
purposes, subject to changing needs of its business.
The consideration paid by Quickturn pursuant to the Purchase Agreement was
valued at $14,500,000 and consisted of $5,000,000 cash, 500,000 shares of
Quickturn Common Stock and warrants to purchase 1,000,000 shares of Quickturn
Common Stock. Subject to certain exceptions, the warrants issued to Synopsys
will become exercisable with respect to one-half of the shares subject thereto
six months after the Closing Date and will become fully exercisable on the first
anniversary of the Closing Date. The exercise price of the warrants is $13.34
per share, which price represents 110% of the closing price of the Quickturn
Common Stock on the Nasdaq Stock Market on June 6, 1997. The warrants will
expire two years after the Closing Date.
The consideration paid by Quickturn for the Acquired Assets (including the
outstanding capital stock of Arkos) was determined pursuant to arms' length
negotiations and took into account various factors concerning the valuation of
the acquired business, including the book value of the Acquired Assets. The
cash used in partial payment for the acquired assets was from the Company's
general working capital.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF THE ACQUIRED BUSINESS
Because the impact of the acquired business does not meet the minimum
materiality threshold of Rule 3-05(b)(2)(i) of Regulation S-X (17 C.F.R. Section
210.3-05(b)(2)(i)), financial information of the acquired business is not
required to be filed pursuant to Item 7(a) of this Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial information is not required to be filed pursuant
to Item 7(b) of this Form 8-K because separate financial statements of the
acquired business are not included in this filing, SEE 17 C.F.R. Section
210.11-01(c).
(c) EXHIBITS
2.1 Asset Purchase Agreement dated as of June 14, 1997.
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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.
Dated: June 27, 1997 QUICKTURN DESIGN SYSTEMS, INC.
/s/ RAYMOND K. OSTBY
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Raymond K. Ostby
Vice President, Finance and Administration,
Chief Financial Officer and Secretary
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INDEX TO EXHIBITS
Exhibit
Number Description of Document
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2.1 Asset Purchase Agreement dated as of June 14, 1997.
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "AGREEMENT") is made and entered into as
of June 14, 1997, by and among Synopsys, Inc., a Delaware corporation
("SELLER"), Arkos Design, Inc., a California corporation and wholly-owned
subsidiary of Seller ("SUB") and Quickturn Design Systems, Inc., a Delaware
corporation ("BUYER").
RECITALS
A. Seller and Sub have been engaged in designing, developing and
marketing processor-based emulation systems (the "SELLER EMULATION BUSINESS").
B. Seller wishes to sell to Buyer and Buyer wishes to purchase from
Seller, on the terms and for the consideration provided below, all the assets
relating to the Seller Emulation Business, including all the stock of Sub
(together, the "ACQUIRED ASSETS"), as provided in this Agreement (such sale by
Seller and purchase by Buyer being referred to as the "ACQUISITION").
C. The Boards of Directors of Seller and Buyer believe it is in the best
interests of their respective companies and the shareholders of their respective
companies that Seller sell to Buyer for the consideration set forth below all
the Acquired Assets, including all the outstanding capital stock of Sub and, in
furtherance thereof, have approved same.
D. Sub, Seller and Buyer desire to make certain representations and
warranties and other agreements in connection with the Acquisition.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE. Subject to the terms and conditions contained in
this Agreement, Seller agrees to sell, assign, transfer and deliver to Buyer,
and Buyer agrees to purchase from Seller, the Acquired Assets on the Closing
Date (as defined in Section 1.6).
1.2 DESCRIPTION OF ACQUIRED ASSETS. At the Closing (as defined in
Section 1.6), Seller shall sell and deliver to Buyer, and Buyer shall purchase
and accept from Seller, all of Seller's right, title, and interest in or to the
Acquired Assets, including without limitation the assets listed on the attached
SCHEDULE 1.2 and all shares of Sub common stock, par value $0.00001 per share
(the "SUB CAPITAL
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STOCK"), such common stock representing all the outstanding capital stock of
Sub. Buyer acknowledges that any income accruable to Sub from Seller for
Seller's use of Sub's technology will be dividended to Seller prior to the
Closing (and the receivable set forth on the Sub Balance Sheet (as defined in
Section 2.6) will be used to satisfy such dividend amount).
1.3 NO BUYER ASSUMPTION OF LIABILITIES. Buyer shall not assume any
liabilities or obligations of any nature (matured or unmatured, fixed or
contingent) of Seller or Sub pursuant to this Agreement or the transactions
contemplated hereby or otherwise.
1.4 CONSIDERATION FOR ASSETS. As consideration (the "CONSIDERATION") for
the sale of the Acquired Assets to Buyer at the Closing, on the terms and
subject to the conditions set forth in this Agreement:
(a) Buyer shall pay to Seller, by wire transfer of next day funds to
such account as is specified by Seller, an amount equal to $3,000,000;
(b) Buyer shall deposit into escrow the sum of $2,000,000 (the
"ESCROW AMOUNT") in accordance with Section 7.1 and the Escrow Agreement
attached as EXHIBIT A;
(c) Buyer shall deliver to Seller 500,000 shares of Buyer's Common
Stock (the "BUYER'S SHARES"); and
(d) Buyer shall deliver to Seller a warrant (the "BUYER'S WARRANT")
having substantially the form attached as EXHIBIT B which warrant shall, subject
to the terms of such warrant, permit Seller to purchase 1,000,000 shares of the
Buyer's Common Stock at an exercise price equal to 110% of the closing price of
Buyer's Common Stock on the Nasdaq National Market on June 6, 1997, which
exercise price the parties hereby agree equals $13.34.
1.5 SALES AND USE TAXES. The sales, use and transfer taxes arising out of
the transfer of the tangible fixed assets included in the Acquired Assets (the
"TRANSFER TAXES") shall be paid by Seller. To the extent permitted by law,
Buyer shall cooperate fully with Seller in minimizing Transfer Taxes, which the
parties estimate (based on a preliminary analysis of the assets to be
transferred) to be approximately $80,000. To the extent a taxing authority
provides notice to Buyer of an audit of the Transfer Taxes, Buyer shall
immediately notify Seller and Seller shall assume responsibility for such audit
and shall pay when due any additional Transfer Taxes (plus interest and
penalties) ultimately assessed with respect to the transfer of the tangible
fixed assets contemplated by this Agreement, other than those additional
Transfer Taxes imposed solely by reason of Buyer's failure to use best efforts
to comply with the procedures set forth in the Delivery Protocol (as defined
below) which taxes shall be the responsibility of Buyer; provided, however, that
such noncompliance was not specifically requested by Seller in writing. Seller
shall have complete authority to control, settle or defend any proposed
adjustment to the Transfer Taxes and Buyer shall cooperate fully with Seller, in
its defense or settlement of any proposed adjustment to Transfer Taxes. Buyer
would supply Seller with a qualified resale certificate for all inventory
transferred as part of the Acquisition.
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1.6 CLOSING.
(a) CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall be held at the offices of Wilson Sonsini
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, CA 94304, at noon on June 14,
1997 (the "CLOSING DATE").
(b) DELIVERY AT CLOSING. At the Closing:
(i) Seller shall deliver to Buyer a certificate
representing the Sub Capital Stock that Buyer is purchasing from Seller
hereunder, properly endorsed in blank for transfer and accompanied by a duly
executed stock power in proper form.
(ii) Buyer shall deliver to Seller the Consideration,
including the cash payment set forth in Section 1.4(a), the Buyer's Shares
(registered in such name(s) and denominations as Seller may reasonably request)
and the Buyer's Warrant.
(iii) Seller, Sub and Buyer shall deliver or cause to be
delivered to one another such other instruments and documents necessary or
appropriate to evidence the due execution, delivery and performance of this
Agreement.
(iv) Seller and Buyer shall deliver an executed Registration
Rights Agreement attached as EXHIBIT D, which shall become effective upon the
Closing.
(v) Seller and Buyer shall deliver an executed Synthesis
Database Licensing Agreement attached as EXHIBIT E, which will become effective
upon the Closing.
(vi) Counsel to Seller shall deliver a legal opinion having
substantially the form of EXHIBIT F.
(c) DELIVERY AFTER CLOSING. Within 30 days following the date of the
Agreement,
(i) Seller shall deliver to Buyer all bills of sale,
endorsements, assignments, consents to assignments to the extent obtained and
other instruments and documents as Buyer may reasonably request to sell, convey,
assign, transfer and deliver to Buyer good title to all the Acquired Assets free
and clear of any and all liens, pledges, security interests, encumbrances,
claims and the like, including, without limitation, a Bill of Sale and General
Assignment of Assets in substantially the form attached as EXHIBIT C.
(ii) Seller, through its officers, agents and employees,
will put Buyer into full possession and enjoyment of all tangible Acquired
Assets (other than the Sub Capital Stock, which shall be delivered as provided
herein), terms FOB Seller, unless Buyer otherwise specifies in writing that
title and risk of loss pass outside of California; provided, however, that with
respect to those Acquired Assets which are delivered to Buyer by remote
telecommunication or other similar
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method, Buyer shall not take title or possession of any tangible manifestation
of such Acquired Assets; and provided further that such tangible manifestations
to be retained by Seller shall not represent title to intellectual property.
Buyer agrees not to request to take possession of any intangible Acquired Asset
by other than remote telecommunication means unless expressly agreed in writing
by Seller. At the Closing, Seller shall commence delivery to Buyer of those
Acquired Assets identified by Buyer to be delivered by remote telecommunication,
and Seller shall use its reasonable best efforts to comply with the delivery
protocol established by Buyer and Seller jointly prior to Closing with respect
to such assets (the "DELIVERY PROTOCOL").
(d) TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after the Closing Date, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Buyer with full right, title and
possession to all Acquired Assets, the officers and directors of Seller are
fully authorized in the name of Seller or otherwise to take, and will take all
such lawful and necessary and/or desirable action (including without limitation
obtaining any required consents or approvals).
1.7 RESIGNATION OF OFFICERS AND DIRECTORS. The officers and directors of
Sub in office immediately prior to the Closing shall resign as officers and
directors of Sub effective as of the Closing, and, effective as of the Closing,
Keith Lobo and Ray Ostby shall be appointed as the two directors of Sub, and
Keith Lobo shall be appointed President of Sub and Ray Ostby shall have been
appointed Chief Financial Officer of Sub. Seller shall have delivered
documentation reasonably approved by Buyer evidencing the foregoing.
ARTICLE II
CERTAIN REPRESENTATIONS AND WARRANTIES OF SELLER AND SUB
In this Agreement, any reference to any event, change, condition or effect
being "MATERIAL" with respect to any entity or group of entities means any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a "MATERIAL ADVERSE EFFECT" with
respect to any entity or group of entities means any event, change or effect
that is materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, business, operations, results of operations or
prospects of such entity and its subsidiaries, taken as a whole.
In this Agreement, any reference to a party's "KNOWLEDGE" means such
party's actual knowledge.
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2.1 ORGANIZATION, STANDING AND POWER. Each of Seller and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of Seller and 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 and in good standing would
have a Material Adverse Effect on such entity or the Acquired Assets. Sub has
delivered a true and correct copy of the Articles of Incorporation and Bylaws or
other charter documents, as applicable, of Sub, each as amended to date, to
Buyer. Sub is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents.
2.2 SUBSIDIARIES. Sub does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
2.3 CAPITAL STRUCTURE. The authorized capital stock of Sub consists of
1,000 shares of Common Stock, of which there are 1,000 shares of Common Stock
issued and outstanding, all of which are owned by Seller. There are no other
outstanding shares of capital stock or voting securities and no outstanding
commitments to issue any shares of capital stock or voting securities. All
outstanding shares of Sub Common Stock are duly authorized, validly issued,
fully paid and non-assessable and are free of any liens or encumbrances, and are
not subject to preemptive rights or rights of first refusal created by statute,
the Articles of Incorporation or Bylaws of Sub or any agreement to which Sub is
a party or by which it is bound. Except for the rights created pursuant to this
Agreement, there are no other options, warrants, calls, rights, commitments or,
agreements of any character to which Sub is a party or by which it is bound
obligating Sub to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of capital stock of
Sub or obligating Sub to grant, extend, accelerate the vesting of, change the
price of, or otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. Except for the rights created pursuant to this
Agreement, there are no contracts, commitments or agreements relating to voting,
purchase or sale of Sub Common Stock. All outstanding shares of Sub Common
Stock were issued in compliance with all applicable federal and state securities
laws.
2.4 AUTHORITY. Each of Seller and Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Seller and on the part of Sub
(including the approval of Seller, its sole shareholder). This Agreement has
been duly executed and delivered by Sub and Seller and constitutes the valid and
binding obligations of Sub and Seller enforceable against Sub and Seller in
accordance with its terms. The execution and delivery of this Agreement by Sub
and Seller do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the organizational documents of Sub or
Seller, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit,
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concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Sub or Seller or any of their
respective properties or assets. No consent, approval, order or authorization
of, or registration or declaration with, any court, administrative agency or
commission or other governmental authority or instrumentality ("GOVERNMENTAL
ENTITY") is required by or with respect to Sub in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby except for such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws.
2.5 VALID OWNERSHIP; EFFECTIVE TRANSFER OF NECESSARY RIGHTS.
(a) OWNERSHIP. Seller owns and has good and marketable to all of the
Acquired Assets free and clear of all liens, pledges, security interests,
encumbrances, claims and the like, and has the rights to sell, assign, transfer,
and deliver the Acquired Assets.
(b) EFFECTIVE TRANSFER OF NECESSARY RIGHTS. Upon the Closing, by
means of this Agreement, together with the documents, instruments and agreements
contemplated hereby, Seller will transfer good and marketable title to all
Acquired Assets (including the Intellectual Property) to Buyer, free and clear
of all liens, pledges, security interests, encumbrances, claims and the like.
The Acquired Assets (including the Intellectual Property) transferred to Buyer
pursuant to this Agreement, and the documents, instruments and agreements
contemplated hereby will include all necessary assets and intellectual property
rights related to the Seller Emulation Business, free and clear of all liens,
pledges, security interests, encumbrances, claims and the like.
2.6 FINANCIAL STATEMENTS. Sub has delivered to Buyer its balance sheet as
of the date of this Agreement (the "SUB BALANCE SHEET"). Within 30 days after
the date of this Agreement, Sub shall have delivered (to the extent available)
its audited annual financial statements since inception.
2.7 ABSENCE OF LIABILITIES. Sub has no obligations or liabilities of any
nature (matured or unmatured, fixed or contingent) other than as disclosed on
the Sub Balance Sheet, and Buyer shall not assume any liabilities or obligations
of Seller or Sub as a result of its purchase of the Acquired Assets.
2.8 LITIGATION. There is no private or governmental action, proceeding,
claim, arbitration or investigation pending before any agency, court or
tribunal, foreign or domestic, or, to the knowledge of Seller or Sub, threatened
against Seller (with respect to the Seller Emulation Business), Sub or any of
Sub's properties, or that could prevent, enjoin, or materially alter or delay
any of the transactions contemplated by this Agreement.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement, judgment,
injunction, order or decree binding upon Sub or Seller which has or could
reasonably be expected to have the effect of prohibiting or impairing Buyer's
future operation of the Seller Emulation Business.
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2.10 INVENTORY. The inventory included in the Acquired Assets
(including raw materials, work in progress and finished goods) is as set forth
on SCHEDULE 1.2 and constitutes all of the inventory relating to the Seller
Emulation Business. Such inventory is identified as to those items which are
consistent with the current version of the Seller Emulation Business product(s)
and those items which are either inconsistent with such current version or
otherwise obsolete or damaged. Seller has also identified on SCHEDULE 1.2 all
inventory that is on loan or consignment to customers, sales offices or design
centers of the Seller Emulation Business and the location of such inventory.
2.11 CAPITAL EQUIPMENT AND HARD ASSETS. All tangible assets listed on
SCHEDULE 1.2 are in substantially good condition and repair and are adequate for
the uses to which they are being put or would be put in the ordinary course of
business consistent with industry standards.
2.12 INTELLECTUAL PROPERTY.
(a) To the knowledge of Seller and Sub, Seller and Sub own, or
are licensed or otherwise possess legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, net lists, schematics, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material that are used in the Seller
Emulation Business as currently conducted by Seller and Sub ("INTELLECTUAL
PROPERTY") .
(b) SCHEDULE 1.2 lists (i) all patents and patent applications
and all registered and unregistered trademarks, trade names and service marks,
registered and unregistered copyrights, and maskworks, included in the
Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all
licenses, sublicenses and other agreements to which Seller or Sub is a party and
pursuant to which any person is authorized to use any Intellectual Property, and
(iii) all licenses, sublicenses and other agreements to which Seller or Sub is a
party and pursuant to which Seller or Sub is authorized to use any third party
patents, trademarks or copyrights, including software ("THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS") which are incorporated in, are, or form a part of any Sub
product or Seller product relating to the Seller Emulation Business (an
"EMULATION PRODUCT").
(c) To the knowledge of Seller and Sub, there is no unauthorized
use, disclosure, infringement or misappropriation of any Intellectual Property
Rights of Seller or Sub.
(d) Neither Seller nor Sub is nor will either be as a result of
the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights.
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(e) All patents, registered trademarks, service marks and
copyrights held by Sub or by Seller relating to the Seller Emulation Business
are valid and subsisting. Neither Sub nor, with respect to the Seller Emulation
Business, Seller, has been sued in any suit, action or proceeding which involves
a claim of infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party;
neither Seller nor Sub has any knowledge that the manufacturing, marketing,
licensing or sale of any Sub product or Seller product relating to the Seller
Emulation Business infringes any patent, trademark, service mark, copyright,
trade secret or other proprietary right of any third party; and neither Seller
nor Sub has brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party.
(f) Seller and Sub have secured valid written assignments to
them from all consultants and employees who contributed to the creation or
development of Intellectual Property of the rights to such contributions that
Seller or Sub do not already own by operation of law.
(g) Seller or Sub have taken all necessary and appropriate steps
to protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright ("CONFIDENTIAL
INFORMATION"). All use, disclosure or appropriation of Confidential Information
owned by Seller or Sub by or to a third party has been pursuant to the terms of
a written agreement between Seller or Sub and such third party. All use,
disclosure or appropriation of Confidential Information not owned by Seller or
Sub has been pursuant to the terms of a written agreement between Seller or Sub
and the owner of such Confidential, Information, or is otherwise lawful.
(h) Seller (i) has not been sued in any suit, action or
proceeding which involves a claim of infringement or violation of any Third
Party Intellectual Property Rights which are incorporated in, are or form a part
of any Emulation Product and (ii) has not brought any action, suit or proceeding
for infringement of Sub's Intellectual Property or breach of any license or
agreement involving Intellectual Property of Sub against any third party.
2.13 TAXES. Seller and Sub have (i) timely filed within the time the
period for filing or any extension granted with respect thereto, all Tax Returns
which they are required to file relating or pertaining to any and all taxes
attributable to or levied upon the Acquired Assets, and (ii) paid any and all
taxes they are required to pay in connection with the taxable periods to which
such Tax Returns relate. There are (and immediately following the Closing there
will be) no liens or similar encumbrances on the Acquired Assets relating or
pertaining to taxes, except with respect to taxes not yet due and payable.
Seller has no knowledge of any basis for the assertion of any claims which, if
adversely determined, would result in a lien or other encumbrance on the
Acquired Assets or otherwise adversely affect Buyer or the Acquired Assets.
There is (i) no material claim for Taxes that is a lien against the property of
Sub or is being asserted against Sub other than liens for Taxes not yet due and
payable, (ii) no audit of any Tax Return of Sub being conducted by a Tax
authority, (iii) no extension of the statute of limitations on the assessment of
any Taxes granted by Sub or any Tax Group and currently in effect, and (iv) no
agreement, contract or arrangement to which Sub is a party
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that may result in the payment of any amount that would not be deductible by
reason of Sections 280G, 162 or 404 of the Code. Sub has not been and will not
be required to include any material 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, events or accounting methods employed prior to the Closing. Sub
is not a party to any tax sharing or tax allocation agreement nor does Sub owe
any amount under any such agreement. Sub has and will have no liability for
unpaid Tax under Section 1.1502 of the Treasury Regulations. For purposes of
this Agreement, the following terms have the following meanings: "TAX" (and,
with correlative meaning, "TAXES" and "TAXABLE") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "TAX AUTHORITY") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period or as
a result of Sub's deconsolidation or disaffiliation with Seller or any other
corporation upon the Closing of the Stock Purchase and (iii) any liability for
the payment of any amounts of the type described in (i) or (ii) as a result of
any express or implied obligation to indemnify any other person. As used
herein, "TAX RETURN" shall mean any return, statement, report or form, including
without limitation estimated Tax returns and reports, withholding Tax returns
and reports and information reports and returns required to be filed with
respect to Taxes. Sub is in full compliance with all terms and conditions of
any Tax exemptions or other Tax-sparing agreement or order of a foreign
government and the consummation of the Acquisition shall not have any adverse
effect on the continued validity and effectiveness of any such Tax exemptions or
other Tax-sparing agreement or order.
2.14 EMPLOYEE MATTERS. Sub has no employees or consultants or
employee benefit plans or agreements, and to the extent it has had any of the
foregoing in the past, has no liabilities or obligations relating in any way
whatsoever to the same.
2.15 COMPLIANCE WITH LAWS. Sub has complied with, is not in violation
of, and has not received any notices of violation with respect to, any federal,
state, local or foreign statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for such
violations or failures to comply as could not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on Sub. Sub has
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity
(i) pursuant to which Sub currently operates or holds any interest in any of its
properties or (ii) that is required for the operation of Sub's business or the
holding of any such interest ((i) and (ii) herein being collectively called "SUB
AUTHORIZATIONS"), and all of such Sub Authorizations are in full force and
effect, except where the failure to obtain or have any such Sub Authorizations
could not reasonably be expected to have a Material Adverse Effect on Sub or the
Acquired Assets.
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2.16 MINUTE BOOKS. Within 30 days following the date of this
Agreement, Seller shall have delivered complete and correct copies of the minute
books of Sub in Seller's possession. No meetings of directors or shareholders
have occurred and no actions by written consent have been executed in the
preceding two years, except as provided in Section 1.7 and Section 2.4.
2.17 BROKERS' AND FINDERS' FEES. Neither Seller nor Sub has incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.18 CUSTOMERS. Seller has provided Buyer with a list of all
customers of the Seller Emulation Business since inception of such business,
together with a schedule of such customers' orders and specifying which orders
(whether for revenue or not) have not yet been filled, and of those orders which
have been filled, those as to which revenue has been recognized, the amount (if
any) of cash collected and the amount of revenue deferred. Additionally, Seller
has provided Buyer, for each listed customer order, a brief description of the
status of that installation and any further commitments, contingencies,
milestones or customer expectations with regard to that order.
2.19 CONTRACTS; CONSENTS. Sub is not a party to any contracts or
agreements other than this Agreement. There are no consents or approvals of
third parties, Governmental Entities or otherwise required for Seller and Sub to
sell, assign or transfer the Acquired Assets to Buyer or to provide Buyer with
the full enjoyment of such Acquired Assets.
2.20 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Seller or Sub herein or in any Schedule hereto, or
certificate furnished by Seller or Sub pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain at the
Closing any untrue statement of a material fact, or omits or will omit at the
Closing to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading. None of the representations and warranties set forth in this
Article II in any way limits any representation or warranty made in Section 2.7.
ARTICLE III
ADDITIONAL SELLER REPRESENTATIONS AND WARRANTIES
Seller further represents and warrants to Buyer as follows:
3.1 ACQUISITION ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with Seller in reliance upon Seller's representation to Buyer, which by Seller's
execution of this Agreement Seller hereby confirms, that the Buyer's Shares and
Buyer's Warrants (collectively, the "SECURITIES") to be acquired by Seller will
be acquired for investment for Seller's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
Seller has no present intention of
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selling, granting any participation in, or otherwise distributing the same. By
executing this Agreement, Seller further represents that Seller does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
3.2 RELIANCE UPON SELLER'S REPRESENTATIONS. Seller understands that the
Securities are not registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT") on the ground that the sale provided for in this Agreement and
the issuance of securities hereunder is exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, and that the Buyer's reliance
on such exemption is based on Seller's representations set forth herein.
3.3 RECEIPT OF INFORMATION. Seller believes it has received all the
information it considers necessary or appropriate for deciding whether to
acquire the Securities. Seller further represents that it has had an
opportunity to ask questions and receive answers from Buyer regarding the
business, properties, prospects and financial condition of Buyer and to obtain
additional information (to the extent Buyer possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access. The
foregoing, however, does not limit or modify the representations and warranties
of Buyer in Article IV of this Agreement or the right of Seller to rely thereon.
3.4 INVESTMENT EXPERIENCE. Seller is experienced in evaluating and
investing in securities and acknowledges that it is able to fend for itself, can
bear the economic risk of its investment, and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the investment in the Securities.
3.5 RESTRICTED SECURITIES. Seller understands that the Securities may not
be sold, transferred or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Securities or an available
exemption from registration under the Securities Act, the Securities must be
held indefinitely. To the extent applicable, each certificate or other document
evidencing any of the Securities shall be endorsed with the following
restrictive legend:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF, OR EXEMPTION THEREUNDER, UNDER
SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT."
Seller covenants that, except to the extent such restrictions are waived by
Buyer, Seller shall not transfer the shares represented by any such certificate
without complying with the restrictions on transfer described in such legend.
Seller may sell the Securities in compliance with Rule 144
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promulgated under the Securities Act without providing Buyer or any of its
representatives an opinion of counsel regarding such sale and with an opinion of
counsel in reliance on any other exception. Seller agrees to provide Buyer with
notice of any sale of the Securities no later than immediately prior to placing
an order with a broker or, if not sold through a broker, at the time of closing
an agreement to sell the Securities, and, to the extent practicable, Seller will
use its best efforts to provide Buyer 48 hours advance notice of any such sale.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 ORGANIZATION, STANDING AND POWER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Buyer has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on Buyer.
4.2 AUTHORITY. Buyer has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and constitutes the valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms. The execution and
delivery of this Agreement by Buyer does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Certificate
of Incorporation or Bylaws of Buyer or any of its subsidiaries, as amended, or
(ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Buyer or any of its
subsidiaries or any of their properties or assets. No consent, approval, order
or authorization of, or registration or declaration with, any Governmental
Entity is required by or with respect to Buyer or any of its subsidiaries in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable securities laws.
4.3 BUYER CAPITAL STRUCTURE. The authorized capital stock of Buyer
consists of 40,000,000 shares of Common Stock, no par value. At the close of
business on May 31, 1997, (i) 16,815,482 shares of Buyer's Common Stock were
issued and outstanding; (ii) 4,936,776 shares of Buyer's Common Stock were
reserved for issuance upon exercise of options (the "BUYER OPTIONS") under
Buyer's various Stock Option Plans and 1994 Director Stock Option Plan, of which
options to
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purchase 3,045,330 shares were outstanding; (iii) 1,200,000 shares of Buyer's
Common Stock were reserved for issuance under Buyer's 1993 Employee Stock
Purchase Plan (the "ESPP"), of which 536,685 shares have been issued; and (iv)
450,000 shares of Buyer's Common Stock were reserved for issuance under options
granted and outstanding but not subject to a specific stock purchase or stock
option plan. Except as set forth in this Section 4.3 and except as contemplated
by this Agreement, there are no existing agreements, options, warrants, rights,
calls or commitments of any character providing for the issuance of any
additional shares of Buyer's Common Stock and there are no outstanding
securities or other instruments convertible into or exchangeable for shares of
Buyer's Common Stock and no commitments to issue such securities or instruments.
4.4 SEC DOCUMENTS. Buyer has made available to Seller a true and complete
copy of Buyer's Form 10-K for the year ended December 31, 1996 and Form 10-Q for
the three (3) months ended March 31, 1997, and any other statement, report,
registration statement or definitive proxy statement filed by Buyer with the SEC
from December 31, 1996 to the Closing Date (the "BUYER SEC DOCUMENTS"). As of
their respective filing dates, Buyer has made all necessary SEC filings, the
Buyer SEC Documents comply or will comply in all material respects with the
requirements of the Securities Exchange Act of 1934 as amended, or the
Securities Act, and none of the Buyer SEC Documents contain or will contain 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 made therein, in
light of the circumstances under which they were made, not misleading. Since
March 31, 1997, there has not occurred a Material Adverse Effect on Buyer.
4.5 SHARES OF COMMON STOCK. The Buyer's Shares, and Buyer Common Stock
issuable on exercise of the Buyer's Warrant, when issued and delivered to Seller
in accordance with this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable.
4.6 BROKERS' OR FINDERS' FEES. Buyer is not a party to, or in any way
obligated under, and has no knowledge of, any contract or outstanding claim for
the payment of any broker's or finder's fee in connection with the origin,
negotiation, execution or performance of this Agreement, the nonpayment of which
could result in the placement of a lien or other encumbrance on the Acquired
Assets, or a claim against Buyer or its affiliates.
4.7 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Buyer herein or in any Schedule hereto, or certificate furnished by
Buyer pursuant to this Agreement, when all such documents are read together in
their entirety, contains or will contain at the Closing any untrue statement of
a material fact, or omits or will omit at the Closing to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PUBLIC DISCLOSURE. Buyer and Seller intend to make a joint press
release regarding the terms of this Agreement, the transactions contemplated
hereby and certain other matters; however, neither shall issue any such press
release or make any such statement or disclosure without the prior written
approval of the other (which approval shall not be unreasonably withheld),
except as may be required by law.
5.2 LEGAL REQUIREMENTS. Each of Buyer, Seller and Sub will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement.
5.3 EMPLOYEES. Seller will not assert a claim (of tortious interference,
theft of trade secrets or otherwise) as a result of Buyer's recruitment of
employees or former employees of the Seller Emulation Business. Seller
acknowledges and agrees that any rights that it has by virtue of non-compete
arrangements entered into in connection with its original acquisition of Sub
shall be assigned to Buyer within 30 days following the Closing or, in the event
that such agreements are not assignable, then Seller agrees to, at the request
of Buyer, enforce any and all of such rights so that they inure to the benefit
of Buyer. Seller further agrees to provide documentation relating to such
agreements as reasonably requested by Buyer.
5.4 BULK SALES. Buyer hereby agrees to waive the requirement, if any,
that Seller or Sub comply with any bulk transfer law which may be applicable to
the transactions contemplated by this Agreement; provided, that Seller agrees to
indemnify and hold harmless Buyer with respect to any noncompliance with such
laws and Buyer's waiver with respect thereto.
5.5 REASONABLE BEST EFFORTS; FURTHER ASSURANCES. Each of the parties to
this Agreement shall use its reasonable best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the
reasonable request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
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ARTICLE VI
CERTAIN POST-CLOSING COVENANTS
6.1 SELLER USE OF BUYER EMULATION SERVICES.
(a) Seller agrees that when it is in need of emulation services
either internally or with respect to a customer project, it will, where
feasible, first offer Buyer the opportunity to undertake the project, giving
Buyer a clear indication of the nature and timing of the project. In
determining whether it has the resources available to undertake the project
according to Seller's desired schedule, Buyer will give Seller's project
priority status over projects of similar size (measured in realizable revenues)
and schedule (measured in terms of timing to completion), unless in Buyer's
reasonable judgment doing so will cause Buyer undue commercial harm. Buyer will
in no event be required to divert resources from an existing project on Seller's
behalf. Buyer will notify Seller in writing of its determination whether to
accept a particular project as promptly as is practicable, with a brief
explanation of any refusal. If Buyer agrees to undertake the project, it will
do so on terms no less favorable than with respect to other current projects of
similar size and schedule.
(b) Buyer agrees to sell its emulation products to Seller (i) for
Seller's internal use (which shall not involve the provision of design or other
services to others), and (ii) for Seller's use in a discrete design services
consulting project, it being understood that following completion of such
project, all Buyer emulation products used in connection with such project can
be used thereafter only in Seller internal projects unless a Vice President of
Buyer consents in writing to use in connection with a specific project. Such
consent of a Vice President of Buyer must be obtained with respect to each
subsequent project with respect to which the same Buyer emulation products are
proposed to be used.
6.2 NONCOMPETITION.
(a) Neither Seller nor any of its affiliates, subsidiaries, or
similarly controlled entities, shall, during the period commencing on the
Closing Date and ending on the fifth anniversary of the Closing Date, directly
or indirectly engage in the integrated circuit emulation business anywhere in
the world. The foregoing restriction shall include without limitation any
investment of cash or other property, loan, joint venture, strategic alliance,
license or other similar business arrangement relating to the integrated circuit
emulation business, but shall not include Seller actions required to satisfy its
service and support requirements pursuant to Section 6.3. In the event that
Seller is acquired (whether through (i) sale of substantial assets, or
(ii) merger, sale of stock or otherwise pursuant to which the shareholders
immediately prior to such transaction hold less than a majority of the voting
securities of the surviving or acquiring corporation after such transaction) by
an entity with significant operations relating to the integrated circuit
emulation business at the time of such transaction (a "PRE-EXISTING EMULATION
BUSINESS"), this prohibition shall not apply to the Pre-Existing Emulation
Business.
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(b) Neither Buyer nor any of its affiliates, subsidiaries or
similarly controlled entities shall, during the period commencing on the Closing
Date and ending on the fifth anniversary of the Closing Date, directly or
indirectly engage in the commercial logic synthesis business, relating to
integrated circuit design creation (the "SYNTHESIS BUSINESS"). The foregoing
restriction shall include, without limitation, any investment of cash or other
property, loan, joint venture, strategic alliance, license or other similar
business arrangement relating to the Synthesis Business. In the event that
Buyer is acquired (whether through (i) sale of substantial assets or
(ii) merger, sale of stock or otherwise pursuant to which the shareholders
immediately prior to such transaction hold less than a majority of the voting
securities of the surviving or acquiring corporation after such transaction) by
an entity with significant operations relating to the Synthesis Business at the
time of such transaction (a "PRE-EXISTING SYNTHESIS BUSINESS"), this prohibition
shall not apply to the Pre-Existing Synthesis Business.
(c) The parties agree that the covenants set forth in Sections 6.2(a)
and 6.2(b) above are a material and substantial part of this Agreement. Because
of the difficulty of measuring economic losses to the nonbreaching party as a
result of a breach of the restrictive covenants set forth in Sections 6.2(a) and
6.2(b) above, and because of the immediate and irreparable damage that would be
caused to the nonbreaching party by such breach, for which monetary damages
would not be a sufficient remedy, the parties agree that in addition to all
other remedies that may be available to the nonbreaching party at law or in
equity, the nonbreaching party shall be entitled to specific performance and any
injunctive or other equitable relief as a remedy for any breach or threatened
breach of such restrictive covenant.
6.3 BUYER SUPPORT OF SELLER EMULATION BUSINESS CUSTOMERS. Buyer agrees to
provide service and support under the terms of its standard service and support
agreements to each customer of the Seller Emulation Business (excluding customer
sites at which equipment has been installed by Seller for free, or for which
there is no Seller record of a revenue transaction or backlog), which agrees to
terminate its existing support and service agreements with Seller or Sub and
waive any remaining rights or claims thereunder or otherwise relating to support
of such customer as a customer of the Seller Emulation Business in exchange for
(i) replacement of its existing Sub emulation products with reasonably
comparable Buyer emulation products, and (ii) Buyer entering into its standard
service and support agreement with such customer (such exchange being referred
to herein as the "SWAP ARRANGEMENT"), but only as to those customers which
accept the Swap Agreement prior to September 30, 1997. Seller's intent is that,
until a particular customer of the Seller Emulation Business accepts the Swap
Arrangement (including the waiver by such customer of any remaining rights or
claims under existing support and service agreements with Seller or Sub or
otherwise relating to support of such customer as a customer of the Seller
Emulation Business), Seller would, to the extent practicable, satisfy all
service and support requirements of such customer in accordance with the terms
of its existing support and service arrangements with such customer. Seller
acknowledges that it may be required to satisfy such support and service
requirements for an indefinite period which may exceed the duration of the term
of the customer's existing support and service arrangements. Seller will inform
Buyer when it believes it has completed its support of any customer. The
parties acknowledge that Buyer shall have no obligation to a particular customer
of
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the Seller Emulation Business other than to offer to enter into the Swap
Arrangement and, only if such arrangement is agreed to by the customer prior to
September 30, 1997, to fulfill the terms of such arrangement. In addition, with
regard to each maintenance contract for which revenue has been deferred and as
to which Buyer and the party to such maintenance contract have entered into the
Swap Arrangement, Seller and Sub agree to return the unearned deferred
maintenance amounts to the applicable customer.
6.4 LICENSE OF INTELLECTUAL PROPERTY AND PROVISION OF EQUIPMENT FOR
SUPPORT SERVICES.
(a) Buyer hereby grants to Seller, for a period of one year from the
date of this Agreement, a limited, nontransferable license (with no right to
sublicense) to use the Intellectual Property, but solely for the purpose of
providing support to Seller's customers as envisioned in Section 6.3 Buyer
agrees that Seller may retain such number of copies of the software,
documentation and other materials (excluding hardware) included in the Acquired
Assets as are reasonably necessary to provide such support.
(b) Buyer will provide Seller, for a period of one year from the date
of this Agreement, at no charge, with at least one complete Seller emulation
system, including hardware, software and documentation, for the purpose of
providing support to Seller's customers as envisioned in Section 6.3, and will
provide such additional systems as the parties may agree are reasonably
necessary to carry out the purposes of Section 6.3 (keeping in mind their mutual
goal to encourage customers to accept the Swap Arrangement).
(c) Buyer will provide Seller, for a period of one year from the date
of this Agreement, at no charge, such parts and equipment as Seller may require
in fulfilling its support obligations as envisioned in Section 6.3, provided
that Seller provides such parts and equipment to its customers without charge.
To the extent that Seller sells any such equipment to its customers (e.g., for a
system upgrade or capacity increase), the proceeds of such sale shall be passed
on to Buyer. In addition, any new revenue recovered by Seller subsequent to the
date of this Agreement from the end user as part of the ongoing process of
maintenance and service will be passed on to Buyer.
(d) Upon the termination of all support services by Seller as
envisioned in Section 6.3, Seller shall notify Buyer of such termination and the
license granted in Section 6.4(a) shall automatically terminate. At such time,
Seller shall return all tangible materials licensed or supplied by Buyer under
this Section 6.4 and shall destroy all intangible copies of such materials in
its possession.
6.5 PATENT LICENSE BACK.
(a) For purposes of this Section 6.5, "Transferred Patents" means the
patents issuing from the applications listed in Schedule 1.2 or another
application derived directly or recursively from such applications as a
division, a continuation, a continuation-in-part, or a foreign counter-part of
such applications.
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(b) For purposes of this Section 6.5, "Simulation Software" means a
computer program owned by Seller that operates on a general purpose computer for
simulating or analyzing the behavior of digital circuits and systems, provided
that such software does not perform or control emulation.
(c) Buyer grants Seller a worldwide, non-exclusive, non-transferable
(except as set forth in this Section 6.5), royalty-free right and license
(without right to sublicense except as set forth in this Section 6.5) under the
Transferred Patents to make, use, sell, offer for sale, or import Simulation
Software. Seller may license third parties to use Simulation Software under the
Transferred Patents in the ordinary course of Seller's business. Seller may
transfer this license to a third party in the event that Seller disposes of all
or substantially all of its assets or business related to Simulation Software.
Seller may not otherwise transfer or sublicense the Transferred Patents.
ARTICLE VII
ESCROW; INDEMNIFICATION
7.1 ESCROW FUND. As soon as practicable after the Closing, the Escrow
Amount shall be deposited with The First National Bank of Boston (or other
institution selected by Buyer with the reasonable consent of Seller) as escrow
agent (the "ESCROW AGENT"), such deposit to constitute the Escrow Fund and to be
governed by the terms set forth herein and in the Escrow Agreement attached
hereto as EXHIBIT A. The Escrow Fund shall be available to compensate Buyer
pursuant to the indemnification obligations of Seller set forth in this
Agreement, with respect to Damages (as defined below) arising by reason of
Seller's failure to deliver any of the Acquired Assets. The Escrow Fund shall
act as partial security for Seller's and Sub's indemnification obligations set
forth in this Agreement, but shall not serve as Buyer's exclusive remedy with
respect thereto. The Escrow Fund shall be released upon the later of (i)
June 27, 1997 and (ii) completion of delivery of all Acquired Assets by Seller
to Buyer, as provided in and subject to the terms of the Escrow Agreement.
7.2 INDEMNIFICATION.
(a) Subject to the limitations set forth in this Article VII, Seller
will defend, indemnify and hold harmless Buyer and its respective officers,
directors, agents and employees, and each person, if any, who controls or may
control Buyer within the meaning of the Securities Act (individually, an
"INDEMNIFIED PERSON" and collectively, "INDEMNIFIED PERSONS"), and shall
reimburse Indemnified Persons, for, from and against any and all losses (which
shall include any diminution in value), costs, damages, liabilities and expenses
arising from claims, demands, actions and causes of action, including, without
limitation, reasonable legal fees, (collectively, "DAMAGES") arising out of
(i) any misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by Sub or
Seller in this Agreement, or any exhibit or other schedule to this Agreement, or
(ii) transactions, events, acts or omissions of or by Seller or Sub relating to
the Seller Emulation Business on or before the Closing
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(including without limitation any claim of infringement (i) as a result of the
inaccuracy of the representation set forth in Section 2.12(a) without regard to
the knowledge qualifier and (ii) which relates to actions or events occurring
prior to the date of the Agreement).
(b) Subject to the limitations set forth in this Article VII, Buyer
shall defend, indemnify and hold harmless each Indemnified Person, and shall
reimburse Indemnified Persons, for, from and against all Damages arising out
of any misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants or agreements given or made by Buyer in
this Agreement or any exhibit or other schedule to this Agreement.
(c) Buyer and Seller each acknowledge that such Damages, if any,
would relate to unresolved contingencies existing at the Closing, which if
resolved at the Closing would have led to a reduction in the total purchase
price Buyer would have agreed to issue in connection with the Acquisition.
Accordingly, Seller agrees that at the sole election of Buyer, certain warrants
may become unexercisable and/or be cancelled in accordance with the provisions
of the Buyer's Warrant.
7.3 INDEMNIFICATION PROCEDURE. All claims for indemnification under this
Article VII (individually, a "CLAIM" and collectively, "CLAIMS") shall be
asserted and resolved as follows:
(a) In the event that any Claim for which Seller or Sub, as the case
may be (the "INDEMNIFYING PARTY"), would be liable to indemnify an Indemnified
Person hereunder is asserted which Claim does not involve a Claim being asserted
against or sought to be collected by a third party, the Indemnified Person shall
with reasonable promptness send a Claim Notice (as defined in Section 7.3(b)
below) with respect to such Claim to the Indemnifying Party. If the
Indemnifying Party does not notify the Indemnified Person within 30 days from
the date of receipt of such Claim Notice that the Indemnifying Party disputes
such Claim, the amount of such Claim shall be conclusively deemed a liability of
the Indemnifying Party hereunder. In case the Indemnifying Party shall object
in writing to any Claim made in accordance with this Section 7.3(a), the
Indemnified Person shall have fifteen (15) days to respond in a written
statement to the objection of the Indemnifying Party. If after such fifteen
(15) day period there remains a dispute as to any Claims, the parties shall
attempt in good faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such Claims. If the parties should
so agree, a memorandum setting forth such agreement shall be prepared and signed
by both parties.
(b) In the event that any Claim for which an Indemnifying Party would
be liable to an Indemnified Person hereunder is asserted against an Indemnified
Person by a third party, the Indemnified Person shall with reasonable promptness
notify the Indemnifying Party of such Claim, including a copy of the Claim made
if the Claim was made in writing, specifying the nature of such claim and the
amount or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such Claim) (the "CLAIM
NOTICE"). The Indemnifying Party shall have 30 days from the receipt of the
Claim Notice (the "NOTICE PERIOD") to notify the Indemnified Person (i) whether
or not the Indemnifying Party disputes the Indemnifying Party's liability to the
Indemnified Person hereunder with respect to such Claim and (ii) if the
Indemnifying
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Party does not dispute such liability, whether or not the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend
against such Claim, provided that the Indemnifying Party is hereby authorized
(but not obligated) prior to and during the Notice Period to file any motion,
answer or other pleading and to take any other action which the Indemnifying
Party shall deem necessary or appropriate to protect the Indemnifying Party's
interests. In the event that the Indemnifying Party notifies the Indemnified
Person within the Notice Period that the Indemnifying Party does not dispute the
Indemnifying Party's obligation to indemnify hereunder and desires to defend the
Indemnified Person against such Claim and except as hereinafter provided, the
Indemnifying Party shall have the right to defend by appropriate proceedings,
which proceedings shall be diligently settled or prosecuted by the Indemnifying
Party to a final conclusion; PROVIDED that, unless the Indemnified Person
otherwise consents in writing, which consent shall not be unreasonably withheld,
the Indemnifying Party may not settle any matter (in whole or in part) unless
such settlement includes a complete and unconditional release of the Indemnified
Person. If the Indemnified Person desires to participate in, but not control,
any such defense or settlement the Indemnified Person may do so at the
Indemnified Person's sole cost and expense. If the Indemnifying Party elects
not to defend the Indemnified Person against such Claim, whether by failure of
the Indemnifying Party to give the Indemnified Person timely notice as provided
above or otherwise, then the Indemnified Person, without waiving any rights
against the Indemnifying Party, may settle or defend against any such Claim in
the Indemnified Person's sole discretion and if it is determined that the
Indemnifying Party is responsible therefore under this Article VII, the
Indemnified Person shall be entitled to recover from the Indemnifying Party the
amount of any settlement or judgment and, on an ongoing basis, all indemnifiable
costs and expenses of the Indemnified Person with respect thereto, including
interest from the date such costs and expenses were incurred.
(c) The Indemnified Person's failure to give reasonably prompt notice
to the Indemnifying Party of any actual, threatened or possible claim or demand
which may give rise to a right of indemnification hereunder shall not relieve
the Indemnifying Party of any liability which the Indemnifying Party may have to
the Indemnified Person unless the failure to give such notice materially and
adversely prejudiced the Indemnifying Party.
ARTICLE VIII
CERTAIN TAX MATTERS
Buyer and Seller hereby covenant and agree with respect to certain tax
matters as follows:
8.1 RETURNS; INDEMNIFICATION; LIABILITY FOR TAXES.
(a) Seller shall prepare and file (or cause to be prepared and filed)
on a timely basis all Tax Returns with respect to Sub and its subsidiaries for
all taxable periods ending on or before the Closing Date ("SUB TAX RETURNS") and
shall pay, and shall indemnify and hold Buyer harmless against and from (i) all
Taxes of Sub and its subsidiaries for all taxable years or periods which end on
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or before the Closing Date; (ii) all Taxes for all taxable years or periods of
all members subsidiaries of any affiliated group of which Sub and any of its
subsidiaries is or has been a member prior to the Closing Date; and (iii) with
respect to any taxable period commencing before the Closing Date and ending
after the Closing Date (a "STRADDLE PERIOD") all Taxes of Sub and its
subsidiaries attributable to the portion of the Straddle Period prior to and
including the Closing Date (the "PRE-CLOSING PERIOD"). For purposes of this
Agreement, the portion of any Tax that is attributable to the Pre-Closing Period
shall be (i) in the case of a Tax that is not based on net income, gross income,
premiums or gross receipts, the total amount of such Tax for the period in
question multiplied by a fraction, the numerator of which is the number of days
in the Pre-Closing Period, and the denominator of which is the total number of
days in such Straddle Period, and (ii) in the case of a Tax that is based on any
of net income, gross income, premiums or gross receipts, the Tax that would be
due with respect to the Pre-Closing Period if such Pre-Closing Period were a
separate taxable period, except that exemptions, allowances, deductions or
credits that are calculated on an annual basis (such as the deduction for
depreciation or capital allowances) shall be apportioned on a per them basis.
For purposes hereof, all Taxes which are the subject of this Article VIII
arising from the Stock Purchase hereof, including Taxes resulting from the
Election, shall be deemed to be Taxes attributable to the Pre-Closing Period and
shall be the responsibility of Seller.
(b) Buyer shall prepare and file (or cause to be prepared and filed)
on a timely basis all Tax Returns of Sub relating to periods ending after the
Closing Date and shall pay, and, except as provided in subsection (c) hereof,
shall indemnify and hold Seller harmless against and from (i) all Taxes of Sub
and its subsidiaries for any taxable year or period commencing after the Closing
Date; and (ii) all Taxes of Sub and its subsidiaries for any Straddle Period
other than Taxes attributable to the Pre-Closing Period.
8.2 COOPERATION; REFUNDS AND CREDITS.
(a) All refunds or credits of Taxes for or attributable to taxable
years or periods of Sub and its subsidiaries ending on or before the Closing
Date (or the Pre-Closing Period, in the case of a Straddle Period) shall be for
the account of Seller; all other refunds or credits of Taxes, for or
attributable to Sub and its subsidiaries shall be the account of Buyer.
Following the Closing, Buyer shall cause Sub and its subsidiaries to forward to
Seller any such refunds or credits due Seller pursuant to this section after
receipt or realization thereof by Buyer, and Seller shall forward (or cause to
be forwarded) to Buyer any refunds or credits due to Buyer pursuant to this
section after receipt or realization thereof by Seller, in each case in
accordance with the provisions of Section 8.2(c) below.
(b) If an audit examination of any Tax Return of Seller or its
subsidiaries for any taxable period ending on or before the Closing Date shall
result (by settlement or otherwise) in any adjustment the effect of which is to
increase deductions, losses or tax credits or decrease income, gains, premiums,
revenues or recapture of tax credits ("CHANGES") reflected on a Tax Return of
Buyer, Sub and its subsidiaries for any taxable period ending after the Closing
Date, Seller will notify Buyer and provide it with all necessary information so
that it can reflect on the appropriate Tax
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Return of Buyer any appropriate Changes. If as a result of such Changes, Buyer
or its subsidiaries enjoy a net Tax benefit from an increase in deductions,
losses or tax credits and/or a decrease in income, gains, premiums, revenues or
recapture of tax credits ("BUYER BENEFITS") for taxable periods ending after the
Closing Date, Buyer shall pay to Seller the amount of such Buyer Benefit, as and
when such Buyer Benefits are realized by Buyer in accordance with
Section 8.2(d).
(c) If an audit examination of any Tax Return of Buyer or its
subsidiaries for taxable periods ending after the Closing Date shall result (by
settlement or otherwise) in any Change reflected on a Tax Return of Seller or
its subsidiaries for any taxable periods ending on or before the Closing Date,
Buyer will notify Seller and provide it with all necessary information so that
Seller can reflect any appropriate Changes on its Tax Return. If as a result of
such Changes, Seller or its subsidiaries enjoy a net Tax benefit from an
increase in deductions, losses or tax credits and/or a decrease in the income,
gains, premiums, revenues or recapture of tax credits ("SELLER BENEFITS") for
taxable periods ending on or before the Closing Date, Seller shall pay to Buyer
the amount of such Seller Benefits as and when such Seller Benefits are realized
by Seller, in accordance with Section 8.2(d).
(d) Any payments of refunds or credits for Taxes, or any payment of
Buyer Benefits or Seller Benefits, that are required to be paid under this
Agreement shall be made within 10 business days of the receipt of any refund or
30 Business Days of the realization of any tax benefit, as the case may be. Any
payments not made within such time period, shall be subject to an interest
charge of 12% per annum.
8.3 TERMINATION OF TAX SHARING AGREEMENTS. Seller hereby agrees and
covenants that there are and will be obligations of or to Sub or its
subsidiaries pursuant to any tax sharing agreement or any similar arrangement in
effect at anytime before or on the Closing Date, and any further obligations
that might otherwise have existed thereunder shall be extinguished as of the
Closing Date.
8.4 CONDUCT OF AUDITS AND OTHER PROCEDURAL MATTERS.
(a) Each party shall, at its own expense, control any audit or
examination by any Taxing Authority, and have the right to initiate any claim
for refund or amended return, and contest, resolve and defend against any
assessment, notice of deficiency or other adjustment or proposed adjustment of
Taxes ("PROCEEDINGS") for any taxable period for which that party is charged
with payment or indemnification responsibility under this Agreement. Each party
shall promptly forward to the other in accordance with Section 9.2 all written
notifications and other written communications, including if available the
original envelope showing any postmark, from any taxing authority received by
such party or its affiliates relating to any liability for Taxes for any taxable
period for which such other party or any of its affiliates is charged with
payment or indemnification responsibility under this Agreement and each
indemnifying party shall promptly notify, and consult with, each indemnified
party as to any action it proposes to take with respect to any liability for
Taxes for which it is required to indemnify another party and shall not enter
into any closing agreement or final settlement with any Taxing Authority with
respect to any such liability without the written
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consent of the indemnified parties, which consent shall not be unreasonably
withheld. In the case of any Proceedings relating to any Straddle Period, Buyer
shall control such Proceedings and shall consult in good faith with Seller as to
the conduct of such Proceedings. Seller shall reimburse Buyer for such portion
of the costs, including legal costs, of conducting such Proceedings as is
represented by the portion of the Tax with respect to such Straddle Period for
which Seller is liable pursuant to this Agreement. Each party shall, at the
expense of the requesting party, execute or cause to be executed any powers of
attorney or other documents reasonably requested by such requesting party to
enable it to take any and all actions such party reasonably requests with
respect to any Proceedings which the requesting party controls. The failure by
a party to provide timely notice under this subsection shall relieve the other
party from its obligations under this Article VIII with respect to the subject
matter of any notification not timely forwarded, to the extent the other party
has suffered a loss or other economic detriment because of such failure to
provide notification in a timely fashion.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL AT CLOSING. The representations, warranties and agreements
set forth in this Agreement shall survive the Closing, except (a) as
specifically provided in Article VI, and (b) the representations, warranties
and/or agreements set forth in Article II, Article III, Article IV and
Article VII shall survive until the latest of (i) the second anniversary of the
Closing; (ii) with respect to Section 2.13 (Taxes) the expiration of all
applicable statutes of limitations; and (iii) final resolution of any pending
Claim under Article VII (but only as to such pending Claim or Claims).
9.2 SPECIFIC PERFORMANCE. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement (including the
Synthesis Database Licensing Agreement) were not performed in accordance with
their specific terms or were otherwise breached. Moreover, each party's
obligation under this Agreement (including the Synthesis Database Licensing
Agreement) is unique. If any party should default in its obligations under this
Agreement (including the Synthesis Database Licensing Agreement), the parties
each acknowledge that it would be extremely impracticable to measure the
resulting damages. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement (including
the Synthesis Database Licensing Agreement) and to enforce specifically the
terms and provisions hereof in any court of the U.S. or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled in law or in equity.
9.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
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(a) if to Seller to:
Synopsys, Inc.
700 E. Middlefield Road
Mountain View, California 94043
Attention: Paul Lippe, Sr. Vice President Business & Market Development
Facsimile No.: (415) 694-4087
Telephone No.: (415) 962-5000
with a copy to:
Steve Shevick, Esq.
700 E. Middlefield Road
Mountain View, California 94043
Facsimile No.: (415) 694-4087
Telephone No.: (415) 962-5000
(b) if to Sub, to:
Arkos Design, Inc.
700 E. Middlefield Road
Mountain View, California 94043
Attention: President
Facsimile No.: (415) 694-4087
Telephone No.: (415) 962-5000
(c) if to Buyer, to:
Quickturn Design Systems, Inc.
440 Clyde Avenue
Mountain View, CA 94043
Attention: President
Facsimile No.: (415) 967-3189
Telephone No.: (415) 967-3300
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Larry W. Sonsini, Esq.
Facsimile No.: (415) 493-6811
Telephone No.: (415) 493-9300
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9.4 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "INCLUDE," "INCLUDES" and "INCLUDING" when used
herein shall be deemed in each case to be followed by the words "WITHOUT
LIMITATION." The phrase "MADE AVAILABLE" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "THE DATE OF THIS
AGREEMENT", "THE DATE HEREOF," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to June 14, 1997. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
9.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.6 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits and the
Schedules, (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided.
9.7 SEVERABILITY. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.8 REMEDIES CUMULATIVE. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive, of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
9.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws that might otherwise govern under applicable principles
of conflicts of law. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any court located within the State of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized
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by the laws of the State of California for such persons and waives and covenants
not to assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
9.10 RULES OF CONSTRUCTION. The parties agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
9.11 EXPENSES. Whether or not the Acquisition is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, the fees and
expenses of its advisers, accountants and legal counsel) shall be paid by the
party incurring such expense.
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IN WITNESS WHEREOF, Seller, Sub and Buyer have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized,
all as of the date first written above.
SYNOPSYS, INC.
By: /s/ AART J. DE GEUS
------------------------------------------
Name: Aart J. De Geus
----------------------------------------
Title: President and Chief Executive Officer
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ARKOS DESIGN, INC.
By: /s/ DEAN WOHLWEND
-----------------------------------------
Name: Dean Wohlwend
----------------------------------------
Title: Chief Financial Officer
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QUICKTURN DESIGN SYSTEMS, INC.
By: /s/ KEITH LOBO
------------------------------------------
Name: Keith Lobo
----------------------------------------
Title: President
---------------------------------------
