<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SUMMIT DESIGN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 7372
(STATE OR OTHER (PRIMARY STANDARD 93-1137888
JURISDICTION INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE IDENTIFICATION NO.)
NUMBER)
9305 S.W. GEMINI DRIVE
BEAVERTON, OREGON 97008
(503) 643-9281
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
LARRY J. GERHARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
9305 S.W. GEMINI DRIVE
BEAVERTON, OREGON 97008
(503) 643-9281
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
ALAN K. AUSTIN, ESQ. THOMAS W. FURLONG, ESQ.
ELIZABETH R. FLINT, ESQ. DAVID A. HUBB, ESQ.
STEVEN V. BERNARD, ESQ. PAMELA PASTI, ESQ.
SUSAN L. STAPLETON, ESQ. GRAY CARY WARE & FREIDENRICH
WILSON SONSINI GOODRICH & ROSATI A PROFESSIONAL CORPORATION
PROFESSIONAL CORPORATION 400 HAMILTON AVENUE
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94301
PALO ALTO, CALIFORNIA 94304-1050 (415) 328-6561
(415) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO TO BE PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share......... 4,025,000 shares $10.00 $40,250,000 $13,880
</TABLE>
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(1) Includes 525,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) promulgated under the Securities
Act of 1933, as amended.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUMMIT DESIGN, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION OR CAPTION IN PROSPECTUS
------------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Forepart of Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page; Page 3
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges................. Prospectus Summary; Risk Factors
4. Use of Proceeds............................... Summary; Use of Proceeds
5. Determination of Offering Price............... Outside Front Cover Page; Underwriting
6. Dilution...................................... Dilution
7. Selling Security Holders...................... Principal and Selling Stockholders
8. Plan of Distribution.......................... Outside and Inside Front Cover Pages;
Underwriting
9. Description of Securities to be Registered.... Description of Capital Stock
10. Interests of Named Experts and Counsel........ Legal Matters
11. Information with Respect to the Registrant.... Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Use
of Proceeds; Dividend Policy;
Capitalization; Dilution; Selected
Consolidated Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management,
Certain Transactions; Principal and
Selling Stockholders; Description of
Capital Stock; Experts; Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFERTO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 20, 1996
[LOGO OF SUMMIT DESIGN APPEARS HERE]
3,500,000 SHARES
COMMON STOCK
Of the 3,500,000 shares of Common Stock offered hereby, 1,750,000 shares are
being sold by Summit Design, Inc. ("Summit" or the "Company") and 1,750,000
shares are being sold by the Selling Stockholders. See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders. Prior to this offering, there has been
no public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price will be between $8.00 and $10.00 per
share. See "Underwriting" for information relating to the method of determining
the initial public offering price.
----------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 6.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE DISCOUNTS AND PROCEEDS TO SELLING
TO PUBLIC COMMISSIONS COMPANY (1) STOCKHOLDERS (2)
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<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
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Total (2)....................... $ $ $ $
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</TABLE>
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(1) Before deducting expenses payable by the Company, estimated at $950,000.
(2) Certain Selling Stockholders have granted the Underwriters a 30-day option
to purchase up to an additional 525,000 shares of Common Stock solely to
cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholders will be $ , $ and
$ , respectively.
----------
The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens
& Company"), San Francisco, California, on or about , 1996.
ROBERTSON, STEPHENS & COMPANY NEEDHAM & COMPANY, INC.
The date of this Prospectus is , 1996
<PAGE>
SUMMIT DESIGN'S SOFTWARE PRODUCTS enable organizations to more easily realize
the benefits of high level design automation by simplifying and automating IC
design entry and verification and by linking manufacturing test to design. These
products assist organizations in meeting market demands for rapid time to
market, increased product functionality and lower product cost.
THE CONVENTIONAL HLDA TOP-DOWN THE SUMMIT DESIGN PROCESS
DESIGN PROCESS
(Graphic showing steps (Graphic showing steps
in the conventional HLDA in the top-down design
top-down design process) process using Summit's
software products)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
BACKGROUND OF LINES OF HDL CODE
Most HLDA design and test
program generation tools re-
quire IC developers to work
with large amounts of textual
data. As a result, the devel-
opment and test process is
often error prone and time
consuming and yields results
that are difficult to commu-
nicate.
BACKGROUND OF LINES OF HDL CODE
<PAGE>
Summit's SLDA products allow engineers to graphically design ICs, thereby
eliminating the need to manually create designs in a textual HDL code. This
offers several benefits to
design engineers
including easier
design entry,
verification and
reuse, and faster,
more complete
design debugging.
Screen shot of an
SLDA state diagram
Summit's TDS
products can reduce
test program
development costs
and can improve the Screen shot of a TDS flow chart
quality of
manufacturing test
programs by
providing a
graphical
environment to view, manage and manipulate the vast amounts of test based
data. Summit's Design to Test products provide graphical simulation test data
creation, graphical simulation results analysis and automatic manufacturing
test program generation.
<PAGE>
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Consolidated Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 30
Management............................................................... 45
Certain Transactions..................................................... 54
Principal and Selling Stockholders....................................... 57
Description of Capital Stock............................................. 60
Shares Eligible for Future Sale.......................................... 62
Underwriting............................................................. 64
Legal Matters............................................................ 65
Experts.................................................................. 66
Additional Information................................................... 66
Index to Financial Statements............................................ F-1
</TABLE>
----------------
The Company intends to furnish to its stockholders annual reports containing
audited consolidated financial statements examined by its independent public
accountants and quarterly reports containing unaudited financial information
for each of the first three quarters of each fiscal year.
Summit Design, the Summit logo, Visual HDL, Visual HDL for VHDL, TDS, Visual
Testbench and Wavebridge are trademarks of the Company. This Prospectus also
includes trademarks of companies other than the Company.
The Company was incorporated in the State of Delaware on December 29, 1993.
The Company's principal executive offices are located at 9305 S.W. Gemini
Drive, Beaverton, Oregon 97008 and its telephone number is (503) 643-9281.
Unless the context otherwise requires, the terms "Company" and "Summit" as used
in this Prospectus refer to (i) Summit Design, Inc. and its wholly-owned
subsidiaries following the acquisition of SEE Technologies Software Environment
for Engineers Ltd. ("SEE Technologies") and the reorganization of Test Systems
Strategies, Inc. ("TSSI") as a wholly-owned subsidiary of Summit (collectively,
the "Reorganization") and (ii) TSSI prior to the Reorganization. SEE
Technologies changed its name to Summit Design (EDA) Ltd. in September 1994.
3
<PAGE>
SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
Prospectus. The following summary is qualified in its entirety by the more
detailed information, including "Risk Factors," and the consolidated financial
statements and notes thereto, appearing elsewhere in this Prospectus.
THE COMPANY
Summit Design, Inc. ("Summit" or the "Company") is a leading provider of
graphical design entry and verification software tools and design to test
software tools. The Company's products assist integrated circuit ("IC") system,
design and test engineers in meeting the market demands for rapid time to
market, increased product functionality and lower product cost. Summit's
graphical Systems Level Design Automation ("SLDA") products enable IC systems
and design engineers to create and verify IC designs using familiar graphical
paradigms such as block diagrams, state machines, flow charts or truth tables
rather than the less intuitive textual hardware description language ("HDL")
code required by synthesis and simulation tools. The Company's SLDA products
automatically generate optimized HDL descriptions from graphical designs,
eliminating time consuming and error prone manual entry of HDL code. The
Company's Design to Test products provide graphical simulation test data
creation, graphical simulation results analysis and automatic manufacturing
test program generation.
Faced with a scarcity of qualified design and test engineers and the need to
improve time to market given shorter product lifecycles, corporations with IC
design requirements need to increase design productivity to keep pace with the
increasing complexity of IC designs and the growth in the number of new IC
designs starts. Electronic design automation ("EDA") software tools have
enabled engineers to accelerate IC development schedules and create more
complex chips. However, IC development productivity has continued to lag
advances in fabrication technology in part because these tools require circuits
to be described in a textual HDL. IC design engineers, who typically create a
design using hand-drawn graphical paradigms, must manually translate their
hand-drawn designs into HDL code. This process is time-consuming and error
prone, and requires the engineer to master a complex HDL programming language.
The complexity of the textual HDL code also inhibits the ability of design
teams to communicate the functional intent of the code and to reuse the code or
retarget the design in future projects. In addition, most manufacturing test
program generation software tools require IC test engineers to work with
complex textual test programs and related data and to debug these programs on
the actual manufacturing test equipment used to test the ICs, consuming
valuable equipment process time.
Summit's SLDA products allow engineers to graphically design and verify ICs
using familiar graphical paradigms and automatically produce a synthesis-ready
HDL design, thus eliminating manual textual coding in an HDL. Graphical IC
designs are more easily debugged and communicated among IC design teams,
facilitate review by engineering management and can be more easily modified and
reused in future developments. These products optimize and can automatically
re-target the design output for nearly all of the EDA industry's standard
synthesis and simulation tools. The Company's Design to Test tools allow design
and test engineers to graphically develop simulation test pattern and timing
data, analyze the complex and voluminous simulation results and automatically
generate manufacturing test programs. These graphical tools allow the engineer
to check the IC design for manufacturing testability prior to release from the
design cycle, minimizing the need to re-design the IC to improve testability.
Summit's Visual Testbench product, released in the fourth quarter of 1995,
integrates the design and test processes and allows the design engineer and
test engineer to cooperatively develop simulation and manufacturing test
programs.
The Company employs direct sales, distributors and telesales to target
individual customers and product market segments. The Company's end-user
customers include companies in a wide range of industries, including
semiconductor devices, semiconductor test equipment, telecommunications,
computer/peripherals, consumer electronics and aerospace/defense. The Company
has installed more than 1,100 seats of its SLDA tools in more than 125
companies, of which more than 100 companies have entered into support
contracts. In addition, the Company has more than 250 active installations of
its Design to Test products.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the
Company........................ 1,750,000 shares
Common Stock Offered by the
Selling Stockholders........... 1,750,000 shares
Common Stock Outstanding after
the Offering................... 12,790,435 shares (1)
Use of Proceeds................ Working capital and general corporate purposes
and to repay certain outstanding indebtedness.
See "Use of Proceeds."
Proposed Nasdaq National Market
symbol......................... SMMT
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (2):
Revenue........................... $ 7,240 $12,982 $14,070 $ 2,742 $ 4,607
Income (loss) from operations..... (1,503) (1,544) (2,576) (1,200) 305
Net income (loss)................. (1,622) (2,046) (3,151) (1,325) 78
Pro forma net income (loss) per
share (3)........................ $ (0.15) $ (0.18) $ (0.28) $ (0.12) $ 0.01
Pro forma number of shares used in
per share calculation (3)........ 11,048 11,348 11,378 11,364 11,414
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED (4)
------ ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $1,304 $14,334
Working capital......................................... (302) 13,102
Total assets............................................ 8,367 21,397
Long-term obligations, less current portion............. 1,085 792
Total stockholders' equity.............................. 689 14,386
</TABLE>
- --------
(1) Based on the number of shares outstanding as of March 31, 1996. Excludes
1,107,252 shares issuable upon exercise of options outstanding as of March
31, 1996 at a weighted average exercise price of $1.34 per share. See
"Capitalization."
(2) The results of SEE Technologies are included in the Consolidated Financial
Statements of the Company commencing January 1, 1994.
(3) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing pro forma net income
(loss) per share.
(4) Adjusted to give effect to the sale of 1,750,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price
of $9.00 per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."
Except as otherwise indicated, all share information in this Prospectus
assumes the Underwriters' over-allotment option is not exercised, and is
adjusted to reflect the conversion of all outstanding shares of Preferred Stock
into an aggregate of 9,103,346 shares of Common Stock upon the closing of this
offering.
5
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus. In addition to the other information in this Prospectus,
the following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the Common Stock offered by this
Prospectus.
HISTORY OF OPERATING LOSSES; FLUCTUATIONS IN QUARTERLY RESULTS
While the Company has generated net income in each of the two quarters in
the period ended March 31, 1996, it has not shown net income on an annual
basis since 1991. There can be no assurance that the Company will be
profitable in the future. In addition, the Company has experienced significant
quarterly fluctuations in operating results and cash flows and it is likely
that these fluctuations will continue in future periods. These fluctuations
have been, and may in the future be, caused by a number of factors, including
the rate of acceptance of new products, corporate acquisitions and
consolidations, product, customer and channel mix, the size and timing of
orders, lengthy sales cycles, the timing of new product announcements and
introductions by the Company and its competitors, seasonal factors,
rescheduling or cancellation of customer orders, the Company's ability to
continue to develop and introduce new products and product enhancements on a
timely basis, the level of competition, purchasing and payment patterns,
pricing policies of the Company and its competitors, product quality issues,
currency fluctuations and general economic conditions.
The Company has generally recognized a substantial portion of its revenue in
the last month of each quarter, with this revenue concentrated in the last
weeks of the quarter. Any significant deferral of purchases of the Company's
products could have a material adverse effect on the Company's business,
financial condition and results of operations in any particular quarter, and
to the extent that significant sales occur earlier than expected, operating
results for subsequent quarters may be adversely affected. The Company's
revenue is difficult to forecast for several reasons. The market for certain
of the Company's software products is evolving. The Company's sales cycle is
typically six to nine months and varies substantially from customer to
customer. The Company operates with little product backlog because its
products are typically shipped shortly after orders are received. In addition,
a significant portion of the Company's sales are made through indirect
channels and can be harder to predict. The Company establishes its expenditure
levels for product development, sales and marketing and other operating
activities based primarily on its expectations as to future revenue. As a
result, if revenue in any quarter falls below expectations, expenditure levels
could be disproportionately high as a percentage of revenue, and the Company's
operating results for that quarter would be adversely affected. Based upon the
factors described above, the Company believes that its quarterly revenue,
expenses and operating results are likely to vary significantly in the future,
that period-to-period comparisons of its results of operations are not
necessarily meaningful and that, as a result, such comparisons should not be
relied upon as indications of the Company's future performance. Moreover,
although the Company's revenue has increased in recent periods, there can be
no assurance that the Company's revenue will grow in future periods or that
the Company will remain profitable on a quarterly or annual basis. Due to the
foregoing or other factors, it is likely that the Company's results of
operations may be below investors' and market analysts' expectations in some
future quarters, which could have a severe adverse effect on the market price
of the Company's Common Stock. See "Selected Consolidated Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview" and "--Quarterly Results."
PRODUCT CONCENTRATION; UNCERTAINTY OF MARKET ACCEPTANCE OF SLDA AND DESIGN TO
TEST PRODUCTS
The Company's revenue is predominantly derived from two product lines,
Visual HDL, which includes Visual HDL for VHDL and Visual HDL for Verilog, and
TDS. The Company believes that these products will continue to account for a
substantial portion of its revenue in the future. As a result, factors
adversely affecting sales of these products, including increased competition,
inability to successfully introduce enhanced
6
<PAGE>
or improved versions of these products, product quality issues and
technological change, could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's future success depends primarily upon the market acceptance of
its existing and future SLDA products. The Company commercially shipped its
first SLDA product, Visual HDL for VHDL, in the first quarter of 1994. For the
three months ended March 31, 1996 and the years ended December 31, 1995 and
1994, revenue from SLDA products and related maintenance contracts represented
59.8%, 50.4% and 34.8%, respectively, of the Company's total revenue. The
Company's SLDA products incorporate certain unique design methodologies and
thus represent a departure from industry standards for design entry and
verification. The Company believes that broad market acceptance of its SLDA
products will depend on several factors, including the ability to
significantly enhance design productivity, ease of use, interoperability with
existing EDA tools, price and the customer's assessment of the Company's
financial resources and its technical, managerial, service and support
expertise. The Company also depends on its distributors to assist the Company
in gaining market acceptance of its products. There can be no assurance that
sufficient priority will be given by the Company's distributors to marketing
the Company's products or whether such distributors will continue to offer the
Company's products. There can be no assurance that the Company's SLDA products
will achieve broad market acceptance. A decline in the demand for, or the
failure to achieve broad market acceptance of, the Company's SLDA products
will have a material adverse effect on the Company's business, financial
condition and results of operations.
Although demand for SLDA products has increased in recent years, the market
for SLDA products is still emerging and there can be no assurance that it will
continue to grow or that, even if the market does grow, businesses will
continue to purchase the Company's SLDA products. If the market for SLDA
products fails to grow or grows more slowly than the Company currently
anticipates, the Company's business, financial condition and results of
operations would be materially adversely affected.
Traditionally, EDA customers have been risk averse in accepting new design
methodologies. Because many of Summit's tools embody new design methodologies,
this risk aversion on the part of potential customers presents an ongoing
marketing and sales challenge to the Company and makes the introduction and
acceptance of new products unpredictable. The Company's newest Design to Test
product, Visual Testbench, introduced in the fourth quarter of 1995, provides
a new methodology and requires a change in the traditional design flow for
creating IC test programs. The Company anticipates a lengthy period of test
marketing for the Visual Testbench product. Accordingly, the Company cannot
predict the extent, if any, to which it will realize revenue from Visual
Testbench. The failure of Visual Testbench or any other future Design to Test
product to achieve market acceptance will have a material adverse effect on
the Company's business, financial conditions and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--Products" and "--Marketing and Sales."
COMPETITION
The EDA industry is highly competitive and the Company expects competition
to increase as other EDA companies introduce SLDA and Design to Test products.
The Company faces different competitive dynamics in the markets for its SLDA
and Design to Test products. In the SLDA market, the Company principally
competes with Mentor Graphics Corporation ("Mentor Graphics") and a number of
smaller firms. Indirectly, the Company also competes with other firms that
offer alternatives to SLDA and could potentially offer more directly
competitive products in the future. Certain of these companies have
significantly greater financial, technical and marketing resources and larger
installed customer bases than the Company. Some of the Company's current and
future competitors offer a more complete range of EDA products and may
distribute products that directly compete with the Company's SLDA products by
bundling such products with their core product line. In addition, the
Company's products perform a variety of functions, certain of which are, and
in the future may be, offered as separate products or discrete point solutions
by the Company's existing and future competitors. For example, certain
companies currently offer design entry products without simulators.
7
<PAGE>
There can be no assurance that such competition will not cause the Company to
offer point solutions instead of, or in addition to, the Company's current
software products. Such point solutions would be priced lower than the
Company's current product offerings and could cause the Company's average
selling prices to decrease, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In the
Design to Test market, the Company competes primarily with the internal design
groups of its existing and potential customers, many of which to date have
designed and developed customized Design to Test tools for their particular
needs, as well as smaller emerging companies.
The EDA industry has experienced significant consolidation in recent years
and the acquisition of one of the Company's competitors by a larger, more
established EDA vendor could create a more significant competitor. The Company
competes on the basis of certain factors including product capabilities,
product performance, price, support of industry standards, ease of use, first
to market and customer technical support and service. The Company believes
that it competes favorably overall with respect to these factors, but there
can be no assurance that the Company will be able to compete successfully
against current and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on its business, financial
condition and results of operations. There can be no assurance that the
Company's current and future competitors will not be able to develop products
comparable or superior to those developed by the Company or to adapt more
quickly than the Company to new technologies, evolving industry trends or
customer requirements. Increased competition could result in price reductions,
reduced margins and loss of market share, all of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Competition."
DEPENDENCE ON ELECTRONICS INDUSTRY MARKET
Because the electronics industry is characterized by rapid technological
change, short product life cycles, fluctuations in manufacturing capacity and
pricing and margin pressures, certain segments, including the computer,
semiconductor, semiconductor test equipment and telecommunications industries,
have experienced sudden and unexpected economic downturns. During these
periods, capital spending is commonly curtailed and the number of design
projects often decreases. Because the Company's sales are dependent upon
capital spending trends and new design projects, negative factors affecting
the electronics industry could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's future
operating results may reflect substantial fluctuations from period to period
as a consequence of such industry patterns, general economic conditions
affecting the timing of orders from customers and other factors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Background."
DEPENDENCE ON THIRD PARTIES FOR PRODUCT INTEROPERABILITY
Because the Company's products must interoperate with EDA products of other
companies, particularly simulation and synthesis products, the Company must
have timely access to third party software to perform development and testing
of its products. Although the Company has established relationships with a
variety of EDA vendors to gain early access to new product information, these
relationships may be terminated by either party with limited notice. In
addition, such relationships are with companies that are current or potential
future competitors of the Company, including Synopsys, Inc. ("Synopsys"),
Mentor Graphics and Cadence Design Systems ("Cadence"). For example, the
Company's Visual HDL for Verilog product is currently designed to work
exclusively with the Verilog XL simulator product sold by Cadence. If any of
these relationships were terminated and the Company was unable to obtain in a
timely manner information regarding modifications of third party products
necessary for modifying its software products to interoperate with these third
party products, the Company could experience a significant increase in
development costs, the development process would take longer, product
introductions would be delayed and the Company's business, financial condition
and results of operations could be materially adversely affected. See
"Business--Product Development."
8
<PAGE>
NEW PRODUCTS AND TECHNOLOGICAL CHANGE; EVOLVING INDUSTRY STANDARDS
The EDA industry is characterized by extremely rapid technological change,
frequent new product introductions and evolving industry standards. The
introduction of products embodying new technologies and the emergence of new
industry standards can render existing products obsolete and unmarketable. In
addition, customers in the EDA industry require software products that allow
them to reduce time to market, differentiate their products, improve their
engineering productivity and reduce their design errors. The Company's future
success will depend upon its ability to enhance its current products, develop
and introduce new products that keep pace with technological developments and
emerging industry standards and address the increasingly sophisticated needs
of its customers. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new products
that respond to technological change or emerging industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these products, or that
its new products will adequately meet the requirements of the marketplace and
achieve market acceptance. The Company has announced that it plans to release
new versions of its products in the second half of 1996. If the Company is
unable, for technological or other reasons, to develop and introduce products
in a timely manner in response to changing market conditions, industry
standards or other customer requirements, particularly if such product
releases have been pre-announced, the Company's business, financial condition
and results of operations will be materially adversely affected.
The Company's Design to Test products employ the Company's WGL format. The
Company permits others to use this format without charge, and the Company
believes that it has been widely adopted in the industry. An industry group in
which the Company currently participates is formulating a new format, STIL,
that it plans to present as a new industry standard. If this standard is
adopted commercially, the Company would be required to provide products that
operate with the STIL format. Development of such products would take
significant effort and expense. Moreover, any delay in the availability of
such products could materially adversely affect the Company's business,
financial condition and results of operations.
Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycles. The
Company has in the past discovered software errors in certain of its products
and has experienced delays in shipment of products during the period required
to correct these errors. There can be no assurance that, despite testing by
the Company and by current and potential customers, errors will not be found,
resulting in loss of, or delay in, market acceptance and sales, diversion of
development resources, injury to the Company's reputation or increased service
and warranty costs, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Products" and "--Product Development."
DEPENDENCE ON DISTRIBUTORS
The Company relies on distributors for licensing and support of its products
outside of North America. Approximately 58.4% and 42.0% of the Company's
revenue for the three months ended March 31, 1996 and the year ended December
31, 1995, respectively, were attributable to sales made through distributors.
The Company has also entered into a joint venture with Anam S&T Co., Ltd.
("Anam"), effective April 1, 1996, pursuant to which the joint venture
corporation (Summit Design Asia, Ltd. ("Summit Asia")) was granted exclusive
rights to manufacture, sell, distribute and support all of Summit's products
in the Asia-Pacific region, excluding Japan. Prior to the joint venture, Anam
had acted as an independent distributor of the Company's products. There can
be no assurance that this joint venture will be effective in maintaining or
increasing sales relative to the levels experienced prior to the joint
venture. During the fourth quarter of 1995, the Company entered into an
exclusive distribution agreement with ATE Services Company, Ltd. ("ATE")
pursuant to which ATE was granted exclusive rights to sell, distribute and
support all of Summit's Design to Test products within Japan until October
1998, subject to the Company's ability to terminate the relationship if ATE
fails to meet quarterly sales objectives. The agreement may also be terminated
by either party for breach. In addition, in the first quarter of 1996, the
Company entered into a three-year, exclusive distribution agreement for its
9
<PAGE>
SLDA products in Japan with Seiko Instruments, Inc. ("Seiko"). In the event
Seiko fails to meet specified quotas for two or more quarterly periods,
exclusivity can be terminated by Summit, subject to Seiko's right to pay a
specified fee to maintain exclusivity. The agreement is renewable for
successive five-year terms by mutual agreement of the Company and Seiko and is
terminable by either party for breach. The Company also has independent
distributors in Europe and is dependent on the continued viability and
financial stability of its distributors. Since the Company's products are used
by skilled design engineers, distributors must possess sufficient technical,
marketing and sales resources and must devote these resources to a lengthy
sales cycle, customer training and product service and support. Only a limited
number of distributors possess these resources. In addition, the Company's
distributors generally offer products of several different companies. There
can be no assurance that the Company's current distributors will continue to
market or service and support the Company's products effectively, that any
distributor will continue to sell the Company's products or that the
distributors will not devote greater resources to products of other companies.
The loss of, or a significant reduction in, revenue from the Company's
distributors could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business--
Marketing and Sales."
INTERNATIONAL SALES AND OPERATIONS
Approximately 60.9% and 52.2% of the Company's revenue for the three months
ended March 31, 1996 and the year ended December 31, 1995, respectively, were
attributable to sales made outside North America. The Company expects that
international revenue will continue to represent a significant portion of its
total revenue. The Company's international revenue is currently denominated in
U.S. dollars. As a result, increases in the value of the U.S. dollar relative
to foreign currencies could make the Company's products more expensive and,
therefore, potentially less competitive in those markets. The Company pays the
expenses of its international operations in local currencies and does not
engage in hedging transactions with respect to such obligations. International
sales and operations are subject to numerous risks, including tariff
regulations and other trade barriers, requirements for licenses, particularly
with respect to the export of certain technologies, collectability of accounts
receivable, changes in regulatory requirements, difficulties in staffing and
managing foreign operations and extended payment terms. There can be no
assurance that such factors will not have a material adverse effect on the
Company's future international sales and operations and, consequently, on the
Company's business, financial condition and results of operations.
In order to successfully expand international sales, the Company may need to
establish additional foreign operations, hire additional personnel and recruit
additional international distributors. This will require significant
management attention and financial resources and could adversely affect the
Company's operating margins. In addition, to the extent that the Company is
unable to effect these additions in a timely manner, the Company's growth, if
any, in international sales will be limited. There can be no assurance that
the Company will be able to maintain or increase international sales of the
Company's products, and failure to do so could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Marketing and Sales."
OPERATIONS IN ISRAEL
The Company's research and development operations related to its SLDA
products are located in Israel and may be affected by economic, political and
military conditions in that country. Accordingly, the Company's business,
financial condition and results of operations could be materially adversely
affected if hostilities involving Israel should occur. This risk is heightened
due to the restrictions on the Company's ability to manufacture or transfer
outside of Israel any technology developed under research and development
grants from the government of Israel as described in "--Israeli Research,
Development and Marketing Grants." In addition, while all of the Company's
sales are denominated in U.S. dollars, many of the Company's expenses in
Israel are paid in Israeli currency, thereby subjecting the Company to foreign
currency fluctuations and to
10
<PAGE>
economic pressures resulting from Israel's generally high rate of inflation.
The Company's primary expense which is paid in Israeli currency is employee
salaries for research and development activities. As a result, an increase in
the value of Israeli currency in comparison to the U.S. dollar could increase
the cost of research and development expenses and general and administrative
expenses. There can be no assurance that currency fluctuations, changes in the
rate of inflation in Israel or any of the other aforementioned factors will
not have a material adverse effect on the Company's business, financial
condition or results of operations. In addition, coordination with and
management of the Israeli operations requires the Company to address
differences in culture, regulations and time zones. Failure to successfully
address these differences could be disruptive to the Company's operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Operations in Israel."
The Company's Israeli production facility has been granted the status of an
"Approved Enterprise" under the Israeli Investment Law for the Encouragement
of Capital Investments, 1959 (the "Investment Law"). Taxable income of a
company derived from an "Approved Enterprise" is eligible for certain tax
benefits, including significant income tax rate reductions for up to seven
years following the first year in which the company has Israeli taxable income
(after using any available net operating losses). The tax benefits derived
from a certificate of approval for an "Approved Enterprise" relate only to
taxable income attributable to such "Approved Enterprise" and are conditioned
upon fulfillment of the conditions stipulated by the Investment Law, the
regulations promulgated thereunder and the criteria set forth in the
certificate of approval. In the event of a failure by the Company to comply
with these conditions, the tax benefits could be canceled, in whole or in
part, and the Company would be required to refund the amount of the canceled
benefits, adjusted for inflation and interest. There can be no assurance that
the Company's Israeli production facility will continue to operate or qualify
as an "Approved Enterprise" or that the benefits under the "Approved
Enterprise" regulations will continue, or be applicable, in the future. The
loss of, or any material decrease in, these income tax benefits could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effective Corporate Tax Rates" and
"Business--Operations in Israel."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the continued service
of its key technical and management personnel and its ability to continue to
attract and retain highly-skilled technical, sales and marketing and
management personnel. The Company has entered into employment agreements with
certain of its executive officers, however, such agreements do not guarantee
the services of these employees and do not contain noncompetition provisions.
Competition for personnel in the software industry in general, and the EDA
industry in particular, is intense, and the Company has at times in the past
experienced difficulty in recruiting qualified personnel. There can be no
assurance that the Company will retain its key personnel or that it will be
successful in attracting and retaining other qualified technical, sales and
marketing and management personnel in the future. The loss of any key
employees or the inability to attract and retain additional qualified
personnel may have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not carry "key
person" life insurance on any of its key personnel. Additions of new personnel
and departures of existing personnel, particularly in key positions, can be
disruptive and can result in departures of additional personnel, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management" and "Business--Employees."
ISRAELI RESEARCH, DEVELOPMENT AND MARKETING GRANTS
Summit's Israeli subsidiary has obtained research and development grants
from the Office of the Chief Scientist (the "Chief Scientist") in the Israeli
Ministry of Industry and Trade of approximately $232,000 and $608,000 in 1993
and 1995, respectively. The Company's Visual HDL for VHDL product is currently
based on technology developed with funding from such grants. As of March 31,
1996, the Company was obligated
11
<PAGE>
to pay back approximately $232,000 and $608,000 for the 1993 and 1995 grants,
respectively. The terms of the grants prohibit the manufacture of products
developed under these grants outside of Israel and the transfer of the
technology developed pursuant to these grants to any person, without the prior
written consent of the Chief Scientist. If the Company is unable to obtain the
consent of the government of Israel, the Company may be unable to take
advantage of strategic manufacturing and other opportunities outside of
Israel. Although the Company is eligible to apply for additional grants from
the Chief Scientist, it has no present plans to do so. The Company also
received a Marketing Fund Grant from the Israeli Ministry of Industry and
Trade for an aggregate of $326,000. The grant must be repaid at the rate of 3%
to 5% of the increase in exports over the 1993 export level of all Israeli
products, until repaid. As of March 31, 1996, approximately $298,000 was
outstanding under the grant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business--Product
Development" and "--Operations in Israel" and Note 7 of Notes to Consolidated
Financial Statements.
LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company's success depends in part upon its proprietary technology. The
Company relies on a combination of copyright, trademark and trade secret laws,
confidentiality procedures, licensing arrangements and technical means to
establish and protect its proprietary rights. As part of its confidentiality
procedures, the Company generally enters into non-disclosure agreements with
its employees, distributors and corporate partners, and limits access to, and
distribution of, its software, documentation and other proprietary
information. In addition, the Company's products are protected by hardware
locks and software encryption techniques designed to deter unauthorized use
and copying. Despite these precautions, it may be possible for a third party
to copy or otherwise obtain and use the Company's products or technology
without authorization, or to develop similar technology independently.
The Company provides its SLDA products to end-users primarily under "shrink-
wrap" license agreements included within the packaged software. These
agreements are not negotiated with or signed by the licensee, and thus may not
be enforceable in certain jurisdictions. The Company provides its Design to
Test products to end-users under written license agreements, signed by each
licensee at the time of purchase of a license. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights as fully as
do the laws of the United States. There can be no assurance that the Company's
means of protecting its proprietary rights in the United States or abroad will
be adequate or that competitors will not independently develop similar
technology.
The Company could be increasingly subject to infringement claims as the
number of products and competitors in the Company's industry segment grows,
the functionality of products in its industry segment overlaps and an
increasing number of software patents are granted by the United States Patent
and Trademark Office. There can be no assurance that a third party will not
claim such infringement by the Company with respect to current or future
products. Any such claims, with or without merit, could be time-consuming,
result in costly litigation, cause product delays or require the Company to
enter into royalty or licensing agreements. Such royalty or license
agreements, if required, may not be available on terms acceptable to the
Company or at all. Failure to protect its proprietary rights or claims of
infringement could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Proprietary
Rights."
MANAGEMENT OF GROWTH
The Company's ability to achieve significant growth will require it to
implement and continually expand its operational and financial systems,
recruit additional employees and to train and manage current and future
employees. The Company expects any such growth will place a significant strain
on its operational resources and systems. Failure to effectively manage any
such growth would have a material adverse effect on the Company's business,
financial condition and results of operations.
12
<PAGE>
CONTROL BY CURRENT STOCKHOLDERS
The Company's officers, directors, principal stockholders and their
affiliates will, in the aggregate, beneficially own approximately 48.1% of the
Company's outstanding shares of Common Stock after this offering, assuming no
exercise of the underwriters' over-allotment option. As a result, these
stockholders, if acting together, would be able to effectively control most
matters requiring approval by the stockholders of the Company, including, in
most cases, the election of all of the directors. The Company has entered into
agreements with its officers and directors indemnifying them against losses
they may incur in legal proceedings arising from their service to the Company.
See "Principal and Selling Stockholders" and "Description of Capital Stock."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that a regular trading market will
develop and continue after this offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined through negotiations between
the Company and the representatives of the Underwriters and may not be
indicative of the market price of the Common stock following this offering.
The stock markets have experienced price and volume fluctuations that have
particularly affected technology companies, resulting in changes in the market
prices of the stocks of many companies which may not have been directly
related to the operating performance of those companies. Such broad market
fluctuations may adversely affect the market price of the Common Stock
following this offering. In addition, factors such as announcements of
technological innovations or new products by the Company or its competitors,
market conditions in the computer software or hardware industries and
quarterly fluctuations in the Company's operating results may have a
significant adverse effect on the market price of the Company's Common Stock.
See "--History of Operating Losses; Fluctuations in Quarterly Results" and
"Underwriting."
DILUTION
The assumed initial public offering price is substantially higher than the
net tangible book value per share of the outstanding Common Stock. As a
result, purchasers of the Common Stock offered hereby will incur immediate,
substantial dilution in net tangible book value per share. To the extent that
outstanding options to purchase the Company's Common Stock are exercised,
there will be further dilution. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock after the offering
could adversely affect the market price of the Common Stock and could impair
the Company's ability to raise capital through the sale of equity securities.
Upon completion of the offering, the Company will have outstanding 12,790,435
shares of Common Stock, assuming no exercise of options after March 31, 1996.
Of these shares, the 3,500,000 shares offered hereby (4,025,000 shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), unless purchased by "affiliates"
of the Company as that term is defined in Rule 144 under the Securities Act
("Rule 144"). The remaining 9,290,435 shares of Common Stock outstanding upon
completion of the offering are "restricted securities" as that term is defined
in Rule 144.
Beginning 90 days after the effective date of the Registration Statement
(the "Registration Statement") of which this Prospectus forms a part,
approximately 118,630 shares of Common Stock will be eligible for sale
pursuant to Rule 701 under the Securities Act ("Rule 701"). Upon the
expiration of lock-up agreements between certain of the Company's stockholders
and the Underwriters (the "Lock-up Agreements"), beginning 181 days after the
effective date of the Registration Statement, 7,558,394 shares will be
eligible for sale pursuant to Rule 701 and Rule 144, subject in certain cases
to the volume, manner of sale and notice requirements of Rule 144. In
addition, pursuant to lock-up provisions set forth in stock purchase
agreements
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<PAGE>
executed in connection with the Reorganization, the Company's Investors'
Rights Agreement, as amended, and under the Company's incentive stock option
plan (the "Stand-Off Agreements"), an additional 301,928 shares will become
eligible for sale pursuant to Rule 701 and Rule 144 beginning 181 days after
the effective date of the Registration Statement. The remaining 1,311,483
shares outstanding will become eligible for sale from time to time more than
181 days after the effective date of the Registration Statement as the
Company's rights to repurchase such shares expire.
In addition to the foregoing, as of March 31, 1996, there were outstanding
options to purchase an aggregate of 1,107,252 shares of Common Stock. If such
options are exercised, 708,478 shares will be eligible for sale beginning 181
days after the effective date of the Registration Statement upon expiration of
the Lock-up Agreements and the lock-up provisions contained in the Stand-Off
Agreements. The Company has agreed not to release shares from the lock-up
provisions of the Stand-Off Agreements without the prior written consent of
the representatives of the Underwriters.
The holders of approximately 8,616,314 shares of Common Stock may require
the Company, beginning six months after the effective date of the Registration
Statement, on not more than two occasions, to file a registration statement
under the Securities Act registering their shares at the Company's expense,
subject to certain conditions. See "Shares Eligible for Future Sale" and
"Description of Capital Stock--Registration Rights of Certain Holders."
The Company intends to file a Form S-8 registration statement under the
Securities Act as soon as practicable after consummation of the offering to
register the issuance of shares of Common Stock reserved for issuance upon
exercise of options granted under its stock option and stock purchase plans.
See "Management--Stock Plans."
ANTITAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
Upon consummation of this offering, the Company's Board of Directors will
have the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. The Company has no present plans to issue shares of
Preferred Stock. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibit the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 also could have the effect of delaying or preventing a change of
control of the Company. Further, certain provisions of the Company's Amended
and Restated Certificate of Incorporation (the "Restated Certificate") and
Amended and Restated Bylaws, each of which will become effective upon
consummation of this offering, and of Delaware law could delay or make more
difficult a merger, tender offer or proxy contest involving the Company. These
provisions include advance notice procedures for stockholders to nominate
candidates for election as directors of the Company, no stockholder action by
written consent, limitations on persons who can call stockholder meetings and
supermajority voting procedures for certain amendments to the Company's
Restated Certificate. See "Description of Capital Stock--Preferred Stock" and
"--Delaware Anti-Takeover Law and Certain Charter Provisions."
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,750,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$13,697,500 at an assumed initial public offering price of $9.00 per share and
after deducting the estimated underwriters' discounts and commissions and
offering expenses payable by the Company. The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Stockholders.
The Company expects to use the net proceeds for working capital and general
corporate purposes, including financing accounts receivable and capital
expenditures made in the ordinary course of its business, and to repay
approximately $700,000 of outstanding indebtedness. In addition, the Company
may apply a portion of the net proceeds of the offering to acquire
complementary businesses, products or technologies. Although the Company has
not identified any specific businesses, products or technologies that it may
acquire, nor are there any current agreements or negotiations with respect to
any such transactions, the Company from time to time evaluates such
opportunities. Pending such uses, the Company will invest the net proceeds
from this offering in interest bearing securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain its earnings, if any, for use
in its business and does not anticipate paying any cash dividends in the
foreseeable future. In addition, the Company's working capital line of credit
agreement prohibits the payment of dividends without the lender's prior
approval.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 (i) on an actual basis, (ii) on a pro forma basis to give effect to
the automatic conversion of all outstanding shares of Preferred Stock into
Common Stock and the filing of the Company's Restated Certificate to authorize
30,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock at
par values of $.01 per share upon the closing of this offering and (iii) on an
as adjusted basis to reflect the sale of the 1,750,000 shares of Common Stock
offered by the Company hereby at the assumed initial public offering price of
$9.00 per share and the application of the estimated net proceeds therefrom
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by the Company. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations, less current portion.... $ 1,085 $ 1,085 $ 792
-------- -------- --------
Stockholders' equity:
Preferred Stock, $.01 par value;
9,334,283 shares authorized, 9,103,346
shares issued and outstanding, actual;
5,000,000 shares authorized, no shares
issued and outstanding, pro forma and as
adjusted.................................... 91 -- --
Common Stock, $.01 par value; 20,000,000
shares authorized, 1,937,089 shares issued
and outstanding, actual; 30,000,000 shares
authorized, 11,040,435 shares issued and
outstanding, pro forma; 12,790,435 shares
issued and outstanding, as adjusted (1)..... 19 110 128
Additional paid-in capital................... 15,456 15,456 29,135
Accumulated deficit.......................... (14,877) (14,877) (14,877)
-------- -------- --------
Total stockholders' equity................. 689 689 14,386
-------- -------- --------
Total capitalization..................... $ 1,774 $ 1,774 $ 15,178
======== ======== ========
</TABLE>
- --------
(1) Excludes 1,107,252 shares issuable upon exercise of options outstanding as
of March 31, 1996 at a weighted average exercise price of $1.34 per share.
See "Management--Stock Plans."
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<PAGE>
DILUTION
The net tangible book value of the Company at March 31, 1996 was
approximately $689,000, or $0.06 per share of Common Stock, after giving
effect to the conversion of all outstanding Preferred Stock. "Net tangible
book value" represents the amount of total tangible assets of the Company less
total liabilities divided by the number of shares of Common Stock outstanding.
After giving effect to the sale of the 1,750,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$9.00 per share (after deducting the estimated underwriting discounts and
commissions and offering expenses payable by the Company), the Company's pro
forma net tangible book value at March 31, 1996 would have been $14,386,000,
or $1.12 per share. This represents an immediate increase in net tangible book
value of $1.06 per share to existing stockholders and an immediate dilution of
$7.88 per share to new investors. The following table illustrates this
dilution per share.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $9.00
Net tangible book value per share before the offering........ $0.06
Increase in net tangible book value per share attributable to
new investors............................................... 1.06
-----
Pro forma net tangible book value per share after the offer-
ing........................................................... 1.12
-----
Dilution per share to new investors............................ $7.88
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the differences in the total consideration paid and the average price per
share paid between the existing stockholders and the new investors with
respect to the 1,750,000 shares of Common Stock to be issued by the Company.
The calculations in this table with respect to shares of Common Stock to be
purchased by new investors in this offering assume an initial public offering
price of $9.00 per share (before deducting the estimated underwriting
discounts and commissions and offering expenses payable by the Company).
<TABLE>
<CAPTION>
SHARES PURCHASED (1) TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 11,040,435 86% $16,897,264 52% $1.53
New investors........... 1,750,000 14 15,750,000 48 $9.00
---------- --- ----------- ---
Total............... 12,790,435 100% $32,647,264 100%
========== === =========== ===
</TABLE>
- --------
(1) Sales by the Selling Stockholders in this offering will reduce the number
of shares held by existing stockholders to 9,290,435 shares, or 73% of the
total number of shares of Common Stock outstanding after the offering, and
will increase the number of shares held by new investors to 3,500,000
shares, or 27% of the total number of shares of Common Stock outstanding
after the offering.
The computations in the tables above exclude 1,107,252 shares of Common
Stock reserved for issuance at March 31, 1996 upon exercise of outstanding
options under the Summit Design, Inc. 1994 Stock Plan at a weighted average
exercise price of $1.34 per share. To the extent such options are exercised,
there will be further dilution to new investors. See "Capitalization,"
"Management--Stock Plans" and Note 8 of Notes to Consolidated Financial
Statements.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated statement of operations data for the
years ended December 31, 1993, 1994 and 1995 and the consolidated balance
sheet data at December 31, 1994 and 1995 are derived from the consolidated
financial statements of the Company, which have been audited by Coopers &
Lybrand L.L.P., and are included elsewhere in this Prospectus. The
consolidated balance sheet data at December 31, 1993 are derived from audited
financial statements not included in this Prospectus. The consolidated
statement of operations data for the years ended December 31, 1991 and 1992
and for the three months ended March 31, 1995 and 1996 and the consolidated
balance sheet data at December 31, 1991 and 1992 and at March 31, 1995 and
1996 have been derived from unaudited financial statements that include all
adjustments that the Company considers necessary for a fair presentation of
the financial information set forth therein. The results of operations for the
three months ended March 31, 1996 are not necessarily indicative of the
results to be expected for future periods. The selected consolidated financial
data should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------ -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA (1):
Revenue:
Product licenses....... $7,540 $ 7,716 $ 4,693 $ 9,143 $10,383 $ 1,821 $ 3,547
Maintenance and
services.............. -- -- 2,547 2,323 2,637 521 918
Other.................. -- -- -- 1,516 1,050 400 142
------ ------- ------- ------- ------- -------- -------
Total revenue.......... 7,540 7,716 7,240 12,982 14,070 2,742 4,607
Cost of revenue:
Product licenses....... 298 433 440 681 651 134 132
Maintenance and
services ............. -- -- 330 390 400 103 102
------ ------- ------- ------- ------- -------- -------
Total cost of revenue.. 298 433 770 1,071 1,051 237 234
------ ------- ------- ------- ------- -------- -------
Gross profit .......... 7,242 7,282 6,470 11,911 13,019 2,505 4,373
Operating expenses:
Research and
development........... 2,414 2,642 2,381 4,632 5,113 1,266 1,332
Sales and marketing.... 3,414 4,456 3,673 5,867 7,370 1,778 2,097
General and
administrative........ 602 1,359 1,919 2,309 3,112 661 639
Restructuring expense.. -- 300 -- -- -- -- --
In-process technology.. -- -- -- 647 -- -- --
------ ------- ------- ------- ------- -------- -------
Total operating
expenses.............. 6,430 8,757 7,973 13,455 15,595 3,705 4,068
------ ------- ------- ------- ------- -------- -------
Income (loss) from
operations............. 812 (1,475) (1,503) (1,544) (2,576) (1,200) 305
Other income (expense),
net.................... (56) (122) (119) (100) (176) (52) (52)
------ ------- ------- ------- ------- -------- -------
Income (loss) before
income taxes........... 757 (1,597) (1,622) (1,644) (2,752) (1,252) 253
Income tax provision.... 59 -- -- 402 399 73 175
------ ------- ------- ------- ------- -------- -------
Net income (loss)....... $ 698 $(1,597) $(1,622) $(2,046) $(3,151) $ (1,325) $ 78
====== ======= ======= ======= ======= ======== =======
Pro forma net income
(loss) per share (2)... $ (0.15) $ (0.18) $ (0.28) $ (0.12) $ 0.01
======= ======= ======= ======== =======
Pro forma number of
shares used in per
share calculation (2).. 11,048 11,348 11,378 11,364 11,414
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------ -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 387 $ 267 $ 429 $1,193 $ 592 $ 972 $1,304
Working capital........ 256 (1,265) (2,077) (444) (530) (1,862) (302)
Total assets........... 3,053 2,670 2,703 8,036 8,903 7,666 8,367
Long-term obligations,
less current portion.. 181 580 302 253 1,216 203 1,085
Total stockholders'
equity (deficit)...... 396 (1,178) (1,304) 1,295 592 (124) 689
</TABLE>
- -------
(1) The results of SEE Technologies are included in the Consolidated Financial
Statements of the Company commencing January 1, 1994.
(2) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in computing pro forma net
income (loss) per share.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus. The following discussion also should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Prospectus.
OVERVIEW
Summit was founded in December 1993 to act as the holding company for TSSI
and SEE Technologies (now Summit Design (EDA) Ltd.). TSSI was founded in 1979
to develop and market IC manufacturing test products. In January 1993, TSSI
retained a new Chief Executive Officer and began to restructure its senior
management team. Thereafter, the Company broadened its strategy from focusing
primarily on manufacturing test products to include providing graphical SLDA
design entry and verification tools and integrating these with its core
technology. As part of its strategy, in early 1994, TSSI acquired SEE
Technologies, an Israeli company that, through its predecessor, began
operations in 1983 and had operated primarily as a research and development
and consulting company focused on the EDA and SLDA market. As a result of the
Reorganization, TSSI and SEE Technologies became wholly-owned subsidiaries of
Summit in the first quarter of 1994. The results of operations of the Company
prior to January 1, 1994 are those of TSSI and as of and after January 1, 1994
are the combined results of TSSI and SEE Technologies.
The Company's ongoing implementation of its strategy has involved
significant expenditures. Following the Reorganization, the Company
significantly increased its research and development expenditures to support
the continued development of SLDA and Design to Test products. To promote its
products, the Company has added sales and marketing staff, increasing its
sales and marketing expenditures by 101% from 1993 to 1995, and has
restructured its key distributor relationships. This concurrent effort to
develop products and promote market awareness and acceptance of its products
in a new and evolving market has contributed to the Company's annual losses.
Such losses were mitigated in part in each of the six quarters following the
Reorganization by revenue from initial stocking orders from distributors and
one-time sales of technology. The Company introduced its first SLDA product,
Visual HDL for VHDL 1.0, in the first quarter of 1994. This product lacked
compiled simulation and operated only on a PC platform. In the third quarter
of 1994, with the release of version 2.5, Summit expanded the simulation
capability of Visual HDL for VHDL and introduced its UNIX-based version of
this product. The Company has experienced increased sales of its SLDA products
in each of the five quarters in the period ended March 31, 1996. As a result,
the Company generated net income in each of the last two quarters. However,
there can be no assurance that the Company will experience continued growth in
revenue or be profitable in the future.
Prior to the Reorganization, the Company's TDS product and related
maintenance revenue accounted for all of the Company's revenue. Currently, the
Company's revenue is predominantly derived from two product lines, Visual HDL,
which includes Visual HDL for VHDL and Visual HDL for Verilog, and TDS, and
the Company believes that these products will continue to account for a
substantial portion of its revenue in the future. See "Risk Factors--Product
Concentration; Uncertainty of Market Acceptance of SLDA and Design to Test
Products."
Revenue consists primarily of fees for licenses of the Company's software
products, maintenance and customer training. Revenue from the sale of software
licenses is recognized at the later of the time of shipment or satisfaction of
all acceptance terms. Maintenance revenue is deferred and recognized ratably
over the term of the maintenance agreement, which is typically 12 months.
Revenue from customer training is recognized when the service is performed.
The Company sells its products through a direct sales force in North America
and selected European countries and through distributors in the Company's
other international markets. Revenue from product sales through distributors
is recognized net of the associated distributor discounts. Fees received for
granting distribution rights are deferred and recognized ratably over the term
of the distribution agreement.
19
<PAGE>
The Company has a range of prices for its products which depends on
platform, HDL language, functionality, duration of license and distribution
channel. In addition, the Company's products perform a variety of functions,
certain of which are, and in the future may be, offered as separate products
or discrete point solutions by the Company's existing and future competitors.
For example, certain companies currently offer design entry products without
simulators. There can be no assurance that such competition will not cause the
Company to offer point solutions instead of, or in addition to, the Company's
current software products. Such point solutions would be priced lower than the
Company's current product offerings and could cause the Company's average
selling prices to decrease. Accordingly, based on these and other factors, the
Company expects that average selling prices for its products will continue to
fluctuate in the future.
The Company has entered into a joint venture with Anam, effective April 1,
1996, pursuant to which the joint venture corporation (Summit Asia) was
granted exclusive rights to manufacture, sell, distribute and support all of
Summit's products in the Asia-Pacific region, excluding Japan. Prior to the
joint venture, Anam had acted as an independent distributor of the Company's
products. The amount of revenue from sales through Summit Asia which is
remitted to Summit is fixed by the joint venture agreement at a percentage
which approximates the percentage applicable to sales through Anam prior to
the formation of the joint venture. Summit accounts for its ownership interest
in Summit Asia on the equity method of accounting and, as a result, Summit's
pro rata share of the profits and losses of Summit Asia will be recognized as
income or losses on Summit's income statement in "Other income (expense),
net." The Company does not expect to recognize income from its investment in
Summit Asia for the foreseeable future, if at all. See "Business--Marketing
and Sales."
Approximately 60.9%, 52.2%, 38.6% and 38.1% of the Company's total revenue
for the three months ended March 31, 1996 and the years ended December 31,
1995, 1994 and 1993, respectively, were attributable to sales made outside
North America. The Company expects that international revenue will continue to
represent a significant portion of its total revenue. The Company's
international revenue is currently denominated in U. S. dollars. As a result,
increases in the value of the U.S. dollar relative to foreign currencies could
make the Company's products more expensive and, therefore, potentially less
competitive in those markets. The Company pays the expenses of its
international operations in local currencies and does not engage in hedging
transactions with respect to such obligations. International sales and
operations are subject to numerous risks, including tariff regulations and
other trade barriers, requirements for licenses, particularly with respect to
the export of certain technologies, collectability of accounts receivable,
changes in regulatory requirements, difficulties in staffing and managing
foreign operations and extended payment terms. See "Business--Marketing and
Sales."
20
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the Company's Consolidated Statement of
Operations Data expressed as a percentage of total revenue for the periods
indicated.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue:
Product licenses........... 64.8% 70.4% 73.8% 66.4% 77.0%
Maintenance and services... 35.2 17.9 18.7 19.0 19.9
Other...................... -- 11.7 7.5 14.6 3.1
------- ------- ------- ------- -------
Total revenue............ 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Product licenses........... 6.0 5.2 4.6 4.8 2.9
Maintenance and services... 4.6 3.0 2.9 3.8 2.2
------- ------- ------- ------- -------
Total cost of revenue.... 10.6 8.2 7.5 8.6 5.1
------- ------- ------- ------- -------
Gross profit............. 89.4 91.8 92.5 91.4 94.9
Operating expenses:
Research and development... 32.9 35.7 36.3 46.3 28.9
Sales and marketing........ 50.7 45.2 52.4 64.8 45.5
General and administra-
tive...................... 26.5 17.8 22.1 24.1 13.9
In-process technology...... -- 5.0 -- -- --
------- ------- ------- ------- -------
Total operating ex-
penses.................. 110.1 103.7 110.8 135.2 88.3
------- ------- ------- ------- -------
Income (loss) from opera-
tions....................... (20.7) (11.9) (18.3) (43.8) 6.6
Other income (expense), net.. (1.7) (0.8) (1.3) (1.9) (1.1)
------- ------- ------- ------- -------
Income (loss) before income
taxes....................... (22.4) (12.7) (19.6) (45.7) 5.5
Income tax provision......... -- 3.1 2.8 2.6 3.8
------- ------- ------- ------- -------
Net income (loss)............ (22.4)% (15.8)% (22.4)% (48.3)% 1.7%
======= ======= ======= ======= =======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Total Revenue
The Company's revenue is comprised of product licenses revenue, maintenance
and services revenue and other revenue. Total revenue increased by 68% from
$2.7 million for the three months ended March 31, 1995 to $4.6 million for the
three months ended March 31, 1996. During these periods, other than the
purchaser of certain technology in a one-time transaction, no customer
accounted for more than 10% of the Company's total revenue.
Product licenses revenue. The Company's product licenses revenue is derived
from license fees from the Company's SLDA and Design to Test products. Product
licenses revenue increased by 95% from $1.8 million for the three months ended
March 31, 1995 to $3.5 million for the three months ended March 31, 1996.
Revenue from SLDA and Design to Test products accounted for 70.7% and 29.3%,
respectively, of product licenses revenue for the quarter ended March 31, 1996
and for 34.4% and 65.6%, respectively, of product licenses revenue for the
quarter ended March 31, 1995.
21
<PAGE>
SLDA revenue increased 300% from $626,000 for the three months ended March
31, 1995 to $2.5 million for the three months ended March 31, 1996. The
increase was primarily attributable to the hiring of the SLDA sales force
beginning in late 1994 and early 1995, improved distribution in Japan and
thereafter increased market acceptance of the Company's SLDA products.
Design to Test revenue decreased 13% from $1.2 million for the three months
ended March 31, 1995 to $1.0 million for the three months ended March 31,
1996. The decrease was primarily attributable to decreased sales in the United
States in the first quarter of 1996, due to the focus of the Company's sales
force on promotion of the Company's SLDA products. In addition, revenue from
Design to Test products typically results from fewer, larger orders and, as a
result, the timing of orders can result in significant variations in quarterly
revenue.
Maintenance and services revenue. The Company's maintenance and services
revenue is derived from maintenance contracts related to the Company's SLDA
and Design to Test products and training classes offered to purchasers of the
Company's software products. Maintenance and services revenue increased 76%
from $521,000 for the three months ended March 31, 1995 to $918,000 for the
three months ended March 31, 1996. The increase was attributable to an
increase in maintenance revenue related to growth in the installed base of
SLDA customers and an increase in domestic Design to Test maintenance revenue
due to the Company hiring a telemarketing salesperson dedicated to sales of
maintenance.
Other revenue. Other revenue consists of revenue from one-time technology
sales and fees received for granting distribution rights. Other revenue for
the three months ended March 31, 1995 was approximately $400,000, which
consisted of $350,000 related to a one-time sale of technology and $50,000 of
distribution rights fees. For the three months ended March 31, 1996 other
revenue consisted of $142,000 of distribution rights fees. No material costs
were associated with other revenue for the three months ended March 31, 1995
and 1996.
Cost of Revenue
Cost of product licenses revenue. Cost of product licenses revenue includes
product packaging, software documentation, labor and other costs associated
with handling, packaging and shipping product and other production related
costs. Cost of product licenses revenue decreased slightly from $134,000 for
the three months ended March 31, 1995 to $132,000 for the three months ended
March 31, 1996. As a percentage of product licenses revenue, the cost of
product licenses revenue decreased from 7.4% for the quarter ended March 31,
1995 to 3.7% for same period in 1996. The decrease was primarily due to
leveraging fixed costs across increased product licenses revenue and, to a
lesser extent, to lower sales of TDS products, which have a higher cost of
revenue than the Company's SLDA products.
Cost of maintenance and services revenue. Cost of maintenance and services
revenue, which consists primarily of personnel costs for customer support and
training classes offered to purchasers of the Company's products, remained
relatively unchanged at $103,000 for the three months ended March 31, 1995 and
$102,000 for the three months ended March 31, 1996. As a percentage of
maintenance and services revenue, the cost of maintenance and services revenue
decreased from 19.8% for the three months ended March 31, 1995 to 11.1% for
the three months ended March 31, 1996. The Company expects that its cost of
maintenance and services revenue will increase in future periods as the
Company adds customer support personnel.
Research and Development
Research and development expenses consist of the engineering and operations
support costs of developing new products and enhancements to existing products
and performing quality assurance activities. Research and development expenses
remained relatively unchanged at approximately $1.3 million for the three
months ended March 31, 1995 and 1996. As a percentage of total revenue,
research and development expenses decreased from 46.3% for the quarter ended
March 31, 1995 to 28.9% for the same period in 1996
22
<PAGE>
due to the increase in total revenue for the first quarter of 1996. The
Company believes that significant investment in research and development is
required to remain competitive in its markets, and the Company therefore
anticipates that research and development expenses will increase in absolute
dollars in future periods, but may vary as a percentage of total revenue.
Software development costs are accounted for in accordance with Financial
Accounting Standards Board Statement No. 86, under which the Company is
required to capitalize software development costs after technological
feasibility has been established. To date, development costs have been
expensed as incurred since technological feasibility generally has not been
established until shortly before the release of a new product, and no material
development costs have been incurred after establishment of technological
feasibility.
Sales and Marketing
Sales and marketing expenses, consisting primarily of salaries, commissions
and promotional costs, increased from $1.8 million for the three months ended
March 31, 1995 to $2.1 million for the three months ended March 31, 1996. The
increase was primarily attributable to increased commissions and travel and,
after entering into exclusive distribution agreements in Japan, costs
associated with relocating the Company's direct sales support from Japan to
the United States. As a percentage of total revenue, sales and marketing
expenses decreased from 64.8% for the quarter ended March 31, 1995 to 45.5%
for the same period in 1996. The decrease was primarily attributable to the
increase in total revenue for the first quarter of 1996. In the future, the
Company expects sales and marketing expenses to continue to increase in
absolute dollars, in part due to the hiring of additional sales personnel.
General and Administrative
General and administrative expenses consist primarily of the corporate,
finance, human resource, information services, administrative, legal and
auditing expenses of the Company. General and administrative expenses
decreased slightly from $661,000 for the three months ended March 31, 1995 to
$639,000 for the three months ended March 31, 1996. As a percentage of total
revenue, general and administrative expenses decreased from 24.1% for the
quarter ended March 31, 1995 to 13.9% for the same period in 1996. The
decrease as a percentage of total revenue was primarily attributable to the
increase in total revenue in the first quarter of 1996. The Company expects
general and administrative expenses to increase in absolute dollars to support
future operations and sales and the additional costs associated with being a
public company.
Other Income (Expense), Net
Other income (expense) consists of interest income and expense associated
with available cash balances, loans, lines of credit and gains or losses from
the sale of property and equipment. Other income (expense) was a net expense
of $52,000 for the three months ended March 31, 1995 and 1996. The net expense
for each of these periods was primarily due to interest expense associated
with outstanding bank borrowings and capital lease obligations, partially
offset by interest earned on the Company's cash holdings.
Income Tax Provision
Income tax provision increased from $73,000 for the three months ended March
31, 1995 to $175,000 for the three months ended March 31, 1996. The increase
was primarily attributable to increased Japanese sales and the payment of
withholding tax of approximately 10% on such sales. State income tax payments
were lower than statutory limits due to the carryforward of net operating
losses. See "--Effective Corporate Tax Rates."
23
<PAGE>
YEARS ENDED DECEMBER 31, 1995, DECEMBER 31, 1994 AND DECEMBER 31, 1993
Total Revenue
Total revenue increased by 79% from $7.2 million in 1993 to $13.0 million in
1994 and by 8% to $14.1 million in 1995. The increase from 1993 to 1994
primarily resulted from the introduction of the Company's first SLDA product
in the first quarter of 1994 and one-time sales of technology in 1994 of
approximately $1.5 million. The increase from 1994 to 1995 primarily resulted
from increased sales of the Company's SLDA products. During 1993, 1994 and
1995, other than the purchaser of certain technology in a one-time transaction
in 1994, no customer accounted for more than 10% of the Company's total
revenue.
Product licenses revenue. Product licenses revenue increased by 95% from
$4.7 million in 1993 to $9.1 million in 1994 and by 14% to $10.4 million in
1995. Revenue from SLDA and Design to Test products accounted for 0% and 100%,
respectively, of product licenses revenue for 1993, for 49.4% and 50.6%,
respectively, of product licenses revenue for 1994, and 58.5% and 41.5%,
respectively, of product licenses revenue for 1995.
The Company's first SLDA product, Visual HDL for VHDL, was introduced in the
first quarter of 1994 and accordingly the Company did not recognize any
revenue for SLDA licenses in 1993. SLDA revenue increased by 35% from $4.5
million in 1994 to $6.1 million in 1995. The increase was primarily
attributable to the hiring of the SLDA sales force beginning in late 1994 and
early 1995 and increased market acceptance of the product in 1995,
particularly in the second half of 1995. The increase was also attributable to
follow-on sales in 1995 to certain key customers that had initially purchased
SLDA products in 1994 and 1995.
Design to Test revenue decreased slightly from $4.7 million in 1993 to $4.6
million in 1994 and decreased by 7% to $4.3 million in 1995. The decreases
were principally due to the focus of the Company's sales force during 1995 on
promotion of the Company's SLDA products.
Maintenance and services revenue. Maintenance and services revenue decreased
by 9% from $2.5 million in 1993 to $2.3 million in 1994 and increased by 14%
to $2.6 million in 1995. The decrease from 1993 to 1994 was primarily
attributable to the Company's sales force focusing on the introduction of the
Company's SLDA products in 1994 rather than on the sale of maintenance
contracts. The increase from 1994 to 1995 was primarily the result of
maintenance contracts associated with increased sales of SLDA products and the
addition of a telemarketing salesperson dedicated to sales of maintenance
contracts.
Other revenue. Other revenue was $0 in 1993, $1.5 million in 1994 and $1.1
million in 1995 due to one-time sales of technology and fees received for
granting distribution rights. Other revenue for 1994 and 1995 included $1.5
million and $850,000, respectively, attributable to technology sales. No
material costs were associated with these sales.
Cost of Revenue
Cost of product licenses revenue. Cost of product licenses revenue increased
from $440,000 in 1993 to $681,000 in 1994 and decreased to $651,000 in 1995.
The increase from 1993 to 1994 primarily resulted from the addition of
facilities in Israel acquired in connection with the acquisition of SEE
Technologies in February 1994 and costs associated with the Company's SLDA
product, which was initially shipped in the first quarter of 1994. The
decrease from 1994 to 1995 was due in part to costs associated with the
introduction of the Company's SLDA product in 1994. As a percentage of product
licenses revenue, the cost of product licenses revenue decreased from 9.4% for
1993 to 7.4% for 1994 and to 6.3% for 1995. Cost of product licenses revenue
as a percentage of product licenses revenue decreased from 1993 through 1995
principally due to the Company's higher margin SLDA products constituting a
greater percentage of the Company's product mix and leveraging fixed costs
across increased product licenses revenue.
Cost of product licenses revenue for 1995 includes a one-time write-off of
$107,000 of prepaid royalty fees for software deemed unusable, offset by the
reduction of $84,000 of reserves related to the expiration of training
credits.
24
<PAGE>
Cost of maintenance and services revenue. Cost of maintenance and services
revenue increased from $330,000 in 1993 to $390,000 in 1994 and increased
slightly to $400,000 in 1995. The increase from 1993 to 1994 resulted from the
addition of support personnel in connection with the introduction of the
Company's SLDA product. As a percentage of maintenance and services revenue,
the cost of maintenance and services revenue was 13.0%, 16.8% and 15.2% for
1993, 1994 and 1995, respectively.
Research and Development
Research and development expenses increased from $2.4 million in 1993 to
$4.6 million in 1994 and to $5.1 million in 1995. The increase from 1993 to
1994 was primarily due to the substantial increase in the number of research
and development employees as a result of the acquisition of SEE Technologies
in February 1994. The increase from 1994 to 1995 was primarily attributable to
an increase in salaries. As a percentage of total revenue, research and
development expenses increased from 32.9% in 1993 to 35.7% in 1994 and to
36.3% in 1995.
Sales and Marketing
Sales and marketing expenses increased from $3.7 million in 1993 to $5.9
million in 1994 and to $7.4 million in 1995. The increase from 1993 to 1994
were primarily attributable to the expansion of the Company's sales and
marketing organization and increased costs associated with the production of
marketing literature and trade show costs to support the introduction of the
Company's Visual HDL for VHDL product. The increase from 1994 to 1995 was
principally due to the continued expansion of the Company's direct sales
force. As a percentage of total revenue, sales and marketing expenses
decreased from 50.7% in 1993 to 45.2% in 1994 and increased to 52.4% in 1995.
General and Administrative
General and administrative expenses increased from $1.9 million in 1993 to
$2.3 million in 1994 and to $3.1 million in 1995. The increases from 1993 to
1995 were primarily due to increases in personnel, investments in financial
information and control systems to support expanded operations and costs
associated with the Company's international operations. During the second
quarter of 1995, the Company also wrote-off expenses of approximately $270,000
primarily related to prepaid expenses deemed to have no future value and costs
associated with the severance of a senior manager. As a percentage of total
revenue, general and administrative expenses decreased from 26.5% in 1993 to
17.8% in 1994 and increased to 22.1% in 1995.
In-Process Technology
The Company expensed $647,000 of acquired in-process technology in the first
quarter of 1994 attendant to the Reorganization. These costs related entirely
to the SLDA products being developed by SEE Technologies.
Other Income (Expense), Net
Other income (expense) was a net expense of $119,000, $100,000 and $176,000
for 1993, 1994 and 1995, respectively. The increases in net expense were
primarily a result of increased interest expense associated with outstanding
bank borrowings and capital lease obligations and a decrease in interest
income.
Income Tax Provision
Income tax provision was $0 for 1993, $402,000 for 1994 and $399,000 for
1995. The increase in income tax expense from 1993 to 1994 and 1995 was the
result of a change in the Company's operational structure. For 1993 and prior,
the Company maintained a wholly-owned subsidiary in Japan which resulted in no
Japanese withholding taxes from sales. For 1994 and 1995, under the
restructured operations, the increase was primarily attributable to the
payment of withholding tax on Japanese and other Asian sales. State income tax
payments were lower than statutory limits due to operating losses. See "--
Effective Corporate Tax Rates."
25
<PAGE>
Quarterly Results
The following table sets forth selected unaudited quarterly financial
information for each of the five quarters in the period ended March 31, 1996.
This information has been derived from unaudited consolidated statements of
operations data that, in the opinion of management, are stated on a basis
consistent with the audited financial statements and include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information in accordance with generally accepted
accounting principles. The Company's quarterly results have been in the past,
and may be in the future, subject to significant fluctuations. The Company
believes that results of operations for the interim periods are not
necessarily indicative of the results to be expected in the future.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996
-------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Product licenses............ $ 1,821 $ 1,848 $ 3,225 $ 3,489 $ 3,547
Maintenance and services.... 521 681 646 789 918
Other....................... 400 550 50 50 142
------- ------- ------- ------- -------
Total revenue............... 2,742 3,079 3,921 4,328 4,607
------- ------- ------- ------- -------
Cost of revenue:
Product licenses............ 134 213 131 173 132
Maintenance and services.... 103 107 97 93 102
------- ------- ------- ------- -------
Total cost of revenue....... 237 320 228 266 234
------- ------- ------- ------- -------
Gross profit................ 2,505 2,759 3,693 4,062 4,373
Operating Expenses:
Research and development.... 1,266 1,360 1,252 1,235 1,332
Sales and marketing......... 1,778 1,979 1,718 1,895 2,097
General and administrative.. 661 993 724 734 639
------- ------- ------- ------- -------
Total operating expenses.... 3,705 4,332 3,694 3,864 4,068
------- ------- ------- ------- -------
Income (loss) from opera-
tions....................... (1,200) (1,573) (2) 198 305
Other income (expense), net.. (52) (48) (21) (55) (52)
------- ------- ------- ------- -------
Income (loss) before income
taxes....................... (1,252) (1,621) (23) 143 253
Income tax provision......... 73 100 148 78 175
------- ------- ------- ------- -------
Net income (loss)............ $(1,325) $(1,721) $ (170) $ 65 $ 78
======= ======= ======= ======= =======
Pro forma net income (loss)
per share................... $ (0.12) $ (0.15) $ (0.01) $ 0.01 $ 0.01
Pro forma number of shares
used in per share calcula-
tion........................ 11,364 11,369 11,376 11,382 11,414
AS A PERCENTAGE OF TOTAL REV-
ENUE:
Revenue:
Product licenses............ 66.4% 60.0% 82.2% 80.6% 77.0%
Maintenance and services.... 19.0 22.1 16.5 18.2 19.9
Other....................... 14.6 17.9 1.3 1.2 3.1
------- ------- ------- ------- -------
Total revenue............... 100.0 100.0 100.0 100.0 100.0
------- ------- ------- ------- -------
Cost of revenue:
Product licenses............ 4.8 6.9 3.3 4.0 2.9
Maintenance and services.... 3.8 3.5 2.5 2.1 2.2
------- ------- ------- ------- -------
Total cost of revenue....... 8.6 10.4 5.8 6.1 5.1
------- ------- ------- ------- -------
Gross profit................ 91.4 89.6 94.2 93.9 94.9
Operating Expenses:
Research and development.... 46.3 44.2 31.9 28.5 28.9
Sales and marketing......... 64.8 64.3 43.8 43.8 45.5
General and administrative.. 24.1 32.2 18.6 17.0 13.9
------- ------- ------- ------- -------
Total operating expenses.... 135.2 140.7 94.3 89.3 88.3
------- ------- ------- ------- -------
Income (loss) from opera-
tions....................... (43.8) (51.1) (0.1) 4.6 6.6
Other income (expense), net.. (1.9) (1.5) (0.5) (1.3) (1.1)
------- ------- ------- ------- -------
Income (loss) before income
taxes....................... (45.7) (52.6) (0.6) 3.3 5.5
Income tax provision......... 2.6 3.3 3.7 1.8 3.8
------- ------- ------- ------- -------
Net income (loss)............ (48.3)% (55.9)% (4.3)% 1.5% 1.7%
======= ======= ======= ======= =======
</TABLE>
26
<PAGE>
Since the three months ended March 31, 1995, the Company's total revenue has
increased in each subsequent quarter. The increase in revenue, particularly in
the last three quarters, is primarily attributable to increased market
acceptance of the SLDA product line that commenced shipment in the first
quarter of 1994. The following table sets forth the revenue from the Company's
SLDA and Design to Test products for each of the five quarters in the period
ended March 31, 1996. The Company believes that product revenue for the
interim periods is not necessarily indicative of future results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996
-------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
PRODUCT
- -------
SLDA.............................. $ 626 $1,138 $2,100 $2,207 $2,506
Design to Test.................... 1,195 710 1,125 1,282 1,041
</TABLE>
In the quarters ended March 31 and June 30, 1995, the Company recognized
other revenue of $350,000 and $500,000, respectively, related to the one-time
sale of certain technology. In addition, cost of product licenses revenue for
the second quarter of 1995 totaled $213,000, which includes a one-time write-
off of $107,000 of prepaid royalty fees for software deemed unusable.
Total operating expenses for the second quarter of 1995 increased as a
result of increases in each of its components. Research and development
expenses increased due to salary increases during the quarter, and were lower
in the following quarters primarily as a result of the departure of research
and development personnel associated with the development of technology which
had been sold and the restructuring of certain additional personnel to
increase efficiencies. Sales and marketing expenses increased in part due to
the forgiveness of a loan to a sales officer and the one-time write-off of
receivables deemed uncollectable. In addition, general and administrative
expenses increased in part due to the write-off of approximately $270,000
primarily related to prepaid expenses deemed to have no future value and costs
associated with the severance of a senior manager.
The Company has experienced significant quarterly fluctuations in operating
results and cash flows and it is likely that these fluctuations will continue
in future periods. These fluctuations have been, and may in the future be,
caused by a number of factors, including the rate of acceptance of new
products, corporate acquisitions and consolidations, product, customer and
channel mix, the size and timing of orders, lengthy sales cycles, the timing
of new product announcements and introductions by the Company and its
competitors, seasonal factors, rescheduling or cancellation of customer
orders, the Company's ability to continue to develop and introduce new
products and product enhancements on a timely basis, the level of competition,
purchasing and payment patterns, pricing policies of the Company and its
competitors, product quality issues, currency fluctuations and general
economic conditions.
The Company has generally recognized a substantial portion of its revenue in
the last month of each quarter, with this revenue concentrated in the last
weeks of the quarter. Any significant deferral of purchases of the Company's
products could have a material adverse effect on the Company's business,
financial condition and results of operations in any particular quarter, and
to the extent that significant sales occur earlier than expected, operating
results for subsequent quarters may be adversely affected. The Company's
revenue is difficult to forecast for several reasons. The market for certain
of the Company's software products is evolving. The Company's sales cycle is
typically six to nine months and varies substantially from customer to
customer. The Company operates with little product backlog because its
products are typically shipped shortly after orders are received. In addition,
a significant portion of the Company's sales are made through indirect
channels and can be harder to predict. The Company establishes its expenditure
levels for product development, sales and marketing and other operating
activities based primarily on its expectations as to future revenue. As a
result, if revenue in any quarter falls below expectations, expenditure levels
could be disproportionately high as a percentage of revenue, and the Company's
operating results for that quarter
27
<PAGE>
would be adversely affected. Based upon the factors described above, the
Company believes that its quarterly revenue, expenses and operating results
are likely to vary significantly in the future, that period-to-period
comparisons of its results of operations are not necessarily meaningful and
that, as a result, such comparisons should not be relied upon as indications
of the Company's future performance. Moreover, although the Company's revenue
has increased in recent periods, there can be no assurance that the Company's
revenue will grow in future periods or that the Company will remain profitable
on a quarterly or annual basis. Due to the foregoing or other factors, it is
likely that the Company's results of operations may be below investors' and
market analysts' expectations in some future quarters, which could have a
severe adverse effect on the market price of the Company's Common Stock.
EFFECTIVE CORPORATE TAX RATES
The Company's future effective tax rate depends in part on the availability
of United States and Israeli net operating loss ("NOLs") and credit
carryforwards. As of March 31, 1996, the Company had recorded U.S. federal and
state NOLs of approximately $10.2 million and $7.7 million, respectively and
Israeli NOLs of approximately $6.4 million. To date, the Company has not
generated taxable income, and neither the United States nor the Israeli taxing
authorities have verified the accuracy or availability of the Company's NOLs
and credit carryforward amounts. In addition, such amounts are subject to
limitation in certain circumstances, including as a result of certain changes
of ownership or operations. Thus, as a result of the Reorganization and a
subsequent preferred stock financing, the NOLs and credit carryforward
amounts, if available, will be subject to an annual limitation on the amount
that may be utilized. There can be no assurance as to the amount of such NOLs
or carryforwards that will be available to the Company, if any, or that the
Company will be able to avail itself of such benefits.
In addition to its NOLs and credit carryforwards, the Company is currently
scheduled to receive tax benefits over the next several years under a tax
holiday in Israel. The Company's existing Israeli production facility has been
granted "Approved Enterprise" status under the Israeli Investment Law, which
entitles the Company to reductions in the tax rate normally applicable to
Israeli companies with respect to the income generated by its "Approved
Enterprise" programs. In particular, the tax holiday covers the seven-year
period beginning the first year in which Summit Design (EDA) Ltd., the
Company's Israeli subsidiary, generates Israeli taxable income (after using
any available NOLs), provided that such benefits will terminate in 2006
regardless of whether the seven-year period has expired. The tax holiday
provides that, during such seven-year period, a portion of the Company's
taxable income from its Israeli operations will be taxed at favorable tax
rates. The termination or reduction of the Company's Israeli tax benefits
would have a material adverse effect on the Company's overall actual effective
tax rate. The Company has recently applied for "Approved Enterprise" status
with respect to a new project and intends to apply in the future with respect
to additional projects. There can be no assurance that the Company will be
granted any approvals and therefore there can be no assurance the Company will
continue to receive favorable tax status, if at all. See "Risk Factors--
Operations in Israel."
The Company is also subject to the risk that United States and foreign tax
laws and rates may change in a future period or periods, and that any such
changes may materially adversely affect the Company's tax rate. As a result of
the factors described above and other related factors, there can be no
assurance that the Company will maintain a favorable tax rate in future
periods. Any increase in the Company's effective tax rate, or variations in
the effective tax rate from period to period, could have a material adverse
effect on the Company's business, financial condition and results of
operations.
28
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through the private placement of approximately $15.4 million of capital stock,
as well as capital equipment leases, borrowings under its bank line of credit,
Israeli research and development grants and cash generated from operations. As
of March 31, 1996, the Company had approximately $1.3 million in cash, cash
equivalents and short term investments and a $2.0 million bank line of credit.
The line of credit expires on April 30, 1997 and borrowings thereunder accrue
interest at specified percentages above the prime lending rate based on the
Company's ratio of debt to tangible net worth. Advances under the line of
credit are limited to a specified percentage of eligible accounts receivable
(as defined in the line of credit). As of March 31, 1996, the Company had no
borrowings outstanding under this line of credit. Additionally, as of March
31, 1996, the Company had $345,476 outstanding under an equipment term loan.
The loan matures in June 1998 and accrues interest at the prime rate plus 1%
(9.25% at March 31, 1996).
As of March 31, 1996, the Company had a working capital deficit of
approximately $302,000. The accounts receivable balance, net of allowance for
doubtful accounts, was $4.3 million, $5.5 million and $4.1 million at March
31, 1996 and December 31, 1995 and 1994, respectively. The average accounts
receivable days' sales outstanding was 84 days, 115 days and 115 days as of
March 31, 1996 and December 31, 1995 and 1994, respectively. The number of
days' sales outstanding results in part from a significant percentage of
international sales with payment terms ranging from 60 to 90 days and a large
amount of sales in the last weeks of a quarter.
Net cash generated by operating activities was approximately $2.0 million
for the three months ended March 31, 1996. Net cash used by operating
activities was approximately $3.0 million, $2.6 million and $673,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. For the three
months ended March 31, 1996, cash generated by operating activities resulted
primarily from increased sales of SLDA products and improved collection of
accounts receivable. For 1995 and 1994, the use of cash from operations
resulted primarily from the Company's net loss and the increase in accounts
receivable. For 1993, the use of cash from operations resulted primarily from
the Company's net loss.
Net cash used in investing activities was approximately $110,000, $758,000,
$552,000 and $129,000 for the three months ended March 31, 1996 and for the
years ended December 31, 1995, 1994 and 1993, respectively. Net cash used in
investing activities was related primarily to the acquisition of property and
equipment.
Net cash used by financing activities was $1.1 million for the quarter ended
March 31, 1996 and net cash provided by financing activities was approximately
$3.1 million, $3.9 million and $1.0 million for the years ended December 31,
1995, 1994, and 1993, respectively. The cash used in the first quarter of 1996
was primarily to repay amounts outstanding under the Company's line of credit.
The cash provided in 1995, 1994 and 1993 was related primarily to the issuance
of preferred stock and short-term borrowings, partially offset by debt
payments and principal payments on capital lease obligations.
The Company presently believes the net proceeds from the sale of the common
stock offered by the Company hereby, together with existing funds and funds
expected to be generated from operations, will satisfy the Company's
anticipated working capital and other cash requirements for at least the next
12 months.
29
<PAGE>
BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
INTRODUCTION
Summit Design, Inc. is a leading provider of graphical design entry and
verification software tools and design to test software tools. The Company's
products assist integrated circuit ("IC" or "chip") system, design and test
engineers in meeting the market demands for rapid time to market, increased
product functionality and lower product cost. Summit's graphical SLDA products
enable IC systems and design engineers to create and verify IC designs using
familiar graphical paradigms such as block diagrams, state machines, flow
charts or truth tables rather than the less intuitive textual HDL code
required by synthesis and simulation tools. The Company's SLDA products
automatically generate optimized HDL descriptions from graphical designs,
eliminating time consuming and error prone manual entry of HDL code. The
Company's Design to Test products provide a graphical simulation test data
creation, graphical simulation results analysis and automatic manufacturing
test program generation.
BACKGROUND
Electronic design automation ("EDA") software has played a critical role in
accelerating the dramatic advances in the electronics industry over the past
two decades. The need for EDA has resulted from the increasing complexity of
ICs as well as the increasing number of new IC design starts and the scarcity
of skilled IC design and test engineers. The increase in the complexity of ICs
lengthens the development cycle while, at the same time, competitive pressures
shorten product life cycles. The objectives of EDA are to reduce time to
market and the costs associated with product design and verification while
permitting the development of a greater number of designs of higher speed and
density chips that can be reliably manufactured and tested.
IC development productivity has increased through the evolution of EDA, but
has significantly lagged fabrication technology in recent years. Fabrication
technology has advanced from the ability to produce chips with over 1 thousand
gates at 5 micron line-widths in the 1970s, to more than 10,000 gates in the
1980s, to greater than 1 million gates at sub 0.5 micron line-widths today.
For example, the processor used in the original IBM PC in 1981 had
approximately 10,000 gates and was manufactured using 3 micron process
technology, whereas the Pentium Pro introduced in 1995 contains approximately
2 million gates and is manufactured using 0.35 micron process technology. This
trend of higher levels of integration is expected to continue since the
benefits include increasing speed and functionality at decreasing cost.
In contrast to the progress in fabrication technology, the productivity of
the average design engineer has not kept pace. For example, an average
engineer would typically design approximately 8 gates per day in the mid-
1970s, approximately 40 gates per day in the early 1980s and nearly 400 gates
per day in the late 1980s and early 1990s. As a result, a greater number of
engineering hours are required to produce many of today's more complex
designs, leading to either longer development schedules or the need for larger
design teams. To address this challenge, organizations with IC design
capabilities continue to search for EDA tools that enable them to increase
their productivity and meet the aggressive development schedules dictated by
competitive forces.
Advances in EDA
EDA tools emerged in the early 1970s with the introduction of computer aided
design ("CAD") software that permitted engineers to textually enter designs of
several thousand gates, and in the early 1980s evolved to computer aided
engineering ("CAE") software that enabled engineers to graphically enter
designs of tens of thousands of gates. Despite the advantages of graphical CAE
tools, design at the gate level became
30
<PAGE>
impractical and more error prone as design complexities and gate counts
increased. To address these problems, textual HDLs, logic synthesis and
functional level simulation tools were introduced in the late 1980s, allowing
engineers to engage in high level design automation ("HLDA"). To use the HLDA
methodology, engineers are required to describe their IC design in a textual
HDL, such as VHDL or Verilog. After the design is coded in HDL, the HDL
description can be executed using simulation software to emulate the operation
of the desired IC, allowing the engineer to debug the design without building
a hardware prototype. The HDL description can be automatically translated to a
gate level description using a synthesis software tool.
The Importance of Test
Once the IC development process has been completed and verified,
manufacturing can begin. As a part of the manufacturing process, millions of
chips are tested to verify their quality and functionality prior to shipment.
Manufacturing test must be both fast and exhaustive to allow high volume
manufacturing of ICs that approach a zero defect level. Test plays such a
critical role in the manufacturing process that chips are sometimes re-
designed just to optimize testability. Manufacturing test typically involves
multi-million dollar hardware test equipment running a software test program
which utilizes millions of elements of timing and pattern data for each chip
under test. The software test programs are typically produced after the design
process is completed but before manufacturing can begin. Today, EDA suppliers
provide automatic test program generation software tools that assist test
engineers in acquiring vast amounts of timing and pattern data from gate level
simulation tools. These tools then create a manufacturing test program by
combining the data with program templates for specific hardware test
equipment. Significant profits from the sale of ICs and related systems can be
lost as a result of delays in the completion of an adequate manufacturing test
program.
Limitations of HLDA and Test
HLDA tools have enabled engineers to accelerate IC development schedules and
create more complex chips. However, these tools have significant limitations.
First, the conventional design flow for IC engineers using HLDA tools is to
represent a design in hand-drawn graphical paradigms such as block diagrams,
state machines, flow charts or truth tables, and then laboriously translate
their hand-drawn graphical designs into a textual HDL which resembles software
program code. This process is time consuming and error prone, and requires the
engineer to master a complex programming language. Second, the numerous lines
of HDL code that comprise a design are very difficult for engineering teams to
understand and communicate during design reviews and equally difficult for
engineering management to understand and evaluate. Third, while it would be
possible to accelerate time to market by reusing portions of HDL code where
similar functions are needed, reuse of HDL code is difficult and often avoided
because the complex HDL code complicates understanding the design's functional
intent. Fourth, the HLDA methodology is further limiting because textual HDL
code typically must be written in either Verilog or VHDL and according to
strict rules unique to a specific synthesis tool. This limits the ability of
engineers to increase synthesis efficiency by using various HDL languages and
multiple synthesis tools. Finally, the lack of stylistic restrictions in HDLs
often allows designers to express an IC functional design several different
ways. As a result, an HDL design could comply with HDL programming constraints
and yet not be able to be synthesized. As importantly, the lack of
restrictions allows a designer to produce an HDL description that can be
synthesized but that is not as efficient in terms of the resulting gate count
or circuit timing. Further, the lack of programming consistency between
engineers arising from the lack of stylistic restrictions complicates design
team management and design integration. Primarily as a result of the above
shortcomings, adoption of HLDA tools as of 1995, had been limited to
approximately 11% of the estimated 285,000 IC design engineers worldwide.
Although EDA suppliers today provide automatic test program generation
software tools, test engineers are still required to spend substantial time
debugging the test programs and the timing and pattern data on the actual
manufacturing test equipment that will be used to test the ICs. This effort
lengthens time to market and consumes valuable equipment process time that
would otherwise be used for manufacturing test. The
31
<PAGE>
timing and pattern data required by these test programs is either hand coded
or converted from the output of gate level simulators. As a result, the time
required to develop a test program and the related data is often longer than
the time required to complete the IC design. In addition, although the
preparation of test data begins during design simulation, the lack of
integration of HLDA and automatic test program generation tools forces the
design process and the test preparation process to be separate and serial. The
separate nature of design and test preparation often results in duplicative
efforts of design and test engineers which can lead to delayed product
introduction. The serial nature of design and test preparation can delay
recognition of unacceptable testability characteristics of an IC which can
result in chip redesign.
In order to meet the market's demands for more powerful, higher density ICs
and to reduce both time to market and cost, IC designers and manufacturers
seek design and test tools that overcome the limitations of the current HLDA
and test development methodologies.
THE SUMMIT SOLUTION
Summit offers software products to assist design and test engineers in
meeting the market demands for rapid time to market, increased product
functionality and lower product cost. In 1994, Summit introduced Visual HDL
for VHDL, its first graphical SLDA product, which accelerates the development,
verification and documentation of single function ICs as well as complete
systems on a chip. Summit's SLDA products automate manual design entry and
verification by enabling IC systems and design engineers to create and verify
IC designs using familiar graphical paradigms such as block diagrams, state
machines, flow charts and truth tables, rather than less intuitive textual HDL
code. The Company's Design to Test software tools allow the design or test
engineer to graphically create simulation test data and compare simulation
results. The Design to Test software also automatically generates
manufacturing test programs. The Company's most recently introduced Design to
Test product integrates the design and test processes and allows the design
engineer and test engineer to cooperatively develop simulation and
manufacturing test programs.
The Company's software products enable organizations to more easily realize
the benefits of HLDA by simplifying and automating IC design entry and
verification and by linking manufacturing test to design.
THE CONVENTIONAL THE SUMMIT DESIGN PROCESS
HLDA TOP-DOWN DESIGN PROCESS
[GRAPHIC SHOWING STEPS [GRAPHIC SHOWING STEPS IN THE
IN THE CONVENTIONAL HLDA TOP-DOWN DESIGN PROCESS USING
TOP-DOWN DESIGN PROCESS] SUMMIT'S SOFTWARE PRODUCTS]
32
<PAGE>
The Company believes that its products provide the following benefits:
Increased Design Productivity
Summit's SLDA products enhance designers' ability to create, verify and
document HDL designs while managing the HDL development environment. These
products provide the ability to capture, analyze and verify a variety of high
level graphical descriptions and automatically produce a synthesis-ready HDL
design, thus eliminating the need to perform time-consuming and error-prone
manual coding in an HDL. These familiar graphical descriptions are more easily
debugged and more easily communicated among IC engineering team members. The
descriptions also facilitate review and approval by engineering management.
Design Reuse, Re-targeting and Consistency
The Company's SLDA products enable engineers to use libraries of existing
VHDL or Verilog code. This code can be used as HDL inputs or automatically
converted into a graphical format. Due to the widespread ability of engineers
to understand this graphical format, designs can be more easily modified and
reused in future developments. In addition, Summit's products can optimize the
design output for nearly all of the EDA industry's standard synthesis and
simulation tools. In the event the designer requires a different synthesis or
simulation tool, the design can be automatically re-targeted to optimize the
HDL output for the desired tool set. Finally, because each engineer's work is
implemented using the Company's software, which automatically generates the
actual HDL code, design efficiency and consistency is maintained even when
several engineers work on a project.
Ensure Chip Functionality and Manufacturing Testability
The Company's Design to Test tools provide design and test engineers with
the capability to graphically develop simulation test pattern and timing data
and assist the engineers in the analysis of the complex and voluminous
simulation results. These graphical tools allow the engineer to check the IC
under development for manufacturing testability prior to release from the
design cycle, minimizing the need to re-design for improved manufacturing
testability. Summit's Design to Test tools automate test program generation,
thus reducing the need to debug test programs on expensive and highly utilized
manufacturing test equipment.
Reduced Test Development Time
The Company's Visual Testbench product, released in the fourth quarter of
1995, integrates the efforts of design engineers and test engineers to reduce
the time required for manufacturing test development. This product
automatically converts the millions of elements of pattern and timing data
from the graphically prepared simulation input and from simulation results.
The converted information is then combined with tester specific templates to
automatically generate manufacturing test programs. The Company believes that
Visual Testbench can reduce manufacturing test preparation time significantly.
STRATEGY
The Company's mission is to be the leading supplier of SLDA and Design to
Test software and to achieve wide-spread acceptance of these technologies. The
key elements of the Company's strategy to achieve this mission are as follows:
Accelerate Market Adoption of SLDA
Summit intends to expand market acceptance by focusing on key customer
accounts to ensure their successful adoption of the SLDA methodology. The
Company believes that successful adoption by certain key customers in various
industries will promote adoption by other customers within those industries.
The Company also believes that its joint development and marketing programs
with industry leaders promote awareness and adoption of SLDA. In addition,
Summit supports all of the industry's major synthesis, simulation, layout and
test products and continues to support and complement new standards as they
emerge. The Company also targets student engineers by introducing them to its
SLDA products through programs with various universities.
33
<PAGE>
Integrate Design to Test Into SLDA Methodology
The Company is leveraging its test expertise by integrating its Test
Development Series technology into the SLDA design process. This integrated
approach can significantly reduce users' time to market by permitting test
design to occur in parallel with, and as part of, product design. The
Company's first step in implementing this strategy was its recent introduction
of Visual Testbench, a graphical tool that allows the design and test engineer
to verify designs and automatically generate test programs. The Company
intends to develop additional features and functionality in the areas of
graphical user interface and parallel test development with the goal of
reducing or eliminating manual test development.
Leverage SLDA Technology Leadership
The Company intends to continue to advance its technological leadership in
graphical design entry and verification to meet the future needs of current
users and to provide compelling reasons for adoption by new users. For
example, the Company's addition of Visual HDL for Verilog in the fourth
quarter of 1995 extended its graphical SLDA methodology to a new group of
users. In the future, the Company intends to support other important modeling
languages such as C and C++.
Broaden the Scope of SLDA
The Company will continue to identify challenges facing both IC systems
engineers and IC design engineers in the areas of SLDA and Design to Test and
to focus its development efforts on products to further increase productivity
in the creation, verification, documentation and test of single function ICs
and complete systems on a chip. The Company believes that power, timing,
thermal and cost constraints management and analog circuit design will become
increasingly significant bottlenecks, especially in the area of complete
systems on a chip. Summit believes that in the future its SLDA products will
provide a graphical means for both systems and design engineers to specify the
functional intent and simulate the interoperability of hardware and software,
as well as the capability to perform what-if analysis on constraints such as
power, speed, temperature and cost at the front end of the development
process.
PRODUCTS
The Company's SLDA products, Visual HDL for VHDL and Visual HDL for Verilog,
provide system design management, graphical design entry, graphical level
simulation, HDL code generation and high speed compiled simulation. These
products are the result of a focused five-year development effort of
approximately 40 EDA software development experts, and today are in their
third major release. The Company's Design to Test products, Test Development
Series ("TDS") and Visual Testbench, provide graphical simulation test data
creation, simulation results analysis and automatic manufacturing production
test program generation. The TDS product has been developed over a 15 year
period, and today is in its eighth major release. Visual Testbench has been
under development since 1994 and was first released in the fourth quarter of
1995.
The Company's products are constructed using modern software design methods
and programming languages such as C and C++. All of the Company's products
operate on the industry's most popular UNIX workstations, while Visual HDL for
VHDL also operates on PCs running Windows 3.1, Windows 95 and Windows NT.
System Level Design Automation
Visual HDL for VHDL and Visual HDL for Verilog (together, "Visual HDL") are
graphical entry and verification solutions designed to simplify and accelerate
top-down design. Visual HDL can raise productivity by allowing system level,
behavioral level and functional level design entry using graphical design
methods such as block diagrams, state machines, flow charts and truth tables.
As a result, engineers no longer need to textually program their designs in
lines of VHDL or Verilog code. Once the design is graphically captured, Visual
HDL can then automatically generate synthesizable HDL code that is optimized
for specific synthesis tools.
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Set forth below is a depiction of a block diagram, state machine, flow chart
and truth table created by design engineers using the Company's SLDA products.
[GRAPHIC SHOWING SCREEN SHOTS OF A BLOCK DIAGRAM, STATE MACHINE, FLOW CHART
AND TRUTH TABLE CREATED USING SUMMIT'S SLDA PRODUCTS]
Visual HDL for VHDL uses VHDL as its internal data format and Visual HDL for
Verilog uses Verilog as its internal data format, allowing both products to
support all the hardware modeling features of both of these standard HDL
languages. Competing products typically use proprietary internal languages
making them more difficult to use because the design engineer must learn an
additional textual language. Such products do not take full advantage of the
functionality of VHDL or Verilog, thus limiting the level of integration that
can be achieved with industry standard simulation and synthesis tools.
The Visual HDL design environment offers several benefits to top-down
designers, including: easier design entry, verification and reuse, and faster,
more complete design debugging. Because Visual HDL represents HDL code
graphically, designers can better communicate their ideas in a much more
intuitive manner. This allows experienced and novice HDL designers to work
together efficiently. Visual HDL automatically generates HDL code that is
optimized for efficient synthesis. It can also import VHDL or Verilog code and
automatically generate graphics from this source text. Utilizing the graphical
representations generated by Visual HDL, designers are able to quickly
determine the original design intent, allowing them to save time by reusing
design components in future designs. An important aspect of Visual HDL is its
graphical simulation and debug environment. This environment allows designers
to view the path of simulation execution and the simulation results. This
gives them the opportunity to shorten development time by focusing on
debugging their circuits instead of debugging their HDL code. Visual HDL also
provides point-and-click functionality which allows engineers to quickly
determine the cause of a bug by highlighting the specific line of text and the
related graphical representation where the error exists, thereby significantly
shortening the time to debug a program.
Visual HDL operates in both VHDL and Verilog on UNIX workstations and in
VHDL on PCs. It supports a broad range of HLDA synthesis and simulation
products, including products from Synopsys, Mentor Graphics, Cadence,
VIEWlogic, Compass, IBM, Altera, Simplicity and Exemplar. Visual HDL for VHDL
was first shipped in the first quarter of 1994, and Visual HDL for Verilog was
first shipped in the fourth quarter of 1995. To date, the Company has licensed
over 1,100 seats of Visual HDL. The fourth major release is scheduled for the
second half of 1996.
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Visual HDL's single seat list price ranges from $12,500 to $46,800. The list
price of the UNIX workstation version of Visual HDL for VHDL is higher than
that for PCs. The actual price for a system also varies depending on the
duration of the license and the simulation features included. For example,
because Visual HDL for VHDL generally includes a Summit simulator, its price
is higher than Visual HDL for Verilog, which uses the Verilog XL simulator
sold by Cadence. Finally, the Visual HDL price for a floating license commands
a premium over the node locked version since it offers multi-user flexibility.
Design to Test Products
Test Development Series is a vendor-independent test software development
system with a comprehensive portfolio of tools designed to automatically
convert gate-level simulation data to test programs that operate on automatic
manufacturing test equipment. TDS provides simulation analysis, stimulus
generation, simulation rules checking, tester resource checking, automatic
manufacturing test equipment test program generation and test program
conversion. TDS accepts data from more than 30 of the industry's leading gate
level simulators and more than 20 automatic test pattern generators and
produces test programs for more than 80 models of ATE equipment.
Set forth below is a depiction of graphical simulation data created using
the Company's TDS products.
[GRAPHIC SHOWING GRAPHICAL SIMULATION DATA
CREATED USING SUMMIT'S TDS PRODUCTS]
Test development engineers use TDS to convert design simulation data into
optimized and debugged test programs. TDS can reduce test program development
costs and can improve the quality of manufacturing test programs by providing
a graphical environment to view, manage and manipulate the vast amounts of
text-based test data. TDS provides simulation data converters and test program
generators (wavebridges) through a central database. This can help engineers
move test programs from one tester to another, providing greater flexibility
in the use of manufacturing test equipment. In addition, TDS offers
specialized timing data management tools that assist in the development of
test programs that can help IC manufacturers efficiently sort parts by their
operating speed. The ninth major release for TDS is scheduled for the fourth
quarter of 1996.
A typical fully configured TDS system would include graphical wave editors,
a library of simulation data converters and a wavebridge and would have a list
price of approximately $100,000. However, the components of a TDS system can
be sold individually. For example, each of the Company's installed base of
customers needs to purchase a new wavebridge for each new tester which the
customer uses in its manufacturing process. The list prices for components
range from approximately $15,000 for a simulation data converter to $40,000
for a wavebridge, excluding any additional development costs that may be
charged to the customer in connection with customized or special orders.
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Visual Testbench provides a new methodology for creating simulation
stimulus, validating device specifications and tying simulation results
directly to test. Visual Testbench provides a structured solution to a task
traditionally resolved by manually writing lines of HDL code. Visual Testbench
is designed to raise productivity by providing graphical timing diagrams,
specification spreadsheets and flowcharts for simulation stimulus creation. In
addition, this product allows the designer to check that timing requirements
have been met by the simulation. Unique to Visual Testbench is its ability to
directly connect a Verilog simulation to ATE test equipment. In addition, the
Company is currently developing a VHDL version of Visual Testbench. The
Company believes that the market for Visual Testbench will be primarily design
teams and, as a result, the test development function will, to an extent, be
performed during the design phase. Visual Testbench's structured test program
development process should allow design teams to spend less time explaining
their test programs to test engineers or trying to put their devices into
production. The second major release for Visual Testbench is scheduled for the
second half of 1996.
The list price for Visual Testbench ranges from $25,000 to $40,000 depending
on the configuration. Visual Testbench provides a new methodology for creating
IC test programs. The Company anticipates a lengthy period of test marketing
for Visual Testbench. Accordingly, the Company cannot predict the extent, if
any, to which it will realize revenue from this product.
The Company's revenue is predominantly derived from two product lines,
Visual HDL, which includes Visual HDL for VHDL and Visual HDL for Verilog, and
TDS, and the Company believes that these products will continue to account for
a substantial portion of its revenue in the future. The Company's future
success depends primarily upon the market acceptance of its existing and
future SLDA products. The Company's SLDA products incorporate certain unique
design methodologies and thus represent a departure from industry standards
for design entry and verification. The Company believes that broad market
acceptance of its SLDA products will depend on several factors, including the
ability to significantly enhance design productivity, ease of use,
interoperability with existing EDA tools, price and the customer's assessment
of the Company's financial resources and its technical, managerial, service
and support expertise. Although demand for SLDA products has increased in
recent years, the market for SLDA products is still emerging and there can be
no assurance that it will continue to grow or that, even if the market does
grow, businesses will continue to purchase the Company's SLDA products. A
decline in the demand for, or the failure to achieve broad market acceptance
of, the Company's SLDA products will have a material adverse effect on the
Company's business, financial condition and results of operations.
CUSTOMERS
The Company's end-user customers include companies in a wide range of
industries, including semiconductor devices, semiconductor test equipment,
telecommunications, computer/peripherals, consumer electronics,
aerospace/defense and other electronics entities. The Company has installed
more than 1,100 seats of its SLDA tools in more than 125 companies, of which
more than 100 companies have entered into support contracts. In addition, the
Company has more than 250 active installations of its Design to Test products.
No single customer represented more than 10% of the Company's total revenue in
1995. The following table lists a representative sample of the Company's
worldwide end-user customers that generated at least $25,000 in revenue for
the Company in 1995 or 1996.
<TABLE>
<CAPTION>
SEMICONDUCTOR SEMICONDUCTOR COMPUTER/ CONSUMER AEROSPACE/
DEVICES TEST EQUIPMENT TELECOMMUNICATIONS PERIPHERALS ELECTRONICS DEFENSE OTHER
- ----------------- -------------- ------------------- --------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
AMD Advantest Bay Networks Compaq Canon Allied Signal Anam
Level One Credence Bell Northern Fujitsu Honeywell Hughes Aircraft Fuji/Xerox
Microchip Teradyne Ericsson Hewlett-Packard Matsushita Lockheed-Martin InFocus Systems
Motorola General Instruments Hitachi Mitsubishi Rockwell Lucky Goldstar
National Semi. Hitachi IBM NEC TRW Sumitomo Metal
SGS-Thomson Lucent OKI Philips Xerox
Texas Instruments Nippon Denso Seagate Sharp Zenith
Northern Telecom Siemens Sony
Rohm Storage Tech.
</TABLE>
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The following examples illustrate the selection and use of the Company's
products by certain of the Company's customers. There can be no assurance that
new or existing customers will achieve any of the benefits described below.
A supplier of networking products used Visual HDL to develop a twelve-port
Ethernet switch with an integrated ATM port for backbone or server
connectivity. For this customer, minimizing time-to-market was critical to
meeting market-share and profit objectives. The design team coded the entire
design in Visual HDL. The final chip consisted of graphical constructs
representing 60,000 lines of VHDL code that synthesized into 115,000 gates.
The ability to design and debug the chip using Visual HDL contributed to this
customer meeting its design schedule.
A workstation division of a computer supplier used Visual HDL to
successfully re-target an 11,000 gate ASIC for a workstation graphics chip.
The primary engineer had worked on the design for over two months targeting a
specific ASIC process. When the design needed to be re-targeted to a second
ASIC technology, the designer was able to retarget the design in less than one
day using Visual HDL. The same task could have taken the engineer up to a
month to complete using traditional re-targeting methods.
A computer peripheral manufacturer designed a 10,000-gate interrupt/local
bus controller using Visual HDL. The design team had to complete the new
design in three to four months, and had differing levels of design experience.
The engineer working on the most significant parts of the design had very
little knowledge of HDL-based design. The team leader estimated that it would
have taken up to two months to sufficiently familiarize the engineer with the
HDL code. The graphical design environment of Visual HDL enabled the engineer
to effectively communicate with the other team member and familiarize himself
with the HDL code. The design was completed on schedule.
A product line group at a semiconductor manufacturer purchased Test
Development Series products to replace its prior older generation test
manufacturing solution. The group thereafter has used TDS products in
substantially all of its test development. For example, TDS products were used
to create a different test program and translate Verilog scan vectors to a
different environment for a battery pack power management chip. The
translation was functionally correct and required little debug time.
MARKETING AND SALES
The Company markets its products to customers worldwide who design or
manufacture ICs for their own use or sale in a wide variety of industries. The
primary objectives of the Company's marketing effort are to increase market
awareness of the Company's products, to promote the adoption of SLDA and
Design to Test methodologies, and to evaluate customer satisfaction and
determine additional customer demands. To increase market awareness, the
Company displays its SLDA and Design to Test products at all major industry
trade shows, including the annual Design Automation Conference and
International Test Conference. The Company also promotes its products through
advertisements in trade journals and by sponsoring various seminar series. To
promote the adoption of its methodologies, the Company offers its products at
a reduced cost to design engineer programs at several universities so that
engineering students may become familiar with Summit's products and design
techniques.
The Company's sales strategy is to employ its direct sales, independent and
affiliated distributors and telesales distribution channels to efficiently and
effectively target individual customer and product market segments. As of
March 31, 1996, the Company had 29 employees in its sales organization and six
people in its marketing group.
Direct Sales. The Company employs direct sales teams which combine
technically proficient sales persons with skilled field applications engineers
capable of serving the sophisticated needs of the management and engineering
staff of its customers. The Company assigns selected direct sales personnel to
target major
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accounts, such as vertically integrated systems design houses like Lucent,
IBM, Motorola and Siemens that produce their own IC designs for their
electronic products. Major accounts receive particular focus because of their
size and influence as industry leaders.
Following the release of Visual HDL for VHDL, the direct sales force
concentrated on promoting that product, and sales efforts related to TDS
products decreased. The Company recently has adopted a strategy of designating
sales personnel as either SLDA or Design to Test specialists in an effort to
ensure that each product line receives focused attention from members of
Summit's direct sales force. The Company's direct sales force operates in the
United States and portions of Europe, with offices in California, Oregon,
Texas, Massachusetts, Florida, France and Germany. Approximately 41.6% and
58.0% of the Company's revenue for the first quarter of 1996 and for the year
ended December 31, 1995, respectively, were generated through Summit's direct
sales force.
Distributors. Distributors promote and distribute the Company's products in
the Asia-Pacific region, the United Kingdom, France, Germany, Sweden, Italy
and Israel. Approximately 58.4% and 42.0% of the Company's revenue in the
first quarter of 1996 and in the year ended December 31, 1995, respectively,
were attributable to sales made through distributors. During the fourth
quarter of 1995, the Company entered into an exclusive distribution agreement
with ATE pursuant to which ATE was granted exclusive rights to sell,
distribute and support all of Summit's Design to Test products within Japan
until October 1998, subject to the Company's ability to terminate the
relationship if ATE fails to meet quarterly sales objectives. The agreement
may also be terminated by either party for breach. In addition, in the first
quarter of 1996, the Company entered into a three-year, exclusive distribution
agreement for its SLDA products in Japan with Seiko. In the event Seiko fails
to meet specified quotas for two or more quarterly periods, exclusivity can be
terminated by Summit, subject to Seiko's right to pay a specified fee to
maintain exclusivity. The agreement is renewable for successive five-year
terms by mutual agreement of the Company and Seiko and is terminable by either
party for breach.
In March 1996, to centralize management of the distribution of the Company's
products in the Asia-Pacific region, excluding Japan, the Company entered into
a joint venture with Anam, pursuant to which the joint venture corporation
(Summit Asia) was granted exclusive rights to manufacture, sell, distribute
and support all of Summit's products in the Asia-Pacific region, excluding
Japan. Prior to the joint venture, Anam had acted as an independent
distributor of the Company's products. The joint venture provides a direct
sales force for the Company's products in Korea and facilitates management and
support of the independent distributors that market the Company's products in
Taiwan, Singapore, Hong Kong, Australia, Malaysia and India. Anam currently
owns approximately 80% of the stock of Summit Asia. However, as payments are
made by Summit Asia to Anam for the repurchase from Anam of certain rights
related to Summit's products, and as stock options are exercised by employees
and board members, Summit's percentage ownership can increase until it is
equal to that of Anam. The Board of Directors of Summit Asia currently
consists of two representatives from Anam, one from Summit Asia and one from
Summit. Actions of the Board require approval of 75% of the directors. There
can be no assurance that this joint venture will be effective in maintaining
or increasing sales or efficiencies relative to the levels experienced prior
to the joint venture.
Telesales. Telesales is currently used to market the renewal of maintenance
and technical support agreements for both SLDA and Design to Test products in
North America, allowing the direct sales force to concentrate its efforts on
new accounts. The Company expects its use of the telesales channel to grow in
the future, in applications such as the marketing of product upgrades and add-
on business.
Approximately 60.9% and 52.2% of the Company's revenue for the three months
ended March 31, 1996 and the year ended December 31, 1995, respectively, were
attributable to sales made outside of North America. In order to successfully
expand international sales, the Company may need to establish additional
foreign operations, hire additional personnel and recruit additional
international distributors. This will require
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<PAGE>
significant management attention and financial resources and could adversely
affect the Company's operating margins. In addition, to the extent that the
Company is unable to effect these additions in a timely manner, the Company's
growth, if any, in international sales will be limited. There can be no
assurance that the Company will be able to maintain or increase international
sales of the Company's products, and failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company's reliance on distributors involves certain risks. For example,
the Company is dependent on the continued viability and financial stability of
its distributors. Since the Company's products are used by skilled design
engineers, distributors must possess sufficient technical, marketing and sales
resources and must devote these resources to a lengthy sales cycle, customer
training and product service and support. Only a limited number of
distributors possess these resources. In addition, the Company's distributors
generally offer products of several different companies. There can be no
assurance that the Company's current distributors will continue to market or
service and support the Company's products effectively, that any distributor
will continue to sell the Company's products or that the distributors will not
devote greater resources to products of other companies. The loss of, or a
significant reduction in, revenue from the Company's distributors could have a
material adverse effect on the Company's business, financial condition and
results of operations.
CUSTOMER SERVICES
Technical support is available to customers on both a pre-sale and post-sale
basis. Pre-sale support involves the Company's application engineers working
with the Company's direct sales force and distributors to provide on-site
support during the end user's evaluation and implementation process. Post-sale
support is provided through annual service agreements which provide customers
with a choice of two programs. The first program allows the customer to access
the Company's technical support team via telephone and receive all minor
enhancements and any major upgrades. This program is sold for 20% of the list
price of the product. Under the second program, the customer purchases
telephone technical support for 8% of the list price of the product and can
purchase upgrades for between 15% and 20% of the list price depending on the
technical content of the upgrade and the current version used by the customer.
In addition to its maintenance, technical support and upgrade fees, the
Company also conducts a variety of training programs ranging from introductory
level courses to advanced training on full use of all of its products.
Training is offered at the Company's facilities, at distributors' facilities
and at customer locations worldwide. The Company intends to further expand its
focus on customer training. For the three months ended March 31, 1996 and the
year ended December 31, 1995, maintenance and services provided approximately
19.9% and 18.7% of the Company's total revenue, respectively.
COMPETITION
The EDA industry is highly competitive and the Company expects competition
to increase as other EDA companies introduce SLDA and Design to Test products.
The Company faces different competitive dynamics in the markets for its SLDA
and Design to Test products. In the SLDA market, the Company principally
competes with Mentor Graphics and a number of smaller firms. Indirectly, the
Company also competes with other firms that offer alternatives to SLDA and
could potentially offer more directly competitive products in the future.
Certain of these companies have significantly greater financial, technical and
marketing resources and larger installed customer bases than the Company. Some
of the Company's current and future competitors offer a more complete range of
EDA products and may distribute products that directly compete with the
Company's SLDA products by bundling such products with their core product
line. In addition, the Company's products perform a variety of functions,
certain of which are, and in the future may be, offered as separate products
or discrete point solutions by the Company's existing and future competitors.
For example, certain companies currently offer design entry products without
simulators. There can be no assurance that such competition will not cause the
Company to offer point solutions instead of, or in addition to, the
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<PAGE>
Company's current software products. Such point solutions would be priced
lower than the Company's current product offerings and could cause the
Company's average selling prices to decrease, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. In the Design to Test market, the Company competes primarily with
the internal design groups of its existing and potential customers, many of
which to date have designed and developed customized Design to Test tools for
their particular needs, as well as smaller emerging companies.
The EDA industry has experienced significant consolidation in recent years
and the acquisition of one of the Company's competitors by a larger, more
established EDA vendor could create a more significant competitor. The Company
competes on the basis of certain factors including product capabilities,
product performance, price, support of industry standards, ease of use, first
to market and customer technical support and service. The Company believes
that it competes favorably overall with respect to these factors, but there
can be no assurance that the Company will be able to compete successfully
against current and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on its business, financial
condition and results of operations. There can be no assurance that the
Company's current and future competitors will not be able to develop products
comparable or superior to those developed by the Company or to adapt more
quickly than the Company to new technologies, evolving industry trends or
customer requirements. Increased competition could result in price reductions,
reduced margins and loss of market share, all of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
PRODUCT DEVELOPMENT
The Reorganization in early 1994 resulted in the joining of SEE
Technologies, a technological leader in graphical design entry and
verification, with TSSI, a technological leader in production test products.
Thus, development of SLDA products has been performed at the Company's offices
in Israel and development of Design to Test products has been conducted at the
Company's principal office in Beaverton, Oregon. As of March 31, 1996, the
Company's research and development team consisted of 64 software developers,
including 38 dedicated to the Company's SLDA products and 26 focused on Design
to Test products.
For the three months ended March 31, 1996 and for the years ended December
31, 1995, 1994 and 1993, the Company's research and development expenditures
were approximately $1.3 million, $5.1 million, $4.6 million and $2.4 million,
respectively, which represent approximately 28.9%, 36.3%, 35.7% and 32.9% of
revenue in each such period. The Company has to date expensed all research and
development costs as incurred. In addition, the Company has received grants
from the Israeli Chief Scientist. See "--Operations in Israel" and
Consolidated Financial Statements.
Summit's research and development strategy is to be proactive in determining
customer needs and to develop new SLDA and manufacturing test products to meet
these needs. The Company believes that system-level definition and design
analysis will become increasingly significant bottlenecks in the IC
development process and thus present product development opportunities. The
Company's research and development efforts are focused on creating products to
further increase productivity in the creation, verification, documentation and
production test of both IC and system level designs. Accordingly, in addition
to continued development of SLDA and TDS products, the Company is continuing
to dedicate resources to integrating its TDS technology into the SLDA design
process. Visual Testbench, first shipped in the fourth quarter of 1995, is a
product of such efforts.
The Company has actively sought to establish cooperative relationships with
certain EDA industry leaders in order to gain early access to new product
information and to better integrate the Company's products with those supplied
by other vendors in the EDA market. For example, the Company established a
relationship with Advantest in the Design to Test area through which the
Company received product information from Advantest from which the Company
developed a wavebridge for a third party customer. In addition, in the SLDA
products area, the Company has a relationship with Cadence in which Cadence
helps specify the
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<PAGE>
integration between Summit's Visual HDL for Verilog and Cadence Verilog XL
simulator. The Company believes that these relationships mutually benefit the
Company and the EDA vendors by fostering development and facilitating
interoperability of the Company's and vendors' complimentary products. These
relationships may be terminated by either party with limited notice. In
addition, such relationships are with companies that are current or potential
future competitors of the Company. If any of these relationships were
terminated and the Company was unable to obtain in a timely manner information
regarding modifications of third party products necessary for modifying its
software products to interoperate with these third party products, the Company
could experience a significant increase in development costs, the development
process would take longer, product introductions would be delayed and the
Company's business, financial condition and results of operations could be
materially adversely affected.
The EDA industry is characterized by extremely rapid technological change,
frequent new product introductions and evolving industry standards. The
introduction of products embodying new technologies and the emergence of new
industry standards can render existing products obsolete and unmarketable. In
addition, customers in the EDA industry require software products that allow
them to reduce time to market, differentiate their products, improve their
engineering productivity and reduce their design errors. The Company's future
success will depend upon its ability to enhance its current products, develop
and introduce new products that keep pace with technological developments and
emerging industry standards and address the increasingly sophisticated needs
of its customers. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new products
that respond to technological change or emerging industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these products, or that
its new products will adequately meet the requirements of the marketplace and
achieve market acceptance. The Company has announced that it plans to release
new versions of certain of its products in the second half of 1996. If the
Company is unable, for technological or other reasons, to develop and
introduce products in a timely manner in response to changing market
conditions, industry standards or other customer requirements, particularly if
such product releases have been pre-announced, the Company's business,
financial condition and results of operations would be materially adversely
affected.
The Company's Design to Test products employ the Company's WGL format. The
Company permits others to use this format without charge, and the Company
believes that it has been widely adopted in the industry. An industry group in
which the Company currently participates is formulating a new format, STIL,
that it plans to present as a new industry standard. If this standard is
adopted commercially, the Company would be required to provide products that
operate with the STIL format. Development of such products would take
significant effort and expense. Moreover, any delay in the availability of
such products could materially adversely affect the Company's business,
financial condition and results of operations.
Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycles. The
Company has in the past discovered software errors in certain of its products
and has experienced delays in shipment of products during the period required
to correct these errors. There can be no assurance that, despite testing by
the Company and by current and potential customers, errors will not be found,
resulting in loss of, or delay in, market acceptance and sales, diversion of
development resources, injury to the Company's reputation or increased service
and warranty costs, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
PROPRIETARY RIGHTS
The Company's success depends upon its proprietary technology. The Company
relies on a combination of copyright, trademark and trade secret laws,
confidentiality procedures, licensing arrangements and technical means to
establish and protect its proprietary rights. As part of its confidentiality
procedures, the Company generally enters into non-disclosure agreements with
its employees, distributors and corporate partners, and
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limits access to, and distribution of, its software, documentation and other
proprietary information. In addition, the Company's products are protected by
hardware locks and software encryption techniques designed to deter
unauthorized use and copying. Despite these precautions, it may be possible
for a third party to copy or otherwise obtain and use the Company's products
or technology without authorization, or to develop similar technology
independently. In addition, effective protection of intellectual property
rights may be unavailable or limited in certain foreign countries.
The Company provides its SLDA products to end-users primarily under "shrink-
wrap" license agreements included within the packaged software. These
agreements are not negotiated with or signed by the licensee, and thus may not
be enforceable in certain jurisdictions. The Company provides its Design to
Test products to end-users under written license agreements, signed by each
licensee at the time of purchase of a license. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights as fully as
do the laws of the United States. There can be no assurance that the Company's
means of protecting its proprietary rights in the United States or abroad will
be adequate or that competitors will not independently develop similar
technology.
The Company could be increasingly subject to infringement claims as the
number of products and competitors in the Company's industry segment grows,
the functionality of products in its industry segment overlaps and an
increasing number of software patents are granted by the United States Patent
and Trademark Office. There can be no assurance that a third party will not
claim such infringement by the Company with respect to current or future
products. Any such claims, with or without merit, could be time-consuming,
result in costly litigation, cause product delays or require the Company to
enter into royalty or licensing agreements. Such royalty or license
agreements, if required, may not be available on terms acceptable to the
Company or at all. Failure to protect its proprietary rights or claims of
infringement could have a material adverse effect on the Company's business,
financial condition and results of operations.
OPERATIONS IN ISRAEL
The Company's research and development operations related to its SLDA
products are located in Israel and may be affected by economic, political and
military conditions in that country. Accordingly, the Company's business,
financial condition and results of operations could be materially adversely
affected if hostilities involving Israel should occur. This risk is heightened
due to the restrictions on the Company's ability to manufacture or transfer
outside of Israel any technology developed under research and development
grants from the government of Israel as described in "Business--Product
Development." In addition, while all of the Company's sales are denominated in
United States dollars, many of the Company's expenses in Israel are paid in
Israeli currency, thereby subjecting the Company to foreign currency
fluctuations and to economic pressures resulting from Israel's generally high
rate of inflation. The Company's primary expense which is paid in Israeli
currency is employee salaries for research and development activities. As a
result, an increase in the value of Israeli currency in comparison to the U.S.
dollar could increase the cost of research and development expenses and
general and administrative expenses. There can be no assurance that currency
fluctuations, changes in the rate of inflation in Israel or any of the other
aforementioned factors will not have a material adverse effect on the
Company's business, financial condition or results of operations. In addition,
coordination with and management of the Israeli operations requires the
Company to address differences in culture, regulations and time zones. Failure
to successfully address these differences could be disruptive to the Company's
operations.
The Company's Israeli production facility has been granted the status of an
"Approved Enterprise" under the Investment Law. Taxable income of a company
derived from an "Approved Enterprise" is eligible for certain tax benefits,
including significant income tax rate reductions for up to seven years
following the first year in which the company has Israeli taxable income
(after using any available net operating losses). The tax benefits derived
from a certificate of approval for an "Approved Enterprise" relate only to
taxable income attributable to such "Approved Enterprise" and are conditioned
upon fulfillment of the conditions stipulated
43
<PAGE>
by the Investment Law, the regulations promulgated thereunder and the criteria
set forth in the certificate of approval. In the event of a failure by the
Company to comply with these conditions, the tax benefits could be canceled,
in whole or in part, and the Company would be required to refund the amount of
the canceled benefits, adjusted for inflation and interest. The Company
believes that it operates in compliance with all the "Approved Enterprise"
conditions and criteria applicable to it. However, there can be no assurance
that the Company's Israeli production facility will continue to operate or
qualify as an "Approved Enterprise" or that the benefits under the "Approved
Enterprise" regulations will continue, or be applicable, in the future. The
loss of or any material decrease in these income tax benefits could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effective Corporate Tax Rates."
Israeli Research, Development and Marketing Grants. Summit's Israeli
subsidiary has obtained research and development grants from the Chief
Scientist in the Israeli Ministry of Industry and Trade of approximately
$232,000 and $608,000 in 1993 and 1995, respectively. The Company's Visual HDL
for VHDL product is currently based on technology developed with funding from
such grants. As of March 31, 1996, the Company was obligated to pay back
approximately $232,000 and $608,000 for the 1993 and 1995 grants,
respectively. The terms of the grants prohibit the manufacture of products
developed under these grants outside of Israel and the transfer of the
technology developed pursuant to these grants to any person, without the prior
written consent of the Chief Scientist. If the Company is unable to obtain the
consent of the government of Israel, the Company may be unable to take
advantage of strategic manufacturing and other opportunities outside of
Israel. Although the Company is eligible to apply for additional grants from
the Chief Scientist, it has no present plans to do so. The Company also
received a Marketing Fund Grant from the Israeli Ministry of Industry and
Trade for an aggregate of $326,000. The grant must be repaid at the rate of 3%
to 5% of the increase in exports over the 1993 export level of all Israeli
products, until repaid. As of March 31, 1996, approximately $298,000 was
outstanding under the grant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business--Product
Development" and Note 7 of Notes to Consolidated Financial Statements.
EMPLOYEES
As of March 31, 1996, the Company had 118 employees, 64 of whom were engaged
primarily in research and development and related operations, 35 of whom were
engaged primarily in sales and marketing and 19 of whom were engaged primarily
in corporate management and administration. A total of 67 of these employees
were located in the United States, 43 in Israel and eight in Europe and Asia.
The Company's employees are not represented by any collective bargaining
organization and the Company has never experienced a work stoppage. The
Company's future success will depend, in part, on its ability to continue to
attract, retain and motivate highly qualified technical, marketing and
management personnel, who are in great demand.
LITIGATION
The Company is not a party to any material litigation and is not aware of
any pending or threatened litigation that could have a material adverse effect
upon the Company's business, operating results or financial condition.
FACILITIES
The Company's principal facility, located in Beaverton, Oregon, consists of
approximately 31,000 square feet of office space leased pursuant to an
agreement which terminates on December 31, 1999. This space is used for the
Company's U.S. research and development, production, sales and marketing and
administration. The Company also leases approximately 9,800 square feet of
office space in Herzlia, Israel for research and development under a lease
with DCL Technologies that expires on December 31, 1997. The Company expects
that its current facilities will be adequate to serve its needs for the
foreseeable future.
44
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company as of May 31, 1996.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Larry J. Gerhard................. 55 Chairman of the Board, President and
Chief Executive Officer
C. Albert Koob................... 42 Vice President--Finance and Chief
Financial Officer and Secretary
Zamir Paz........................ 47 Vice President--Worldwide Engineering
and Operations and Director
Daniel C. Skilken................ 37 Vice President--Worldwide Marketing
D. Gregory Kott.................. 36 Vice President--North American Sales
Roger A. Bitter.................. 52 General Manager--TSSI Division
Eric Benhayoun................... 42 Vice President--European Sales
Operations
Robert Meehl..................... 35 Corporate Controller
Art Fletcher..................... 31 Treasurer and Director of Financial
Planning
Amihai Ben-David (1)............. 47 Director
John Grillos (1)(2).............. 54 Director
Fred L. Hanson (2)............... 57 Director
Jay B. Morrison.................. 49 Director
Mark Stevens (1)................. 36 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Mr. Gerhard has served as President, Chief Executive Officer and Director of
the Company since January 1993 and was elected Chairman of the Board in May
1996. From November 1991 to November 1992, Mr. Gerhard was the President and
Chief Executive Officer of Enterprise Communications and Computing Inc., a
communications products provider for the Unix-based virtual mainframe market.
Mr. Gerhard was the President and Chief Executive Officer of Ventura Software,
Inc. ("Ventura"), a desktop publishing company and a wholly-owned subsidiary
of Xerox Corporation from November 1989 to November 1991. Prior to that time,
Mr. Gerhard was employed for nine years with Decision Data, Inc., a supplier
of peripherals and applications software for IBM System 3X and AS400,
including the last three years as President and Chief Executive Officer.
Mr. Koob has served as Vice President--Finance and Chief Financial Officer
since October 1995 and Secretary since May 1996. From October 1989 to April
1994, Mr. Koob was the Vice President and Chief Financial Officer of Ventura.
Mr. Koob was the Vice President and General Manager of Decision Business
Solutions, an IBM midrange system reseller, from 1987 to 1989. Prior to 1987,
Mr. Koob held various senior level financial management positions with
technology companies.
Mr. Paz has served as Vice President--Worldwide Engineering and Operations
and Director of the Company since January 1994. From January 1991 to January
1994, Mr. Paz was President and Managing Director of SEE Technologies Software
Environment for Engineers, Ltd. Prior to that time, Mr. Paz was employed for
eight years at Daisy Systems Israel, an EDA provider, where he served as
Director of Design Entry and Technical Marketing.
Mr. Skilken has served as Vice President--Worldwide Marketing since December
1993. From June 1991 to December 1993, Mr. Skilken was the Director of
Corporate Marketing at COMPASS Design Automation, Inc. (a subsidiary of VLSI
Technology) ("COMPASS"), an EDA supplier. From December 1989 to June 1991,
45
<PAGE>
Mr. Skilken was the Director of ASIC Marketing for the IC Group at Mentor
Graphics, an EDA provider. From December 1988 to December 1989, Mr. Skilken
worked at Daisy-Cadnetix, an EDA supplier, most recently as Director of
Semiconductor Industry Marketing. From January 1983 to December 1988, Mr.
Skilken worked at VLSI Tekchnology, a semiconductor manufacturer, where his
last position was Product Marketing Manager for the ASIC Division.
Mr. Kott has served as Vice President--North American Sales since August
1994. From June 1994 to August 1994, he served as Director, Major Accounts.
From January 1994 to May 1994, Mr. Kott was the Western Area Sales Director
for the Logic Modeling Division of Synopsys, an EDA provider. From January
1987 to January 1994, Mr. Kott held various sales positions at Mentor
Graphics, most recently as Director of IC Sales.
Mr. Bitter has served as General Manager--TSSI Division since March 1996.
From January 1994 to February 1996, Mr. Bitter served as Vice President--Far
East Sales Operations. From August 1991 to January 1994, Mr. Bitter was
President of COMPASS Japan K.K. From August 1986 to June 1990, Mr. Bitter held
various positions at Silicon Compiler Systems, an EDA supplier, where he
served most recently as Vice President of Far East Operations. From October
1985 to August 1986, Mr. Bitter served as Vice President--Worldwide Sales for
SDA, an EDA company. From August 1983 to October 1985, Mr. Bitter was the
Western Regional Sales Manager for the Western U.S. sales offices of Mentor
Graphics.
Mr. Benhayoun has served as Vice President--European Sales Operations since
November 1994. From June 1994 to November 1994, Mr. Benhayoun was the European
Marketing Manager for the Modeling Product Division of Synopsys. From March
1990 to June 1994, Mr. Benhayoun was the General Manager and Director of Logic
Modeling Corporation France, an SDA provider which was acquired by Synopsys in
January 1994. Prior to that time, he held various European sales and marketing
management positions with Cadnetix Corporation and Daisy Systems, each an EDA
supplier.
Mr. Meehl has served as Corporate Controller since March 1996. From February
1995 to March 1996, Mr. Meehl was Manager, Financial Planning and Analysis of
TriQuint Semiconductor, Inc. ("TriQuint"), a semiconductor manufacturer. From
January 1992 to February 1995, Mr. Meehl held various positions at the Oregon
Department of Transportation, most recently as Manager, Financial and Economic
Analysis. From March 1990 to January 1992, Mr. Meehl was employed as a
Financial Analyst of Industrial Funding Corporation ("Industrial Funding"), an
equipment leasing company.
Mr. Fletcher has served as Treasurer and Director of Financial Planning
since April 1996. From October 1995 to March 1996, Mr. Fletcher was Director
of Business and Financial Planning. From April 1994 to September 1995, Mr.
Fletcher was Manager of Financial Planning and Systems. From February 1992 to
April 1994, Mr. Fletcher managed the financial planning and analysis function
for TriQuint. Prior to that time, Mr. Fletcher was employed by Industrial
Funding for three years in a finance and accounting position.
Mr. Ben-David has served as a Director of the Company since January 1994. He
has been the founder, Chief Executive Officer and Chairman of DCL Technologies
Ltd., a public company located in Israel and traded on the Tel-Aviv Stock
Exchange, since May 1982. DCL Technologies Ltd. specializes in the development
of high technology companies in the areas of communications, computer
telephony, expert systems and electronic design automation. From January 1991
until the Reorganization, Mr. Ben-David was Chairman of the Board of SEE
Technologies.
Mr. Grillos has served as a Director of the Company since February 1994. Mr.
Grillos has been employed by Robertson, Stephens & Company LLC, an investment
banking firm, in its venture capital group since August 1988. He is also a
director of CBT Group, PLC and of several private companies.
Mr. Hanson has served as a Director of the Company since September 1995. He
has been President and Chief Executive Officer of Information Optics Corp., an
optical memory company, since October 1995. From October 1994 to December
1995, Mr. Hanson was part owner and Chief Executive Officer of Acquisitions,
Mergers and Reorganizations, Inc., a consulting company. From August 1992 to
April 1993, he was President and Chief Executive Officer of Burr-Brown Corp.,
an electronic components company. He was President and
46
<PAGE>
Chief Executive Officer of Bipolar Integrated Technology, an integrated
circuits company, from April 1990 to August 1992. Mr. Hanson started his
career with Hewlett-Packard where his final position was General Manager of
the Corvalis Division in Corvalis, Oregon.
Mr. Morrison has served as a Director of the Company since May 1996. He has
been a General Partner of Newbury Ventures, Inc., a venture capital investment
firm, since January 1992. From July 1990 to December 1991, he was President of
Berkeley International Capital Corp., which was a wholly-owned subsidiary of
Govett & Co. Ltd. that specialized in private equity investments.
Mr. Stevens has served as a Director of the Company since February 1994. He
has been a General Partner of Sequoia Capital VI, a venture capital investment
fund, since March 1993. Prior to that time, beginning in July 1989, Mr.
Stevens was an associate at Sequoia Capital. Mr. Stevens currently serves on
the Board of Directors of Aspect Development, a client/server applications
software company, and several private companies. Prior to working at Sequoia
Capital, Mr. Stevens held technical sales and marketing positions at Intel
Corporation.
The Company's Bylaws currently authorize eight directors, which number may
be changed from time-to-time by the Board of Directors. All directors hold
office until the next annual meeting of stockholders or until their successors
are duly elected and qualified. The Amended and Restated Bylaws which will
become effective upon consummation of this offering provide that, beginning
with the first annual meeting of stockholders following this offering, the
Board of Directors will be divided into three classes, with each class serving
staggered, three-year terms. Certain of the current directors of the Company
were nominated and elected in accordance with voting rights provided to the
various series of preferred stock, which voting rights will terminate when the
preferred stock is automatically converted to common stock upon the closing of
this offering. Executive officers of the Company are elected by the Board of
Directors on an annual basis and serve until their successors have been duly
elected and qualified. There are no family relationships among any of the
executive officers or directors of the Company.
The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee oversees actions taken by the Company's
independent auditors, recommends the engagement of auditors and reviews the
Company's internal audits. The Compensation Committee approves the
compensation of executives of the Company and makes recommendations to the
Board of Directors with respect to standards for setting compensation levels.
The Compensation Committee also administers the Company's employee stock
option and stock purchase plans. See "--Stock Plans."
DIRECTOR COMPENSATION
Directors do not currently receive any cash compensation for their services
as members of the Board of Directors or its committees, except for Fred
Hanson. The Company entered into a one-year directorship agreement with Mr.
Hanson in September 1995 pursuant to which he receives a salary of $17,500 per
year as compensation for acting as a director and is entitled to reimbursement
for expenses incurred in attending board meetings outside of the Oregon area.
In addition, in September 1995, Mr. Hanson was granted an option to purchase
20,000 shares of the Company's Common Stock at an exercise price of $1.75 per
share. In lieu of the quarterly salary payments, the Company, on Mr. Hanson's
behalf, purchased 10,000 of the shares subject to the option for the aggregate
purchase price of $17,500. Mr. Ben-David is reimbursed for travel costs
incurred in attending board meetings. Effective as of the date of the first
annual meeting of stockholders following the consummation of this offering,
all non-employee directors will receive $20,000 per year and $1,000 per
meeting (excluding committee meetings) as compensation for their services as
members of the Board of Directors. Members also will be reimbursed for all
travel and related expenses incurred in connection with attending board and
committee meetings. The Company recently established a director stock option
plan that provides for nondiscretionary annual stock option grants to non-
employee directors. The director stock option plan will become effective upon
consummation of this offering. See "--Stock Plans--1996 Director Option Plan"
and "Certain Transactions."
47
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to the Chief Executive
Officer and each of the four other most highly compensated executive officers
of the Company whose salary and bonus exceeded $100,000 (collectively, the
"Named Executive Officers") for services rendered in all capacities to the
Company and its subsidiaries during the year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
NO. OF
BONUS SECURITIES
SALARY ($) OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION ($) (1) (1) COMPENSATION ($) OPTIONS COMPENSATION ($)
- --------------------------- ------- ------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Larry J. Gerhard
President and Chief
Executive Officer..... 240,000 -- -- -- 6,589 (2)
Daniel C. Skilken
Vice President--
Worldwide Marketing... 125,000 -- -- -- --
D. Gregory Kott
Vice President--North
American Sales........ 116,042 25,000 1,200 (3) 52,500 (4) 342 (5)
Roger A. Bitter
General Manager--TSSI
Division.............. 135,157 -- -- -- 121,200 (6)
Eric Benhayoun
Vice President--
European Sales
Operations............ 117,557 53,732 (7) -- -- (8) --
</TABLE>
- --------
(1) Amounts shown include cash and noncash compensation earned and received by
executive officers as well as amounts earned but deferred at the election
of those officers.
(2) Includes $5,389 paid to Mr. Gerhard for moving expenses incurred in
connection with completing his relocation from Southern California and
$1,200 in medical expenses not covered by the Company's medical plan.
(3) Consists of a car allowance.
(4) Includes an option granted on March 1, 1995 to purchase 45,000 shares of
Common Stock and an option granted on December 20, 1995 to purchase 7,500
shares of Common Stock. On September 13, 1995, in connection with a
repricing of all outstanding options having an exercise price in excess of
$1.75 per share, the Company canceled and replaced the option to purchase
45,000 shares of Common Stock at a purchase price of $2.50 per share with
a new option to purchase the same number of shares of Common Stock at an
exercise price of $1.75 per share.
(5) Contribution made by the Company on behalf of Mr. Kott pursuant to the
Company's 401(k) Plan.
(6) Consists of reimbursements to Mr. Bitter for taxes and housing costs in
Japan.
(7) Commissions earned during the fiscal year ended December 31, 1995, $9,625
of which was paid in 1996.
(8) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, the Company
canceled and replaced the option granted to Mr. Benhayoun on October 25,
1994 to purchase 58,500 shares of Common Stock at a purchase price of
$2.50 per share with a new option to purchase the same number of shares of
Common Stock at an excercise price of $1.75 per share. Such new option is
not reflected in the above table.
48
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information regarding stock options granted
during the fiscal year ended December 31, 1995 to each of the Named Executive
Officers.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (3)
--------------------------------------------------------- --------------------
NO. OF % OF TOTAL
SECURITIES OPTIONS FAIR
UNDERLYING GRANTED TO MARKET
OPTIONS EMPLOYEES EXERCISE VALUE ON
GRANTED IN 1995 PRICE DATE OF EXPIRATION
NAME (1) (2) ($)/SHARE GRANT DATE 5% ($) 10% ($)
---- ---------- ---------- --------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry J. Gerhard........ -- -- -- -- -- -- --
Daniel C. Skilken....... -- -- -- -- -- -- --
D. Gregory Kott......... 52,500 9.5% (4) 1.75 (5) 1.75 (5) 3/1/2005 (6) 57,780 146,425
Roger A. Bitter......... -- -- -- -- -- -- --
Eric Benhayoun(7)....... -- -- -- -- -- -- --
</TABLE>
- --------
(1) Options granted in 1995 are immediately exercisable and generally vest
over four years, with 25% of the option shares becoming fully vested one
year from the grant date and 1/48th vesting in each successive month, with
full vesting occurring on the fourth anniversary date. The Company has a
repurchase right for shares not vested. Under the terms of the 1994 Stock
Plan, the administrator retains discretion, subject to plan limits, to
modify the terms of outstanding options and to reprice outstanding
options. The options have a term of 10 years, subject to earlier
termination in certain situations related to termination of employment.
See "Stock Plans" for a description of the material payment terms of the
options.
(2) Based on a total of 551,187 options granted to all employees and
consultants during 1995.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
(4) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, 357,869
options were canceled and replaced. If such options were included in the
number of options granted in 1995, the total number of options granted to
all employees and consultants in 1995 would be 909,056, the total number
of options granted to Mr. Kott would be 97,500 and Mr. Kott's percentage
of total options granted in 1995 would be 10.7%.
(5) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, the Company
canceled and replaced an option to purchase 45,000 shares of Common Stock
at a purchase price of $2.50 per share with a new option to purchase the
same number of Common Stock at an exercise price of $1.75 per share. Such
new option is not reflected in the above table.
(6) The expiration date for 7,500 of the options granted is 12/20/2005.
(7) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, the Company
canceled and replaced the option granted to Mr. Benhayoun on October 25,
1994 to purchase 58,500 shares of Common Stock at a purchase price of
$2.50 per share with a new option to purchase the same number of shares of
Common Stock at an exercise price of $1.75 per share. Such new option is
not reflected in the above table.
49
<PAGE>
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
There were no option exercises by the Named Executive Officers during the
fiscal year ended December 31, 1995. The following table sets forth certain
information with respect to the value of stock options held by such
individuals as of December 31, 1995.
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1995 AND DECEMBER 31,
1995 OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT 12/31/95 OPTIONS AT 12/31/95($)(2)
ACQUIRED ON VALUE ---------------------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry J. Gerhard... -- -- -- -- -- --
Daniel C. Skilken....... -- -- -- -- -- --
D. Gregory Kott......... -- -- 82,500 (3) -- 37,500 --
Roger A. Bitter......... -- -- -- -- -- --
Eric Benhayoun.......... -- -- 58,500 (4) -- 0 0
</TABLE>
- --------
(1) Unvested options are immediately exercisable, provided that any unvested
shares are subject to repurchase by the Company at the original exercise
price paid per share upon the optionee's cessation of service to the
Company.
(2) Based on the estimated fair market value of $1.75 per share of Common
Stock on December 31, 1995, as determined by the Company's Board of
Directors, minus the exercise price.
(3) Includes 63,750 unvested shares of Common Stock that would have been
subject to repurchase by the Company on December 31, 1995 if the options
had been exercised.
(4) Includes 26,813 unvested shares of Common Stock that would have been
subject to repurchase by the Company on December 31, 1995 if the options
had been exercised.
EMPLOYMENT AGREEMENTS
The Company entered into a five-year employment agreement with Mr. Gerhard
effective January 14, 1993 pursuant to which he receives an annual base
salary, an annual bonus of up to 25% of his base salary and all standard
benefits accorded other executives of the Company. In addition, in the event
Mr. Gerhard is terminated other than for cause, he is entitled to severance of
$20,000 per month plus all insurance benefits until he accepts other full time
employment, but in no event longer than 18 (24 months in certain
circumstances). Under the employment agreement and accompanying stock
restriction agreement, Mr. Gerhard was granted the right to purchase 412,777
shares of Common Stock at a specified price per share, of which 294,840 shares
are subject to vesting over a four-year period. Mr. Gerhard also received an
option to purchase shares of preferred stock of TSSI at the same price and
terms as other investors in such preferred stock. The employment agreement
further provides that the Company would facilitate Mr. Gerhard's relocation to
the Company's headquarters by arranging for the sale of Mr. Gerhard's prior
residence. In the event Mr. Gerhard resigned within 36 months after the
effective date of the agreement, he was obligated to resell to the Company up
to 147,420 shares at $0.01 per share and assume certain liabilities associated
with his relocation to Oregon. In the event Mr. Gerhard resigns or is
terminated for cause at any time, any unvested options, and shares issued upon
early exercise of such unvested options, may be repurchased by the Company at
$0.01 per share. Upon consummation of this offering, all unvested options will
automatically vest. See "Certain Transactions."
In May 1996, the Board of Directors authorized the Company to enter into a
new four-year employment agreement with Mr. Gerhard. The agreement will
provide for an initial grant of options to purchase up to 75,000 shares
(subject to a four-year vesting period) at an exercise price equal to the
public offering price set forth on the cover of this Prospectus, an annual
base salary, an annual bonus payable only if the Company achieves its annual
revenue plan, an annual option to be granted only if the Company
50
<PAGE>
achieves a specified percentage revenue growth as compared to the prior year,
and certain medical benefits and severance payments.
On November 20, 1993, the Company entered into a four-year employment
agreement with Mr. Skilken pursuant to which he receives an annual base
salary, an annual bonus of up to 25% of his base salary, all standard benefits
accorded other executives of the Company and relocation expenses. Under the
agreement, Mr. Skilken was granted options to purchase up to 103,194 shares of
Common Stock, subject to vesting over a four-year period, and the right to
purchase preferred stock of TSSI on the same terms and conditions as other
purchasers. In addition, in the event Mr. Skilken is terminated other than for
cause, the options automatically vest and he is entitled to severance of
$10,416 per month plus all insurance benefits until he accepts other full time
employment, but in no event longer than 12 months. In the event Mr. Skilken
resigns within 48 months after the date of the employment agreement, any
unvested options, and shares issued upon early exercise of such unvested
option, may be repurchased by the Company at the option exercise price.
On January 1, 1995, the Company entered into a four-year employment
agreement with Mr. Bitter pursuant to which he receives an annual base salary,
an annual bonus of up to 25% of his base salary, all standard benefits
accorded other executives of the Company and relocation costs. In addition,
pursuant to the agreement, the Company also reimbursed Mr. Bitter for certain
living expenses while he resided in Japan and, subject to certain conditions,
agreed to provide Mr. Bitter with a loan to repay his prior tax liabilities,
which loan has been forgiven by the Company. The agreement also provides that
options to purchase up to 103,194 shares of Common Stock previously granted to
Mr. Bitter shall automatically vest upon termination of Mr. Bitter other than
for cause and upon the sale of more than 20% of the assets or more than 50% of
the outstanding capital stock of the Company. In addition, upon consummation
of this offering, the four-year vesting schedule with respect to such options
will accelerate by one year. In the event Mr. Bitter is terminated for other
than cause, he is entitled to severance of $10,000 per month plus all
insurance benefits until he accepts other full time employment, but in no
event longer than nine months. In the event Mr. Bitter resigns or is
terminated for cause within 48 months after the date of the employment
agreement, the Company may cancel the options to purchase the 103,194 shares,
whether vested or unvested, and any shares previously issued upon exercise of
such options may be repurchased by the Company at the option exercise price.
However, in certain circumstances, the Company's right to repurchase or cancel
is limited to 67% of such options or shares issued in respect of options.
On March 1, 1995, the Company entered into a four-year employment agreement
with Mr. Kott pursuant to which he receives an annual base salary, an annual
bonus of up to 25% of his base salary and all standard benefits accorded other
executives of the Company. Under the agreement, Mr. Kott was granted options
to purchase up to 52,500 shares of Common Stock, subject to vesting over a
four-year period. Such options automatically vest upon termination of Mr. Kott
other than for cause and upon the sale of more than 50% of the assets or
outstanding capital stock of the Company. In addition, in the event Mr. Kott
is terminated other than for cause, he is entitled to severance of $10,000 per
month plus all insurance benefits until he accepts other full time employment,
but in no event longer than six months. In the event Mr. Kott resigns or is
terminated for cause within 36 months after the date of the employment
agreement, any vested and unvested options, and shares issued upon exercise of
such options, may be repurchased by the Company at the option exercise price.
STOCK PLANS
1994 Stock Plan. The Company's 1994 Stock Plan (the "1994 Plan") was adopted
by the Board of Directors and approved by the Company's stockholders in
January 1994 and was amended by the Board in May 1996, subject to stockholder
approval. The 1994 Plan is administered by the Board of Directors or a
committee appointed by the Board (the "Administrator") and has a term of 10
years. Pursuant to the Plan, options to acquire an aggregate of 2,322,000
shares of Common Stock may be granted. The Plan provides for grants to
employees (including officers and employee directors) and consultants of the
Company and is intended to qualify as an "incentive stock option plan" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
51
<PAGE>
Subject to the provisions of the 1994 Plan, the Administrator has the
authority to determine the individuals to whom stock options are to be
granted, the number of shares to be covered by each option, the exercise
price, the fair market value, the type of option, the term of the option, the
restrictions, if any, on the exercise of the option, the terms for the payment
of the option price and other terms and conditions. Incentive stock options
granted under the 1994 Plan must have an exercise price of at least 100% of
the fair market value on the date of grant. Payments by optionholders upon
exercise of an option may be made (as determined by the Administrator) in cash
or such other form of payment as permitted under the 1994 Plan. In addition,
an optionee may engage in a same day exercise of an option and sale of the
underlying stock, using a portion of the proceeds from the sale of the stock
to pay the exercise price. In the event of a proposed merger of the Company
with or into another corporation or a sale of substantially all of the assets
of the Company, outstanding options may be assumed or equivalent options
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume options or substitute equivalent options, optionees shall have
the right to exercise their options as to all shares subject to such options,
including shares as to which options would not otherwise be exercisable.
1996 Employee Stock Purchase Plan. The material terms of the Company's 1996
Employee Stock Purchase Plan (the "1996 Purchase Plan") were approved by the
Board of Directors in May 1996. The 1996 Purchase Plan will be submitted to
the Board of Directors for further approval, and to the stockholders of the
Company for approval prior to consummation of this offering. The Company has
reserved a total of 150,000 shares of Common Stock for issuance under the 1996
Purchase Plan. The 1996 Purchase Plan, which is intended to qualify under
Section 423 of the Code, permits eligible employees of the Company to purchase
Common Stock through payroll deductions of up to 10% of their base salary, up
to a maximum of $25,000 of Common Stock (determined as of the first day of the
offering period) for all purchase periods ending within any calendar year. The
price of Common Stock purchased under the 1996 Purchase Plan will be 85% of
the lower of the fair market value of the Common Stock on the first day of
each 24-month offering period or the last day of the applicable six-month
purchase period. Employees may end their participation in the 1996 Purchase
Plan at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination
of employment with the Company. Rights granted under the 1996 Purchase Plan
are not transferable by a participant other than by will, the laws of descent
and distribution, or as otherwise provided under the plan. The first offering
period of the 1996 Purchase Plan will begin on the effective date of this
offering and will end on the last trading day on or before October 31, 1998.
The first purchase period will be approximately eight and one-half months,
ending on the last trading day in the period ending April 31, 1997. Subsequent
offering periods will last 24 months and will commence on the first trading
day on or after May 1 and November 1 of each year during which the 1996
Purchase Plan is in effect, and will terminate on the last trading day in the
periods ending 24 months later. Each 24-month offering period will consist of
four purchase periods of approximately six months duration. The 1996 Purchase
Plan will be administered by the Board of Directors or by a committee
appointed by the Board. Employees are eligible to participate if they are
customarily employed by the Company or any designated subsidiary for at least
20 hours per week and for more than five months in any calendar year.
1996 Director Option Plan. Non-employee directors are entitled to
participate in the Company's 1996 Director Option Plan (the "Director Plan").
The material terms of the Director Plan were approved by the Board of
Directors in May 1996. The Director Plan will be submitted to the Board of
Directors for further approval, and to the stockholders of the Company for
approval prior to consummation of this offering, but shall not become
effective until the effective date of this offering. A total of 150,000 shares
of Common Stock has been reserved for issuance under the Director Plan.
The Director Plan provides for an automatic grant of an option (the "First
Option") to purchase 7,500 shares of Common Stock to each non-employee
director on the date on which the Director Plan becomes effective or, if
later, an option to purchase 10,000 shares of Common Stock on the date on
which the person first becomes a non-employee director. After the First Option
is granted to the non-employee director, he or she shall automatically be
granted an option to purchase 10,000 shares (a "Subsequent Option") on the
date
52
<PAGE>
of the annual meeting of each subsequent year, provided he or she is then a
non-employee director and, provided further, that on such date he or she has
served on the Board for at least six months. First Options and each Subsequent
Option shall have terms of ten years. All of the shares subject to the First
Option and each Subsequent Option shall become vested and exercisable 12
months after the option grant, provided that one-ninth of the shares subject
to the First Option granted on the effective date of the Director plan shall
become vested and exercisable at the end of each month after the option grant,
and provided further that, in each case, the optionee continues to serve as a
director on such dates. The exercise prices of the First Option and each
Subsequent Option shall be 100% of the fair market value per share of the
Company's Common Stock on the date of the grant of the option.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate, to be filed upon the closing
of the offering, limits the liability of directors to the maximum extent
permitted by Delaware law. Delaware law provides that a corporation's
certificate of incorporation may contain a provision eliminating or limiting
the personal liability of a director for monetary damages for breach of their
fiduciary duties as directors, except for liability (i) for any breach of
their duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the director
derived an improper personal benefit.
The Company's Amended and Restated Bylaws provide that the Company shall
indemnify its directors and officers and may indemnify its employees and
agents to the fullest extent permitted by law. The Company believes that
indemnification under its Amended and Restated Bylaws covers at least
negligence and gross negligence on the part of indemnified parties.
The Company has entered into agreements to indemnify its directors and
officers in addition to the indemnification provided for in the Company's
Amended and Restated Bylaws. These agreements, among other things, indemnify
the Company's directors and officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or officer of
the Company, any subsidiary of the Company or any other company or enterprise
to which the person provides services at the request of the Company. The
Company believes that these provisions and agreements are necessary to attract
and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed in August 1994 and is currently
composed of Messrs. Ben-David, Grillos and Stevens. No interlocking
relationship exists between any member of the Company's Compensation Committee
and any member of any other company's board of directors or compensation
committee.
53
<PAGE>
CERTAIN TRANSACTIONS
In connection with the Reorganization, in December 1993, DCL Holding and
Investments in Technology (1993), Ltd. ("DCL") and Zamir Paz, the former
stockholders of SEE Technologies, exchanged all of their shares of SEE
Technologies stock for an aggregate of 2,661,154 and 935,000 shares of Series
A Preferred Stock of Summit, respectively. As a result, SEE Technologies
became a wholly-owned subsidiary of Summit. In February 1994, DCL and Mr. Paz
contributed an aggregate of 185,474 and 43,680 and shares of Series A
Preferred Stock, respectively, to Summit. Also in connection with the
Reorganization, a wholly-owned subsidiary of Summit merged with and into TSSI,
with TSSI being the surviving corporation. As consideration, the former
stockholders of TSSI received capital stock of Summit under the following
conversion schedule: (i) holders of TSSI common stock received .5896815 shares
of Common Stock of Summit for each TSSI share; (ii) holders of TSSI Series A,
B and C Preferred Stock received .5896815 shares of Series B Preferred Stock
of Summit for each such TSSI share; and (iii) holders of TSSI Series D
Preferred Stock received 1.179363 shares of Series B Preferred Stock of Summit
for each TSSI Series D share.
On February 10, 1994, the Company sold $400,000 aggregate principal amount
of convertible subordinated debentures (the "Convertible Debentures") in a
transaction exempt from the registration requirements of the Securities Act.
The following directors, executive officers and beneficial holders of at least
5% of the capital stock of the Company (including members of their immediate
family) purchased Convertible Debentures as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
PURCHASER CONVERTIBLE DEBENTURES
--------- ----------------------
<S> <C>
Larry J. Gerhard (1)(2)............................ $75,000
Zamir Paz (1)(2)................................... 10,000
Daniel C. Skilken (1).............................. 40,000
Roger A. Bitter (1)................................ 10,000
DCL (3)............................................ 30,000
</TABLE>
- --------
(1) Executive officer of the Company.
(2) Director of the Company.
(3) Holder of more than 5% of the Company's outstanding capital stock. Amihai
Ben-David is a director of both DCL and the Company.
Interest on the Convertible Debentures accrued at an annual rate of 5%. On
November 11, 1994, all of the then outstanding Convertible Debentures were
converted at the Company's option into an aggregate of 375,000 shares of
Series C Preferred Stock. Prior to consummation of the offering, all
outstanding shares of Series C Preferred Stock will convert into shares of
Common Stock on a one-for-one basis.
54
<PAGE>
In May 1994, the Company sold 823,091 shares of Series D Preferred Stock at
a price of $3.75 per share in a transaction exempt from the registration
requirements of the Securities Act. The following directors, executive
officers and beneficial holders of at least 5% of the Company's capital stock
purchased Series D Preferred Stock:
<TABLE>
<CAPTION>
SHARES OF
PURCHASER (1) SERIES D PREFERRED STOCK
------------- ------------------------
<S> <C>
Entities affiliated with Robertson, Stephens &
Company (2)..................................... 26,665
Entities affiliated with Sequoia Capital (3)..... 400,000
First Century Partnership III (4)................ 68,622
Daniel C. Skilken (5)............................ 10,666
Stuart Schube (6)................................ 66,665
Walter Cunningham (7)............................ 57,332
</TABLE>
- --------
(1) See note to table of beneficial ownership in "Principal and Selling
Stockholders" for information relating to the beneficial ownership of such
shares.
(2) Includes 13,736 shares and 12,929 shares held by Bayview Investors, Ltd.
and RCS III, L.P., respectively. Mr. Grillos, a director of the Company,
is employed by Robertson, Stephens & Company LLC in its venture capital
group.
(3) Includes 376,000 shares and 24,000 shares acquired by Sequoia Capital
Growth Fund and Sequoia Technology Partners III, respectively. Mr.
Stevens, a director of the Company, is a General Partner of Sequoia
Capital IV.
(4) Holder of more than 5% of the Company's capital stock.
(5) Executive officer of the Company.
(6) Includes 53,333 shares held by Genesis Fund Ltd. and 6,666 shares held by
A.G. Edwards & Sons, Inc. as custodian for Stuart Schube IRA.
(7) Includes 53,333 shares held by Genesis Fund Ltd., of which Mr. Cunningham
is a General Partner, and 1,333 shares held by Walter Cunningham, IRA.
Prior to consummation of the offering, all outstanding shares of Series D
Preferred Stock will convert into shares of Common Stock on a one-for-one
basis.
In June and July 1995, the Company sold 600,000 shares of Series E Preferred
Stock at a price of $4.52 per share in transactions exempt from the
registration requirements of the Securities Act. An aggregate of 122,675
shares were sold to an entity affiliated with Jay Morrison, a director of the
Company. Prior to consummation of the offering, all outstanding shares of
Series E Preferred Stock will convert into shares of Common Stock on a one-
for-one basis.
The Company has entered into employment agreements with certain officers.
See "Management--Employment Agreements." The Company has also entered into
indemnification agreements with each of its directors and executive officers.
Such agreements require the Company to indemnify such individuals to the
fullest extent permitted by Delaware law.
In September 1995, the Company entered into a one-year directorship
agreement with Fred Hanson, a non-employee director of the Company, pursuant
to which Mr. Hanson receives a salary of $17,500 per year. The Company also
issued Mr. Hanson an option to purchase 20,000 shares of the Company's Common
Stock at an exercise price of $1.75 per share. In lieu of receiving quarterly
salary payments, the Company, on Mr. Hanson's behalf, purchased 10,000 of the
shares subject to the option for the aggregate purchase price of $17,500.
At the time of the Reorganization, the Company and DCL entered into a one-
year financial services agreement pursuant to which DCL, in exchange for an
aggregate of $100,000, agreed to provide to the Company on an as-needed basis
certain financial consulting services, including bookkeeping, tax filings,
payroll, accounts payable and statutory filings. The agreement terminated on
February 10, 1995.
55
<PAGE>
At the time of the Reorganization, the Company and DCL entered into a one-
year agreement pursuant to which DCL agreed to provide to the Company certain
engineering consulting services on an as-needed basis in exchange for an
aggregate of $1.4 million. Similarly, at the same time, SEE Technologies and
DCL entered into a one-year agreement pursuant to which SEE Technologies
agreed to provide to DCL certain engineering consulting services on an as-
needed basis in exchange for an aggregate of $1.3 million, one-half of which
was paid six months after the agreement was executed and one-quarter of which
was paid at the end of each three-month period thereafter. Each of the
foregoing agreements terminated on February 10, 1995.
At the time of the Reorganization, SEE Technologies entered into a four-year
sublease pursuant to which SEE Technologies subleases space for its corporate
offices from DCL on terms and conditions similar to those under which DCL
leases such office space from its owner.
On April 1, 1991, DCL and SEE Technologies entered into an agreement with
Intergraph Corporation pursuant to which it agreed to perform certain
engineering services for Intergraph. On February 10, 1994, DCL, Intergraph and
SEE Technologies entered into an agreement which terminated the previous
agreement and extinguished any rights or ownership interests of Intergraph in
the Visual HDL technology developed by SEE Technologies. In connection with
this termination, the Company issued 168,000 shares of common stock to
Intergraph.
To facilitate the relocation of Larry J. Gerhard to Beaverton, Oregon, the
Company agreed with a third-party real estate firm ("PHH") that PHH would
purchase Mr. Gerhard's former residence in Southern California and thereafter
undertake to resell such residence. The Company further agreed to reimburse
PHH for all expenses and any loss incurred on resale. The residence was sold
following a drop in the Southern California housing market and, as a result,
in addition to payment of certain carrying costs, the Company issued to PHH a
note in the aggregate principal amount of $441,705. The note matures on August
30, 1997 and accrues interest at an annual rate of prime plus 1%. However, the
closing of this offering will cause the maturity date of the note to
accelerate to ten business days after the closing date. As of March 31, 1996,
an aggregate of $321,611 was outstanding under the note. The Company intends
to use a portion of the net proceeds of this offering to repay all outstanding
indebtedness under the note.
In February 1996, the Company agreed to forgive a loan made to Roger Bitter,
an executive officer of the Company, as part of Mr. Bitter's relocation back
to the United States. As of such date, the outstanding amount due on the loan
was approximately $89,892.
In September 1995, the Company loaned $87,056 to Zamir Paz, an executive
officer of the Company, for the purchase of a primary residence pursuant to a
promissory note that bore interest at the annual rate of prime plus 1%. The
principal was repaid in October 1995 and the interest was repaid in June 1996.
Robertson, Stephens & Company LLC ("Robertson, Stephens") is acting as lead
underwriter of the offering. For acting in this capacity, Robertson, Stephens
will be entitled to receive customary underwriting fees. John Grillos is an
employee of Robertson, Stephens and a director of the Company. Certain
affiliates of Robertson, Stephens will beneficially own approximately 8.1% of
the outstanding Common Stock of the Company upon completion of the offering.
See "Underwriting."
56
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, as of March 31, 1996, and as adjusted to reflect
the sale of the shares of Common Stock pursuant to the offering by (a) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (b) each of the Company's directors, (c)
each of the Named Executive Officers, (d) each additional Selling Stockholder
and (e) all directors and executive officers of the Company as a group. Unless
otherwise noted in the footnotes to the table, (i) the Company believes that
the persons named in the table have sole voting and investing power with
respect to all shares of Common Stock indicated as being beneficially owned by
them and (ii) officers and directors can be contacted at the principal offices
of the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING
(1) SHARES BEING (1)(2)
----------------------- OFFERED -----------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT FOR SALE NUMBER PERCENT
- ------------------------- ------------ ---------------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
DCL Technologies Ltd.
(3)..................... 2,305,680 20.9 250,000 2,055,680 16.1
P.O. Box 544
46105 Herzlia Israel
Robertson, Stephens &
Company (4)............. 1,285,655 11.6 250,000 1,035,655 8.1
555 California Street
Suite 2600
San Francisco, CA 94104
Sequoia Capital (5)..... 1,171,242 10.6 -- 1,171,242 9.2
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Stuart Schube (6)....... 825,950 7.5 188,429 637,521 5.0
520 Post Oak Boulevard
Houston, TX 77027
STAR Venture Capital
Management Ltd (7)...... 797,659 7.2 240,017 557,642 4.4
28A Leopoldstrasse
80208 Munich, Germany
First Century Partners
(8)..................... 768,835 7.0 250,000 518,835 4.1
One Palmer Square
Princeton, NJ 08542
Fiering & Sjolie
Handelsgesellschaft
m.b.H. ................. 601,320 5.4 -- 601,320 4.7
A-1180 Wien
Ruhrhofergasse 12
Austria
Walter Cunningham (9)... 552,675 5.0 28,429 524,246 4.1
520 Post Oak Boulevard
Houston, TX 77027
Larry J. Gerhard (10)... 646,735 5.9 -- 646,735 5.1
c/o Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, Oregon 97008
Zamir Paz (11).......... 601,320 5.4 -- 601,320 4.7
Daniel C. Skilken (12).. 153,860 1.4 -- 153,860 1.2
D. Gregory Kott (13).... 90,500 * -- 90,500 *
Roger A. Bitter (14).... 125,194 1.1 -- 125,194 1.0
Eric Benhayoun (15)..... 66,500 * -- 66,500 *
Amihai Ben-David (16)... 2,305,680 20.9 250,000 2,055,680 16.1
John Grillos (17)....... 1,285,655 11.6 250,000 1,035,655 8.1
Fred L. Hanson (18)..... 20,000 * -- 20,000 *
Jay B. Morrison (19).... 265,886 2.4 80,000 185,886 1.5
Mark Stevens (20)....... 1,171,242 10.6 -- 1,171,242 9.2
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED NUMBER OF OWNED
PRIOR TO OFFERING(1) SHARES BEING AFTER OFFERING(1)(2)
----------------------- OFFERED -----------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT FOR SALE NUMBER PERCENT
- ------------------------- ------------ ---------------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ADDITIONAL SELLING
STOCKHOLDERS:
Michael Bragg........... 766 * 766 -- --
Jerome J. Brown......... 7,622 * 7,622 -- --
Charles Burrows......... 2,948 * 2,948 -- --
Copley Partners I, L.P.. 18,624 * 18,624 -- --
Crossroads Capital
Limited Partnership..... 37,249 * 37,249 -- --
William Den Beste (21).. 2,948 * 2,948 -- --
Lawrence Evans.......... 2,594 * 2,594 -- --
David H. Flaningham..... 78,616 * 78,616 -- --
Norman Green............ 19,179 * 1,784 17,395 *
Grenly, Rotenberg,
Laskowski, Evans &
Bragg, P.C. ............ 5,896 * 5,896 -- --
How & Company........... 27,937 * 27,937 -- --
Intergraph Corporation.. 168,000 1.5 168,000 -- --
Jerusalem Pacific
Ventures (1994) LP...... 265,886 2.4 80,000 185,886 1.5
Charles McIntyre (22)... 24,323 * 24,323 -- --
David Moffenbeier (23).. 49,484 * 10,000 39,484 *
Quality Electronics,
Inc. ................... 133,329 1.2 20,000 113,329 *
Norman Rickles.......... 471 * 471 -- --
ROC Venture Company,
Ltd. ................... 236,898 2.1 71,069 165,829 1.3
Stanley Rotenberg....... 707 * 707 -- --
Steve Tsubota........... 40,388 * 10,000 30,388 *
All directors and
executive officers as a
group (14 persons) (24). 6,857,879 60.6 580,000 6,277,879 48.1
</TABLE>
- --------
* Represents less than 1% of the total.
(1) Based on 11,040,435 shares of Common Stock outstanding prior to the
offering. A person is deemed to be the beneficial owner of securities that
can be acquired by such person within 60 days upon the exercise of
options. Calculations of percentage of beneficial ownership assume the
exercise by only the respective named stockholder of all options for the
purchase of Common Stock held by such stockholder which are exercisable
within 60 days.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Includes 2,275,680 shares held by DCL Holding & Investments in Technology
(1993) Ltd., of which 250,000 shares are being sold in the offering.
(4) Includes 172,568 shares held by Bayview Investors, Ltd. and 1,113,087
shares held by RCS III, L.P. RCS III, L.P. is selling 250,000 shares in
the offering.
(5) Includes 68,376 shares held by Sequoia Technology Partners III, 1,071,255
shares held by Sequoia Capital Growth Fund, 20,445 shares held by Sequoia
XVI and 11,166 shares held by Sequoia XVII.
(6) Includes 10,204 shares held by A.G. Edwards & Sons, Inc. as Custodian for
Stuart Schube, IRA, 2,599 shares held by Stuart Schube Money Purchase
Plan, 184,813 shares held by the Genesis Fund, Ltd., 363,863 shares held
by UncoVentures, Ltd. and 239,801 shares held by Wesbanc Venture, Ltd.
Mr. Schube is a General Partner of the Genesis Fund, Ltd., UNCO Ventures,
Ltd. and Westbanc, Ltd. and therefore may be deemed to be a beneficial
owner of the shares. Mr. Schube disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(7) Includes 170,034 shares held by Dandana Ltd., 337,517 shares held by SVE
STAR Ventures Enterprises No. 111 GbR, 28,237 shares held by SVE STAR
Ventures Enterprises No. 111 GbR, 148,524 shares held by SVM STAR Ventures
Managementgesellschaft and 113,347 shares held by Yozma Venture Capital
Ltd. Dandana Ltd. and Yozma Venture Capital Ltd. are selling 51,011 and
34,006, respectively, in the offering.
58
<PAGE>
(8) Includes 753,491 shares held by First Century Partnership III and 15,344
shares held by Omega Partners, L.P. First Century Partnership III is
selling 250,000 in the offering.
(9) Includes 184,813 shares held by the Genesis Fund Ltd. and 363,863 shares
held by Unco Ventures Ltd., of which Mr. Cunningham is a General Partner,
and 3,999 shares held by Walter Cunningham, IRA. Unco Ventures Ltd. is
selling 28,429 shares in the offering. Mr. Cunningham disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein.
(10) Includes 10,000 shares held by Kathleen Gerhard, the spouse of Larry
Gerhard.
(11) All shares are held by Fiering & Sjolie Handelsgesellschaft m.b.H.
Because Mr. Paz is the U.S. representative of Fiering & Sjolie
Handelsgesellschaft m.b.H., he may be deemed to be a beneficial owner of
such shares. Mr. Paz disclaims beneficial ownership of such shares.
(12) Includes 40,849 shares subject to the Company's right of repurchase.
(13) Includes 82,500 shares issuable upon exercise of options, of which 47,502
shares would be subject to Company's right of repurchase if issued.
(14) Includes 42,999 shares subject to the Company's right of repurchase, and
12,000 shares issuable upon exercise of options, of which all shares
would be subject to the Company's right of repurchase if issued.
(15) Includes 58,500 shares issuable upon exercise of options, of which 22,563
shares would be subject to Company's right of repurchase if issued.
(16) Includes 2,275,680 shares held by DCL Holding & Investments in Technology
(1993) Ltd. and 30,000 shares held by DCL Technologies Ltd. Mr. Ben-David
is the Chief Executive Officer and Chairman of DCL Technologies Ltd. and
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein.
(17) Includes 172,568 shares held by Bayview Investors, Ltd. and 1,113,087
shares held by RCS III, L.P. Robertson, Stephens & Company Private Equity
Group, LLC is the general partner of RCS III and Bayview Investors, Ltd.
Robertson, Stephens & Company Private Equity Group, LLC is the general
partner of RCS III and Bayview Investors, Ltd. Mr. Grillos is a managing
director of Robertson, Stephens & Company Private Equity Group, LLC and a
limited partner of Bayview Investors, Ltd. As such, Mr. Grillos may be
deemed to have or to share investment control over the above shares. Mr.
Grillos disclaims any beneficial interest in such shares in excess of his
pecuniary interest as a managing director of Robertson, Stephens &
Company Private Equity Group, LLC and as a limited partner of Bayview
Investors, Ltd.
(18) Includes 10,000 shares issuable upon exercise of options, all of which
would be subject to the Company's right to repurchase.
(19) These shares are owned by Jerusalem Pacific Ventures (1994) L.P., of
which Mr. Morrison is affiliated with the General Partner of the fund
that manages Jerusalem Pacific Ventures (1994) L.P. and as such may be
deemed a beneficial owner of such shares. Mr. Morrison disclaims
beneficial ownership of such shares.
(20) Includes 68,376 shares held by Sequoia Technology Partners III, 1,071,255
shares held by Sequoia Capital Growth Fund, 20,445 shares held by Sequoia
XVI and 11,166 shares held by Sequoia XVII. Mr. Stevens is a special
limited partner of Sequoia Capital Growth Fund and, as such, may be
deemed to be a beneficial owner of such shares. Mr. Stevens disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
(21) Mr. Den Beste is a former executive officer of the Company and TSSI.
(22) Mr. McIntyre is a former executive officer of the Company and TSSI.
(23) Mr. Moffenbeier is a former director of the Company, TSSI and Summit
Design (EDA) Ltd.
(24) Includes 268,500 shares issuable upon exercise of options.
59
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of common stock, par value $.01 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share.
COMMON STOCK
As of March 31, 1996, there were 11,040,435 shares of Common Stock
outstanding (after giving effect to the conversion of all outstanding
Preferred Stock) held of record by 173 stockholders. The holders of Common
Stock are entitled to one vote for each share held of record on all matters to
be voted on by stockholders. Subject to preferences that may be applicable to
any Preferred Stock which may be outstanding, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior liquidation
rights of Preferred Stock, if any, then outstanding. Holders of Common Stock
have no preemptive rights or rights to convert their Common Stock into other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock.
PREFERRED STOCK
Upon the closing of this offering, 5,000,000 shares of undesignated
Preferred Stock will be authorized and no shares will be outstanding. The
Board of Directors will have the authority to issue the shares of Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and
the number of shares constituting any series or the designation of such series
without any further vote or action by the stockholders. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock or the likelihood that such holders will receive dividend payments or
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
After this offering, the holders of approximately 8,616,314 shares of Common
Stock, or their transferees, will be entitled to certain rights with respect
to the registration of such shares under the Securities Act. Under the terms
of an agreement between the Company and such holders, if the Company proposes
to register any of its securities under the Securities Act, either for its own
account or the account of other securityholders exercising registration
rights, the holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein; provided, among other
conditions, that the underwriters of any offering have the right to limit the
number of such shares included in such registration. In addition, the
securityholders benefiting from these rights may require the Company,
beginning six months after the date of this Prospectus, on not more than two
occasions to file a registration statement under the Securities Act with
respect to such shares, and the Company is required to use its best efforts to
effect such registration, subject to certain conditions and limitations.
Further, holders of a specified percentage of shares may require the Company
to file a registration statement on Form S-3 to register all or a portion of
their shares when such form becomes available to the Company, subject to
certain conditions and limitations. Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable and could
have an adverse effect on the market price for the Company's Common Stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"), which prohibits a publicly held
Delaware corporation from engaging in any "business
60
<PAGE>
combination" with an "interested stockholder" for three years following the
date that such stockholder became an interested stockholder, unless (i) prior
to such date, the board of directors of the corporation approved either the
business combination or the transaction that resulted in the stockholder
becoming an interested stockholder; (ii) upon consummation of the transaction
that resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced; or (iii) on or
subsequent to such date, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.
Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholders. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior did own) 15% or
more of the corporation's voting stock.
The Company's Restated Certificate, which will become effective upon
consummation of this offering, will require that any action required or
permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of the stockholders and may not be
effected by a consent in writing. In addition, special meetings of the
stockholders of the Company may be called only by the Board of Directors or a
committee of the Board. These provisions may have the effect of deterring
hostile takeovers or delaying changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston has been appointed as the transfer agent
and registrar for the Company's Common Stock.
61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, based on the number of shares outstanding
as of March 31, 1996, the Company will have outstanding an aggregate of
12,790,435 shares of Common Stock, assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
the 3,500,000 shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, unless held by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. The remaining 9,290,435 shares of Common Stock held by
existing shareholders are "restricted" securities within the meaning of Rule
144 under the Securities Act. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which rules are summarized below.
Beginning 90 days after the effective date of the Registration Statement,
approximately 118,630 shares of Common Stock will be eligible for sale
pursuant to Rule 701 under the Securities Act ("Rule 701"). Upon the
expiration of lock-up agreements between certain of the Company's stockholders
and the Underwriters (the "Lock-up Agreements"), beginning 181 days after the
effective date of the Registration Statement (the "Registration Statement") of
which this Prospectus forms a part, 7,558,394 shares will be eligible for sale
pursuant to Rule 701 and Rule 144, subject in certain cases to the volume,
manner of sale and notice requirements of Rule 144. In addition, pursuant to
lock-up provisions set forth in stock purchase agreements executed in
connection with the Reorganization, the Investors' Rights Agreement, as
amended, and under the Company's incentive stock option plan (the "Stand-Off
Agreements"), an additional 301,928 shares will become eligible for sale
pursuant to Rule 701 and Rule 144 beginning 181 days after the effective date
of the Registration Statement. The remaining 1,311,483 shares outstanding will
become eligible for sale from time to time more than 181 days after the
effective date of the Registration Statement as the Company's rights to
repurchase such shares expire.
In addition to the foregoing, as of March 31, 1996, there were outstanding
options to purchase an aggregate of 1,107,252 shares of Common Stock. If such
options are exercised, 708,478 shares will be eligible for sale upon
expiration of the lock-up provisions contained in the Stand-Off Agreements
beginning 181 days after the effective date of the Registration Statement. The
Company has agreed not to release shares from the lock-up provisions of the
Stand-Off Agreements without the prior written consent of the representatives
of the Underwriters.
In general, under Rule 144 as currently in effect, an affiliate of the
Company, or person (or persons whose shares are aggregated) who has
beneficially owned restricted shares for at least two years but less than
three years, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) 1% of the then outstanding
shares of the Common Stock (approximately 127,904 shares immediately after the
offering) or (ii) the average weekly trading volume during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission. Sales pursuant to Rule 144 are subject
to certain requirements relating to manner of sale, notice and availability of
current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale and who
has beneficially owned his or her shares for at least three years is entitled
to sell such shares pursuant to Rule 144(k) without regard to the limitations
described above. In general, under Rule 701 under the Securities Act as
currently in effect, any employee, consultant or advisor of the Company who
purchases shares from the Company in connection with a compensatory stock or
option plan or other written agreement related to compensation is eligible to
resell such shares 90 days after the effective date of the offering in
reliance on Rule 144, but without compliance with certain restrictions
contained in Rule 144.
The Company intends to file a Form S-8 registration statement under the
Securities Act as soon as practicable after consummation of the offering to
register the issuance of shares of Common Stock reserved
62
<PAGE>
for issuance upon exercise of options granted under its stock option and stock
purchase plans, thus permitting the resale of such shares by non-affiliates in
the public market without restriction under the Securities Act, subject to
compliance with the contractual provisions described above. Such registration
statement will become effective immediately upon filing.
As of March 31, 1996, the holders of approximately 8,616,314 shares are
entitled to certain registration rights with respect to such shares. If such
registration rights are exercised, the shares can be sold without any holding
period or sales volume limitation. If such holders, by exercising their
registration rights, cause a large number of shares to be registered and sold
in the public market, such sales could have an adverse effect on the market
price for the Company's Common Stock. If the Company were required to include
in a Company-initiated registration the shares held by such holders pursuant
to the exercise of their registration rights, such sales might have an adverse
effect on the Company's ability to raise needed capital. See "Description of
Capital Stock--Registration Rights of Certain Holders."
Prior to this offering, there has been no public market for the Common Stock
of the Company and no predictions can be made as to the effect, if any, that
market sales of shares of Common Stock prevailing from time to time may have
on the market price of the Common Stock. Nevertheless, sales of significant
numbers of shares of the Common Stock in the public market may adversely
affect the market price of the Common Stock offered hereby and could impair
the Company's future ability to raise capital through an offering of its
equity securities.
63
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC and Needham & Company, Inc. (the
"Representatives"), have severally agreed with the Company and the Selling
Stockholders, subject to the terms and conditions of the Underwriting
Agreement, to purchase the numbers of shares of Common Stock set forth
opposite their respective names below. The Underwriters are committed to
purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Robertson, Stephens & Company LLC....................................
Needham & Company, Inc...............................................
---------
Total............................................................ 3,500,000
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the shares of Common Stock to the
public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession of not
in excess of $ per share, of which $ may be reallowed to other dealers.
After the initial public offering, the offering price, concession and
reallowance to dealers may be reduced by the Representatives. No such
reduction shall change the amount of proceeds to be received by the Company as
set forth on the cover page of this Prospectus.
Certain Selling Stockholders have granted to the Underwriters an option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 525,000 additional shares of Common Stock, at the same price
per share as the Company and Selling Stockholders will receive for the
3,500,000 shares that the Underwriters have agreed to purchase. To the extent
that the Underwriters exercise this option, each of the Underwriters will have
a firm commitment to purchase approximately the same percentage of such
additional shares that the number of shares of Common Stock to be purchased by
it shown in the above table represents as a percentage of the 3,500,000 shares
offered hereby. If purchased, such additional shares will be sold by the
Underwriters on the same terms as those on which the 3,500,000 shares are
being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
Each officer and director of the Company, and certain other persons that
beneficially own or have dispositive power over substantially all of the
shares of the Company's Common Stock, have agreed with the Representatives for
a period of 180 days after the effective date of the Registration Statement
(the "Lock-Up Period"), subject to certain exceptions, not to offer to sell,
contract to sell, or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of Common Stock, any options or warrants to
purchase any shares of Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock now owned or hereafter acquired
directly by such holders or with respect to which they have or hereafter
acquire the power of disposition, without the prior written consent of
Robertson, Stephens & Company LLC. Robertson, Stephens & Company LLC may, in
its sole discretion and at any time without notice, release all or any portion
of the securities subject to lock-up agreements. Pursuant to pre-existing
agreements, substantially all other holders of Common Stock and options to
purchase Common Stock have agreed not to sell such shares or shares issuable
upon the exercise of options for at least 180 days after the effective date of
the Registration Statement without the prior written consent of the Company.
In addition, the Company has
64
<PAGE>
agreed that during the Lock-Up Period, the Company will not, without the prior
written consent of Robertson, Stephens & Company LLC, subject to certain
exceptions, issue, sell, contract to sell, or otherwise dispose of, any shares
of Common Stock, any options or warrants to purchase any shares of Common
Stock or any securities convertible into, exercisable for or exchangeable for
shares of Common Stock other than the Company's sales of shares in this
offering, the issuance of Common Stock upon the exercise of outstanding
options and the Company's issuance of options and stock under the 1994 Plan,
the 1996 Purchase Plan and Director Plan.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock is being determined through negotiations among the Company, the Selling
Stockholders and the Representatives. Among the factors considered in such
negotiations are prevailing market conditions, certain financial information
of the Company, market valuations of other companies that the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.
The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
Certain venture funds affiliated with Robertson, Stephens & Company LLC
beneficially owned 1,285,655 shares of the Company's Common Stock as of March
31, 1996. See "Management," "Certain Transactions" and "Principal and Selling
Stockholders." In view of this relationship, the offering is being made in
accordance with Schedule E of the By-Laws of the National Association of
Securities Dealers, Inc., which provides, among other things, that the price
of the Common Stock can be no higher than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Needham & Company, Inc. is serving in such role and will
recommend the maximum public offering price of the Common Stock. Needham &
Company, Inc. has also participated in the preparation of the Registration
Statement of which this Prospectus is a part and has performed due diligence
with respect thereto.
John Grillos, a director of the Company, is employed by Robertson, Stephens
& Company LLC in its venture capital group.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Wilson Sonsini Goodrich & Rosati,
P.C., Palo Alto, California. As of March 31, 1996, certain members and
investment partnerships of Wilson Sonsini Goodrich & Rosati, P.C.,
beneficially owned an aggregate of 11,229 shares of the Company's Common
Stock. Certain legal matters will be passed upon for the Underwriters by Gray
Cary Ware & Freidenrich, A Professional Corporation, Palo Alto, California.
65
<PAGE>
EXPERTS
The consolidated financial statements and schedule of the Company as of
December 31, 1994 and December 31, 1995 and for each of the three years in the
period ended December 31, 1995 included in this Prospectus have been so
included in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, which includes explanatory paragraphs with respect to a change in
accounting method related to accounting for income taxes and restatements of
the 1993 and 1994 financial statements, given on the authority of said firm as
experts in auditing and accounting.
On February 9, 1996, Coopers & Lybrand L.L.P. was engaged as the principal
independent accountants for the Company and its subsidiaries, replacing KPMG
Peat Marwick LLP ("KPMG"), which was dismissed in January, 1996. The change
was approved by the audit committee of the Company's Board of Directors. In
connection with the audits of the two fiscal years in the period ended
December 31, 1995 and through the interim period ended January 31, 1996, there
were no disagreements with KPMG on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to KPMG's satisfaction would have caused
them to make reference to the matter in their report. The audit reports of
KPMG on the consolidated financial statements of the Company as of and for the
years ended December 31, 1993 and 1994 did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty
or audit scope. The audit report for the year ended December 31, 1993 was
modified for the change in accounting method related to SFAS No. 109,
"Accounting for Income Taxes." The audit report for the year ended December
31, 1994 was modified to include a discussion on the restatement of the
Company's 1993 financial statements for the timing of when certain expenses
were recognized in the financial statements. During the audit period ended
December 31, 1994, and through the interim period ended January 31, 1996 there
have been no reportable events.
During the two fiscal years ended December 31, 1995, and through the interim
period ended February 8, 1996, the Company had not consulted with Coopers &
Lybrand L.L.P. on items which concerned the subject matter of a disagreement
or reportable event with the former auditor.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act, with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedule thereto. For further
information with respect to the Company and such Common Stock, reference is
made to the Registration Statement and the exhibits and schedule filed as part
thereof. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and,
in each instance, if such contract or document is filed as an exhibit,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference to such exhibit. A copy of the Registration
Statement, and the exhibits and schedule thereto, may be inspected without
charge at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048, and copies of all or any part of the
Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the Commission.
66
<PAGE>
SUMMIT DESIGN, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March
31, 1996 (unaudited).................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31,
1993, 1994 and 1995 and for the Three Months Ended March 31, 1995 and
1996 (unaudited)........................................................ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 and for the Three Months Ended March
31, 1996 (unaudited).................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995 and for the Three Months Ended March 31, 1995 and
1996 (unaudited)........................................................ F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders Summit Design, Inc.
We have audited the accompanying consolidated balance sheets of Summit
Design, Inc. and its subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Summit
Design, Inc. and its subsidiaries as of December 31, 1995 and 1994, and the
results of their consolidated operations and their cash flows for the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note 9 of Notes to Consolidated Financial Statements,
effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
As discussed in Note 2 of Notes to Consolidated Financial Statements, the
1993 and 1994 financial statements have been restated.
Coopers & Lybrand L.L.P.
Portland, Oregon
June 18, 1996
F-2
<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31,
1996
DECEMBER 31, UNAUDITED
------------------ MARCH 31, PRO FORMA
1994 1995 1996 (NOTE 13)
-------- -------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 1,193 $ 592 $ 1,304
Accounts receivable, less allowance
for doubtful accounts of $355,
$455 and $455..................... 4,144 5,521 4,319
Prepaid expenses and other......... 324 319 295
-------- -------- --------
Total current assets............. 5,661 6,432 5,918
Furniture and equipment, net......... 1,449 1,790 1,693
Deposits and other assets............ 926 681 756
-------- -------- --------
Total assets..................... $ 8,036 $ 8,903 $ 8,367
======== ======== ========
LIABILITIES
Current liabilities:
Note payable to bank............... $ 1,516 $ 1,000 $ --
Long-term debt, current portion.... 411 854 847
Capital lease obligation, current
portion........................... 239 191 170
Accounts payable................... 1,347 994 717
Accrued liabilities................ 1,496 2,247 2,119
Deferred revenue................... 1,096 1,676 2,367
-------- -------- --------
Total current liabilities........ 6,105 6,962 6,220
Long-term debt, less current
portion............................. 60 1,065 958
Capital lease obligations, less
current portion..................... 193 151 127
Deferred revenue, less current
portion............................. 283 83 373
Other long-term liabilities.......... 100 50 --
-------- -------- --------
Total liabilities................ 6,741 8,311 7,678
-------- -------- --------
Commitments and contingencies (Notes
6 and 11)
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.01 par
value. Authorized 9,334 shares in
1995 and 1996 and 5,000 shares pro
forma; issued and outstanding: 8,599
shares in 1994, 9,103 shares in 1995
and 1996, and no shares pro forma;
aggregate liquidation preference of
$19,315 at December 31, 1995........ 86 91 91
Common stock, $.01 par value.
Authorized 20,000 shares in 1995 and
1996 and 30,000,000 shares pro
forma; issued and outstanding 1,969
shares in 1994, 1,887 shares in
1995, 1,937 shares in 1996 and
11,040 shares pro forma; liquidation
preference of $189 at December 31,
1995 ............................... 20 19 19 $ 110
Additional paid-in capital........... 12,993 15,437 15,456 15,456
Accumulated deficit.................. (11,804) (14,955) (14,877) (14,877)
-------- -------- -------- --------
Total stockholders' equity....... 1,295 592 689 $ 689
-------- -------- -------- ========
Total liabilities and
stockholders' equity............ $ 8,036 $ 8,903 $ 8,367
======== ======== ========
</TABLE>
The accompanying notes are integral part of the consolidated financial
statements.
F-3
<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Product licenses................ $ 4,693 $ 9,143 $10,383 $ 1,821 $3,547
Maintenance and services........ 2,547 2,323 2,637 521 918
Other........................... -- 1,516 1,050 400 142
------- ------- ------- ------- ------
Total revenue................. 7,240 12,982 14,070 2,742 4,607
Cost of revenue:
Product licenses................ 440 681 651 134 132
Maintenance and services........ 330 390 400 103 102
------- ------- ------- ------- ------
Total cost of revenue......... 770 1,071 1,051 237 234
------- ------- ------- ------- ------
Gross profit...................... 6,470 11,911 13,019 2,505 4,373
Operating expenses:
Research and development........ 2,381 4,632 5,113 1,266 1,332
Sales and marketing............. 3,673 5,867 7,370 1,778 2,097
General and administrative...... 1,919 2,309 3,112 661 639
In-process technology........... -- 647 -- -- --
------- ------- ------- ------- ------
Total operating expenses...... 7,973 13,455 15,595 3,705 4,068
------- ------- ------- ------- ------
Income (loss) from operations..... (1,503) (1,544) (2,576) (1,200) 305
Other income (expense), net....... (119) (100) (176) (52) (52)
------- ------- ------- ------- ------
Income (loss) before income
taxes............................ (1,622) (1,644) (2,752) (1,252) 253
Income tax provision.............. -- 402 399 73 175
------- ------- ------- ------- ------
Net income (loss)................. $(1,622) $(2,046) $(3,151) $(1,325) $ 78
======= ======= ======= ======= ======
Pro forma net income (loss) per
share............................ $ (0.15) $ (0.18) $ (0.28) $ (0.12) $ 0.01
======= ======= ======= ======= ======
Pro forma number of shares used in
per share calculation............ 11,048 11,348 11,378 11,364 11,414
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1993, 1994 and 1995,
and the three months ended March 31, 1996 (unaudited)
(In thousands, except shares)
<TABLE>
<CAPTION>
CONVERTIBLE NOTE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
------------------- ----------------- PAID-IN ACCUMULATED FROM STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCKHOLDER EQUITY
---------- ------- --------- ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1992 .................. 4,840,894 $ 6,878 1,170,970 $ 80 $ -- $ (8,136) $ -- $(1,178)
Issuance of Series D
preferred stock net of
issuance costs......... 800,000 1,181 -- -- -- -- -- 1,181
Conversion of bridge
loan into preferred
stock.................. 200,000 300 -- -- -- -- -- 300
Issuance of common
stock.................. -- -- 750,000 8 -- -- (7) 1
Issuance of common stock
under stock option
plan................... -- -- 128,807 14 -- -- -- 14
Net loss................ -- -- -- -- -- (1,622) -- (1,622)
---------- ------- --------- ---- ------- -------- ----- -------
BALANCE, DECEMBER 31,
1993................... 5,840,894 8,359 2,049,777 102 -- (9,758) (7) (1,304)
Recapitalization........ (1,806,973) (8,319) (841,061) (89) 8,408 -- -- --
Issuance of Series A
preferred stock in
merger................. 3,367,000 34 -- -- 1,077 -- -- 1,111
Conversion of Series C
Debentures into Series
C preferred stock...... 375,000 4 -- -- 371 -- -- 375
Issuance of Series D
preferred stock, net of
issuance costs......... 823,091 8 -- -- 3,079 -- -- 3,087
Payments from
stockholder............ -- -- -- -- -- -- 7 7
Issuance of common
stock.................. -- -- 188,048 1 4 -- -- 5
Exercise of warrants.... -- -- 47,174 1 -- -- -- 1
Repurchase of common
stock.................. -- -- (3,898) -- (1) -- -- (1)
Issuance of common stock
under stock option
plan................... -- -- 528,550 5 55 -- -- 60
Net loss................ -- -- -- -- -- (2,046) -- (2,046)
---------- ------- --------- ---- ------- -------- ----- -------
BALANCE, DECEMBER 31,
1994................... 8,599,012 86 1,968,590 20 12,993 (11,804) -- 1,295
Issuance of Series E
preferred stock........ 600,000 6 -- -- 2,575 -- -- 2,581
Repurchase of Series C
preferred stock........ (65,000) (1) -- -- (64) -- -- (65)
Repurchase of Series D
preferred stock........ (30,666) -- -- -- (115) -- -- (115)
Issuance of common stock
under stock option
plan................... -- -- 71,757 1 49 -- -- 50
Repurchase of common
stock.................. -- -- (153,705) (2) (1) -- -- (3)
Net loss................ -- -- -- -- -- (3,151) -- (3,151)
---------- ------- --------- ---- ------- -------- ----- -------
BALANCE, DECEMBER 31,
1995................... 9,103,346 91 1,886,642 19 15,437 (14,955) -- 592
Issuance of common stock
under stock option
plan................... -- -- 63,001 -- 21 -- -- 21
Repurchase of common
stock.................. -- -- (12,554) -- (2) -- -- (2)
Net income.............. -- -- -- -- -- 78 -- 78
---------- ------- --------- ---- ------- -------- ----- -------
BALANCE, MARCH 31, 1996
(UNAUDITED)............ 9,103,346 $ 91 1,937,089 $ 19 $15,456 $(14,877) $ -- $ 689
========== ======= ========= ==== ======= ======== ===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............... $(1,622) $(2,046) $(3,151) $(1,325) $ 78
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation.................. 197 457 588 183 216
(Gain) loss on disposal of
assets....................... 150 15 (1) -- --
Gain on sale of subsidiary.... (72) -- -- -- --
In-process technology......... -- 647 -- -- --
Changes in assets and
liabilities:
Accounts receivable......... 385 (2,599) (1,377) 50 1,202
Prepaid expenses and other.. 38 (230) 6 36 24
Accounts payable............ (97) 787 (353) (526) (277)
Accrued liabilities......... 311 (2) 751 249 (128)
Deferred revenue............ 183 357 380 707 981
Other, net.................. (146) (14) 195 (6) (125)
------- ------- ------- ------- -------
Net cash provided by (used
in) operating
activities............... (673) (2,628) (2,962) (632) 1,971
------- ------- ------- ------- -------
Cash flows from investing
activities:
Additions to furniture and
equipment...................... (62) (937) (773) (64) (110)
Cash acquired in merger......... -- 212 -- -- --
Cash included in sale of
subsidiary..................... (67) -- -- -- --
Proceeds on asset dispositions.. -- 173 15 -- --
------- ------- ------- ------- -------
Net cash used in investing
activities............... (129) (552) (758) (64) (110)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Issuance of preferred stock..... 1,181 3,087 2,581 -- --
Issuance of common stock........ 15 72 50 8 19
Proceeds from notes payable and
long-term debt................. -- 1,052 3,260 673 --
Repurchase of preferred stock... -- -- (180) (100) --
Repurchase of common stock...... -- -- (3) (2) --
Principal payments of debt
obligations.................... (120) (67) (2,329) (30) (1,114)
Principal payments of capital
lease obligations.............. (112) (200) (260) (74) (54)
------- ------- ------- ------- -------
Net cash provided by (used
in) financing
activities............... 964 3,944 3,119 475 (1,149)
------- ------- ------- ------- -------
Increase (decrease) in
cash and cash
equivalents.............. 162 764 (601) (221) 712
Cash and cash equivalents,
beginning of period.............. 267 429 1,193 1,193 592
------- ------- ------- ------- -------
Cash and cash equivalents, end of
period........................... $ 429 $ 1,193 $ 592 $ 972 $ 1,304
======= ======= ======= ======= =======
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest...................... $ 109 $ 144 $ 195 $ 32 $ 63
Income taxes.................. $ 3 $ 3 $ 1 $ -- $ 1
Supplemental disclosure of noncash
investing and financing
activities:
Equipment acquired under capital
leases......................... $ 292 $ 232 $ 170 $ 196 $ 9
Net assets acquired in merger... $ -- $ 1,111 $ -- $ -- $ --
Conversion of debt to preferred
stock.......................... $ 300 $ 375 $ -- $ -- $ --
Note received in sale of
subsidiary..................... $ 586 $ -- $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 1996 and for the three months ended March 31,
1995 and 1996 is unaudited)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Summit Design, Inc. (Summit or the Company) is a provider of graphical
design entry and verification software tools and design to test software
tools. North American sales are principally made by the Company's direct sales
force. Sales in Europe and Asia are primarily made through distributors.
Approximately 42% and 58.4% of the Company's revenue for the year ended
December 31, 1995 and the three months ended March 31, 1996, respectively,
were attributable to sales made through distributors.
The Company produces two main product lines--SLDA and Design to Test. Each
of these product lines contributed approximately 50% to the Company's revenue
in 1995.
Summit Design (EDA) Ltd., a wholly-owned subsidiary of the Company (formerly
SEE Technologies Software Environment for Engineers Ltd., hereafter SEE
Technologies), provides product research and development as well as sales and
support of certain product lines.
Summit Design, Inc. is headquartered in Beaverton, Oregon. Summit Design
(EDA) Ltd. is located in Herzlia, Israel, near Tel Aviv.
The following is a summary of the Company's significant accounting policies:
Basis of Consolidation
The 1994, 1995 and 1996 consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Test System
Strategies, Inc. (TSSI) and Summit Design (EDA) Ltd. The 1993 consolidated
financial statements include the accounts of TSSI and its wholly-owned
subsidiary, TSSI-Japan, which was sold in December 1993. Upon consolidation,
all intercompany accounts, transactions and profits have been eliminated.
The Company was formed to accomplish the recapitalization and merger of TSSI
and SEE Technologies (the Reorganization). Under the terms of the merger
agreement which was effective January 1, 1994, all outstanding shares of stock
of TSSI and SEE Technologies were exchanged for approximately 60% and 40%
ownership in the Company, respectively. The Series A, B, C and D preferred
stockholders of TSSI received Summit Series B preferred stock at conversion
rates of .5896815 or 1.179363, resulting in 4,033,921 shares of Summit Series
B preferred being issued. Approximately 2 million outstanding shares of TSSI
common stock were converted at the rate of one share of TSSI common stock into
.5896815 shares of Summit common stock. The stockholders of SEE Technologies
received Summit Series A preferred stock totaling 3,367,000 shares. The
acquisition was accounted for under the purchase method of accounting with the
Company acquiring SEE Technologies for approximately $1.1 million. The
operations of SEE Technologies have been included commencing January 1, 1994.
F-7
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The approximate fair value of assets and liabilities acquired at the date of
merger are as follows (in thousands):
<TABLE>
<S> <C>
Cash............................................................. $ 212
Accounts receivable.............................................. 178
Prepaids and other assets........................................ 663
Inventories...................................................... 12
Marketable securities............................................ 101
Furniture and equipment.......................................... 150
In-process technology............................................ 647
Accrued and other liabilities.................................... (504)
Chief Scientist grant............................................ (348)
------
$1,111
======
</TABLE>
The amount allocated to in-process technology was determined based upon
known valuation techniques in the high technology industry. The technological
feasibility of in-process technology had not been established and had no
alternative future use at the time of merger. Accordingly, the entire amount
of approximately $647,000 was charged to operations in the first quarter of
1994.
Revenue Recognition
Product licenses revenue is derived from the sale of products to
distributors and end-users. Revenue from the sale of product licenses is
recognized upon delivery of the product if remaining vendor obligations are
insignificant and collection of the resulting receivable is probable. The
Company provides a ninety-day warranty on certain products. Estimated sales
returns and provisions for insignificant vendor obligations and estimated
warranty costs are recorded upon delivery of the product.
Maintenance and services revenue includes software maintenance and other
service revenue, primarily from training. Software maintenance revenue is
deferred and recognized ratably over the life of the maintenance contract.
Other service revenue is recognized as the related service is performed.
Fees received for granting distribution rights are deferred and recognized
ratably over the term of the distribution agreement.
Research and Development Costs
Costs related to research, design and development of products are charged to
research and development expense as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established by completion of a working model of the product and ending when a
product is available for general resale to customers. To date, completion of a
working model of the Company's products and general release have substantially
coincided. As a result, the Company has not capitalized any software
development costs since such costs have not been significant.
Cash Equivalents
The Company considers all highly liquid debt instruments with a remaining
maturity of three months or less when purchased to be cash equivalents.
Furniture and Equipment
Furniture and equipment, consisting primarily of computer equipment and
office furniture, are stated at cost, net of related depreciation. Maintenance
and repairs are charged to expense as incurred. Depreciation is
F-8
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
computed using the straight-line method over the estimated useful lives of the
related assets ranging from three to seven years. Amortization of equipment
under capital leases is provided using the straight-line method over the
shorter of the related lease terms or economic life of the leased assets. Upon
disposal of an asset subject to depreciation, the cost and related accumulated
depreciation are removed from the accounts and resulting gains and losses are
reflected in operations.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting and
tax bases of assets and liabilities and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period of change. Valuation allowances are established when
necessary, to reduce deferred tax assets to the amounts expected to be
realized.
Concentration of Credit Risk
The Company sells its products primarily to commercial end-users across many
industries directly and through independent and affiliated distributors in
North America, Europe and Asia. The Company's end-user customers include
companies in a wide range of industries, including semiconductor devices,
semiconductor test equipment, telecommunications, computer/peripherals,
consumer electronics, aerospace/defense and other electronics entities. The
Company performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral. The Company maintains
allowances for potential losses, and such losses have been within management's
expectations.
At December 31, 1995, substantially all of the Company's cash and cash
equivalents are invested in interest-bearing deposits with a major bank.
Foreign Currency Translation
The Company's subsidiary in Israel uses the U.S. dollar as its functional
currency for financial reporting purposes. The Company's sales to foreign
distributors and customers are denominated in U.S. dollars.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Disclosure of Fair Value of Financial Instruments
The carrying amount of financial instruments including cash and cash
equivalents, accounts receivable, other current assets, accounts payable and
accrued liabilities approximated fair value as of December 31, 1995 because of
the relatively short maturity of these instruments. The carrying value of note
payable and long-term debt approximated fair value as of December 31, 1995,
based upon the interest rates available for the same or similar loans.
F-9
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro Forma
Upon the closing of an initial public offering of the Company's common
stock, all convertible preferred stock outstanding will convert into an
aggregate of 9,103,346 shares of common stock. The unaudited pro forma
stockholders' equity at March 31, 1996, is adjusted for the conversion of the
convertible preferred stock outstanding at March 31, 1996, as disclosed on the
face of the consolidated balance sheets.
Computation of Net Income (Loss) Per Share
Historical net income (loss) per share is computed using the weighted
average number of shares of common stock outstanding. Common equivalent shares
from stock options are excluded from the computation when their effect is
antidilutive, except that, pursuant to the Securities Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares, issued at
prices below the anticipated public offering price during the twelve months
immediately preceding the initial filing date of the Company's initial public
offering, have been included as if they were outstanding for all periods
presented using the treasury stock method and the assumed initial public
offering price of $9.00. Pro forma net income (loss) per share includes common
shares issuable upon the conversion of the outstanding preferred stock (using
the if-converted method) as if they were outstanding for all periods ending
prior to the Company's initial public offering.
The historical net income (loss) per share of the Company and the shares
used in the calculation of historical net income (loss) per share are as
follows (shares in thousands):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
---------------------- MARCH 31,
1993 1994 1995 1996
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Net income (loss) per share............... $(1.05) $(1.11) $(1.68) $ 0.01
====== ====== ====== ======
Shares used in per share calculation...... 1,542 1,842 1,873 11,414
</TABLE>
Interim Financial Data (Unaudited)
The consolidated financial statements as of March 31, 1996 and for the three
months ended March 31, 1995 and 1996 are unaudited; however, these financial
statements have been prepared on a basis consistent with the audited financial
statements and, in the opinion of management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation
of the financial position and results of operations in accordance with
generally accepted accounting principles. Results of the interim periods are
not necessarily indicative of results for the entire year.
Accounting for Stock Options
During October 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS 123) which established a fair value based method of
accounting for stock based compensation plans. While the Company is studying
the impact of the pronouncement, it continues to account for employee stock
options under APB Opinion No. 25, "Accounting for Stock Issued to Employees."
SFAS 123 will be effective for fiscal years beginning after December 15, 1995.
2. RESTATEMENT:
The Company has restated its 1993 and 1994 financial statements to charge
software development costs incurred prior to technological feasibility to
research and development expense. The 1994 financial statements have also been
restated to adjust for misstatements of 1994 distribution rights fees and
depreciation expense.
F-10
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of these restatements was to increase net loss and pro forma per
share net loss by $738,000 and $0.07 in 1993 and $2,030,000 and $0.18 in 1994,
respectively. The increase in 1993 net loss is comprised of $738,000 related
to software development costs. The increase in 1994 net loss is comprised of
$1,265,000, $483,000 and $282,000 related to software development costs,
distribution rights fees and depreciation, respectively.
3. FURNITURE AND EQUIPMENT:
Furniture and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1994 1995 1996
------- ------- ---------
<S> <C> <C> <C>
Office furniture and equipment..................... $ 262 $ 354 $ 285
Computer equipment................................. 1,415 2,175 2,363
Leasehold improvements............................. 35 38 38
Vehicles........................................... 39 14 14
Capital leases..................................... 711 682 682
------- ------- -------
2,462 3,263 3,382
Less accumulated depreciation and amortization..... (1,013) (1,473) (1,689)
------- ------- -------
$ 1,449 $ 1,790 $ 1,693
======= ======= =======
</TABLE>
4. NOTE PAYABLE TO BANK:
The Company has available a $2 million line of credit with U.S. National
Bank of Oregon, which matures April 30, 1997 and is collateralized by accounts
receivable, inventory, chattel paper, general intangibles, patents,
trademarks, copyrights and products and proceeds of the foregoing. Maximum
borrowings under the line shall not exceed 75% of eligible accounts
receivable. Interest on the unpaid balance accrues at a rate that ranges from
prime plus 1.25% to prime plus 2.0%, depending on the debt to tangible net
worth ratio maintained by the Company, and is payable monthly. Prime at
December 31, 1995 was 8.25%. At December 31, 1995, approximately $1 million
was outstanding under the Company's line of credit. There was no amount
outstanding at March 31, 1996.
The line of credit agreement contains financial covenants, including
covenants relating to the ratio of current assets to current liabilities,
working capital, net worth, the ratio of debt to net worth and dividend
restrictions.
5. ACCRUED LIABILITIES:
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
------ ------ ---------
<S> <C> <C> <C>
Commissions payable..................................... $ 194 $ 340 $ 416
Payroll and related benefits............................ 722 1,384 1,132
Accrued management relocation costs..................... 400 47 --
Accounting and legal.................................... -- 80 120
Sales and state income taxes payable.................... 84 42 42
Other................................................... 96 354 409
------ ------ ------
$1,496 $2,247 $2,119
====== ====== ======
</TABLE>
F-11
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LEASES:
The Company is obligated under capital leases for equipment that expire at
various dates during the next five years. The leased assets are included in
equipment at a capitalized amount of $682,000 at December 31, 1995. Related
accumulated amortization of $398,000 at December 31, 1995, is included in
accumulated depreciation and amortization.
The Company has entered into a noncancelable operating lease for the use of
a building. Rental expense was approximately $179,000, $193,000, $261,000,
$66,000 and $76,000 for the three years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1995 and 1996. In addition, Summit Design
(EDA) Ltd. entered into a sublease with a related party for its premises. The
lease expires in 1997. Annual rental is contingent on the Israeli consumer
price index and is approximately $165,000 annually.
Future minimum lease payments under these operating leases and capital
leases for the years ending December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1996........................................................ $ 208 $ 454
1997........................................................ 65 347
1998........................................................ 48 324
1999........................................................ 48 344
----- ------
Total minimum lease payments.............................. 369 $1,469
======
Less amount representing interest (at rates ranging from 5%
to 15%).................................................... (27)
-----
Present value of minimum capital lease payments........... 342
Less current installments of obligations under capital lease
payments................................................... (191)
-----
Obligations under capital leases, excluding current
installments............................................. $ 151
=====
</TABLE>
7. LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------ MARCH 31,
1994 1995 1996
----- ------ ---------
<S> <C> <C> <C>
Equipment note, payable in monthly installments of $14
plus interest at prime plus 1% (9.25% at December 31,
1995), collateralized by the equipment financed, due
June 1998............................................. $ -- $ 381 $ 345
Note payable to a corporation, payable in monthly
installments of $19 plus interest at the prime rate
plus 1% (9.25% at December 31, 1995), due September
1997.................................................. -- 391 322
Marketing loan payable to the Israeli government....... 60 298 298
Chief Scientist grant payable to the Israeli
government............................................ 348 849 840
Other.................................................. 63 -- --
----- ------ -----
471 1,919 1,805
Current portion........................................ 411 854 847
----- ------ -----
Noncurrent portion..................................... $ 60 $1,065 $ 958
===== ====== =====
</TABLE>
F-12
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Chief Scientist grant represents research and development funding of
$232,000 in 1993 and $608,000 in 1995 received from the Israeli government
which is to be repaid at the rate of 3% to 5% of the sale of Visual HDL for
VHDL until 150% and 100% of the 1993 and 1995 grants, respectively, are repaid
in full. The 1993 grant is reflected at 150% of the original grant received.
The Company has entered into an agreement with the Israeli government whereby
the amount under the 1995 grant will be unconditionally repaid no later than
July 31, 2000.
The Company received a Marketing Fund loan of $326,000 from the Israeli
Ministry of Industry and Trade through 1995. This loan is to be repaid at the
rate of 3% to 5% of the increase in export sales of all Israeli products over
the base year until repaid.
Future principal payments of debt outstanding for the years ending December
31 are as follows (in thousands):
<TABLE>
<S> <C>
1996.............................................................. $ 854
1997.............................................................. 638
1998.............................................................. 230
1999.............................................................. 197
------
$1,919
======
</TABLE>
8. STOCKHOLDERS' EQUITY:
Preferred Stock
Preferred stock is summarized as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 31,
1994 1995 1996
------ ------ ---------
<S> <C> <C> <C>
Series A -- $.01 par; 3,367,000 shares authorized,
issued and outstanding; liquidation preference of
$4,411 at December 31, 1995....................... $ 34 $ 34 $34
Series B -- $.01 par; 4,033,949 shares authorized
and 4,033,921 shares issued and outstanding;
liquidation preference of $7,584 at December 31,
1995.............................................. 40 40 40
Series C -- $.01 par; 400,000 shares authorized,
375,000 shares in 1994 and 310,000 shares in 1995
and 1996 issued and outstanding; liquidation
preference of $310 at December 31, 1995........... 4 3 3
Series D -- $.01 par; 933,334 shares authorized,
823,091 shares in 1994 and 792,425 shares issued
and outstanding in 1995 and 1996; liquidation
preference of $2,972 at December 31, 1995......... 8 8 8
Series E -- $.01 par; 600,000 shares authorized,
issued and outstanding; liquidation preference of
$4,038 at December 31, 1995....................... -- 6 6
------ ------ ---
$ 86 $ 91 $91
====== ====== ===
</TABLE>
Each share of preferred stock has voting rights and is convertible (subject
to anti-dilutive adjustments in certain circumstances) into one share of
common stock at the option of the holder, or automatically upon the sale of
the Company's common stock pursuant to a public offering with aggregate net
cash proceeds to the Company of at least $10 million and a price to the public
of at least $5.50 per share.
F-13
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the event of a liquidation, which includes a merger or sale of
substantially all of the Company's assets, the holders of Series E preferred
stock receive preference in the amount of $6.73 per share, plus all declared
but unpaid dividends, over all other outstanding shares of stock. Holders of
Series D preferred stock have a liquidation priority over holders of Series A-
C preferred stock up to a liquidation preference of $3.75, plus all declared
but unpaid dividends. Holders of Series A and Series B preferred stock,
treated as one class, have a liquidation priority over holders of Series C
preferred stock and common stock up to a liquidation preference of $1.31 and
$1.88 per share, respectively, plus all declared but unpaid dividends. Holders
of Series C preferred stock have liquidation priority over holders of common
stock up to a liquidation priority of $1.00 per share. Common stockholders
have a liquidation preference up to $.10 per share upon satisfaction of the
Series A, Series B, Series C, Series D and Series E preferred preferences. Any
remaining assets shall be shared equally among all outstanding stockholders.
If, in the event of liquidation, the Company's assets are insufficient to
pay the holders of any particular series of preferred stock their full
preferential amount, then legally available assets of the Company will be
distributed ratably among holders of that series of preferred stock after
payment of the full preferential amount has been made to all series of
preferred stock having a senior liquidation preference.
Each share of preferred stock has a dividend rate of $.10. Dividends are not
cumulative and none have been declared or paid to date.
1994 Stock Plan
The Company has a stock plan pursuant to which the Company may grant options
to employees and consultants. Under the terms of the plan, the option price is
determined by the Board of Directors at the time the option is granted. Under
the plan, 1,687,000 shares of common stock are authorized for issuance.
Options granted are immediately exercisable, and ownership generally vests 25%
twelve months after the date of grant and the remainder at 1/48 of the grant
amount in each successive month thereafter. Shares issued are subject to
repurchase until vested. Options expire no later than 10 years after the date
of grant.
F-14
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, options to purchase 612,282 shares were vested.
Options outstanding and transactions were as follows:
<TABLE>
<CAPTION>
EXERCISE
OPTIONS PRICE RANGE
--------- --------------
<S> <C> <C>
Balance, December 31, 1992........................... 213,615 $0.25 -- $0.51
Options granted.................................... 370,024 $0.01 -- $0.20
Options exercised.................................. (75,955) $0.25 -- $0.51
Options canceled................................... (32,726) $0.20 -- $0.51
--------- --------------
Balance, December 31, 1993........................... 474,958 $0.01 -- $0.51
Options granted.................................... 1,035,796 $0.02 -- $2.50
Options exercised.................................. (528,550) $0.02 -- $0.51
Options canceled................................... (108,747) $0.01 -- $1.75
--------- --------------
Balance, December 31, 1994........................... 873,457 $0.02 -- $5.00
Options granted.................................... 551,187 $1.75
Options exercised.................................. (71,757) $0.02 -- $0.51
Options canceled................................... (192,075) $0.02 -- $2.50
--------- --------------
Balance, December 31, 1995........................... 1,160,812 $0.02 -- $2.50
Options granted.................................... 62,500 $1.75 -- $7.50
Options exercised.................................. (63,001) $0.02 -- $2.50
Options canceled................................... (53,059) $0.35 -- $2.50
--------- --------------
Balance, March 31, 1996.............................. 1,107,252 $0.02 -- $7.50
========= ==============
</TABLE>
Effective September 13, 1995, the Board of Directors of the Company approved
an adjustment to the exercise price of the Company's outstanding stock options
with an exercise price in excess of $1.75. All outstanding options subject to
the adjustment were repriced to $1.75, the fair market value at that date as
determined by the Board. Participation by each option holder was voluntary.
The weighted average exercise price per share of options outstanding at March
31, 1996 is $1.34.
Right to Repurchase Stock
The Company has the right of first refusal to repurchase common stock issued
to employees or common stock issued upon exercise of warrants. This right
terminates 90 days after the first sale of Company common stock pursuant to a
Registration Statement filed with the Securities and Exchange Commission.
Common Shares Reserved
As of December 31, 1995, the Company has reserved shares of common stock for
issuance as follows:
<TABLE>
<S> <C>
Conversion of preferred stock..................................... 9,103,346
Exercise of common stock options.................................. 1,160,812
----------
10,264,158
==========
</TABLE>
F-15
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES:
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109 on a prospective basis effective January 1, 1993. The
adoption did not have a significant impact on the Company's financial
statements. The provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Current:
Federal............................... $ -- $ -- $ -- $ -- $ --
State................................. -- -- 1 -- --
Foreign............................... -- 402 398 73 175
------- ------- ------- ------- -------
$ -- $ 402 $ 399 $ 73 $ 175
======= ======= ======= ======= =======
</TABLE>
The difference between the effective income tax rate and the statutory U.S.
federal income tax rate is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Tax provision (benefit) at
statutory rate.................. $ (551) $ (334) $ (907) $ (421) $ 87
Foreign withholding taxes........ -- 402 398 73 175
Deferred taxes, primarily
increase in valuation allowance
and utilization of net operating
losses.......................... 551 334 907 421 (87)
State............................ -- -- 1 -- --
------- ------- ------- -------- -------
$ -- $ 402 $ 399 $ 73 $ 175
======= ======= ======= ======== =======
</TABLE>
At December 31, 1995, the Company had net operating loss carryforwards for
federal and state income tax purposes which can be used to offset future
income subject to taxes. In addition, there are unused research and
experimentation and foreign tax credits which may be available for offset
against future federal income taxes after use of the loss carryforwards. Such
loss carryforwards and tax credits are summarized below (in thousands):
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATES
------- ------------
<S> <C> <C>
Loss carryforwards:
Federal................................................. $10,180 2001 -- 2010
State................................................... 7,733 2001 -- 2010
Research and experimentation credits (federal only)....... 263 2001 -- 2011
Foreign tax credits (federal only)........................ 486 1998 -- 1999
</TABLE>
Due to changes in the Company's ownership structure which occurred as a
result of the Reorganization and a subsequent preferred stock financing, the
federal and state net operating loss carryforwards are limited in use to
approximately $1.7 million annually. The tax credit carryfowards are also
subject to limitation due to the change in ownership.
In addition, the Company has foreign income tax net operating losses of
approximately $6.4 million. These foreign losses were generated in Israel over
several years and have not yet received final assessment
F-16
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
from the Israeli government. Consequently, management is uncertain as to the
continued availability of a substantial portion of such foreign loss
carryforwards.
The approximate effects of temporary differences which give rise to deferred
tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1994 1995 1996
------- ------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Federal and state net operating loss
carryforwards................................... $ 2,710 $ 3,836 $ 3,627
Foreign operating loss carryforwards............. 1,062 1,134 1,091
Research and experimentation credit
carryforwards................................... 263 263 263
Foreign tax credit carryforwards................. 77 486 661
Other deferred tax items......................... 873 735 939
------- ------- -------
Total gross deferred tax assets................ 4,985 6,454 6,581
Less valuation allowances........................ (4,479) (5,982) (6,049)
------- ------- -------
Net deferred tax assets........................ 506 472 532
------- ------- -------
Deferred tax liabilities:
Other deferred tax items......................... (506) (472) (532)
------- ------- -------
Total gross deferred tax liabilities........... (506) (472) (532)
------- ------- -------
Net deferred taxes............................. $ -- $ -- $ --
======= ======= =======
</TABLE>
The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
Management evaluates on a quarterly basis the recoverability of the deferred
tax assets and the level of the valuation allowance. The net change in the
valuation allowance for the years ended December 31, 1994 and 1995 was an
increase of approximately $900,000 and $1.5 million, respectively. The
valuation allowance at January 1, 1994 was approximately $3.6 million.
Approximately $1.1 million of the increase in the valuation allowance for the
year ended December 31, 1995 resulted from the operating loss generated in
such year.
10. 401(K) PLAN:
The Company has a 401(k) plan (the Plan) covering substantially all
employees meeting minimum service requirements. The Plan allows for the
Company to make discretionary matching contributions as determined by a
committee of the Board of Directors. The Company provided a discretionary
contribution of $6,000 and $10,000 in 1994 and 1995, respectively.
11. COMMITMENTS AND CONTINGENCIES:
Summit Design (EDA) Ltd. has registered floating charges on all its assets
as security for compliance with the terms attached to Israeli investment
grants received.
The Company has entered into employment agreements with certain of its
executive officers. These agreements provide for base annual compensation and
certain incentive bonuses and stock options on various vesting schedules as
well as severance compensation in the event of termination without cause.
F-17
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS:
The Company operates in a single industry segment comprising the electronic
design automation industry.
The Company markets its products and services to customers in North America,
Europe and the Asia Pacific region. Net revenue from export sales accounted
for 38%, 39%, 52%, 52%, and 61% of total revenue in 1993, 1994, 1995 and the
three months ended March 31, 1995 and 1996, respectively. During these
periods, other than the purchaser of certain technology in a one-time
transaction, no single customer accounted for more than 10% of total revenue.
Foreign operations of Summit Design (EDA) Ltd. accounted for less than 10% of
total revenue of the Company in each of the three years in the period ended
December 31, 1995. Identifiable assets of the Company's subsidiary were $1.3
million at December 31, 1995.
13. RELATED PARTIES:
At the time of the Reorganization, the Company entered into a one-year
financial services agreement with a significant stockholder pursuant to which
the stockholder provided the Company certain financial consulting services
related to its subsidiary in Israel. The Company entered into an agreement to
pay $100,000 to this stockholder in 1994 in conjunction with this agreement.
The Company also entered into a one-year agreement with the stockholder
whereby the Company received certain engineering and consulting services for a
sum of $1.4 million in 1994. Similarly, SEE Technologies and the stockholder
entered into a one-year agreement pursuant to which SEE Technologies provided
certain engineering and consulting services to the stockholder for a sum of
$1.3 million in 1994. Additionally, SEE Technologies leases its corporate
offices from the stockholder under a four-year sublease agreement on the same
terms and conditions that the stockholder leases such space.
14. SUBSEQUENT EVENTS:
In May 1996, the Company's Board of Directors authorized management of the
Company to file a Registration Statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. Also in May 1996, the Board of Directors approved an Amended and
Restated Certificate of Incorporation to be filed upon the completion of this
offering. The Amended and Restated Certificate of Incorporation, among other
things, authorizes 5,000,000 shares, $0.01 par value of Preferred Stock and
increased the authorized number of shares of Common Stock, par value $0.01 per
share, from 20,000,000 shares to 30,000,000 shares. Additionally, the Board
authorized increases in the number of shares issuable under the 1994 Stock
Plan to 2,322,000.
The Company entered into an agreement with Seiko Instruments, Inc. (Seiko)
in February 1996, which granted to Seiko an exclusive right to distribute and
support certain Summit products in Japan. Under the terms of the agreement,
Seiko will pay the Company a distribution rights fee of $1,100,000 during the
period of the agreement which is three years ending February 1999. The Company
will receive payments from Seiko of $800,000, $200,000 and $100,000 in 1996,
1997 and 1998, respectively. In the three months ended March 31, 1996, the
Company recognized revenue of $92,000 associated with this agreement.
Effective April 1, 1996, the Company invested $100,000 for a 20% interest in
a joint venture corporation which has the exclusive rights to manufacture,
sell, distribute and support all of the Company's products in the Asia-Pacific
region, excluding Japan.
F-18
<PAGE>
VISUAL HDL
Visual HDL can raise designer productivity by allowing system level,
behavioral level and functional level design entry using graphical design
methods such as block diagrams, state machines, flow charts and truth tables.
Summit has installed more than 1,100 seats of its SLDA tools in more than 125
companies, of which more than 100 companies have entered into support
contracts.
[GRAPHIC SHOWING SCREEN SHOTS OF SLDA BLOCK DIAGRAMS, STATE MACHINES, FLOW
CHARTS AND TRUTH TABLES]
TDS
Test development engineers use TDS to convert design simulation data into
optimized and debugged test programs. The Company has more than 150 active
installations of its TDS product.
[GRAPHIC SHOWING SCREEN SHOTS OF SIMULATION DATA]
<PAGE>
[GRAPHIC OF MOUNTAIN]
[SUMMIT DESIGN LOGO APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale and distribution of Common Stock being registered. All amounts
are estimates except the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration fee................................................ $ 13,880
NASD filing fee................................................. 4,525
Printing expenses............................................... 150,000
Legal fees and expenses......................................... 250,000
Accounting fees and expenses.................................... 175,000
Blue Sky fees and expenses...................................... 5,000
Transfer Agent and Registrar fees and expenses.................. 10,000
Nasdaq Application and listing fees............................. 25,125
Directors and Officers Insurance Premium........................ 240,000
Miscellaneous................................................... 76,470
--------
Total......................................................... $950,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Article Eighth of the Certificate of Incorporation of
the Company, filed herewith as Exhibit 3.1; Article VI of the Bylaws of the
Company, filed herewith as Exhibit 3.3; Section 145 of the Delaware General
Corporation Law; and the form of indemnification agreement filed herewith as
Exhibit10.1 which, among other things, and subject to certain conditions,
authorize the Company to indemnify, or indemnify by their terms, as the case
may be, the directors and officers of the Company against certain liabilities
and expenses incurred by such persons in connection with claims made by reason
of their being such a director or officer.
See the form of the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement for certain provisions relating to indemnification of
the Company and its officers and directors.
The Company has obtained directors and officers insurance providing
indemnification for certain of the Company's directors, officers, affiliates,
partners or employees for certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since December 29, 1993, the date of its incorporation, the Company has sold
unregistered securities in the amounts, at the time, and for the aggregate
amounts of consideration listed as follows:
(a) In December 1993, the Company issued 3,596,154 shares of its Series A
Preferred Stock to the two stockholders of SEE Technologies in exchange for
3,390,900 Ordinary Shares of SEE Technologies. The two stockholders
subsequently contributed 229,154 shares of the Series A Preferred Stock to
Summit.
(b) In February 1994, the Company entered into an agreement with Test
Systems Strategies, Inc. ("TSSI") whereby the Company acquired (i) all of
the outstanding Common Stock of TSSI in exchange for 1,806,340 shares of
the Company's Common Stock which were issued to 112 stockholders and
(ii) all of the outstanding Preferred Stock of TSSI in exchange for
4,033,921 shares of the Company's Series B Preferred Stock which were
issued to 27 stockholders.
II-1
<PAGE>
(c) In February 1994, the Company issued $400,000 aggregate principal
amount of convertible subordinated debentures to 16 persons and entities.
On November 11, 1994, all of the then outstanding convertible subordinated
debentures were converted into 375,000 shares of Series C Preferred Stock
of the Company.
(d) In May 1994, the Company sold to 21 stockholders an aggregate of
823,091 shares of its Series D Preferred Stock at $3.75 per share, for an
aggregate purchase price of $3,085,845.
(e) In June and July 1995, the Company sold to 7 stockholders an
aggregate of 600,000 shares of its Series E Preferred Stock at $4.52 per
share, for an aggregate purchase price of $2,711,048.
(f) From January 1994 through March 31, 1996, the Registrant has granted
stock options to purchase 2,259,992 shares of the Company's Common Stock at
a weighted average exercise price of $1.34 per share to employees,
consultants and directors pursuant to its 1994 Stock Plan.
The transactions listed in Item 15 were made in reliance upon the exemptions
from registration under the Securities Act of 1933, as amended, contained in
Section 4(2) thereof. No underwriters were involved in any of the foregoing
transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.
3.2* Form of Amended and Restated Certificate of Incorporation to be filed
promptly after the closing of the offering.
3.3 Bylaws, as amended.
3.4* Amended and Restated Bylaws.
4.1* Specimen Common Stock Certificate of Company.
4.2 Investors' Rights Agreement between the Registrant and the parties
named therein dated
February 10, 1994, as amended.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement between Registrant and its executive
officers and directors.
10.2 1994 Stock Plan, as amended.
10.3* 1996 Employee Stock Purchase Plan.
10.4* 1996 Director Option Plan.
10.5 Employment Agreement between the Registrant and Larry J. Gerhard dated
December 13, 1993.
10.6 Employment Agreement between the Registrant and C. Albert Koob dated
October 21, 1995.
10.7 Employment Agreement between the Registrant and Zamir Paz dated
January 1, 1996.
10.8 Employment Agreement between the Registrant and Dan Skilken dated
November 20, 1993.
10.9 Employment Agreement between the Registrant and Roger Bitter dated
November 22, 1993,
as amended.
10.10* Employment Agreement between the Registrant and Eric Benhayoun dated
October 31, 1994.
10.11 Employment Agreement between the Registrant and David Greg Kott dated
March 1, 1995.
10.12 Board of Directors Directorship Agreement between the Registrant and
Fred L. Hanson dated
October 9, 1995.
10.13 Lease Agreement between the Registrant and Petula Associates Ltd. and
Koll Creekside Associates II dated October 26, 1993, as amended.
10.14 Sublease Agreement, dated as of January 1993 between DCL Technologies,
Ltd. and SEE
Technologies, Ltd.
10.15 Bank Line of Credit Agreement between Registrant and U.S. National
Bank of Oregon dated
May 1, 1996.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.16+ Joint Venture Agreement between Summit Design Israel, Inc. and Anam S&T
Co., Ltd. dated March 21, 1996.
10.17+ Distributor Agreement between the Registrant and Seiko Instruments,
Inc., dated February 1, 1996.
10.18+ Distributor Agreement between the Registrant and ATE Service Co., Ltd.,
dated October 23, 1995, and amended as of April 9, 1996.
11.1 Statement regarding computation of the Company's per share earnings.
16.1 Letter re Change in Certifying Accountant.
21.1 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included in Exhibit
5.1).
24.1 Powers of attorney (See page II-4).
27 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Documents for which confidential treatment has been requested.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or shown in the
Consolidated Financial Statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Beaverton, State of Oregon, on the 19th day of June, 1996.
SUMMIT DESIGN, INC.
/s/ Larry J. Gerhard
By:
----------------------------------
Larry J. Gerhard
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Larry J. Gerhard and C. Albert Koob, jointly
and severally, his true and lawful attorneys-in-fact and agents, each with the
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign, execute and file this Registration
Statement and any or all amendments (including, without limitation, post-
effective amendments and abbreviated registration statements) to this
Registration Statement on Form S-1, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission or any regulatory authority, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, or their or his substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Larry J. Gerhard President, Chief Executive June 19, 1996
- -------------------- Officer and Director
Larry J. Gerhard (Principal Executive Officer)
/s/ C. Albert Koob Vice President and Chief June 19, 1996
- -------------------- Financial Officer (Principal
C. Albert Koob Financial and Accounting
Officer)
/s/ Zamir Paz Director June 19, 1996
- --------------------
Zamir Paz
/s/ Amihai Ben-David Director June 19, 1996
- --------------------
Amihai Ben-David
/s/ John Grillos Director June 19, 1996
- --------------------
John Grillos
/s/ Fred L. Hanson Director June 19, 1996
- --------------------
Fred L. Hanson
/s/ Jay Morrison Director June 19, 1996
- --------------------
Jay Morrison
/s/ Mark Stevens Director June 19, 1996
- --------------------
Mark Stevens
</TABLE>
II-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
In connection with our audits of the consolidated financial statements of
Summit Design Inc. and its subsidiaries as of December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995, which
financial statements are included in the Prospectus, we have also audited the
financial statement schedule listed in Item 16b herein.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Portland, Oregon
June 18, 1996
II-5
<PAGE>
SCHEDULE II
SUMMIT DESIGN, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1993:
Allowance for doubtful
accounts............. $341 $125 $ -- $18 $448
Year ended December 31,
1994:
Allowance for doubtful
accounts............. 448 (36) -- 57 355
Year ended December 31,
1995:
Allowance for doubtful
accounts............. 355 306 -- 206 455
</TABLE>
<PAGE>
Exhibit 1.1
3,500,000 SHARES/1/
SUMMIT DESIGN, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
_______, 1996
ROBERTSON, STEPHENS & COMPANY LLC
NEEDHAM & COMPANY, INC.
As Representatives of the several Underwriters
c/o Robertson, Stephens & Company LLC
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
Summit Design, Inc., a Delaware corporation (the "Company"), and certain
stockholders of the Company named in Schedule B hereto (hereafter called the
"Selling Stockholders") address you as the Representatives of each of the
persons, firms and corporations listed in Schedule A hereto (herein collectively
called the "Underwriters") and hereby confirm their respective agreements with
the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
1,750,000 shares of its authorized and unissued Common Stock, par value $0.01
per share, to the several Underwriters. The Selling Stockholders, acting
severally and not jointly, propose to sell an aggregate of 1,750,000 shares of
the Company's authorized and outstanding Common Stock, par value $0.01 per
share, to the several Underwriters. The 1,750,000 shares of Common Stock, par
value $0.01, of the Company to be sold by the Company are hereinafter called the
"Company Shares" and the 1,750,000 shares of Common Stock, par value $0.01, to
be sold by the Selling Stockholders are hereinafter called the "Selling
Stockholder Shares." The Company Shares and the Selling Stockholder Shares are
hereinafter collectively referred to as the "Firm Shares." Certain Selling
Stockholders listed in Schedule C also propose to grant to the Underwriters an
option to purchase up to 500,000 additional shares of the Company's Common
Stock, par value $0.01 (the "Option Shares"), as provided in Section 7 hereof.
As used in this Agreement, the term "Shares" shall include the Firm Shares and
the Option Shares. All shares of Common Stock, par value $0.01, of the Company
to be outstanding after giving effect to the sales contemplated hereby,
including the Shares, are hereinafter referred to as "Common Stock."
2. Representations, Warranties and Agreements of the Company and the
Selling Stockholders.
(a) The Company represents and warrants to and
agrees with each Underwriter and each Selling Stockholder that:
(i) A registration statement on Form S-1 (File No. 333-
_____) with respect to the Shares, including a prospectus subject to completion,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act
______________________
/1/ Plus an option to purchase up to 500,000 additional shares from
certain stockholders to cover over-allotments.
1
<PAGE>
and has been filed with the Commission; such amendments to such registration
statement, such amended prospectuses subject to completion and such abbreviated
registration statements pursuant to Rule 462(b) of the Rules and Regulations as
may have been required prior to the date hereof have been similarly prepared and
filed with the Commission; and the Company will file such additional amendments
to such registration statement, such amended prospectuses subject to completion
and such abbreviated registration statements as may hereafter be required.
Copies of such registration statement and amendments, of each related prospectus
subject to completion (the "Preliminary Prospectuses") and of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations have
been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission the information omitted from the registration statement
pursuant to Rule 430A(a) or, if Robertson, Stephens & Company LLC, on behalf of
the several Underwriters, shall agree to the utilization of Rule 434 of the
Rules and Regulations, the information required to be included in any term sheet
filed pursuant to Rule 434(b) or (c), as applicable, of the Rules and
Regulations pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if Robertson,
Stephens & Company LLC, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or (c),
as applicable, of the Rules and Regulations. The term "Registration Statement"
as used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files a
term sheet pursuant to Rule 434 of the Rules and Regulations, the information
deemed to be a part of the registration statement at the time it became
effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and Regulations)
and, in the event of any amendment thereto or the filing of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations
relating thereto after the effective date of such registration statement, shall
also mean (from and after the effectiveness of such amendment or the filing of
such abbreviated registration statement) such registration statement as so
amended, together with any such abbreviated registration statement. The term
"Prospectus" as used in this Agreement shall mean the prospectus relating to the
Shares as included in such Registration Statement at the time it becomes
effective (including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the Rules and Regulations); provided,
however, that if in reliance on Rule 434 of the Rules and Regulations and with
the consent of Robertson, Stephens & Company LLC, on behalf of the several
Underwriters, the Company shall have provided to the Underwriters a term sheet
pursuant to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Act, the
term "Prospectus" shall mean the "prospectus subject to completion" (as defined
in Rule 434(g) of the Rules and Regulations) last provided to the Underwriters
by the Company and circulated by the Underwriters to all prospective purchasers
of the Shares (including the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 434(d) of the Rules
and Regulations). Notwithstanding the foregoing, if any revised prospectus
shall be provided to the Underwriters by the Company for use in connection with
the offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such use.
If in reliance on Rule 434 of the Rules and Regulations and with the consent of
Robertson, Stephens & Company LLC, on behalf of the several Underwriters, the
Company shall have provided to the Underwriters a term sheet pursuant to Rule
434(b) or (c), as applicable, prior to the time that a confirmation is sent or
given for purposes of Section 2(10)(a) of the Act, the Prospectus and the term
sheet, together, will not be materially different from the prospectus in the
Registration Statement.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus has
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conformed in all material respects to the requirements of the Act and the Rules
and Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up to
and on the Closing Date (hereinafter defined) and on any later date on which
Option Shares are to be purchased, (i) the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act and
the Rules and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, (ii) the Registration
Statement, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (iii) the Prospectus, and any amendments or supplements thereto,
did not and will not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties contained in this subparagraph
2(a)(ii) shall apply to information contained in or omitted from the
Registration Statement or Prospectus, or any amendment or supplement thereto, in
reliance upon, and in conformity with, written information relating to any
Underwriter furnished to the Company by such Underwriter specifically for use in
the preparation thereof.
(iii) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation with full power and authority
(corporate and other) to own, lease and operate its properties and conduct its
business as described in the Prospectus; the Company owns all of the outstanding
capital stock of its subsidiaries free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities which are material to the conduct of
its business, all of which are valid and in full force and effect; neither the
Company nor any of its subsidiaries is in violation of its respective charter or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness, or in any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of its subsidiaries or their respective properties
may be bound; and neither the Company nor any of its subsidiaries is in material
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or over
their respective properties of which it has knowledge. The Company does not own
or control, directly or indirectly, any interest in any corporation, association
or other entity other than Summit Design (EDA) Ltd., an Israeli company, Test
Systems Strategies, Inc., a ______________________ corporation and Summit Design
Asia, LTD., a _______ corporation.
(iv) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract,
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indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of its subsidiaries or their respective properties
may be bound, (ii) the charter or bylaws of the Company or any of its
subsidiaries, or (iii) any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective properties is
required for the execution and delivery of this Agreement and the consummation
by the Company or any of its subsidiaries of the transactions herein
contemplated, except such as may be required under the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or under state or other
securities or Blue Sky laws, all of which requirements have been satisfied in
all material respects.
(v) There is not any pending or, to the best of the
Company's knowledge, threatened action, suit, claim or proceeding against the
Company, any of its subsidiaries or any of their respective officers or any of
their respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in any material adverse change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise or might materially and adversely affect their properties, assets or
rights, (ii) might prevent consummation of the transactions contemplated hereby
or (iii) is required to be disclosed in the Registration Statement or Prospectus
and is not so disclosed; and there are no agreements, contracts, leases or
documents of the Company or any of its subsidiaries of a character required to
be described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement by the Act or the Rules and
Regulations which have not been accurately described in all material respects in
the Registration Statement or Prospectus or filed as exhibits to the
Registration Statement.
(vi) All outstanding shares of capital stock of the Company
(including the Selling Stockholder Shares) have been duly authorized and validly
issued and are fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities, and the authorized and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" and conforms
in all material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus (and such statements correctly state
the substance of the instruments defining the capitalization of the Company);
the Company Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Company against payment therefor in accordance with the terms of this Agreement,
will be duly and validly issued and fully paid and nonassessable, and will be
sold free and clear of any pledge, lien, security interest, encumbrance, claim
or equitable interest; and no preemptive right, co-sale right, registration
right, right of first refusal or other similar right of stockholders exists with
respect to any of the Company Shares or the issuance and sale thereof other than
those that have been expressly waived prior to the date hereof and those that
will automatically expire upon and will not apply to the consummation of the
transactions contemplated on the Closing Date. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale or transfer of the Shares except as
may be required under the Act, the Exchange Act or under state or other
securities or Blue Sky laws. All issued and outstanding shares of capital stock
of each subsidiary of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, and were not issued in violation of or
subject to any preemptive right, or other rights to subscribe for or purchase
shares and, except for the interest in Summit Design Asia, LTD. owned by Anam
_____, are owned by the Company free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest. Except as disclosed in the
Prospectus and the financial statements of the Company, and the related notes
thereto, included in the Prospectus, neither the Company nor any subsidiary has
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus
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accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
(vii) Coopers & Lybrand LLP, which has examined the
consolidated financial statements of the Company, together with the related
schedules and notes, as of December 31, 1995 and 1994 and for each of the years
in the three (3) years ended December 31, 1995 filed with the Commission as a
part of the Registration Statement, which are included in the Prospectus, are
independent accountants within the meaning of the Act and the Rules and
Regulations; the audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company and its subsidiaries at the respective dates and for the
respective periods to which they apply; and all audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, filed with the Commission as
part of the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration Statement
present fairly the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements or schedules are required to be included in the
Registration Statement.
(viii) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (i) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (ii) any transaction that is material
to the Company and its subsidiaries considered as one enterprise, except
transactions entered into in the ordinary course of business, (iii) any
obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or outstanding indebtedness of the Company
or any of its subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries, or (vi) any loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries which has been sustained or
will have been sustained which has a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise.
(ix) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its subsidiaries has good and marketable
title to all properties and assets described in the Registration Statement and
Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (ii) the agreements to which the
Company or any of its subsidiaries is a party described in the Registration
Statement and Prospectus are valid agreements, enforceable by the Company and
its subsidiaries (as applicable), except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles and, to the best of the Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default under any of such agreements, and (iii) each of the Company and
its subsidiaries has valid and enforceable leases for all properties described
in the Registration Statement and Prospectus as leased by it, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles. Except as set
forth in the Registration Statement and Prospectus, the Company owns or leases
all such properties as are necessary to its operations as now conducted or as
proposed to be conducted.
(x) The Company and its subsidiaries have timely filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes shown thereon as due, and there is no tax deficiency that has
been or, to the best of the Company's knowledge, might be asserted against the
Company or any of its subsidiaries that might have a material adverse effect on
the condition (financial or otherwise),
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earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise; and all tax liabilities are
adequately provided for on the books of the Company and its subsidiaries.
(xi) The Company and its subsidiaries maintain insurance with
insurers of recognized financial responsibility of the types and in the amounts
generally deemed adequate for their respective businesses and consistent with
insurance coverage maintained by similar companies in similar businesses,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company or its subsidiaries against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against,
all of which insurance is in full force and effect; neither the Company nor any
such subsidiary has been refused any insurance coverage sought or applied for;
and neither the Company nor any such subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise.
(xii) No labor disturbance by the employees of the Company or
any of its subsidiaries exists or, to the best of Company's knowledge, is
imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, subassemblers,
value added resellers, subcontractors, original equipment manufacturers,
authorized dealers or international distributors that might be expected to
result in a material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise. No collective bargaining agreement
exists with any of the Company's employees and, to the best of the Company's
knowledge, no such agreement is imminent.
(xiii) Each of the Company and its subsidiaries owns or
possesses adequate rights to use all patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names and copyrights which
are necessary to conduct its businesses as described in the Registration
Statement and Prospectus; the expiration of any patents, patent rights, trade
secrets, trademarks, service marks, trade names or copyrights would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; the Company has not received any notice of, and
has no knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights; and the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, might have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise.
(xiv) The Common Stock has been approved for quotation on The
Nasdaq National Market, subject to official notice of issuance.
(xv) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the 1940 Act and such rules and regulations.
(xvi) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
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(xvii) Neither the Company nor any of its subsidiaries has at
any time during the last five (5) years (i) made any unlawful contribution to
any candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(xviii) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(xix) Each officer and director of the Company, each Selling
Stockholder and each beneficial owner of [______________] or more shares of
Common Stock has agreed in writing that such person will not, for a period of
180 days from the date that the Registration Statement is declared effective by
the Commission (the "Lock-up Period"), offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities") now
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to partners or
stockholders of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii) with the prior
written consent of Robertson, Stephens & Company LLC. The foregoing restriction
has been expressly agreed to preclude the holder of the Securities from engaging
in any hedging or other transaction which is designed to or reasonably expected
to lead to or result in a Disposition of Securities during the Lock-up Period,
even if such Securities would be disposed of by someone other than such holder.
Such prohibited hedging or other transactions would include, without limitation,
any short sale (whether or not against the box) or any purchase, sale or grant
of any right (including, without limitation, any put or call option) with
respect to any Securities or with respect to any security (other than a broad-
based market basket or index) that includes, relates to or derives any
significant part of its value from Securities. Furthermore, such person has also
agreed and consented to the entry of stop transfer instructions with the
Company's transfer agent against the transfer of the Securities held by such
person except in compliance with this restriction. The Company has provided to
counsel for the Underwriters a complete and accurate list of all securityholders
of the Company and the number and type of securities held by each
securityholder. The Company has provided to counsel for the Underwriters true,
accurate and complete copies of all of the agreements pursuant to which its
officers, directors and stockholders have agreed to such or similar restrictions
(the "Lock-up Agreements") presently in effect or effected hereby. The Company
hereby represents and warrants that it will not release any of its officers,
directors or other stockholders from any Lock-up Agreements currently existing
or hereafter effected without the prior written consent of Robertson, Stephens &
Company LLC.
(xx) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S) 9601, et
seq.), or otherwise designated as a contaminated site under applicable state or
local law.
(xxi) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general or
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specific authorization, and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xxii) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(xxiii) The Company has complied with all provisions of Section
517.075, Florida Statutes, relating to doing business with the Government of
Cuba or with any person or affiliate located in Cuba.
(b) Each Selling Stockholder, severally and not jointly, represents
and warrants to and agrees with each Underwriter and the Company that:
(i) Such Selling Stockholder now has and on the Closing
Date, and on any later date on which Option Shares are purchased, will have
valid marketable title to the Shares to be sold by such Selling Stockholder,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than pursuant to this Agreement; and upon delivery of
such Shares hereunder and payment of the purchase price as herein contemplated,
each of the Underwriters will obtain valid marketable title to the Shares
purchased by it from such Selling Stockholder, free and clear of any pledge,
lien, security interest pertaining to such Selling Stockholder or such Selling
Stockholder's property, encumbrance, claim or equitable interest, including any
liability for estate or inheritance taxes, or any liability to or claims of any
creditor, devisee, legatee or beneficiary of such Selling Stockholder.
(ii) Such Selling Stockholder has duly authorized (if
applicable), executed and delivered, in the form heretofore furnished to the
Representatives, an irrevocable Power of Attorney (the "Power of Attorney")
appointing ___________ and ___________ as attorneys-in-fact (collectively, the
"Attorneys" and individually, an "Attorney") and a Letter of Transmittal and
Custody Agreement (the "Custody Agreement") with ____________________________,
as custodian (the "Custodian"); each of the Power of Attorney and the Custody
Agreement constitutes a valid and binding agreement on the part of such Selling
Stockholder, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; and each of such Selling
Stockholder's Attorneys, acting alone, is authorized to execute and deliver this
Agreement and the certificate referred to in Section 6(h) hereof on behalf of
such Selling Stockholder, to determine the purchase price to be paid by the
several Underwriters to such Selling Stockholder as provided in Section 3
hereof, to authorize the delivery of the Selling Stockholder Shares and the
Option Shares to be sold by such Selling Stockholder under this Agreement and to
duly endorse (in blank or otherwise) the certificate or certificates
representing such Shares or a stock power or powers with respect thereto, to
accept payment therefor, and otherwise to act on behalf of such Selling
Stockholder in connection with this Agreement.
(iii) All consents, approvals, authorizations and orders
required for the execution and delivery by such Selling Stockholder of the Power
of Attorney and the Custody Agreement, the execution and delivery by or on
behalf of such Selling Stockholder of this Agreement and the sale and delivery
of the Selling Stockholder Shares and the Option Shares to be sold by such
Selling Stockholder under this Agreement (other than, at the time of the
execution hereof (if the Registration Statement has not yet been declared
effective by the Commission), the issuance of the order of the Commission
declaring the Registration Statement effective and such consents, approvals,
authorizations or orders as may be necessary under state or other securities or
Blue Sky laws) have been obtained and are in full force and effect; such Selling
Stockholder, if other than a natural person, has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization as the type of entity that it purports to be; and such Selling
Stockholder has full legal right, power and authority to enter into and perform
its obligations under this Agreement and such Power of Attorney and Custody
Agreement, and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Stockholder under this Agreement.
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(iv) Such Selling Stockholder will not, during the Lock-up
Period, effect the Disposition of any Securities now owned or hereafter acquired
directly by such Selling Stockholder or with respect to which such Selling
Stockholder has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to partners or
stockholders of such Selling Stockholder, provided that the distributees thereof
agree in writing to be bound by the terms of this restriction, or (iii) with the
prior written consent of Robertson, Stephens & Company LLC. The foregoing
restriction is expressly agreed to preclude the holder of the Securities from
engaging in any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than the
Selling Stockholder. Such prohibited hedging or other transactions would
include, without limitation, any short sale (whether or not against the box) or
any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Such Selling
Stockholder also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of the securities held by
such Selling Stockholder except in compliance with this restriction.
(v) Certificates in negotiable form for all Shares to be
sold by such Selling Stockholder under this Agreement, together with a stock
power or powers duly endorsed in blank by such Selling Stockholder, have been
placed in custody with the Custodian for the purpose of effecting delivery
hereunder.
(vi) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles; and the
performance of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms and
provisions of or constitute a default under any bond, debenture, note or other
evidence of indebtedness, or under any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or instrument to
which such Selling Stockholder is a party or by which such Selling Stockholder,
or any Selling Stockholder Shares or any Option Shares to be sold by such
Selling Stockholder hereunder, may be bound or, to the best of such Selling
Stockholder's knowledge, result in any violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over such
Selling Stockholder or over the properties of such Selling Stockholder, or, if
such Selling Stockholder is other than a natural person, result in any violation
of any provisions of the charter, bylaws or other organizational documents of
such Selling Stockholder.
(vii) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(viii) Such Selling Stockholder has not distributed and will
not distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(ix) All information furnished by or on behalf of such
Selling Stockholder relating to such Selling Stockholder and the Selling
Stockholder Shares and Option Shares that is contained in the representations
and warranties of such Selling Stockholder in such Selling Stockholder's Power
of Attorney or set forth in the Registration Statement or the Prospectus is, and
at the time the Registration Statement became or becomes, as the case may be,
effective and at all times subsequent thereto up to and on the Closing Date
(hereinafter defined) and on any later date on which Option Shares are to be
purchased, was or will be, true, correct and complete, and does not, and at the
time the Registration Statement became or becomes, as the case may be, effective
and at all times subsequent thereto up to and on the Closing Date (hereinafter
defined), and on any later date on which Option Shares are to be purchased, will
not, contain any untrue statement of a material
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fact or omit to state a material fact required to be stated therein or necessary
to make such information not misleading.
(x) Such Selling Stockholder will review the Prospectus and
will comply with all agreements and satisfy all conditions on its part to be
complied with or satisfied pursuant to this Agreement on or prior to the Closing
Date, or on any later date on which Option Shares are to be purchased, as the
case may be and will advise one of its Attorneys and Robertson, Stephens &
Company LLC prior to the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, if any statement to be made on behalf
of such Selling Stockholder in the certificate contemplated by Section 6(h)
would be inaccurate if made as of the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be.
(xi) Such Selling Stockholder does not have, or has waived
prior to the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Shares that are to be sold
by the Company or any of the other Selling Stockholders to the Underwriters
pursuant to this Agreement; such Selling Stockholder does not have, or has
waived prior to the date hereof, any registration right or other similar right
to participate in the offering made by the Prospectus, other than such rights of
participation as have been satisfied by the participation of such Selling
Stockholder in the transactions to which this Agreement relates in accordance
with the terms of this Agreement; and such Selling Stockholder does not own any
warrants, options or similar rights to acquire, and does not have any right or
arrangement to acquire, any capital stock, rights, warrants, options or other
securities from the Company, other than those described in the Registration
Statement and the Prospectus.
(xii) Such Selling Stockholder is not aware (without having
conducted any investigation or inquiry) that any of the representations and
warranties of the Company set forth in Section 2.a. above is untrue or
inaccurate in any material respect.
3. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and the Selling Stockholders
agree, severally and not jointly, to sell to the Underwriters, and each
Underwriter agrees, severally and not jointly, to purchase from the Company and
the Selling Stockholders, respectively, at a purchase price of $______________
per share, the respective number of Company Shares as hereinafter set forth and
Selling Stockholder Shares set forth opposite the names of the Company and the
Selling Stockholders in Schedule B hereto. The obligation of each Underwriter to
the Company and to each Selling Stockholder shall be to purchase from the
Company or such Selling Stockholder that number of Company Shares or Selling
Stockholder Shares, as the case may be, which (as nearly as practicable, as
determined by you) is in the same proportion to the number of Company Shares or
Selling Stockholder Shares, as the case may be, set forth opposite the name of
the Company or such Selling Stockholder in Schedule B hereto as the number of
Firm Shares which is set forth opposite the name of such Underwriter in Schedule
A hereto (subject to adjustment as provided in Section 10) is to the total
number of Firm Shares to be purchased by all the Underwriters under this
Agreement.
The certificates in negotiable form for the Selling Stockholder Shares have
been placed in custody (for delivery under this Agreement) under the Custody
Agreement. Each Selling Stockholder agrees that the certificates for the Selling
Stockholder Shares of such Selling Stockholder so held in custody are subject to
the interests of the Underwriters hereunder, that the arrangements made by such
Selling Stockholder for such custody, including the Power of Attorney is to that
extent irrevocable and that the obligations of such Selling Stockholder
hereunder shall not be terminated by the act of such Selling Stockholder or by
operation of law, whether by the death or incapacity of such Selling Stockholder
or the occurrence of any other event, except as specifically provided herein or
in the Custody Agreement. If any Selling Stockholder should die or be
incapacitated, or if any other such event should occur, before the delivery of
the certificates for the Selling Stockholder Shares hereunder, the Selling
Stockholder Shares to be sold by such Selling Stockholder shall, except as
specifically provided herein or in the Custody Agreement, be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether
the Custodian shall have received notice of such death or other event.
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Delivery of definitive certificates for the Firm Shares to be purchased by
the Underwriters pursuant to this Section 3 shall be made against payment of the
purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Company with regard to the Shares being purchased from the Company, and to the
order of the Custodian for the respective accounts of the Selling Stockholders
with regard to the Shares being purchased from such Selling Stockholders (and
the Company and such Selling Stockholders agree not to deposit and to cause the
Custodian not to deposit any such check in the bank on which it is drawn, and
not to take any other action with the purpose or effect of receiving immediately
available funds, until the business day following the date of its delivery to
the Company or the Custodian, as the case may be, and, in the event of any
breach of the foregoing, the Company or the Selling Stockholders, as the case
may be, shall reimburse the Underwriters for the interest lost and any other
expenses borne by them by reason of such breach), at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, (or at such other place as
may be agreed upon among the Representatives and the Company and the Attorneys),
at 7:00 A.M., San Francisco time (a) on the third (3rd) full business day
following the first day that Shares are traded, (b) if this Agreement is
executed and delivered after 1:30 P.M., San Francisco time, the fourth (4th)
full business day following the day that this Agreement is executed and
delivered or (c) at such other time and date not later than seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company and the Attorneys may determine (or at such time
and date to which payment and delivery shall have been postponed pursuant to
Section 10 hereof), such time and date of payment and delivery being herein
called the "Closing Date;" provided, however, that if the Company has not made
-------- -------
available to the Representatives copies of the Prospectus within the time
provided in Section 4(d) hereof, the Representatives may, in their sole
discretion, postpone the Closing Date until no later than two (2) full business
days following delivery of copies of the Prospectus to the Representatives. The
certificates for the Firm Shares to be so delivered will be made available to
you at such office or such other location including, without limitation, in New
York City, as you may reasonably request for checking at least one (1) full
business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2) full
business days prior to the Closing Date. If the Representatives so elect,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the Representatives .
It is understood that you, individually, and not as the Representatives of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $______________ per share. After the initial public offering, the
several Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), on the inside front
cover concerning stabilization and over-allotment by the Underwriters, and under
the first and second paragraphs under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement, and you, on behalf of
the respective Underwriters, represent and warrant to the Company and the
Selling Stockholders that the statements made therein do not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4. Further Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; the Company will use its best efforts to
cause any
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abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations as may be required subsequent to the date the Registration Statement
is declared effective to become effective as promptly as possible; the Company
will notify you, promptly after it shall receive notice thereof, of the time
when the Registration Statement, any subsequent amendment to the Registration
Statement or any abbreviated registration statement has become effective or any
supplement to the Prospectus has been filed; if the Company omitted information
from the Registration Statement at the time it was originally declared effective
in reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the Rules
and Regulations, the Company will provide evidence satisfactory to you that the
Prospectus and term sheet meeting the requirements of Rule 434(b) or (c), as
applicable, of the Rules and Regulations, have been filed, within the time
period prescribed, with the Commission pursuant to subparagraph (7) of Rule
424(b) of the Rules and Regulations; if for any reason the filing of the final
form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the time
period prescribed; it will notify you promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; promptly upon your request, it will
prepare and file with the Commission any amendments or supplements to the
Registration Statement or Prospectus which, in the opinion of counsel for the
several Underwriters ("Underwriters' Counsel"), may be necessary or advisable in
connection with the distribution of the Shares by the Underwriters; it will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if, at
any time when a prospectus relating to the Shares is required to be delivered
under the Act, any event shall have occurred as a result of which the Prospectus
or any other prospectus relating to the Shares as then in effect would include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; in case any Underwriter is required
to deliver a prospectus nine (9) months or more after the effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus which shall not previously have been
submitted to you a reasonable time prior to the proposed filing thereof or to
which you shall reasonably object in writing, subject, however, to compliance
with the Act and the Rules and Regulations, and the provisions of this
Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet under
Rule 434, in no event later than the first (1st) full business day following the
first day that Shares are traded, copies of the Registration Statement (three of
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<PAGE>
which will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as you may from time to time reasonably request.
Notwithstanding the foregoing, if Robertson, Stephens & Company LLC, on behalf
of the several Underwriters, shall agree to the utilization of Rule 434 of the
Rules and Regulations, the Company shall provide to you copies of a Preliminary
Prospectus updated in all respects through the date specified by you in such
quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its securityholders
as soon as practicable, but in any event not later than the forty-fifth (45th)
day following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12) month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end of
each respective period, annual reports (including financial statements audited
by independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and the other several Underwriters hereunder, upon request (i)
concurrently with furnishing such reports to its stockholders, statements of
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's stockholders, (ii) concurrently with furnishing to
its stockholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of stockholders' equity, and of
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent certified public accountants, (iii)
as soon as they are available, copies of all reports (financial or other) mailed
to stockholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or the National Association of Securities Dealers, Inc. ("NASD"), (v)
every material press release and every material news item or article in respect
of the Company or its affairs which was generally released to stockholders or
prepared by the Company or any of its subsidiaries, and (vi) any additional
information of a public nature concerning the Company or its subsidiaries, or
its business which you may reasonably request. During such five (5) year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts of
the Company and its subsidiaries are consolidated, and shall be accompanied by
similar financial statements for any significant subsidiary which is not so
consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR in conformity with the requirements
of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company or any
Selling Stockholder to perform any agreement on their respective parts to be
performed hereunder or to fulfill any condition of the Underwriters' obligations
hereunder, or if the Company shall terminate this Agreement pursuant to Section
11(a) hereof, or if the Underwriters shall terminate this Agreement pursuant to
Section 11(b)(i), the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including fees and disbursements of Underwriters'
Counsel) incurred by the Underwriters in investigating or preparing to market or
marketing the Shares.
(k) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected
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(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(l) During the Lock-up Period, the Company will not, without the
prior written consent of Robertson Stephens & Company LLC, effect the
Disposition of, directly or indirectly, any Securities other than the sale of
the Company Shares hereunder and the Company's issuance of options or Common
Stock under the Company's presently authorized 1994 Stock Plan (the "Option
Plan").
(m) During a period of ninety (90) days from the effective date of
the Registration Statement, the Company will not file a registration statement
registering shares under the Option Plan or other employee benefit plan.
5. Expenses.
(a) The Company and the Selling Stockholders agree with each
Underwriter that:
(i) The Company and the Selling Stockholders will pay and bear
all costs and expenses in connection with the preparation, printing and filing
of the Registration Statement (including financial statements, schedules and
exhibits), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky Survey and
any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and Power of
Attorney, and any instruments related to any of the foregoing; the issuance and
delivery of the Shares hereunder to the several Underwriters, including transfer
taxes, if any, the cost of all certificates representing the Shares and transfer
agents' and registrars' fees; the fees and disbursements of counsel for the
Company; all fees and other charges of the Company's independent certified
public accountants; the cost of furnishing to the several Underwriters copies of
the Registration Statement (including appropriate exhibits), Preliminary
Prospectus and the Prospectus, and any amendments or supplements to any of the
foregoing; NASD filing fees and the cost of qualifying the Shares under the laws
of such jurisdictions as you may designate (including filing fees and fees and
disbursements of Underwriters' Counsel in connection with such NASD filings and
Blue Sky qualifications); and all other expenses directly incurred by the
Company and the Selling Stockholders in connection with the performance of their
obligations hereunder. Any additional expenses incurred as a result of the sale
of the Shares by the Selling Stockholders will be borne collectively by the
Company and the Selling Stockholders. The provisions of this Section 5(a)(i) are
intended to relieve the Underwriters from the payment of the expenses and costs
which the Selling Stockholders and the Company hereby agree to pay, but shall
not affect any agreement which the Selling Stockholders and the Company may
make, or may have made, for the sharing of any of such expenses and costs. Such
agreements shall not impair the obligations of the Company and the Selling
Stockholders hereunder to the several Underwriters.
(ii) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis for
all reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) listed from time to
time in The Wall Street Journal which represents the base rate on corporate
loans posted by a substantial majority of the nation's thirty (30) largest banks
(the "Prime Rate"). Any such interim reimbursement payments which are not made
to the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
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(iii) In addition to their other obligations under Section 8(b)
hereof, each Selling Stockholder agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(b) hereof relating to such Selling Stockholder, it will
reimburse the Underwriters on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of such
Selling Stockholder's obligation to reimburse the Underwriters for such expenses
and the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters shall
promptly return such payment to the Selling Stockholders, together with
interest, compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments which are not made to the Underwriters within
thirty (30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(b) In addition to their other obligations under Section 8(c) hereof,
the Underwriters severally and not jointly agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(c) hereof, they will reimburse the Company and
each Selling Stockholder on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company and each such Selling
Stockholder for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company and each such Selling Stockholder shall promptly return
such payment to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company and each such Selling Stockholder
within thirty (30) days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 5(a)(ii), 5(a)(iii)
and 5(b) hereof, including the amounts of any requested reimbursement payments,
the method of determining such amounts and the basis on which such amounts shall
be apportioned among the reimbursing parties, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 5(a)(ii), 5(a)(iii)
and 5(b) hereof and will not resolve the ultimate propriety or enforceability of
the obligation to indemnify for expenses which is created by the provisions of
Sections 8(a), 8(b) and 8(c) hereof or the obligation to contribute to expenses
which is created by the provisions of Section 8(e) hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Selling Stockholders
herein, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company, any Selling Stockholder or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of Underwriters' Counsel.
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(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been reasonably satisfactory to Underwriters' Counsel, and such counsel
shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to in
this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of counsel for the Company and the Selling Stockholders, dated the
Closing Date or such later date on which Option Shares are to be purchased
addressed to the Underwriters and with reproduced copies or signed counterparts
thereof for each of the Underwriters, to the effect that:
(i) The Company and each Significant Subsidiary (as that
term is defined in Regulation S-X of the Act) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction, if any, in which the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations
or business of the Company and its subsidiaries considered as one enterprise. To
such counsel's knowledge, the Company does not own or control, directly or
indirectly, any interest in any corporation, association or other entity other
than Summit Design (EDA) Ltd., Test Systems Strategies, Inc. and Summit Design
Asia, Ltd.
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption "Capitalization"
as of the dates stated therein, the issued and outstanding shares of capital
stock of the Company (including the Selling Stockholder Shares) have been duly
and validly issued and are fully paid and nonassessable, and, to such counsel's
knowledge, will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal or
other similar right;
(v) All issued and outstanding shares of capital stock of
each Significant Subsidiary of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and, to such counsel's knowledge,
have not been issued in violation of or subject to any preemptive right, co-sale
right, registration right, right of first refusal or other similar right and are
owned by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest;
(vi) The Shares to be issued by the Company pursuant to the
terms of this Agreement have been duly authorized and, upon issuance and
delivery against payment therefor in accordance with the terms hereof, will be
duly and validly issued and fully paid and nonassessable, and will not have been
issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right.
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(vii) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by you, is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except insofar as indemnification provisions may be
limited by applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles;
(ix) The Registration Statement has become effective under
the Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or threatened under the
Act;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the requirements of
the Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the captions
"Management," "Description of Capital Stock" and "Shares Eligible for Future
Sale," to the extent that it constitutes matters of law or legal conclusions,
has been reviewed by such counsel and is a fair summary of such matters and
conclusions; and the forms of certificates evidencing the Common Stock and filed
as exhibits to the Registration Statement comply with Delaware law;
(xii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the Act and the
applicable Rules and Regulations;
(xiii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which are
not described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation
of the transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations;
(xv) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except such as have been
obtained under the Act or such as may be required under state or other
securities or Blue Sky laws in connection with the purchase and the distribution
of the Shares by the Underwriters;
(xvi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or any of its
subsidiaries of a character required to be disclosed in
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the Registration Statement or the Prospectus by the Act or the Rules and
Regulations or by the Exchange Act or the applicable rules and regulations of
the Commission thereunder, other than those described therein;
(xvii) To such counsel's knowledge, neither the Company nor any
of its subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries, or over any of their properties or
operations;
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to securities of
the Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights known to such
counsel to registration of such shares of Common Stock or other securities,
because of the filing of the Registration Statement by the Company have, with
respect to the offering contemplated thereby, waived such rights or such rights
have expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full satisfaction of
such rights;
(xix) Each Selling Stockholder which is not a natural person
has full right, power and authority to enter into and to perform its obligations
under the Power of Attorney and Custody Agreement to be executed and delivered
by it in connection with the transactions contemplated herein; the Power of
Attorney and Custody Agreement of each Selling Stockholder that is not a natural
person has been duly authorized by such Selling Stockholder; the Power of
Attorney and Custody Agreement of each Selling Stockholder has been duly
executed and delivered by or on behalf of such Selling Stockholder; and the
Power of Attorney and Custody Agreement of each Selling Stockholder constitutes
the valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles;
(xx) Each of the Selling Stockholders has full right, power
and authority to enter into and to perform its obligations under this Agreement
and to sell, transfer, assign and deliver the Shares to be sold by such Selling
Stockholder hereunder;
(xxi) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of each Selling Stockholder; and
(xxii) Upon the delivery of and payment for the Shares as
contemplated in this Agreement, each of the Underwriters will receive valid
marketable title to the Shares purchased by it from such Selling Stockholder,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest. In rendering such opinion, such counsel may assume that the
Underwriters are without notice of any defect in the title of the Shares being
purchased from the Selling Stockholders.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the Closing Date and on any later date on which Option Shares are to
be purchased, the Registration Statement and any amendment or supplement thereto
(other than the financial statements including supporting schedules and other
financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the Closing Date
or any later date on which the Option Shares are to be purchased, as the case
may be, the
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Registration Statement, the Prospectus and any amendment or supplement thereto
(except as aforesaid) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or the State of California and the State
of Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, the Selling
Stockholders or officers of the Selling Stockholders (when the Selling
Stockholder is not a natural person), and of government officials, in which case
their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, an opinion of
Gray Cary Ware & Freidenrich, in form and substance satisfactory to you, with
respect to the sufficiency of all such corporate proceedings and other legal
matters relating to this Agreement and the transactions contemplated hereby as
you may reasonably require, and the Company shall have furnished to such counsel
such documents as they may have requested for the purpose of enabling them to
pass upon such matters.
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter from
Coopers & Lybrand LLP addressed to the Underwriters, dated the Closing Date or
such later date on which Option Shares are to be purchased, as the case may be,
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations and based upon the procedures described in such letter delivered
to you concurrently with the execution of this Agreement (herein called the
"Original Letter"), but carried out to a date not more than five (5) business
days prior to the Closing Date or such later date on which Option Shares are to
be purchased, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
the Closing Date or such later date on which Option Shares are to be purchased,
as the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. The Original Letter from Coopers & Lybrand
LLP shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheet of the Company as of December 31, 1995 and
related consolidated statements of operations, stockholders' equity, and cash
flows for the twelve (12) months ended December 31, 1995, (iii) state that
Coopers & Lybrand LLP has performed the procedures set out in Statement on
Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information and providing the report of Coopers & Lybrand LLP as described in
SAS 71 on the financial statements for each of the quarters in the two-quarter
period ended June 30, 1996 (the "Quarterly Financial Statements"), (iv) state
that in the course of such review, nothing came to their attention that leads
them to believe that any material modifications need to be made to any of the
Quarterly Financial Statements in order for them to be in compliance with
generally accepted accounting principles consistently applied across the periods
presented, and (v) address other matters agreed upon by Coopers & Lybrand LLP
and you. In addition, you shall have received from Coopers & Lybrand LLP a
letter addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of December 31, 1995, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
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(g) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a certificate of
the Company, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, signed by the Chief Executive Officer
and Chief Financial Officer of the Company, to the effect that, and you shall be
satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or any
later date on which Option Shares are to be purchased, as the case may be, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Act and the Rules and Regulations and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, the Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been (a)
any material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise, (b) any transaction that is material to the
Company and its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (c) any obligation, direct or
contingent, that is material to the Company and its subsidiaries considered as
one enterprise, incurred by the Company or its subsidiaries, except obligations
incurred in the ordinary course of business, (d) any change in the capital stock
or outstanding indebtedness of the Company or any of its subsidiaries that is
material to the Company and its subsidiaries considered as one enterprise, (e)
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company or any of its subsidiaries, or (f) any loss or damage
(whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise.
(h) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for each Selling
Stockholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have not been
informed that:
(i) The representations and warranties made by such Selling
Stockholder herein are not true or correct in any material respect on the
Closing Date or on any later date on which Option Shares are to be purchased, as
the case may be; or
(ii) Such Selling Stockholder has not complied with any
obligation or satisfied any condition which is required to be performed or
satisfied on the part of such Selling Stockholder at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be.
(i) The Company shall have obtained and delivered to you an agreement
from each officer and director of the Company, each Selling Stockholder and each
beneficial owner of [______________] or
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more shares of Common Stock in writing prior to the date hereof that such person
will not, during the Lock-up Period, effect the Disposition of any Securities
now owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to partners or
stockholders of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii) with the prior
written consent of Robertson, Stephens & Company LLC. The foregoing restriction
shall have been expressly agreed to preclude the holder of the Securities from
engaging in any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than the
such holder. Such prohibited hedging or other transactions would include,
without limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (include, without limitation, any put or
call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Furthermore, such
person will have also agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
Securities held by such person except in compliance with this restriction.
(j) The Company and the Selling Stockholders shall have furnished to
you such further certificates and documents as you shall reasonably request
(including certificates of officers of the Company, the Selling Stockholders or
officers of the Selling Stockholders (when the Selling Stockholder is not a
natural person) as to the accuracy of the representations and warranties of the
Company and the Selling Stockholders herein, as to the performance by the
Company and the Selling Stockholders of their respective obligations hereunder
and as to the other conditions concurrent and precedent to the obligations of
the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company and the Selling Stockholders will furnish
you with such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
7. Option Shares.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
certain Selling Stockholders listed in Schedule C hereby grant to the several
Underwriters, for the purpose of covering over-allotments in connection with the
distribution and sale of the Firm Shares only, a nontransferable option to
purchase up to an aggregate of 500,000 Option Shares at the purchase price per
share for the Firm Shares set forth in Section 3 hereof. Such option may be
exercised by the Representatives on behalf of the several Underwriters on one
(1) or more occasions in whole or in part during the period of thirty (30) days
after the date on which the Firm Shares are initially offered to the public, by
giving written notice to the Company and the Attorneys. The number of Option
Shares to be purchased by each Underwriter upon the exercise of such option
shall be the same proportion of the total number of Option Shares to be
purchased by the several Underwriters pursuant to the exercise of such option as
the number of Firm Shares purchased by such Underwriter (set forth in Schedule A
hereto) bears to the total number of Firm Shares purchased by the several
Underwriters (set forth in Schedule A hereto), adjusted by the Representatives
in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be purchased
by the several Underwriters pursuant to the exercise of the option granted by
this Section 7 shall be made against payment of the purchase price therefor by
the several Underwriters by certified or official bank check or checks drawn in
next-day funds, payable to the order of the Custodian (and the Selling
Stockholders agree not to deposit any such check in the bank on which it is
drawn, and not to take any other action with the purpose or effect of receiving
immediately available funds, until the business day following the date of its
delivery to the Custodian). In the event of any breach of the foregoing, the
Selling Stockholders shall reimburse the Underwriters for the interest lost and
any other expenses borne by them by reason of such breach. Such delivery and
payment shall take place at the offices of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, at 650 Page Mill Road, Palo Alto,
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California 94304-1050, or at such other place as may be agreed upon among the
Representatives and the Attorneys (i) on the Closing Date, if written notice of
the exercise of such option is received by the Attorneys at least two (2) full
business days prior to the Closing Date, or (ii) on a date which shall not be
later than the third (3rd) full business day following the date the Attorneys
receive written notice of the exercise of such option, if such notice is
received by the Attorneys less than two (2) full business days prior to the
Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the Representatives of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company and the Selling Stockholders herein, to
the accuracy of the statements of the Company, the Selling Stockholders and
officers of the Company made pursuant to the provisions hereof, to the
performance by the Company and the Selling Stockholders of their respective
obligations hereunder, to the conditions set forth in Section 6 hereof, and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may request in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants or agreements of the Company and the Selling Stockholders or the
satisfaction of any of the conditions herein contained.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD), under
the Act, the Exchange Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities (or actions in respect thereof)
arising out of or based upon (i) any breach of any representation, warranty,
agreement or covenant of the Company herein contained, (ii) any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and,
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provided further, that the indemnity agreement provided in this Section 8(a)
with respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any losses, claims, damages,
liabilities or actions based upon any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state therein a
material fact purchased Shares, if a copy of the Prospectus in which such untrue
statement or alleged untrue statement or omission or alleged omission was
corrected had not been sent or given to such person within the time required by
the Act and the Rules and Regulations, unless such failure is the result of
noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter within the meaning of the Act or the Exchange Act.
This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject
(including, without limitation, in its capacity as an Underwriter or as a
"qualified independent underwriter" within the meaning of Schedule E of the
Bylaws of the NASD) under the Act, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Selling Stockholder
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in the case of subparagraphs (ii) and (iii) of this Section 8(b) to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or such Underwriter
by such Selling Stockholder, directly or through such Selling Stockholder's
representatives, specifically for use in the preparation thereof, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
provided in this Section 8(b) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
losses, claims, damages, liabilities or actions based upon any untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state therein a material fact purchased Shares, if a copy of the Prospectus
in which such untrue statement or alleged untrue statement or omission or
alleged omission was corrected had not been sent or given to such person within
the time required by the Act and the Rules and Regulations, unless such failure
is the result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter within the meaning of the Act or the Exchange Act.
This indemnity agreement shall be in addition to any liabilities which such
Selling Stockholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company and each Selling Stockholder against any losses,
claims, damages or liabilities, joint or several, to which the Company or such
Selling Stockholder may become subject under the Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Underwriter herein
contained, (ii) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a
23
<PAGE>
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this Section 8(c) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof, and agrees to reimburse
the Company and each such Selling Stockholder for any legal or other expenses
reasonably incurred by the Company and each such Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(c) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer of the
Company who signed the Registration Statement and each director of the Company,
each Selling Stockholder and each person, if any, who controls the Company or
any Selling Stockholder within the meaning of the Act or the Exchange Act. This
indemnity agreement shall be in addition to any liabilities which each
Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 8, notify the indemnifying party in writing of the commencement
thereof but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party otherwise than
under this Section 8. In case any such action is brought against any indemnified
party, and it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it shall elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section 8(a),
8(b) or 8(c) hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; provided that such
consent shall not be unreasonably withheld. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnification could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on all claims that are the subject
matter of such proceeding.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 8
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that, except as set forth
in Section 8(f) hereof, the Underwriters severally and not jointly are
24
<PAGE>
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company and the Selling Stockholders are responsible for the remaining portion,
provided, however, that (i) no Underwriter shall be required to contribute any
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter exceeds the amount of damages which
such Underwriter is otherwise required to pay and (ii) no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this Section 8(e)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter, the Company or
any Selling Stockholder within the meaning of the Act or the Exchange Act and
each officer of the Company who signed the Registration Statement and each
director of the Company.
(f) The liability of each Selling Stockholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 8 shall be
limited to an amount equal to the initial public offering price of the Selling
Stockholder Shares sold by such Selling Stockholder to the Underwriters minus
the amount of the underwriting discount paid thereon to the Underwriters by such
Selling Stockholder. The Company and such Selling Stockholders may agree, as
among themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company, the Selling Stockholders and the Underwriters herein or in certificates
delivered pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or any Selling Stockholder, or
any of their officers, directors or controlling persons within the meaning of
the Act or the Exchange Act, and shall survive the delivery of the Shares to the
several Underwriters hereunder or termination of this Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number of
Firm Shares which such defaulting Underwriter or Underwriters agreed but failed
to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the privilege of substituting
within twenty-four (24) hours (including non-business hours) another underwriter
or underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further twenty-four (24) hours,
if
25
<PAGE>
necessary, to allow the Company the privilege of finding another underwriter or
underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 10, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement, supplements to the Prospectus or other
such documents which may thereby be made necessary, and (ii) the respective
number of Firm Shares to be purchased by the remaining Underwriters and
substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and pay
for all such Firm Shares so agreed to be purchased by the defaulting Underwriter
or Underwriters or substitute another underwriter or underwriters as aforesaid
and the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the preceding
paragraph of this Section 10, neither the Company nor any Selling Stockholder
shall be liable to any Underwriter (except as provided in Sections 5 and 8
hereof) nor shall any Underwriter (other than an Underwriter who shall have
failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Firm Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, the Selling
Stockholders and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company or any Selling Stockholder (except to the
extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., San Francisco time, on the first full business day following the effective
date of the Registration Statement, or (ii) the time of the initial public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(j), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
or any Selling Stockholder shall have failed, refused or been unable to perform
any agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse, or (ii) if additional material governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading in
securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or
26
<PAGE>
financial markets as in your reasonable judgment makes it inadvisable or
impracticable to proceed with the offering, sale and delivery of the Shares, or
(v) if there shall have been an outbreak or escalation of hostilities or of any
other insurrection or armed conflict or the declaration by the United States of
a national emergency which, in the reasonable opinion of the Representatives,
makes it impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus. In the event of termination pursuant
to subparagraph (i) above, the Company shall remain obligated to pay costs and
expenses pursuant to Sections 4(j), 5 and 8 hereof. Any termination pursuant to
any of subparagraphs (ii) through (v) above shall be without liability of any
party to any other party except as provided in Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case confirmed by letter.
12. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o Robertson, Stephens & Company LLC, 555
California Street, Suite 2600, San Francisco, California 94104, telecopier
number (415) 781-0278, Attention: General Counsel; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Summit Design, Inc., 9305 S.W. Gemini
Drive, Beaverton, Oregon 97008, telecopier number (503) 646-9320, Attention:
Larry J. Gerhard, Chief Executive Officer; if sent to one or more of the Selling
Stockholders, such notice shall be sent mailed, delivered, telegraphed (and
confirmed by letter) or telecopied (and confirmed by letter) to
[___________________________], as Attorney-in-Fact for the Selling Stockholders,
at Summit Design, Inc., 9305 S.W. Gemini Drive, Beaverton, Oregon 97008,
telecopier number (503) 646-9320.
13. Parties. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and the Selling Stockholders and
their respective executors, administrators, successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons
within the meaning of the Act or the Exchange Act, officers and directors
referred to in Section 8 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company and the Selling Stockholders under this
Agreement, you shall act on behalf of each of the several Underwriters, and the
Company and the Selling Stockholders shall be entitled to act and rely upon any
statement, request, notice or agreement made or given by you jointly or by
Robertson, Stephens & Company LLC on behalf of you.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
15. Counterparts. This Agreement may be signed in several counterparts,
each of which will constitute an original.
27
<PAGE>
If the foregoing correctly sets forth the understanding among the Company,
the Selling Stockholders and the several Underwriters, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among the Company, the Selling Stockholders and the several
Underwriters.
Very truly yours,
Summit Design, Inc.
By:_________________________________________________
Selling Stockholders
By:_________________________________________________
Attorney-in-Fact for the Selling Stockholders
named in Schedule B hereto
Accepted as of the date first above written:
ROBERTSON, STEPHENS & COMPANY LLC
NEEDHAM & COMPANY, INC.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By: ROBERTSON, STEPHENS & COMPANY LLC
By: ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By:_________________________________
Authorized Signatory
28
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Underwriters Number of Firm Shares To Be Purchased
- --------------------------------------- -------------------------------------------
<S> <C>
Robertson, Stephens & Company LLC......
Needham & Company, Inc.................
Total.............................
-----------
===========
</TABLE>
29
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Company Number of Company Shares To Be Sold
- -------------------------------------- -------------------------------------------------
<S> <C>
Summit Design, Inc.
Total............................
-----------
===========
Name of Selling Stockholder Number of Selling Stockholder Shares To Be Sold
--------------------------- -------------------------------------------------
Total............................
-----------
===========
</TABLE>
30
<PAGE>
SCHEDULE C
----------
<TABLE>
<CAPTION>
Name of Selling Stockholder Number of Option Shares To Be Sold
--------------------------- ----------------------------------
<S> <C>
Total..............................
----------
==========
</TABLE>
31
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
SUMMIT DESIGN, INC.
-------------------
FIRST. The name of the corporation is Summit Design, Inc.
SECOND. The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware
19801. The name of its registered agent at such address is Corporation Trust
Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. A. Classes of Stock. The aggregate number of shares which the
----------------
corporation shall have authority to issue is 35,000,000, divided into 20,000,000
shares of Common Stock with the par value of $0.01 per share, and 15,000,000
shares of Preferred Stock with the par value of $0.01 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
Preferred Stock authorized by this Certificate of Incorporation may be issued
from time to time in series. The rights, preferences, privileges, and
restrictions granted to and imposed on the Series A Preferred Stock are as set
forth below in Subsection (B) of this Article Fourth.
1. Designation of Preferred. Four million (4,000,000) of the shares
------------------------
of the Preferred Stock authorized by the Company's Certificate of Incorporation
are hereby designated "Series A Preferred Stock."
2. Dividend Provision. The holders of shares of Series A Preferred
------------------
Stock shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the Corporation pursuant to an
event causing the Conversion Price of the Series A Preferred Stock to be
adjusted pursuant to Paragraph 5 hereof) on the Common Stock of the Corporation,
at the rate of $0.10 per share per annum with respect to each outstanding share
of the Series A Preferred Stock, payable when, as and if declared by the Board
of Directors. Such dividends shall not be cumulative.
<PAGE>
After payment of the dividend preferences referred to above,
outstanding shares of Preferred Stock shall participate with shares of Common
Stock as to any additional declaration or payment of any dividend (payable other
than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of the Corporation pursuant to an event causing the
Series A Conversion Price of the Preferred Stock to be adjusted pursuant to
Paragraph 5 hereof), with the outstanding shares of Preferred Stock
participating as though they had all been converted into Common Stock.
3. Liquidation Preferences.
-----------------------
a. In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive the amount of $0.75 per share for
each share of Series A Preferred Stock then held by them. After payment to the
holders of Common Stock of $0.10 per share, the remaining assets and funds of
the Corporation, which are legally available for distribution, shall be
distributed in equal amounts per share to the holders of the Series A Preferred
Stock and the holders of the Common Stock with the outstanding shares of
Preferred Stock participating as though they had all been converted into Common
Stock.
If, upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Preferred Stock shall be insufficient to
permit the payment to such holders of Preferred Stock of the full preferential
amount set forth above, then the assets and funds of the Corporation legally
available for distribution shall first be distributed ratably among the holders
of the Series A Preferred Stock.
b. For purposes of this Paragraph 3, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, or to
include the Corporation's sale of all or substantially all of its assets or the
acquisition of this Corporation by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of this
Corporation for securities or consideration issued, or caused to be issued, by
the acquiring corporation or its subsidiary.
c. In the event the Corporation shall propose to take any
action of the types described in subparagraphs (a) and (b) of this Paragraph 3
the Corporation shall, within ten (10) days after the date that the Board of
Directors approves such action, or twenty (20) days prior to any shareholders'
meeting called to
-2-
<PAGE>
approve such action, whichever is earlier, give each holder of shares of
Preferred Stock initial written notice of the proposed action. Such initial
written notice shall describe the material terms and conditions of such proposed
action, including a description of the stock, cash and property to be received
by the holders of shares of Preferred Stock upon consummation of the proposed
action and the date of delivery thereof. If any material change in the facts
set forth in the initial notice shall occur, the Corporation shall promptly give
written notice to each holder of shares of Preferred Stock of such material
change.
d. The Corporation shall not consummate any proposed action of
the types described in subparagraphs (a) and (b) of this Paragraph 3 before the
expiration of thirty (30) days after the mailing of the initial notice or twenty
(20) days after the mailing of any subsequent written notice, whichever is
later; provided that any such 30-day or 20-day period may be shortened upon the
written consent of the holders of a majority of the outstanding shares of
Preferred Stock.
e. In the event the Corporation shall propose to take any
action of the types described in subparagraphs (a) and (b) of this Paragraph 3
which will involve the distribution of assets other than cash, the Corporation
shall promptly engage independent competent appraisers to determine the value of
the assets to be distributed to the holders of shares of Preferred Stock. The
Corporation shall, upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Preferred Stock of the appraiser's
valuation. All notices pursuant to this Paragraph 3 shall be deemed given upon
personal delivery or upon deposit in a United States Post Office by registered
or certified mail or by delivery to the offices of a nationally recognized
express courier service.
4. Redemption.
----------
a. The Series A Preferred Stock shall be redeemed in whole or
in part (from legally available funds and otherwise subject to statutory
restrictions on redemption rights under Delaware law) by the Corporation upon
the vote of the holders of at least eighty-five percent (85%) of the holders of
the Series A Preferred Stock. The redemption price shall be $0.83 for each share
of Series A Preferred Stock, as adjusted for stock splits, recombinations and
the like (the "Redemption Price").
b. In case of any redemption of a part only of the outstanding
shares of Series A Preferred Stock, the Corporation shall effect such redemption
pro rata.
-3-
<PAGE>
c. At least sixty (60) days prior to the date fixed for any
redemption of Series A Preferred Stock (the "Redemption Date"), a written notice
shall be mailed to each holder of record of Series A Preferred Stock to be
redeemed, postage prepaid, addressed to such holder at his post office address
as shown on the records of the Corporation, notifying such holder of the
obligation of the Corporation to redeem such shares, stating the Redemption Date
and the date on which such holder's Conversion Rights as to such shares
terminate and calling upon such holder to surrender to the Corporation at the
place designated his certificate or certificates representing the shares to be
redeemed (the "Redemption Notice") .
Each holder of Series A Preferred Stock to be redeemed shall
present and surrender his certificate or certificates representing such Series A
Preferred Stock to the Corporation at the place designated in the Redemption
Notice, and thereupon the Redemption Price of such shares shall be payable to or
on the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. From and after the Redemption Date, unless default is made in the
payment of the Redemption Price, all rights of the holders of the Series A
Preferred Stock that is redeemed on such Redemption Date as shareholders of the
Corporation, except the right to receive the Redemption Price, shall cease and
determine, and such shares shall not thereafter be transferred on the books of
the Corporation or be deemed to be outstanding for any purposes whatsoever.
d. The Preferred Stock may not be redeemed or repurchased
except as provided in this Paragraph 4.
5. Conversion. The holders of the Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
a. Right to Convert.
----------------
Each share of Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share and on or prior to the fifth (5th) day prior to such Redemption Date, if
any, as may have been fixed in any Redemption Notice, at the office of the
Corporation or any transfer agent for the Preferred Stock, into the number of
shares of Common Stock equal to the "Series A Conversion Rate." The initial
Series A Conversion Rate shall each be one (1), and such initial Series A
Conversion Rate shall be subject to the adjustments described below. Any
adjustment of the Series A Conversion Rate shall also cause an appropriate
adjustment of the
-4-
<PAGE>
"Series A Conversion Price" (as hereinafter defined) calculated by dividing the
adjusted Series A Conversion Rate into the Series A Conversion Price. The
initial Series A Conversion Price shall be $1.50. In the event of a call for
redemption pursuant to Paragraph 4 hereof of any shares of Preferred Stock which
are convertible into Common Stock, the Conversion Rights shall terminate as to
the shares designated for redemption at the close of business on the fifth (5th)
day preceding the Redemption Date, unless default is made in payment of the
Redemption Price.
(1) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at its then effective Conversion Rate in
the event of the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Corporation to the public at a price per share of not less than $5.00 (as
adjusted for stock splits, recombinations and the like) and an aggregate
offering price of not less than $5,000,000. In the event of such an offering,
the person(s) entitled to receive the Common Stock issuable upon such conversion
of Preferred Stock shall not be deemed to have converted such Preferred Stock
until immediately prior to the closing of such sale of securities.
(2) No fractional shares of Common Stock shall be issued
upon conversion of Preferred Stock. Any shares of Series A Preferred Stock
surrendered for conversion which would otherwise result in a fractional share of
Common Stock shall be redeemed on the basis of $0.75 per share payable as
promptly as possible whenever funds are legally available therefor.
b. Mechanics of Conversion. Before any holder of Preferred
-----------------------
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
principal office of the Corporation or of any transfer agent for the Preferred
Stock, and shall give written notice to the Corporation at such office that he
elects to convert the same and shall state therein the name or names in which he
wishes the certificate or certificates for shares of Common Stock to be issued;
said conversion notice shall contain such representations as may reasonably be
required by the Corporation, to the effect that the shares to be received upon
conversion are not being acquired and will not be transferred in any way which
might violate then applicable laws. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock, or to his nominee or
-5-
<PAGE>
nominees, a certificate or certificates for the number of shares of Common Stock
to which he shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
c. Adjustment for Combinations or Consolidations of Common
-------------------------------------------------------
Stock. In the event the Corporation at any time, or from time to time, after
- -----
the effective date of a written agreement by the Corporation for the initial
sale or issuance of Series A Preferred Stock (hereinafter referred to as the
"Original Issue Date"), effects a subdivision or combination of its outstanding
Common Stock into a greater or lesser number of shares without a proportionate
and corresponding subdivision or combination of its outstanding Preferred Stock,
then and in each such event the Series A Conversion Rate shall be increased or
decreased proportionately.
d. Adjustment for Dividends, Distributions and Common Stock
--------------------------------------------------------
Equivalents. In the event the Corporation at any time or from time to time
- -----------
after the Original Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock, or other securities
or rights (hereinafter referred to as "Common Stock Equivalents") convertible
into or entitling the holder thereof to receive additional shares of Common
Stock without payment of any consideration by such holder for such Common Stock,
then and in each such event the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable in payment
of such dividend or distribution or upon conversion or exercise of such Common
Stock Equivalents shall be deemed to be issued and outstanding as of the time of
such issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date. In each such event, the Series A
Conversion Rate shall be increased as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business on
such record date, by multiplying such Conversion Rate by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus
-6-
<PAGE>
the number of shares of Common Stock issuable in payment of such dividend or
distribution or upon conversion or exercise of such Common Stock Equivalents;
and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date; provided, however, (A) if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Series A Conversion Rate shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Series A Conversion Rate shall be adjusted pursuant to this
Paragraph 5(d) as of the time of actual payment of such dividends or
distributions; (B) if such Common Stock Equivalents provide, with the passage of
time or otherwise, for any decrease in the number of shares of Common Stock
issuable upon conversion or exercise thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, the
Series A Conversion Rate shall, upon any such decrease becoming effective, be
recomputed to reflect such decrease insofar as it affects the rights of
conversion or exercise of the Common Stock Equivalents then outstanding; (C)
upon the expiration of any rights or conversion or exercise under any
unexercised Common Stock Equivalents, the Series A Conversion Rate computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if the only additional shares of Common Stock
issued were the shares of such stock, if any, actually issued upon the
conversion or exercise of such Common Stock Equivalents; and (d) in the case of
Common Stock Equivalents which expire by their terms not more than sixty (60)
days after the date of issuance thereof, no adjustment in any Conversion Rate
shall be made until the expiration or exercise of all such Common Stock
Equivalents, whereupon such adjustments shall be made in the manner provided in
clause (C) above.
e. Anti-dilution Adjustment for Diluting Issues. Except as
--------------------------------------------
otherwise provided in this subparagraph (e), in the event the Corporation sells
or issues any Common Stock or Common Stock Equivalents at a per share
consideration (as defined below) less than the Series A Conversion Price then in
effect, then the Series A Conversion Rate and Series A Conversion Price then in
effect shall be adjusted as provided in subparagraphs (i), (ii) and (iii)
hereof. For the purposes of the foregoing, the per share consideration with
respect to the sale or issuance of Common Stock shall be the price per share
received by the Corporation, prior to the payment of any expenses, commissions,
discounts and other
-7-
<PAGE>
applicable costs. With respect to the sale or issuance of Common Stock
Equivalents which are convertible into or exchangeable for Common Stock without
further consideration, the per share consideration shall be determined by
dividing the maximum number of shares of Common Stock issuable with respect to
such Common Stock Equivalents (as set forth in the instrument relating thereto
without regard to any provisions contained therein for subsequent adjustment of
such number) into the aggregate consideration received by the Corporation upon
the sale or issuance of such Common Stock Equivalents. With respect to the
issuance of other Common Stock Equivalents, the per share consideration shall be
determined by dividing the maximum number of shares of Common Stock issuable
with respect to such Common Stock Equivalents into the total aggregate
consideration received by the Corporation upon the sale or issuance of such
Common Stock Equivalents plus the minimum aggregate amount of additional
consideration receivable by the corporation upon the conversion or exercise of
such Common Stock Equivalents. The issuance of Common Stock or Common Stock
Equivalents for no consideration shall be deemed to be an issuance at a per
share consideration of $.01. In connection with the sale or issuance of Common
Stock and/or Common Stock Equivalents for non-cash consideration, the amount of
consideration shall be determined by the Board of Directors of the Corporation.
As used herein, "Additional Shares of Common Stock" shall mean either
shares of Common Stock issued subsequent to the Original Issue Date or, with
respect to the issuance of Common Stock Equivalents, the maximum number of
shares of Common Stock issuable in exchange for, upon conversion of, or upon
exercise of such Common Stock Equivalents.
(i) Upon each issuance of Additional Shares of Common Stock for
a per share consideration less than the Conversion Price for the Series A
Preferred Stock in effect on the date of such issuance, the Conversion Rate
of Series A Preferred Stock in effect on such date will be adjusted by
multiplying it by a fraction:
(x) the numerator of which shall be the number of shares of
Common Stock outstanding (assuming conversion of all outstanding
Preferred Stock) immediately prior to the issuance of such
Additional Shares of Common Stock, plus the number of such
Additional Shares of Common Stock so issued, and
(y) the denominator of which shall be the number of shares of
Common Stock outstanding (assuming conversion of all outstanding
Preferred Stock)
-8-
<PAGE>
immediately prior to the issuance of such Additional Shares of
Common Stock plus the number of shares of Common Stock which the
aggregate net consideration received by the Corporation for the
total number of such Additional Shares of Common Stock so issued
would purchase at the Conversion Price for such series of
Preferred Stock then in effect.
(ii) Upon each issuance of Common Stock Equivalents,
exchangeable without further consideration into Common Stock, for a per
share consideration less than the Series A Conversion Price in effect on
the date of such issuance, the Series A Conversion Rate in effect on such
date will be adjusted as in subparagraph (i) immediately above on the basis
that the related Additional Shares of Common Stock are to be treated as
having been issued on the date of issuance of the Common Stock Equivalents,
and the aggregate consideration received by the Corporation for such Common
Stock Equivalents shall be deemed to have been received for such Additional
Shares of Common Stock.
(iii) Upon each issuance of Common Stock Equivalents other
than those described in subparagraph (ii) above, for a per share
consideration less than the Series A Conversion Price in effect on the date
of such issuance, the Series A Conversion Rate in effect on such date will
be adjusted as in subparagraph (i) immediately above on the basis that the
related Additional Shares of Common Stock are to be treated as having been
issued on the date of issuance of such Common Stock Equivalents, and the
aggregate consideration received and that receivable by the Corporation on
conversion or exercise of such Common Stock Equivalents shall be deemed to
have been received for such Additional Shares.
(iv) Once any Additional Shares of Common Stock have been
treated as having been issued for the purpose of this Paragraph 5(e), they
shall be treated as issued and outstanding shares of Common Stock whenever
any subsequent calculations must be made pursuant hereto; provided that on
the expiration of any options, warrants or rights to purchase Additional
Shares of Common Stock, the termination of any rights to convert or
exchange for Additional Shares of Common Stock, or the expiration of any
options or rights related to such convertible or exchangeable securities on
account of which an adjustment in the Series A Conversion Rate has been
made previously pursuant to this subparagraph 5(e), such Conversion Rate
shall forthwith be readjusted to such Conversion Rate as would have
obtained had the adjustment made
-9-
<PAGE>
upon the issuance of such options, rights, securities or options or rights
related to such securities been made upon the basis of the issuance of only
the number of shares of Common Stock actually issued upon the exercise of
such options or rights, upon the conversion or exchange of such securities
or upon the exercise of the options or rights related to such securities.
Any adjustment of the Series A Conversion Rate shall also cause an
appropriate adjustment of the Series A Conversion Price calculated by
dividing the adjusted Series A Conversion Rate into $0.75.
(v) The foregoing notwithstanding, no adjustment of any
Conversion Rate or Conversion Price shall be made as a result of the
issuance of:
-- any shares of Common Stock pursuant to which any Conversion Rate
and Conversion Price are adjusted under subparagraphs (c) or (d) of this
Paragraph 5; or
-- any shares of Common Stock issued pursuant to the exchange,
conversion, or exercise of any Common Stock Equivalents which have
previously been incorporated into computations hereunder on the date when
such Common Stock Equivalents were issued; or
-- any shares of Common Stock issuable upon conversion of the Series
A Preferred Stock.
f. No Adjustment. No adjustment in the Series A Conversion
-------------
Rate and the Series A Conversion Price need be made if such adjustment would
result in a change in the Series A Conversion Price of less than $.01. Any
adjustment of less than $.01 which is not made shall be carried forward and
shall be made at the time of and together with any subsequent adjustment which,
on a cumulative basis, amounts to an adjustment of $.01 or more in the Series A
Conversion Price.
g. No Impairment. The Corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Paragraph 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
-10-
<PAGE>
h. Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Series A Conversion Rate pursuant to this
Paragraph 5, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the applicable Conversion Rate at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Preferred
Stock.
i. Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any Common Stock
Equivalents or any rights to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Corporation shall mail to each holder of Preferred Stock at
least twenty (20) days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution or rights, and the amount and character of such,
dividend, distribution or right.
j. Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
k. Notices. Any notice required by the provisions of this
-------
Paragraph 5 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United
-11-
<PAGE>
States mail, postage prepaid, or delivered to the offices of a nationally
recognized express courier service and addressed to each holder of record at his
address appearing on the books of the Corporation.
6. Voting Rights. Each share of Preferred Stock issued and
-------------
outstanding shall have the number of votes equal to the number of shares of
Common Stock into which such shares of Preferred Stock could be converted on the
record date for the vote or consent of shareholders and shall have voting rights
and powers equal to the voting rights and powers of the Common Stock. The
holder of each share of Preferred Stock shall be entitled to notice of any
shareholders' meeting in accordance with the Bylaws of the Corporation.
7. Covenants. In addition to any other rights provided by law, so
---------
long as any Preferred Stock shall be outstanding, the Corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of not less than a majority of such outstanding shares of Preferred Stock:
a. Amend or repeal any provision of, or add any provision to,
the Corporation's Certificate of Incorporation or Bylaws if such action would
alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, any series of Preferred Stock, or
increase or decrease the number of shares of any series of Preferred Stock
authorized hereby;
b. Authorize or issue shares of any class of stock having any
preference or priority as to dividends or assets superior to or on a parity with
any preference or priority of the Preferred Stock or authorize or issue shares
of stock of any class or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having option rights to purchase, any
shares of stock of the Corporation having any preference or priority as to
dividends or assets superior to or on a parity with any such preference or
priority of the Preferred Stock;
c. Reclassify any outstanding shares into shares having any
preference or priority as to dividends or assets superior to or on a parity with
any such preference or priority of the Preferred Stock;
d. Pay or declare any dividends on any Common Stock without
paying or declaring an equal dividend on the Preferred Stock;
-12-
<PAGE>
e. Repurchase, acquire or retire any shares of Preferred Stock
other than pursuant to the provisions of Paragraph 5 hereof; or
f. Undertake or effect any consolidation or merger of the
Corporation with or into another corporation or the conveyance of all or
substantially all of the assets of the Corporation to another person.
8. Waiver of Rights and Preferences. Except as otherwise expressly
--------------------------------
provided herein or otherwise provided by law, any or all of the rights and
preferences of any series Preferred Stock contained herein which causes, creates
or imposes any limit or restriction on the Corporation, may be amended or waived
upon the affirmative vote of not less than eighty-five percent (85%) of the
outstanding shares of Series A Preferred Stock. Nothing herein shall prevent
one or more holders of shares of Preferred Stock from waiving any right or
preference contained in this Certificate of Incorporation as such may apply to
such holder without the concurrence of the other holders of shares of Preferred
Stock.
FIFTH. The name and mailing address of the incorporator are as follows:
Bruce M. McNamara, Esq.
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation
Two Palo Alto Square
Palo Alto, CA 94306
SIXTH. The Board of Directors of the corporation is expressly authorized
to adopt, amend or repeal the by-laws of the corporation, but the stockholders
may make additional by-laws and may alter or repeal any by-law whether adopted
by them or otherwise.
SEVENTH. Elections of directors need not be by written ballot except and
to the extent provided in the by-laws of the corporation.
EIGHTH. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as the same exists or may hereafter be amended. Any repeal or modification of
this Article EIGHTH shall not adversely affect any right or protection of a
director of the corporation existing hereunder with respect to any act or
omission occurring prior to such repeal or modification.
-13-
<PAGE>
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed and that the facts stated
therein are true.
/s/ Bruce M. McNamara
______________________________________
Incorporator
-14-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SUMMIT DESIGN, INC.
Summit Design, Inc., a Delaware corporation, does hereby certify that the
following amendments to the Corporation's Certificate of Incorporation have been
duly adopted in accordance with the provisions of Section 242 and Section 228 of
the Delaware General Corporation Law and notice of the approval of such
amendments by the Corporation's stockholders has been given in accordance with
Section 228(d) of the Delaware General Corporation Law.
1. Article FOURTH of the Certificate of Incorporation of this
corporation is amended and restated in full to read as follows:
"FOURTH. A. Classes of Stock. The aggregate number of shares which
----------------
the corporation shall have authority to issue is 29,334,283 divided into
20,000,000 shares of Common Stock with the par of $0.01 per share, and
9,334,283 shares of Preferred Stock with the par value of $0.01 per share.
B. Rights, Preference and Restrictions of Preferred Stock.
------------------------------------------------------
The Preferred Stock authorized by this Certificate of Incorporation may be
issued from time to time in series. The rights, preferences, privileges,
and restrictions granted to an imposed on the Series A, Series B, Series C,
Series D and Series E Preferred Stock as set forth below in this Subsection
(B) of this Article Fourth.
1. Designation of Preferred. Three million, three hundred
------------------------
sixty-seven thousand (3,367,000) of the shares of the Preferred Stock
authorized by this Certificate of Incorporation are hereby designated
"Series A Preferred Stock," four million, thirty-three thousand, nine
hundred forty-nine (4,033,949) of the shares of the Preferred Stock
authorized by this Certificate of Incorporation are hereby designated
"Series B Preferred Stock," four hundred thousand (400,000) shares of
Preferred Stock authorized by this Certificate of Incorporation are hereby
designated "Series C Preferred Stock", nine hundred thirty-three thousand,
three hundred thirty-four (933,334) of the shares of Preferred Stock
authorized by this Certificate of Incorporation are hereby designated
"Series D Preferred Stock" and six hundred thousand (600,000) shares of
Preferred Stock authorized by this Certificate of Incorporation are hereby
designated "Series E Preferred Stock."
2. Dividend Provision. The holders of Series A, Series B,
------------------
Series C, Series D and Series E Preferred Stock shall be entitled to
receive dividends, out of any assets legally available therefor, prior and
in preference to any declaration or payment of any dividend (payable other
than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of the Corporation pursuant to an event causing the
respective Conversion Price of the Series A, Series B, Series C, Series D
and Series E Preferred Stock to be adjusted pursuant to
<PAGE>
Paragraph 5 hereof) on the Common Stock of the Corporation, at the rate of
$0.01 per share per annum (as adjusted for stock splits, dividends paid in
stock, recombinations and the like) with respect to each outstanding share
of the Series A, Series B, Series C, Series D and Series E Preferred Stock,
payable when, as and if declared by the Board of Directors. Such dividends
shall not be cumulative. Dividends, if paid on shares of Series A, Series
B, Series C, Series D and Series E Preferred Stock, must be paid on, or, if
declared and set apart for payment on, must be declared and set apart for
payment on, each such series of Preferred Stock contemporaneously, and if
less than full dividends are paid on or declared and set apart for payment
on such series, then the same percentage of the respective dividend rate on
each such series of Preferred Stock shall be paid on or declared and set
apart.
After payment of the dividend preferences referred to above,
outstanding shares of Preferred Stock shall participate with shares of
Common Stock as to any additional declaration of payment of any dividend
(payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the Corporation pursuant
to an event causing the respective Conversion Price of the Preferred Stock
to be adjusted pursuant to Paragraph 5 hereof), with the outstanding shares
of Preferred Stock participating as though they had all been converted into
Common Stock.
3. Liquidation Preferences.
-----------------------
a. In the event of any liquidation, dissolution or winding
up of the Corporation, either voluntary or involuntary, the holders of
Series E Preferred Stock shall be entitled to receive the amount of $6.73
per share, plus all declared but unpaid dividends, for each share of Series
E Preferred Stock then held by them, prior to and in preference to the
holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Common Stock. After payment
of such amounts to the holders of the Series E Preferred Stock, the holders
of Series D Preferred Stock shall be entitled to receive the amount of
$3.75 per share, plus all declared but unpaid dividends, for each share of
Series D Preferred Stock then held by them, prior to and in preference to
the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Common Stock. After payment of such amounts to the
holders of the Series D Preferred Stock, the holders of Series A and Series
B Preferred Stock shall be entitled to receive the amounts of $1.31 and
$1.88 per share, plus all declared but unpaid dividends, for each share of
Series A Preferred Stock and Series B Preferred Stock, respectively, then
held by them, prior to and in preference to the holders of Series C
Preferred Stock and Common Stock. The Series A and B Preferred Stock shall
rank on a parity as to the receipt of the respective preferential amounts
for each such series with respect to the occurrence of such event. After
payment of such amounts to the holders of Series A and B Preferred Stock,
the holders of Series C Preferred Stock shall be entitled to receive the
amount of $1.00 per share, plus all declared but unpaid dividends, for each
share of Series C Preferred Stock then held by them prior to and in
preference to the holders of Common Stock. After payment of such amounts
-2-
<PAGE>
to the holders of Series C Preferred Stock, the holders of Common Stock
shall be entitled to receive the amount of $0.10 per share plus all
declared but unpaid dividends, for each share of Common Stock held by them.
After all of the foregoing distributions have been made, the remaining
assets and funds of the Corporation, which are legally available for
distribution, shall be distributed in equal amounts per share to the
holders of the Series A, Series B, Series C, Series D and Series E
Preferred Stock and the holders of the Common Stock with the outstanding
shares of Series A, Series B, Series C, Series D, and Series E Preferred
Stock participating as though they had all been converted into Common
Stock. The amount of each of the liquidation preferences stated in this
paragraph shall be adjusted for stock splits, dividends paid in stock,
recombinations and the like.
If, upon the occurrence of such event, the assets and funds
thus distributed among the holders of any particular series of Preferred
Stock shall be insufficient to permit the payment to all holders of such
series of Preferred Stock of the full preferential amount set forth above,
then the assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of that series
of Preferred Stock after payment of the full preferential amount set forth
above has been made with respect to all series of Preferred Stock having a
senior liquidation preference.
b. For purposes of this Paragraph 3, a liquidation,
dissolution or winding up of the Corporation shall be deemed to be
occasioned by, or to include, the Corporation's sale of all or
substantially all of its assets or the acquisition of this Corporation by
another entity by means of merger, consolidation or other transaction or
series of related transactions in which the Corporation's stockholders
before the transaction hold less than 50% of the voting securities of the
surviving entity; provided however, that the merger of a subsidiary of the
Corporation with Test Systems Strategies Inc., an Oregon corporation, and
issuance of shares of the Corporation's Series B Preferred Stock in
connection therewith shall be excluded from this subparagraph (b) and shall
not be considered a liquidation, dissolution or winding up of the
Corporation. The provisions of this Section 3(b) can be waived with respect
to all series of Preferred Stock by the approval of the holders of a
majority of the Series A, Series B, Series D and Series E Preferred Stock,
each voting separately as a series.
c. In the event the Corporation shall propose to take any
action of the types described in subparagraphs (a) and (b) of this
Paragraph 3, the Corporation shall cause to be provided to each holder of
shares of Preferred Stock written notice of the proposed action at least
twenty (20) days prior to the earlier of (i) any stockholder action to
approve such action, and (ii) the date such action shall be taken. Such
written notice shall describe the material terms and conditions of such
proposed action, including a description of the stock, cash and property to
be received by the holders of shares of Preferred Stock upon consummation
of the proposed action and the date of delivery thereof. If the terms of
the proposed transaction shall change materially (as determined by the
Board of Directors), then a new notice shall be provided in accordance with
this section.
-3-
<PAGE>
The Corporation shall not consummate or approve any
proposed action of the types described in subparagraphs (a) and (b) before
the expiration of the notice period provided above; provided that such
period may be shortened upon the written consent of the holders of a
majority of the Series A, Series B, Series D and Series E Preferred Stock,
each voting separately as a series. This subparagraph (c) may not be
amended without the approval of the holders of a majority of the Series A,
Series B, Series D and Series E Preferred Stock, each voting separately as
a series.
d. In the event the Corporation shall propose to take any
action of the types described in subparagraphs (a) and (b) of this
Paragraph 3 which will involve the distribution of assets other than cash,
the Corporation shall promptly engage independent competent appraisers to
determine the value of the assets to be distributed to the holders of
shares of Preferred Stock. The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of shares
of Preferred Stock of the appraiser's valuation.
4. Redemption.
----------
a. Upon the vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the holders of the Series A, Series B,
Series D and Series E Preferred Stock, voting together as one class, the
Company shall offer to redeem the Series A, Series B, Series C, Series D
and Series E Preferred Stock in whole or in part (from legally available
funds and otherwise subject to statutory restrictions on redemption rights
under Delaware law). The redemption price shall be $1.31 for each share of
Series A Preferred Stock, $1.88 for each share of Series B Preferred Stock,
$1.00 for each share of Series C Preferred Stock, $3.75 for each share of
Series D Preferred Stock, and $4.45 for each share of Series E Preferred
Stock, as adjusted for stock splits, dividends paid in stock,
recombinations and the like (the "Redemption Price").
b. Notice of such vote by the Series A, Series B, Series D
and Series E Preferred Stock shall be given to the Corporation within ten
(10) days thereof. Upon receipt of such notice, the Corporation shall fix a
date for redemption of the shares of Series A, Series B, Series C, Series D
and Series E Preferred Stock which the holders thereof opt to have redeemed
(the "Redemption Date") which shall be at least ninety (90) days and not
more than one hundred twenty (120) days from the date notice of the vote
was received by the Corporation.
c. In case of any redemption of a part only of the
outstanding shares of Series A, Series B, Series C, Series D and Series E
Preferred Stock, the Corporation shall effect such redemption pro rata in
proportion to the aggregate redemption price of such shares of Preferred
Stock (computed by multiplying the Redemption Price for a particular series
by the number of shares of such series outstanding as of the Redemption
Date).
-4-
<PAGE>
d. At least sixty (60) days prior to the date fixed for
any redemption of Series A, Series B, Series C, Series D or Series E
Preferred Stock (the "Redemption Date"), a written notice shall be mailed
to each holder of record of Series A, Series B, Series C, Series D and
Series E Preferred Stock, notifying such holder of the offer by the
Corporation to redeem such shares, stating the Redemption Date, the date on
which such holder must notify the Corporation of its election to have such
holder's shares redeemed, and, if redemption is elected or deemed elected
pursuant to the final sentence of this paragraph, the date on which such
holder's Conversion Rights as to such shares terminate and calling upon
such holder to surrender to the Corporation at the place designated his
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). The election to be redeemed by the holders of a
majority of the shares of a particular series of preferred stock shall be
deemed to be an election to be redeemed by the holders of all shares of
preferred stock of such series.
Each holder of Series A, Series B, Series C, Series D and
Series E Preferred Stock to be redeemed shall present and surrender his
certificate or certificates representing such Series A, Series B, Series C,
Series D and Series E Preferred Stock to the Corporation at the place
designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to or on the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. From and after the Redemption
Date, unless default is made in the payment of the Redemption Price, all
rights of the holders of the Series A, Series B, Series C, Series D and
Series E Preferred Stock that is redeemed on such Redemption Date as
stockholders of the Corporation, except the right to receive the Redemption
Price, shall cease and terminate, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding
for any purposes whatsoever.
e. The Preferred Stock may not be redeemed except as
provided in this Paragraph 4.
5. Conversion. The holders of the Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
a. Right to Convert.
----------------
Each share of Preferred Stock shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of
such share and (as to any such share the holder of which has notified the
Company of its election to have such share redeemed or as to which election
to be redeemed is deemed to have been made) on or prior to the fifth (5th)
day prior to such Redemption Date, if any, as may have been fixed in any
Redemption Notice, at the office of the Corporation or any transfer agent
for the Preferred Stock, into Common Stock at the respective Conversion
Rate (as hereinafter defined) in effect at the time of conversion. The
number of shares of Common Stock into which each share of
-5-
<PAGE>
Series A Preferred Stock may be converted is hereinafter referred to as the
"Series A Conversion Rate," the number of shares of Common Stock into which
each share of Series B Preferred Stock may be converted is hereinafter
referred to as the "Series B Conversion Rate," the number of shares of
Common Stock into which each share of Series C Preferred Stock may be
converted is hereinafter referred to as the "Series C Conversion Rate", the
number of shares of Common Stock into which each share of Series D
Preferred Stock may be converted is hereinafter referred to as the "Series
D Conversion Rate" and the number of shares of Common Stock into which each
share of Series E Preferred Stock may be converted is hereinafter referred
to as the "Series E Conversion Rate." The initial Series A Conversion Rate,
Series B Conversion Rate, Series C Conversion Rate, Series D Conversion
Rate, and Series E Conversion Rate shall be one (1), and such initial
Conversion Rates shall be subject to the adjustments described below. Any
adjustment of the Series A Conversion Rate, Series B Conversion Rate,
Series C Conversion Rate, Series D Conversion Rate or Series E Conversion
Rate shall also cause an appropriate adjustment of the Series A, Series B,
Series C, Series D or Series E Conversion Price (as hereinafter defined),
respectively, calculated by dividing the adjusted Series A Conversion Rate
into $1.31 and the adjusted Series B Conversion Rate into $1.88 and the
adjusted Series C Conversion Rate into $1.00 and the adjusted Series D
Conversion Rate into $3.75 and the adjusted Series E Conversion Rate into
$4.45, respectively. The amount obtained by dividing $1.31 by the Series A
Conversion Rate shall be called the "Series A Conversion Price", the amount
obtained by dividing $1.88 by the Series B Conversion Rate shall be called
the "Series B Conversion Price", the amount obtained by dividing $1.00 by
the Series C Conversion Rate shall be called the "Series C Conversion
Price", the amount obtained by dividing $3.75 by the Series D Conversion
Rate shall be called the "Series D Conversion Price" and the amount
obtained by dividing $4.45 by the Series E Conversion Rate shall be called
the "Series E Conversion Price." In the event of a call for redemption
pursuant to Paragraph 4 hereof of any shares of Preferred Stock which are
convertible into Common Stock, the Conversion Rights shall terminate as to
the shares designated or deemed to have been designated by the holders
thereof for redemption at the close of business on the fifth (5th) day
preceding the Redemption Date, unless default is made in payment of the
Redemption Price.
(i) Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer
and sale of Common Stock for the account of the Corporation to the public
at a price per share to the public of not less than $5.50 (as adjusted for
stock splits, dividends paid in stock, recombinations and the like) and
proceeds to the Corporation net of underwriting discounts and commissions
of not less than $10,000,000 (a "Qualifying Public Offering"). In the event
of such an offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of Preferred Stock shall not be deemed to
have converted such Preferred Stock until immediately prior to the closing
of such sale of securities.
-6-
<PAGE>
(ii) At the option of the Corporation, each share of
Series D Preferred Stock shall automatically be converted into shares of
Common Stock at its then effective Conversion Rate, if less than sixty-six
and two-thirds percent (66-2/3%) of the shares of Series D Preferred Stock
issued pursuant to that certain Series D Preferred Stock Purchase Agreement
dated May 17, 1994, remain outstanding.
At the option of the Corporation, each share of Series
E Preferred Stock shall automatically be converted into shares of Common
Stock at its then effective Conversion Rate, if less than sixty-six and
two-thirds percent (66-2/3%) of the shares of Series E Preferred Stock
issued pursuant to that certain Series E Preferred Stock Purchase Agreement
dated June 19, 1995, remain outstanding.
At least thirty (30) days prior to the date fixed for
any conversion of Series D Preferred Stock or Series E Preferred Stock (the
"Conversion Date"), a written notice shall be mailed to each holder of
record of Series D Preferred Stock or Series E Preferred Stock to be
converted, notifying such holder of the right of the Corporation to convert
such shares, stating the Conversion Date and calling upon such holder to
surrender to the Corporation at the place designated his certificate or
certificates representing the shares to be converted (the "Conversion
Notice"). Upon receipt of a certificate of Series D Preferred Stock or
Series E Preferred Stock, the Corporation shall, as soon as practicable
thereafter, issue and deliver at such place designated to such holder, or
to his nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close
of business on the Conversion Date, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date.
(iii) No fractional shares of Common Stock shall be
issued upon conversion of Preferred Stock. Any shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock surrendered for conversion
which would otherwise result in a fractional share of Common Stock shall be
redeemed on the basis of $1.31 per share, $1.88 per share, $1.00 per share,
$3.75 per share and $4.45 per share, respectively, adjusted for stock
splits, dividends paid in stock, recombinations and the like, payable as
promptly as possible whenever funds are legally available therefor.
b. Mechanics of Conversion. Before any holder of Preferred
-----------------------
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at
the principal office at the Corporation or of any transfer agent for the
Preferred Stock, and shall give written notice to the Corporation at such
office that he elects to convert the same and shall state therein the name
or names in which he wishes the certificate or certificates for shares of
Common Stock to be issued; said conversion notice shall contain such
representations as may reasonably be
-7-
<PAGE>
required by the Corporation, to the effect that the shares to be received
upon conversion are not being acquired and will not be transferred in any
way which might violate then applicable laws. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such
holder of Preferred Stock, or to his nominee or nominees, a certificate or
certificates for the number of shares of Common stock to which he shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of
the shares of Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder
of such shares of Common Stock on such date.
c. Adjustment for Combinations or Consolidations of Common
-------------------------------------------------------
Stock. In the event the Corporation at any time, or from time to time,
-----
after the date this Amendment is filed with the Delaware Secretary of State
(hereinafter referred to as the "Original Measurement Date" with respect to
each such series), effects a subdivision or combination of its outstanding
Common Stock into a greater or lesser number of shares without a
proportionate and corresponding subdivision or combination of its
outstanding Preferred Stock, then and in each such event respective
Conversion Rate shall be increased or decreased proportionately.
d. Adjustment for Dividends, Distributions and Common
--------------------------------------------------
Stock Equivalents. In the event the Corporation at any time or from time to
-----------------
time after the Original Measurement Date shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of
Common Stock, or other securities or rights (hereinafter referred to as
"Common Stock Equivalents") convertible into or entitling the holder
thereof to receive additional shares of Common Stock without payment of any
consideration by such holder for such Common Stock, then and in each such
event the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable in payment of such
dividend or distribution or upon conversion or exercise of such Common
Stock Equivalents shall be deemed to be issued and outstanding as of the
time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date. In each such event,
each respective Conversion Rate shall be increased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying such Conversion
Rate by a fraction:
(i) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution or upon conversion or
exercise of such Common Stock Equivalents; and
-8-
<PAGE>
(ii) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding or deemed to be
issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date; provided, however, (A) if such
record date shall have been fixed and such dividend is not fully paid or if
such distribution is not fully made on the date fixed therefor, each
Conversion Rate shall be recomputed accordingly as of the close of business
on such record date and thereafter each Conversion Rate shall be adjusted
pursuant to this Paragraph 5(d) as of the time of actual payment of such
dividends or distributions; (B) if such Common Stock Equivalents provide,
with the passage of time or otherwise, for any change in the number of
shares of Common Stock issuable upon conversion or exercise thereof (or
upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, each Conversion Rate shall, upon any
such change becoming effective, be recomputed to reflect such change
insofar as it affects the rights of conversion or exercise of the Common
Stock Equivalents then outstanding; (C) upon the expiration of any rights
or conversion or exercise under any unexercised Common Stock Equivalents,
each Conversion Rate computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if
the only additional shares of Common Stock issued were the shares of such
stock, if any, actually issued upon the conversion or exercise of such
Common Stock Equivalents; and (D) in the case of Common Stock Equivalents
which expire by their terms not more than sixty (60) days after the date of
issuance thereof, no adjustment in any Conversion Rate shall be made until
the expiration or exercise of all such Common Stock Equivalents, whereupon
such adjustments shall be made in the manner provided in clause (C) above.
e. Anti-dilution Adjustment for Diluting Issues. Except as
--------------------------------------------
otherwise provided in this subparagraph (e), in the event the Corporation
sells or issues any Common Stock or Common Stock Equivalent at a per share
consideration (as defined below) less than the Conversion Price for any
series of Preferred Stock then in effect, then the Conversion Rate and
Conversion Price then in effect with respect to such series shall be
adjusted as provided in subparagraphs (i), (ii) and (iii) hereof. For the
purposes of the foregoing, the per share consideration with respect to the
sale or issuance of Common Stock shall be the price per share received by
the Corporation, prior to the payment of any expenses, commissions,
discounts and other applicable costs. With respect to the sale or issuance
of Common Stock Equivalents which are convertible into or exchangeable for
Common Stock without further consideration, the per share consideration
shall be determined by dividing the maximum number of shares of Common
Stock issuable with respect to such Common Stock Equivalents (as set forth
in the instrument relating thereto without regard to any provisions
contained therein for subsequent adjustment of such number) into the
aggregate consideration received by the Corporation upon the sale or
issuance of such Common Stock Equivalents. With respect to the issuance of
other Common Stock Equivalents, the per share consideration shall be
determined by dividing the maximum number of shares of Common Stock
issuable with respect to such Common Stock Equivalents into the total
aggregate consideration received by the Corporation upon the sale or
issuance of such Common Stock Equivalents
-9-
<PAGE>
plus the minimum aggregate amount of additional consideration receivable by
the Corporation upon the conversion or exercise of such Common Stock
Equivalents. In connection with the sale or issuance of Common Stock and/or
Common Stock Equivalents for non-cash consideration, the amount of
consideration shall be reasonably determined in good faith by the Board of
Directors of the Corporation.
As used herein, "Additional Shares of Common Stock" shall mean
either shares of Common Stock issued subsequent to the Original Issue Date
or, with respect to the issuance of Common Stock Equivalents, the maximum
number of shares of Common Stock issuable in exchange for, upon conversion
or, or upon exercise of such Common Stock Equivalents.
(i) Upon each issuance of Additional Shares of
Common Stock for a per share consideration less than the Conversion Price
for the Series A Preferred Stock or the Series B Preferred Stock or the
Series C Preferred Stock or the Series D Preferred Stock or the Series E
Preferred Stock in effect on the date of such issuance, the Conversion Rate
of such series of Preferred Stock in effect on such date will be adjusted
by multiplying it by a fraction.
(x) the numerator of which shall be the number of shares of
Common Stock outstanding (assuming conversion of all outstanding
Preferred Stock) immediately prior to the issuance of such
Additional Shares of Common Stock, plus the number of such
Additional Shares of Common Stock so issued, and
(y) the denominator of which shall be the number of shares of
Common Stock outstanding (assuming conversion of all outstanding
Preferred Stock) immediately prior to the issuance of such
Additional Shares of Common Stock plus the number of shares of
Common Stock which the aggregate net consideration received by
the Corporation for the total number of such Additional Shares of
Common Stock so issued would purchase the Conversion Price for
such series of Preferred Stock then in effect.
(ii) Upon each issuance of Common Stock Equivalents,
exchangeable without further consideration into Common Stock, for a per
share consideration less than the respective Conversion Price in effect on
the date of such issuance, the Conversion Rate for such series of Preferred
Stock in effect on such date will be adjusted as in subparagraph (i)
immediately above on the basis that the related Additional Shares of Common
Stock are to be treated as having been issued on the date of issuance of
the Common Stock Equivalents, and the aggregate consideration received by
the Corporation for such Common Stock Equivalents shall be deemed to have
been received for such Additional Shares of Common Stock.
-10-
<PAGE>
(iii) Upon each issuance of Common Stock Equivalents
other than those described in subparagraph (ii) above, for a per share
consideration less than the respective Conversion Price in effect on the
date of such issuance, the Conversion Rate of such series of Preferred
Stock in effect on such date will be adjusted as in subparagraph (i)
immediately above on the basis that the related Additional Shares of Common
Stock are to be treated as having been issued on the date of issuance of
such Common Stock Equivalents, and the aggregate consideration received and
that receivable by the Corporation or conversion or exercise of such Common
Stock Equivalents shall be deemed to have been received for such Additional
Shares.
(iv) Once any Additional Shares of Common Stock have
been treated as having been issued for the purpose of this Paragraph 5(e),
they shall be treated as issued and outstanding shares of Common Stock
whenever any subsequent calculations must be made pursuant hereto; provided
that on the expiration of any options, warrants or rights to purchase
Additional Shares of Common Stock, the termination of any rights to convert
or exchange for Additional Shares of Common Stock, or the expiration of any
options or rights related to such convertible or exchangeable securities on
account of which an adjustment in a Conversion Rate has been made
previously pursuant to this Paragraph 5(e), such Conversion Rate shall
forthwith be readjusted to such Conversion Rate as would have obtained had
the adjustment made upon the issuance of such options, rights, securities
or options or rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common Stock actually issued
upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities.
(v) The foregoing notwithstanding, no adjustment of
any Conversion Rate or Conversion Price shall be made as a result of the
issuance of:
-- shares of Common Stock or any options, warrants or rights to
purchase shares of Common Stock issued or issuable to employees
or officers of the Corporation pursuant to any stock option plan,
stock incentive plan or agreement approved by the Board of
Directors of the Corporation;
-- any shares of Common Stock pursuant to which any Conversion Rate
and Conversion Price are adjusted under subparagraphs (c) or (d)
of this Paragraph 5;
-- any shares of Common Stock issued pursuant to the exchange,
conversion, or exercise of any Common Stock Equivalents which
have previously been incorporated into computations hereunder on
the date when such Common Stock Equivalents were issued;
-11-
<PAGE>
-- any shares of Common Stock issued upon conversion of any share of
Preferred Stock.
f. No Adjustment. No adjustment in a Conversion Rate and
-------------
Conversion Price need be made if such adjustment would result in a change
in the Conversion Price of less than $0.01. Any adjustment of less than
$.01 which is not made shall be carried forward and shall be made at the
time of and together with any subsequent adjustment which, on a cumulative
basis, amounts to an adjustment of $0.01 or more in a Conversion Price.
g. No Impairment. The Corporation will not, by amendment
-------------
of this Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid to seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
the carrying out of all the provisions of this Paragraph 5 and in the
taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Preferred Stock against
impairment.
h. Certificate as to Adjustments. Upon the occurrence of
-----------------------------
each adjustment or readjustment of a Conversion Rate pursuant to this
Paragraph 5, the Corporation at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to each holder of Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the applicable Conversion Rate at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
the conversion of such series of Preferred Stock.
i. Notices of Record Date. In the event of any taking by
----------------------
the Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive
any dividend (other than a cash dividend) or other distribution, any Common
Stock Equivalents or any rights to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall provide to
each holder of Preferred Stock at least ten(10) days prior to the date
specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or rights, and
the amount and character of such, dividend, distribution or right.
j. Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of
-12-
<PAGE>
the Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such
purpose.
6. Voting Rights.
-------------
a. Each share of Preferred Stock issued and outstanding
shall have the number of votes equal to the number of shares of Common
Stock into which such shares of Preferred Stock could be converted on the
record date for the vote or consent of shareholders and shall have voting
rights and powers equal to the voting rights and powers of the Common
Stock. The holder of each share of Preferred Stock shall be entitled to
notice of any shareholders' meeting in accordance with the Bylaws of the
Corporation. Except as set forth in subsections (b), (c), (d), (e) and (f)
below, the holders of Preferred Stock shall vote with holders of the Common
Stock upon any other matters submitted to a vote of shareholders, except
those matters required by law or this Certificate of Incorporation to be
submitted to a class or series vote.
b. The holders of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect two (2) directors to the Board
of Directors as follows: (i) the holders of a majority of the outstanding
shares of Series A Preferred Stock shall be entitled to elect one (1)
director and may remove from office such director and fill any vacancy
with respect to such position, if the holders of a majority of the
outstanding shares of Series A Preferred so approve, and (ii) the holders
of eighty-five percent (85%) of the outstanding shares of Series A
Preferred Stock shall be entitled to elect one (1) director and may remove
from office such director and fill any vacancy with respect to such
position, if the holders of eighty-five percent (85%) of the outstanding
shares of Series A Preferred Stock so approve; provided, however, if the
-------- -------
holders of at least eighty-five percent (85%) of the outstanding shares of
Series A Preferred Stock do not elect an individual under this subsection
(b)(ii) at an annual meeting, then the director in office at the time of
the annual meeting shall be deemed to have been elected and shall hold
office until the next annual meeting at which time if the holders of at
least eighty-five percent (85%) of the outstanding shares of Series A
Preferred Stock do not elect an individual, such position will remain
vacant until such holders elect a person to fill the vacancy.
c. The holders of a majority of the outstanding shares of
Series B Preferred Stock, voting as a separate class, shall be entitled to
elect two (2) directors to the Board of Directors and to remove from office
either or both of them and to fill any vacancy or vacancies caused by the
resignation, death or removal of either or both of them.
-13-
<PAGE>
d. The holders of a majority of the outstanding shares of
Series D Preferred Stock, voting as a separate class, shall be entitled to
elect one (1) director of the Board of Directors, and to remove such
director from office and to fill any vacancy caused by the resignation,
death or removal of such director.
e. The holders of a majority of the outstanding shares of
Series E Preferred Stock, voting as a separate class, shall be entitled to
elect one (1) director to the Board of Directors, and to remove such
director from office and to fill any vacancy caused by the resignation,
death or removal of such director.
f. The holders of a majority of the outstanding Preferred
Stock, voting together as a single class, shall be entitled to elect one
(1) director to the Board of Directors, and to remove such director from
office and to fill any vacancy caused by the resignation, death or removal
of such director.
g. The holders of a majority of the outstanding Common
Stock and Preferred Stock, voting together as a single class, shall be
entitled to elect one (1) director to the Board of Directors at each annual
meeting of stockholders, and to remove such director from office and to
fill any vacancy caused by the resignation, death or removal of such
director.
h. The voting rights of the holders of Preferred Stock set
forth in subsections (b), (c), (d), (e), (f) and (g) above shall terminate
upon the closing of a Qualifying Public Offering.
7. Covenants. In addition to any other rights provided by
---------
law, so long as any Preferred Stock shall be outstanding, the Corporation
shall not:
a. without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of shares of Series A,
Series B, Series D and Series E Preferred Stock, voting together as one
class;
(i) Amend or repeal any provision of, or add any
provision to, the Corporation's Certificate of Incorporation or Bylaws if
such action would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, any series of
Preferred Stock, or increase or decrease the number of shares of any series
of Preferred Stock authorized hereby;
(ii) Authorize or issue shares of any class of stock
having any preference or priority as to dividends or assets superior to or
on a parity with any preference or priority of the Preferred Stock or
authorize or issue shares of stock of any class or any bonds, debentures,
notes or other obligations convertible into or exchangeable for, or having
option rights to purchase, any shares of stock of the Corporation having
any
-14-
<PAGE>
preference or priority as to dividends or assets superior to or on a parity
with any such preference or priority of the Preferred Stock; or
(iii) Undertake or effect any consolidation or merger
of the Corporation with or into another corporation or the conveyance of
substantially all of the assets of the Corporation to another person.
b. without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of the shares of each of
Series A, Series B, Series D and Series E Preferred Stock, each voting
separately as a series:
(i) In addition to the vote required pursuant to
Section 7(a)(i), amend or repeal any provision of, or add any provision to,
the Corporation's Certificate of Incorporation or Bylaws if such action
would alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of, any series of Preferred
Stock, or increase or decrease the number of shares of any series of
Preferred Stock authorized hereby; provided, however, that this Section
7(b)(i) shall not be applicable to any amendment, repeal or addition to the
Corporation's Certificate of Incorporation or Bylaws that (A) is made to
permit the sale of additional shares of capital stock of the Corporation as
to which the holders of Preferred Stock have first refusal rights pursuant
to that certain Investors' Rights Agreement dated as of February 10, 1994,
as amended, and (B) affects the Series A, Series B, Series D and Series E
Preferred Stock in the same manner;
(ii) Reclassify any outstanding shares into shares
having any preference or priority as to dividends or assets superior to or
on a parity with any such preference or priority of the Preferred Stock;
(iii) Pay or declare any dividends on any Common Stock
without paying or declaring an equal dividend on the Preferred Stock;
(iv) Repurchase, acquire or retire any shares of
Preferred Stock other than pursuant to the provisions of Section 5 hereof;
(v) In addition to the vote required pursuant to
Section 7(a)(iii), undertake or effect any consolidation or merger with or
into another corporation, or the conveyance of all or substantially all of
the assets of the Corporation, or a liquidation, dissolution or winding up
of the Corporation; provided, however, that approval of each of Series A
-------- -------
Series B, Series D and Series E Preferred Stock will not be required under
this subsection (v) if (i) the consideration paid in cash or marketable
securities on account of each outstanding share of Preferred Stock in
connection with such transaction is at least (a) $7.50 per share, if such
transaction occurs in 1994 or (b) $12.50 per share, if such transaction
occurs in 1995 and 1996, with appropriate adjustment with respect to (a)
and (b) for stock splits, stock dividends and the like or (ii) such action
is taken after 1996;
-15-
<PAGE>
(vi) Increase the number of authorized members of the
Board of Directors above eight (8); or
(vii) Amend, or take any action intended to
circumvent, the provisions of this Section 7(b).
c. without first obtaining the affirmative vote or written
consent of the holders of not less than eighty-five percent (85%) of the
outstanding shares of Series A Preferred Stock:
(i) Authorize or issue additional shares of Series A
Preferred Stock;
(ii) Redeem any shares of Series A Preferred Stock
notwithstanding the provisions at Section 4;
(iii) Convert any shares of Series A Preferred Stock
except (a) pursuant to Section 5(a)(i) or (b) pursuant to the election of a
holder of Series A Preferred Stock pursuant to Section 5(a);
(iv) Amend or otherwise adversely affect the rights
of the holders of Series A Preferred Stock to elect two (2) persons to the
Corporation's Board of Directors as set forth in Section 6(b); or
(v) Amend or take any action intended to circumvent
the provisions of this Section 7(c).
d. without first obtaining the approval of (a) the holders
of a majority of Series A Preferred Stock, voting separately as one series;
(b) the holders of a majority of the Series B Preferred Stock, voting
separately as one series; and (c) the holders of a majority of all shares
of Preferred Stock then outstanding voting together as one class:
(i) Amend Article XII of the Corporation's Bylaws;
or
(ii) Amend or take any action intended to circumvent
the provisions of this Section 7(d) or Article XII of the Corporation's
Bylaws.
8. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given in delivered personally or by
express courier, mailed by registered or certified mail (return receipt
requested), provided that all notices to foreign addresses shall be made by
a recognized international express courier service, or sent by telecopy,
confirmation received, to the parties at such addresses and telecopy
numbers which have been provided to the corporation.
-16-
<PAGE>
2. The foregoing amendment of the Certificate of Incorporation was
duly approved as of March 11, 1996 by a vote of the holders of a majority of the
outstanding shares of the Corporation's Series A Preferred Stock voting as a
separate series, a majority of the outstanding shares of the Corporation's
Series B Preferred Stock voting as a separate series, a majority of the
outstanding shares of the Corporation's Series C Preferred Stock voting as a
separate series, a majority of the outstanding shares of the Corporation's
Series D Preferred Stock voting as a separate series, a majority of the
outstanding shares of the Corporation's Series E Preferred Stock voting as a
separate series, a majority of the outstanding shares of the Corporation's
Preferred Stock voting as a separate class, and a majority of the outstanding
shares of the Corporation's Common Stock in accordance with Section 242(b) of
the Delaware General Corporation Law.
IN WITNESS WHEREOF, Summit Design, Inc. has caused this Certificate of
Amendment to be signed and attested to by its duly authorized officers, as of
this 11th day of March, 1996.
SUMMIT DESIGN, INC.
By:/s/ Larry J. Gerhard
-------------------------------------
Larry J. Gerhard
President and Chief Executive Officer
Attest:
/s/ C. Albert Koob
- ---------------------------
C. Albert Koob
Assistant Secretary
-17-
<PAGE>
Exhibit 3.3
________________________________________________________________________________
BYLAWS
OF
SUMMIT DESIGN, INC.
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C> <C>
ARTICLE I - CORPORATE OFFICES................................................... 1
1.1 REGISTERED OFFICE..................................................... 1
1.2 OTHER OFFICES......................................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS........................................... 1
2.1 PLACE OF MEETINGS..................................................... 1
2.2 ANNUAL MEETING........................................................ 1
2.3 SPECIAL MEETING....................................................... 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS...................................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.......................... 2
2.6 QUORUM................................................................ 2
2.7 ADJOURNED MEETING; NOTICE............................................. 2
2.8 VOTING................................................................ 3
2.9 WAIVER OF NOTICE...................................................... 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING............................................................... 3
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING
CONSENTS.............................................................. 4
2.12 PROXIES............................................................... 4
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE................................. 5
ARTICLE III - DIRECTORS......................................................... 5
3.1 POWERS................................................................ 5
3.2 NUMBER OF DIRECTORS................................................... 5
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS............................................................. 6
3.4 RESIGNATION AND VACANCIES............................................. 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.............................. 7
3.6 FIRST MEETINGS........................................................ 7
3.7 REGULAR MEETINGS...................................................... 8
3.8 SPECIAL MEETINGS; NOTICE.............................................. 8
3.9 QUORUM................................................................ 8
3.10 WAIVER OF NOTICE...................................................... 8
3.11 ADJOURNED MEETING; NOTICE............................................. 9
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A
MEETING............................................................... 9
3.13 FEES AND COMPENSATION OF DIRECTORS.................................... 9
3.14 APPROVAL OF LOANS TO OFFICERS......................................... 9
3.15 REMOVAL OF DIRECTORS.................................................. 10
ARTICLE IV - COMMITTEES......................................................... 10
4.1 COMMITTEES OF DIRECTORS............................................... 10
4.2 COMMITTEE MINUTES..................................................... 11
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
4.3 MEETINGS AND ACTION OF COMMITTEES..................................... 11
ARTICLE V - OFFICERS............................................................ 11
5.1 OFFICERS.............................................................. 11
5.2 ELECTION OF OFFICERS.................................................. 12
5.3 SUBORDINATE OFFICERS.................................................. 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS................................... 12
5.5 VACANCIES IN OFFICES.................................................. 12
5.6 CHAIRMAN OF THE BOARD................................................. 12
5.7 PRESIDENT............................................................. 13
5.8 VICE PRESIDENT........................................................ 13
5.9 SECRETARY............................................................. 13
5.10 TREASURER............................................................. 14
5.11 ASSISTANT SECRETARY................................................... 14
5.12 ASSISTANT TREASURER................................................... 14
5.13 AUTHORITY AND DUTIES OF OFFICERS...................................... 15
ARTICLE VI - INDEMNITY.......................................................... 15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS............................. 15
6.2 INDEMNIFICATION OF OTHERS............................................. 15
6.3 INSURANCE............................................................. 16
ARTICLE VII - RECORDS AND REPORTS............................................... 16
7.1 MAINTENANCE AND INSPECTION OF RECORDS................................. 16
7.2 INSPECTION BY DIRECTORS............................................... 17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS...................................... 17
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS........................ 17
ARTICLE VIII - GENERAL MATTERS.................................................. 18
8.1 CHECKS................................................................ 18
8.2 EXECUTION OF CORPORATE CONTRACTS AND
INSTRUMENTS........................................................... 18
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES................................ 18
8.4 SPECIAL DESIGNATION ON CERTIFICATES................................... 19
8.5 LOST CERTIFICATES..................................................... 19
8.6 CONSTRUCTION; DEFINITIONS............................................. 20
8.7 DIVIDENDS............................................................. 20
8.8 FISCAL YEAR........................................................... 20
8.9 SEAL.................................................................. 20
8.10 TRANSFER OF STOCK..................................................... 20
8.11 STOCK TRANSFER AGREEMENTS............................................. 20
8.12 REGISTERED STOCKHOLDERS............................................... 21
ARTICLE IX - AMENDMENTS......................................................... 21
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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----
<S> <C>
ARTICLE X - DISSOLUTION......................................................... 21
ARTICLE XI - CUSTODIAN.......................................................... 22
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES........................... 22
11.2 DUTIES OF CUSTODIAN................................................... 23
ARTICLE XII - CERTAIN ADDITIONAL
PROVISIONS REGARDING OPERATIONS IN ISRAEL............................. 23
</TABLE>
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<PAGE>
BYLAWS
OF
SUMMIT DESIGN, INC.
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
- ---------- ----------
agent of the corporation at such location is The Corporation Trust Company.
-----------------------------
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such designation,
the annual meeting of stockholders shall be held on the __________ of __________
in each year at ____.m. However, if such day falls on a legal holiday, then the
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected and any other proper
business may be transacted.
2.3 SPECIAL MEETING
---------------
<PAGE>
Special meetings of stockholders for any purpose or purposes may be called
at any time by the Board of Directors, or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and whose
powers and authority, as expressly provided in a resolution of the Board of
Directors, include the power to call such meetings, but such special meetings
may not be called by any other person or persons.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the
-2-
<PAGE>
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting the corporation may
transact any business that might have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.8 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.9 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
-3-
<PAGE>
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporation action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
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<PAGE>
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
-5-
<PAGE>
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
-------------------
The authorized number of directors shall be six (6). This number may be
changed by a duly adopted amendment to the certificate of incorporation or by an
amendment to this bylaw adopted by the vote or written consent of the holders of
a majority of the stock issued and outstanding and entitled to vote or by
resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the corporation.
When one or more directors so resigns and the resignation is effective at a
future date, unless otherwise provided in the certificate of incorporation, a
majority of the directors then in office, including those who have so resigned,
shall have power
-6-
<PAGE>
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
-7-
<PAGE>
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of
the board of directors, or as shall be specified in a written waiver signed by
all of the directors.
3.7 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of
-8-
<PAGE>
the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
-9-
<PAGE>
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
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ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation
Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange
of all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
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Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution of
the board of directors and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
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The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board
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of directors, have general supervision, direction, and control of the business
and the officers of the corporation. He shall preside at all meetings of the
shareholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the board of directors. He shall have the general powers and
duties of management usually vested in the office of president of a corporation
and shall have such other powers and duties as may be prescribed by the board of
directors or these bylaws.
5.8 VICE PRESIDENT
--------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of
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the corporation, if one be adopted, in safe custody and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors or by these bylaws.
5.10 TREASURER
---------
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the president and directors,
whenever they request it, an account of all of his transactions as treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the board of directors or
these bylaws.
5.11 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
-------------------
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
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5.13 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
---------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation or any subsidiary, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation
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or of another enterprise at the request of such predecessor corporation.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
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The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any
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other person authorized to do so by proxy or power of attorney duly executed by
such person having the authority.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or regis-
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trar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation
shall declare a dividend upon partly paid shares of the same class, but only
upon the basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of
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the lost, stolen or destroyed certificate, or his legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
----
The corporate seal shall have the name of the corporation inscribed thereon
and shall be in such form as may be approved from time to time by the Board of
Directors.
8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority
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to transfer, it shall be the duty of the corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate, and record the
transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that
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effect by a majority of the whole board at any meeting called for that purpose,
shall cause notice to be mailed to each stockholder entitled to vote thereon of
the adoption of the resolution and of a meeting of stockholders to take action
upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the
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corporation is insolvent, to be receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not
to liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
ARTICLE XII
CERTAIN ADDITIONAL PROVISIONS REGARDING OPERATIONS IN ISRAEL
------------------------------------------------------------
(a) Except with approval of (i) the Board of Directors of the corporation;
(ii) the holders of a majority of Series A Preferred Stock, voting separately as
one series; (iii) the holders of a majority of the Series B Preferred Stock,
voting separately as one series; and (iv) the holders of a majority of all
shares of Preferred Stock then outstanding voting together as one class, the
corporation:
(A) shall not sell or otherwise transfer its interest in SEE
Technologies Software Environment for Engineers, Ltd., an Israeli
corporation ("SEE");
---
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(B) shall not permit SEE to sell or otherwise transfer its rights in
Visual HDL, other than in the normal course of business;
(C) shall not permit the removal of Zamir Paz as the President of
SEE; and
(D) shall cause the Board of Directors of its subsidiaries to be the
same as the Board of Directors of the corporation.
(b) Except with approval of the Chief Executive Officer of the corporation
and the President of SEE, the corporation shall
(i) not permit the salaries and material benefits of the engineers
employed by SEE to be materially altered;
(ii) cause the primary research, development and improvement work on
Visual HDL and related products to be conducted at SEE in Israel; and
(iii) in the event that a reduction in force has been approved by the
Board of Directors of the corporation with respect to the engineers
employed by the corporation or any of its subsidiaries (a "RIF"), cause
---
such RIF to be implemented so that the ratio of the number of engineers
employed by SEE to the aggregate number of engineers employed by the
corporation and its subsidiaries immediately prior to the RIF shall be less
than or equal to such ratio as calculated immediately following such RIF.
(c) The provisions of this Article XII shall terminate on the earlier of:
(i) January 1, 1997 or (ii) the closing of an initial public offering of Common
Stock of Summit Design Inc. pursuant to an effective registration statement
under the Securities Act of 1933, as amended with gross proceeds to the public
of at least $7,500,000; provided however, that the corporation shall use its
diligent efforts to adhere to the provisions of subsections (b)(i), (ii) and
(iii) above after the provisions of this Article XII are terminated. This
Article XII may only be amended or superseded with the approval of (i) the Board
of Directors of the corporation; (ii) the holders of a majority of Series A
Preferred Stock, voting separately as one series; (iii) the holders of a
majority of the Series B Preferred Stock, voting separately as one series; and
(iv) the holders of a majority of all shares of Preferred Stock then outstanding
voting together as one class.
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AMENDMENT TO BYLAWS OF
SUMMIT DESIGN, INC.
Section 3.2 of Article III of the Bylaws of Summit Design, Inc. shall be amended
and restated in full as follows:
3.2 NUMBER OF DIRECTORS
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The authorized number of directors shall be eight (8). This number may
be changed by a duly adopted amendment to the certificate of incorporation
or by an amendment to this bylaw adopted by the vote or written consent of
the holders of a majority of the stock issued and outstanding and entitled
to vote or by resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office
expires.
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Exhibit 4.2
INVESTORS' RIGHTS AGREEMENT
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This Investors' Rights Agreement (the "Agreement") is entered into as of
the 10th day of February 1994 by and among Summit Design, Inc., a Delaware
corporation (the "Company"), and the persons listed on the attached Schedule A
who become signatories to this agreement (collectively, the "Investors").
AGREEMENT
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In consideration of the mutual promises and covenants contained herein, the
parties agree as follows:
1. Registration Rights.
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1.1 Definitions. As used in this Agreement, the following terms
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shall have the following respective meanings:
a. The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
and the declaration or ordering of the effectiveness of such registration
statement.
b. The term "Preferred Shares" shall mean all shares of Series
A, Series B and Series C Preferred Stock of the Company held by any Holder.
c. The term "Registrable Securities" means all of the
following: (i) all shares of Common Stock of the Company issued or issuable
upon conversion of Preferred Shares (the "Conversion Shares") and (ii) all
shares of Common Stock issued or issuable in respect of the stock referred to in
(i) above as a result of a stock split, stock dividend, recapitalization or
similar event or any Common Stock otherwise issued or issuable with respect to
the Preferred Shares, provided, however, that shares of Common Stock or other
securities shall no longer be treated as Registrable Securities if (A) they have
been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction registered with the SEC, (B)
they have been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon consummation of
such sale or (C) in the case of a Holder who then holds less than one percent
(1%) of the then outstanding Common Stock (determined on the basis of assumed
conversion of all securities convertible into Common Stock), the shares are
available for sale, in the opinion of counsel to the Company, without compliance
with the registration and prospectus
<PAGE>
delivery requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto may be removed upon the
consummation of such sale. Registrable Securities shall also mean shares of
Common Stock of the Company issued or issuable upon exercise of vested options
to individuals who are Employee and Director Stockholders.
d. The terms "Holder" and "Holders" mean any person or persons
holding or having the right to acquire Registrable Securities and transferees
qualifying under Subsection 1.11 hereof.
e. The term "Initiating Holders" shall mean any Holder or
Holders who in the aggregate are Holders of not less than fifty-one percent
(51%) of the Registrable Securities.
f. The term "SEC" means the Securities and Exchange Commission.
g. The term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Agreement, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and the fees and disbursements of one counsel retained by the
Holders.
h. The term "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
i. The term "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of the Registrable
Securities.
j. "Employee and Director Stockholders" shall mean the
Company's directors, president and chief financial officer, and any executive
officer of the Company or any subsidiary of the Company or any subsidiary of the
Company in charge of a principal business unit, division or function, as
determined by the Board of Directors in its sole discretion, so long as such
individuals (i) shall continue to serve the Company in the foregoing positions
on the effective date of the registration statement in which they wish to
include shares and (ii) agree to be bound by all other provisions of this
Agreement. Notwithstanding the foregoing, an individual's status as an Employee
and Director Stockholder does not limit any rights such individual may have as
an Investor hereunder.
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1.2 Requested Registration.
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a. Demand for Registration. In case the Company shall receive
-----------------------
from the Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to all or a part of the
Registrable Securities (other than a registration on Form S-3 or any successor
form regardless of its designation) having an aggregate proposed offering price
to the public, net of underwriting discounts and commissions, of at least
$3,000,000 the Company will:
(1) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(2) as soon as practicable, use its diligent best efforts
to effect all such registrations, qualifications, or compliances (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within fifteen (15) business days
after written notice from the Company is given under subsection 1.2(a)(l) above;
provided that the Company shall not be obligated to take any action to effect
any such registration, qualification or compliance pursuant to this subsection
1.2:
(A) Prior to the earlier of (I) December 31, 1994 or
(II) six months after the effective date of a registration statement pertaining
to the Company's initial registered offering;
(B) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(C) After the Company has effected two such
registrations pursuant to this subsection 1.2, which have been declared or
ordered effective and the securities offered pursuant to such registrations have
been sold;
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(D) Within six (6) months following the effective date
of a prior registered offering of the Company's securities pursuant to
subsection 1.3 below.
Subject to the foregoing clauses (A) through (D), the Company shall
file a registration statement as soon as practicable after receipt of the
request or requests of the Initiating Holders; provided, however, that if the
Company shall furnish to such Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed on or before the date
filing would be required and it is therefore essential to defer the filing of
such registration statement, the Company shall have the right to defer such
filing for a period of not more than one hundred and twenty (120) days after
receipt of the request of the Initiating Holders. During such one hundred and
twenty (120) day period, the Company may not effect any registration (other than
a registration relating solely to employee benefit plans, or a registration
relating solely to an SEC Rule 145 transaction, or a registration on any other
form or any successor to such forms, which does not include substantially the
same information as would be required to be included in a registration state-
ment covering the sale of Registrable Securities) for its own account or for the
account of holders of other registration rights, unless such registration had
been filed prior to receipt of the request or requests of the Initiating
Holders.
b. Underwriting. If the Initiating Holders intend to
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distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this subsection 1.2 and the Company shall include such information
in the written notice referred to in subsection 1.2(a)(l). The underwriter shall
be selected by the Company but shall be reasonably acceptable to the holders of
a majority of the Registrable Securities proposed to be sold by the Initiating
Holders. The right of any Holder to registration pursuant to subsection 1.2
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder) to the extent provided herein. The Company shall
(together with all Holders proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected as above provided. Notwithstanding any
other provision of this subsection 1.2, if the underwriter advises the
Initiating Holders and the Company in writing that marketing
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factors require a limitation of the number of shares to be underwritten, the
Company shall so advise all Holders, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders requesting inclusion in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held (or
entitled to be held upon conversion) by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the underwriter and the Initiating Holders. The Registrable
Securities and/or other securities so withdrawn shall also be withdrawn from
registration; provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the
underwriter limitation in this subsection 1.2. Such withdrawn Registrable
Securities shall not be transferred in a public distribution prior to one
hundred and eighty (180) days after the effective date of such registration, or
such other shorter period of time as the underwriters may reasonably require.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account or the
account of others in such registration if the underwriter so agrees and the
number of Registrable Securities which would otherwise have been included in
such registration and underwriting will not thereby be limited.
1.3 Company Registration.
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a. If at any time or from time to time, the Company shall
determine to register any of its securities, for its own account or the account
of any of its stockholders, other than (i) a registration relating solely to
employee benefit plans, or a registration relating solely to an SEC Rule 145
transaction, or a registration on any successor to such forms, which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, or (ii)
a registration statement pursuant to Section 1.2 hereof, the Company will:
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(1) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(2) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests by any Holder or Holders, made within thirty (30) days after such
written notice has been given by the Company, except as set forth in subsection
1.3(b) below.
b. Underwriting. If the registration of which the Company
------------
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to subsection 1.3(a)(l). In such event the right of any Holder to
registration pursuant to subsection 1.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other Holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 1.3, if the
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, and (i) if the registration is the first
registered offering of the sale of the Company's securities to the general
public, the underwriter may limit the amount of securities (including
Registrable Securities) to be included in the registration and underwriting by
the Company's stockholders, or may exclude such securities entirely from such
registration and underwriting, provided, that securities (other than Registrable
Securities) of any of the Company's stockholders may not be included in the
registration and underwriting prior to any Registrable Securities; or (ii) if
such registration is other than the first registered offering of the Company's
securities to the general public, the underwriter may limit the amount of
securities to be included in the registration and underwriting by the Company's
stockholders, provided, however, the number of Registrable Securities to be
included in such registration and underwriting shall not be reduced to less than
thirty percent (30%) of the aggregate amount of Registrable Securities requested
to be included therein without the prior consent of Holders thereof. In the
event of any such limitation or exclusion of Registrable Securities, the Company
shall so advise all Holders
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of Registrable Securities which would otherwise be registered and underwritten
pursuant hereto, and the number of shares of Registrable Securities that may
be included in the registration and underwriting shall be allocated among
Holders requesting registration in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities (or securities convertible into
Registrable Securities) held by each of such Holders as of the date of the
notice pursuant to subsection 1.3(a)(i) above. If any Holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the underwriter. Such withdrawn Registrable
Securities shall not be transferred in a public distribution prior to 180 days
after the effective date of such registration statement, or such other shorter
period of time as the underwriters may require.
c. Right to Terminate Registration. The Company shall have the
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right to terminate or withdraw any registration initiated by it under this
Section 1.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
1.4 Form S-3. The Company shall use its best efforts to qualify for
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registration on Form S-3 or its successor form. After the Company has qualified
for the use of Form S-3, Holders of not less than twenty-five percent (25%) of
the then outstanding Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of Shares by such Holders), subject only to the following:
a. The Company shall not be required to effect a registration
pursuant to this subsection 1.4 within one hundred and eighty (180) days of the
effective date of any registration referred to in subsections 1.2 and 1.3 above
or within one year of the effective date of any registration referred to in this
subsection 1.4;
b. The Company shall not be required to effect a registration
pursuant to this subsection 1.4 unless the Holder or Holders requesting
registration propose to dispose of shares of Registrable Securities having an
aggregate disposition price (before deduction of underwriting discounts and
expenses of sale) of at least $500,000;
c. The Company shall not be obligated to take any action
pursuant to this Section 1.4 in any particular jurisdiction in which the Company
would be required to execute a general consent
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to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act;
d. The Company shall not be obligated to take any action
pursuant to this Section 1.4 if the Company, within ten days of the receipt of
the request of the Holders, gives notice of its bona fide intention to effect
the filing of a registration statement with the Commission within 90 days of
receipt of such request (other than a registration relating solely to employee
benefit plans, or a registration relating solely to an SEC Rule 145 transaction,
or registration on any other form or any successor to such forms which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities);
e. The Company shall not be obligated to take any action
pursuant to this Section 1.4 if the Company shall furnish to such Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for registration statements to be filed in the
near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 180 days
from the receipt of the request to file such registration by such Holder;
provided, however, that the Company will not exercise such right more than once
in any twelve month period.
The Company shall give written notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this
subsection 1.4 and shall provide a reasonable opportunity (no fewer than twenty
(20) days from the delivery of the notice) for other Holders to participate in
the registration, provided that if the registration is for an underwritten
offering, the terms of Section 1.3(b) shall apply to all participants in such
offering. The underwriter shall be selected in the same manner as is set forth
in subsection 1.2(b). Subject to the foregoing, the Company will use its best
efforts to effect promptly the registration of all shares of Registrable
Securities on Form S-3 to the extent requested by the Holder or Holders thereof
for purposes of disposition.
1.5 Lockup Agreement. In consideration for the Company's agreeing
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to its obligations under this Section 1, each Holder agrees, in connection with
the registration of the Company's securities in its initial public offering and
second public offering that, effective upon the request of the underwriters
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managing the Company's initial and second public offering, such Holder shall be
obligated, so long as all executive officers and directors of the Company are
bound by a comparable obligation, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Registrable
Securities (other than those included in the registration) without the prior
written consent of such underwriters, for such period of time (not to exceed one
hundred and eighty (180) days) from the effective date of such registration as
the underwriters may specify.
1.6 Expenses of Registration.
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The Company shall bear all Registration Expenses incurred in
connection with any (i) the registration, qualification or compliance pursuant
to subsection 1.2, (ii) all registrations, qualifications or compliance pursuant
to subsection 1.3 and (iii) two registrations, qualifications or compliance
pursuant to subsection 1.4.
1.7 Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder participating therein advised in writing as to
the initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
a. Keep such registration, qualification or compliance pursuant
to subsections 1.2, 1.3 or 1.4 effective until the earlier to occur of (i) one
hundred eighty (180) days after the effective date of such registration or (ii)
until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; and
b. Furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request.
1.8 Indemnification.
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a. The Company will indemnify each Holder of Registrable
Securities, each of its officers, directors and partners, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which such registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all claims, losses,
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expenses, damages and liabilities (or actions in respect thereto) including any
of the foregoing incurred in settlement of any litigation commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act or any state securities law applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any reasonable legal and any other expenses
incurred in connection with investigating, defending or settling any such claim,
loss, damage, liability or action, provided that the Company will not be liable
in any such case to the extent that any such claim, loss, damage or liability
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter specifically for use therein.
b. Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company within the meaning of Section 15 of Securities Act, and
each other such Holder, each of its officers, directors and partners and each
person controlling such Holder within the meaning of Section 15 of Securities
Act, against all claims, losses, expenses, damages and liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such Holders, such directors, officers, partners,
persons or underwriters for any reasonable legal or any other expenses incurred
in connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in
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each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering-circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder specifically for use
therein; provided, however, the total amount for which any Holder shall be
liable under this subsection 1.8(b) shall not in any event exceed the aggregate
proceeds received by such Holder from the sale of Registrable Securities held by
such Holder in such registration.
c. Each party entitled to indemnification under this subsection
1.8 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action and
provided further, that the Indemnifying Party shall not assume the defense for
matters as to which there is a conflict of interest or separate and different
defenses but rather in such case shall pay the expenses of a separate lawyer for
Indemnified Party, as incurred. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. No Indemnified Party shall consent to entry of any
judgment or enter into any settlement without the consent of each Indemnifying
Party, which consent shall not be unreasonable withheld.
1.9 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to herein.
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1.10 Rule 144 Reporting. With a view to making available to Holders
------------------
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees at all times after ninety (90) days after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public to:
a. Make and keep public information available, as those terms
are understood and defined in SEC Rule 144;
b. Use its best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Securities Exchange Act of 1934, as amended (the "Exchange Act");
c. So long as a Holder owns any Registrable Securities, to
furnish to such Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as the Holder may reasonably request in complying with any rule or
regulation of the SEC allowing the Holder to sell any such securities without
registration.
d. After its initial public offering, to take whatever actions
are necessary in order for it to qualify to use Form S-2 or S-3, or any form
subsequently adopted by the SEC to take the place of Form S-2 or S-3 which does
not require substantially more disclosure than the form which it replaces.
1.11 Transfer of Registration Rights. Holders' rights to cause the
-------------------------------
Company to register their securities and keep information available, granted to
them by the Company under subsections 1.2, 1.3, 1.4 and 1.10 may be assigned to
a transferee or assignee who (i) receives all of the Registrable Securities
originally purchased by any transferring or assigning Holder, (ii) in the event
that the conditions of clause (i) are not satisfied, receives at least 100,000
shares (as adjusted for stock dividends, stock splits, recapitalizations and the
like) of a Holder's Registrable Securities, or (iii) is a partner or shareholder
of a Holder that is a partnership or corporation and is distributing such
Registrable Securities to its partners or stockholders. Any transfer or
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assignment permitted by the foregoing sentence shall be effective as long as the
Company is given written notice by such Holder at the time of or within a
reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned.
1.12 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date hereof, the Company shall not, without the prior written consent of more
than two-thirds (2/3) of the Registrable Securities then held by Investors,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder to: (a)
exercise a demand registration prior to the date set forth in subsection
1.2(a)(ii)(A) above, or (b) participate in a registration pursuant to
subsection 1.3 hereof other than on terms identical to those applicable to the
Holders.
1.13 Termination of Registration Rights. The registration rights
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contained in subsections 1.2, 1.3 and 1.4 shall terminate five (5) years after
the effective date of the Company's Qualifying Public Offering.
2. Information Rights. The Company hereby covenants and agrees that it
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will furnish to each Investor, so long as such Investor holds any shares of the
Company Series A Preferred Stock or Series B Preferred Stock or Common Stock
issued on conversion thereof:
(a) As soon as practicable after the end of each fiscal year, and in
any event within ninety (90) days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as at the end of such fiscal year and
consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and audited and certified by independent public
accountants of recognized national standing selected by the Company.
(b) As soon as available and in any event within forty-five (45) days
after the close of each of the first three (3) fiscal quarters of each fiscal
year of the Company, unaudited consolidated financial statements (including
balance sheets, statements of income and statements of changes in financial
condition) of the Company and its subsidiaries, if any, for the current fiscal
year to date and for the quarter then ended, in each case
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<PAGE>
setting forth in comparative form the financial statements for the corresponding
fiscal quarter in the previous fiscal year, prepared in accordance with
generally accepted accounting principles (but without footnotes and subject to
year-end audit adjustment), all in reasonable detail and certified by the
Company's chief financial officer.
(c) All such other information as the Company shall have supplied to
its holders of Common Stock as a class.
(d) The rights set forth in this Section 2 shall terminate upon the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Company to
the public at a price per share of not less than $5.00 (as adjusted for stock
splits recombination and the like) and an aggregate offering price of not less
than $7,500,000 (a "Qualifying Public Offering").
3. Right of First Offer.
--------------------
(a) The term "Equity Securities" shall mean (i) Common Stock and
rights, options or warrants to purchase Common Stock; (ii) any other instrument
convertible into Common Stock; (iii) any security convertible into or
exchangeable for any of the foregoing and (iv) any agreement or commitment to
issue any of the foregoing.
(b) If, at any time after the date of this Agreement, the Company
shall propose to sell any Equity Securities, it shall give each Investor the
first right to purchase, pro rata, a portion of such Equity Securities on the
terms the Company proposes to sell such securities. The Investor's pro rata
share of the Equity Securities shall be equal to the percentage that the capital
stock of the Company held by such Investor on as converted basis on the date of
the Company's written notification referred to in the following sentence bears
to all outstanding capital stock of the Company on an as-converted basis on the
date of such written notification. Prior to any sale or issuance by the Company
of any Equity Securities subject to this right of first offer, the Company shall
notify all Holders, in writing, of its intention to sell and issue such Equity
Securities, setting forth the terms under which it proposes to make such sale.
Within fifteen (15) business days after receipt of such notice, each Investor
shall notify the Company as to the maximum amount of the Equity Securities so
offered which such Investor desires to purchase. If the Investors as a group do
not purchase the maximum portion of the Equity Securities to which they are
entitled pursuant to this Section 3 (the "Maximum Portion"), each such Investor
shall be entitled to
-14-
<PAGE>
purchase his pro-rata share, based on the relative amounts of the Maximum
Portion which each such Investor was originally entitled to purchase, of the
Maximum Portion not taken by the other Investors.
(c) If, within fifteen (15) business days after the Company gives its
aforesaid notice, the Investors have not notified the Company that they desire
to purchase their portion of the Equity Securities described in such notice upon
the terms and conditions set forth in such notice, the Company may, during a
period of ninety (90) days following the end of such fifteen (15) business day
period, sell and issue the securities covered by this right of first offer as to
which the Investors do not indicate a desire to purchase at a price and upon
terms and conditions no more favorable to such outside investors than those set
forth in the notice to the Investors.
(d) Investors purchasing any of the Equity Securities offered by the
Company shall pay for them by check or such other method as permitted in the
notice referred to in subsection (b) above against delivery of the securities at
the executive offices of the Company at the time of the scheduled closing
therefor. The Company shall take all such action (except registration under the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as may be reasonably required by any regulatory authority in connection
with the exercise by the Investors of the right to purchase Equity Securities as
set forth in subsection 3(b) above.
(e) The right of first offer contained in (a), above, shall not apply
to (i) securities issued pursuant to the acquisition of another corporation by
the Company by merger, purchase of substantially all of the assets, or other
reorganization, (ii) shares of the Common Stock (or related options) issued to
employees, officers or directors of the Company pursuant to any employee stock
offering, plan, agreement or arrangement approved by the Board of Directors of
the Company (iii) securities issued in connection with any stock split, stock
dividend or recapitalization by the Company, (iv) securities not issued for cash
or cash equivalents, (v) securities issued upon conversion of Preferred Stock or
upon the exercise of any option or warrant which was itself an Equity Security,
(vi) securities issued under the Securities Purchase Agreement dated February
10, 1994 pursuant to which the Company is issuing an aggregate principal amount
of $400,000 of Convertible Subordinated Debentures or (vii) issuance to
Integraph Corporation of up to 175,000 shares of Common Stock in connection with
the termination of the Agreement by and between Integraph Corporation, DCL
Technologies Ltd and SEE Technologies Software Environment for Engineers, Ltd.
dated April 1, 1991. In addition,
-15-
<PAGE>
notwithstanding anything herein to the contrary, each of the following Investors
who purchased Convertible Subordinated Debentures on February 10, 1994 will not
have a right to purchase Equity Securities under this Section 3: Chuck
McIntyre, Dan Skilken, Steven Tsubota, Garry Burt, David Moffenbeier, Kevin
Fetterley, Moshe Guy, Elchanon Herzog, Ilan Regev and Kwo Woo.
(f) The rights set forth in this Section 3 shall terminate upon the
closing of a Qualifying Public Offering.
4. Assignment of Rights and Confidentiality of Information. The rights
-------------------------------------------------------
granted pursuant to Sections 2 and 3 may only be assigned by each Investor (i)
upon the sale or transfer of at least 200,000 shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, or Common Stock
issued on conversion thereof, or any combination thereof, or (ii) to an
affiliate of the Investor. For purposes of this paragraph 4, an "affiliate"
shall mean any partner or shareholder of the Investor, any person or entity that
directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with an Investor, or the parents,
children, grandchildren, siblings, nieces or nephews of an Investor, or a trust
for their benefit or benefit of the Investor. Notwithstanding the foregoing,
such rights may not be assigned to a transferee which the Company reasonably
believes is a competitor or intends to become a competitor of the Company or has
a conflict of interest by reason of such transfer. Each Holder agrees that any
information obtained by such Holder pursuant to Section 2 will not be disclosed
to any person or entity without the prior written consent of the Company (other
than Holder's investment advisors, lawyers of accounting for purposes or making
investment decisions); provided, however, that such consent shall not be
unreasonably withheld.
5. General.
-------
5.1 Waivers and Amendments. With the written consent of Investors
----------------------
holding at least 2/3 of the then outstanding Registrable Securities, the
obligations of the Company and the rights of the Investors under this Agreement
may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), and with the same consent the Company, when authorized by
resolution of its Board of Directors, may enter into a supplementary agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement. Upon the effectuation of
each such waiver, consent, agreement of
-16-
<PAGE>
amendment or modification, the Company shall promptly give written notice
thereof to the Investors who have not previously consented thereto in writing.
5.2 Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
5.3 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
5.4 Entire Agreement. This Agreement and the other documents
----------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and this Agreement shall supersede and cancel all prior agreements between the
parties hereto with regard to the subject matter hereof. The parties further
agree that the Company shall have no further obligations with respect to the
following agreements, including without limitation, registration rights, rights
of first refusal, information and other rights under (i) that Preferred Stock
Purchase Agreement, dated as of November 26, 1985 among the Company, David
Flaningham, William Den Beste, Bow Lane Capital Corp., RCS III, L.P., Bayview
Venture Investors, Ltd., Wesbanc Ventures, Ltd., Sequoia Capital IV, Sequoia
XVI, Sequoia Technology Partners II, The Suez Technology Fund, Sven Simonsen,
trustee of the Simonsen Revocable Trust, dated October 14, 1982, and The Board
of Trustees of Leland Stanford University, as amended; (ii) that Preferred Stock
Purchase Agreement - 1987, dated as of August 5, 1987, among the Company and RCS
III, L.P., Bayview Venture Investors, Ltd., Bow Lane Capital Corp., Sequoia
Capital IV, Sequoia Technology Partners II, Wesbanc Ventures, Ltd., First
Century Partnership III, Omega Partners, The Suez Technology Fund, Sequoia XVII,
Stuart Schube, IRA, Stuart Schube; (iii) that Preferred Stock Purchase
Agreement, dated April 22, 1993, between the Company and RCS III, Bayview
Venture Investors, Ltd., Brown Venture Associates, First Century Partnership
III, Larry Gerhard, Norman Green, Omega Partners, Stuart Schube, Money Market
Plan, Sequoia Technology Partners II, Sequoia Capital IV, Sequoia Capital XVI,
Sequoia XVII, Sven Simonsen, trustee of the Simonsen Revocable Trust, dated
October 14, 1982, The Suez Technology Fund, Unco Ventures and Wesbanc Ventures,
Ltd.; and (iv) that Registration Rights Agreement, dated as of November 26,
1985, among the Company, David Flaningham, William Den Beste, RCS III, L.P.,
Bayview Venture Investors, Ltd., Unco Ventures, Inc., Wesbanc Ventures, Ltd.,
First Century
-17-
<PAGE>
Partnership III, Omega Partners, The Suez Technology Fund, Sequoia XVII, The
Sequoia Technology Partners II, Sequoia Capital IV, Sequoia XVI, Stuart Schube
IRA, Stuart Schube Money Market Plan, The Board of Trustees of Leland Stanford
University, Larry J. Gerhard, Kathleen C. Gerhard, Omega Partners, The Sven
Simonsen Trustee for the Simonsen Revocable Trust, dated October 14, 1982, and
Brown Ventures, Ltd., as amended on August 5, 1987 in connection with the sale
of TSSI's Series C Preferred Stock, and as further amended on April 22, 1993, in
connection with the sale of TSSI's Series D Preferred Stock by Amendment No. 1
thereto by and among the Company and RCS III, Bayview Investors, Ltd., Bow Lane
Capital Corporation, Sequoia Capital IV, Westbanc Ventures, Ltd. First Century
Partnership III, Omega Partners, The Suez Technology Fund, Sequoia XVII, Sequoia
Technology Partners II, Stuart Schube, Board of Trustees of Leland Stanford
University, Sequoia XVI, Sequoia XX, Sequoia XVII, Larry J. Gerhard and Kathleen
C. Gerhard, Unco Ventures, Norman Green, First Century Partnership III, Stuart
Schube Money Market Plan, Brown Ventures Associates and Sven Simonsen Revocable
Trust.
5.5 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested, or, if
to a foreign address, sent by a recognized international express courier service
addressed (a) if to any Investor, at such Investor's address as set forth on
Schedule A, or at such other address as such Investor shall have furnished to
the Company in writing or (b) if to the Company, at 9305 S.W. Gemini Drive,
Beaverton, Oregon 97005, or at such other address as the Company shall have
furnished to the Investors in writing.
5.6 Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
5.7 Titles and Subtitles. The titles of the sections and subsections
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed this Agreement on the
date first above written.
SUMMIT DESIGN, INC.
By: /s/ Zamir Paz
--------------------------------
Zamir Paz, President
By: /s/ Amihai Ben-David
--------------------------------
Amihai Ben-David, Chairman
-19-
<PAGE>
SCHEDULE A
----------
LARRY J. GERHARD KATHLEEN C. GERHARD
/s/ Larry J. Gerhard /s/ Kathy C. Gerhard
_________________________________ _________________________________
DAVID FLANINGHAM WILLIAM DEN BESTE
/s/ Dave Flaningham /s/ William Den Beste
_________________________________ _________________________________
NORMAN GREEN CHARLES BURROWS
/s/ Norman Green /s/ Charles Burrows
_________________________________ _________________________________
ZAMIR PAZ DCL HOLDING & INVESTMENTS IN
TECHNOLOGY (1993) LTD.
/s/ Zamir Paz /s/ Amihai Ben-David
_________________________________ _________________________________
Amihai Ben-David
Chief Executive Officer
RSC III, L.P. BAYVIEW VENTURE INVESTORS, INC.
By: Robertson, Stephens & Co., By: Robertson, Stephens & Co.,
L.P. L.P.
By: Robertson, Stephens & Co., By: Robertson, Stephens & Co.,
Inc. Inc.
By: /s/ John Grillos By: /s/ John Grillos
____________________________ ______________________________
John Grillos John Grillos
Managing Director Managing Director
SEQUOIA TECHNOLOGY PARTNERS II SEQUOIA CAPITAL IV
By: /s/ Mark Stevens By: /s/ Mark Stevens
___________________________ ______________________________
Mark Stevens Mark Stevens
Title:_________________________ Title: ___________________________
<PAGE>
SEQUOIA XVI SEQUOIA XVII
By: /s/ Mark Stevens By: /s/ Mark Stevens
_________________________ ___________________________
Mark Stevens Mark Stevens
Title: ______________________ Title: ________________________
THE SUEZ TECHNOLOGY FUND THE BOARD OF TRUSTEES
OF LELAND STANFORD UNIVERSITY
By: /s/ Greg H. Conger By: /s/ Carol Gilmer
_________________________ ___________________________
Name: Name: Carol Gilmer
_______________________ _________________________
Title: Title: Assistant Secretary
______________________ ________________________
UNCO VENTURES, INC. WESBANC VENTURES, LTD.
By: /s/ Walter Cunningham By: /s/ Stuart Schube
_________________________ ___________________________
Name: Walter Cunningham Name: Stuart Schube
_______________________ _________________________
Title: General Partner Title: General Partner
______________________ ________________________
GENESIS STUART SCHUBE
By: /s/ Walter Cunningham /s/ Stuart Schube
_________________________ _______________________________
Name: Walter Cunningham
_______________________
Title: General Partner
______________________
STUART SCHUBE, IRA STUART SCHUBE, MONEY MARKET
PLAN
By: /s/ Stuart Schube By: /s/ Stuart Schube
_________________________ ___________________________
Stuart Schube Stuart Schube
Title: Stuart Schube, Title: Stuart Schube, Owner Money
Owner IRA Market Plan
_________________ ___________________
OMEGA PARTNERS FIRST CENTURY PARTNERSHIP III
By: /s/ Michael J. Myers By: /s/ Michael J. Myers
_________________________ ___________________________
Name: Michael J. Myers Name: Michael J. Myers
_______________________ _________________________
Title: General Partner Title: General Partner
______________________ ________________________
-2-
<PAGE>
BROWN VENTURE ASSOCIATES SIMONSEN REVOCABLE TRUST, DATED
OCTOBER 14, 1982
By: /s/ Jerome J. Brown By: /s/ Sven Simonsen
------------------------- ---------------------------
Name: Jerome J. Brown Sven Simonsen
----------------------- Trustee
Title: President
----------------------
GRENLEY, ROTENBERG, LASKOWSKI, STAN ROTENBERG
EVANS & BRAGG, P.C.
By: /s/ Lawrence Evans /s/ Stan Rotenberg
------------------------- -------------------------------
Name: Lawrence Evans
-----------------------
Title: President
----------------------
MICHAEL J. BRAGG LARRY EVANS
/s/ Michael Bragg /s/ Larry Evans
- ----------------------------- -------------------------------
NORMAN RICKLES WSG&R 94A
/s/ Norman Rickles /s/ Elizabeth R. Flint
- ----------------------------- -------------------------------
LARRY GERHARD BRUCE LOUGHNER
/s/ Larry Gerhard /s/ Bruce Loughner
- ----------------------------- -------------------------------
CHUCK MCINTYRE DAN SKILKEN
/s/ Charles M. McIntyre /s/ Daniel Skilken
- ----------------------------- -------------------------------
D.C.L. TECHNOLOGIES, LTD STEVEN TSUBOTA
/s/ Amihai Ben-David /s/ Steven Tsubota
- ----------------------------- -------------------------------
GARRY BURT WILLIAM E. DEN BESTE
/s/ Garry W. Burt /s/ William Den Beste
- ----------------------------- -------------------------------
DAVID MOFFENBEIER KEVIN FETTERLEY
/s/ David C. Moffenbeier /s/ Kevin E. Fetterley
- ----------------------------- -------------------------------
-3-
<PAGE>
- ----------------------------- -------------------------------
ROGER BITTER MOSHE GUY
/s/ Roger Bitter /s/ Moshe Guy
- ----------------------------- -------------------------------
ELCHANAN HERZOG ILAN REGEV
/s/ Elchanan Herzog /s/ Ilan Regev
- ----------------------------- -------------------------------
KUO WU ZAMIR PAZ
/s/ Kuo Wu /s/ Zamir Paz
- ----------------------------- -------------------------------
-4-
<PAGE>
AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
----------------------------------------
This Amendment to Investors' Rights Agreement is entered into as of March
23, 1994 by and between Summit Design, Inc., a Delaware corporation (the
"Company"), the persons (the "Investors") listed on Schedule A to that certain
Investors' Rights Agreement dated as of February 10, 1994 (the "Investors'
Rights Agreement") and Intergraph Corporation ("Intergraph").
RECITALS
--------
A. The Company and the Investors previously entered into the Investors'
Rights Agreement to provide the Investors with certain registration and other
rights applicable to the shares of the Company's stock held by the Investors.
B. The Company is entering into a Stock Purchase Agreement with
Intergraph as of the date hereof pursuant to which the Company is issuing
Intergraph shares of the Company's Common Stock and in connection therewith the
Company is to provide Intergraph with registration rights under the Investors'
Rights Agreement as to such shares.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Subsection 1.1(c)(i) of the Investors' Rights Agreement is hereby
amended to add the following clause to the end of such subsection:
"all shares of Common Stock of the Company held by Investors as of
February 10, 1994 and all shares of Common Stock of the Company issued
to Intergraph Corporation pursuant to that certain Stock Purchase
Agreement between the Company and Intergraph Corporation dated March
23, 1994 and"
2. The terms "Holder" or "Holders" as used in Subsection 1.1(d) of the
Investors' Rights Agreement shall include Intergraph for purposes of Section 1
of the Investors' Rights Agreement, and the term "Investor" shall be deemed to
include Intergraph for purposes of Section 5.1 of the Investors' Rights
Agreement, but only to the extent that such Section 5.1 applies to an amendment
or waiver of Section 1. Intergraph acknowledges that it has no rights under
Section 2, 3 and 4 of the Investors' Rights Agreement.
3. All other provisions of the Investors' Rights Agreement shall remain
in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.
SUMMIT DESIGN, INC.
By: /s/ Larry J. Gerhard
------------------------------
Larry Gerhard, President
INTERGRAPH CORPORATION
By: /s/ Charles E. Robertson
------------------------------
Its: Vice President
-----------------------------
Electronics Engineering
-2-
<PAGE>
SCHEDULE A
----------
LARRY J. GERHARD KATHLEEN C. GERHARD
/s/ Larry J. Gerhard /s/ Kathleen C. Gerhard
- --------------------------- -----------------------------
ZAMIR PAZ DCL HOLDING & INVESTMENTS IN
TECHNOLOGY (1993) LTD.
/s/ Zamir Paz
- --------------------------- -----------------------------
Amihai Ben-David
Chief Executive Officer
RSC III, L.P. BAYVIEW VENTURE INVESTORS, INC.
By: Robertson, Stephens & Co., L.P. By: Robertson, Stephens & Co., L.P.
By: Robertson, Stephens & Co., Inc. By: Robertson, Stephens & Co., Inc.
By: /s/ John Grillos By: /s/ John Grillos
- --------------------------- -----------------------------
John Grillos John Grillos
Managing Director Managing Director
SEQUOIA TECHNOLOGY
PARTNERS II SEQUOIA CAPITAL IV
By: /s/ Mark Stevens By: /s/ Mark Stevens
- --------------------------- -----------------------------
Mark Stevens Mark Stevens
Title: Partner Title: Partner
---------------------- -----------------------
SEQUOIA XVI SEQUOIA XVII
By: /s/ Mark Stevens By: /s/ Mark Stevens
------------------------ --------------------------
Mark Stevens Mark Stevens
Title: Partner Title: Partner
--------------------- -----------------------
<PAGE>
THE SUEZ TECHNOLOGY FUND THE BOARD OF TRUSTEES
OF LELAND STANFORD UNIVERSITY
By: /s/ David E. Gold By: /s/ Carol Gilmer
--------------------- ------------------------
Name: David E. Gold Name: Carol Gilmer
------------------- ----------------------
Title: Investment Manager Title: Assistant Secretary
------------------ ---------------------
UNCO VENTURES, INC. WESBANC VENTURES, LTD.
By: /s/ Stuart Schube By: /s/ Stuart Schube
--------------------- ------------------------
Name: Stuart Schube Name: Stuart Schube
------------------- ----------------------
Title: General Partner Title: General Partner
------------------ ---------------------
THE GENESIS FUND STUART SCHUBE
By: /s/ Stuart Schube By: /s/ Stuart Schube
--------------------- ------------------------
Name: Stuart Schube
-------------------
Title: General Partner
------------------
STUART SCHUBE, IRA STUART SCHUBE, MONEY MARKET
PLAN
By: /s/ Stuart Schube By: /s/ Stuart Schube, Money Market Plan
--------------------- ------------------------
Stuart Schube Stuart Schube
Title: as Trustee for I.R.A Title: Stuart Schube, a trustee
------------- of Money MMP
--------------
OMEGA PARTNERS III FIRST CENTURY PARTNERSHIP III
By: /a/ Michael J. Myers By: /s/ Michael J. Myers
--------------------- ------------------------
Name: Michael J. Myers Name: Michael J. Myers
------------------- ----------------------
Title: General Partner Title: General Partner
------------------ ---------------------
BROWN VENTURE ASSOCIATES SIMONSEN REVOCABLE TRUST,
DATED OCTOBER 14, 1982
By: /s/ Jerome Brown By:
--------------------- ------------------------
Name: Brown Venture Assoc Sven Simonsen
Title: President Trustee
-2-
<PAGE>
GRENLEY, ROTENBERG, LASKOWSKI,
EVANS & BRAGG, P.C.
By: /s/ Lawrence Evans
---------------------
Name: Lawrence Evens
-------------------
Title: President
------------------
MICHAEL J. BRAGG STAN ROTENBERG
/s/ Michael J. Bragg /s/ Stan Rotenberg
- ------------------------ ------------------------
NORMAN RICKLES LARRY EVANS
/s/ Norman Rickles /s/ Larry Evans
- ------------------------ ------------------------
STEVEN TSUBOTA BRUCE LOUGHNER
/s/ Steven Tsubota
- ------------------------ ------------------------
CHUCK MCINTYRE DAN SKILKEN
/s/ Charles M. McIntyre
- ------------------------ ------------------------
GARRY BURT KUO WU
/s/ Kuo Wu
- ------------------------ ------------------------
DAVID MOFFENBEIER KEVIN FETTERLEY
/s/ David Moffenbeier /s/ Kevin Fetterly
- ------------------------ ------------------------
ROGER BITTER MOSHE GUY
- ------------------------ ------------------------
-3-
<PAGE>
DAVID FLANINGHAM WILLIAM DEN BESTE
/s/ David Flaningham /s/ William Den Beste
- ------------------------ ------------------------
NORMAN GREEN CHARLES BURROWS
/s/ Charles Burrows
- ------------------------ ------------------------
ELCHANAN HERZOG ILAN REGEV
- ------------------------ ------------------------
WS INVESTMENT COMPANY 94A
- ------------------------
-4-
<PAGE>
SECOND AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
-----------------------------------------------
This Second Amendment to Investors' Rights Agreement is entered into as of
May 17, 1994 by and between Summit Design, Inc., a Delaware corporation (the
"Company"), the persons (the "Investors") listed on Schedule A to that certain
Investors' Rights Agreement dated as of February 10, 1994, as amended (the
"Investors' Rights Agreement"), Intergraph Corporation ("Intergraph") and the
individuals and entities listed on Schedule 1.1 to the Series D Preferred Stock
Purchase Agreement (the "New Investors").
RECITALS
--------
A. The Company and the Investors previously entered into the Investors'
Rights Agreement to provide the Investors with certain registration and other
rights applicable to the shares of the Company's stock held by the Investors.
B. The Company is entering into a Series D Preferred Stock Purchase
Agreement with the New Investors as of the date hereof pursuant to which the
Company is issuing to the New Investors shares of the Company's Series D
Preferred Stock and in connection therewith the Company is to provide the New
Investors with all rights under the Investors' Rights Agreement as to such
shares.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Subsection 1.1(b) of the Investors' Rights Agreement is hereby amended
in full as follows:
"b. The term "Preferred Shares" shall mean all shares of Series A,
Series B, Series C and Series D Preferred Stock of the Company held by
any Holder."
2. The first sentence of Section 2. Information Rights of the Investors'
------------------
Rights Agreement is hereby amended in full as follows:
"The Company hereby covenants and agrees that it will furnish to each
Investor, so long as such Investor holds any shares of the Company
Series A Preferred Stock or Series B Preferred Stock or Series D
Preferred Stock or Common Stock issued on conversion thereof:"
3. The last sentence of Section 3(e) Right of First Offer of the
--------------------
Investors' Rights Agreement is hereby amended in full as follows:
"In addition, notwithstanding anything herein to the contrary, each of
the following Investors who purchased Convertible Subordinated
Debentures on February 10, 1994 will not have a right to purchase
Equity Securities under
<PAGE>
this Section 3: Chuck McIntyre, Dan Skilken, Steven Tsubota, Garry
Burt, David Moffenbeier, Kevin Fetterley, Moshe Guy, Elchanon Herzog,
Ilan Regev, Kuo Wu, Bruce Loughner and Roger Bitter."
4. The first sentence of Section 4. Assignment of Rights and
------------------------
Confidentiality of Information of the Investors' Rights Agreement is hereby
- ------------------------------
amended in full as follows:
"The rights granted pursuant to Sections 2 and 3 may only be assigned
by each Investor (i) upon the sale or transfer of at least 200,000
shares of Series A Preferred Stock, Series B Preferred, Series C
Preferred Stock, or Series D Preferred Stock, or Common Stock issued
on conversion thereof, or any combination thereof, or (ii) to an
affiliate of the Investor."
5. All other provisions of the Investors' Rights Agreement shall remain
in full force and effect.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.
SUMMIT DESIGN, INC. INDOSUEZ VENTURES
By: /s/ Larry Gerhard By: /s/ Gary Nierger
--------------------------- --------------------------
Larry Gerhard, President
Its: Investment Manager
-------------------------
SEQUOIA CAPITAL, INC. WS INVESTMENT COMPANY 94A
By: By: /s/ Elizabeth R. Flint
--------------------------- --------------------------
Its: Its: Partner
-------------------------- -------------------------
ROBERTSON, STEPHENS & COMPANY, L.P. QUALITY ELECTRONICS, INC.
By: By: /s/ Stephen M. Kim
--------------------------- --------------------------
Its: Its:
-------------------------- -------------------------
FIRST CENTURY PARTNERS JERRY BROWN
By:
--------------------------- -----------------------------
Its:
--------------------------
WALTER CUNNINGHAM, IRA WALTER CUNNINGHAM
/s/ N. Coren Watts /s/ R. W. Cunningham
- ------------------------------ -----------------------------
By: Woodway Financial Advisors
---------------------------
FBO: Walter Cunningham
--------------------------
Title: Trustee
------------------------
-3-
<PAGE>
LARRY J. GERHARD KATHLEEN C. GERHARD
/s/ Larry J. Gerhard /s/ Kathy C. Gerhard
- ------------------------------ -----------------------------
ZAMIR PAZ DCL HOLDING & INVESTMENTS IN
TECHNOLOGY (1993) LTD.
/s/ Zamir Paz /s/ Amihai Ben-David
- ------------------------------ -----------------------------
Amihai Ben-David
Chief Executive Officer
RCS III, L.P. BAYVIEW INVESTORS, LTD.
By: Robertson, Stephens & Co., L.P. By: Robertson, Stephens & Co., L.P.
its General Partner its General Partner
By: /s/ George R. Hecht By: /s/ George R. Hecht
--------------------------- -------------------------
George R. Hecht George R. Hecht
Managing Director Managing Director
SEQUOIA TECHNOLOGY SEQUOIA CAPITAL IV
PARTNERS II
By: /s/ Donald T. Valentine By: /s/ Donald T. Valentine
--------------------------- -------------------------
Donald T. Valentine Donald T. Valentine
Title: General Partner Title: General Partner
------------------------ ----------------------
SEQUOIA XVI SEQUOIA XVII
By: /s/ Donald T. Valentine By: /s/ Donald T. Valentine
--------------------------- -------------------------
Donald T. Valentine Donald T. Valentine
Title: General Partner Title: General Partner
------------------------ ----------------------
-4-
<PAGE>
SUEZ TECHNOLOGY FUND THE BOARD OF TRUSTEES
OF LELAND STANFORD UNIVERSITY
By: /s/ David E. Gold By:
--------------------------- ---------------------------
Name: David E. Gold Name:
------------------------- -------------------------
Title: Investment Manager Title:
------------------------ ------------------------
UNCO VENTURES, INC. WESBANC VENTURES, LTD.
By: /s/ R. W. Cunningham By: /s/ Stuart Schube
--------------------------- ---------------------------
Name: R. Walter Cunningham Name: Stuart Schube
------------------------- -------------------------
Title: General Partner Title: General Partner
------------------------ ------------------------
GENESIS FUND LTD. STUART SCHUBE
By: /s/ R. W. Cunningham /s/ Stuart Schube
--------------------------- ------------------------------
Name: R. Walter Cunningham
-------------------------
Title: Managing General Partner
------------------------
Title:
STUART SCHUBE, IRA STUART SCHUBE, MONEY MARKET
PLAN
By: /s/ Stuart Schube By: /s/ Stuart Schube
--------------------------- --------------------------
Stuart Schube Stuart Schube
Title: Owner Title: Owner
------------------- ------------------
OMEGA PARTNERS III FIRST CENTURY PARTNERSHIP III
By: /s/ Lisa Runell By: /s/ Lisa Runell
--------------------------- ---------------------------
Name: Lisa Runell Name: Lisa Runell
------------------------- -------------------------
Title: General Partner Title: General Partner
------------------------ ------------------------
BROWN VENTURE ASSOCIATES SIMONSEN REVOCABLE TRUST,
DATED OCTOBER 14, 1982
By: /s/ Jerome J. Brown By:
--------------------------- ---------------------------
Name: Jerome J. Brown Sven Simonsen
------------------------- Trustee
Title: President
------------------------
-5-
<PAGE>
<PAGE>
GRENLEY, ROTENBERG, LASKOWSKI, INTERGRAPH CORPORATION
EVANS & BRAGG, P.C.
By: /s/ Michael J. Bragg By:
--------------------------- --------------------------
Name: Michael J. Bragg
-------------------------
Title: Director Secretary Its:
------------------------ -------------------------
MICHAEL J. BRAGG STAN ROTENBERG
/s/ Michael J. Bragg /s/ Stan Rotenberg
- ------------------------------ -----------------------------
NORMAN RICKLES LARRY EVANS
/s/ Norman Rickles /s/ Larry Evans
- ------------------------------ -----------------------------
STEVEN TSUBOTA DAVID BRINKER
/s/ Steven Tsubota /s/ David Brinker
- ------------------------------ -----------------------------
CHUCK MCINTYRE DAN SKILKEN
/s/ Dan Skilken
- ------------------------------ -----------------------------
GARRY BURT KUO WU
/s/ Garry Burt /s/ Kuo Wu
- ------------------------------ -----------------------------
DAVID MOFFENBEIER KEVIN FETTERLEY
/s/ David C. Moffenbeier /s/ Kevin Fetterley
- ------------------------------ -----------------------------
ROGER BITTER MOSHE GUY
/s/ Roger Bitter
- ------------------------------ -----------------------------
-6-
<PAGE>
<PAGE>
DAVID FLANINGHAM WILLIAM DEN BESTE
/s/ William Den Beste
- ------------------------------ -----------------------------
NORMAN GREEN CHARLES BURROWS
/s/ Norman Green /s/ Charles Burrows
- ------------------------------ -----------------------------
ELCHANAN HERZOG ILAN REGEV
- ------------------------------ -----------------------------
SEQUOIA TECHNOLOGY SEQUOIA CAPITAL GROWTH FUND
PARTNERS III
By: /s/ Donald T. Valentine By: /s/ Donald T. Valentine
--------------------------- --------------------------
Title: General Partner Title: General Partner
------------------------ -----------------------
FENWICK & WEST ILANA ACHIMEIR
By: /s/ Barry Kramer /s/ Ilana Achimeir
--------------------------- -----------------------------
Title: Partner
------------------------
-7-
<PAGE>
THIRD AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
----------------------------------------------
This Third Amendment to Investors' Rights Agreement is entered into as of
June 19, 1995 by and among Summit Design, Inc., a Delaware corporation (the
"Company"), the individuals and entities listed on Schedule A to that certain
Investors' Rights Agreement dated as of February 10, 1994, as amended (the
"Investors' Rights Agreement"), Intergraph Corporation, the individuals and
entities party to the Second Amendment to Investors' Rights Agreement dated as
of May 17, 1994 and the individuals and entities listed on Schedule 1.1 to the
Series E Preferred Stock Purchase Agreement, dated as of the date hereof (the
"New Investors").
RECITALS
--------
WHEREAS, the Company and certain investors previously entered into the
Investors' Rights Agreement to provide such investors with certain registration
and other rights applicable to the shares of the Company's stock held by such
investors;
WHEREAS, the Company is entering into a Series E Preferred Stock Purchase
Agreement with the New Investors as of the date hereof pursuant to which the
Company is issuing to the New Investors shares of the Company's Series E
Preferred Stock and in connection therewith the Company is to provide the New
Investors with all rights under the Investors' Rights Agreement as to such
shares;
WHEREAS, certain individuals party to the Investors' Rights Agreement are
entering into Series A Preferred Stock Purchase Agreements with the New
Investors as of the date hereof pursuant to which the individuals are
transferring to the New Investors shares of the Company's Series A Preferred
Stock and in connection therewith such individuals desire to assign to the New
Investors all rights under Sections 2 and 3 of the Investors' Rights Agreement
as to such shares being transferred;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The preamble of the Investors' Rights Agreement is hereby amended as
follows:
The phrase "(collectively, the "Investors")" is deleted.
2. Section 1.1 of the Investors' Rights Agreement is hereby amended to
add the following:
"k. The term "Investors" shall mean (i) the persons listed on
the attached Schedule A who become signatories to this Agreement, (ii)
Intergraph Corporation to the extent set forth in the Amendment to the
Investors' Rights Agreement dated as of March 23, 1994 (the "First
Amendment"), (iii) the parties to the Second Amendment to the
Investors' Rights Agreement dated as of May 17, 1994 defined therein
as the "New Investors" and (iv) the parties to the Third Amendment to
the Investors' Rights
<PAGE>
Agreement dated as of June 19, 1995 defined therein as the "New
Investors" (the "Third Amendment Investors").
l. The term "Affiliate" shall mean any partner or shareholder of
the Investor or Holder, as the case may be, any person or entity that
directly or indirectly through one or more intermediaries controls or
is controlled by or is under common control with an Investor or
Holder, as the case may be, or the parents, children, grandchildren,
siblings, nieces or nephews of an Investor or Holder, as the case may
be, or a trust for their benefit or benefit of the Investor or Holder,
as the case may be, or, as to Yozma Venture Capital Ltd., any person
or entity which would be an Affiliate of the Third Amendment
Investors."
3. Subsection 1.1(b) of the Investors' Rights Agreement is hereby amended
in full as follows:
"b. The term "Preferred Shares" shall mean all shares of
Series A, Series B, Series C, Series D and Series E
Preferred Stock of the Company held by any Investor or
transferee thereof qualifying under Subsection 1.11 hereof."
4. Subsection 1.1(c)(i) of the Investors' Rights Agreement is hereby
amended to add the following clause to the end of such subsection:
"and all shares of Common Stock of the Company acquired
pursuant to those certain Common Stock Purchase Agreements,
dated as of June __, 1995, by and among William DenBeste and
Ethelwyn M. Bowler and the purchasers listed in Schedule 1.1
thereto, respectively, and"
5. Subsection 1.1(d) of the Investors' Rights Agreement is hereby amended
in full as follows:
" d. Except as limited by paragraph 2 of the First
Amendment, the terms "Holder" and "Holders" mean (i) any
person or persons holding Registrable Securities or having
the right to acquire Registrable Securities upon conversion
of Preferred Shares, (ii) Employee and Director Stockholders
having the right to acquire Registrable Securities upon
exercise of vested stock options and (iii) transferees
qualifying under Subsection 1.11 hereof."
6. The first sentence of Section 2 of the Investors' Rights Agreement is
hereby amended in full as follows:
-2-
<PAGE>
"The Company hereby covenants and agrees that it will
furnish to each Investor, so long as such Investor holds (i)
any shares of the Company's Series A Preferred Stock, Series
B Preferred Stock or Series D Preferred Stock or at least
100,000 shares of the Company's Series E Preferred Stock or
(ii) Common Stock issued on conversion of the foregoing:"
7. The following Section is hereby added to the Investors' Rights
Agreement immediately following paragraph (d) of Section 2:
" (d) On the first day of each fiscal year, a budget and business
plan for such fiscal year; provided that the Company shall have no
obligation to deliver such budget and business plan to any Investor
that does not beneficially own at least 100,000 shares of Series E
Preferred Stock or Common Stock issued on conversion of the foregoing
(as adjusted for stock splits, recombinations and the like)."
8. Paragraph (d) of Section 2 of the Investors' Rights Agreement shall be
renumbered as paragraph "(e)" and is hereby amended in full as follows:
" (e) The rights set forth in this Section 2 shall terminate upon
the closing of a firm commitment underwritten public offering pursuant
to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the
account of the Company to the public at a price per share to the
public of not less than $5.50 (as adjusted for stock splits, dividends
paid in stock, recombinations and the like) and proceeds to the
Company net of underwriting discounts and commissions of not less than
$10,000,000 (a "Qualifying Public Offering")."
9. Section 4 of the Investors' Rights Agreement is hereby amended in full
as follows:
"The rights granted pursuant to Sections 2 and 3 may only be assigned
by each Investor (i) upon the sale or transfer of at least 200,000
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock,
or Common Stock issued on conversion thereof, or any combination
thereof, or (ii) to an Affiliate of the Investor. Notwithstanding the
foregoing, such rights may not be assigned to a transferee which the
Company reasonably believes is a competitor or intends to become a
competitor of the Company or has a conflict of interest by reason of
such transfer. Each Investor agrees that any information obtained by
such Investor or assignee pursuant to Section 2 will not be disclosed
to any person or entity (other than such Investor's investment
advisors, lawyers or accountants for purposes of making investment
decisions) without the prior written consent of the Company, which
consent shall not be unreasonably withheld;
-3-
<PAGE>
provided, however, that each Investor may, in connection with its
reports to its partners or shareholders, make general statements
regarding the nature and progress of the Company's business, not
containing technical or specific financial information."
10. Section 5.1 of the Investors' Rights Agreement is hereby amended to
add the following to the end of such section:
"Any provision of this Agreement to the contrary notwithstanding, no
such waiver, consent, agreement of amendment or modification which
would have the effect of removing, restricting or limiting in any way
any right of the holders of any particular series of preferred stock
without having the same effect on each other series of preferred stock
shall be effective unless consented to in advance in writing by a
majority of the holders of the adversely affected series."
11. The following Section is hereby added to the Investors' Rights
Agreement:
"5.9 Aggregation of Shares. All Preferred Shares or Registrable
---------------------
Securities, as the case may be, held or acquired by Affiliates of an
Investor or Holder, as the case may be, shall be aggregated with those
of such Investor or Holder, as the case may be, for the purpose of
determining the availability of any rights or the applicability of any
limitations under this Agreement."
12. The following Section is hereby added to the Investors' Rights
Agreement:
"5.10 Exercise by Star Purchasers. Solely for purposes of
---------------------------
administrative simplicity, any right of the Star Purchasers (as
defined in the Third Amendment) and their Affiliates under this
Agreement shall be exercised by SVM STAR Venture Capital Management
Ltd."
13. All other provisions of the Investors' Rights Agreement shall remain
in full force and effect.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.
SUMMIT DESIGN, INC. WS INVESTMENT COMPANY 94A
By: /s/ Larry Gerhard By:
-------------------------------- -----------------------------------
Larry Gerhard, President
Its:
----------------------------------
FENWICK & WEST WALTER CUNNINGHAM, IRA
By: By: /s/ Walter Cunningham, IRA
-------------------------------- -----------------------------------
Walter Cunningham
Its: Its:
------------------------------- ----------------------------------
QUALITY ELECTRONICS, INC. LARRY J. GERHARD
By: /s/ Larry J. Gerhard
-------------------------------- --------------------------------------
Its: ZAMIR PAZ
-------------------------------
/s/ Zamir Paz
WALTER CUNNINGHAM --------------------------------------
/s/ Walter Cunningham SMITH BARNEY CUSTODIAN
- ----------------------------------- FOR LARRY J. GERHARD
KATHLEEN C. GERHARD By: /s/ Larry J. Gerhard
-----------------------------------
/s/ Kathleen C. Gerhard Name:
- ----------------------------------- ---------------------------------
Title:
--------------------------------
DCL HOLDING & INVESTMENTS IN SMITH BARNEY CUSTODIAN
FOR TECHNOLOGY (1993) LTD. FOR KATHLEEN GERHARD
/s/ Amihai Ben-David By: /s/ Kathleen Gerhard
- ----------------------------------- -----------------------------------
Amihai Ben-David Name:
Chief Executive Officer ---------------------------------
Title:
--------------------------------
-5-
<PAGE>
RCS III, L.P. BAYVIEW INVESTORS, LTD.
By: Robertson, Stephens & Co., L.P. By: Robertson, Stephens & Co., L.P.
its General Partner its General Partner
By: Robertson, Stephens & Co., Inc. By: Robertson, Stephens & Co., Inc.
its General Partner its General Partner
By: /s/ John Grillos By: /s/ John Grillos
-------------------------------- -----------------------------------
Name: John Grillos Name: John Grillos
------------------------------ ---------------------------------
Title: Managing Director Title: Managing Director
----------------------------- --------------------------------
SEQUOIA CAPITAL IV SEQUOIA CAPITAL XVI
By: /s/ Mark Stevens By: /s/ Mark Stevens
-------------------------------- -----------------------------------
Name: Mark Stevens Name: Mark Stevens
------------------------------ ---------------------------------
Title: Partner Title: Partner
----------------------------- --------------------------------
SEQUOIA XVII WESBANC VENTURES LTD.
By: /s/ Mark Stevens By: Westbanc Ventures Ltd.
-------------------------------- -----------------------------------
Name: Mark Stevens Name: /s/ Stuart Schube
------------------------------ ---------------------------------
Title: Partner Title: General Partner
----------------------------- --------------------------------
SUEZ TECHNOLOGY FUND THE BOARD OF TRUSTEES
OF LELAND STANFORD UNIVERSITY
By: By:
-------------------------------- -----------------------------------
Name: Name:
------------------------------ ---------------------------------
Title: Title:
----------------------------- --------------------------------
UNCO VENTURES LTD. ILANA ACHIMEIR
By: Unco Ventures Ltd.
-------------------------------- -----------------------------------
Name: /s/ Stuart Schube
------------------------------
Title: General Partner
-----------------------------
-6-
<PAGE>
THE GENESIS FUND LTD. SEQUOIA CAPITAL GROWTH FUND
By: /s/ Stuart Schube By: /s/ Mark Stevens
-------------------------------- -----------------------------------
Name: Stuart Schube Name: Mark Stevens
------------------------------ ---------------------------------
Title: General Partner Title: Partners
----------------------------- --------------------------------
A.G. EDWARDS & SONS, INC. STUART SCHUBE, MONEY MARKET
CUSTODIAN FOR STUART SCHUBE IRA PLAN
By: /s/ Stuart Schube I.R.A By: /s/ Stuart Schube; Money Market Plan
-------------------------------- -----------------------------------
Name: S. Schube Stuart Schube
------------------------------
Title: General Partner Title: Beneficiary & Owner
----------------------------- --------------------------------
OMEGA PARTNERS III FIRST CENTURY PARTNERSHIP III
By: /s/ Michael J. Myers By: /s/ Michael J. Myers
-------------------------------- -----------------------------------
Name: Michael J. Myers Name: Michael J. Myers
------------------------------ ---------------------------------
Title: General Partner Title: General Partner
----------------------------- --------------------------------
SIMONSEN REVOCABLE TRUST, JEROME J. BROWN
DATED OCTOBER 14, 1982
By:
------------------ --------------------------------------
Sven Simonsen
Trustee
GRENLEY, ROTENBERG, LASKOWSKI, INTERGRAPH CORPORATION
EVANS & BRAGG, P.C.
By: By:
-------------------------------- -----------------------------------
Name:
------------------------------
Title: Its:
----------------------------- ---------------------------------
-7-
<PAGE>
MICHAEL J. BRAGG STAN N. ROTENBERG
- ----------------------------------- --------------------------------------
NORMAN A. RICKLES LAWRENCE EVANS
- ----------------------------------- --------------------------------------
STEVEN TSUBOTA DAVID BRINKER
/s/ Steven Tsubota /s/ David Brinker
- ----------------------------------- --------------------------------------
CHARLES MCINTYRE DANIEL SKILKEN
/s/ Charles McIntyre /s/ Daniel Skilken
- ----------------------------------- --------------------------------------
STUART SCHUBE KUO WU
/s/ Stuart Schube /s/ Kuo Wu
- ----------------------------------- --------------------------------------
DAVID MOFFENBEIER KEVIN FETTERLY
/s/ David Moffenbeier
- ----------------------------------- --------------------------------------
ROGER BITTER MOSHE GUY
/s/ Roger Bitter
- ----------------------------------- --------------------------------------
DAVID FLANINGAM WILLIAM DENBESTE
/s/ William Denbeste
- ----------------------------------- --------------------------------------
-8-
<PAGE>
NORMAN GREEN CHARLES BURROWS
___________________________________ ______________________________________
ELCHANAN HERZOG ILAN REGEV
___________________________________ ______________________________________
SEQUOIA TECHNOLOGY
PARTNERS III
By:________________________________
Title:_____________________________
-9-
<PAGE>
DANDANA LTD. YOZMA VENTURE CAPITAL LTD.
SVM SVM
STAR VENTURE CAPITAL STAR VENTURE CAPITAL
MANAGEMENT LTD. MANAGEMENT LTD.
By: /s/ Meir Barel By: /s/ Meir Barel
--------------------------- -----------------------------------
Name: Name:
------------------------- ---------------------------------
Title: Title:
------------------------ --------------------------------
SVE STAR VENTURES ENTERPRISES NO. III GBR
BY: SVM STAR VENTURES MANAGEMENT GMBH NO. 3
By: /s/ Meir Barel
--------------------------------
Name: Dr. Meir Barel
------------------------------
Title: Managing Partner
-----------------------------
SVE STAR VENTURES ENTERPRISES NO. IIIA GBR
BY: SVM STAR VENTURES MANAGEMENT GMBH NO. 3
By: /s/ Meir Barel
--------------------------------
Name: Dr. Meir Barel
------------------------------
Title: Managing Partner
-----------------------------
SVM STAR VENTURES MANAGEMENTGESELLSCHAFT
MBH NR.3 & CO. BETEILIGUNGS KG
BY: SVM STAR VENTURES MANAGEMENT GMBH NO. 3
By: /s/ Meir Barel
--------------------------------
Name: Dr. Meir Barel
------------------------------
Title: Managing Partner
-----------------------------
JERUSALEM PACIFIC VENTURES (1994) LP
By: /s/ Jay Morrison
--------------------------------
Name: Jay Morrison
------------------------------
Title: Authorized Signatory
-----------------------------
-10-
<PAGE>
FOURTH AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
-----------------------------------------------
This Fourth Amendment to Investors' Rights Agreement is entered into as of
July 31, 1995 by and among Summit Design, Inc., a Delaware corporation (the
"Company"), the individuals and entities listed on Schedule A to that certain
Investors' Rights Agreement dated as of February 10, 1994, as amended (the
"Investors' Rights Agreement"), Intergraph Corporation, the individuals and
entities party to the Second Amendment to Investors' Rights Agreement dated as
of May 17, 1994, the individuals and entities listed on Schedule 1.1 to the
Series E Preferred Stock Purchase Agreement, dated as of June 19, 1995 and the
entity listed on Schedule 1.1 to the First Addendum to Series E Preferred Stock
Purchase Agreement, dated as of the date hereof (the "New Investor").
RECITALS
--------
WHEREAS, the Company and certain investors previously entered into the
Investors' Rights Agreement to provide such investors with certain registration
and other rights applicable to the shares of the Company's stock held by such
investors;
WHEREAS, the Company is entering into a First Addendum to Series E
Preferred Stock Purchase Agreement with the New Investor as of the date hereof
pursuant to which the Company is issuing to the New Investor shares of the
Company's Series E Preferred Stock and in connection therewith the Company is to
provide the New Investor with all rights under the Investors' Rights Agreement
as to such shares;
WHEREAS, a certain individual party to the Investors' Rights Agreement is
entering into a First Addendum to Series A Preferred Stock Purchase Agreement
with the New Investor as of the date hereof pursuant to which such individual is
transferring to the New Investor shares of the Company's Series A Preferred
Stock and in connection therewith such individual desires to assign to the New
Investor all rights under Sections 2 and 3 of the Investors' Rights Agreement as
to such shares being transferred;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Section 1.1(k) of the Investors' Rights Agreement is hereby amended in
full as follows:
"The term "Investors" shall mean (i) the persons listed on the
attached Schedule A who become signatories to this Agreement, (ii)
Intergraph Corporation to the extent set forth in the Amendment to the
Investors' Rights Agreement dated as of March 23, 1994 (the "First
Amendment"), (iii) the parties to the Second Amendment to the
Investors' Rights Agreement dated as of May 17, 1994 defined therein
as the "New Investors," (iv) the parties to the Third Amendment to the
Investors' Rights Agreement dated as of June 19, 1995 defined therein
as the "New Investors" (the "Third Amendment Investors") and (v) the
party to the Fourth Amendment to the Investors' Rights Agreement dated
as of July 31, 1995 defined therein as the "New Investor".
<PAGE>
2. Subsection 1.1(c)(i) of the Investors' Rights Agreement is hereby
amended to add the following clause to the end of such subsection:
"and all shares of Common Stock of the Company acquired pursuant to
those certain First Addendums to Common Stock Purchase Agreements,
dated as of July 31, 1995, by and among William DenBeste and Ethelwyn
M. Bowler and the purchaser listed in Schedule 1.1 thereto,
respectively, and"
3. All other provisions of the Investors' Rights Agreement shall remain
in full force and effect.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.
SUMMIT DESIGN, INC. WS INVESTMENT COMPANY 94A
By: /s/ Larry J. Gerhard By:
-------------------------------- -----------------------------------
Larry Gerhard, President Its:
----------------------------------
FENWICK & WEST WALTER CUNNINGHAM, IRA
By: By: /s/ Walter Cunningham
-------------------------------- -----------------------------------
Walter Cunningham
Its: Its: Owner/Beneficiary
------------------------------- ----------------------------------
QUALITY ELECTRONICS, INC. LARRY J. GERHARD
By: /s/ Stephen M. Kim /s/ Larry J. Gerhard
-------------------------------- ----------------------------------
Its: President
------------------------------- ZAMIR PAZ
/s/ Zamir Paz
--------------------------------------
WALTER CUNNINGHAM
/s/ Walter Cunningham SMITH BARNEY CUSTODIAN
- ----------------------------------- FOR LARRY J. GERHARD
By:
KATHLEEN C. GERHARD -----------------------------------
Name:
- ----------------------------------- ---------------------------------
Title:
--------------------------------
SMITH BARNEY CUSTODIAN
DCL HOLDING & INVESTMENTS IN FOR KATHELEN GERHARD
FOR TECHNOLOGY (1993) LTD.
By:
/s/ Amihai Ben-David -----------------------------------
- ----------------------------------- Name:
Amihai Ben-David ---------------------------------
Chief Executive Officer Title:
--------------------------------
-3-
<PAGE>
RCS III, L.P. BAYVIEW INVESTORS, LTD.
By: Robertson, Stephens & Co., L.P. By: Robertson, Stephens & Co., L.P.
its General Partner its General Partner
By: Robertson, Stephens & Co., Inc. By: Robertson, Stephens & Co., Inc.
its General Partner its General Partner
By: By:
-------------------------------- -----------------------------------
Name: Name:
------------------------------ ---------------------------------
Title: Title:
----------------------------- --------------------------------
SEQUOIA CAPITAL IV SEQUOIA CAPITAL XVI
By: /s/ Mark Stevens By: /s/ Mark Stevens
-------------------------------- -----------------------------------
Name: Mark Stevens Name: Mark Stevens
------------------------------ ---------------------------------
Title: Partner Title: Partner
----------------------------- --------------------------------
SEQUOIA XVII WESBANC VENTURES LTD.
By: /s/ Mark Stevens By: /s/ Stuart Schube
-------------------------------- -----------------------------------
Name: Mark Stevens Name: Stuart Schube
------------------------------ ---------------------------------
Title: Partner Title: General Partner
----------------------------- --------------------------------
SUEZ TECHNOLOGY FUND THE BOARD OF TRUSTEES
OF LELAND STANFORD UNIVERSITY
By: By:
-------------------------------- -----------------------------------
Name: Name:
------------------------------ ---------------------------------
Title: Title:
----------------------------- --------------------------------
UNCO VENTURES, INC. ILANA ACHIMEIR
By: /s/ Stuart Schube
-------------------------------- ---------------------
Name: Stuart Schube
------------------------------
Title: General Partner
-----------------------------
-4-
<PAGE>
THE GENESIS FUND LTD. SEQUOIA CAPITAL GROWTH FUND
By: /s/ Stuart Schube By: /s/ Mark Stevens
-------------------------------- -----------------------------------
Name: Stuart Schube Name: Mark Stevens
------------------------------ ---------------------------------
Title: General Partner Title: Partner
----------------------------- --------------------------------
A.G. EDWARDS & SONS, INC. STUART SCHUBE, MONEY MARKET
CUSTODIAN FOR STUART SCHUBE IRA PLAN
By: /s/ Stuart Schube By: /s/ Stuart Schube
-------------------------------- -----------------------------------
Name: Stuart Schube Stuart Schube
------------------------------
Title: Beneficiary / Owner I.R.A. Title: Owner of MMP
----------------------------- --------------------------------
OMEGA PARTNERS III FIRST CENTURY PARTNERSHIP III
By: By:
-------------------------------- -----------------------------------
Name: Name:
------------------------------ ---------------------------------
Title: Title:
----------------------------- --------------------------------
SIMONSEN REVOCABLE TRUST, JEROME J. BROWN
DATED OCTOBER 14, 1982
By:
-------------------------------- ------------------------------------
Sven Simonsen
Trustee
GRENLEY, ROTENBERG, LASKOWSKI, INTERGRAPH CORPORATION
EVANS & BRAGG, P.C.
By: /s/ Lawrence Evans By:
-------------------------------- -----------------------------------
Name: Lawrence Evans
------------------------------
Title: President Title:
----------------------------- --------------------------------
-5-
<PAGE>
MICHAEL J. BRAGG STAN N. ROTENBERG
/s/ Michael J. Bragg /s/ Stan N. Rotenberg
- ----------------------------------- --------------------------------------
NORMAN A. RICKLES LAWRENCE EVANS
/s/ Norman Rickles /s/ Lawrence Evans
- ----------------------------------- --------------------------------------
STEVEN TSUBOTA DAVID BRINKER
/s/ Steven Tsubota
- ----------------------------------- --------------------------------------
CHARLES MCINTYRE DANIEL SKILKEN
- ----------------------------------- --------------------------------------
STUART SCHUBE KUO WU
/s/ Stuart Schube /s/ Kuo Wu
- ----------------------------------- --------------------------------------
DAVID MOFFENBEIER KEVIN FETTERLY
/s/ David Moffenbeier
- ----------------------------------- --------------------------------------
ROGER BITTER MOSHE GUY
- ----------------------------------- --------------------------------------
DAVID FLANINGAM WILLIAM DENBESTE
/s/ William DenBeste
- ----------------------------------- --------------------------------------
-6-
<PAGE>
NORMAN GREEN CHARLES BURROWS
- ----------------------------------- --------------------------------------
ELCHANAN HERZOG ILAN REGEV
- ----------------------------------- --------------------------------------
SEQUOIA TECHNOLOGY
PARTNERS III
By: /s/ Mark Stevens
--------------------------------
Title: Partner
-----------------------------
DANDANA LTD. YOZMA VENTURE CAPITAL LTD.
SVM STAR VENTURE CAPITAL SVM STAR VENTURE CAPTAL
MANAGEMENT LTD MANAGEMENT LTD
By: /s/ Meir Barel By: /s/ Meir Barel
-------------------------------- -----------------------------------
Name: Name:
------------------------------ ---------------------------------
Title: Title:
----------------------------- --------------------------------
SVE STAR VENTURES ENTERPRISES NO. III GBR
BY: SVM STAR VENTURES MANAGEMENT GMBH NO. 3
By: /s/ Meir Barel
--------------------------------
Name: Dr. Meir Barel
------------------------------
Title: Managing Partner
-----------------------------
SVE STAR VENTURES ENTERPRISES NO. IIIA GBR
BY: SVM STAR VENTURES MANAGEMENT GMBH NO. 3
By: /s/ Meir Barel
--------------------------------
Name: Dr. Meir Barel
------------------------------
Title: Managing Partner
-----------------------------
-7-
<PAGE>
SVM STAR VENTURES MANAGEMENTGESELLSCHAFT
MBH NR.3 & CO. BETEILIGUNGS KG
BY: SVM STAR VENTURES MANAGEMENT GMBH NO. 3
By: /s/ Meir Barel
-------------------------
Name: Dr. Meir Barel
------------------------------
Title: Managing Partner
-----------------------------
JERUSALEM PACIFIC VENTURES (1994) LP
By:
-------------------------
Name:
------------------------------
Title:
-----------------------------
ROC VENTURE COMPANY, LTD.
BY: CHINA VENTURE MANAGEMENT
Chin Lin, President
By: /s/ Chin Lin
-------------------------
Fund Manager
-8-
<PAGE>
Exhibit 10.1
SUMMIT DESIGN, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this 10th day of
June, 1996, by and between Summit Design, Inc., a Delaware corporation (the
"Company"), and _________________________ ("Indemnitee").
WHEREAS the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited; and
WHEREAS the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
NOW, THEREFORE, in consideration for Indemnitee's services as an officer or
director of the Company, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding or any alternative
dispute resolution mechanism, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that Indemnitee is or was a director, officer, employee or agent of
the Company, or any subsidiary of the Company, by reason of any action or
inaction on the part of Indemnitee while an officer or director or by reason of
the fact that Indemnitee is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval shall not be unreasonably
withheld) actually and reasonably incurred by Indemnitee in connection with such
action, suit or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
---------------
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that Indemnitee's conduct was unlawful.
<PAGE>
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) and, to the fullest extent permitted by law, amounts
paid in settlement actually and reasonably incurred by Indemnitee in connection
with the defense or settlement of such action or suit if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery of the State of Delaware or such other court shall
deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 1, or in
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. Agreement to Serve. In consideration of the protection afforded by
------------------
this Agreement, if Indemnitee is a director of the Company he agrees to serve at
least for the six months after the effective date of this Agreement as a
director and not to resign voluntarily during such period without the written
consent of a majority of the Board of Directors. If Indemnitee is an officer of
the Company not serving under an employment contract, he agrees to serve in such
capacity at least for the balance of the current fiscal year of the Company and
not to resign voluntarily during such period without the written consent of a
majority of the Board of Directors. Following the applicable period set forth
above, Indemnitee agrees to continue to serve in such capacity at the will of
the Company (or under separate agreement, if such agreement exists) so long as
he is duly appointed or elected and qualified in accordance with the applicable
provisions of the Bylaws of the Company or any subsidiary of the Company or
until such time as he tenders his resignation in writing. Nothing contained in
this Agreement is intended to create in Indemnitee any right to continued
employment.
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action, suit or proceeding). Indemnitee hereby undertakes to repay
-2-
<PAGE>
such amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the
Company to Indemnitee within thirty (30) days following delivery of a written
request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the President of the
Company at the address shown on the signature page of this Agreement (or such
other address as the Company shall designate in writing to Indemnitee). Notice
shall be deemed received three business days after the date postmarked if sent
by domestic certified or registered mail, properly addressed, five business days
if sent by airmail to a country outside of North America; otherwise notice shall
be deemed received when such notice shall actually be received by the Company.
In addition, Indemnitee shall give the Company such information and cooperation
as it may reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 3 shall be made no later than thirty (30) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within thirty (30) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 14 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed. However, Indemnitee
shall be entitled to receive interim payments of expenses pursuant to Subsection
3(a) unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by the Company (including it Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) that Indemnitee has not met such applicable standard of
conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice
------------------
of a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company
-3-
<PAGE>
shall give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of
such proceeding in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
--------------------
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election to do so. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ his counsel in any such proceeding at
Indemnitee's expense; and (ii) if (A) the employment of counsel by Indemnitee
has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement,
-----
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be, ipso facto, within
---- -----
the purview of Indemnitee's rights and Company's obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested Directors, the General Corporation Law of
the State of Delaware, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments,
-4-
<PAGE>
fines or penalties actually or reasonably incurred by him in the investigation,
defense, appeal or settlement of any civil or criminal action, suit or
proceeding, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such expenses, judgments,
fines or penalties to which Indemnitee is entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
----------------------
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
perfor mance of its indemnification obligations under this Agreement. Among
other considerations, the Company will weigh the costs of obtaining such
insurance coverage against the protection afforded by such coverage. In all
policies of director and officer liability insurance, Indemnitee shall be named
as an insured in such a manner as to provide Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors, if Indemnitee is a director; or of the Company's officers, if
Indemnitee is not a director of the Company but is an officer. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a
subsidiary or parent of the Company.
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
-----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to
-5-
<PAGE>
indemnification under this Agreement or any other statute or law or otherwise as
required under Section 145 of the Delaware General Corporation Law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors has approved the initiation or bringing
of such suit; or
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. California Pseudo-Foreign Corporation Law. To the extent that the
-----------------------------------------
provisions of this Agreement may be unenforceable because of the pseudo-foreign
corporation laws contained in Section 2115 of the California General Corporation
Laws, the Company hereby agrees to indemnify and hold harmless Indemnitee, to
the maximum extent and in the manner permitted by the California General
Corporation Laws, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding
arising by reason of the fact that Indemnitee is or was an agent of the Company.
11. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
-6-
<PAGE>
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Agreement.
12. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
13. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
14. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
15. Notice. All notices, requests, demands and other communications under
-------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
------------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
17. Choice of Law. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware without regard to the conflict of law principles thereof.
18. Period of Limitations. No legal action shall be brought and no cause
---------------------
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs,
-7-
<PAGE>
executors or personal or legal representatives after the expiration of two years
from the date of accrual of such cause of action, and any claim or cause of
action of the Company shall be extinguished and deemed released unless asserted
by the timely filing of a legal action within such two-year period; provided,
--------
however, that if any shorter period of limitations is otherwise applicable to
- -------
any such cause of action, such shorter period shall govern.
19. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
21. Integration and Entire Agreement. This Agreement sets forth the
--------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SUMMIT DESIGN, INC.
By:_____________________________
Its:____________________________
Address: 9305 S.W. Gemini Drive
Beaverton, OR 97005
-8-
<PAGE>
AGREED TO AND ACCEPTED:
INDEMNITEE:
[_____________________________]
______________________________
(signature)
Address: _____________________________
_____________________________
-9-
<PAGE>
Exhibit 10.2
SUMMIT DESIGN, INC.
1994 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
--------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means a Committee appointed by the Board of
---------
Directors in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Summit Design, Inc., a Delaware corporation.
-------
(g) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or Consultant
shall not be considered interrupted in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. A leave of
absence approved by the Company shall include sick leave, military leave, or any
other personal leave. For purposes of Incentive Stock Options, no such leave may
exceed 90 days, unless reemployment upon expiration of such leave is guaranteed
by statute or contract, including Company policies. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
on the 91st day of such leave any Incentive Stock Option held by the Optionee
shall cease to be treated as an Incentive Stock Option and shall be treated for
tax purposes as a Nonstatutory Stock Option.
<PAGE>
(i) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(j) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system for the last market trading day prior to the time of
determination as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but
not on the National Market System thereof) or if the Market Value of the Common
Stock cannot be determined under (i) above but the Common Stock is regularly
quoted by a recognized securities dealer but selling prices are not reported,
its Fair Market Value shall be the mean between the high bid and low asked
prices for the Common Stock for the last market trading day prior to the time of
determination or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
------
(q) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(r) "Optionee" means an Employee or Consultant who receives an
--------
Option.
-2-
<PAGE>
(s) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1994 Stock Plan.
----
(u) "Prior TSSI ISO" means any incentive stock option granted to an
--------------
employee of Test Systems Strategies, Inc. ("TSSI") pursuant to the TSSI 1988
Incentive Stock Option Plan (the "TSSI Plan") and thereafter substituted for by
an Incentive Stock Option exercisable for Shares of the Company pursuant to the
terms of this Plan and of the Agreement and Plan of Reorganization dated January
19, 1994 between Summit Design, Inc., TSSI, Summit Sub, Inc. and See
Technologies Software Environment for Engineers, Ltd.
(v) "SEE" means See Technologies Software Environment for Engineers,
---
Ltd.
(w) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(x) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 2,322,000 shares of Common Stock. The shares may be authorized
but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Plan Procedure.
--------------
(i) Administration With Respect to Directors and Officers.
-----------------------------------------------------
With respect to grants of Options to Employees who are also officers or
directors of the Company, the Plan shall be administered by (A) the Board if the
Board may administer the Plan in compliance with Rule 16b-3 promulgated under
the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan
intended to qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
-3-
<PAGE>
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who
- ---------
are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of incentive stock option plans, if
any, of applicable state corporate and securities laws, of the Code, and of any
applicable stock exchange (including Nasdaq) (the "Applicable Laws"). Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or any
combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreements for use under the Plan,
which forms may differ with respect to individual Optionees;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, including the terms
of any right of first refusal of the
-4-
<PAGE>
Company to purchase Shares granted pursuant to the Plan and the terms of any
repurchase option of the Company with respect to unvested Shares;
(vii) with respect to any Option, to determine whether and under
what circumstances an Option may be settled in cash under subsection 9(f)
instead of Common Stock;
(viii) to reduce the exercise price of the Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary, including
Options granted in substitution of options granted under the TSSI Plan) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment relationship with the Company, nor shall
it interfere in any way with his or her right or the Company's right to
terminate his or her employment relationship at any time, with or without cause.
-5-
<PAGE>
(e) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.
(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11(a).
(iii) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the canceled Option shall be counted against the limit
set forth in Section 5(e)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction shall be treated as a cancellation of the
Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Committee,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
-6-
<PAGE>
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Committee.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and, in the case of a Prior TSSI ISO may
consist entirely of (1) cash, (2) check, or (3) other Shares which (x) in the
case of Shares acquired upon exercise of an Option, have been owned by the
Optionee for more than six months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised. In the case of all other
Options, the consideration may consist entirely of (1) cash, (2) check, (3)
promissory note, (4) other Shares which (x) in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for more than six months
on the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
(6) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any
-----------------------------------------------
Nonstatutory Option and, subject to the $100,000 limitation of Section 5(b) on
the exercisability of Incentive Stock Options in any one year, any Incentive
Stock Option granted hereunder shall be exercisable under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment shall be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
-7-
<PAGE>
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company, such Optionee may within sixty (60) days after the
date of such termination (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise his or her
Option to the extent that Optionee was entitled to exercise it at the date of
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate. Notwithstanding the above provisions of this Section 9(b), in
the event of an Optionee's change of status from Consultant to Employee, an
Optionee's Nonstatutory Stock Option shall not automatically terminate solely as
a result of such change of status. In addition, in the case of an Option other
than a Prior TSSI ISO, in the event of an Optionee's change of status from
Employee to Consultant, an Employee's Incentive Stock Option shall not
automatically terminate but shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option on
the ninety-first (91st) day following such change of status.
(c) Disability of Optionee. In the event that an Optionee's
----------------------
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section
----------
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or
-8-
<PAGE>
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Optionee shall have the right to exercise his or her Option
until ten (10) days prior to such transaction as to all of the Optioned Stock
covered thereby. In addition, any Company repurchase option applicable to Shares
shall lapse as to all such Shares, provided such transaction takes place at the
time and in the manner contemplated. To the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company:
(i) Options. Each Option shall be assumed or an equivalent
-------
Option shall be substituted by such successor corporation (including as a
"Successor" any purchaser of
-9-
<PAGE>
substantially all of the assets of the Company) or a parent or subsidiary of
such successor corporation. In the event that the successor corporation or a
parent or subsidiary of such successor corporation does not agree to assume the
Option or to substitute an equivalent option, the Administrator shall, as soon
as practicable prior to the effective date of such transaction, provide for the
Optionee to have the right to exercise the Option as to all or a portion of the
Optioned Stock, including Shares that would not otherwise be exercisable. In
such event the Administrator shall notify the Optionee as soon as practicable
prior to the effective date of such transaction that the Option shall be fully
exercisable for a period of ten (10) days from the date of such notice, and the
Option shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option shall be considered assumed if, following the merger,
the Option confers the right to purchase, for each Share of Optioned Stock
subject to the Option immediately prior to the merger, the consideration
(whether stock, cash, or other securities or property) received in the merger by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger was not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger.
(ii) Shares Subject to Repurchase Option. Any Shares subject
-----------------------------------
to a repurchase option of the Company shall be exchanged for the consideration
(whether stock, cash, or other securities or property) received in the merger or
asset sale by the holders of Common Stock for each Share held on the effective
date of the transaction, as described in the preceding paragraph. If the
Optionee receives shares of stock of the successor corporation or a parent or
subsidiary of such successor corporation in exchange for Shares subject to a
repurchase option, such exchanged shares shall continue to be subject to the
repurchase option as provided in the Restricted Stock Purchase Agreement.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including
-10-
<PAGE>
the requirements of Nasdaq or an established stock exchange), the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the grant and exercise of such
Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of Nasdaq or any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
17. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
18. Addendum to the 1994 Summit Design, Inc. Stock Plan. This Addendum
---------------------------------------------------
shall apply to any person who is granted an Option under the 1994 Summit Design,
Inc. Stock Plan (the "Plan") and is an employee or consultant of SEE and is a
resident of the State of Israel, or is otherwise
-11-
<PAGE>
subject to the laws of the State of Israel (such persons are referred to
collectively hereinafter as the "Israelis").
The Summit Design, Inc. Option Agreements and Restricted Stock
Purchase Agreements delivered to the Israelis pursuant to the Options granted to
the Israelis (each an "Israeli Option") shall contain certain terms and
conditions as is required by applicable Israeli law or approved by the Company,
including, but not limited to the following:
1) Each Israeli Option granted to an Israeli on or before January
31, 1994 shall be immediately exercisable for 25% of the shares subject to such
Option, with the remaining Shares to vest equally on a monthly basis over a
three year period beginning on January 1, 1994. Such vesting schedule may be
accelerated by the Administrator of the Plan and shall be accelerated in
accordance with any employment agreement an Israeli may have with the Company.
2) The Common Stock issuable upon exercise of an Israeli Option that
is not yet vested shall be held in escrow and trust in Israel for the benefit of
the Company and the applicable Israeli Optionee as required by Israeli law and
according to the terms and conditions of such Israeli Optionee's Restricted
Stock Purchase Agreement.
3) To the fullest extent possible, all terms and conditions
necessary to qualify each Israeli Option intended by the Company to be taxed as
the Israeli equivalent of an Incentive Stock Option or Nonstatutory Option, as
the case may be, to be so taxed by the State of Israel.
4) All applicable foreign currency control requirements of any
Israeli governmental entity.
-12-
<PAGE>
1994 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
- ----------------
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
25% OF THE SHARES SUBJECT TO THE OPTION SHALL VEST TWELVE MONTHS AFTER THE
VESTING COMMENCEMENT DATE, AND 1/48 OF THE SHARES SUBJECT TO THE OPTION SHALL
VEST EACH MONTH THEREAFTER.
<PAGE>
Termination Period:
------------------
This Option may be exercised for _____ [days/months] after termination of
the Optionee's Continuous Status as an Employee or Consultant. Upon the death or
Disability of the Optionee, this Option may be exercised for such longer period
as provided in the Plan. In the event of the Optionee's change in status from
Employee to Consultant or Consultant to Employee, this Option Agreement shall
remain in effect. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
-2-
<PAGE>
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares;
4. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal and state tax consequences
----------------
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
---------------------
(i) Nonstatutory Stock Option. The Optionee may incur
-------------------------
regular federal income tax and state income tax liability upon exercise of a
NSO. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if
-3-
<PAGE>
any, of the Fair Market Value of the Exercised Shares on the date of exercise
over their aggregate Exercise Price. If the Optionee is an Employee or a former
Employee, the Company will be required to withhold from his or her compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
in cash equal to a percentage of this compensation income at the time of
exercise, and may refuse to honor the exercise and refuse to deliver Shares if
such withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an
----------------------
ISO, the Optionee will have no regular federal income tax or state income tax
liability upon its exercise, although the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee undergoes a
change of status from Employee to Consultant, any Incentive Stock Option of the
Optionee that remains unexercised shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a Nonstatutory Stock Option on
the ninety-first (91st) day following such change of status.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at least one
---
year, any gain realized on disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one
---
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the
-4-
<PAGE>
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by California law
except for that body of law pertaining to conflict of laws.
8. NO GUARANTEE OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
--------------------------
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN
EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
-5-
<PAGE>
OPTIONEE: SUMMIT DESIGN, INC.
____________________________________ By:_____________________________________
Signature
____________________________________ Title:__________________________________
Print Name
____________________________________
Residence Address
____________________________________
-6-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
_______________________________________
Spouse of Optionee
-7-
<PAGE>
EXHIBIT A
---------
1994 STOCK PLAN
EXERCISE NOTICE
Summit Design, Inc.
9305 S. W. Gemini Drive
Beaverton, OR 97008
Attention: Corporate Secretary
1. Exercise of Option. Effective as of today, ________________, 199__,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Summit Design, Inc. (the "Company") under
and pursuant to the 1994 Stock Plan (the "Plan") and the Stock Option Agreement
dated _____________, 19___ (the "Option Agreement"). The purchase price for the
Shares shall be $_____________, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in SECTION 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
<PAGE>
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by California law except for that body of law pertaining to conflict of
laws.
Submitted by: Accepted by:
PURCHASER: SUMMIT DESIGN, INC.
__________________________________ By: _________________________________
Signature
__________________________________ Its: ________________________________
Print Name
Address: Address:
- ------- -------
___________________________ 9305 S. W. Gemini Drive
___________________________ Beaverton, OR 97008
-2-
<PAGE>
Exhibit 10.5
TEST SYSTEMS STRATEGIES, INC.
EMPLOYMENT AGREEMENT
EMPLOYEE: LARRY J. GERHARD
EFFECTIVE DATE: JANUARY 14, 1993
This agreement is entered into on December 13, 1993, effective as of the above
date between TEST SYSTEMS STRATEGIES, INC. an Oregon corporation (hereinafter
"TSSI") and the above referenced employee (hereinafter "Gerhard").
1. Employment and Duties. TSSI hereby employs Gerhard to serve and perform
----------------------
in the role of President and Chief Executive Officer reporting to the Board of
Directors. Gerhard agrees to perform the duties of these positions to the best
of his ability, and to devote full time and attention to the transaction of
TSSI's business.
2. Term.
-----
(a) This agreement shall have an initial term of five years, unless
terminated in accordance with subsection 2(b) - {e) below. After the initial
term of five years, or any extension term, the term of the agreement shall be
automatically extended for additional one-year terms unless terminated by other
party with at least 90 days advance written notice prior to the end of the then
current term. Both parties acknowledge that the employment created herein is
Employment-at-Will, and may be terminated with or without cause under the terms
stated herein.
(b) Notwithstanding the foregoing, this agreement may be immediately
terminated by the Board of Directors in the event Gerhard engages or becomes
engaged in any criminal practice which the Board of Directors reasonably
determines is detrimental or harmful to the good name, goodwill or reputation of
TSSI, or which does or could adversely effect the interests of TSSI.
Termination under this paragraph 2(b) is "Termination for Cause".
(c) In the event that this agreement is terminated for reasons other than
those specified in paragraph 2(b) or in the event that the TSSI Board of
Directors requires Gerhard to perform in any role other than as President and
CEO, then TSSI shall pay Gerhard $20,000.00 per month plus all current benefits
for eighteen (18) months, provided however, that if Gerhard accepts full-time
employment from another party prior to the expiration of eighteen (18) months
after Gerhard's termination, the Company's obligations under this subsection (b)
shall immediately terminate.
(d) In the event of an IPO or Sale as defined in section 12 of the Stock
Restriction Agreement attached as Exhibit 1, Gerhard shall serve as President
and CEO of the Successor company and all terms of this agreement shall apply. In
the event that Gerhard is not elected to serve in this role and under these
terms, then
<PAGE>
Gerhard shall receive $20,000.00 per month plus all current benefits for twenty-
four (24) months, provided however, that if Gerhard accepts full-time employment
from another party prior to the expiration of twenty-four (24) months after
Gerhard's termination, the Company's obligations under this subsection (c) shall
immediately terminate.
(e) In the event that Gerhard voluntarily resigns within thirty-six (36)
months after Effective Date, all of TSSI's obligations under this agreement
shall terminate. In addition, in the event that Gerhard voluntarily resigns
within thirty-six (36) months after Effective Date, then Gerhard agrees (I) to
resell to TSSI 250,000 shares of the 500,000 Lot 2 shares as specified in
Section 1 of the Stock Restriction Agreement at (.01) per share and (ii) that
all liabilities and costs, including without limitation any loss on the sale of
Gerhard's home, under the TSSI and PHH Home Equity Agreement shall become the
obligation of Gerhard; and (iii) if Gerhard's house is not sold prior to the
date of his voluntary resignation, then the TSSI and PHH Home Equity Agreement
shall terminate and TSSI shall have no further obligation under this Agreement.
Further, Gerhard agrees to hold at least 250,000 shares of Common Stock until
the earlier of: (I) the date that any of the venture capital funds associated
with Robertson, Stephens & Company, Sequoia Capital and First Century
Partnership have either (a) distributed any of the shares of capital stock of
TSSI to their respective partners, or (b) sold any of their shares of capital
stock of TSSI in the public market; or (ii) January 15, 1996.
(f) Notwithstanding the above, termination of this agreement shall not
release Gerhard from any obligations under sections 4,5,6, and 7 hereof, or TSSI
from any obligations under sections 2.(c), 2.(d), and 3.(f) hereof, or any of
the obligations under paragraph 13.
3. Compensation. In consideration of the services to be performed by Gerhard,
-------------
TSSI agrees to pay Gerhard compensation consisting of the following:
(a) Base salary of $20,000.00 per month and reviews for change in the
first calendar quarter of each year of employment.
(b) Annual bonus of up to 25% of base salary, as determined by the terms
and conditions specified in the employee bonus plan attached as exhibit 2., or
as proposed by the CEO and approved by the Board of Directors.
(c) Right to purchase 700,000 shares of TSSI's common stock under the
terms and conditions defined in the Stock Restriction Agreement attached as
exhibit 1.
(d) Right to purchase 128,000 shares of TSSI's Preferred D stock under the
same terms and conditions as all other Preferred D investors.
(e) All benefits as specified in the TSSI's handbook and that are in
effect for the executive officer of the corporation with the most years of
service. These benefits include 100% medical and dental coverage under the
TSSI's Blue Cross/Blue Shield plan, disability, accidental death and
dismemberment and life insurance as specified in the Employee handbook revised
6/1/92, the TSSI sponsored 401(k) retirement savings
<PAGE>
plan as provided to all employees and vacation as specified in the Employee
handbook revised 6/1/92.
(f) TSSI agrees to enter into an agreement with PHH Home Equity for the
sale of Gerhard's San Diego home at 13451 TSSI Circle, Poway, CA 92064 prior to
November 1, 1993 at a price of $1,250,000.00 and on terms to be agreed upon by
TSSI and Gerhard and PHH Home Equity. TSSI agrees that all liabilities and
costs, including without limitation, any loss on the sale of Gerhard's home,
under the TSSI and PHH Home Equity Agreement, are the obligation of TSSI.
4. Confidentiality. Gerhard acknowledges that certain customer lists, design
----------------
work, and related information, equipment, computer software, and other
proprietary products and information, whether of a technical or non-technical
nature, including but not limited to schematics, drawings, models, photographs,
sketches, blueprints, printouts, and program listings of TSSI, collectively
referred to as "Technology", were and will be designated and developed by TSSI
at great expense and over lengthy periods of time, are secret and confidential,
are unique and constitute the exclusive property and trade secrets of TSSI, and
any use or disclosure of such Technology, except in accordance with and under
the provisions of this or any other written agreements between the parties,
would be wrongful and would cause irreparable injury to TSSI. Gerhard hereby
agrees that he will not, at any time, without the express written consent of
TSSI, publish, disclose, or divulge to any person, firm, or corporation any of
the Technology, nor will Gerhard use, directly or indirectly, for Gerhard's own
benefit or the benefit of any other person, firm, or corporation, any of the
Technology, except in accordance with this Agreement or other written agreements
between the parties.
5. Inventions. All original written material including programs, charts,
-----------
schematics, drawings, tables, tapes, listings, and technical documentation which
are prepared partially or solely by Gerhard in connection with employment by
TSSI shall belong exclusively to TSSI.
6. Return of Documents. Gerhard acknowledges that all originals and copies of
--------------------
records, reports, documents, lists, plans, drawings, memoranda, notes, and other
documentation related to the business of TSSI or containing any confidential
information of TSSI shall be the sole and exclusive property of TSSI, and shall
be returned to TSSI upon the termination of employment for any reason whatsoever
or upon the written request of TSSI.
7. Compliance. Gerhard agrees to comply with all of TSSI's written employment
-----------
policies, guidelines, and procedures as contained in an employment manual,
including revisions and additions thereto.
8. Injunction. In addition to all other legal rights and remedies, TSSI shall
-----------
be entitled to obtain from any court of competent jurisdiction preliminary and
permanent injunctive relief of any actual or threatened violation of any term
hereof without requirement of bond, as well as an equitable accounting of all
profits or benefits arising out of such violation.
<PAGE>
9. Waiver. The waiver of either party of a breach of any provision of this
-------
Agreement shall not operate or be construed as a waiver of any subsequent breach
thereof.
10. Disputes. The legal relations of the parties hereunder, and all other
---------
matters hereunder, shall be governed by the laws of the State of Oregon.
Unresolved disputes shall be resolved in a court of competent jurisdiction in
Washington County, Oregon, and all parties hereto consent to the jurisdiction of
such court.
11. Board Approval. The effectiveness of this agreement shall be subject to
---------------
the prior approval of the Board of Directors of TSSI.
12. Entire Agreement. This Agreement sets forth the entire agreement between
-----------------
the parties hereto, and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the
subject matter hereof. No modification of amendment hereof is effective unless
in writing and signed by both parties.
13. In the event TSSI is unable to meet any of its obligations under this
agreement during the initial term of five years in a timely manner then
Robertson, Stephens & Company and Sequoia Capital jointly and severally
guarantee such obligations. With regard to Section 2.(c) of this agreement,
this guarantee shall be for twelve (12) months rather than eighteen (18) months.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first herein above written.
"EMPLOYER": TEST SYSTEMS STRATEGIES, INC.,
an Oregon Corporation
By: /s/ John Grillos
---------------------------------------
Name: John Grillos
Title: Director
"EMPLOYEE": /s/ Larry J. Gerhard
------------------------------------------
Larry J. Gerhard
"GUARANTORS": /s/ John Grillos
------------------------------------------
Robertson, Stephens & Company
/s/ Mark Stevens
------------------------------------------
Sequoia Capital
<PAGE>
Exhibit 10.6
SUMMIT DESIGN, INC.
EMPLOYMENT AGREEMENT
EMPLOYEE: C. ALBERT KOOB
EFFECTIVE DATE: OCTOBER 21, 1995
This Agreement is entered into as of the above date by and between SUMMIT
DESIGN, INC., a Delaware corporation ("SUMMIT") and the above-named employee
("Koob").
1. Employment and Duties. SUMMIT hereby employs Koob to serve and perform in
----------------------
the role of Vice President of Finance and Chief Financial Officer reporting to
the Chief Executive Officer. Koob agrees to perform the duties of this position
to the best of his ability and to devote full time and attention to the
transaction of SUMMIT's business.
2. Term and Termination.
---------------------
(a) This Agreement shall have an initial term of four (4) years,
unless sooner terminated in accordance with Subsection 2(b) and/or 2(c) and/or
2(d) and/or 2(e) below. After the initial term of four (4) years, or any
extension thereof, the term of the Agreement shall automatically extend for
additional one (1) year periods unless terminated by either party with at least
ninety (90) days' advanced written notice prior to the end of the then-current
term. Both parties acknowledge that the employment created herein is Employment-
at-Will and may be terminated with or without cause under the terms stated
herein.
(b) In the event that Koob notifies Summit (in writing) of
termination of his employment with Summit for any reason other than specified in
Section 2(d), this Agreement shall terminate as of the date of such
notification. Termination under this Section 2(b) is "Resignation".
(c) In the event that Summit notifies Koob (in writing) of
termination of his employment by Summit because Koob willfully abandoned the
duties of his position or engaged in any business or criminal practice which the
Chief Executive Officer and Board of Directors reasonably determines is
detrimental or harmful to the good name, goodwill, or reputation of Summit, or
which does or could adversely effect the interests of Summit, then this
Agreement shall terminate as of the date of such notification. Termination under
this Section 2(c) is "Cause".
(d) In the event that Koob notifies Summit (in writing) of his
resignation as an employee of Summit because Summit has required (in writing)
Koob to perform solely in any role other than Vice President of Finance and
Chief Financial Officer without Koob's consent (in writing), then this Agreement
shall terminate as of the date of such notification. Termination under this
Section 2(d) is "Construction".
(e) In the event that Summit notifies Koob (in writing) of
termination of his employment by Summit for any reason other than specified in
Section 2(b) and/or 2(c) and/or 2(d), this Agreement shall terminate as of the
date of such notification. Termination under this Section 2(e) is "convenience".
<PAGE>
(f) Notwithstanding the above, termination of this Agreement shall
not release Koob from any obligations under Sections 4, 5, 6, and 7 hereof.
3. Compensation and Benefits. In consideration of the services to be performed
--------------------------
by Koob, SUMMIT agrees to pay Koob the compensation and extend to Koob the
benefits consisting of the following:
(a) Annual Base Salary of $125,000, paid twice monthly and prorated
and beginning on the first pay period following the date agreed upon by Koob and
the Chief Executive Officer.
(b) A starting bonus, payable upon signing, of $20,000 in addition to
an annual bonus of 25% under the terms of the Executive Bonus Plan.
(c) Equity.
(i) Summit hereby grants Koob an incentive stock option of
75,000 shares of Summit common stock at $ 1.75 per share. These shares
are governed by the terms and conditions of the Summit Incentive Stock
Option Plan ("ISO Plan"). Notwithstanding the terms and conditions of
the ISO plan, 25% of these shares shall vest 12 months after the
effective date of this agreement, and the remaining shares shall vest
at the rate of 1/36 per month for the next 36 months.
In addition, if Summit completes a public offering of its
common stock ("IPO"), the vesting defined above shall accelerate by
one (1) year. In addition, if more than 75% of the assets, or more
than 50% of the outstanding shares of Summit are sold to another
company, all of the shares covered under this Section 3(c)(i) shall be
100% vested at closing of the transaction.
In addition, if this Agreement is terminated for
Construction as defined in Section 2(d) or convenience as defined in
Section 2(e), all shares covered under this Section 3(c)(i) shall be
100% vested.
In addition, if this Agreement is terminated for Resignation
as defined in Section 2(b) or Cause as defined in Section 2(c) within
36 months of the effective date of this Agreement, then Summit shall
have the right to repurchase all unvested shares and all vested shares
that have been vested for less than one (1) year for $1.75 per share.
In addition, in the event of death or disability, vesting
shall continue for twenty four (24) months.
In addition, Koob shall have piggy-back rights equal to
those extended to other Summit senior executives.
(d) Koob shall be provided the right to participate in the health,
dental, and life insurance programs provided for the senior level executives of
Summit.
<PAGE>
(e) Koob shall earn three (3) weeks vacation during his first year of
employment and each year thereafter. This vacation shall be available for use as
earned according to the standard policy of Summit.
(f) In addition, to assist in Koob's relocation from California to
Oregon, Summit agrees to provide Koob with a relocation package and reimburse
Koob for expenses incurred, not to exceed $50,000.00. Summit also agrees to
provide temporary living expenses for as long as reasonably required but not to
extend past December 1, 1995, as follows:
. Housing - not to exceed $1,750.00 per month;
. Meals - not to exceed $100.00 per week; and
. Travel - not to exceed three trips per month ($180.00 per trip).
(g) In the event that this Agreement is terminated for Construction
as defined in Section 2(d) or convenience as defined in Section 2(e), then
Summit shall pay Koob $10,416.67 per month plus all insurance benefits normally
paid by Summit. This payment shall continue monthly for nine (9) months
provided, however, that if Koob accepts full-time employment from another party
prior to the end of such nine (9) months, these monthly payments shall
immediately terminate.
4. Confidentiality. Koob acknowledges that certain customer lists, design
----------------
work, and related information, equipment, computer software, and other
proprietary products and information, whether of a technical or non-technical
nature, including but not limited to schematics, drawings, models, photographs,
sketches, blueprints, printouts, and program listings of SUMMIT, collectively
referred to as "Technology", were and will be designated and developed by SUMMIT
at great expense and over lengthy periods of time, are secret and confidential,
are unique and constitute the exclusive property and trade secrets of SUMMIT,
and any use or disclosure of such Technology, except in accordance with and
under the provisions of this or any other written agreements between the
parties, would be wrongful and would cause irreparable injury to SUMMIT. Koob
hereby agrees that he will not, at any time, without the express written consent
of SUMMIT, publish, disclose, or divulge to any person, firm, or corporation any
of the Technology, nor will Koob use, directly or indirectly, for Koob's own
benefit or the benefit of any other person, firm, or corporation, any of the
Technology, except in accordance with this Agreement or other written agreements
between the parties.
5. Inventions. All original written material including programs, charts,
-----------
schematics, drawings, tables, tapes, listings, and technical documentation which
are prepared partially or solely by Koob in connection with employment by SUMMIT
shall belong exclusively to SUMMIT.
6. Return of Documents. Koob acknowledges that all originals and copies of
--------------------
records, reports, documents, lists, plans, drawings, memoranda, notes, and other
documentation related to the business of SUMMIT or containing any confidential
information of SUMMIT shall be the sole and exclusive property of SUMMIT, and
shall be returned to SUMMIT upon the termination of employment for any reason
whatsoever or upon the written request of SUMMIT.
7. Compliance. Koob agrees to comply with all of SUMMIT's written employment
-----------
policies, guidelines, and procedures as contained in an employment manual,
including revisions and additions thereto.
<PAGE>
8. Injunction. In addition to all other legal rights and remedies, SUMMIT
-----------
shall be entitled to obtain from any court of competent jurisdiction preliminary
and permanent injunctive relief of any actual or threatened violation of any
term hereof without requirement of bond, as well as an equitable accounting of
all profits or benefits arising out of such violation.
9. Waiver. The waiver of either party of a breach of any provision of this
-------
Agreement shall not operate or be construed as a waiver of any subsequent breach
thereof.
10. Disputes. The legal relations of the parties hereunder, and all other
---------
matters hereunder, shall be governed by the laws of the State of Oregon.
Unresolved disputes shall be resolved in a court of competent jurisdiction in
Washington County, Oregon, and all parties hereto consent to the jurisdiction of
such court.
11. Entire Agreement. This Agreement sets forth the entire agreement between
-----------------
the parties hereto, and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the
subject matter hereof. No modification of amendment hereof is effective unless
in writing and signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first herein above written.
"EMPLOYER": SUMMIT:
A Delaware Corporation
By: /s/ Larry J. Gerhard 11/1/95
-----------------------------------
Name: Larry J. Gerhard
Title: Chief Executive Officer, SUMMIT
"EMPLOYEE": /s/ C. Albert Koob 11/1/95
--------------------------------------
C. Albert Koob
<PAGE>
Exhibit 10.7
SUMMIT DESIGN, INC.
EMPLOYMENT AGREEMENT - No. 3
Employee: Zamir Paz (ID. No. ###-##-####)
This Agreement is entered into as of January 1, 1996, (hereinafter
"Starting Day") by and between Summit Design, Inc., a Delaware, U.S.
company (hereinafter "SUMMIT") and the above referenced employee
(hereinafter "Paz").
1. Employment and Duties:
----------------------
SUMMIT hereby employs Paz to serve and perform in the role of Vice
President of SUMMIT reporting to the Chief Executive Officer of Summit
Design, Inc. In addition SUMMIT has the right to appoint Paz to serve as
President of Summit Design (EDA) Ltd. (Hereinafter "SEE"), a wholly owned
Israeli subsidiary of SUMMIT, without further compensation (neither from
SUMMIT nor from SEE).
Paz agrees to perform the duties of these positions to the best of his
ability, and to devote full time and attention to the transaction of
SUMMIT's (while in the U.S.). Paz does not have the authority to solicit,
negotiate or conclude contracts on behalf of SUMMIT while in Israel.
Likewise Paz is not authorized to solicit, negotiate or conclude contracts
on behalf of SEE while in the United States.
Paz's employment at SEE will be terminated as of December 31st, 1995 and
Paz will have not employer-employee relationship with SEE after December
31, 1995. Paz will get no compensations or benefits from SEE, after
December 31, 1995.
2. Term:
----
(a) This agreement shall have an initial term of four (4) years, unless
sooner terminated in accordance with Sections 2(b)-(d) below. After
the initial term of four years, or any extension term, the term of
agreement shall be automatically extended for additional one-year
terms unless terminated by either party with at least 90 days advance
written notice prior to the end of the then current term. Without
limiting the provisions of Sections 2(b)-(d) below, both parties
acknowledge that the employment created herein is employment-at-will,
and may be terminated with or without cause under the terms stated
herein.
(b) Notwithstanding the foregoing, this agreement may be immediately
terminated by SUMMIT in the event that Paz resigns or willfully
abandons the duties of this position or engages or becomes engaged in
any criminal or unethical practice which the Board determines is
detrimental or harmful to the good name, goodwill, or reputation of
SUMMIT or SEE, or which does or could adversely effect the interests
of SUMMIT or SEE.
<PAGE>
(c) In the event that this agreement is terminated for any reasons other
than those specified in paragraph 2(b) or in the event SUMMIT requires
Paz to perform in any role other than as President of SEE and or Vice
President of SUMMIT without Paz's consent, then SUMMIT shall be
obligated to pay Paz his current monthly Base Salary plus all current
benefits that Paz is entitled to including but not limited to those
benefits Paz is entitled to under this agreement of any future
agreement between Paz and SUMMIT (including but not limited to:
accommodations, car rentals/leasing, medical and life and other
insurance normally paid by SUMMIT) for twelve months. Paz's payments
under this subsection 2(c) shall be reduced on a pro-rata basis by the
amount of severance pay that Paz actually receives or was eligible to
receive from SEE as required by Israeli Law ("Pitzuyeem").
During all of this 12 months period, Paz will be considered a SUMMIT
employee, and all of the payments and benefits under this subsection
(c) will be considered his compensation in consideration of his
employment at SUMMIT, provided however that during this 12 months
period, Paz will not have to perform any active task or active duty
for SUMMIT or SEE in order to maintain the payments and benefits
mentioned in this subsection (c), unless mutually agreed in writing
between Paz and SUMMIT. If Paz accepts full-time employment from
another party prior to the expiration of this twelve (12) months
period, all payments, benefits and insurance coverage under this
subsection (c) shall immediately terminate. (d) In the event of the
sale or at least 20% of the assets of SUMMIT, Paz shall serve as
President of SEE and Vice President of SUMMIT or the successor company
to SUMMIT, as appropriate, and his employment shall continue to be
governed by all of the terms of this agreement. In the event of an
initial public offering of the Common Stock of SUMMIT pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, Paz shall continue to serve as President of SEE and Vice
President of SUMMIT pursuant to the terms of this agreement. In the
event that Paz is not selected to serve in these roles and under these
terms, then Paz shall receive the compensation and benefits pursuant
to the terms of Section 2(c).
3. Compensation:
------------
In consideration of the services to be performed by Paz, SUMMIT agrees to
pay Paz compensation consisting of the following:
(a) Base salary of eighty-three thousand dollars ($83,000) per year ("Base
Salary") during the initial term of this Agreement which will be paid
twice monthly.
(b) Paz shall be provided the right to participate in the health, dental
and life insurance programs provided for the senior level executives
of SUMMIT.
(c) Annual bonus eligibility of up to 40% of the Base Salary under the
terms of the SUMMIT Executive Bonus Plan.
-2-
<PAGE>
(d) Compensation for each additional one year period for which Paz's
employment is extended under Section 2, shall be fixed within 60 days
of the expiration of the preceding one year period that this Agreement
is in effect.
(e) All cash compensation and allowances provided under this agreement
shall be subject to usual withholding and payroll taxes as required by
U.S. and Oregon State law.
(f) While residing in the U.S., Paz will accrue vacation in accordance
with Summit U.S. vacation policy, provided however that Paz will be
considered as working for SUMMIT since the day he started to work for
SEE (and so he may accrue up to a 44 day maximum).
4. Confidentiality.
---------------
Paz acknowledges that certain customer lists, design work and related
information, equipment, computer software, and other proprietary products,
whether of technical or non technical nature, including but not limited to
schematics, drawings, models, photographs, sketches, blueprints, printouts,
and program listings of SUMMIT and its subsidiaries, collectively referred
to as "technology", were and will be designated and developed by SUMMIT and
its subsidiaries at great expenses and over lengthy periods of time, are
secret and confidential, are unique and constitute the exclusive property
and trade secrets of SUMMIT and its subsidiaries, as appropriate, and the
use or disclosure of such Technology, except in accordance with and under
the provision of this or any other written agreements between the parties,
would be wrongful and would cause irreparable injury to SUMMIT and its
subsidiaries. Paz therefore agrees that he will not, at any time, without
the express written consent of SUMMIT and its subsidiaries, publish,
disclose or divulge to any person, firm or corporation any of the
Technology, nor will Paz use, directly or indirectly, for Paz's own benefit
or the benefit of any other persons, firm, or corporation, any of the
Technology, except in accordance with this agreement or other written
agreements between the parties.
5. Inventions:
----------
All original written material including programs, charts, schematics,
drawings, tables, tapes, listings, and technical documentation which are
prepared partially or solely by Paz in connection with employment by SUMMIT
and/or tasks or duties performed at SEE, shall belong exclusively to SUMMIT
and SEE, respectively.
6. Return of Documents:
-------------------
Paz acknowledges that all originals and copies of records, reports,
documents, lists, plans, drawings, memoranda, notes, and other
documentation related to the business of SUMMIT and its subsidiaries or
containing any confidential information of SUMMIT and its subsidiaries
shall be the sole and exclusive property of SUMMIT or its subsidiaries, as
appropriate, and shall be returned to SUMMIT or its subsidiaries, as
appropriate, upon the termination of employment for any reason whatsoever,
or upon the written request of SUMMIT or its subsidiaries.
-3-
<PAGE>
7. Compliance:
----------
Paz agrees to comply with all of SUMMIT's written employment policies,
guidelines and procedures, as contained in an employment manual, including
revision and additions thereto.
8. Injunction:
----------
In addition to other legal rights and remedies, SUMMIT and its subsidiaries
shall be entitled to obtain from any court of competent jurisdiction
preliminary and permanent injunctive relief of any actual or threatened
violation of any term hereof without requirement of bond, as well as an
equitable accounting of all profits or benefits arising out of such
violation.
9. Waiver:
------
The waiver by either part of a breach of any provision of this agreement
shall not operate or be construed as a waiver of any subsequent breach
thereof.
10. Disputes:
--------
The legal relations of the parties hereunder, and all other matters
hereunder, shall be governed by the laws of Oregon. Unresolved disputes
shall be resolved in a court of competent jurisdiction in Washington
County, and all parties hereto consent to the jurisdiction of such court.
11. Entire Agreement:
----------------
This agreement sets forth the entire agreement between the parties hereto,
and fully supersedes any and all prior agreements or understandings,
written or oral, between the parties hereto pertaining to the subject
matter hereof. No modification of amendment hereof is effective unless in
writing and signed by both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first herein above written.
"EMPLOYER" Summit Design, Inc., a Delaware U.S. Corporation.
By: /s/ Larry J. Gerhard
--------------------------------
Name: Larry J. Gerhard
Title: Chief Executive Officer
"EMPLOYEE"
/s/ Zamir Paz
--------------------------------------
Zamir Paz
-4-
<PAGE>
RELOCATION AGREEMENT - APPENDIX 1 TO EMPLOYMENT AGREEMENT NO. 3
EMPLOYEE: ZAMIR PAZ (ID No. ###-##-####)
This Agreement is entered into as of the Starting Day, January 1, 1996, by
and between Summit Design, Inc., a Delaware, U.S. company (hereinafter
"SUMMIT") and the above referenced employee (hereinafter "Paz").
1. Purpose:
-------
Since Paz has been a SEE employee located in Israel, the purpose of this
agreement is to define the terms and conditions of his relocation to the
U.S. to work at the company premises in Beaverton, Oregon, and then his
relocation back to Israel, of so chosen by the company and or Paz.
2. Relocation Term:
---------------
Paz will be relocating to the U.S. to work at the company premises at
Beaverton Oregon, or any location within a reasonable 45 minutes drive from
that location (hereinafter "PDX"), for a period of 18 months starting
January 1, 1996 (hereinafter the "Minimum Term").
At the end of the Minimum Term SUMMIT may choose to relocate Paz back to
Israel or work at SEE, or, with a written consent from Paz to continue his
employment within the U.S. for periods that will not force him to relocate
back to Israel within a school year (September 1st until July 1st,
hereinafter "School Year"). Within the Minimum Term, but not within a
school year, SUMMIT may choose to relocate Paz back to Israel.
It is understood that Paz has no obligation, by this contract, to be
located in the U.S. for any period after the Minimum Term. The whole
period Paz will be resident in the U.S. as an employee of either SUMMIT or
SEE at SUMMIT's premises in PDX, starting at the Starting Day, and whether
longer or shorter than the Minimum Term, will be defined as the "Relocation
Term".
3. Relocation Assistance
---------------------
To assist Paz in relocating and residing in PDX, the following financial
assistance will be provided:
(i) Air tickets (business class) for Paz and his family from Israel
to PDX.
(ii) One Hundred (100) days of emergency living including housing,
meals, and transportation.
(iii) Tax assistance of $1500 annually.
(iv) Transition support for his children to learn English, not to
exceed $1500.
-5-
<PAGE>
(v) Bridge loan financing for the purchase of a home for up to 30
days for an amount not to exceed $95,000. Interest will be
charged at Prime divided by 1%.
4. Assistance During Relocation Term
---------------------------------
(i) Annual airfare home for the family to Israel in Business Class
(ii) Availability of two late model cars that the Company will lease
for Paz and his Family's use. The monthly cost not to exceed
$1,200 per month including fuel.
(iii) Monthly housing paid by SUMMIT at the rate of $2,500.
(iv) SUMMIT will cover the expenses of Paz's tax reporting during
the relocation period until the end of the tax year when the
Relocation Period ended, for up to $1,500 per tax year.
(v) In consideration for Paz maintaining his personal residence in
Israel for his use during visits to SEE, SUMMIT agrees to pay
his maintenance costs on the home up to a maximum of $600 (six
hundred dollars) per month. Receipts will be provided and the
expenses administered through expense report reporting. In the
event Paz does not spend at least three weeks in Israel in any
given calendar quarter, then his sum may be withheld at
Summit's discretion.
(vi) Paz's spouse, Mrs. Dafna Paz, has to continue her research work
at the Tel-Aviv University, in order to complete her Ph.D.
thesis in Engineering. Limited computing and office resources
will be provided for her by SUMMIT, at SUMMIT's premises, to
help her complete her research work.
5. Employment after the Relocation Term:
------------------------------------
After the Relocation Term, and before the termination of his employment
agreement, Paz will become again a SEE employee.
Paz's base salary at SEE, after the relocation term (hereinafter "SEE
Salary"), will be renegotiated at the time of his relocation but will not
be less than the base salary of any Summit employee at that time at peer
position with Paz (i.e. senior executive reporting to the CEO). In
calculating Paz's SEE equivalent compensation, his use of a company car and
other similar perks will be valued for measuring comparable compensation.
An employment agreement between SEE and Paz, will be executed concurrent
with Paz's relocation to Israel. This said agreement will be identical in
structure and terms to the above Employment Agreement No. 2, except: the
base salary as mentioned above in this paragraph 5, the adjustment implied
by the laws of Israel and the location "Oregon" that will be changed to
"Israel" when relevant.
-6-
<PAGE>
The employment of Paz with SUMMIT during the Relocation Term, will be
considered as employment with SEE, for all purposes assumed by the Israel
laws (continuous work).
6. Termination of Relocation Term before the Minimum Term:
------------------------------------------------------
It is understood that based on this agreement, Paz makes his home expenses
and capital purchases for staying the U.S. at least the Minimum Term.
Shorter Relocation Term might cause Paz significant losses. In the event
that the Relocation Term becomes shorter than the Minimum Term, for any
reason, including but not limited to the following:
the termination of the employment agreement with Paz for any reason, except
if Paz willfully resigns or willfully abandons the duties of this position;
Paz is relocated back to Israel for any reason; SUMMIT moves the employment
location and offices Paz need to work at from PDX; etc..., Paz will get the
following compensations from SUMMIT.
(i) Paz plans to buy a house within PDX. Selling the house before
the Minimum Term might cause him losses. In that case SUMMIT
will compensate him for the difference between the whole cost
of buying the house (when bought) and the amount he will
actually get for selling the house. Paz will have a period of
120 days to decide whether he wants to keep the house and lose
the compensation (if any), or to sell the house and get the
compensation (if any). SUMMIT's liability under the paragraph
6(i) is limited to $25,000. Summit's agreement to 6(i) is only
enforceable if more than 50% of the assets of Summit are sold.
(ii) Paz plans his Israel tax payments based on the Minimum Term.
Returning to Israel earlier than planned may cause him
additional tax liability. SUMMIT will compensate Paz paying the
balance of Income Tax incurred by the Israeli government to be
paid by Paz on his earnings from the employment with SUMMIT,
within the Relocation Term. SUMMIT's liability under this
paragraph 6(ii) is limited to $25,000 per tax year.
(iii) SUMMIT will pay Paz $4,000 to cover for the extra equipment and
furniture he will have to buy, that cannot be taken back to
Israel.
7. Termination of the Relocation Term
----------------------------------
When the Relocation Term terminates for any reason and at any time, unless
otherwise agreed between Paz and SUMMIT, SUMMIT will pay for the following
services done for Paz:
(i) Air tickets for him his Spouse and his children from PDX to
Israel in Business class.
(ii) Surface shipment of all of his shippable property, except cars,
up to a volume of 1 full ship container (about 60 Cubic
Meters), from PDX to Israel.
-7-
<PAGE>
(iii) Company car or rental car in Israel for up to 30 days.
8. Entire Agreement:
----------------
This agreement sets forth the relocation appendix to the employment
agreement stated above between the parties hereto, and together with that
employment agreement fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to
the subject matter hereof. No modification of amendment hereof is
effective unless in writing and signed by both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first herein above written.
"EMPLOYER" Summit Design, Inc., a Delaware U.S. Corporation.
By: /s/ Larry J. Gerhard
___________________________
Name: Larry J. Gerhard
Title: Chief Executive Officer
"EMPLOYEE" /s/ Zamir Paz
___________________________
Zamir Paz
-8-
<PAGE>
Exhibit 10.8
TEST SYSTEMS STRATEGIES, INC.
EMPLOYMENT AGREEMENT
EMPLOYEE: Dan Skilken
EFFECTIVE DATE: November 20, 1993
This Agreement is entered into as of the above date between Test Systems
Strategies, Inc., an Oregon corporation (hereinafter "TSSI") and the above
referenced employee (hereinafter "Skilken").
1. Employment and Duties. TSSI hereby employs Skilken to serve and
---------------------
perform in the role of Vice President of World Wide Marketing reporting to the
Chief Executive Officer. Skilken agrees to perform the duties of this position
to the best of his ability, and to devote full time and attention to the
transaction of TSSI's business.
2. Term.
----
(a) This agreement shall have an initial term of four years, unless
sooner terminated in accordance with subsection 2(b)-(e) below. After the
initial term of four years, or any extension term, the term of the agreement
shall be automatically extended for additional one-year terms unless terminated
by either party with at least 90 days advance written notice prior to the end of
the then current term. Both parties acknowledge that the employment created
herein is Employment-at-Will, and may be terminated with or without cause under
the terms stated herein.
(b) Notwithstanding the foregoing, this agreement may be immediately
terminated by the Chief Executive Officer in the event that Skilken willfully
abandons the duties of his position or engages or becomes engaged in any
criminal practice which the Chief Executive Officer reasonably determines is
detrimental or harmful to the good name, goodwill or reputation of TSSI, or
which does or could adversely effect the interests of TSSI. Termination under
this paragraph 2(b) is "Termination for Cause."
(c) In the event that this agreement is terminated for reasons other
than those specified in paragraph 2(b) or in the event that the TSSI Chief
Executive Officer requires Skilken to perform in any role other than as Vice
President of World Wide Marketing without Skilkens consent, then TSSI shall pay
Skilken $10,416.00 per month plus all current benefits for twelve (12) months,
provided however, that if Skilken accepts full-time employment from another
party prior to the expiration of twelve (12) months after Skilken's termination,
this $10,416.00 per month payment plus benefits shall immediately terminate. In
addition, all shares granted to Skilken under paragraph (3)c shall be 100%
vested.
(d) In the event of an IPO or Sale of at least 20% of TSSI assets,
Skilken shall serve as Vice President of World Wide Marketing of the successor
company and all terms of this agreement shall apply. In the event that Skilken
is not selected to serve in this role and under these terms, then Skilken shall
receive all compensation, benefits, and vesting described in Section (3)c.
<PAGE>
(e) In the event that Skilken voluntarily resigns within forty-eight
(48) months after Effective Date, all of TSSI's obligations under this agreement
shall terminate. In addition, in the event that Skilken voluntarily resigns
within forty-eight (48) months after Effective Date, and Gerhard is still CEO or
a Board Member of TSSI, then Skilken agrees (i) to resell to TSSI all ISO shares
at the purchase price or (.01) per share whichever is greater or return to TSSI
all of the proceeds from the sale of all shares that would not have been vested
under the four (4) year vesting schedule.
(f) Notwithstanding the above, termination of this agreement shall
not release Skilken from any obligations under sections 4, 5, 6 and 7 hereof.
3. Compensation. In consideration of the services to be performed by
------------
Skilken. TSSI agrees to pay Skilken compensation consisting of the following:
(a) Base Salary of $10,416.00 per month, paid twice monthly and
prorated and beginning on the first pay period following the date agreed upon by
Skilken and the Chief Executive Officer, and reviews for change in the first
calendar quarter of each year of employment.
(b) Annual bonus of up to 25% of base salary, as determined by the
terms and conditions specified in the Executive Bonus Plan as provided to
Skilken.
(c) Incentive stock option grant of 175,000 shares at (.01) per share
of TSSI's common stock under the terms and conditions defined in the TSSI
Incentive Stock Option Plan. These options will vest over a four year period.
The first 25% will vest after your first twelve (12) months of employment with
the remaining stock to vest at 1/36th per month. In the event of an initial
public offering by TSSI, Skilken shall have piggyback rights equal to that of
all the officers of TSSI, including the Chief Executive Officer of TSSI.
(d) Right to purchase up to $50,000 of TSSI's Preferred E Stock under
the same terms and conditions as all other Preferred E investors, if a Preferred
E round is offered.
(e) All benefits as specified in the TSSI's handbook.
(f) In addition, to assist you with relocation to your new home in
Oregon, the company will provide you with a package, which will pay up to a 6%
real estate fee upon the sale of your current home, expenses at cost for moving
your household goods, incidental moving expenses as agrreeed by you, the CEO and
the CFO and temporary living expenses of up to $1,200.00 per month for up to six
(6) months, while you are in the transition period.
4. Confidentiality. Skilken acknowledges that certain customer lists,
---------------
design work, and related information, equipment, computer software, and other
proprietary products, whether of technical or non technical nature, including
but not limited to schematics, drawings, models, photo graphs, sketches,
blueprints,. printouts, and program listings of TSSI, collectively referred to
as "Technology," were and will be designed and developed by TSSI at great
expense and over lengthy periods of time, are secret and confidential, are
unique and constitute the exclusive property and trade
-2-
<PAGE>
secrets of TSSI, and that any use or disclosure of such Technology, except in
accordance with and under the provisions of this or any other written agreements
between the parties, would be wrongful and would cause irreparable injury to
TSSI. Skilken therefore agrees that he will not, at any time, without the
express written consent of TSSI, publish, disclose or divulge to any person,
farm or corporation any of the technology, nor will Skilken use, directly or
indirectly, for Skilken's own benefit or the benefit of any other person, firm
or corporation, any of the technology, except in accordance with this agreement,
or other written agreements between the partes.
5. Inventions. All original written material including programs, charts,
----------
schematics, drawings, tables, tapes, listings and technical documentation which
are prepared partially or solely by Skilken in connection with employment by
TSSI, shall belong exclusively to TSSI.
6. Return of Documents. Skilken acknowledges that all originals and
-------------------
copies of records, reports, documents, lists, plans, drawings, memoranda, notes,
and other documentation related to the business of TSSI or containing any
confidential information of TSSI shall be the sole and exclusive property of
TSSI, and shall be returned to TSSI upon the termination of employment for any
reason whatsoever, or upon the written request of TSSI.
7. Compliance. Skilken agrees to comply with all of TSSI's written
----------
employment policies, guidelines and procedures, as contained in an employment
manual, including revisions and additions thereto.
8. Injunction. In addition to all other legal rights and remedies, TSSI
----------
shall be entitled to obtain from any court of competent jurisdiction preliminary
and permanent injunctive relief of any actual or threatened violation of any
term hereof without requirement of bond, as well as an equitable accounting of
all profits or benefits arising out of such violation.
9. Waiver. The waiver by either party of a breach of any provision of
------
this agreement shall not operate or be construed as a waiver of any subsequent
breach thereof.
10. Disputes. The legal relations of the parties hereunder, and all other
--------
matters hereunder, shall be governed by the laws of the State of Oregon.
Unresolved disputes shall be resolved in a court of competent jurisdiction in
Washington County, Oregon, and all parties hereto consent to the jurisdiction of
such court.
11. Entire Agreement. This agreement sets forth the entire agreement
----------------
between the parties hereto, and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the
subject matter hereof. No modification or amendment hereof is effective unless
in writing and signed by both parties.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first hereinabove written.
"EMPLOYER": TEST SYSTEMS STRATEGIES, INC.,
an Oregon corporation
By: /s/ Larry J. Gerhard
----------------------------------
Name: Larry J. Gerhard
--------------------------------
Title: President and CEO
--------------------------------
"EMPLOYEE":
/s/ Dan Skilken
--------------------------------------
Dan Skilken
-4-
<PAGE>
Exhibit 10.9
SUMMIT DESIGN, INC.
AMENDED EMPLOYMENT AGREEMENT
EMPLOYEE: ROGER BITTER
ORIGINAL EFFECTIVE DATE: November 22, 1993
AMENDED EFFECTIVE DATE: January 1, 1995
This Agreement was entered into as of the above original effective date by and
between Test Systems Strategies, Inc., an Oregon corporation ("TSSI"), and the
above-named employee ("Bitter"). The Agreement is amended as of the above
"Amended Effective Date" and amendments made apply only on and after the
effective date and shall not in any case be retroactive. The Amended Agreement
is between Summit Design, Inc. ("Summit") and Bitter.
1. Employment and Duties. SUMMIT hereby employs Bitter to serve and perform
----------------------
in the role of Vice President of Far East Operations reporting to the Chief
Executive Officer (or Chief Operating Officer if such position exists) or will
perform in role of President of Summit Design, Asia; a Joint Venture between
Summit and Anam, if such Joint Venture is formed, reporting as defined in the
Articles of Incorporation of the Joint Venture. Bitter agrees to perform the
duties of this position to the best of his ability and to devote full time and
attention to the transaction of SUMMIT's business.
2. Term and Termination.
---------------------
(a) This Agreement shall have an initial term of four (4) years commencing
on the original effective date listed above, unless sooner terminated in
accordance with Subsection 2(b) and/or 2(c) and/or 2(d) and/or 2(e) below.
After the initial term of four (4) years, or any extension thereof, the term of
the Agreement shall automatically extend for additional one (1) year periods
unless terminated by either party with at least ninety (90) days' advanced
written notice prior to the end of the then-current term. Both parties
acknowledge that the employment created herein is Employment-at-Will and may be
terminated with or without cause under the terms stated herein.
(b) In the event that Bitter notifies Summit of termination of his
employment with Summit for any reason other than specified in Section 2(d), this
Agreement shall terminate as of the date of such notification. Termination
under this Section 2(b) is "Resignation".
(c) In the event that Summit notifies Bitter of termination of his
employment by Summit because Bitter willfully abandoned the duties of his
position or engaged in any business or criminal practice which the Chief
Executive Officer and the Chief Operating Officer and the Board of Directors
reasonably determines is detrimental or harmful to the good name, goodwill, or
reputation of Summit, or which does or could adversely effect the interests of
Summit, then this Agreement shall terminate as of the date of such notification.
Termination under this Section 2(c) is "Cause".
(d) In the event that Bitter notifies Summit of his resignation as an
employee of Summit because Summit has required (in writing) Bitter to perform
solely in any role other than Vice President of Far East Operations or President
of Summit Design/Asia
1
<PAGE>
without Bitter's consent (in writing), then this Agreement shall terminate as of
the date of such notification. Termination under this Section 2(d) is
"Construction".
(e) In the event that Summit notifies Bitter of termination of his
employment by Summit for any reason other than specified in Section 2(b) and/or
2(c) and/or 2(d), this Agreement shall terminate as of the date of such
notification. Termination under this Section 2(e) is "convenience".
(f) Notwithstanding the above, termination of this Agreement shall not
release Bitter from any obligations under Sections 5, 6, 7 and 8 hereof.
3. Compensation and Benefits. In consideration of the services to be performed
--------------------------
by Bitter, SUMMIT agrees to pay Bitter the compensation and extend to Bitter the
benefits consisting of the following:
(a) Base Salary of $10,000 per month, paid monthly, prorated and beginning
on the first pay period following the date agreed upon by Bitter and the Chief
Executive Officer or Chief Operating Officer.
(b) Annual bonus target of $30,000, based on performance of Far East
Operations measured by 100% attainment of revenue goals set forth in the
approved Business Plan ("Plan") of Summit and operating expense spending not to
exceed the targets specified in the Plan.
(c) Equity
(i) Summit hereby acknowledges the existing grant to Bitter of
an incentive stock option of 103,194 shares of Summit common stock at $0.02
per share. These shares are governed by the terms and conditions of the
Summit Incentive Stock Option Plan ("ISO Plan"), and shall vest 25% after
year one and 1/48th per month thereafter.
(ii) In addition, if more than 20% of the assets or more than
50% of the outstanding shares of Summit are sold to another company, all of
the shares covered under this Section 3(c)(i) shall be 100% vested at
closing of the transaction.
(iii) In addition, if this Agreement is terminated for
Construction as defined in Section 2(d) or convenience as defined in
Section 2(e), all shares covered under this Section 3(c)(i) shall be 100%
vested.
(iv) In addition, if this Agreement is terminated for
Resignation as defined in Section 2(b) or Cause as defined in Section 2(c)
within 48 months of the original effective date of this Agreement, then
Summit shall have the right to repurchase all vested shares and all
unvested shares for $.02 /share. For purposes of this section (c)(iv)
"repurchase" shall mean payment of $.02/share for shares purchased by
Bitter and cancellation of all outstanding and unexercised options to
purchase shares.
2
<PAGE>
(v) Notwithstanding subsection (c)(iv) immediately above, if the
Agreement is terminated for Resignation as defined in Section 2(b) and such
Resignation is the direct result of Summit notifying Bitter in writing that
Summit requires Bitter to report directly to a person other than the Chief
Executive Officer or the Chief Operating Officer and such Resignation is
effective more than two (2) years from the effective date of this
Agreement, Summit's right to repurchase shall be limited to sixty-seven
percent (67%) of the total of all shares covered under this section 3
(c)(i).
(vi) In addition, in the event of death or disability, vesting
shall continue for twelve (12) months.
(vii) In addition, if summit completes a public offering of its
common stock ("IPO"), the vesting defined under Section 3(c)(i) shall
accelerate by one (1) year.
(d) Bitter shall be provided the right to participate in the health,
dental, and life insurance programs provided for the senior level executives of
Summit.
(e) Bitter shall be entitled to other standard benefits as specified in
the Summit Employee Handbook.
(f) In the event that this Agreement is terminated for Construction as
defined in Section 2(d) or convenience as defined in Section 2(e), then Summit
shall pay Bitter $10,000.00 per month plus all insurance benefits normally paid
by Summit. This payment shall continue monthly for nine (9) months provided,
however, that if Bitter accepts full-time employment from another party prior to
the end of such nine (9) months, these monthly payments shall immediately
terminate.
4. Living and Travel Expenses.
---------------------------
(a) In addition to payment of normal business expenses reimbursable under
Summit's travel and expense policy, Bitter shall be entitled to the following
benefits for as long as he is resident in Japan and employed by Summit:
(i) Rental of residential living quarters for Bitter and family,
not to exceed 1,000,000 YEN per month. Such rental is to be paid directly
by Summit.
(ii) Reimbursement of actual utilities expenses, not to exceed
$1,000.00 per month, for electricity, gas and water and security, in
connection with the residential quarters. Basic and long distance
telephone expenses are not reimbursable under this benefit.
(iii) Reimbursement of actual expenses, not to exceed $4,500.00
per year to prepare U.S. and Japanese tax returns for Bitter.
(b) In addition, Bitter will receive reimbursement of actual business and
personal automobile expenses not to exceed $550.00 per month.
5. Loan for Pre-employment Tax Liabilities
---------------------------------------
(a) Summit agrees to loan Bitter amounts totaling the sum of the U.S.
Dollar equivalent of Japanese Yen 8,462,500, (eight million four hundred sixty
two thousand,
3
<PAGE>
five hundred) as specified below to satisfy Bitter's debts for
prior years' taxes owned to the Japanese government as of the effective date of
this Agreement.
(b) Amounts to be loaned will be advanced in increments as Summit makes
payments to Bitter under the existing payment schedule covering Bitter's tax
debts and will be evidenced by a signed promissory demand note.
(c) The U.S. Dollar amount is to be determined at the current exchange
rate as of the date of each advance made under this loan agreement.
(d) The loan will be forgiven by Summit according to your continuous
employment with Summit under the following schedule:
(i) 50% provided that Bitter remains continuously employed with
Summit or its related companies until 12/31/96 and Bitter has relocated his
permanent residence to the United States at that time.
(ii) 100% provided that Bitter remains continuously employed with
Summit or its related companies until 12/31/97.
(iii) Notwithstanding conditions contained in Section 5(d)(i) and
(ii) above, in the event Bitter's past Japanese tax obligation that
constitutes the basis of this loan and any related tax consequences are
assumed by Bitter's former employer and Summit thereby receives full
reimbursement from Compass of amounts advanced under this Section 5, the
Promissory Note referenced above will be canceled immediately and any
amounts paid to Summit by Bitter will be returned to Bitter.
(iv) 100% provided Bitter is terminated for convience of
construction.
6. Confidentiality. Bitter acknowledges that certain customer lists, design
----------------
work, and related information, equipment, computer software, and other
proprietary products and information, whether of a technical or non-technical
nature, including but not limited to schematics, drawings, models, photographs,
sketches, blueprints, printouts, and program listings of SUMMIT, collectively
referred to as "Technology", were and will be designated and developed by SUMMIT
at great expense and over lengthy periods of time, are secret and confidential,
are unique and constitute the exclusive property and trade secrets of SUMMIT,
and any use or disclosure of such Technology, except in accordance with and
under the provisions of this or any other written agreements between the
parties, would be wrongful and would cause irreparable injury to SUMMIT. Bitter
hereby agrees that he will not, at any time, without the express written consent
of SUMMIT, publish, disclose, or divulge to any person, firm, or corporation any
of the Technology, nor will Bitter use, directly or indirectly, for Bitter's own
benefit or the benefit of any other person, firm, or corporation, any of the
Technology, except in accordance with this Agreement or other written agreements
between the parties.
7. Inventions. All original written material including programs, charts,
-----------
schematics, drawings, tables, tapes, listings, and technical documentation which
are prepared partially or solely by Bitter in connection with employment by
SUMMIT shall belong exclusively to SUMMIT.
4
<PAGE>
8. Return of Documents. Bitter acknowledges that all originals and copies of
--------------------
records, reports, documents, lists, plans, drawings, memoranda, notes, and other
documentation related to the business of SUMMIT or containing any confidential
information of SUMMIT shall be the sole and exclusive property of SUMMIT, and
shall be returned to SUMMIT upon the termination of employment for any reason
whatsoever or upon the written request of SUMMIT.
9. Compliance. Bitter agrees to comply with all of SUMMIT's written
-----------
employment policies, guidelines, and procedures as contained in an employment
manual, including revisions and additions thereto.
10. Injunction. In addition to all other legal rights and remedies, SUMMIT
-----------
shall be entitled to obtain from any court of competent jurisdiction preliminary
and permanent injunctive relief of any actual or threatened violation of any
term hereof without requirement of bond, as well as an equitable accounting of
all profits or benefits arising out of such violation.
11. Waiver. The waiver of either party of a breach of any provision of this
-------
Agreement shall not operate or be construed as a waiver of any subsequent breach
thereof.
12. Disputes. The legal relations of the parties hereunder, and all other
---------
matters hereunder, shall be governed by the laws of the State of Oregon.
Unresolved disputes shall be resolved in a court of competent jurisdiction in
Washington County, Oregon, and all parties hereto consent to the jurisdiction of
such court.
13. Entire Agreement. This Agreement sets forth the entire agreement between
-----------------
the parties hereto, and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the
subject matter hereof. No modification of amendment hereof is effective unless
in writing and signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first herein above written.
"EMPLOYER": SUMMIT:
A Delaware Corporation
By: /s/ Larry J. Gerhard
______________________________________
Name: Larry J. Gerhard
Title: Chief Executive Officer, SUMMIT
/s/ Roger Bitter
____________________________________
"EMPLOYEE": Roger Bitter
5
<PAGE>
PROMISSORY NOTE
April____, 1995 Beaverton,
Oregon
Roger Bitter, referred to herein as "MAKER", agrees to pay to the Order of
Summit Design, Inc., at 9305 SW Gemini Drive, Beaverton, Oregon, USA, referred
to herein as "HOLDER", on order, the sum of the U.S Dollar equivalent of
Japanese Yen 8,462,500, (eight million four hundred sixty two thousand, five
hundred) or actual amount documented paid by Summit, with interest thereon at
the rate of 6% per annum, simple interest.
This note shall be due on demand, or immediately in the event of termination of
employment, for any reason, with Summit Design or its related companies.
MAKER agrees to pledge as security for this note all vested and unvested common
stock options and all common or preferred stock owned by MAKER in HOLDER.
This note is payable in U.S. Dollars. At any time the maximum rate of interest
applicable to this transaction shall not exceed the legal maximum rate of
interest for a note of this type. Any sums paid in excess of any lawful
limitation shall be applied to principal. After default herein, this note will
bear interest at the highest legal rate for this type of note until paid in
full. Upon any default, MAKER agrees to pay a reasonable attorney's fee for any
and all services of an attorney, whether in or out of court, and for appeal and
post-judgment collection legal services.
Dated:___________________________
________________________________
Roger Bitter
6
<PAGE>
Exhibit 10.11
SUMMIT DESIGN, INC.
EMPLOYMENT AGREEMENT
EMPLOYEE: DAVID GREG KOTT
EFFECTIVE DATE: March 1, 1995
This Agreement is entered into as of the above date by and between SUMMIT
DESIGN, INC., a Delaware corporation ("SUMMIT") and the above-named employee
("Kott").
1. Employment and Duties. SUMMIT hereby employs Kott to serve and perform in
----------------------
the role of Vice President of North American Sales reporting to the Chief
Executive Officer or Chief Operating Officer. Kott agrees to perform the duties
of this position to the best of his ability and to devote full time and
attention to the transaction of SUMMIT's business.
2. Term and Termination.
---------------------
(a) This Agreement shall have an initial term of four (4) years,
commencing on the effective date, unless sooner terminated in accordance with
Subsection 2(b) and/or 2(c) and/or 2(d) and/or 2(e) below. After the initial
term of four (4) years, or any extension thereof, the term of the Agreement
shall automatically extend for additional one (1) year periods unless terminated
by either party with at least ninety (90) days' advanced written notice prior to
the end of the then-current term. Both parties acknowledge that the employment
created herein is Employment-at-Will and may be terminated with or without cause
under the terms stated herein.
(b) In the event that Kott notifies Summit of termination of his
employment with Summit for any reason other than specified in Section 2(d), this
Agreement shall terminate as of the date of such notification. Termination under
this Section 2(b) is "Resignation".
(c) In the event that Summit notifies Kott of termination of his
employment by Summit because Kott willfully abandoned the duties of his position
or engaged in any business or criminal practice which the Chief Executive
Officer, or Chief Operating Officer, or Board of Directors reasonably determines
is detrimental or harmful to the good name, goodwill, or reputation of Summit,
or which does or could adversely affect the interests of Summit, then this
Agreement shall terminate as of the date of such notification. Termination under
this Section 2(c) is "Cause".
(d) In the event that Kott notifies Summit of his resignation as an
employee of Summit because Summit has required (in writing) Kott to perform
solely in any role other than Vice President of North American Sales without
Kott's consent (in writing), then this Agreement shall terminate as of the date
of such notification. Termination under this Section 2(d) is "Construction".
1
<PAGE>
(e) In the event that Summit notifies Kott of termination of his
employment by Summit for any reason other than specified in Section 2(b) and/or
2(c) and/or 2(d), this Agreement shall terminate as of the date of such
notification. Termination under this Section 2(e) is "convenience".
(f) Notwithstanding the above, termination of this Agreement shall not
release Kott from any obligations under Sections 4, 5, and 6 hereof.
3. Compensation and Benefits. In consideration of the services to be
--------------------------
performed by Kott, SUMMIT agrees to pay Kott the compensation and extend to Kott
the benefits consisting of the following:
(a) Annual Base Salary of $120,000, paid twice monthly and prorated and
beginning on the first pay period following the date agreed upon by Kott and the
Chief Executive Officer.
(b) Eligible for annual bonus of 25% based on achieving both net-to-Summit
revenue targets for North America and expense guidelines:
(c) Equity
(I) Summit hereby grants Kott an incentive stock option of
45,000 shares of Summit common stock at $2.50 per share. These shares are
governed by the terms and conditions of the Summit Incentive Stock Option
Plan ("ISO Plan"). Notwithstanding the terms and conditions of the ISO
Plan, 25% of these shares shall vest 12 months after the effective date of
this Agreement and the remaining shares shall vest at a rate of 1/36 per
month for the next 36 months.
(ii) In addition, if more than 20% of the assets or more than
50% of the outstanding shares of Summit are sold to another company, all of
the shares covered under this Section 3(c)(i) shall be 100% vested at
closing of the transaction.
(iii) In addition, if this Agreement is terminated for
Construction as defined in Section 2(d) or convenience as defined in
Section 2(e), all shares covered under this Section 3(c)(i) shall be 100%
vested.
(iv) In addition, if this Agreement is terminated for
Resignation as defined in Section 2(b) or Cause as defined in Section 2(c)
within 36 months of the effective date of this Agreement, then Summit shall
have the right to repurchase all vested shares and all unvested
2
<PAGE>
shares for their issued price. For the purpose of this Section 3(c)(iv),
"repurchase" shall mean payment of the issued price for return of any
shares purchased by Kott and cancellation of all outstanding and
unexercised options to purchase shares.
(v) In addition, in the event of death or disability, vesting
shall continue for twelve (12) months.
(d) Kott shall be provided the right to participate in the health, dental,
and life insurance programs provided for the senior level executives of Summit.
(e) Kott shall earn Three (3) weeks vacation during his first year of
employment and each year thereafter. This vacation shall be available for use as
earned according to the standard policy of Summit.
(f) In the event that this Agreement is terminated for Construction as
defined in Section 2(d) or Convenience as defined in Section 2(e), then Summit
shall pay Kott $10,000.00 per month plus all insurance benefits normally paid by
Summit. This payment shall continue monthly for six (6) months provided,
however, that if Kott accepts full-time employment from another party prior to
the end of such six (6) months, these monthly payments shall immediately
terminate.
4. Confidentiality. Kott acknowledges that certain customer lists, design
----------------
work, and related information, equipment, computer software, and other
proprietary products and information, whether of a technical or non-technical
nature, including but not limited to schematics, drawings, models, photographs,
sketches, blueprints, printouts, and program listings of SUMMIT, collectively
referred to as "Technology", were and will be designated and developed by SUMMIT
at great expense and over lengthy periods of time, are secret and confidential,
are unique and constitute the exclusive property and trade secrets of SUMMIT,
and any use or disclosure of such Technology, except in accordance with and
under the provisions of this or any other written agreements between the
parties, would be wrongful and would cause irreparable injury to SUMMIT. Kott
hereby agrees that he will not, at any time, without the express written consent
of SUMMIT, publish, disclose, or divulge to any person, firm, or corporation any
of the Technology, nor will Kott use, directly or indirectly, for Kott's own
benefit or the benefit of any other person, firm, or corporation, any of the
Technology, except in accordance with this Agreement or other written agreements
between the parties.
5. Inventions. All original written material including programs, charts,
-----------
schematics, drawings, tables, tapes, listings, and technical documentation which
are prepared partially or solely by Kott in connection with employment by SUMMIT
shall belong exclusively to SUMMIT.
3
<PAGE>
6. Return of Documents. Kott acknowledges that all originals and copies of
--------------------
records, reports, documents, lists, plans, drawings, memoranda, notes, and other
documentation related to the business of SUMMIT or containing any confidential
information of SUMMIT shall be the sole and exclusive property of SUMMIT, and
shall be returned to SUMMIT upon the termination of employment for any reason
whatsoever or upon the written request of SUMMIT.
7. Compliance. Kott agrees to comply with all of SUMMIT's written employment
-----------
policies, guidelines, and procedures as contained in an employment manual,
including revisions and additions thereto.
8. Injunction. In addition to all other legal rights and remedies, SUMMIT
-----------
shall be entitled to obtain from any court of competent jurisdiction preliminary
and permanent injunctive relief of any actual or threatened violation of any
term hereof without requirement of bond, as well as an equitable accounting of
all profits or benefits arising out of such violation.
9. Waiver. The waiver of either party of a breach of any provision of this
-------
Agreement shall not operate or be construed as a waiver of any subsequent breach
thereof.
10. Disputes. The legal relations of the parties hereunder, and all other
---------
matters hereunder, shall be governed by the laws of the State of Oregon.
Unresolved disputes shall be resolved in a court of competent jurisdiction in
Washington County, Oregon, and all parties hereto consent to the jurisdiction of
such court.
11. Entire Agreement. This Employment Agreement sets forth the entire
-----------------
agreement between the parties hereto, and fully supersedes any and all prior
employment agreements or understandings, written or oral, between the parties
hereto pertaining to the subject matter hereof. No modification of amendment
hereof is effective unless in writing and signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first herein above written.
"EMPLOYER": SUMMIT:
A Delaware Corporation
By: /s/ Larry J. Gerhard
___________________________________
Name: Larry J. Gerhard
Title: Chief Executive Officer, SUMMIT
/s/ David Greg Kott
___________________________________
"EMPLOYEE": David Greg Kott
4
<PAGE>
Exhibit 10.12
SUMMIT DESIGN, INC.
BOARD OF DIRECTORS
DIRECTORSHIP AGREEMENT
On September 13, 1995, the Board of Directors of Summit Design, Inc. ("SUMMIT")
elected Fred L. Hanson ("HANSON") as a Director to the Board for the term
beginning September 13, 1995 through and including September 12, 1996. HANSON
accepted the Directorship and agreed to commit to twelve (12) days, during that
specified one year period, wherein he would attend Board meetings and whatever
other functions or meetings the President & CEO of SUMMIT requests.
Twenty-thousand (20,000) shares of SUMMIT Common Stock were granted to HANSON,
by the Board of Directors, in the form of Incentive Stock Options (ISO), under
Summit Design, Inc's 1994 Stock Plan Option Agreement at the purchase price of
$1.75 per share.
Of the twenty-thousand (20,000) Shares, ten-thousand (10,000) Shares are vested
in full as of the commencement date of September 13, 1995, the remaining 10,000
Shares to vest as follows: Twenty-five percent (25%) of the Shares shall vest
twelve (12) months after the Vesting Commencement Date and one forty-eighth
(1/48th) of the Shares subject to the Option shall vest at the end of each month
thereafter, so that all of the 10,000 Shares shall be vested in full four years
after the Vesting Commencement Date.
In addition, the Board of Directors agreed that HANSON shall receive a salary of
$17,500.00 per year. The salary and fully vested stock shall be paid and
purchased under one of the following options:
a) payment to HANSON by SUMMIT, as compensation for acting as a Director
for the above mentioned one year period, in quarterly payments of
$4,357.00 (less applicable taxes); or
b) SUMMIT shall purchase, on HANSON's behalf, and at HANSON's sole
discretion, the abovementioned 10,000 fully vested shares for the
purchase price of $1.75 per share ($17,500.00), and will issue to
HANSON a Common Stock certificate for 10,000 Shares of SUMMIT DESIGN,
INC. Common Stock at said time of purchase, any time within three
years from the commencement date of September 13, 1995. The agreement
to purchase the 10,000 fully vested Shares is in lieu of the above
described salary owned to HANSON as and for his position as a
Director, for the period September 13, 1995 through September 12,
1996.
c) All expenses for travel, outside of the Oregon area, for Board
business, will be paid in full by SUMMIT.
<PAGE>
In the event that HANSON resigns, at his own discretion, as Director of Summit,
then, on a prorata basis, HANSON shall return the appropriate number of SUMMIT
Common Stock Shares, or, reimburse SUMMIT the dollar amount paid for the period
of the term not served.
Dated: October 9, 1995 SUMMIT DESIGN, INC.
/s/ Larry J. Gerhard
________________________________
By: Larry J. Gerhard
President & CEO
ACKNOWLEDGED:
/s/ Fred L. Hanson
________________________________
FRED L. HANSON
-2-
<PAGE>
Exhibit 10.13
BUSINESS PARK LEASE
1. BASIC LEASE TERMS.
a. DATE OF LEASE EXECUTION: 10/26/93
-----------------------------------------------------
b. TENANT: Test Systems Strategies, Inc.
---------------------------------------------------------------------
Trade Name: same
-----------------------------------------------------------------
Address (Leased Premises): 9305 SW Gemini Drive, Beaverton, OR 97005
--------------------------------------------------
Building/Unit: 15/ALL
--------------------------------------------------------------
Address (For Notices): same as above
------------------------------------------------------
_____________________________________________________________________________
c. LANDLORD: Petula Associates Ltd. and Koll Creekside Associates II
-----------------------------------------------------------------
Address (For Notices): c/o Forum Properties, Inc., 8705 SW Nimbus Ave.
----------------------------------------------------
Ste. 230, Beaverton, OR 97005
---------------------------------------------------------------------------
___________________________________________________________________________
d. TENANT'S USE OF PREMISES: Headquarters office, sales office, research &
-------------------------------------------------
development and manufacturing of computer services
---------------------------------------------------------------------------
e. PREMISES AREA: Approximately 31,381 Square Feet
----------------------------------
f. PROJECT AREA: Approximately 117,870 Square Feet
-----------------------------------
g. AGREED UPON PREMISES PERCENT OF PROJECT: 26.6 %
--------------------------------
h. TERM OF LEASE Commencement: 1/1/94 Expiration: 12/31/99
------ --------
Number of Months:72
--
i. BASE MONTHLY RENT: $ 13,800.00* *First two months rent abated.
----------------------------------------------
j. RENT ADJUSTMENT (Initial One):
- --------
Landlord (1) Cost of Living. If this provision is initialed, the cost of
- --------
living provisions of Section 4.b(1) apply.
- --------
Landlord (2) Step increase. If this provision is initialed, the step
- --------
adjustment provisions of Section 4.b(2) apply as follows:
<TABLE>
<CAPTION>
<S> <C>
Effective Date of New Base
Rent Increase Monthly Rent
January 1 , 1995 $ 17,040.00
--------------------------- ----------------------------------
January 1 , 1996 S 20,160.00
--------------------------- ----------------------------------
January 1 , 1997 $ 22,908.00
--------------------------- ----------------------------------
___________________________, 19____ $ __________________________________
___________________________, 19____ $ __________________________________
</TABLE>
k. ANNUAL EXPENSE BASE:
Expense Rate $ 0.00
-------------
Premises Area Square Feet X 31.381
-------------
Annual Expense Base $ 0.00
-------------
Note: An Annual Expense Base of $0 does not mean Expenses are not payable
by Tenant. See Section 4 below. Currently, Expenses are estimated to be
$.22* per square foot per month. *See Section 30. Subject maximum limits
set forth in Section 30.
l. PREPAID RENT: $13,800.00 (due and payable at expiration of rent abatement
----------
period).
m. TOTAL SECURITY DEPOSIT: $14,499.00* , including a $1,098.00 nonrefundable
----------- --------
cleaning fee. Tenant's Security Deposit and nonrefundable cleaning fee on
its existing lease will be transferred to this Lease. No additional deposit
or fee is required under this Lease.
n. BROKER(S): (Greg Hume: Greg Hume Properties, Inc.
----------------------------------------------------------------
o. GUARANTORS: n/a
----------------------------------------------------------------
2. Premises.
Landlord leases to Tenant the premises described in Section 1 and in
Exhibit A (the "Premises"), located in the project described on Exhibit B (the
"Project"). Landlord reserves the right to modify Tenant's percentage of the
Project as set forth in Section 1 if the Project size is increased through the
development of additional property. By taking occupancy of the Premises, Tenant
acknowledges that it generally accepts the Premises subject to (i) any work
which Landlord agreed to perform prior to the commencement which Landlord and
Tenant identify in writing, prior to occupancy, as not completed, and (ii) for a
period of one year from the date the Premises are substantially complete,
Landlord shall repair and/or replace any defects in the Premises to the extent
such defects are caused by defects in materials or workmanship; Tenant shall
promptly notify Landlord of such defects as soon as and when discovered by
Tenant, and Landlord shall repair or correct the same within a reasonable time
from the date of such notice.
1
<PAGE>
3. TERM.
a. The term of this Lease is for the period set forth in Section 1, commencing
on the date in Subsection 1.h (the "Commencement Date"). Upon the date of
substantial completion of the construction of the improvements to the
Premises described in subparagraph (c) below (herein the "Delivery Date"),
possession of the Premises shall be delivered to Tenant; provided, the
Delivery Date shall not occur prior to January 1, 1994, unless the Premises
are substantially complete prior to January 1, 1994, and Tenant elects in
writing to take possession thereof upon or after such substantial
completion but prior to January 1, 1994, in which case the Delivery Date
for the Premises shall be such earlier date that Tenant takes possession of
the Premises, and Base Monthly Rent shall be pro-rated accordingly.
Notwithstanding the foregoing, Landlord may in its reasonable discretion
allow Tenant to begin installing its computer cables and phone lines in the
Premises prior to the Delivery Date; provided Landlord and Tenant execute a
separate letter agreement with respect thereto prior to such activities
commencing. For purposes of this Lease the term "substantially complete" is
the stage in the progress of the construction of the Tenant Improvements
when such construction is sufficiently complete in accordance with
Exhibit E attached hereto so Tenant can occupy the Premises for their
intended use.
b. The term of this Lease shall be automatically extended, upon the Delivery
Date, to expire on the last day of the seventy-second (72nd) full calendar
month following the Delivery Date. Prior to taking possession of the
Premises, Landlord and Tenant shall execute a confirming letter or
amendment, confirming the Delivery Date and the date upon which the Lease
term shall expire.
c.
(1) The Tenant Improvements in the Premises shall be substantially completed by
Landlord in accordance with the terms and provisions of Exhibit E attached
hereto. Any inconsistency between the provisions of this subparagraph 3.(c)
and Exhibit E attached hereto shall be controlled by this
subparagraph 3.(c).
(2) Landlord shall substantially complete the Tenant Improvements in the
Premises substantially in accordance with Exhibit E attached hereto by
December 31, 1993 (the "Target Date"); provided, Landlord shall use all
reasonable efforts to substantially complete the Premises by December 20,
1993.
(a) Any delays in substantially completing the Premises which are
attributable to Tenant shall automatically extend the Target Date by
the same number of days.
(b) Any delays in substantially completing the Premises which are beyond
the control of either Landlord or Tenant shall automatically extend
the Target Date and the Commencement Date by the same number of days,
without liability to either party.
d.
(1) If there are delays in substantially completing the Premises extending the
Delivery Date beyond January 1, 1994, of the type mentioned in
subparagraph 3.(c)(2)(a) above (the number of days such delays extend the
Delivery Date beyond January 1, 1994, is sometimes referred herein as the
"Tenant Delay Period"), then notwithstanding the date possession of the
Premises is actually delivered to Tenant, the Delivery Date and the
Commencement Date shall be deemed to have occurred on the earlier date
that the Premises reasonably could have been substantially completed
absent such delays attributable to Tenant.
(2) If there are delays in substantially completing the Premises attributable
to Landlord extending the Delivery Date beyond January 1, 1994, the
Commencement Date shall be automatically extended by the number days (the
"Landlord Delay Period") such delays extended the Delivery Date beyond
January 1, 1994, and Landlord shall pay all rent, common area charges, and
any other additional rent under the lease for Tenant's existing space only
for the number of days represented by the Landlord Delay Period.
(3) If there are delays in substantially completing the Premises not
attributable to Tenant extending the Delivery Date beyond March 12, 1994,
either party may, as its sole and exclusive remedy against the other party,
immediately terminate this Lease without liability to the other party, by
written notice on or before March 22, 1994, and all payments and deposits
paid by Tenant shall be fully refunded. In the event of such termination,
any extension of the lease (pursuant to Section 3.(e) below) for Tenant's
existing space shall terminate sixty (60) days after the termination notice
is given to the other party. If neither party notifies the other by March
22, 1994, Landlord shall proceed in completing the Premises, and neither
party thereafter shall have the option of terminating this Lease because of
delays in substantially completing the Premises.
e. If for any reason there are delays in substantially completing the Premises
extending the Delivery Date beyond January 1, 1994, the lease for Tenant's
existing space shall be extended for a period sufficient to enable Tenant
to vacate the same and move in and occupy the Premises in accordance with
this Lease, and Tenant shall pay all rent, common area charges, and any
other additional rent under the lease for Tenant's existing space only for
the number of days represented by the Tenant Delay Period.
f. If there are delays in substantially completing the Premises attributable
to Landlord extending the Delivery Date beyond January 1, 1994, the
Commencement Date may begin only after Landlord has provided Tenant
fourteen (14) days written notice of the revised projected Delivery Date.
Such notice shall contain Landlord's good faith estimate of the revised
projected Delivery Date, and Landlord shall update or supplement such
notice in the event Landlord's good faith estimate changes for any reason.
4. RENT
a. BASE MONTHLY RENT. Tenant shall pay to Landlord base monthly rent in the
initial amount in Section 1 which shall be payable monthly in advance on
the first day of each and every calendar month ("Base Monthly Rent");
provided, however, the Base Monthly Rent for the first month of the term
(or the first month following any rental abatement period, if applicable)
is due upon execution of this Lease by Tenant. If the term of this Lease
contains any rental abatement
2
<PAGE>
period, Tenant hereby agrees that if Tenant breaches the Lease and/or
abandons the Premises before the end of the Lease term, or if this Lease or
Tenant's right to possession is terminated by Landlord because of Tenant's
breach of the Lease, Landlord shall, at its option, (1) void the rental
abatement period, and (2) recover from Tenant, in addition to all other
damages due Landlord, rent for the duration of the rental abatement period
at a rental rate equivalent to the highest Base Monthly Rent specified
herein. All charges and sums due from Tenant to Landlord hereunder shall be
deemed rent.
For purposes of Section 467 of the Internal Revenue Code, the parties to
this Lease hereby agree to allocate the stated rents, provided herein, to
the periods which correspond to the actual rent payments as provided under
the terms and conditions of this agreement.
b. Rent Adjustment.
(2) Step Increase. If Section 1.j(2) is initialed, Base Monthly Rent shall
be increased periodically to the amounts and at the times set forth in
Section 1.j(2).
c. Expenses. The purpose of this Section 4.c is to ensure that Tenant bears a
share of all Expenses related to the use, maintenance, ownership, repair or
replacement, and insurance of the Project. Accordingly, beginning on the
date Tenant takes possession of the Premises, Tenant shall pay to Landlord
that portion of Tenant's share of Expenses related to the Project which is
in excess of the Annual Expense Base, if any, shown in Section 1, subject
to the Maximum limits set forth in Section 30.
(1) Expenses Defined. The term "Expenses" shall mean all costs and
expenses incurred by Landlord with respect to the ownership,
operation, maintenance, repair or replacement, and insurance of the
Project, including without limitation, the following costs:
(a) All supplies, materials, labor, equipment, and utilities used in
or related to the operation and maintenance of the Project;
(b) All management, janitorial, legal, accounting, insurance, and
service agreement costs related to the Project;
(c) All maintenance, replacement and repair costs relating to the
areas within or around the Project, including, without limitation,
air conditioning systems, sidewalks, landscaping, service areas,
driveways, parking areas (including resurfacing and restriping
parking areas), walkways, building exteriors (including painting),
signs and directories, repairing and replacing roofs, walls, etc.
These costs may be included either based on actual expenditures or
based on establishment of reasonable reserves.
(d) Amortization (along with reasonable financing charges) of capital
improvements made to the Project which may be required by any
government authority or which will improve the operating
efficiency of the Project (provided, however, that the amount of
such amortization for improvements not mandated by government
authority shall not exceed in any year the amount of costs
reasonably determined by Landlord in its sole discretion to have
been saved by the expenditure either through the reduction, or
minimization of increases, of costs which would have otherwise
occurred).
(e) All Real Property Taxes, which shall mean and include all taxes,
assessments (general and special) and other impositions or charges
which may be taxed, charged, levied, assessed or imposed upon all
or any portion of or in relation to the Project or any portion
thereof, any leasehold estate in the Premises or measured by rent
from the Premises, including any increase caused by the transfer,
sale or encumbrance of the Project or any portion thereof. "Real
Property Taxes" shall also include any form of assessment, levy,
penalty, charge or tax (other than estate, inheritance, net income
or franchise taxes) imposed by any authority having a direct or
indirect power to tax or charge, including, without limitation,
any city, county, state, federal or any Improvement or other
disstrict, whether such tax is (1) determined by the area of the
Project or the rent or other sums payable under this Lease; (2)
upon or with respect to any legal or equitable interest of
Landlord in the Project or any part thereof; (3) upon this
transaction or any document to which Tenant is a party creating a
transfer in any interest in the Project; (4) in lieu of or as a
direct substitute in whole or in part of or in addition to any
real property taxes on the Project; (5) based on any parking
spaces or parking facilities provided in the Project; or (6) in
consideration for services, such as police protection, fire
protection, street, sidewalk and roadway maintenance, refuse
removal or other services that may be provided by any
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governmental or quasi-governmental agency from time to time which
were formerly provided without charge or with less charge to
property owners or occupants. "Real Property Taxes" shall also
include all assessments under recorded covenants or master plans
and/or by owner's associations.
(2) Annual Estimate of Expenses. When Tenant takes possession of the
Premises, Landlord shall estimate Tenant's portion of Expenses for the
remainder of the calendar year based on the Tenant's portion of the
Project Area set forth in Section 1. At the commencement of each
calendar year thereafter, Landlord shall estimate Tenant's portion of
Expenses for the coming year based on the Tenant's portion of the
Project Area set forth in Section 1.
(3) Monthly Payment of Expenses. If Tenant's portion of said estimate of
Expenses shows an increase for the remainder of the first calendar
year over the Annual Expense Base, if any, as set forth in Section 1,
Tenant shall pay to Landlord, as additional rent, such estimated
increase in monthly installments of one-twelfth (1/12) beginning on
the date Tenant takes possession of the Premises. If Tenant's portion
of said estimate of Expenses shows an increase for subsequent calendar
years over the Annual Expense Base, if any, as set forth in Section 1,
Tenant shall pay to Landlord, as additional rent, such estimated
increase in monthly installments of one-twelfth (1/12) beginning on
January 1 of the forthcoming calendar year, and one-twelfth (1/12) on
the first day of each succeeding calendar month. As soon as practical
following each calendar year, Landlord shall prepare an accounting of
actual Expenses Incurred during the prior calendar year and such
accounting shall reflect Tenant's share of Expenses. If the additional
rent paid by Tenant under this Section 4.c(3) during the preceding
calendar year was less than the actual amount of Tenant's share of
Expenses, Landlord shall so notify Tenant and Tenant shall pay such
amount to Landlord within 30 days of receipt of such notice. Such
amount shall be deemed to have accrued during the prior calendar year
and shall be due and payable from Tenant even though the term of this
Lease has expired or this Lease has been terminated prior to Tenant's
receipt of this notice. Tenant shall have thirty (30) days from
receipt of such notice to contest the amount due; failure to so notify
Landlord shall represent final determination of Tenant's share of
expenses. If Tenant's payments were greater than the actual amount,
then such overpayment shall be credited by Landlord to all present
rent due under this Section 4.c(3) or paid to Tenant if Tenant's Lease
has expired and Tenant has no further obligation with regard to
Expenses. Upon request by Tenant, Landlord shall promptly provide to
Tenant a copy of the accounting reflecting Tenant's share of Expenses,
together with all computations thereof and supporting records and
information.
(4) Rent Without Offset and Late Charge. All rent shall be paid by Tenant
to Landlord monthly in advance on the first day of every calendar
month, at the address shown in Section 1, or such other place as
Landlord may designate in writing from time to time. All rent shall be
paid without prior demand or notice and without any deduction or
offset whatsoever. All rent shall be paid in lawful currency of the
United States of America. All rent due for any partial month shall be
prorated at the rate of 1/30th of the total monthly rent per day.
Tenant acknowledges that late payment by Tenant to Landlord of any
rent or other sums due under this Lease will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of such costs
being extremely difficult and impracticable to ascertain. Such costs
include, without limitation, processing and accounting charges and
late charges that may be imposed on Landlord by the terms of any
encumbrance or note secured by the Premises. Therefore, if any rent or
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other sum due from Tenant is not received within 5 days of the date
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such payment is due, Tenant shall pay to Landlord an additional sum
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equal to 5% of such overdue payment. Landlord and Tenant hereby agree
-----------------------------------
that such late charge represents a fair and reasonable estimate of the
costs that Landlord will incur by reason of any such late payment and
that the late charge is in addition to any and all remedies available
to the Landlord and that the assessment and/or collection of the late
charge shall not be deemed a waiver of any default. Additionally, all
such delinquent rent or other sums, plus this late charge, shall bear
interest at the prime rate of the U.S. National Bank of Oregon, plus
2%, on a fully floating basis (herein the "Default Rate"), from the
date first due until the date paid in full. Any payments of any kind
returned for insufficient funds will be subject to an additional
handling charge of $25.00, and thereafter, Landlord may require Tenant
to pay all future payments of rent or other sums due by money order or
cashier's check.
5. PREPAID RENT.
Upon the execution of this Lease, Tenant shall pay to Landlord the prepaid
rent set forth in Section 1, and if Tenant is not in default of any provisions
of this Lease, such prepaid rent shall be applied toward the Base Monthly Rent
due for the first month of the term (or the first month following any Base
Monthly Rent abatement period, if applicable). Upon a default by Tenant prior to
such application, Landlord shall have the right, without waiver of the default
or prejudice to other remedies, to use the prepaid rent or any of it to cure the
default or to compensate Landlord for all or any damages resulting from the
default. Landlord's obligations with respect to the prepaid rent are those of a
debtor and not of a trustee, and Landlord can commingle the prepaid rent with
Landlord's general funds. Landlord shall not be required to pay Tenant interest
on the prepaid rent. Landlord shall be entitled to immediately endorse and cash
Tenants prepaid rent; however, such endorsement and cashing shall not constitute
Landlord's acceptance of this Lease. In the event Landlord does not accept this
Lease, Landlord shall return said prepaid rent.
6. DEPOSIT.
Upon execution of this Lease, Tenant shall deposit the security deposit set
forth in Section 1 with Landlord as security for the performance by Tenant of
the provisions of this Lease. Upon a default by Tenant, Landlord shall have the
right, without waiver of the default or prejudice to other remedies, to use the
security deposit or any portion of it to cure the default or to compensate
Landlord for any damages resulting from Tenant's default. Upon demand, Tenant
shall immediately pay to Landlord a sum equal to the portion of the security
deposit expended or applied by Landlord to maintain the security deposit in the
amount initially deposited with Landlord only in the event Landlord has
rightfully expended or applied any amounts thereof. In no event will Tenant
have the right to apply any part of the security deposit to any rent or other
sums due under this Lease. If Tenant is not in default at the expiration or
termination of this Lease, Landlord shall return the entire security deposit to
Tenant, except for the portion designated in Section 1, if any, which Landlord
shall retain as a nonrefundable cleaning fee. Landlord's obligations with
respect to the deposit are those of a debtor and not of a trustee, and Landlord
can commingle the security deposit with Landlord's general funds. Landlord
shall not be required to pay Tenant interest on the deposit. Landlord shall be
entitled to immediately endorse and cash Tenant's security deposit; however,
such endorsement and cashing shall not constitute Landlord's acceptance of this
Lease. In the event Landlord does not accept this Lease, Landlord shall return
said security deposit. If Landlord sells its interest in the Premises during
the term hereof and
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deposits with or credits to the purchaser the unapplied portion of the security
deposit, thereupon Landlord shall be discharged from any further liability or
responsibility with respect to the security deposit.
7. USE OF PREMISES AND PROJECT FACILITIES.
Tenant shall use the Premises solely for the purposes set forth in
Section 1 and for no other purpose without obtaining the prior written consent
of Landlord. Tenant acknowledges that neither Landlord nor any agent of Landlord
has made any representation or warranty with respect to the Premises or with
respect to the suitability of the Premises or the Project for the conduct of
Tenant's business, nor has Landlord agreed to undertake any modification,
alteration or improvement to the Premises or the Project, except as provided in
writing in this Lease. Tenant acknowledges that Landlord may from time to time,
at its sole discretion, make such modifications, alterations, deletions or
improvements to the Project as Landlord may deem necessary or desirable, without
compensation to Tenant; provided Landlord provides Tenant with reasonable notice
thereof (unless Landlord reasonably determines that its interest is jeopardized,
in such emergency situations, no notice is required); and provided Landlord
shall conduct such activities on the Premises in a manner that will cause the
least convenience, annoyance, or disturbance to Tenant. Tenant shall promptly
and at all times comply with all federal, state and local statutes, laws,
ordinances, orders and regulations affecting the Premises and the Project
(herein "Laws"), as well as all master plans, restrictive covenants, and also
any rules and regulations that Landlord may adopt from time to time. Tenant
shall not do or permit anything to be done in or about the Premises or bring or
keep anything in the Premises that will in any way increase the premiums paid by
Landlord on its insurance related to the Project or which will in any way
increase the premiums for fire or casualty insurance carried by other tenants in
the Project. Tenant will not perform any act or carry on any practices that may
injure the Premises or the Project; that may be a nuisance or menace to other
tenants in the Project; or that shall in any way interfere with the quiet
enjoyment of such other tenants. Tenant shall not use the Premises for sleeping,
washing clothes, cooking or the preparation, manufacture or mixing of anything
that might emit any objectionable odor, noises, vibrations or lights onto such
other tenants. If sound insulation is required to muffle noise produced by
Tenant on the Premises, Tenant at its own cost shall provide all necessary
insulation. Tenant shall not do anything on the Premises which will overload any
existing parking or service to the Premises. Pets and/or animals of any type
shall not be kept on the Premises.
Landlord covenants that, prior to delivery of the Premises to Tenant,
Landlord shall have modified the Premises such that the same are substantially
in compliance with a reasonable interpretation of the Americans With
Disabilities Act ("ADA") based upon the information of Tenant's specific uses of
portions of the Premises delivered from Tenant to Landlord. In the event any
state or federal agency requires, directly or indirectly after the Commencement
Date, any additions or modifications to the Premises related to ADA Compliance,
Landlord shall pay for and bear full responsibility for the same, except that
Tenant shall pay for and bear full responsibility for the same if such
modifications or additions: (a) are required of all businesses similar to
Tenant's or businesses in Tenant's industry or (b) arise out of or are a result
of (i) disabled personnel employed by Tenant, (ii) specific business activities
of Tenant on the Premises, or (iii) alterations to the Premises requested or
caused by Tenant. In any event, Landlord shall bear all responsibility for ADA
Compliance with respect to exterior portions of the building, including parking
areas, walkways, and building entrances. Any capital expenditures by Landlord
for improvements to the Premises and/or the exterior portions of the building in
connection with ADA Compliance may be amortized over their expected useful life
and included in Expenses as defined in Section 4.c.(1) above, subject to the
maximum limits set forth in Section 30.
8. SIGNAGE.
All signage shall comply with rules and regulations set forth by Landlord
as may be modified from time to time. Current rules and regulations relating to
signs are described on Exhibit C. Tenant shall place no window covering (e.g.,
shades, blinds, curtains, drapes, screens, or tinting materials), stickers,
signs, lettering, banners or advertising or display material on or near exterior
windows or doors if such materials are visible from the exterior of the
Premises, without Landlord's prior written consent. Similarly, Tenant may not
install any alarm boxes, foil protection tape or other security equipment on
the Premises without Landlord's prior written consent. Any material violating
this provision may be destroyed by Landlord without compensation to Tenant.
9. PERSONAL PROPERTY TAXES.
Tenant shall pay before delinquency all taxes, assessments, license fees and
public charges levied, assessed or imposed upon its business operations as well
as upon all trade fixtures, leasehold improvements, merchandise and other
personal property in or about the Premises; provided, Tenant may forego payment
of the same pending Tenant's in good faith protest, challenge, or appeal of any
such amounts.
10. PARKING.
Landlord grants to Tenant and Tenant's customers, suppliers, employees and
invitees, a nonexclusive license to use the designated parking areas in the
Project for the use of motor vehicles during the term of this Lease. Landlord
reserves the right at any time to grant similar nonexclusive use to other
tenants, to promulgate rules and regulations relating to the use of such parking
areas, including reasonable restrictions on parking by tenants and employees, to
designate specific spaces for the use of any tenant, to make changes in the
parking layout from time to time, and to establish reasonable time limits on
parking. Overnight parking is prohibited and any vehicle violating this or any
other vehicle regulation adopted by Landlord is subject to removal at the
owner's expense. Notwithstanding the foregoing, and subject to events or factors
beyond Landlord's control, including, without limitation, condemnation and
governmental imposed limitations or restrictions affecting the minimum or
maximum number of parking spaces Landlord is able to provide Tenant, Landlord
shall make available for use by Tenant and Tenant's agents, employees, and
invitees, parking spaces (the "Parking Spaces") described in the attached
parking site plan equivalent to 3.75 spaces per one thousand (1,000) square feet
of Premises leased; provided, Landlord shall refrain from leasing or granting
any use rights to any other party with respect to such parking spaces; and
provided further, Landlord shall have no duty or obligation to prevent vehicles
not authorized by Landlord from using such parking spaces. Tenant shall have
sole responsibility for ensuring that unauthorized vehicles do not use the
Parking Spaces. Tenant acknowledges and agrees that it shall make no claim
against Landlord if a vehicle not authorized by Landlord uses any Parking Space
and that the same shall not constitute a default by Landlord under this lease.
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11. Utilities.
Tenant shall pay for all water, gas, heat, light, power, sewer,
electricity, telephone or other service metered, chargeable or provided to the
Premises.
12. Maintenance.
Landlord shall maintain, in good condition, the structural parts of the
Premises, which shall include only the foundations, bearing and exterior walls
(excluding glass), sub-flooring and roof (excluding skylights), the unexposed
electrical, plumbing and sewerage systems, including without limitation, those
portions of the systems lying outside the Premises, exterior doors (excluding
glass), window frames, gutters and downspouts on the Building and the heating,
ventilating and air conditioning system servicing the Premises; provided,
however, the cost of all such maintenance shall be considered "Expenses" for
purposes of Section 4.c. Except as provided above, Tenant shall maintain and
repair the Premises in good condition, including, without limitation,
maintaining and repairing walls, floors, ceilings, interior doors, the office
partitions/cubicles, exterior and interior windows and fixtures as well as
damage caused by Tenant, its agents, employees or invitees. Upon expiration or
termination of this Lease, Tenant shall surrender the Premises to Landlord in
the same condition as existed at the commencement of the term, except for
reasonable wear and tear or damage caused by fire or other casualty not caused
by Tenant or its invitees or agents. Nothing herein shall excuse Tenant from
financial responsibility for property damage caused by Tenant or Tenant's
agents.
13. Alterations.
a. Tenant shall not make any alterations to the Premises, or to the Project,
including any changes to the existing landscaping, without Landlord's prior
written consent in each instance. If Landlord gives its consent to such
alterations, Landlord may post notices in accordance with the laws of the
state in which the Premises are located. Any alterations made shall remain
on and be surrendered with the Premises upon expiration or termination of
this Lease, except that Landlord may, within 30 days before or 30 days after
the expiration or termination of this Lease or the termination of Tenant's
right of possession, elect to require Tenant to remove any alterations
which Tenant may have made to the Premises. If Landlord so elects, at its
own cost Tenant shall restore the Premises to the condition designated by
Landlord in its election, before the last day of the term or within 30 days
after notice of its election is given, whichever is later.
b. Any request for Landlord's consent to alterations shall be made at least
thirty (30) days before any work may be commenced and shall be accompanied
by (i) detailed and costed plans and specifications for all alterations, and
(ii) Tenant's written agreement to provide, upon completion of work, a
complete set of as-built plans and specifications. Landlord may withhold
consent, in its sole discretion, or may issue such consent subject to
conditions. All alterations shall be constructed only after obtaining
Landlord's prior written consent and only in conformity with all Laws. The
issuance of Landlord's consent shall not be a waiver of nor an opinion
regarding Tenant's obligation to comply with all Laws.
c. Should any Landlord consent in writing to Tenant's alteration of the
Premises, Tenant shall contract with a contractor approved by Landlord for
the construction of such alterations, shall secure all appropriate
governmental approvals and permits, and shall complete such alterations with
due diligence in compliance with the plans and specifications approved by
Landlord. All such construction shall be performed in a manner which wil
not interfere with the quiet enjoyment of other tenants of the Project.
d. Tenant shall pay all costs for construction of alterations and shall keep
the Premises and the Project free and clear of all liens which may result
from work by third parties authorized by Tenant. If any such lien is filed,
the same shall be an event of default hereunder. It shall be a further event
of default for Tenant to fail to remove such lien within ten (10) days of
the filing thereof.
14. RELEASE AND INDEMNITY.
As material consideration to Landlord, Tenant agrees that Landlord and
Landlord's partners, shareholders, officers, directors, employees and agents
(collectively the "Protected Parties") shall not be liable to Tenant for any
damage to Tenant or Tenant's property from any cause, and Tenant waives all
claims against Landlord for damage to persons or property arising for any
reason, except for damage resulting directly from Landlord's breach of its
express obligations under this Lease which Landlord has not cured within a
reasonable time after receipt of written notice of such breach from Tenant.
Tenant shall defend, indemnify and hold Landlord and all other Protected Parties
harmless from all claims, losses, causes of action, costs and expenses, and
damages arising out of (a) any damage to any person or property occurring in, on
or about the Premises, (b) use by Tenant or its agents of the Premises and/or
the Project or other properties of Landlord, and/or (c) Tenant's breach or
violation of any term of this Lease.
15. INSURANCE.
Tenant, at its cost, shall maintain public liability and property damage
insurance and products liability insurance with a single combined liability
limit of $1,000,000, insuring against all liability of Tenant and its authorized
representatives arising out of or in connection with Tenant's use or occupancy
of the Premises. Public liability insurance, products liability insurance and
property damage insurance shall insure performance by Tenant of the indemnity
provisions of Section 14. Landlord, Forum Properties, Inc. and the other
Protected Parties shall be named as additional insured and the policy shall
contain cross-liability endorsements. On all its personal property, at its
cost, Tenant shall maintain a policy of standard fire and extended coverage
insurance with vandalism and malicious mischief endorsements and "all risk"
coverage on all Tenant's improvements and alterations in or about the Premises,
to the extent of at least 90% of their full replacement value. The proceeds
from any such policy shall be used by Tenant for the replacement of personal
property and the restoration of Tenant's improvements or alterations. All
insurance required to be provided by Tenant under this Lease shall release
Landlord and the other protected parties from any claims for damage to any
person or the Premises and the Project, and to Tenant's fixtures, personal
property, improvements and alterations in or on the Premises or the Project,
caused by or resulting from risks insured against under any insurance policy
carried by Tenant and in force at the time of such damage. All insurance
required to be provided by Tenant under this Lease: (a) shall be issued by
insurance companies authorized to do business
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in the state in which the Premises are located with a financial rating of at
least an A-XII status as rated in the most recent edition of Best's Insurance
Reports; (b) shall be issued as a primary policy; and (c) shall contain an
endorsement requiring at least 30 days prior written notice of cancellation to
Landlord and Landlord's lender, before cancellation or change in coverage, scope
or amount of any policy. Tenant shall deliver a certificate or copy of such
policy together with evidence of payment of all current premiums to Landlord
within 30 days of execution of this Lease. Tenant's failure to provide evidence
of such coverage to Landlord may, in Landlord's sole discretion, constitute a
default under this Lease.
16. DESTRUCTION.
If during the term, the Premises or Project is more than 25% destroyed
(based upon replacement cost) from any cause, or rendered inaccessible or
unusable from any cause, Landlord may, in its sole discretion, terminate this
Lease by delivery of notice to Tenant within 30 days of such event without
compensation to Tenant. If Landlord does not elect to terminate this Lease, and
if, in Landlord's estimation, the Premises cannot be restored within 180 days
following such destruction, then Landlord shall notify Tenant within thirty (30)
days of the event causing the damage or destruction, and Tenant may terminate
this Lease by delivery of notice to Landlord within 30 days of receipt of
Landlord's notice. If Landlord does not terminate this Lease and if in
Landlord's estimation the Premises can be restored within 180 days, then
Landlord shall commence to restore the Premises in compliance with then existing
laws and shall complete such restoration with due diligence. In such event, this
Lease shall remain in full force and effect, but there shall be an abatement of
Base Monthly Rent between the date of destruction and the date of completion of
restoration, based on the extent to which destruction interferes with Tenant's
use of the Premises; provided, there shall be no abatement if such damage is the
result of Tenant's negligence or wrongdoing. Tenant shall not be entitled to any
damages or compensation for loss of use or any inconvenience occasioned by
damage or any repair or restoration.
17. CONDEMNATION.
a. Definitions. The following definitions shall apply. (1 ) "Condemnation"
means (a) the exercise of any governmental power of eminent domain, whether
by legal proceedings or otherwise by condemnor and (b) the voluntary sale or
transfer by Landlord to any condemnor either under threat of condemnation or
while legal proceedings for condemnation are proceeding; (2) "Date of
Taking" means the date the condemnor has the right to possession of the
property being condemned; (3) "Award" means all compensation, sums or
anything of value awarded, paid or received on a total or partial
condemnation; and (4) "Condemnor" means any public or quasi-public
authority, or private corporation or individual, having a power of
condemnation.
b. Obligations to Be Governed by Lease. If during the term of the Lease there
is any taking of all or any part of the Premises or the Project, the rights
and obligations of the parties shall be determined pursuant to this Lease.
c. Total or Partial Taking. If the Premises are totally taken by condemnation,
this Lease shall terminate on the Date of Taking. If any portion of the
Premises is taken by Condemnation, this Lease shall terminate as to the part
so taken as of the Date of Taking, but shall in all other respects remain in
effect, except that Tenant can elect to terminate this Lease if the
remaining portion of the Premises is rendered unsuitable for Tenant's
continued use of the Premises. If Tenant elects to terminate this Lease,
Tenant must exercise its right to terminate by giving notice to Landlord
within 30 days after the nature and extent of the Condemnation have been
finally determined. If Tenant elects to terminate this Lease, Tenant shall
also notify Landlord of the date of termination, which date shall not be
earlier than 30 days nor later than 90 days after Tenant has notified
Landlord of its election to terminate; except that this Lease shall
terminate on the Date of Taking if the Date of Taking falls on a date before
the date of termination as designated by Tenant. If any portion of the
Premises is taken by condemnation and this Lease remains in full force and
effect, on the Date of Taking the Base Monthly Rent shall be reduced by an
amount in the same ratio as the total number of square feet in the Premises
taken bears to the total number of square feet in the Premises immediately
before the Date of Taking.
d. Landlord's Election. Notwithstanding anything herein to the contrary, if the
Project or any portion thereof is taken by Condemnation and the portion
taken does not, in Landlord's sole judgment, feasibly permit the
continuation of the operation of the Project by Landlord, then Landlord
shall have the right to terminate this Lease by written notice given within
thirty (30) days following the Date of Taking.
e. Award. Tenant shall have no right or claim to all or any portion of the
Award; provided this shall not limit Tenant's right to seek and to receive
compensation for relocation expenses or the value of its personal property
taken, so long as receipt of such compensation does not decrease the Award
otherwise payable to Landlord.
18. ASSIGNMENT OR SUBLEASE.
Tenant shall not assign or encumber its interest in this Lease or the
Premises or sublease all or any part of the Premises or allow any other person
or entity (except Tenant's authorized representatives, employees, invitees, or
guests) to occupy or use all or any part of the Premises without first obtaining
Landlord's consent which Landlord may not unreasonably withhold. The criteria to
determine if Landlord's consent should be granted or withheld, shall include the
following: The prospective tenant's, assignee's, or transferee's (a) intended
use of the Premises, (b) parking needs, and (c) credit worthiness. Any
assignment, encumbrance or sublease without Landlord's written consent shall be
voidable and at Landlord's election, shall constitute a default. If Tenant is a
partnership, a withdrawal or change, voluntary, involuntary or by operation of
law of any partner, or the dissolution of the partnership, shall be deemed a
voluntary assignment. If Tenant consists of more than one person, a purported
assignment, voluntary or involuntary or by operation of law from one person to
the other or to a third party shall be deemed a voluntary assignment. If Tenant
is a corporation, any dissolution, merger, consolidation or other reorganization
of Tenant, or sale or other transfer of a controlling percentage of the capital
stock of Tenant, or the sale of at least 50% of the value of the assets of
Tenant shall be deemed a voluntary assignment. The phrase "controlling
percentage" means ownership of and right to vote stock possessing at least 50%
of the total combined voting power of all classes of Tenant's capital stock
issued, outstanding and entitled to vote for election of directors. The
preceding two sentences shall not apply to corporations the stock of which is
traded through an exchange or over the counter. All rent received by Tenant from
its subtenants in excess of the rent payable by Tenant to Landlord under this
Lease (allocated on a square footage basis in cases of partial subleasing) shall
be paid to Landlord, and any sums to be paid by an assignee to Tenant in
consideration of the assignment of this Lease shall be paid to Landlord. If
Tenant requests Landlord to consent to a proposed assignment or subletting,
Tenant shall pay to Landlord, whether or not consent is ultimately given, $100
or Landlord's reasonable attorneys' fees incurred in connection with such
request, whichever is greater. No interest of Tenant
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in this Lease shall be assignable by involuntary assignment through operation of
law (including without limitation the transfer of this Lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary
assignment: (a) If Tenant is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or institutes proceedings under the
Bankruptcy Act in which Tenant is the bankrupt; or if Tenant is a partnership or
consists of more than one person or entity, if any partner of the partnership or
other person or entity is or becomes bankrupt or insolvent, or makes an
assignment for the benefit of creditors; or (b) If a writ of attachment or
execution is levied on this Lease; or (c) If in any proceeding or action to
which Tenant is a party, a receiver is appointed with authority to take
possession of the Premises. An involuntary assignment shall constitute a default
by Tenant and Landlord shall have the right to elect to terminate this Lease, in
which case this Lease shall not be treated as an asset of Tenant.
19. DEFAULT.
The occurrence of any of the following shall constitute a default by Tenant:
(a) A failure to pay rent or other charge within ten (10) days of the due date;
(b) Abandonment and vacation of the Premises (failure to occupy and operate the
Premises for ten consecutive days shall be deemed an abandonment and vacation);
or (c) Failure to perform any other provision of this Lease. Landlord agrees not
to exercise any remedies for a default by Tenant covered by Section 19(c) unless
such default continues after written notice of the same has been given to Tenant
and the cure period, if any, set forth in such written notice has lapsed (or has
been terminated as provided below) without cure being completed. It is
acknowledged that no cure period, or only a brief cure period, may be allowed by
Landlord, in its discretion, if Landlord determines that such is necessary to
protect Landlord's interest. The length of any cure period shall be that
determined by Landlord, using reasonable business judgment, taking into
consideration the nature of default, its consequences for Landlord, and the
amount of time reasonably necessary under the circumstances to allow Tenant a
reasonable opportunity to cure. In no event shall any cure period be in excess
of thirty (30) days be granted. Landlord may terminate any cure period in the
event Tenant does not demonstrate that it is diligently pursuing cure during the
allowed time.
20. LANDLORD'S REMEDIES.
a. Landlord shall have the following remedies if Tenant is in default. These
remedies are not exclusive; they are cumulative and in addition to any
remedies now or later allowed by law, Landlord may terminate this Lease
and/or Tenant's right to possession of the Premises at any time. No act by
Landlord other than giving notice to Tenant shall terminate this Lease. Acts
of maintenance, efforts to relet the Premises, or the appointment of a
receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a termination of this Lease. Upon termination of
this Lease or of Tenant's right to possession, Landlord has the right to
recover from Tenant: (1) The worth of the unpaid rent that had been earned
at the time of such termination; (2) The worth of the amount of the unpaid
rent that would have been earned after the date of such termination; and
(3) Any other amount, including court, reasonable attorney and collection
costs, necessary to compensate Landlord for all detriment proximately
caused by Tenant's default. "The Worth", as used for Item 20(1) in this
Paragraph 20 is to be computed by allowing interest at the Default Rate.
"The worth" as used for Item 20(2) in this Paragraph 20 is to be computed
by discounting the amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of termination of Tenant's right of possession.
b. All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If Tenant shall fail to pay any
sum of money owed to any party other than Landlord, for which it is liable
hereunder, or if Tenant shall fail to perform any other act on its part to
be performed hereunder, and such failure shall continue for ten (10) days
after notice thereof by Landlord, Landlord may, without waiving such default
or any other right or remedy, but shall not be obligated to, make any such
payment or perform any such other act to be made or performed by Tenant. All
sums so paid by Landlord and all necessary incidental costs, together with
interest thereon at the Default Rate from the date of expenditure by
Landlord, shall be payable to Landlord on demand.
21. ENTRY ON PREMISES.
Landlord and its authorized representatives shall have the right to enter
the Premises at all reasonable times for any of the following purposes: (a) To
determine whether the Premises are in good condition and whether Tenant is
complying with its obligations under this Lease; (b) To do any necessary
maintenance and to make any restoration to the Premises or the Project that
Landlord has the right or obligation to perform; (c) To post "for sale" signs at
any time during the term, to post "for rent" or "for lease" signs during the
last 90 days of the term, or during any period while Tenant is in default;
(d) To show the Premises to prospective brokers, agents, buyers, tenants or
persons interested in leasing or purchasing the Premises, at any time during the
term; or (e) To repair, maintain or improve the Project and to erect scaffolding
and protective barricades around and about the Premises but not so as to prevent
entry to the Premises and to do any other act or thing necessary for the safety
or preservation of the Premises or the Project. Landlord shall not be liable in
any manner for any inconvenience, disturbance, loss of business, nuisance or
other damage arising out of Landlord's entry onto the Premises as provided in
this Section 21. Tenant shall not be entitled to an abatement or reduction of
rent if Landlord exercises any rights reserved in this Section 21. Landlord
shall conduct its activities on the Premises as provided herein in a manner that
will cause the least inconvenience, annoyance or disturbance to Tenant. For each
of these purposes, Landlord shall at all times have and retain a key with which
to unlock all the doors in, upon and about the Premises, excluding Tenant's
vaults and safes. Tenant shall not alter any lock or install a new or additional
lock or bolt on any door of the Premises without prior written consent of
Landlord. If Landlord gives its consent, Tenant shall furnish Landlord with a
key for any such lock. Except for emergency, the right of Landlord and its
authorized representatives to enter the Premises shall be subject to twenty four
(24) hours prior verbal or written notice to Tenant.
22. SUBORDINATION.
Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, and at the election of Landlord or
any mortgagee or any beneficiary of a Deed of Trust with a lien on the Project
or any ground lessor with respect to the Project, this Lease shall be subject
and subordinate at all times to (a) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Project, and (b) the lien
of any mortgage or deed of trust which may now exist of hereafter be executed in
any amount for which the Project, ground leases or underlying leases, or
Landlord's interest or estate in any of said items is specified as security. In
the event that any ground lease or underlying lease terminates for any reason or
any mortgage or Deed of Trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant
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of the successor in interest to Landlord, at the option of such successor in
Interest. Tenant covenants and agrees to execute and deliver, upon demand by
Landlord and in the form requested by Landlord any additional documents
evidencing the priority or subordination of this Lease with respect to any such
ground lease or underlying leases or the lien of any such mortgage or Deed of
Trust. Tenant hereby irrevocably appoints Landlord as attorney-in-fact of Tenant
to execute, deliver and record any such document in the name and on behalf of
Tenant; provided Landlord has submitted a written request to Tenant to execute
and deliver such document, and Tenant without reasonable justification has
failed to comply with ten (10) days of such request. Notwithstanding the
foregoing subordination of this Lease, Tenant's right to quiet enjoyment and the
use and enjoyment of the Premises in accordance with this Lease shall not be
disturbed if Tenant is not in default hereunder.
Tenant, within ten days from notice from Landlord, shall execute and
deliver to Landlord, in recordable form, certificates stating that this Lease is
not in default, is unmodified and in full force and effect, or in full force and
effect as modified, and stating the modifications. This certificate should also
state the amount of current monthly rent, the dates to which rent has been paid
in advance, the amount of any security deposit and prepaid rent, and such other
matters as Landlord may request. Failure to deliver this certificate to Landlord
within ten days shall be conclusive upon Tenant that this Lease is in full force
and effect and has not been modified except as may be represented by Landlord in
such certificate. In addition, in connection with any sale or financing
involving the Premises, Tenant shall deliver to Landlord, within twenty (20)
days of request by Landlord, a current audited financial statement of Tenant and
of each guarantor if available or its most recently prepared year-end.
23. NOTICE.
Any notice, demand, request, consent, approval or communication desired by
either party or required to be given, shall be in writing and either served
personally or sent by prepaid certified first class mail, addressed as set forth
in Section 1. Either party may change its address by notification to the other
party. Notice shall be deemed to be communicated 48 hours from the time of such
mailing, or upon the time of service as provided in this Section 23.
24. WAIVER.
No delay or omission in the exercise of any right or remedy by either party
hereto shall impair such right or remedy or be construed as a waiver. No act or
conduct of Landlord, including without limitation, acceptance of the keys to the
Premises, shall constitute an acceptance of the surrender of the Premises by
Tenant before the expiration of the term. Only written notice from Landlord to
Tenant shall constitute acceptance of the surrender of the Premises and
accomplish termination of the Lease. Landlord's consent to or approval of any
act by Tenant requiring Landlord's consent or approval shall not be deemed to
waive or render unnecessary Landlord's consent to or approval of any subsequent
act by Tenant. Any waiver by Landlord of any default must be in writing and
shall not be a waiver of any other default concerning the same or any other
provision of the Lease. Tenant's consent to or approval of any act by Landlord
requiring Tenant's consent or approval shall not be deemed to waive or render
unnecessary Tenant's consent to or approval of any subsequent act by Landlord.
Any waiver by Tenant of any default must be in writing and shall not be a waiver
of any other default concerning the same or any other provision of the Lease.
25. SURRENDER OF PREMISES; HOLDING OVER.
Upon expiration of the term or the termination of this Lease or of Tenant's
right of possession, Tenant shall surrender to Landlord the Premises and all
tenant improvements (including without limitation the office partitions/cubicles
which Tenant hereby acknowledges are the personal property of Landlord) and
alterations (except alterations which Tenant has the right or obligation to
remove) in good condition, except for ordinary wear and tear. Tenant shall
remove all personal property including, without limitation, all wallpaper,
paneling and other decorative improvements or fixtures and shall perform all
restoration made necessary by the removal of any alterations or Tenant's
personal property before the expiration of the term, including for example,
restoring all wall surfaces to their condition prior to the commencement of this
Lease. Landlord can elect to retain or dispose of in any manner Tenant's
personal property not removed from the Premises by Tenant prior to the
expiration of the term. Tenant waives all claims against Landlord for any damage
to Tenant resulting from Landlord's retention or disposition of Tenant's
personal property. Tenant shall be liable to Landlord for Landlord's costs for
storage, removal or disposal of Tenant's personal property. If Tenant fails to
surrender the Premises upon the expiration of the term, or upon the termination
of this Lease or of Tenant's right of possession, Tenant shall defend, indemnify
and hold Landlord harmless from all resulting loss or liability, including
without limitation, any claim made by any succeeding tenant founded on or
resulting from such failure.
If Tenant, with Landlord's consent, remains in possession of the Premises
after expiration of this Lease, such possession by Tenant shall be deemed to be
a month-to-month tenancy terminable on written 30-day notice at any time, by
either party. All provisions of this Lease, except those pertaining to term and
rent, shall apply to the month-to-month tenancy. Tenant shall pay Base Monthly
Rent in an amount equal to 125% of the Base Monthly Rent for the last full
calendar month during the regular term plus 100% of said last month's estimate
of Tenant's share of Expenses pursuant to Section 4.c(3).
26. LIMITATION OF LIABILITY.
In consideration of the benefits accruing hereunder, Tenant agrees that,
regardinq any claim against Landlord and/or any other Protected Party, including
in the event of any actual or alleged failure, breach or default by Landlord:
a. The sole and exclusive remedy of Tenant shall be against the interest of
Landlord in the Project, and neither Landlord nor any other Protected Party
shall have any other liability whatsoever.
b. If Landlord is a partnership, the following provisions of this Item b. shall
also apply; (i) No partner of Landlord shall be sued or named as a party in
any suit or action; (ii) No service of process shall be made against any
partner of Landlord (except as may be necessary to secure jurisdiction of
the partnership); (iii) No partner of Landlord shall be required to answer
or otherwise plead to any service or process; (iv) No judgment may be taken
against any partner of Landlord; (v) Any judgment taken against any partner
of Landlord may be vacated and set aside at any time without hearing; and
(vi) No writ of execution will ever be levied against the assets of any
partner of Landlord.
c. These covenants and agreements contained in this Section 26 are enforceable
both by Landlord and also by any other Protected Party.
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d. Tenant agrees that each of the foregoing provisions shall be applicable to
any and all liabilities, claims and causes of action whatsoever, including
those based on any provision of this Lease, any Implied covenant, and/or any
statute or common law principle.
27. MISCELLANEOUS PROVISIONS.
a. Time of Essence. Time is of the essence of each provision of this Lease.
b. Successor. This Lease shall be binding on and inure to the benefit of the
parties and their successors, except as provided in Section 18 herein.
c. Landlord's Consent. Any consent required by Landlord under this Lease must
be granted in writing. No such consent shall be unreasonably withheld, but
any consent may be issued subject to reasonable conditions. As a condition
to any consent, Landlord may require that any other party or parties with a
right of consent issue such consent on terms acceptable to Landlord.
d. Commissions. Each party represents that it has not had dealings with any
real estate broker, finder or other person with respect to this Lease in any
manner, except for the broker identified in Section 1, who shall be
compensated by Landlord.
e. Other Charges. If Landlord becomes a party to any litigation concerning this
Lease, the Premises or the Project, by reason of any act or omission of
Tenant or any agent, guest or invitee of Tenant, Tenant shall be liable to
Landlord for all attorneys' fees and costs incurred by Landlord in
connection with such litigation, including any appeal or review. If Tenant
becomes a party to any litigation concerning this Lease, the Premises or
the Project, by reason of any act or omission of Landlord or any agent,
guest or invitee of Landlord, Landlord shall be liable to Tenant for all
attorneys' fees and costs incurred by Tenant in connection with such
litigation, including any appeal or review.
In the event of litigation between Tenant and Landlord and/or any other
Protected Party, the prevailing party shall be entitled to recover from the
losing party all costs and attorneys' fees incurred both at and in
preparation for trial and any appeal or review. If Landlord employs a
collection agency to recover delinquent charges, Tenant agrees to pay all
collection agency and attorneys' fees charged to Landlord in addition to
rent, late charges, interest and other sums payable under this Lease.
f. Landlord's Successors. In the event of a sale or conveyance by Landlord of
the Project or a portion thereof including the Premises, or of Landlord's
interest in the foregoing, the same shall operate to release Landlord from
any liability under this Lease thereafter, and in such event Landlord's
successor in interest shall be solely responsible for all obligations of
Landlord under this Lease; provided Landlord shall be responsible for its
obligations under this Lease prior to such sale or conveyance.
g. Interpretation. This Lease shall be construed and interpreted in accordance
with the laws of the state in which the Premises are located. This Lease
constitutes the entire agreement between the parties with respect to the
Premises and the Project, except for such guarantees or modifications as may
be executed in writing by the parties from time to time. When required by
the context of this Lease, the singular shall include the plural, and the
masculine shall include the feminine and/or neuter. "Party" shall mean
Landlord or Tenant. If more than one person or entity constitutes Tenant,
the obilgations imposed upon Tenant shall be joint and several. The
enforceability, invalidity or illegality of any provision shall not render
the other provisions unenforceable, invalid or illegal.
h. Third Parties. The Protected Parties shall have the right to enforce the
provisions of this Lease which reference them. Except for the foregoing,
there are no third parties benefited hereby, this Lease being intended
solely for the benefit of Landlord and Tenant. Notwithstanding the
foregoing, the beneficiary under a trust deed, or a mortgagee, holding a
security interest in the Project shall be a third party beneficiary of the
Tenant's obligations set forth in Sections 28e. and 28f. hereof and shall
have the right to enforce such provisions.
i. Survival. The release and indemnity covenants of the parties hereto, the
right of Landlord to enforce its remedies hereunder, the attorneys' fees
provisions hereof, the provisions of Section 26 hereof, as well as all
provisions of this Lease which contemplate performance after the expiration
or termination hereof or the termination of Tenant's right to possession
hereunder, shall survive any such expiration or termination.
28. EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE
a. Emissions. Tenant shall not:
(1) Discharge, emit or permit to be discharged or emitted, any liquid, solid
or gaseous matter, or any combination thereof, into the atmosphere, the
ground or any body of water, which matter, as reasonably determined by
Lessor or any governmental entity, does, or may, pollute or contaminate
the same, or is, or may become, radioactive or does, or may, adversely
affect the (1) health or safety of persons, wherever located, whether on
the Premises or anywhere else. (2) condition, use or enjoyment of the
Premises or any other real or personal property, whether on the Premises
or anywhere else, or (3) Premises or any of the improvements thereto or
thereon including buildings, foundations, pipes, utility lines,
landscaping or parking areas;
(2) Produce, or permit to be produced, any intense glare, light or heat
except within an enclosed or screened area and then only in such manner
that the glare, light or heat shall not be discernible from outside the
Premises;
(3) Create, or permit to be created, any sound pressure level which will
interfere with the quiet enjoyment of any real property outside the
Premises; or which will create a nuisance or violate any Law, rule,
regulation or requirement;
(4) Create, or permit to be created, any ground vibration that is
discernible outside the Premises;
(5) Transmit, receive or permit to be transmitted or received,
any electromagnetic, microwave or other radiation which is harmful or
hazardous to any person or property in, on or about the Premises, or
anywhere else.
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b. Storage and Use.
(1) Storage. Subject to the uses permitted and prohibited to Tenant under
this lease, Tenant shall store in appropriate leakproof containers all
solid, liquid, or gaseous matter, or any combination thereof, which
matter, if discharged or emitted into the atmosphere, the ground or any
body of water, does or may (1) pollute or contaminate the same, or
(2) adversely affect the (i) health or safety of persons, whether on the
Premises or anywhere else, (ii) condition, use or enjoyment of the
Premises or any real or personal property, whether on the Premises or
anywhere else, or (iii) Premises or any of the improvements thereto or
thereon.
(2) Use. In addition, without Landlord's prior written consent, Tenant shall
not use, store or permit to remain on the Premises any solid, liquid or
gaseous matter which is, or may become, radioactive. If Landlord does
give its consent, Tenant shall store the materials in such a manner that
no radioactivity will be detectable outside a designated storage area
and Tenant shall use the materials in such a manner that (1) no real or
personal property outside the designated storage area shall become
contaminated thereby or (2) there are and shall be no adverse effects on
the (i) health or safety of persons, whether on the Premises or anywhere
else, (ii) condition, use or enjoyment of the Premises or any real or
personal property thereon or therein, or (iii) Premises or any of the
improvements thereto or thereon.
c. Disposal of Waste.
(1) Refuse Disposal. Tenant shall not keep any trash, garbage, waste or
other refuse on the Premises except in sanitary containers and shall
regularly and frequently remove same from the Premises. Tenant shall
keep all incinerators, containers or other equipment used for the
storage or disposal of such materials in a clean and sanitary condition.
(2) Sewage Disposal. Tenant shall properly dispose of all sanitary sewage
and shall not use the sewage system (1) for the disposal of anything
except sanitary sewage or (2) in excess of the lesser of the amount (a)
reasonably contemplated by the uses permitted under this Lease or (b)
permitted by any governmental entity. Tenant shall keep the sewage
disposal system free of all obstructions and in good operating
condition.
(3) Disposal of Other Waste. Tenant shall properly dispose of all other
waste or other matter delivered to, stored upon, located upon or within,
used on, or removed from, the premises in such a manner that it does
not, and will not, adversely affect the (1) health or safety of persons,
wherever located, whether on the Premises or elsewhere, (2) condition,
use or enjoyment of the Premises or any other real or personal property,
wherever located, whether on the Premises or anywhere else, or (3)
Premises or any of the improvements thereto or thereon including
buildings, foundations, pipes, utility lines, landscaping or parking
areas.
d. Compliance with Law. Notwithstanding any other provision in the Lease to the
contrary, Tenant shall comply with all Laws in complying with its
obligations under this Lease, and in particular, Laws relating to the
storage, use and disposal of hazardous or toxic matter.
e. Indemnification. Tenant shall defend, indemnify and hold Landlord, the other
Protected Parties, the Project and the beneficiary under a trust deed, or
mortgagee, holding a security interest in the Project harmless from any
loss, claim, liability or expense, including, without limitation, attorneys'
fees and costs, at trial and/or on appeal and review, arising out of or in
connection with its failure to observe or comply with the provisions of this
Section 28. This indemnity shall survive the expiration or earlier
termination of the term of the Lease or the termination of Tenant's right of
possession and be fully enforceable thereafter.
f. Additional Provisions. The following covenants and agreements shall in no
way diminish or limit the foregoing provisions of this Section 28. No use
may be made of, on or from the Premises relating to the handling, storage,
disposal, transportation, or discharge of Hazardous Substances (as defined
below). All of such use which does occur shall be in strict conformance with
all Laws. Tenant shall give prior written notice to Landlord of any use,
whether incidental or otherwise, of Hazardous Substances on the Premises, or
of any notice of any violation of any Law with respect to such use. Landlord
and any ground lessor or master lessor of the Premises and/or the Project
shall have the right to request and to receive information with respect to
use of Hazardous Substances on the Premises in writing.
In addition to the indemnity obligations contained elsewhere herein, Tenant
shall indemnify, defend and hold harmless Landlord, the other Protected
Parties, the Premises, the Project, and the beneficiary under a trust deed,
or a mortgagee, holding a security interest in the Project, from and against
all claims, losses, damages, costs, response costs and expenses,
liabilities, and other expenses caused by, arising out of, or in connection
with, the generation, release, handling, storage, discharge, transportation,
deposit or disposal in, on, under or about the Premises by Tenant or any of
Tenant's Agents of the following (collectively referred to as "Hazardous
Substances"): hazardous materials, hazardous substances, toxic wastes, toxic
substances, pollutants, petroleum products, underground tanks, oils,
pollution, asbestos, PCB's, materials, or contaminants, as those terms are
commonly used or as defined by federal, state, and/or local law or
regulation related to protection of health or the environment, including but
not limited to, the Resource Conservation and Recovery Act (RCRA) (42 U.S.C.
(S) 6901 at seq.); the Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA) (42 U.S.C. (S) 9601, et seq.); the Toxic
Substances Control Act (15 U.S.C. (S) 2601, et seq.); the Clean Water Act
(33 U.S.C. (S) 1251, et seq.); the Clean Air Act (42 U.S.C. (S) 7401 et
seq.); and ORS Chapters 453, 465 and 466 as any of same may be amended from
time to time, and/or by any rules and regulations promulgated thereunder.
Such damages, costs, liabilities, and expenses shall include such as are
claimed by any regulating and/or administering agency, any ground lessor or
master lessor of the Project, the holder of any Mortgage or Deed of Trust on
the Project, and/or any successor of the Landlord named herein. This
indemnity shall include (a) claims of third parties, including governmental
agencies, for damages, fines, penalties, response costs, monitoring costs,
injunctive or other relief; (b) the costs, expenses or losses resulting from
any injunctive relief, including preliminary or temporary injunctive relief;
(c) the expenses, including fees of attorneys and experts, of reporting the
existence of Hazardous Substances to an agency of the State of Oregon or of
the United States as required by applicable laws and regulations; (d) any
and all expenses or obligations, including attorneys' fees, paralegal fees,
incurred at, before and after any trial or appeal therefrom or review
thereof, or an administrative proceeding or appeal therefrom or review
thereof, whether or not taxable as costs, including, without limitation,
attorneys' fees, paralegal fees, witness fees (expert and otherwise),
deposition costs, photocopying and telephone charges and other expenses
related to the foregoing, all of which shall
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be paid by Tenant to Landlord when such expenses are accrued. This indemnity
shall survive the expiration or earlier termination of the term of the Lease
or the termination of Tenant's right of possession and be fully enforceable
thereafter.
g. Information. Tenant shall provide Landlord with any and all information in
Tenant's possession regarding Hazardous Substances in the Premises which
were caused or deposited by Tenant or Tenant's invitees or agents, including
contemporaneous copies of all filings and reports to governmental entities,
and any other information requested by Landlord. In the event of any
accident, spill or other incident involving Hazardous Substances, Tenant
shall immediately report the same to Landlord and supply Landlord with all
information and reports with respect to the same. All information described
herein shall be provided to Landlord regardless of any claim by Tenant that
it is confidential or privileged.
29. SPACE PLAN.
Attached hereto as Exhibit "D" is a final approved space plan (the "Space
Plan") depicting the Premises as they shall be improved by Landlord prior to
delivery of possession to Tenant. As partial compensation to Landlord for the
cost of the improvement shown on the Space Plan, Tenant shall pay to Landlord
the sum of $ ___. Such sum shall be paid by Tenant to Landlord prior to start of
construction to be determined prior to construction.
30. EXPENSE CAP.
The triple net Expense for the following calendar years will be based on the
following. Under no circumstances will Expenses exceed the amounts set forth
below.
Year 1993 (Months of November and December) capped at $.22 per sq. ft.
per month based on 20,000 sq. ft.
Year 1994 capped at $.22 per sq. ft. per month based on
20,000 sq. ft.
Year 1995 capped at $.23 per sq. ft. per month based on
24,000 sq. ft.
Year 1996 capped at $.24 per sq. ft. per month based on
28,000 sq. ft.
Year 1997, 1998, capped at $.25 per sq. ft. per month based on
31,381 sq. ft.
and 1999
TENANT: Test Systems Strategies, Inc.
By: /s/ Bruce Loughner
------------------------
Its: V.P. Finance
-----------------------
LANDLORD: PETULA ASSOCIATES, LTD., an Iowa corporation
and Koll Creekside Associates II, a California general
partnership dba KC Creekside II, a joint venture
By: /s/ Stanley Carson
------------------------
Its: Vice President
-----------------------
By: /s/ Kurt D. Schaeffer
------------------------
Its: Vice President
-----------------------
EXHIBITS
A - Premises
B - Project
C - Signs
D - Space Plan
E - 1 Tenant Improvements included in rent
E - 2 Tenant Improvements included in rent
E - 3 Tenant Improvements included in rent
Addendum to Exhibit D
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EXHIBIT A
---------
[FLOOR PLAN OF BUILDING APPEARS HERE]
[SEE SUMMIT DESIGN FOR COPY]
13
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EXHIBIT B
---------
[GROUNDS LAYOUT APPEARS HERE]
[SEE SUMMIT DESIGN FOR COPY]
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EXHIBIT C
SIGN REGULATIONS
These criteria has been established for the purpose of maintaining the overall
appearance of the Project. Conformance will be strictly enforced. Any sign
installed without the approval of the Landlord will be brought to conformity at
the expense of the Tenant.
A. General Requirements
1. Tenant shall submit a sketch of his proposed sign to the Landlord for his
approval.
2. A sign monument shall be furnished for the Tenant by the Landlord, and
placed near the Tenant's main entry as directed by Landlord.
3. Tenant shall be responsible for the fulfillment of all requirements of
these criteria in accordance with the general specifications provided
below.
B. General Specifications
1. No electrical or audible signs will be permitted.
2. The sign dimensions are below. These dimensions shall apply to all Tenant
signs.
3. Tenants may select the style, size and color of the individual company's
lettering and logo.
4. Placement of the sign and method of attachment to the monument will be
directed by the Landlord.
5. Upon removal of any sign, any damage to the monument must be repaired by
the Tenant at his expense. All monuments are the property of the
Landlord.
6. Except as provided herein, no advertising placecards, banners, pennants,
names, insignias, trademarks, or other descriptive material shall be
affixed or maintained upon the glass panes or exterior walls of the
building, landscaped areas, streets or parking areas.
[SIGN REQUIREMENTS APPEAR HERE]
15
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[FORUM PROPERTIES LOGO APPEARS HERE]
EXHIBIT C
SIGN REQUIREMENTS (B)
Tenant shall be allowed to place one building mounted sign on the Building.
Tenant's sign shall consist only of its company name and/or graphic logo. Such
sign, and its installation and removal, shall comply with the following
requirements:
1. Sign location shall be as directed by Landlord, but shall
generally be on a second floor concrete wall panel centered
above Tenant's main entry. Location may be adjusted by Landlord
as appropriate for particular building configurations.
2. Sign materials shall be 1 1/2 inch high density strofoam
with gold anodized brushed aluminum faces. Signs shall be
composed of individual letters and/or logo applied directly to
the Building wall with rubber silicone adhesive. Edges of sign
materials shall be painted black.
3. Maximum sign height shall be 42 inches; maximum sign length
shall be 16 feet; maximum height of each individual letter
shall be 18 inches. Overall sign dimensions shall be determined
by measuring between imaginary lines drawn as rectangle at the
outer edges of the outermost letters and/or logo.
4. Tenant shall contract with an experienced, reputable,
insured and bondable sign vendor approved by Landlord for the
installation and maintenance of its sign. All costs associated
with the design, manufacture and installation of Tenant's sign
shall be paid for by Tenant. Upon the expiration or termination
of the Lease, Tenant shall similarly contract for the removal
of the sign and restoration of the wall to its prior condition.
5. Notwithstanding anything herein to the contrary, any
signage by Tenant must comply with all applicable laws and
codes, and Tenant shall be responsible to obtain and to comply
with all required permits.
16
<PAGE>
[FORUM PROPERTIES LOGO APPEARS HERE]
Tenant Name: TSSI
-------------
EXHIBIT E-1
TENANT IMPROVEMENTS
(ALLOWANCE)
1. The following Improvements (the "Tenant Improvements") shall be made to the
Premises prior to occupancy by Tenant, all as generally shown and described
on the Space Plan (Exhibit D). Landlord's obligation is to improve approx.
20,000 SF of Bldg. 15 @ Creekside substantially in accordance with the
above. Landlord's obligation is fulfilled when this work is substantially
completed, meaning the work has been performed to the point where the
premises are fit for use in accordance with their intended purpose,
notwithstanding the fact that minor corrections or completion items
(commonly call "punch list items") remain.
2. The Costs (as defined below) of the Tenant Improvements described in
Section 1 above are included in the base monthly rent to the extent that
such Costs do not exceed the agreed allowance of $330,901 (the "Allowance").
3. A complete construction document package (the "CDP") with respect to the
Tenant Improvements, including a floor plan, a reflected ceiling/lighting
plan, specifications, and any other documents required to describe the
Tenant Improvements, and if appropriate a statement of Costs, shall be
prepared as set forth herein. If any other Exhibit to this Lease also
requires a CDP, a single, combined CDP shall be used.
C. Tenant shall approve the CDP in writing or by initialing the CDP no
later than 9/27/93 Tenant shall not have the right to withhold or
condition such approval, except only that Tenant may make corrections
(the "Corrections") to the CDP to cause the CDP to conform to the Tenant
information if this is not the case or to reduce the Costs to the
Allowance amount if the estimate exceeds the Allowance. Any such
Corrections must be in writing and must be delivered by the date
approval is otherwise required as set forth above.
D. The CDP, once corrected if necessary, shall constitute the working plans
and specifications for the Tenant Improvements, and Tenant shall approve
the same and pay to Landlord the amount shown on the statement of Costs
if and to the extent it exceeds the Allowance, both by the date
established under Item C above (or within 3 working days following
Tenant's receipt of the corrected CDP, if applicable). Unless Landlord
elects otherwise, no permit applications or work regarding the Tenant
Improvements shall be undertaken until such approval (and payment, if
any) are received by Landlord. As total Costs are finalized from the
estimate, Landlord and Tenant shall adjust any differences; in all
events, any net increase in Costs shall be paid by Tenant to Landlord in
cash (to the extent the Allowance is exceeded) within five (5) working
days of notice from Landlord.
E. Time is of essence hereof. In the event Tenant does not comply with the
time deadlines set forth herein, (a) any additional Costs resulting from
such delays shall be paid by Tenant along with the payment required
under Item D above or when otherwise required by Landlord, and (b) any
delays in completion of the Premises may delay Tenant's occupancy of the
Premises, but the Commencement Date (and therefore the date upon which
the accrual of rent commences) shall nonetheless be the date set forth
in the Lease Agreement.
4. Landlord shall not be obligated to construct any further Improvements other
than those set forth in the approved CDP. If, after approval of the CDP,
Tenant desires further Improvements to be constructed, Tenant shall request
construction of the same, in writing. Landlord shall have no obligation to
agree to such request. If Landlord does agree to any such request, then (a)
all Costs related to such further Tenant Improvements shall be paid by
Tenant to Landlord in cash (to the extent the Allowance is exceeded) within
five (5) working days but in all events prior to commencement of
construction or other work related to the further improvements, and (b) any
delays in completion of the Premises attributable to such request, including
delays caused by redesign time, reordering of the work, or Landlord awaiting
Tenant's payment of additional Costs, shall not change the scheduled
Commencement Date (and, therefore, the date upon which the accrual of rent
commences) as set forth in the Lease Agreement. However, Tenant acknowledges
that, because of further requested Improvements, the Premises may not be
available for Tenant to occupy on the scheduled Commencement Date. If
further improvements are required by building officials in order to meet
their interpretation of building codes, or if further improvements are
required due to unforeseen or concealed conditions that are necessary to
complete the work in accordance with the Construction Documents, this work
will be priced, reviewed with the Tenant, and completed. Reimbursement to
the Landlord as well as all other terms and conditions noted above for a
"Tenant requested" change will apply to these revisions as well.
5. When used in this Exhibit, the capitalized term "Costs" means all costs and
expenses incurred by Landlord in connection with the subject work and/or
materials, including but not limited to the costs of labor, materials,
permits, architect, and space planner fees, general conditions,
construction, management, or other professional fees, and all other costs
and expenses.
<PAGE>
[FORUM PROPERTIES LOGO APPEARS HERE]
Tenant Name: TSSI
-------------
EXHIBIT E-2
TENANT IMPROVEMENTS
(ALLOWANCE)
1. The following Improvements (the "Tenant Improvements") shall be made to the
Premises prior to the occupancy by Tenant, all as generally shown and
described on the Space Plan (Exhibit to come). Landlord's obligation is to
-------
improve Building 15 at Creekside Corporate Park substantially in accordance
with the above. Landlord's obligation is fulfilled when this work is
substantially completed, meaning the work has been performed to the point
where the premises are fit for use in accordance with their intended
purpose, notwithstanding the fact that minor corrections or completion items
(commonly called "punch list items") remain.
2. The Costs (as defined below) of the Tenant Improvements described in
Section 1 above are included in the base monthly rent to the extent that
such Costs do not exceed the agreed allowance of $30,901.00 (the
"Allowance"). This allowance can be spent (as stated below) *no sooner than
January 1, 1995.
3. A complete construction document package (the "CDP") with respect to the
Tenant Improvements, including a floor plan, a reflected ceiling/lighting
plan, specifications, and any other documents required to describe the
Tenant Improvements, and if appropriate a statement of Costs, shall be
prepared as set forth herein. If any other Exhibit to this Lease also
requires a CDP, a single, combined CDP shall be used.
A. No later than 8/10/94, Tenant shall deliver to Landlord's designated
architect or space planner (the "Space Planner") all information
requested by the Space Planner to prepare the CDP (the "Tenant
Information"). Delays in receipt of this information from the Tenant
will result in at least a day for day delay in the promised Tenant
occupancy date.
B. Within 15 working days after Tenant's delivery of the Tenant
Information, Landlord and the Space Planner shall deliver to Tenant a
CDP.
C. Tenant shall approve the CDP in writing or by initialing the CDP no
later than 3 working days after Tenant's receipt thereof; Tenant shall
not have the right to withhold or condition such approval, except only
that Tenant may make corrections (the "Corrections") to the CDP to
cause the CDP to conform to the Tenant Information if this not the case
or to reduce the Costs to the Allowance amount if the estimate exceeds
the Allowance. Any such Corrections must be in writing and must be
delivered by the date approval is otherwise required as set forth
above.
D. The CDP, once corrected if necessary, shall constitute the working
plans and specifications for the Tenant Improvements, and Tenant shall
approve the same and pay to the Landlord the amount shown on the
statement of Costs if and to the extent it exceeds the Allowance, both
by the date established under Item C above (or within 3 working days
following Tenant's receipt of the corrected CDP, if applicable). Unless
Landlord elects otherwise, no permit applications or work regarding the
Tenant Improvements shall be undertaken until such approval (and
payment, if any) are received by Landlord. As total Costs are finalized
from the estimate, Landlord and Tenant shall adjust any differences; in
all events, any net increase in Costs shall be paid by Tenant to
Landlord in cash (to the extent the Allowance is exceeded) within
five (5) working days of notice from Landlord.
E. Time is of essence hereof, in the event Tenant does not comply with the
time deadlines set forth herein, (a) any additional Costs resulting
from such delays shall be paid by Tenant along with the payment
required under Item D above or when otherwise required by Landlord, and
(b) any delays in completion of the Premises may delay Tenant's
occupancy of the Premises, but the Commencement Date (and therefore the
date upon which the accrual of rent commences) shall nonetheless be the
date set forth in the Lease Agreement.
4. Landlord shall not be obligated to construct any further Improvements other
than those set forth in the approved CDP. If, after approval of the CDP,
Tenant desires further Improvements to be constructed, Tenant shall request
construction of the same, in writing. Landlord shall have no obligation to
agree to such request. If Landlord does agree to any such request, then (a)
all Costs related to such further Tenant Improvements shall be paid by
Tenant to Landlord in cash (to the extent the Allowance is exceeded) within
five (5) working days but in all events prior to commencement of
construction or other work related to the further Improvements, and (b) any
delays in completion of the Premises attributable to such request, including
delays caused by redesign time, reordering of the work, or Landlord awaiting
Tenant's payment of additional Costs, shall not change the scheduled
Commencement Date (and, therefore, the date upon which the accrual of rent
commences) as set forth in the Lease Agreement. However, Tenant acknowledges
that, because of further requested Improvements, the Premises may not be
available for Tenant to occupy on the scheduled Commencement Date. If
further Improvements are required by building officials in order to meet
their interpretation of building codes, or if further Improvements are
required due to unforeseen or concealed conditions that are necessary to
complete the work in accordance with the Construction Documents, this work
will be priced, reviewed with the Tenant, and completed. Reimbursement to
the Landlord as well as all other terms and conditions noted above for a
"Tenant requested" change will apply to these revisions as well.
5. When used in this Exhibit, the capitalized term "Costs" means all costs and
expensed incurred by Landlord. In connection with the subject work and/or
materials, including but not limited to the costs of labor, materials,
permits, architect and space planner fees, general conditions, construction,
management, or other professional fees, and all other costs and expenses.
* The allowance, up to the amount of the entire allowance shall be
spent first on Hayworth Partitions & attached Hayworth
furnishings prior to spending any monies on other tenant
improvements. The Hayworth partitions & furniture shall remain
property of the landlord.
<PAGE>
[FORUM PROPERTIES LOGO APPEARS HERE]
Tenant Name: TSSI
-------------
EXHIBIT E-3
TENANT IMPROVEMENTS
(ALLOWANCE)
1. The following Improvements (the "Tenant Improvements") shall be made to the
Premises prior to the occupancy by Tenant, all as generally shown and
described on the Space Plan (Exhibit to come). Landlord's obligation is to
-------
improve Building 15 at Creekside Corporate Park substantially in accordance
---------------------------------------
with the above. Landlord's obligation is fulfilled when this work is
substantially completed, meaning the work has been performed to the point
where the premises are fit for use in accordance with their intended
purpose, notwithstanding the fact that minor corrections or completion items
(commonly called "punch list items") remain.
2. The Costs (as defined below) of the Tenant Improvements described in
Section 1 above are included in the base monthly rent to the extent that
such Costs do not exceed the agreed allowance of $30,901.00 (the
"Allowance"). This allowance can be spent (as stated below) *no sooner than
January 1, 1996.
3. A complete construction document package (the CDP) with respect to the
Tenant Improvements, including a floor plan, a reflected ceiling/lighting
plan, specifications, and any other documents required to describe the
Tenant Improvements, and if appropriate a statement of Costs, shall be
prepared as set forth herein. If any other Exhibit to this Lease also
requires a CDP, a single, combined CDP shall be used.
A. No later than 8/10/95, Tenant shall deliver to Landlord's
-------
designated architect or space planner (the "Space Planner") all
information requested by the Space Planner to prepare the CDP (the
"Tenant Information"). Delays in receipt of this information from the
Tenant will result in at least a day for day delay in the promised
Tenant occupancy date.
B. Within 15 working days after Tenant's delivery of the Tenant
Information, Landlord and the Space Planner shall deliver to Tenant a
CDP.
C. Tenant shall approve the CDP in writing or by initialing the CDP no
later than 3 working days after Tenant's receipt thereof; Tenant shall
not have the right to withhold or condition such approval, except only
that Tenant may make corrections (the "Corrections") to the CDP to
cause the CDP to conform to the Tenant Information if this not the case
or to reduce the Costs to the Allowance amount if the estimate exceeds
the Allowance. Any such Corrections must be in writing and must be
delivered by the date approval is otherwise required as set forth
above.
D. The CDP, once corrected if necessary, shall constitute the working
plans and specifications for the Tenant Improvements, and Tenant shall
approve the same and pay to the Landlord the amount shown on the
statement of Costs if and to the extent it exceeds the Allowance,
both by the date established under Item C above (or within 3 working
days following Tenant's receipt of the corrected CDP, if applicable).
Unless Landlord elects otherwise, no permit applications or work
regarding the Tenant Improvements shall be undertaken until such
approval (and payment, if any) are received by Landlord. As total Costs
are finalized from the estimate, Landlord and Tenant shall adjust any
differences; in all events, any net increase in costs shall be paid by
Tenant to Landlord in cash (to the extent the Allowance is exceeded)
within five (5) working days of notice from Landlord.
E. Time is of essence hereof, in the event Tenant does not comply with the
time deadlines set forth herein, (a) any additional Costs resulting
from such delays shall be paid by Tenant along with the payment
required under Item D above or when otherwise required by Landlord, and
(b) any delays in completion of the Premises may delay Tenant's
occupancy of the Premises, but the Commencement Date (and therefore the
date upon which the accrual of rent commences) shall nonetheless be the
date set forth in the Lease Agreement.
4. Landlord shall not be obligated to construct any further Improvements other
than those set forth in the approved CDP. If, after approval of the CDP,
Tenant desires further Improvements to be constructed, Tenant shall request
construction of the same, in writing. Landlord shall have no obligation to
agree to such request. If Landlord does agree to any such request, then (a)
all Costs related to such further Tenant Improvements shall be paid by
Tenant to Landlord in cash (to the extent the Allowance is exceeded) within
five (5) working days but in all events prior to commencement of
construction or other work related to the further Improvements, and (b) any
delays in completion of the Premises attributable to such request, including
delays caused by redesign time, reordering of the work, or Landlord awaiting
Tenant's payment of additional Costs, shall not change the scheduled
Commencement Date (and, therefore, the date upon which the accrual of rent
commences) as set forth in the Lease Agreement. However, Tenant acknowledges
that, because of further requested improvements, the Premises may not be
available for Tenant to occupy on the scheduled Commencement Date. If
further improvements are required by building officials in order to meet
their interpretation of building codes, or if further Improvements are
required due to unforeseen or concealed conditions that are necessary to
complete the work in accordance with the Construction Documents, this work
will be priced, reviewed with the Tenant, and completed. Reimbursement to
the Landlord as well as all other terms and conditions noted above for a
"Tenant requested" change will apply to these revisions as well.
5. When used in this Exhibit, the capitalized term "Costs" means all costs and
expensed incurred by Landlord. In connection with the subject work and/or
materials, including but not limited to the costs of labor, materials,
permits, architect and space planner fees, general conditions, construction,
management, or other professional fees, and all other costs and expenses.
* The allowance, up to the amount of the entire allowance shall be
spent first on Hayworth Partitions & attached Hayworth
furnishings prior to spending any monies on other tenant
improvements. The Hayworth partitions & furniture shall remain
property of the landlord.
<PAGE>
TSSI
Addendum to Exhibit D
10/8/93
Bid Alternates #1, 2, 3, & 4 are included.
Painting of existing gypsum ceiling is excluded.
Signage is by Tenant.
Security alarms are by Tenant.
Haworth System Furniture with Components are included per the Haworth/Thayer
quote #01363119 dated, 10/5/93 (signed by Share on 10/8/93) and attached quote
detail pages 1 thru 22.
<PAGE>
[LOGO OF FORUM PROPERTIES APPEARS HERE]
1st AMENDMENT TO LEASE
---
That certain Lease Dated 10/26/93 by and between PETULA ASSOCIATES, LTD., an
---------------------------
Iowa corporation, and KOLL CREEKSIDE ASSOCIATES II, a California general
- ------------------------------------------------------------------------
partnership dba KC CREEKSIDE II, Landlord, and Test Systems Strategies Inc.,
- -------------------------------- -----------------------------
Tenant, for the premises located at 9305 SW Gemini Drive, Beaverton, OR 97005,
-----------------------------------------
Building 15, Unit all, is amended this 20th day of July, 1994 solely as
-- --- ---- ---- --
hereinafter described by substituting the clauses below in place of the like
numbered clauses in the Lease.
Effective the 10th day of February, 1994, the clause below is substituted for
---- ---------------
like numbered clause in the Lease agreement.
lb. Tenant: Summit Design. Inc.
------------------
All other terms and conditions of the above described Lease shall remain in
full force and effect.
LANDLORD: PETULA ASSOCIATES, LTD. an Iowa
corporation, and KOLL CREEKSIDE ASSOCIATES II,
a California general partnership
dba KC CREEKSIDE II
PETULA ASSOCIATES, LTD. an Iowa corporation
By: /s/ Rod Vogel
---------------------
Rod Vogel
Its: Vice President
--------------------
By:
---------------------
Its:
--------------------
TENANT:
By: /s/ Larry Gerhard
---------------------
Its: President
--------------------
<PAGE>
[LOGO OF FORUM PROPERTIES APPEARS HERE]
EARLY POSSESSION AGREEMENT
Reference is made to that lease dated October 26, 1993 "Lease Date"
------------------------------
between Petula Associates, Ltd. and Koll Creekside Associates II , Landlord
--------------------------------------------------------------
and Test Systems Strategies Inc. , Tenant
-------------------------------------------------------------------
at 9305 SW Gemini Drive, Beaverton, OR 97005
------------------------------------------------------------------------------
Building/Unit 15/ALL .
-----------------------------------------------------------------
Tenant is to be allowed to occupy the premises on December 24, 1993 and rent
--------------------
is to begin on March 1, 1994 (the "Early Possession Period"). Landlord
-----------------------
and Tenant agree that all the terms and conditions of the Lease are to be in
full force and effect as of the date of Tenant's possession of the premises.
Tenant accepts premises in their present condition. Landlord agrees to complete
all tenant improvements as set forth in the Lease. Tenant understands that his
early occupancy may cause some delay in the construction of the tenant
improvements and that such delay will not be cause for forgiveness of any rent
due. It is further understood that any improvement of the leased premises by the
Tenant which may result in the delay in construction of tenant improvements or
in the obtaining of a building permit without prior written consent of Landlord
is hereby prohibited. Any such violation may cause the termination of the Lease.
In the event Tenant takes possession of the premises prior to completion of
construction, Tenant agrees to hold Landlord harmless from any and all claims
for damages to goods, equipment or inconvenience.
Tenant hereby agrees that if Tenant breaches the Lease and/or abandons the
premises before the end of the Lease term, or if Tenant's right to possession is
terminated by Landlord because of Tenant's breach of the Lease, Landlord shall,
at its option, (i) void the Early Possession Agreement; and (ii) recover from
Tenant, in addition to any damages due Landlord under the terms and conditions
of the Lease, rent prorate for the duration of the Early Possession Period at a
rental rate equivalent to two (2) times the monthly rental rate in effect at the
commencement of the Lease.
DATE:
------------------------------------
Petula Associates, Ltd. an Iowa corporation
LANDLORD: and Koll Creekside Associates II, a California
------------------------------------
general partnership dba KC CREEKSIDE II
By: /s/ Rod Vogel
---------------------------------
Rod Vogel,
Vice President
TENANT: Test Systems Strategies, Inc.
------------------------------------
By: /s/ Larry Gerhard
---------------------------------
By: /s/ Bruce Loughner 12/21
---------------------------------
<PAGE>
LEASE AMENDMENT
In accordance with Section 18 of the lease between Petula Associates, Ltd., an
Iowa Corporation and Koll Creekside Associates II, a California general
partnership dba KC Creekside II, a joint venture and Test Systems Strategies,
Inc. (TSSI) dated October 26, 1993, the landlord must give their consent to any
"...dissolution, merger, consolidation or other reorganization of Tenant..."
TSSI is in the due diligence process of a proposed merger where TSSI will hold
60 percent of a newly merged entity. Based upon comments by Mr. Bruce Loughner,
Vice-President of Finance, TSSI represents that such merger will not result in
any material negative variance in its existing financial statements. TSSI
recognizes that under the terms of Section 18 Landlord may require an
examination of such financials to determine the credit worthiness of the
resulting entity.
In order to remain in compliance with the terms of the lease, Koll Creekside
Associates is hereby notified of TSSI's intent to enter into a proposed merger
and grants it's consent as required in Section 18 to proceed with the merger
activities.
TENANT: Test Systems Strategies, Inc.
By: /s/ Bruce Loughner
--------------------------
Its: Chief Financial Officer
-------------------------
LANDLORD: PETULA ASSOCIATES, LTD., an Iowa
corporation and Koll Creekside Associates II,
a California general partnership dba KC Creekside II,
a joint venture.
By: /s/ Rod Vogel
--------------------------
Its: Vice President
-------------------------
Rod Vogel
Vice President
<PAGE>
ADDENDUM TO BUSINESS PARK LEASE
THIS ADDENDUM is entered into between Petula Associates Limited and Koll
Creekside Associates ("Landlord") and Test Systems Strategies, Inc. ("Tenant")
on the day and year written below, as an addendum to that certain Business Park
Lease between these parties, dated effective January 1, 1991 (the "Lease").
IN CONSIDERATION of the mutual terms and covenants set forth in the Lease
and herein, the parties agree to the corrections, modifications and additions to
the Lease set forth herein. The paragraph numbers set forth herein shall
coincide with the paragraph numbers of the Lease. Whenever there is a conflict
between the terms of this Addendum and the Lease, the terms of this Addendum
shall supersede the terms of the Lease.
4.a. The first month's rent shall be due on January 1, 1991.
4.c. Tenant's first installment of Expenses shall be due on January 1,
1991.
4.c.(1)(a),(b) The Expenses relating to supplies, materials, labor,
equipment, repairing and maintaining are limited to the Common Areas of the
Project. Common Areas are all areas of the Project other than areas occupied by
tenants and areas susceptible to occupancy by tenants. Expenses do not include
the cost of leasing, releasing and reletting the Project or portions thereof.
Legal expenses incurred in negotiating, terminating or extending leases or
incurred in proceedings against any tenants other than Tenant are not Expenses
for purposes of this paragraph.
4.c.(3) At the end of the last sentence of this subparagraph, delete the
".", and add the following language: ", or paid to Tenant if Tenant's Lease has
expired and Tenant has no further obligation with regard to Expenses".
4.c.(4) The late charge shall be five (5%) percent of the overdue payment,
and may not be assessed by Landlord against Tenant unless Tenant's rent payment
is more than five (5) days past due.
6. Landlord shall give Tenant a credit in the whole sum of the security
deposit Tenant currently has on deposit pursuant to that certain Koll Net Lease
between these
Page 1. Addendum to Business Park Lease
<PAGE>
same parties dated January 9, 1987 (the "Koll Lease"), against Tenant's
obligation to pay a security deposit under this paragraph. Upon receipt of such
credit, Tenant assigns to Landlord all rights Tenant has to its security deposit
on deposit pursuant to the Koll Lease.
7. Except in an emergency, or other circumstances in which 48 hours prior
notice is not practicable, Landlord shall provide not less than 48 hours written
notice to Tenant prior to making modifications, alterations, deletions or
improvements to the Project which in any way materially interfere with or
disrupt Tenant's use of the Premises. The prohibition against cooking in the
Premises is deleted. Except as provided in this paragraph, Tenant accepts the
Premises "AS IS". Landlord hereby agrees to make certain improvements and
repairs to the Premises, some of which shall be commenced within ten (10) days
of the execution hereof, and others of which shall be commenced within ten (10)
days of the April 20, 1991, payment referenced in Section 32 below, or the
earlier payment of all of the rent due under the Prior Lease (defined
hereinafter) as described in Section 32, whichever first occurs. Tenant agrees
that Landlord shall have reasonable access to the Premises for the purpose of
making these improvements and that Landlord shall cooperate with Tenant to
complete said alterations and repairs in a manner so as to minimize disruption
to Tenant's business, and the improvements, once commenced, shall be completed
with due diligence. All such improvement shall be accomplished without charge to
Tenant. The improvements to be commenced within ten (10) days of the execution
here are as follows:
A. Landlord shall rekey all locks and replace all keys.
B. Landlord shall investigate and unplug, if necessary, any stoppage in
the sewer drains in restrooms.
C. Landlord shall repair and replace any burned out corridor light
bulbs, bulbs in exit signs, and other burned out bulbs and tubes.
D. Landlord shall upgrade the ventilation system in all restrooms and
air balance the existing HVAC system.
E. Landlord shall repair the door closure mechanisms on the exit doors.
F. Landlord shall add four (4) 10 volt duplex outlets to the library
area.
Page 2. Addendum to Business Park Lease
<PAGE>
Within ten (10) days of the April 20, 1991, payment referenced in
Section 32 below or the earlier payment of all the rent due under the Prior
Lease (defined hereafter) as described in Section 32, whichever first occurs,
and if all other payments required hereunder are then current, Landlord shall
commence the following improvements:
A. Landlord shall replace restroom floor coverings, recarpet all
presently carpeted areas, and install new cove base throughout the Premises.
B. Landlord shall repaint all interior walls as well as refinish the
woodwork in the kitchen area.
8. Tenant's current signage is approved by Landlord for the term of this
Lease and any renewal hereof.
10. Landlord will continually provide nonexclusive parking spaces
equivalent to four (4) parking spaces per one thousand (1,000) square feet of
premises leased in Buildings 4 and 5 of the Project in the parking areas
immediately surrounding Buildings 4 and 5 of the Project, and shall exert
reasonable best efforts to ensure that Tenant has the use of its proportionate
share.
12, 13, 14. Tenant shall not be required to remove any alterations which
Tenant made to the Premises with Landlord's prior written consent, unless such
consent was conditioned upon removal. The criteria to determine if Landlord's
withholding of consent is unreasonable shall include, but not be limited to, the
following: whether the alteration, addition or improvement, (a) is visible from
the exterior of the Project; (b) affects the structural integrity of the
Project; or (c) involves the removal or modification of Tenant improvements.
Tenant's release of Landlord shall not extend to Landlord's negligent acts
or Landlord's breaches of the Lease, which Landlord has failed to cure as
provided herein. Tenant's indemnity in favor of Landlord shall not extend to
Landlord's negligent acts or Landlord's breach of the Lease. Landlord shall act
with reasonable promptness and diligence to make any repairs which the Landlord
is otherwise obligated to make under this Lease following receipt of written
notice of the need for such repair by Landlord from Tenant. The reasonableness
of the promptness and diligence with which the Landlord
Page 3. Addendum to Business Park Lease
<PAGE>
makes a repair shall be determined in light of the nature of the repair and
whether and how it critically or non-critically interferes with Tenant's use and
enjoyment of the Premises.
15. In paragraph 15 of the Lease at page 5, line 7, after the word
"against", insert the following language "... to the extent of the coverage
...".
16. In paragraph 16 of the Lease, the second sentence shall be superseded
by the following sentence: "If Landlord does not elect to terminate this Lease,
and if, in Landlord's estimation, the Premises cannot be restored within one
hundred eighty (180) days following such destruction, then Landlord shall notify
Tenant within thirty (30) days of the event causing the damage or destruction,
and Tenant may terminate the Lease by delivery of notice to Landlord within
thirty (30) days of receipt of Landlord's notice."
18. In paragraph 18 of the Lease, the third, fourth, fifth, sixth and
seventh sentences thereof shall be deleted. The following language is deleted
from the first sentence of paragraph 18 of the Lease: "... which Landlord may
withhold in its sole discretion". Any consent of Landlord requested by Tenant
under paragraph 18 shall be governed by paragraph 27(c) of the Lease. Landlord
shall not unreasonably withhold its consent as to any request by Tenant to
assign, convey, transfer or sublet all or any part of the Premises leased. The
criteria to determine if Landlord's withholding of consent is unreasonable,
shall include, but not be limited to, the following: the prospective Tenant's,
assignee's or transferee's (a) intended use of the premises; (b) parking needs;
and (c) credit worthiness. A change of control of Tenant by sale of stock,
assets, merger or otherwise, shall not be an assignment or transfer under the
provisions of this paragraph.
19. Paragraph 19 of the Lease shall be superseded by the following: "The
occurrence of any of the following shall constitute a default by Tenant: (a) a
failure to pay rent or other charge within ten (10) days of the due date
thereof; (b) Abandonment and Vacation of the Premises (failure to occupy and
operate the Premises for ten (10) consecutive days shall be deemed an
abandonment and vacation); or (c) failure to perform any other provision of the
Lease unless Tenant has commenced substantial steps toward the cure of such
failure within fifteen (15) days after written notice thereof by Landlord to
Tenant, and has completed said cure within thirty (30) days of said notice,
unless the
Page 4. Addendum to Business Park Lease
<PAGE>
cure is of such a nature that it cannot practicably be completed within that
time, but can be cured within a reasonable time, then Tenant shall have an
additional reasonable time to cure the default and shall continue to exercise
all diligent efforts to complete said cure as soon thereafter as practicable, it
being the obligation of Landlord to provide Tenant with a written notice of
default for any alleged acts of default under paragraph 19(c) of the Lease.
Notwithstanding the foregoing provision, however, in the event that the nature
of Tenant's breach is such that Landlord's interests would be substantially
jeopardized if the breach were allowed to persist for thirty (30) days (e.g.,
violations of the insurance, use, parking or hazardous waste provisions), then
the period of written notice required under paragraph 19(c) may be reduced by
the Landlord only to the extent necessary, however, to protect Landlord's
interest under the circumstances.
20.a. Paragraph 20.a.(3) is amended to read as follows: "Any other amount,
including court, reasonable attorney and collection fees and costs, which
Landlord is entitled to collect for Tenant's default."
21. Except for emergency, the right of Landlord and its authorized
representatives to enter the Premises shall be subject to twenty four (24) hours
prior verbal or written notice to Tenant.
22. Tenant's appointment of Landlord as attorney-in-fact of Tenant to
execute, deliver and record documents as described in this paragraph shall not
occur unless and until Landlord has submitted a written request to Tenant to
execute, deliver and record any such document, and Tenant has failed to respond
to Landlord within ten (10) days of such request. Tenant's right to quiet
possession and the use and enjoyment of the Premises shall not be disturbed if
Tenant is not in default of the Lease. Lessor will cause its present and future
lenders and the present and future holders of any trust deed, mortgage or other
encumbrance against the Project to honor Tenant's right to the quiet possession
and use and enjoyment of the Premises so long as Tenant is not in default.
24. The non-waiver provisions of this paragraph shall apply equally to
Tenant.
[STAMP APPEARS HERE]
Page 5. Addendum to Business Park Lease
<PAGE>
30. Paragraph 30 of the Lease shall read as follows: "The "Additional
Space" is that leasable area adjacent to the Premises which is outlined in red
on the diagram attached hereto. If Tenant shall be desirous of leasing all or
part of the Additional Space, Landlord agrees to negotiate with Tenant in good
faith to reach agreement as to the lease of the Additional Space. The rights of
Tenant under this paragraph 30 are not assignable, shall terminate upon any
assignment, sublease or event of default hereunder by Tenant, or any termination
of this Lease or of Tenant's right of possession hereunder, and are subordinate
to the rights of Protocol Systems, Inc. which has certain preemptive rights as
to the Additional Space.
31. Landlord will allow TSSI to maintain a basketball hoop at the rear of
the building, as long as it does not interfere with the quiet enjoyment of other
tenants.
32. This Lease supersedes and replaces that certain prior Lease dated
January 16, 1987, by and between Landlord and Tenant (the "Prior Lease"). The
Prior Lease is agreed to be terminated upon the effective date hereof; provided,
the expiration or termination of the Prior Lease shall not release the parties
from any obligations or liabilities which have previously accrued under the
Prior Lease (except as otherwise set forth in this paragraph), nor shall it
terminate the release, indemnity and limitation of liability provisions in the
Prior Lease. Tenant shall be deemed to have complied with all provisions of the
Prior Lease as to the condition of the Premises at the expiration of the Prior
Lease term, and any further obligations of Tenant in that regard shall be
governed by this Lease. It is agreed that Tenant is indebted to Landlord under
the Prior Lease in the total amount of $44,769.89. Such indebtedness shall be
paid in four (4) equal installments of $11,192.47 each, payment in such amount
to be made on or before January 20, 1991, February 20, 1991, March 20, 1991, and
April 20, 1991. Such payments shall be paid as payments of additional rent
hereunder, and shall not be subject to late charges unless not paid within five
(5) days of the respective due date referenced in this paragraph.
IN WITNESS WHEREOF, the parties have hereunto set their hands this ________
day of _________, 199_.
Page 6. Addendum to Business Park Lease
<PAGE>
LANDLORD TENANT
PETULA ASSOCIATES, LTD., an Iowa TEST SYSTEMS STRATEGIES, INC.
corporation, and KOLL CREEKSIDE an Oregon corporation
ASSOCIATES, a California general
partnership, doing business as KC
CREEKSIDE
PETULA ASSOCIATES, LTD, an Iowa by: /s/ William E. DenBeste
corporation -------------------------
Its: William E. DenBeste
------------------------
President
by: /s/ Rod Vogel
--------------------------------------
Rod Vogel
Its: Senior Regional Equity Administrator
Corporate Real Estate Equities
-------------------------------------
by:
-------------------------------------
Its:
-------------------------------------
Page 7. Addendum to Business Park Lease
<PAGE>
Exhibit 10.14
SUB LEASE AGREEMENT
Made and Signed in Herzlia, Israel on the ____ day of January 1993
BY and BETWEEN
DCL Technologies Ltd.
of 20 Galgalei Haplada
Herzlia, Israel
(hereinafter "DCL") of the first part:
-----------------
AND
SEE Technologies Ltd.
of 20 Galgalei Haplada
Herzlia, Israel
(hereinafter "SEE") of the second part:
------------------
WHEREAS DCL signed on December 31st 1992 a lease with the owners of the
building situated at 20 Galgalei Haplada, Herzlia (hereinafter "the
Building") to lease the Building for a 5 year period according to the
terms agreed upon thereto (hereinafter "the Lease"); and
WHEREAS SEE wishes to sub lease three half floors and part of the basement
(hereinafter "the Sub Leased Area"); and
WHEREAS DCL wishes to sub lease to SEE the Sub Leased Area
NOW THEREFORE IT IS AGREED, STIPULATED AND DECLARED BETWEEN THE PARTIES AS
FOLLOWS:
1. GENERAL
-------
1.1 The preamble to this agreement and the appendix attached hereto forms
an integral part hereof.
1.2 The headings of the sections are for the sake of convenience only and
shall not be taken into account in its interpretation.
1.3 The Lease is attached herewith as APPENDIX A to this agreement.
<PAGE>
2. REPRESENTATIONS AND DECLARATIONS
--------------------------------
2.1 DCL hereby represents and declares as follows:
2.1.1 DCL is a public company, registered under the laws of the
state of Israel. Its company number is 52-003648-4.
2.1.2 DCL has full power and authority to enter into this sub lease
agreement.
2.1.3 DCL is the lessee of the Building according to the Lease and
undertakes to fulfill all its obligations according to the
Lessee.
2.1.4 The lessors of the Building ("the Lessors") have granted their
consent to DCL's sub-leasing the Sub Leased Area to SEE.
2.1.5 This sub lease agreement does not violate any provisions of
any law or agreement and to the best of DCL's knowledge, DCL
is not in breach of the Lease.
2.2 SEE hereby represents and declares as follows:
2.2.1 SEE is a private limited company registered under the laws of
the state of Israel. Its company number is ______________.
2.2.2 SEE has full power and authority to enter into this sub-lease
agreement.
2.2.3 This sub-lease agreement does not violate the provisions of
any agreement SEE is part to.
2.2.4 SEE is familiar with the Lease attached hereto as APPENDIX A'
----------
and undertakes not to violate its terms and conditions and/or
to cause DCL to violate the Lease or any part thereof, and
undertakes to adhere to all its terms and conditions set in
the Lease for as long as this sub-lease agreement is valid.
2.2.5 The Sub Leased Area will not be used for any purpose contrary
to section 4 of the Lease.
3. THE SUB LEASE
-------------
3.1 DCL hereby undertakes to sub lease to SEE and SEE hereby undertakes
to accept from DCL by way of sub lease three half floors of the
Building and parts of the basement.
-2-
<PAGE>
3.2 The three half floors will consist of one half floor of the second
floor of the Building and either two half floors on the third floor
of the Building or one half floor on the third and one half floor on
the fourth floors of the Building.
3.3 The parts of the basement include 3 storage rooms in which SEE stores
it's equipment. SEE will exercise best effort to release one of the
rooms until 31 December 1994.
4. UNDERTAKING TOWARD THE LESSORS
------------------------------
4.1 Without derogating from SEE's undertakings in section 2.2.4 above,
SEE hereby agrees to sign appendix c of the Lease and further agrees
to submit the said appendix to the Lessors and to abide to all its
terms.
4.2 SEE agrees to deposit in trust a bank guarantee acceptable by the
Lessors in the sum of US$28,500 (twenty eight thousand five hundred
US dollars) which will be held by Lessors counsel according to the
terms agreed upon in section 16(a) of the Lease. The said bank
guarantee will be returned to SEE immediately after the complete
evacuation of the Sub Leased Area by SEE and SEE presenting to DCL
proof of its paying all payments required according to this
agreement.
5. COMMON AREAS
------------
5.1 As an integral part of this sub lease agreement, SEE shall be
entitled to free use and enjoyment of the common areas of the
Building and of the areas surrounding the Building, i.e. the lobby,
stairways, elevator, the basement including the cafeteria, the
library room, the conference room, the roof and the yard surrounding
the Building (hereinafter "the Common Areas").
6. CONSIDERATION
-------------
6.1 As consideration for the sub-lease granted herein, SEE shall pay 3/8
(three eighths) of the rent and any other payment payable by DCL to
the Lessors according to section 5 of the Lease, on the same dates
and according to the same terms as provided for DCL's payments to the
Lessors according to the said section 9.
6.2 SEE shall add Value Added Tax to all its payments at the rate
applicable at the time, against DCL providing SEE with a proper tax
invoice.
6.3 SEE will not be responsible for any portion of any amount which DCL
may be required to pay to the Lessors by virtue of delinquency in its
payments under the Lease, unless and to the extent that such
delinquency was caused by SEE.
-3-
<PAGE>
7. BUILDING MAINTENANCE AND OTHER COMMON COSTS
-------------------------------------------
7.1 Costs which relate to the Common Areas or that otherwise relate to
both DCL and SEE (Hereinafter "the Common Costs"), shall be borne by
the parties hereto in the following ratio - DCL: 50% and SEE: 50%.
Where DAZEX Israel Ltd., or any other tenant occupying the first
floor of the Building, participates in any of the Common Costs,
DAZIX's payment will be deducted from the Common Costs before the
ratio as stipulated in this section is applied.
7.2 DCL shall be responsible for payment of all Common Costs and SEE
shall pay its share on the same dates and according to the same terms
as provided for DCL's payments.
7.3 SEE will add Value Added Tax to all its Building Expenses payments,
at the rate applicable from time to time, against DCL providing SEE
with a proper tax invoice.
7.4 The following is a list of the items which fall under the category of
common costs:
7.4.1 Building cleaning and maintenance;
7.4.2 Air-conditioning, elevator, switchboard and generator
maintenance;
7.4.3 Alarm and security services;
7.4.4 Electricity; and
7.4.5 Municipality.
8. REPAIRS
-------
8.1 DCL will make any required repairs in the Common Area or in the area
that affect the Sub Leased Area. In the event the repair affects only
the Sub Leased Area and is not a substantial repair, it will be
executed only after receiving SEE's approval. A substantial repair
for the purpose of this section will be defined as any repair
required according to the Lease. DCL undertakes to demand that the
Lessors effect any required repair according to the terms of the
lease. If any repair is in the Common Area, the cost of such repair
shall be paid as provided in section 7.1 above, provided that SEE's
prior consent has been obtained for any repair or replacement of
equipment, whereby SEE's share will be valued at more than US$500
(Five hundred US Dollars).
8.2 If DCL fails to effect repairs in the Sub Lease Area or in the Common
Areas, SEE will have the right to effect the said repair itself,
provided a 7 day prior notice has been served to DCL and in such case
DCL will pay SEE for the cost of the said repair as provided above
for Common Costs immediately.
-4-
<PAGE>
9. TELEPHONES
----------
9.1 The parties will share the outgoing telephone lines and will share
the expenses of the telephones on an as used basis. A special
reporting system installed in the Building will be used to calculate
each party's share in the payment.
10. CAFETERIA
---------
10.1 The parties will jointly manage the cafeteria and will bare the
expenses of the cafeteria on an as used basis. The actual monthly
payments will be paid pro-rata to the food tickets issued to the
employees of each party.
11. SIGNS
-----
11.1 SEE shall be entitled to maintain a sign bearing its name and logo of
the same size and situated in the same place as the present sign
already situated.
12. INSURANCE AND LIABILITY
-----------------------
12.1 SEE shall pay, as provided above for common costs, all insurance
costs borne by DCL according to the Lease (in order to avoid any
doubt it is stated that SEE will pay said insurance costs after
deducting the Lessors participation in the insurance costs as stated
in section 145(g) of the Lease). SEE will be added to the insurance
policy issued to DCL concerning its undertakings according to section
14 of the Lease, as an additional beneficiary with no subrogation or
indemnification right towards it. SEE will be solely responsible for
insuring its own equipment and other tangible property.
12.2 DCL will not be responsible for any damages, direct or indirect, to
property or person, caused to SEE, its employees, representatives or
visitors in the Common Areas or the Sub Leased Areas, unless caused
by an act or omission of DCL. Further, SEE will be solely responsible
for any damage caused in the Sub Leased Area by it's employees and/or
by it's visitors negligence.
12.3 SEE will not be responsible for any damages, direct or indirect, to
property or to person, caused by DCL, its employees, representatives
or visitors in the area leased by DCL, unless caused by an act or
omission of SEE. Further, DCL will be solely responsible for any
damage caused in the area leased by DCL by its employees and/or by
its visitors negligence.
13. QUIET ENJOYMENT
---------------
13.1 DCL hereby undertakes to protect and preserve SEE's right to
exclusive use and enjoyment of the Sub Leased Area and to full and
free use and enjoyment of the Common Area. DCL's personnel shall not
enter the Sub Leased Area, without prior
-5-
<PAGE>
approval but it is agreed that SEE shall not deny DCL's personnel
from entering the Sub Leased Area if such entrance is required for
maintenance, repairs or cleaning.
13.2 DCL will not sub lease any part of the building to other tenants,
except a DCL subsidiary of affiliated company, without the prior
written consent of SEE, which consent shall not be unreasonably
withheld.
14. FIXTURES
--------
14.1 Subject to rights of the Lessors under the Lease, any fixture
installed by SEE heretofore or during the term of the sub lease
granted herein, shall remain the sole property of SEE.
15. USE OF CERTAIN FURNITURE AND EQUIPMENT
--------------------------------------
15.1 DCL and its subsidiaries are using certain furniture and equipment
which belongs to SEE as listed in APPENDIX B to this agreement. SEE
agrees to lease these items to DCL for the price of US$1 (One US
Dollar) per year for the duration of this agreement.
16. TERM
----
16.1 The term of the sub lease granted to SEE according to this agreement
shall commence on January 1, 1994 and shall expire on December 31,
1997, condition to terms of the Lease.
16.2 Notwithstanding the above, SEE declares that it is familiar with
section 5 of the Lease, that entitled DCL to terminate the Lease
after a period of three and one half years (Two and a half years into
this agreement) and agrees that it will have no demands of claims
from DCL in the event DCL exercises its right to terminate the Lease
prematurely. Notice of such premature termination will be served by
DCL to SEE no later 10 days after DCL exercises its said right.
16.3 SEE will return the Sub Leased Area to the possession of DCL and/or
the Lessors, according to the terms of this agreement, in the same
state received without any person or equipment occupying the Sub
Leased Area. In the event SEE does not return the Sub Leased Area as
stated above, SEE will pay DCL double the consideration according to
section 6 above for every day of delay in the complete evacuation of
the Sub Leased Area. Such payment will be deemed a fixed agreed upon
compensation for costs suffered by DCL concerning the delayed
evaluation and will not derogate from any other remedy DCL will be
entitled to according to this agreement or the law.
-6-
<PAGE>
17. TERMINATION
-----------
17.1 Any acts or omissions by either party which entitles the Lessors to
terminate the Lease, whether they terminate the Lease or not, shall
be deemed a fundamental breach of this agreement and shall entitle
the other party to terminate this agreement by written notice
delivered to the breaching party at any time after the occurrence
such act of omission.
17.2 Any delayed payment by more than 15 days owed by SEE to DCL according
to this agreement, shall be deemed a fundamental breach of this
agreement and shall entitle DCL to terminate this agreement after a
15 day period as of the date a written notice has been served to SEE
provided the delayed payment has not been paid during the said 15 day
period.
17.3 Either party may terminate this agreement with notice of immediate
effect in the event either party become insolvent or a receiver or
liquidator has been nominated to control its operation or assets or
any part thereof. If DCL is the insolvent party then it will exercise
its best effort to assign the Lease to SEE if SEE so desires.
18. PAYMENTS
--------
18.1 The parties undertake to pay in a timely fashion all amounts that
they are required to pay according to this agreement, inter alia, all
payments concerning Common Costs, all amounts owed to any utility or
service supplier and all municipal or other taxes and levies
required.
18.2 In the event any party shall fail to pay any payment according to the
terms of this agreement when due, the other party shall be entitled
to, at its sole election, to pay such amounts on the other party's
account and the other party shall then be obliged to reimburse the
paying party for such payment immediately upon the other party's
first written demand. Any such payment will bear interest from the
date of payment until the date of reimbursement at the highest rate
then charged by Bank Leumi Le Israel Ltd. for unauthorized overdrafts
on business debitory accounts.
19. ASSIGNMENT AND SUB LEASE
------------------------
19.1 SEE will not have the right to assign any of its rights and/or
undertakings herein to any third party nor shall SEE have the right
to sub lease the Sub Leased Area, in all or in part, without the
prior express written consent of DCL.
20. MISCELLANEOUS
-------------
20.1 This agreement will be governed by the laws of the State of Israel.
-7-
<PAGE>
20.2 This agreement constitutes the entire and exclusive agreement between
the parties and supersedes all prior oral or written agreements and
understandings concerning the same.
20.3 All notices and other communications will be in writing and deemed to
have been delivered upon personal delivery or after 3 days if mailed
by registered mail.
/s/ Amihai Ben-David /s/ Amihai Ben-David
________________________________ __________________________________
DCL Technologies Ltd. SEE Technologies Ltd.
/s/ Zamir Paz
Zamir
-8-
<PAGE>
Exhibit 10.15
US Bank
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000. 05/01/96 885934510 20041
- ----------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: Summit Design, Inc. Lender: UNITED STATES NATIONAL BANK OF
OREGON
9305 SW Gemini Drive Corporate Banking Division
Portland, OR 97006 PL-7 0regon Commercial Loan
Servicing
555 S.W. Oak
Portland, OR 97204
================================================================================
Principal Amount: $2,000,000.00 Initial Rate: 10.250% Date of Note: May 1,1996
PROMISE TO PAY. Summit Design, Inc. ("Borrower") promises to pay to UNITED
STATES NATIONAL BANK OF OREGON ("Lender"), or order, In lawful money to the
United States to America, on demand, the principal amount of Two Million &
00/100 Dollars (S2,000,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance to each advance. Interest
shall be calculated from the date to each advance until repayment to each
advance.
PAYMENT. Borrower will pay this loan immediately upon Lender's demand. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning June 1, 1996, with all
subsequent interest payments to be due on the same day to each month after that.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the Lender's Prime Rate. This
is the rate of interest which Lender from time to time establishes as its Prime
Rate and is not, for example, the lowest rate of interest which Lender collects
from any borrower or class of borrowers (the "Index"). The interest rate shall
be adjusted without notice effective on the day Lender's prime rate changes.
Lender will tell Borrower the current Index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other rates as well.
The interest rate change will not occur more often than each Day. The Index
currently Is 8.250% per annum. The interest rate to be applied to the unpaid
principal balance to this Note will be at a rate of 2.000 percentage points over
the Index, resulting 43 in an initial rate to 10.250% per annum. * See EXHIBIT A
for Pricing Matrix.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to
by Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the principal
balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (i) Lender
in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and ail accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 7.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
<PAGE>
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender In the State to Oregon. It there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction to the
courts to Multnomah County, the State of Oregon. Subject to the provisions on
arbitration, this Note shall be governed by and construed in accordance with the
laws of the State of Oregon.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. Borrower agrees to be liable
for all sums either: (a) advanced in accordance with the instructions of an
authorized person or (b) credited to any of Borrower's accounts with Lender,
regardless of the fact that persons other than those authorized to borrow have
authority to draw against the accounts. The unpaid principal balance owing on
this Note at any time may be evidenced by endorsements on this Note or by
Lender's internal records, including daily computer print-outs. Lender will have
no obligation to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note: (b) Borrower or any guarantor ceases doing business or is
insolvent: (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or anyother loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good faith
deems itself insecure under this Note or any other agreement between Lender and
Borrower.
ARBITRATION. lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Note or otherwise, including without limitation contract and
tort disputes, shall be arbitrated pursuant to the Rules of the American
Arbitration Association, upon request of either party. No act to take or
dispose of any collateral securing this Note shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; foreclosing by notice and sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to Article
9 of the Uniform Commercial Code. Any disputes, claims, or controversies
concerning the lawfulness or reasonableness of any act, or exercise of any
right, concerning any collateral securing this Note, including any claim to
rescind, reform, or otherwise modify any agreement relating to the collateral
securing this Note, shall also be arbitrated, provided however that no
arbitrator shall have the right or the power to enjoin or restrain any act of
any party. Judgment upon any award rendered by any arbitrator may be entered in
any court having jurisdiction. Nothing in this Note shall preclude any party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches, and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of an action for these purposes.
The Federal Arbitration Act shall apply to the construction, interpretation, an
enforcement of this arbitration provision.
LATE CHARGE. If a payment is 19 days or more past due, Borrower will be charged
a late charge of 5% of the delinquent payment.
<PAGE>
U.S. BANK
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000. 05/01/96 8659345210 20041
- ------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: Summit Design, Inc. Lender: UNITED STATES NATIONAL BANK OF
OREGON
9305 SW Gemini Drive Corporate Banking Division
Portland, OR 97005 PL-7 Oregon Commercial Loan
Servicing
566 S. W. Oak
Portland, OR 97204
================================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered Into between Summit Design, Inc.
(referred to below as "Grantor"); and UNITED STATES NATIONAL BANK OF OREGON
(referred to below as "Lender"). For valuable consideration, Grantor grants to
Lender a security interest In the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated In this Agreement with respect
to the Collateral, In addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
All accounts, chattel paper, general Intangibles and Inventory
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for
any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
Event to Default. The words "Event of Default" mean and include without
limitation any of the Events to Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor" means Summit Design, Inc., its successors and
assigns
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents. In addition to the
Note, this Agreement secures the following described additional
indebtedness: a prior note dated May 1, 1995, in the principal amount of
$460,560.00.
Lender. The word "Lender" means UNITED STATES NATIONAL BANK OF OREGON, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated May 1, 1996,
in the principal amount of $2,000,000.00 from Summit Design, Inc. to
Lender, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or credit
agreement.
<PAGE>
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all
of Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Organization. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the state of Grantor's
incorporation. Grantor has its chief executive office at 9305 SW Gemini
Drive, Portland, OR 97005. Grantor will notify Lender of any change in the
location of Grantor's chief executive office.
Authorization. The execution, delivery, and performance of this Agreement
by Grantor have been duly authorized by all necessary action by Grantor and
do not conflict with, result in a violation of, or constitute a default
under (a) any provision of its articles of incorporation or organization,
or bylaws, or any agreement or other instrument binding upon Grantor or (b)
any law, governmental regulation, court decree, or order applicable to
Grantor.
Perfection of Security Interest. Grantor, agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. This is a continuing Security Agreement and will continue in
effect even though all or any part of the indebtedness is paid in full and
even though for a period of time Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, in genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral. At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
therefore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counter claims against any such account; and
no agreement under which any deductions or discounts may be claimed shall
have been made with the account debtor except those disclosed to Lender in
writing.
Location of Collateral. Grantor, upon request of Lender, will deliver to
Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or losing purchased
by Grantor (b) all real property being rented or based by Grantor: (c)) all
storage facilities owned, rented, based, or being used by Grantor, and (d)
all other properties where Collateral is or may be located. Except in the
ordinary course of its business, Grantor shall not remove the Collateral
from its existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the
records concerning the Collateral), at Grantors address shown above, or at
such other locations as are acceptable to Lender. Except in the ordinary
course of its business, including the sales of Inventory, Grantor shall not
remove the Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of vehicles,
or other titled property, Grantor shall not take or permit any action which
would require application for certificates of title for the vehicles
outside the State of Oregon, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business. Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who quality as a buyer in the ordinary course of business. A safe in
the ordinary course of Grantor's business does not include a transfer in
partial or total satisfaction of a debt or any bulk safe. Grantor shall
not pledge, mortgage, encumber or otherwise permit the Collateral to be
subject to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the prior
written consent of Lender. This includes security interests even if junior
in right to the security interests granted under this Agreement. Unless
waived by Lender, all proceeds from any disposition of the Collateral (for
whatever reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement shall
not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's
rights in the Collateral against the claims and demands of all other
persons.
<PAGE>
05-01-1996 COMMERCIAL SECURITY AGREEMENT
LOAN NO (CONTINUED)
================================================================================
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shaft require, and
insofar as the Collateral consists of accounts and general intangibles,
Grantor shaft deliver to Lender schedules of such Collateral, including
such information as Lender may require, including without limitation names
and addresses of account debtors and agings of accounts and general
intangibles, insofar as the Collateral consists of inventory. Grantor shall
deliver to Lender, as often as Lender shall require, such lists,
descriptions, and designations of such Collateral as Lender may require to
identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit
or permit DAMAGE TO OR DESTRUCTION OF THE COLLATERAL OR ANY PART OF THE
COLLATERAL, LENDER AND ITS DESIGNATED REPRESENTATIVES AND AGENTS SHALL HAVE
THE right at all reasonable times to examine, inspect, and audit tier,
Collateral wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, LOSS OR DAMAGE of or
to any Collateral; of any request for credit or adjustment or of any other
dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or the amount
of the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness,
or upon any of the other Related Documents, Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is Subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental requirements. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). The terms "hazardous
waste" and hazardous substance" shall also include without limitation,
petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and
substances. Grantor hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any Environmental Laws, and (b)
agrees to indemnify and hold harmless Lender against any and all claims and
losses resulting from a breach of this provision of this Agreement, or as a
result of a violation of any Environmental Laws. This obligation to
indemnify shall survive the payment of the indebtedness and the
satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, wilt deliver to
Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days' prior written
notice to Lender and not including any disclaimer of the insurer's
liability for failure to give such a notice. Each insurance policy also
shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor
or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require.
If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if it so
chooses "single interest insurance," which will cover only Lender's
interest in the Collateral.
Application of insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral.
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
indebtedness and shall pay the balance to Grantor. Any proceeds which have
not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a Sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a no-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantors they
become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the payment
of premiums shall remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured; (e) the
<PAGE>
05-01-1996 COMMERCIAL SECURITY AGREEMENT
LOAN NO (CONTINUED)
================================================================================
then current value on the basis of which insurance has been obtained and
the manner of determining that value; and (f) the expiration date of the
policy. In addition, Grantor shall upon request by Lender (however not more
often than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the
Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts and above in the paragraph
titled "Transactions Involving Collateral", Grantor may have possession of the
tangible personal property an beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. Until
otherwise notified by Lender, Grantor may collect any of the Collateral
consisting of accounts. At any time and even though no Event of Default exists,
Lender may exercise its rights to collect the accounts and to notify account
debtors to make payments directly to Lender for application to the indebtedness.
It Lender at any time has possession of any Collateral, whether before or after
an Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interest, encumbrances, and other claims, at any time
levied or placed on the collateral. Lender also may (but shall not be obligated
to) pay all costs for insuring, maintaining and preserving the Collateral. All
such expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the DATE OF REPAYMENT BY GRANTOR. ALL SUCH EXPENSES SHAFT BECOME A
PART OF THE INDEBTEDNESS AND, at Lenders option, will (a) be payable on demand,
(b) be added to the balance Of the Note and b8 apportioned among and be payable
With any installment payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the Note, or (c) be
treated as a balloon payment which will be due and payable at the Note's
maturity. This Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any otherl
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sates
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DETECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the Indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies
or becomes incompetent. Lender, at its option, may, but shall not be
required to, permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender,
and, in doing so, cure the Event of Default.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of the
same provision of this Agreement, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such default, (a) cures the default within fifteen (15) days; or
(b), if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
<PAGE>
05-01-1996 COMMERCIAL SECURITY AGREEMENT
Loan No
================================================================================
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shaft have all the rights of a secured
party under the Oregon Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and alt certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time
of repossession, Grantor agrees Lender may take such other goods, provided
that Lender makes reasonable efforts to return them to Grantor after
repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, tease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its
own name OR THAT OF GRANTOR. LENDER MAY SELL THE COLLATERAL at public
auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after which any
private sale or any other intended disposition of the Collateral is to be
made unless Grantor has signed, after an Event of Default occurs, a
statement renouncing or modifying Grantor's right to notification of sale.
The requirements of reasonable notice shall be met if such notice is given
at feast ten (1O) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale
and selling the Collateral, shall become a part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become part
of the Indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure until
repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness in
such order of preference as Lender may determine. Insofar as the Collateral
consists of accounts, general intangibles, insurance policies, instruments,
chattel paper, chooses in action, or similar property, Lender may demand,
collect, receipt for, settle, compromise, adjust , sue for, foreclose, or
realize on the Collateral as Lender may determine, whether or not
Indebtedness or Collateral is then due. For these purposes, Lender may, on
behalf of and in the name of Grantor, receive, open and dispose of mail
addressed to Grantor; change any address to which mail and payments are to
be sent; and endorse notes, checks, drafts, money orders, documents of
title, instruments and items pertaining to payment, shipment, or storage of
any Collateral. To facilitate collection, Lender may notify account debtors
and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial code,
as may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor's failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted
by Lender in the State Oregon Oregon. H there IS a lawsuit, (Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
Multnomah County, State of Oregon. Subject to the provisions on
arbitration, this Agreement shall Be governed by and construed In
accordance with the laws of the State of Oregon.
Attorneys' Fees Expenses. Grantor agrees to pay upon demand 811 of
Lender's costs and expenses, Including attorneys' fees and Lender's legal
expense, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, whether or not
there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Grantor also shall pay all court costs and such
additional fees as may be directed by the court.
Caption Headings. Caption headings In this Agreement arc for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement,
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to
<PAGE>
05-01-1996 COMMERCIAL SECURITY AGREEMENT
Loan No
================================================================================
the party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent permitted by
applicable law, if there is more than one Grantor, notice to any Grantor
will constitute notice to all Grantors for notice purposes, Grantor will
keep Lender informed at all times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact-tact, irrevocably, with full power of substitution to do
the following: (a) to demand, collect, receive, receipt for, sue and
recover all sums of money or other property which may now or hereafter
become due, owing or payable from the Collateral; (b) to execute, sign and
endorse any and all claims, instruments, receipts, checks, drafts or
warrants issued in payment for the Collateral; (c) to settle or compromise
any and all claims arising under the Collateral, and, in the place and
stead of Grantor, to execute and deliver its release and settlement for the
claim; and (d) to file any claim or claims or to take any action or
institute or take part in any proceedings, either in its own name or in the
name of Grantor, or otherwise, which in the discretion of Lender may seem
to be necessary or advisable. This power is given as security for the
indebtedness, and the authority hereby conferred is and shall be
irrevocable and shall remain in full force and effect until renounced by
Lender.
Preference Payments. Any monies lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
indebtedness and, at Lender's option, shall be payable by Borrower as
provided above in the "EXPENDITURES BY LENDER" paragraph.
SERVABILITY. It a court of competent jurisdiction finds any provision of
this Agreement to be Invalid or unenforceable. &S to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person is obligated for
the Indebtedness, Borrower irrevocably waives, disclaims and relinquishes
all claims against such other person which Borrower has or would otherwise
have by virtue of payment of the Indebtedness or any part thereof,
specifically including but not limited to all rights of indemnity,
contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 1, 1996.
GRANTOR:
Summit Design, Inc.
X /s/ C. Albert Koob
- --------------------------------------------------------------------------------
Authorized Officer
<PAGE>
This exhibit is attached to and made a part of that certain Promissory Note for
$2,000,000.00 dated may 1, 1996 from Summit Design, Inc. to United States
National Bank of Oregon.
Exhibit "A"
(to $2,000,000.00 Promissory Note dated May 1, 1996)
PERFORMANCE PRICING:
Pricing to be based on United Stated National Bank of Oregon's Prime Rate
according to the Borrower's debt to worth as shown below at the Borrower's
Option. The spread over the base rates will be determined quarterly beginning
August 1, 1996 by the Borrower's Debt/Worth, as expressed in the following
matrix:
<TABLE>
<CAPTION>
Debt/Worth Pricing
- ---------- -------
<S> <C>
greater than 2.25 Prime + 2.00 bps
2.24 to 2.00 Prime + 1.75 bps
~1.99 to 1.75 Prime + 1.50 bps
less than 1.74 Prime + 1.25 bps
</TABLE>
Initial interest rate will be Prime + 2.00 bps.
Debt/Worth is defined as (Total Liabilities minus Uneamed Revenue) /
(Shareholders' Equity minus Intangibles).
Summit Design, Inc.
BY: /s/ C. Albert Koob
-------------------------
Authorized Officer
<PAGE>
U.S. Bank
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000. 05/01/96 8659345210 20041
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: SUMMIT DESIGN, INC. Lender: UNITED STATES NATIONAL BANK OF OREGON
9305 SW GEMINI DRIVE CORPORATE BANKING DIVISION
PORTLAND, OR 97005 PL-7 OREGON COMMERCIAL LOAN SERVICING
S. W. Oak
PORTLAND, OR 97204
================================================================================
LOAN TYPE. This is a Variable Rate (2.000% over Lender's Prime Rata. This is the
rate of interest which Lender from time to time establishe5 as its Prime Rate
and is not, for example, the lowest rate of interest which Lender collects from
any borrower or class of borrowers, making an initial rate or 10.250%),
Revolving line of Credit Loan to a Corporation for $2,000,000.00 due on demand.
This is a secured renewal of the following described indebtedness: the
Promissory Note from Summit Design, Inc. to Lender dated May 23, 1994.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT.
X BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
SPECIFIC PURPOSE. The specific purpose of this loan is: Renew operating line,
Note J018.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of S2,000,000.00 as follows:
AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF: $2,000.000.00
S2,000,000.00 As directed
NOTE PRINCIPAL: $2,000,000.00
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED MAY 1,1996.
BORROWER:
SUMMIT DESIGN, INC.
X/s/ C. Albert Koob
----------------------
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000. 05/01/96 8659345210 20041
- -------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or Item.
BORROWER: SUMMIT DESIGN, INC. LENDER: UNITED STATES NATIONAL Bank OF OREGON
9305 SW GEMINI DRTVE CORPORATE BANKING DIVISTON
PORTLAND, OR 97005 PL-7 Oregon Commercial Loan Servicing
555 S. W. Oak
PORTLAND, OR 97204
_
INSURANCE REQUIREMENTS. Summit Design, Inc. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Lender. These
requirements are set forth in the security documents. The following minimum
insurance coverages must be provided on the following described collateral (the
Collateral"):
COLLATERAL: ALL INVENTORY.
TYPE. All risks, including fire, theft and liability.
AMOUNT. Full insurable value,
BASIS. Replacement value.
ENDORSEMENTS. Lender's loss payable clause with stipulation that
coverage will not be cancelled or diminished without a minimum of
ten (10) days' prior written notice to Lender.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender.
PROVISION OF INSURANCE. Grantor agrees to deilver tc Lender, ten (10) days from
the date of this Agreement, evidence of the required insurance as provided
above, with an effective date of May l, 1996, or earlier.
l
================================================================================
WARNING
Unless GRANTOR provides Lender with evidence of the insurance coverage as
required by Grantor's security documents, Lender may purchase insurance at
Grantor's expense to protect Lender's interest. This insurance may, but need
not, also protect Grantor's interest. If the collateral becomes damaged, the
coverage Lender purchases may not pay any claim Grantor makes or any claim made
against Grantor Grantor may later cancel this coverage by Providing evidence
that Grantor has obtained property coverage elsewhere. Grantor will be
responsible for the cost of any insurance purchased by Lender. The cost of this
insurance may be added to Grantor's Indebtedness. If the cost is added to
Grantor s Indebtedness, the interest rate on the underlying Indebtedness will
apply to this added amount. The effective date of coverage may be the date
Grantor's prior coverage lapsed or the date Grantor failed to provide proof of
coverage. The coverage Lender purchases may be considerably more expensive than
insurance Grantor can obtain on Grantor's own and may not satisfy any need for
property damage coverage or any mandatory liability insurance requirements
imposed by applicable law.
================================================================================
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance agent or
company) all information Lender deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 1,1996.
GRANTOR:
SUMMIT DESIGN, INC.
X/s/ C. Albert Koob
--------------------
================================================================================
FOR LENDER USE ONLY
DATE: INSURANCE VERIFICATION PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
<PAGE>
Exhibit 10.16
CONFIDENTIAL
SUMMIT DESIGN ASIA, LTD.
A Joint Venture between Summit Design Israel, Inc. ("Summit")
and Anam S&T Co., LTD. ("Anam")
TERMS AND CONDITIONS OVERVIEW
1.0 LOCATION/OFFICES
- --------------------
Summit Design Asia, Ltd. (SDA) will be incorporated and have its headquarters in
Hong Kong. It will maintain an office there with its Managing Director, Kuo Wu,
initially located in Seoul, Korea.
In addition, SDA will immediately establish a branch office in Korea (SDA
Korea). SDA Korea will be responsible for sales in the local Korean market as
well as manufacturing and shipping products to other Asian countries (see below
for more details).
2.0 SCOPE OF OPERATIONS
- -----------------------
SDA will manufacture, market, sell, distribute and support all of the products
of Summit Design, Inc. in the territory comprised of all Asia Pacific Countries
but not including Japan.
3.0 FINANCING
- -------------
SDA will be financed by initial investments from Summit of * * * and
from Anam of * * *.
Bank accounts will be opened in Hong Kong in the name of SDA at an appropriate
international bank with the capability to conduct efficient multi-currency,
international wire transfers, letters of credit and other business services
appropriate for SDA.
The accounts shall be US Dollar denominated and should have signers as follows:
Managing Director of SDA, up to $100,000.00
Controller of SDA, up to $10,000.00
Managing Director of SDA plus Controller of SDA, any amount
Cochairmen (jointly) of SDA with the Managing Director or Controller, any
amount
It will be desirable to have an investment account as well as an operating
account that idle funds can earn interest.
4.0 SDA OWNERSHIP
- -----------------
SDA will issue * * * shares of common stock, Initial ownership will be:
Anam * * *
Summit * * *
Board members, management and employees will be awarded stock options not to
exceed * * * shares in total. When exercised, these shares will reduce the
share holdings of Anam and Summit on a pro rata basis at the time of exercise.
* Confidential Treatment Requested
<PAGE>
CONFIDENTIAL
For each dollar remitted to Anam by SDA for the purchase of the Copyright
License, Summit will receive * * * of SDA stock. The final share
distribution after full repayment of the copyright purchase price of * * *
and execution of all stock options will be:
Anam * * *
Summit * * *
Option Holders * * *
5.0 SDA BOARD OF DIRECTORS
- --------------------------
The SDA Board of Directors will initially be:
Stephen Kim Cochairman
Larry Gerhard Cochairman
Kuo Wu Member
K.H. Kwon Member
Board of Director members will be elected by vote of the SDA Shareholders. A
slate of new members will be approved and presented by the present Board of
Directors for shareholder approval. In the event that a member is terminated or
resigns then prior to the termination or resignation the Board of Directors
shall approve and appoint a replacement for the exiting member.
A "Majority Vote" of the Board of Directors shall require a seventy-five percent
(75%) concurring vote.
6.0 COPYRIGHT LICENSE PURCHASE
- ------------------------------
SDA will immediately acquire the existing Copyright License held by Anam for a
purchase price of * * *. Payment for the Copyright License shall be made
quarterly beginning April 1, 1997. The amount of each quarterly payment shall be
equal to * * * of SDA's profit from operations for that quarter.
Quarterly payments will continue until the * * * purchase price is paid in
full. SDA may repay any amount of the unpaid balance as approved by a Majority
Vote of the Board of Directors. Total repayment of the * * * is required
prior to any cash distribution as defined in section 7.0.
The Territory as defined by the Copyright License shall be extended as defined
in section 2.0. In addition the * * * paid to Summit as defined in the
Copyright License shall be reduced from * * *. Appendix A is a copy of the
Copyright License.
7.0 EXCESS CASH DISTRIBUTION
- ----------------------------
SDA shall distribute excess cash to shareholders quarterly based on the cash
balance of SDA. In the event that the cash balance of SDA is in excess of one
million dollars ($1,000,000.00) then the excess shall be distributed to
shareholders of SDA on a pro-rata basis.
8.0 MANUFACTURING
- -----------------
The manufacturing activities of SDA will initially take place in SDA Korea. The
extent of the activities is expected to be as follows:
* Confidential Treatment Requested
-2-
<PAGE>
CONFIDENTIAL
TDS: - Reproduction of object code tapes supplied by Summit
Design US
- Authorization codes will be supplied via Summit Design US
upon receipt of required information from SDA
Visual: - SDA will initially subcontract with Tiud in Israel to
manufacture Visual HDL Summit Israel will assist SDA with
setting up the manufacturing process for Visual HDL in
Korea. SDA will have the option of continuing ro
subcontract through Summit Israel for manufacturing if it
so desires.
9.0 ORDER PROCESSING/SHIPPING/INVOICING/PAYMENT
- -----------------------------------------------
One objective of SDA is to minimize the tax burden on the production and sale of
Summit products in the Far East. To accomplish this, the following order
processing flow should be used.
Orders will be received by SDA in Hong Kong from the SDA distributors or direct
sales branches (such as SDA Korea) where the products will be manufactured and
shipped to either the final end users of distributors (depending on the local
arrangement in the country) in the countries where SDA does business. The
processing of orders by SDA Korea will be done under a services agreement
between SDA and SDA Korea on a "cost-plus" basis. A cost-plus ten percent (10%)
is a common level, with monthly service fee payments made to SDA Korea from SDA
Hong Kong.
SDA Korea will notify SDA Hong Kong upon shipment so that the customer may be
invoiced by SDA Hong Kong. SDA Hong Kong will then be responsible for
collection and management of the cash.
PAYMENT OF SUMMIT COPYRIGHT FEES
- --------------------------------
Payment of the fees due under the Copyright License which is to be sold to SDA
by Anam will be paid within sixty (60) days after shipment of product to the
customer. The payments will be made from the SDA Hong Kong bank accounts and
will be made in US Dollars.
OPERATING PLAN FOR SDA
- ----------------------
Appendix B depicts the estimated operating plans for SDA beginning in 1996.
Signatures:
Anam: Summit:
/s/ Stephen M. Kim /s/ Larry J. Gerhard 3/21
____________________________ ____________________________
Stephen M. Kim Larry J. Gerhard
President & CEO President & CEO
Anam S&T Co., LTD. Summit Design Israel, Inc.
* Confidential Treatment Requested
-3-
<PAGE>
CONFIDENTIAL
APPENDIX A
COPYRIGHT LICENSE AGREEMENT
---------------------------
PURPOSE:
- -------
This Agreement is made and entered into this 28th day of December, 1994, by and
between Anam S&T., Ltd., a corporation incorporated and existing under the laws
of the Republic of Korea, having its registered place of office at 3rd Floor,
Anam Building, 154-17, Samsung-Dong, Kangnam-Ku, Seoul, Korea (hereinafter
"Anam"); and Summit Design, Inc., a corporation incorporated and existing under
the laws of Delaware having its registered place of office at 9305 S.W. Gemini
Drive, Beaverton, OR, 97005 U.S.A. (hereinafter referred to as "Summit"). Anam
and Summit when considered together are hereinafter referred to as "The
Companies".
TERMS:
- -----
I. COPYRIGHTS LICENSE ("LICENSE"):
- ------------------------------------
1. Under the terms of this agreement, Summit grants an exclusive License
---------------------------------------------------------------------
to Anam for the use of its copyrights for the Products in the
-------------------------------------------------------------
Territory.
---------
2. "Products":
---------
a. * * *
b. * * *
c. * * *
d. * * *
e. * * *
3. Price:
-----
a. The purchase price of the License is * * *
b. The purchase price is nonrefundable.
c. The purchase price shall be paid according to the terms stated in
section III.
4. "Territory":
----------
a. The initial Territory of Korea, Australia, India, and the
Phillippines.
b. The Territory can be extended to other Asian countries,
Australia, India and the Phillippines by written mutual consent
of the Companies.
5. Term:
----
a. The initial term of the License if Thirty (30) months.
b. The License can be extended after the initial term by written
mutual consent of the Companies.
* Confidential Treatment Requested
<PAGE>
CONFIDENTIAL
6. Termination:
-----------
a. This agreement and the License can be terminated at any time by
Anam with 30 days written notice.
b. This agreement and the License can be terminated at any time by
Summit with 30 days written notice and repurchase of the License.
i. In the event that Summit wishes to repurchase the License
any time during months 1-12, the repurchase price shall be
* * *.
ii. In the event that Summit wishes to repurchase the License
any time during months 13-24, the repurchase price shall be
* * *.
iii. In the event that Summit wishes to repurchase the License
any time during months 25-30, the repurchase price shall
be * * *.
c. This agreement and the License can be terminated at any time by
either party for cause with 15 days written notice if the cause
has not been cured within 30 days after notice.
7. Transfer:
--------
a. This License is non transferable unless approved in writing by
the Companies.
b. In the event that the Companies agree to establish a Joint
Venture Company ("JVC"), the License is transferrable to the JVC
under the terms of the JVC agreement.
II. Fees:
- ----------
1. The following fees shall be paid to Summit in conjunction with the
------------------------------------------------------------------
distribution of the shrinked wrapped software and under the terms
-----------------------------------------------------------------
listed in section III.
----------------------
\ a. License administration and documentation fee ("LAD")
i. LAD is * * of the actual sale price on commercial units
unless the sale discount is greater than * * of the
Commercial List Price; if the sale discount is greater than
* * of the Commercial List Price and Summit has not agreed
in writing to such discount then LAD is * * of the
Commercial List Price.
ii. LAD is * * of the actual sale price on education units
unless the sale discount is greater than * * of the
Education List Price; if the sale discount is greater than
* * of the Education List Price and Summit has not agreed in
writing to such discount then LAD is * * of the Education
List Price.
b. Technology administration and maintenance gee ("TAM")
i. TAM is * * of the actual sale price on commercial units
unless the sale discount is greater than * * of the
Commercial Price List; if the sale discount is greater than
* * of the Commercial Price List and Summit has not agreed
in writing to such discount then TAM is * * of the
Commercial Price List.
ii. TAM is * * of the actual sale price on education units
unless the sale discount is greater than * * of the
Education List Price; if the sale discount is greater than
* * of the Education List Price and Summit
* Confidential Treatment Requested
<PAGE>
has not agreed in writing to such discount then TAM is * *
of the Education List Price.
c. Technical Support Fee ("TSF")
i. TSF is * * of the actual sale price of the Product of a
maintenance agreement is purchase by the customer or
otherwise provided to the customer.
ii. TSF is * * of the actual maintenance renewal price.
2. Commercial List Price and Education List Price are as follows:
--------------------------------------------------------------
Product Commercial List Price Education List Price
------- --------------------- --------------------
SEE EXHIBIT 'A'
III. Payments
- -------------
1. Purchase price of License:
--------------------------
a. First payment due 1/15/95 * * *
b. Second payment due 2/15/95 * * *
c. Final payment due 3/1/95 * * *
2. Fees as stated in section II:
----------------------------
a. All fees shall be paid within 60 days after shipment of Product
or a maintenance service agreement to the customer.
b. All fees shall be paid to Summit in U.S. dollars.
c. All fee percentages listed in Section II are net amounts paid to
Summit.
(In the event a tax issue occurs, this issue will be negotiated
by The Companies.)
IV. Rights and Obligations:
- -----------------------------
1. For as long as the License is in effect Anam shall have the right to
--------------------------------------------------------------------
manufacture, market, sell distribute and support the Products in the
--------------------------------------------------------------------
Territory.
----------
2. For as long as the License is in effect Anam shall have the right to
--------------------------------------------------------------------
request an authorization code and Summit shall have the obligation to
---------------------------------------------------------------------
immediately provide such code. Summit shall be obligated for the LAD
--------------------------------------------------------------------
fee paid by Anam to enter, maintain, and provide information for every
----------------------------------------------------------------------
customer of Anam. This customer data base shall contain complete
----------------------------------------------------------------
configuration management problem lists and upgrade information
--------------------------------------------------------------
required to insure complete customer satisfaction.
--------------------------------------------------
* Confidential Treatment Requested
<PAGE>
CONFIDENTIAL
3. For as long as the License is in effect Summit shall have the
-------------------------------------------------------------
obligation for the TAM fee paid to provide constant maintenance and
-------------------------------------------------------------------
sustaining engineering for the Products to insure their long term
-----------------------------------------------------------------
viability and correctness. New product releases shall be made
-------------------------------------------------------------
available to Anam if and when they are completed and ready for market.
----------------------------------------------------------------------
/s/ Roger Bitter 12/28/94 /s/ K. H. Kwon 12/28/94
______________________________ __________________________
R.A. Bitter; Summit Design, Inc. K.H. Kwon; Anam S&T Ltd.
/s/ L. J. Gerhard 12/28/94 /s/ Stephen M. Kim
______________________________ __________________________
L.J. Gerhard; Summit Design, Inc. Stephen Kim; Anam S&T Ltd.
* Confidential Treatment Requested
<PAGE>
EXHIBIT A
8.0 TDS Price List
KOREA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Prices Effective: January 22, 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Product Product Maint
- --------------------------------------------------------------------------
TDS Products Number List Plan-M
==========================================================================
WaveMaster (including...) TM-BMO-L * *
- --------------------------------------------------------------------------
- Wavemaker
- --------------------------------------------------------------------------
- ASCII I/O Interface
- --------------------------------------------------------------------------
- Conditioner Library
- --------------------------------------------------------------------------
- Utility Library
- --------------------------------------------------------------------------
- Tool Library
- --------------------------------------------------------------------------
- WDB Took Kit (with WGL
in/out and TP Match)
- --------------------------------------------------------------------------
- On-line documentation
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Design Pack (including...) TD-DMO-L * *
- --------------------------------------------------------------------------
- Wavemaker
- --------------------------------------------------------------------------
- Combine IO, Derive,
Concat, Align, Cut,
Move, Merge Conditioners
- --------------------------------------------------------------------------
- On-line Documentation
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
GrabberPack (including...) TH-HP7-L * *
- --------------------------------------------------------------------------
- Wavemaker/WaveGrabber
- --------------------------------------------------------------------------
- HP 16500 Query, Slots,
Upload, Download
Acquire VBridge
- --------------------------------------------------------------------------
- Combine IO, Derive,
Concat, Align, Cut,
Move, Merge Conditioners
- --------------------------------------------------------------------------
- On-line Documentation
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
WaveMaster Options
- --------------------------------------------------------------------------
Equation Support TM-BTO-L * *
- --------------------------------------------------------------------------
Simulation Rules Checker - SRC TC-BDO-L * *
- --------------------------------------------------------------------------
TimePlate Generators (including...) TJ-TLO-L * *
- --------------------------------------------------------------------------
- TPforceGen, TPstrobeGen
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Input and Output Converters
- --------------------------------------------------------------------------
Input Convertors * *
- --------------------------------------------------------------------------
Compass QSim Input Converter TI-CPO-L * *
- --------------------------------------------------------------------------
HILO Input Converter TI-HLO-L * *
- --------------------------------------------------------------------------
LASAR Input Converter TI-LAO-L * *
- --------------------------------------------------------------------------
LSI Logic LSIM Input Converter TI-LSO-L * *
- --------------------------------------------------------------------------
</TABLE>
* Confidential Treatment Requested
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Mentor Graphics LSIM Input
Converter TI-MGO-L * *
- --------------------------------------------------------------------------
Mentor Graphics QuickSim Input
Converter TI-MGI-L * *
- --------------------------------------------------------------------------
Tegas Input Converter TI-TGO-L * *
- --------------------------------------------------------------------------
Valid Input Converter TI-VAO-L * *
- --------------------------------------------------------------------------
Verilog (VCD & PLITDS) Input
Converter (n/a on Solaris) TI-VEO-L * *
- --------------------------------------------------------------------------
VLAIF Input Converter TI-VFO-L * *
- --------------------------------------------------------------------------
ZILOS Input Converter TI-ZLO-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Output Convertors
- --------------------------------------------------------------------------
Compass QSIM Output Converter TO-CPO-L * *
- --------------------------------------------------------------------------
HILO FBT Output Converter TO-HL1-L * *
- --------------------------------------------------------------------------
HILO ICT Output Converter TO-HL2-L * *
- --------------------------------------------------------------------------
HILO Sim Output Converter TO-HLO-L * *
- --------------------------------------------------------------------------
LASAR Output Converter TO-LAO-L * *
- --------------------------------------------------------------------------
LSI Logic Lsim Output Convertor TO-LSO-L * *
- --------------------------------------------------------------------------
Mentor Graphics Lsim Output
Convertor TO-MGO-L * *
- --------------------------------------------------------------------------
Mentor Graphics Quicksim Output
Convertor TO-MG1-L * *
- --------------------------------------------------------------------------
Verilog Output Convertor TO-VEO-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Libraries
- --------------------------------------------------------------------------
Input Converter Library (including
list above) TL-BKO-L * *
- --------------------------------------------------------------------------
Output Converter Library
(including list above TL-BLO-L * *
- --------------------------------------------------------------------------
Input and Output Converter
Libraries (including both
lists above TL-BJO-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Special Convertors
- --------------------------------------------------------------------------
Waves Output Converter TO-WAO-L * *
- --------------------------------------------------------------------------
Texas Instruments TDL In/Out
Converter Pair TL-TDO-L * *
- --------------------------------------------------------------------------
Schlumberger LW In/Out Converter
Pair TL-SCO-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
WaveBridge Products
- --------------------------------------------------------------------------
Advantest T33xx WaveBridge +
PB/VB TW-ADO-L * *
- --------------------------------------------------------------------------
Ando WaveBridge 80xx. 90xx +
PB/VB TW-ANO-L * *
- --------------------------------------------------------------------------
Credence Vista LT-1xxx/Duo
WaveBridge + PB TW-CRO-L * *
- --------------------------------------------------------------------------
IMS ATS/XL WaveBridge +
XL PB/VB TW-IMO-L * *
- --------------------------------------------------------------------------
LTX Trillium WaveBridge +
PB/VA TW-TRO-L * *
- --------------------------------------------------------------------------
Schlumberger ITS9000 WaveBridge TW-SC1-L * *
- --------------------------------------------------------------------------
Teradyne A500 WaveBridge TW-TEO-L * *
- --------------------------------------------------------------------------
Teradyne A580 WaveBridge TW-TE1-L * *
- --------------------------------------------------------------------------
Teradyne J941, J967, J983
WaveBridge + PB/VB TW-TE2-L * *
- --------------------------------------------------------------------------
Teradyne J971 WaveBridge TW-TE3-L * *
- --------------------------------------------------------------------------
Teradyne L200/L300 WaveBridge +
PB/VB TW-TE7-L * *
- --------------------------------------------------------------------------
Teradyne Z8000 WaveBridge TW-TE9-L * *
- --------------------------------------------------------------------------
</TABLE>
* Confidential Treatment Requested
-2-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
<S> <C> <C> <C>
WaveBridge Scan Options
- --------------------------------------------------------------------------
Ando 80xx, 90xx TS-ANO-L * *
- --------------------------------------------------------------------------
Credence Vista LT-1xxx/Duo TS-CRO-L * *
- --------------------------------------------------------------------------
Schlumberger ITS9000 TS-SC1-L * *
- --------------------------------------------------------------------------
Teradyne A580 TS-TE1-L * *
- --------------------------------------------------------------------------
Teradyne J971 TS-TE3-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
WaveBridge Equation Options
- --------------------------------------------------------------------------
LTX Trillium TQ-TRO-L * *
- --------------------------------------------------------------------------
Schlumberger ITS9000 TQ-SC1-L * *
- --------------------------------------------------------------------------
Teradyne A580 TQ-TE1-L * *
- --------------------------------------------------------------------------
Teradyne J971 TQ-TE3-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
WaveBridge FastBridge Options
- --------------------------------------------------------------------------
Teradyne J971 TF-TE3-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
PBridge Products
- --------------------------------------------------------------------------
PBridges * *
- --------------------------------------------------------------------------
Advantest 33xx PBridge/VBridge TP-ADO-L * *
- --------------------------------------------------------------------------
Ando 80xx, 90xx PBridge/VBridge TP-ANO-L * *
- --------------------------------------------------------------------------
Credence STS PBridge/VBridge TP-STO-L * *
- --------------------------------------------------------------------------
Credence Vista LT-1xxx PBridge TP-CRO-L * *
- --------------------------------------------------------------------------
GenRad 16/18 PBridge TP-GEO-L * *
- --------------------------------------------------------------------------
GenRad 227x PBridge/VBridge TP-GE1-L * *
- --------------------------------------------------------------------------
HP3065 + HP3065AT PBridge/VBridge TP-HP2-L * *
- --------------------------------------------------------------------------
HP3070 PBridge/VBridge TP-HP3-L * *
- --------------------------------------------------------------------------
HP82000 PBridge/VBridge TP-HP4-L * *
- --------------------------------------------------------------------------
IMS XL PBridge and VBridge TP-IMO-L * *
- --------------------------------------------------------------------------
LTX Synchromaster PBridge/VBridge TP-LTO-L * *
- --------------------------------------------------------------------------
LTX Trillium PBridge/VBridge TP-TRO-L * *
- --------------------------------------------------------------------------
Megatest MegaOne Polaris
PBridge/VBridge TP-MEO-L * *
- --------------------------------------------------------------------------
Sentry 15 PBridge/VBridge TP-SEO-L * *
- --------------------------------------------------------------------------
Sentry 600-21 PBridge/VBridge TP-SE2-L * *
- --------------------------------------------------------------------------
Teradyne J941, J967, J983
PBridge/VBridge TP-TE2-L * *
- --------------------------------------------------------------------------
Teradyne J953 PBridge/VBridge TP-TE5-L * *
- --------------------------------------------------------------------------
Teradyne L200/L300 PBridge/VBridge TP-TE7-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
VBridges
- --------------------------------------------------------------------------
Advantest VBridge TV-ADO-L * *
- --------------------------------------------------------------------------
Ando VBridge TV-AND-L * *
- --------------------------------------------------------------------------
Credence STS VBridge TV-STO-L * *
- --------------------------------------------------------------------------
GenRad 227x VBridge TV-GE1-L * *
- --------------------------------------------------------------------------
HP3065 VBridge TV-HPO-L * *
- --------------------------------------------------------------------------
HP3070 VBridge TV-HP3-L * *
- --------------------------------------------------------------------------
</TABLE>
* Confidential Treatment Requested
-3-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
<S> <C> <C> <C>
HP82000 VBridge TV-HP4-L * *
- --------------------------------------------------------------------------
IMS XL VBridge TV-IMO-L * *
- --------------------------------------------------------------------------
LTX Synchromaster VBridge TV-LTO-L * *
- --------------------------------------------------------------------------
LTX Trillium VBridge TV-TRO-L * *
- --------------------------------------------------------------------------
Megatest MegaOne Polaris VBridge TV-ME1-L * *
- --------------------------------------------------------------------------
Sentry 15 VBridge TV-SEO-L * *
- --------------------------------------------------------------------------
Sentry 600-21 VBridge TV-SE2-L * *
- --------------------------------------------------------------------------
Teradyne J941, J967, J983 VBridge TV-TE2-L * *
- --------------------------------------------------------------------------
Teradyne J953 VBridge TV-TE5-L * *
- --------------------------------------------------------------------------
Teradyne L200/L300 VBridge TV-TE7-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Emulators
- --------------------------------------------------------------------------
Advantest Emulator (SEF) TE-ADO-L * *
- --------------------------------------------------------------------------
IMS XL Emulator (SEF) TE-IMO-L * *
- --------------------------------------------------------------------------
Sentry 600-21 Emulator (SEF) TE-SE2-L * *
- --------------------------------------------------------------------------
Trillium Emulator (WDB) TE-TRO-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NetBridges/FaultBridges/
Probebridges
- --------------------------------------------------------------------------
Teradyne L200/L300
NetBridge/Probebridge TN-TE7-L * *
- --------------------------------------------------------------------------
Teradyne L200/L300 Faultbridge TF-TE7-L * *
- --------------------------------------------------------------------------
Teradyne Z8000 NetBridge/
Probebridge TN-TE9-L * *
- --------------------------------------------------------------------------
HP3070 FaultBridge TF-HP3-L * *
- --------------------------------------------------------------------------
HP3070 Probebridge TR-HP3-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Other Links
- --------------------------------------------------------------------------
HP83000 Application Link TA-HP8-L * *
- --------------------------------------------------------------------------
WaveGrabber (Add-On) including...
(n/a on Solaris) TG-HP7-L * *
- --------------------------------------------------------------------------
- HP16500 Query, Slots, Upload,
Download
- --------------------------------------------------------------------------
- HP16500 Acquire
- --------------------------------------------------------------------------
- HP 16500 VBridge
- --------------------------------------------------------------------------
Taisel - Talon BE-64 Application
Link TA-TAO-L * *
- --------------------------------------------------------------------------
Tektronix DAS 9200 Grabber
(Add-On) TA-TKO-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Product Upgrades
- --------------------------------------------------------------------------
PBridge to WaveBridge TU-8GO-A * *
- --------------------------------------------------------------------------
VBridge to PBridge TU-8HO-A * *
- --------------------------------------------------------------------------
VBridge to WaveBridge TU-B10-A * *
- --------------------------------------------------------------------------
HP83000 Application Link to
HP83000 WaveBridge (ships Q2) TU-8JO-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Sunset Products (Maintenance Only)
- --------------------------------------------------------------------------
HP9490 Application Link TA-HP6-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
* Confidential Treatment Requested
-4-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Platform/Media
- --------------------------------------------------------------------------
Sparc SunOS 4.1.3 and HP700
HPUX 9.0.5 on CD-ROM TZ-DOO-S * *
- --------------------------------------------------------------------------
Sparc Solaris 2.3 on DC6150 TZ-DGO-S * *
- --------------------------------------------------------------------------
HP300 HP-UX 9.0.3. on 4mm DAT/DDS TZ-DMO-S * *
- --------------------------------------------------------------------------
IBM RS6000, AIX 3.2.5 on 8mm TZ-DKO-S * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Additional or change of platform
types (each) TU-BFO-A * *
- --------------------------------------------------------------------------
Reissue authorization codes to
change host node ID TU-BEO-L * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Documentation (See Notes)
- --------------------------------------------------------------------------
Full Set TD-DEO-D * *
- --------------------------------------------------------------------------
Training Manual TD-DC8-D * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Training (See Notes)
- --------------------------------------------------------------------------
4 & 1/2 day course at Summit
headquarter (per student) TT-BTO-T * *
- --------------------------------------------------------------------------
On-site training 4 day course TT-BUO-T * *
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Special Orders (See Notes)
- --------------------------------------------------------------------------
SEF Access binary programming
interface (including...) TU-BWO-L * *
- --------------------------------------------------------------------------
- SEF linkable object file,
WaveMaster, input convertor
library, technical
assistance
- --------------------------------------------------------------------------
PIF Access binary programming
interface TU-BBO-L * *
- --------------------------------------------------------------------------
- WaveMaker linkable object
file WaveMaster, input,
input convertor library,
technical assistance
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
* Confidential Treatment Requested
-5-
<PAGE>
Exhibit A
2.5 Visual Price List
KOREA PRICE LIST
<TABLE>
<CAPTION>
Prices Effective: May 15, 1995
- --------------------------------------------------------------------------------
Plan M Plan H
- --------------------------------------------------------------------------------
Part Maint Maint
- --------------------------------------------------------------------------------
Visual Products Number List Number List Number List
================================================================================
<S> <C> <C> <C> <C> <C> <C>
PC Products
- --------------------------------------------------------------------------------
Visual HDL VP-BBO-L * VP-880-M * VP-880-H *
- --------------------------------------------------------------------------------
Visual HDL Design Entry VP-DE0-L * VP-DE0-M * VP-DE0-H *
- --------------------------------------------------------------------------------
Visual HDL (Evaluation copy, VP-EV0-L *
time limited Hasp)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Visual Verilog Design Entry VP-VE2-L * VP-VE2-M * VP-VE2-H *
and Debugging
interface (ship 11/95)
- --------------------------------------------------------------------------------
Visual Verilog (Evaluation VP-VE3-L *
Copy, time limited Hasp)
- --------------------------------------------------------------------------------
UNIX Products
- --------------------------------------------------------------------------------
Visual HDL (node locked) VU-NL0-L * VU-NL0-M * VU-NL0-H *
- --------------------------------------------------------------------------------
Visual HDL (floating) VU-FL0-L * VU-FL0-M * VU-FL0-H *
- --------------------------------------------------------------------------------
Visual HDL Design Entry VU-DE1-L * VU-DE1-M * VU-DE1-H *
(node locked)
- --------------------------------------------------------------------------------
Visual HDL Design Entry VU-DE2-L * VU-DE2-M * VU-DE2-H *
(floating)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Visual Verilog Design Entry VU-VE6-L * VU-VE6-M * VU-VE6-H *
and Debugging
interface (node locked)
(ship 11/95)
- --------------------------------------------------------------------------------
Visual Verilog Design Entry VU-VE7-L * VU-VE7-M * VU-VE7-H *
and Debugging
interface (floating) (ship
11/95)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Upgrades
- --------------------------------------------------------------------------------
Visual HDL (2.0-2.5 or VP-BB0-A *
2.5-3.0) for PC
- --------------------------------------------------------------------------------
Visual HDL (2.0-2.5 or VU-NL0-A *
2.5-3.0) for UNIX
(node locked)
- --------------------------------------------------------------------------------
Visual HDL (2.0-2.5 or VU-FL0-A *
2.5-3.0) for UNIX
(floating)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Visual HDL (2.0-3.0) for PC VP-BC0-A *
- --------------------------------------------------------------------------------
Visual HDL (2.0-3.0) for VU-NL1-A *
UNIX (node locked)
- --------------------------------------------------------------------------------
Visual HDL (2.0-3.0) for VU-FL1-A *
UNIX (floating)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Design Entry to full Visual VP-DE0-A *
(PC)
- --------------------------------------------------------------------------------
Design Entry to full Visual VU-DE1-A *
(node locked)
- --------------------------------------------------------------------------------
Design Entry to full Visual VU-DE2-A *
(floating)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Platform/Media
- --------------------------------------------------------------------------------
Sun SPARC, SunOS 4.1.3 on VZ-ZB0-S *
DC6150
- --------------------------------------------------------------------------------
HP700, HP-UX 9.0.5 on 4mm VZ-ZD0-S *
DAT/DDS
- --------------------------------------------------------------------------------
HP700, HP-UX 9.0.5 on DC6150 VZ-ZH0-S *
- --------------------------------------------------------------------------------
</TABLE>
* Confidential Treatment Requested
<PAGE>
Exhibit A
2.5 Visual Price List
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PC on floppies VZ-ZC0-S *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additional platform types VU-BF0-A *
(each)
- --------------------------------------------------------------------------------
Reissue authorization codes VU-BE0-A *
to change host node ID
- --------------------------------------------------------------------------------
Extra Documentation
- --------------------------------------------------------------------------------
Visual HDL Manual for PC VP-BB0-D *
- --------------------------------------------------------------------------------
Visual HDL Manual for UNIX VU-BB0-D *
- --------------------------------------------------------------------------------
Visual HDL Training Guide VU-BC0-D *
for UNIX
- --------------------------------------------------------------------------------
Training (See Notes)
- --------------------------------------------------------------------------------
4 day course at Summit VT-BB0-T *
headquarters (per student)
- --------------------------------------------------------------------------------
On-site training 4 day course VT-BC0-T *
- --------------------------------------------------------------------------------
</TABLE>
* Confidential Treatment Requested
-2-
<PAGE>
Exhibit A
2.5 Visual Price List
Price List Notes
- -------------------------------------------------------------------------------
License Requirements
* is licensed on * basis, through *.
Consult Summit or your Summit Sales Representative for additional information.
Maintenance Plans
Maintenance part numbers are provided for two plans,
Plan "M", *
Plan "H", *
Maintenance can only be ordered for *.
Version Availability
* are available for the current version and * prior as of the date of
this pricelist, e.g., *. * can be ordered for version * . * can be
issued for versions: *.
Additional Platforms
* can support * or an * may be * type by adding *.
Domestic Warranty
* Products are covered by a * warranty. Refer to Summit's Terms and
Conditions document for details.
International Warranty
* Products are covered by a * warranty. Refer to Summit's Terms and
Conditions document for details.
Training
Summit * training course at our headquarters. *.
Discount Schedule Guide Line (**always consult your principal from Summit)
Discounts are for single order volume or Corporate Volume Purchase Agreement.
Volume Discount
* *
* *
* *
* *
* *
* *
Corporate Volume Purchase Agreements (VPA) (**consult principal)
*.
* Confidential Treatment Requested
-3-
<PAGE>
SUMMIT DESIGN, INC.
Pro Forma Income Statement & Headcount
Appendix B
<TABLE>
<CAPTION>
Income Statement 1995 Q1 Q2 Q3 Q4 1996 1996 1997 1998
---- --- --- --- --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue * * * * * * * * *
Gross Margin * * * * * * * * *
% * * * * * * * * *
Operating Expense * * * * * * * * *
G&A * * * * * * * * *
Mrktng & Sales * * * * * * * * *
Dev., Suprt. & Prodctn. * * * * * * * * *
% * * * * * * * * *
Operating Profit * * * * * * * * *
% * * * * * * * * *
Restructuring Expense * * * * * * * * *
Non Operating Income * * * * * * * * *
Interest Income * * * * * * * * *
Other * * * * * * * * *
Interest paid * * * * * * * * *
Profit Before Tax * * * * * * * * *
% * * * * * * * * *
Headcount * * * * * * * * *
</TABLE>
* Confidential Treatment Requested
<PAGE>
* Confidential Treatment Requested
-2-
<PAGE>
APPENDIX C
Project Plan for Summit/Anam JVC
- ----------+------------------------+--------------------------+---------------->
* * *
* Confidential Treatment Requested
<PAGE>
Exhibit 10.17
CONFIDENTIAL
DISTRIBUTOR AGREEMENT
---------------------
This Agreement made and entered into this lst day of February, 1996, by and
between Summit Design, Inc., a Delaware corporation organized and existing under
the laws of the state of Delaware and the U.S.A., with its principal place of
business located at 9305 SW Gemini Drive, Beaverton, OR 97008 (hereinafter
referred to as SUMMIT), and Seiko Instruments Inc., a corporation organized and
existing under the laws of Japan, with its principal place of business located
31-1 Kameido 6 Chome, Koto-Ku, Tokyo 136 Japan (hereinafter referred to as SII).
In consideration of the covenants contained herein, the parties agree as
follows:
1.0 Appointment. SUMMIT hereby appoints SII, as Exclusive Distributor,
-----------
for the sale and support of the SUMMIT Products listed in Appendix A in the
Territory defined in Appendix B, as long as SII meets the Quarterly Quota as
specified in Appendix C, and grants to SII a non-exclusive, non-transferable
license to use and demonstrate the Products to facilitate its performance under
this Exclusive Agreement, and to market to approved sub-distributors and to the
customers in the territory the Products pursuant to the SUMMIT Program User
Agreement described in Article 4.2 hereof. SII will have the right to engage
sub-distributors in the territory providing notification to and written
agreement by SUMMIT. SII hereby agrees to the value, price and payment terms
specified in Appendix E.
1.1 As used in Section 1, Exclusive Distributor shall mean that
SUMMIT may have agreements for distribution of the standalone Products listed in
Appendix A with no more than one (1) direct distributor for the Territory
defined in Appendix B. This distributor may employ sub-distributors if approved
in writing by SUMMIT.
1.2 SII's Exclusivity shall continue for the Base Period and
Extension Periods under the following quota fulfillment rules for exclusivity.
1.2.1 If Quarterly Quotas are achieved then SII maintains the
rights of exclusivity.
1.2.2 If a Quarterly Quota is overachieved then the over-
achievement shall reduce the next Quarterly Quota by the amount of over-
achievement.
1.2.3 If more than one Quarterly Quota is underachieved and the
total under-achievement is greater than 5% of the sum of the quotas, then SII
shall have one (1) additional quarter to make up the under-achievement. If the
under-achievement is not made-up, then SII shall:
1.2.4.1 pay the underachievement in additional
exclusivity fee;
1.2.4.2 negotiate new terms agreeable to both SUMMIT
and SII or
1.2.4.3 abandon exclusivity.
* Confidential Treatment Requested
<PAGE>
CONFIDENTIAL
1.3 The list of Products set forth in Appendix A will only be changed
by SUMMIT in the event that any of the Products listed are abandoned by SUMMIT
on a worldwide basis or undergo general reconfiguration or price change by
SUMMIT on a worldwide basis. New Top-Down-Design products introduced by SUMMIT
will be added to Appendix A if SUMMIT and SII agree on pricing and quota terms
for these products. In the event SII declines for any reason to add any SUMMIT
Top-Down-Design product to Appendix A under this Section 1.3 then SUMMIT may
offer such product through another distributor in Japan. Such changes shall
require a ninety (90) day prior written notice.
2.0 Term of Agreement. This Agreement shall take effect from the date of
-----------------
execution hereof and shall remain in force for a period of three (3) years
("Base Period"), unless and until terminated pursuant to Article 13 hereof. This
Agreement may be renewed for additional five (5) year periods ("Extension
Periods") by mutual agreement as follows:
2.1 In the event SII wants to renew for an Extension Period, SII shall
notify Summit in writing no later than six (6) months prior to the end of the
current period.
2.2 In the event Summit wants to renew for an Extension Period,
Summit shall notify SII in writing no later than one (1) year prior to the end
of the current period.
Quarterly Quotas for the Base Period and Extension Periods are listed in
Appendix C. The discount schedules for the Base Period and Extension Periods are
also listed in Appendix C.
3.0 Responsibilities of Summit.
--------------------------
3.1 SUMMIT agrees to use its best efforts to provide quantities of
the Products sufficient to meet the requirements of SII.
3.2 SUMMIT agrees to use its best efforts to provide telephonic hot
line support to SII and SUMMIT shall provide Bug Fix Releases for Products to
SII when released by SUMMIT.
3.3 SUMMIT agrees to ship products upon receipt of a valid Purchase
Order.
3.4 * * *
3.5 * * *
4.0 Responsibilities of SII.
-----------------------
4.1 SII agrees to use its best efforts to promote the sale of the
Products and to provide Technical Support as defined in Section 5.3.2.b to its
customers.
4.2 SII agrees to sell or otherwise provide the Products only in
accordance with the terms stated herein and the SUMMIT Program User Agreement
attached hereto in Appendix D. SII shall execute with its customers a SUMMIT
Program User Agreement written in Japanese which shall have substantially the
same meaning as the SUMMIT Program User Agreement.
* Confidential Treatment Requested
-2-
<PAGE>
CONFIDENTIAL
4.3 SII agrees to maintain a sales, marketing, and support staff
sufficient to provide for the sales and support of SUMMIT Products in the
Territory directly and/or through the use of sub-distributors.
4.4 SII will provide to SUMMIT, at the beginning of each quarter, a
quarterly status report for the previous quarter, a forecast of the next quarter
and, at the beginning of each month, a forecast update. Quarterly status
reports, forecasts and forecast updates shall include customer names and
addresses, Product quantity and revenue, and Maintenance or Technical Support
revenue. All revenue and prices listed in these reports will be actual sale
values.
4.5 SII agrees to meet at least quarterly with SUMMIT or its
authorized representatives to review the business in the Territory for the
previous quarter and to review SII's forecast for the coming six (6) months.
4.6 SII recognizes that SUMMIT and SII may be required by the laws of
the United States or Japan to provide information regarding the identify of
purchasers of Products. At the request of SUMMIT, SII will immediately provide
to SUMMIT copies of all Product sales records, evidencing actual end-user
destinations, product and service prices and discounts and total sales value.
5.0 Orders, Quotations and Prices.
-----------------------------
5.1 SII shall place orders to SUMMIT via faxed Purchase Order and
SUMMIT will provide confirmation or rejection of such orders by fax within seven
(7) days of receipt of order by SUMMIT. If such fax is not received by SII in
seven (7) days the order is automatically accepted. Each Purchase Order shall be
accompanied by the customer purchase order if such order exists. SII shall
maintain a file of its quotations, offers, acceptances, and all other
correspondence relating to the sale of Products, and shall supply such
information to SUMMIT monthly and quarterly as specified in Section 4.6.
5.2 All prices are F.O.B, Beaverton, Oregon, USA, and exclude duty,
insurance, shipping, local tax, and any use, value-added, or other tax. When
applicable, such items will appear as a separate line item on the invoice.
5.3 Prices.
------
5.3.1 The Recommended List Price for each Product is shown in
Appendix A.
5.3.2 Maintenance, with Upgrades and Technical Support for each
product may be purchased under the following options:
* Confidential Treatment Requested
-3-
<PAGE>
CONFIDENTIAL
(a) Maintenance - Maintenance prices are ** of
Recommended List Price for Products as shown in Appendix A and are paid
annually. Annual Maintenance includes the following:
(i) Product Upgrades for Products purchased, if any
are released during the current maintenance period by SUMMIT.
(ii) Telephonic Hot Line Support, supplied by SII.
(iii) Bug Fix Releases for Products purchased, if any
are released during the current maintenance period by SUMMIT.
(b) Technical Support - Technical Support prices are **
of Recommended List Price for Products as shown in Appendix A and are paid
annually. Technical support includes the following:
(i) Telephonic Hot Line Support, supplied by SII.
(ii) Bug Fix Releases for Products purchased, if any
are released during the current maintenance period by SUMMIT.
(c) Upgrades - Product Upgrades are new major product
releases. Upgrades will be sold to the end user at ** of the Recommended
List Price for each Product.
5.4 Distributor Purchase Price. SII shall purchase Products and the
--------------------------
rights to sell Maintenance, Technical Support and Upgrades at a price paid to
SUMMIT equal to Distributor Purchase Price. The Distributor Purchase Price for
Products shall be equal to the actual customer purchase price minus the
appropriate Annual Discount as specified in Appendix C. In the event that the
actual customer purchase price is less than ** of the Recommended Product List
Price shown in Appendix A, then the Distributor Purchase Price shall be equal to
the Recommended Product List Price times ** minus the appropriate Annual
Discount as specified in Appendix C. The Distributor Purchase Price for
Maintenance, Technical Support and Upgrades shall be equal to the actual custo
mer purchase price minus the appropriate Annual Discount as specified in
Appendix C. In the event that the actual customer purchase price is less than
** of the Recommended List Price shown in Appendix A, then the Distributor
Purchase Price shall be equal to the Recommended List Price times ** minus the
appropriate Annual Discount as specified in Appendix C.
5.5 SII shall pay withholding tax, but only to the extent required by
applicable law, by deducting the same from amounts specified in Section 5.1
above and shall send SUMMIT an official certificate evidencing such payment.
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6.0 Terms of Payment.
----------------
6.1 Payments for Products, Maintenance, Technical Support and
Upgrades shall be made by SII within sixty (60) days, after date of invoice.
The preferred method of payments to SUMMIT is wire transfer. All payments made
to SUMMIT must be in United States Dollars (USD).
6.2 If any payment due SUMMIT from SII is not paid when due, SUMMIT
may at its option; (a) cease further shipments to SII until all overdue payments
have been made or (b) make shipments only against an irrevocable letter of
credit acceptable to SUMMIT.
7.0 Delivery. SUMMIT shall use its best effort to fill all orders
--------
promptly upon acceptance thereof. Deliveries shall be made F.O.B SUMMIT's
factory in Beaverton, Oregon, USA. SUMMIT shall retain title and bear the risk
of loss until such time as a shipment has been placed on-board a commercial
carrier, at which time title shall pass and the risk of loss shall become by
SII. Such loss shall not exceed the replacement cost of the shipment.
8.0 Advertising and Promotion. SII shall conduct advertising and
-------------------------
promotional activities deemed appropriate to promote the sale of the Products in
the Territory. SUMMIT shall supply, free of charge, masters of advertising
materials for marketing of the Products, such as catalogs, brochures, pamphlets,
and the like. SII agrees to refrain from making any claim or representation
concerning the Products in excess of or different from those made by SUMMIT.
9.0 Import and Export.
-----------------
9.1 All import duties and custom's fees, and all import permits and
licenses, are SII's and Customer's sole responsibility.
9.2 The provision of the Products to SII by SUMMIT is subject to all
laws, regulations, and rules of the United States of America, the State of
Oregon and Japan. SUMMIT shall not be bound by terms that are in conflict with
such laws. SII agrees to fully comply with all applicable U.S. export
regulations governing destination, ultimate end-user programs of internal
control and re-export restraints, and other restrictions relating to Products or
the furnishing of technical information or data in any form covered by this
Agreement.
9.3 SII agrees to publish such programs of internal controls as
required by U.S. Export Regulations.
9.4 SII agrees not to take any action that will cause it, or SUMMIT
to be in violation of any law of any jurisdiction in the Territory or the United
States including but not limited to, the U.S. Foreign Corrupt Practices Act of
1977 (FCPA), the U.S. Export Control Laws, and the U.S. Anti-Boycott Laws.
9.5 SII understands that SUMMIT is subject to regulations by agencies
of the United States Government, including the U.S. Department of Commerce,
which may prohibit export
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or diversion of the Products, or Product information to certain countries.
Regardless of any disclosure made by SII to SUMMIT of an ultimate destination of
the Products or Product information, SII warrants that it will not export,
either directly or indirectly, any Product or Product information without first
obtaining all necessary approval from the United States Department of Commerce
and/or any other agency or department of the United States Government.
10.0 Proprietary Rights and Trade Secrets.
------------------------------------
10.1 Except as otherwise provided herein, SUMMIT retains all title and
reserves all rights to the documentation, manuals, information, packaging,
promotional materials, or other data furnished by SUMMIT to SII, or developed by
SII under this agreement, whether in object, printed hard copy, or other form.
10.2 Both parties acknowledge that the Products, including any
modifications, enhancements, or improvements co the Products contain valuable
trade secret information proprietary to SUMMIT. Both parties agree to exercise
the highest degree of care and control with respect to the safeguard of these
trade secrets.
10.3 SUMMIT hereby grants to SII the right to translate associated
documentation and manuals into Japanese.
11.0 Product Warranties.
------------------
11.1 SUMMIT warrants that it owns the copyrights to all software
products sold hereunder, and has the legal right to sell such products.
11.2 SUMMIT's warranty to SII shall be the standard SUMMIT warranty
for the Products as stated in Appendix D under Section "Limited Warranty and
Disclaimer" which is in effect on the date of the shipment of the Products to
the Customer.
11.3 EXCEPT FOR THE EXPRESS WARRANTIES STATED HEREIN, SUMMIT HEREBY
DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, ON ALL PRODUCTS, AND
SPECIFICALLY AND WITHOUT LIMITATION, DISCLAIMS AND PRECLUDES ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
12.0 Infringement.
------------
12.1 SUMMIT, at its expense, will defend SII against any claim action
or suite based on an allegation that a product furnished hereunder infringes a
patent or copyright in the Territory, and SUMMIT will pay any resulting costs,
damages, and attorney's fees finally awarded (after exhaustion of appeals, if
SUMMIT files any appeals), against SII which are attributable to such claim, or
will pay the part of any settlement which is attributable to such claim,
provided that; (a) SII notifies SUMMIT in writing within seventy-two (72) hours
of acquiring knowledge of the claim
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(claim includes any writing related to the subject matter of this subsection);
(b) SUMMIT is permitted to control the defense settlement of the claim, at its
sole discretion, and (c) SII cooperates reasonably in such defense or
settlement.
12.2 In its defense or settlement of any such claim, SUMMIT may (a)
procure for SII the right to continue using the Products; (b) modify the
Products so that it becomes non-infringing; or (c) replace the Products with
substantially equivalent Products not subject to such claim. If the use of any
Product furnished hereunder is enjoined and none of the preceding alternatives
is reasonably available to SUMMIT, SUMMIT will provide SII an opportunity to
return the Product and receive a refund of the purchase price paid, less a
reasonable allowance for use.
12.3 Notwithstanding the foregoing, SUMMIT shall have no liability to
defend, to indemnify SII or to pay any costs, damages, or attorney's fees for
any claim based upon the use of any version of software other than the current
unaltered version released by SUMMIT. Except, in the event of a Patent or
Copyright infringement law suit caused by a version other than the Current
Version SUMMIT shall upgrade these units to the Current Version free of charge.
Current version is the last released version plus one version prior to the last
released version.
12.4 The foregoing states the entire obligation and liability of
SUMMIT with respect to any claims of patent or copyright infringement.
13.0 Termination.
-----------
13.1 This agreement may be terminated by an Agreement duly signed by
the parties hereto.
13.2 Default: In the event of any default in performance of any
agreement, term or provision under this Agreement by either party, the non-
defaulting party may send a written default notice explaining the nature of the
default to the defaulting party. If such default is not rectified within sixty
(60) days after the giving of the default notice, the non-defaulting party may
send termination notice in writing terminating the Agreement. Termination shall
become effective ten (10) days after the giving of the termination notice.
Termination of this Agreement by either party shall not be deemed an election of
remedies or waivers of any claims relating to the other party.
13.3 Bankruptcy: In the event either party voluntarily files a
petition in bankruptcy or has such petition involuntarily filed against it, or
ceases doing business in the ordinary course, the other party may terminate the
Agreement by giving a termination notice, which termination shall become
effective ten (10) days after the giving of the termination notice. Termination
of this Agreement by either party shall not be deemed an election of remedies or
waivers of any claims relating to the other party.
13.4 At the time of termination, SII will receive *** commission as
described in Article 5-Orders, Quotations and Prices.
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13.5 At the time of termination, SUMMIT or its current distributor
shall take over SII's responsibilities to Customers and guarantee the license
right of those Customers in good standing.
14.0 Provisions upon Termination.
---------------------------
14.1 Except as otherwise provided herein, neither SUMMIT nor SII
shall, by reason of the termination, be liable to the other for compensation,
reimbursement, or damages on account of the loss of prospective profits on
anticipated sales, or on account of expenditures, investments, leases, or
commitments made in connection with this Agreement.
14.2 SII shall immediately refrain from further use of all of SUMMIT's
logos, trademarks and trade names. SII shall return all demonstration material,
manuals, literature and brochures.
14.3 Obligations of SII described in Section 17.0 of this Agreement,
shall survive termination or expiration of this Agreement.
15.0 Limitation of Liability. THE LIABILITY OF SUMMIT IN ANY WAY ARISING
-----------------------
OUT THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, WHETHER SUCH
LIABILITY BE FOUNDED ON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY, TORT LIABILITY, OR ANY OTHER THEORY, SHALL IN NO EVENT EXCEED,
AND IS SPECIFICALLY LIMITED TO THE AMOUNT PAID FOR THE PRODUCTS RELATED TO SAID
CLAIM. IN NO EVENT SHALL SUMMIT BE LIABLE FOR CONSEQUENTIAL DAMAGES, INCIDENTAL
DAMAGES, LOST PROFITS, OR LOSS DUE TO BUSINESS INTERRUPTION.
16.0 Arbitration. Any and all disputes arising in connection with this
-----------
Agreement shall be settled by Arbitration, unless otherwise mutually agreed by
both parties. In the event that SII
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initiates the dispute against SUMMIT then the Arbitration shall be held in
Portland, Oregon, USA, and set up in accordance with the Rules of Arbitration
and Conciliation of the International Chamber of Commerce. In the event that
SUMMIT initiates the dispute against SII then the Arbitration shall be held in
Chiba, Japan and set up in accordance with the Rules of Arbitration and
Conciliation of the International Chamber of Commerce. Any and all Arbitrators
appointed pursuant to the ICC Rules shall be fluent in English and all documents
submitted to the Arbitration panel shall be in English or accompanied by an
English translation. Judgment upon the award may be entered in any court having
jurisdiction, or application may be made to such court for a judicial acceptance
of the award and an order of enforcement, as the case may be.
17.0 Confidentiality, Trademarks and Tradenames.
------------------------------------------
17.1 SII shall treat as Confidential and shall not disclose any
information concerning SUMMIT its principal business, or assets, its Products or
its markets, or its future Products or markets, or any other material(s) which
are of a proprietary or confidential nature, and agrees to appropriately
safeguard same until such time as the information property comes into the public
domain.
17.2 SII recognizes and concedes for all purpose the validity of any
trademark, tradename, or any other proprietary mark applied, or to use by SUMMIT
in reference to the Products, and acknowledges these as the sole property of
SUMMIT, whether registered or not.
17.3 During the term of this Agreement, SUMMIT authorizes SII to use
SUMMIT's trademarks and tradenames in Territory only for the purpose of the
marketing, and distribution of SUMMIT's Products. SII agrees that it will use
SUMMIT's name and logo on all packaging, manuals, and materials, and that
SUMMIT's copyright, with its USA address must appear in and on the cover of all
manuals and disk labels, and on the software binary code program. It will be
clearly stated in all manuals, including those translated into any language,
that SUMMIT is the owner of the copyright and SII will add whatever words,
symbols or marks are required in the Territory, as directed by SUMMIT, to give
effective notice of SUMMIT's rights and to preserve all such legal rights of
SUMMIT. SII shall acquire no rights to trademarks or tradenames by virtue of
their use.
17.4 SII is expressly forbidden from altering, removing or modifying
any serial number, identifying number, trademark or other SUMMIT symbol from any
Product or printed materials or software provided under this Agreement.
18.0 Force Majeure. Neither party hereto shall be liable for default of
-------------
any obligation hereunder if such default results from force majeure which
includes; without limitations, governments acts or directives, strikes, acts of
God, war, insurrection, riot or civil commotion, fires, flooding or water
damage, explosions, embargoes, or delays in delivery, whether of the kind herein
enumerated or otherwise, which are not within the reasonable control of the
party affected.
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19.0 Assignment. This Agreement is not assignable or transferable by SII
----------
except with the written consent of SUMMIT. In the event that SUMMIT assigns or
transfers this agreement SUMMIT shall give SII thirty (30) days written notice.
20.0 Notices. Any notices provided for under this Agreement shall be
-------
deemed effective when delivered in person or ten (10) days after deposit in the
mail by registered or certified mail postage paid and addressed to the
respective address listed in the introduction of this Agreement.
21.0 Relationship of the Parties. The parties hereto agree that SII shall
---------------------------
operate as an independent contractor and not as an agent or employee of SUMMIT.
SII has no expresses or implied authorization to incur any obligation or an any
manner otherwise make any commitments on behalf of SUMMIT. SII shall employ its
own personnel and shall be responsible for them and their acts, and in no way
shall SUMMIT be liable for SII, its employees, or third parties.
22.0 Entire Agreement and Severability. This Agreement constitutes the
---------------------------------
entire Agreement between the parties, and supersedes any and all prior oral or
written Agreements. Any modifications, renewals, extensions, waivers, or
amendments shall be effective only when in writing signed by both parties.
Should any clause of this Agreement be rendered illegal or unenforceable due to
legislative changes, the remainder of the Agreement shall continue in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above set forth.
SUMMIT DESIGN, INC. SEIKO INSTRUMENTS, INC.
/s/ Larry J. Gerhard /s/ Shinichi Ishibashi
- ------------------------------- ---------------------------------
Authorized Signature Authorized Signature
Larry J. Gerhard Shinichi Ishibashi
- ------------------------------- ---------------------------------
Name (Type or Print) Name (Type or Print)
President, CEO Division Manager
- ------------------------------- ---------------------------------
Title Title
February 1, 1996 February 1, 1996
- ------------------------------- ---------------------------------
Date Date
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APPENDIX A
JAPAN RECOMMENCED LIST PRICE
----------------------------
PRICES EFFECTIVE: JANUARY 1, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PART PLAN M MAINT PLAN H MAINT
- --------------------------------------------------------------------------------------------------------------------------
VISUAL PRODUCTS NUMBER LIST NUMBER LIST NUMBER LIST
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PC PRODUCTS
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL VP-BBO-L * * VP-BBO-M * * VP-BBO-H * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL Design Entry VP-DEO-L * * VP-DEO-M * * VP-DEO-H * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL; Win95 or NT VP-BNT-L * * VP-BNT-M * * VP-BNT-H * *
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
UNIX PRODUCTS
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL (node locked) VU-NLO-L * * VU-NLO-M * * VU-NLO-H * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL (floating) VU-FLO-L * * VU-FLO-M * * VU-FLO-H * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL Design Entry (node locked) VU-DE1-L * * VU-DE1-M * * VU-DE1-H * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL Design Entry (floating) VU-DE2-L * * VU-DE2-M * * VU-DE2-H * *
- --------------------------------------------------------------------------------------------------------------------------
Visual Verilog Design Entry and Debugging interface VU-VE6-1 * * VU-VE6-M * * VU-VE6-H * *
(node locked) (ship 11/95)
- --------------------------------------------------------------------------------------------------------------------------
Visual Verilog Design Entry and Debugging interface VU-VE7-L * * VU-VE7-M * * VU-VE7-H * *
(floating) (ship 11/95)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
UPGRADES
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL (2.5 or 3.2) for PC VP-BBO-A * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL (2.5 or 3.2) for UNIX (node locked) VU-NLO-A * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL (2.5 or 3.2) for UNIX (floating) VU-FLO-A * *
- --------------------------------------------------------------------------------------------------------------------------
Visual Verilog Design Entry and Debugging interface VU-NL1-A * *
- --------------------------------------------------------------------------------------------------------------------------
Visual Verilog Design Entry and Debugging interface VU-FL1-A * *
- --------------------------------------------------------------------------------------------------------------------------
Design Entry to full Visual (PC) VP-DEO-A * *
- --------------------------------------------------------------------------------------------------------------------------
Design Entry to full Visual (node locked) VU-DE1-A * *
- --------------------------------------------------------------------------------------------------------------------------
Design Entry to full Visual (floating) VU-DE2-A * *
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
EVALUATION INVENTORY & PLATFORM CHANGE
- --------------------------------------------------------------------------------------------------------------------------
Evaluation Inventory Replacement Cost * * Maximum
- --------------------------------------------------------------------------------------------------------------------------
Additional platform types (each) VU-BEO-A * *
- --------------------------------------------------------------------------------------------------------------------------
Reissue authorization codes to change host node ID VU-BEO-A * *
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
EXTRA DOCUMENTATION
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL Manual for PC VP-BBO-D * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL Manual for UNIX VU-BBO-D * *
- --------------------------------------------------------------------------------------------------------------------------
Visual HDL Training Guide for UNIX VU-BCO-D * *
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
TRAINING (SEE NOTES)
- --------------------------------------------------------------------------------------------------------------------------
4 day course at Summit headquarters (per student) VT-BBO-T * *
- --------------------------------------------------------------------------------------------------------------------------
On-site training 4 day course VT-BCO-T * *
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
LICENSE REQUIREMENTS
* * is licensed on * * * basis, through * * *.
Consult Summit or your Summit Sales Representative for additional
information.
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MAINTENANCE PLANS
Maintenance part numbers are provided for two plans.
Plan "M" * * *
Plan "H", * * *
Maintenance can only be ordered for * * *
JAPAN MAINTENANCE FOR THE FIRST YEAR IS:
1996 - * * of Recommended Product List Price
1997 - * * of Recommended Product List Price
1998 - * * of Recommended Product List Price
After 1998 - * * of Recommended Product List Price
WARRANTY
All * * * are covered by * * * warranty. Refer to Summit's Terms and
Conditions document for details.
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APPENDIX B
TERRITORY
SII is allowed to sell the authorized products to customers and install the
said products within the country of Japan and its territories.
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APPENDIX C
PRODUCT QUOTA AND DISCOUNT SCHEDULE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
QUARTERLY QUOTA ANNUAL QUOTA ANNUAL DISCOUNT
YEAR (TO SUMMIT) (TO SUMMIT) (TO SII)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1996
- --------------------------------------------------------------------------------------------
*Q1 * * *
- --------------------------------------------------------------------------------------------
*Q2 * * *
- --------------------------------------------------------------------------------------------
*Q3 * * *
- --------------------------------------------------------------------------------------------
*Q4 * * *
- --------------------------------------------------------------------------------------------
Total * * * * * *
- --------------------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------------------
*Q1 * * *
- --------------------------------------------------------------------------------------------
*Q2 * * *
- --------------------------------------------------------------------------------------------
*Q3 * * *
- --------------------------------------------------------------------------------------------
*Q4 * * *
- --------------------------------------------------------------------------------------------
Total * * * * * *
- --------------------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------------------
*Q1 * * *
- --------------------------------------------------------------------------------------------
*Q2 * * *
- --------------------------------------------------------------------------------------------
*Q3 * * *
- --------------------------------------------------------------------------------------------
*Q4 * * *
- --------------------------------------------------------------------------------------------
Total * * * * * *
- --------------------------------------------------------------------------------------------
Extension Periods
- --------------------------------------------------------------------------------------------
*Quarterly Quotas for Extension Periods shall be the previous years Quota plus * * *
*Discounts for each year of Extension Periods shall be * * *.
- --------------------------------------------------------------------------------------------
</TABLE>
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APPENDIX D
SEIKO INSTRUMENT, INC.
END USER SOFTWARE AGREEMENT
Definitions:
"Distributor" is Seiko Instruments Inc. ("SII").
This is a legal Agreement between you, the end user, and Distributor. By
opening this sealed media package and/or by using the Software, you are agreeing
to be bound by the terms of this Agreement.
GRANT OF USE RIGHT. Distributor grants you the right to use one (1) copy of
the enclosed software program and accompanying documentation (together with any
upgrades supplied by Distributor, the "Software') on a single computer system at
a time, subject to the terms and conditions of this Agreement. All rights not
expressly granted therein are reserved by Distributor or its successors.
YOU MAY:
a. Install the Software on only one computer or workstation;
b. make no more than one (1) copy of the Software in machine readable
form, solely for back-up purposes, and provided that you reproduce all
proprietary notices on the copy; and
c. physically transfer the Software from one computer to another,
provided that the Software is used on only one computer at a time.
YOU MAY NOT:
a. Use the Software on more than one computer or workstation at a time;
b. modify, translate, reverse engineer, decompile, disassemble, create
derivative works based on, or copy (except to create the back-up copy) the
Software;
c. rent, lend, transfer, distribute, or grant any rights in the Software
in any form to any person without the written consent of Distributor; or
d. remove any proprietary notices, labels, or marks from the Software.
UPGRADE PRODUCTS. Any upgrades to the Software may only be used in
conjunction with the prior version of the Software.
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LIMITED WARRANTY AND DISCLAIMER. Distributor warrants that for a period of
ninety (90) days from the date of sale of the Software to you, the media on
which the Software is furnished will, under normal use, be free from defects in
materials and workmanship. Distributor's entire liability and your exclusive
remedy under this warranty (which is subject to you returning the Software to
Distributor) will be, at Distributor's options, to replace the media or to
refund the purchase price and terminate this Agreement. Except for these express
limited warranties, Distributor makes, and you receive, no warranties or
conditions, express, implied, statutory, or otherwise, and Summit specially
disclaims any implied warranties of merchantability, noninfringement and fitness
for a particular purposes. Distributor does not warrant that the Software will
meet your requirements or that the operation of the Software will be
uninterrupted or error free. You assume the responsibility for the selection of
your requirements, software, and hardware to achieve your intended results for
installation; for use; and that the operations of the Software will be
uninterrupted or error free. Some States do not allow the exclusion of implied
warranties so that the above exclusions may not apply to you. This warranty
gives you specific legal rights. You may also have other rights which vary from
geographic area to geographic area.
PROPRIETARY RIGHTS. This use right is not a sale of program code. Title and
copyrights to the Software and accompanying documentation, including the
enclosed copies and any copy made by you, remain with Summit or its suppliers or
successors.
LIMITATION OF LIABILITY. Distributor's liabilities arising out of this
Agreement shall not exceed the amounts paid by you to obtain the Software. In no
event will Summit be liable for any loss of data, lost opportunity of profits,
cost of cover, or special, incidental consequential, or indirect damages arising
from the use of the Software in this Agreement, however caused and on any theory
of liability. These limitations will apply even if Summit or an authorized
dealer has been advised of the possibility of such damage, and notwithstanding
any failure of essential purpose of any limited remedy. You acknowledge that the
amount paid for the Software reflects this allocation of risk. Some States do
not allow the limitation or exclusion of liability for incidental or
consequential damages, so the above limitation or exclusion may not apply to
you.
EXPORT RESTRICTIONS. You agree that you will not export or re-export the
Software in any from without the appropriate United States and foreign
government licenses. Your failure to comply with this provision is a material
breach of this contract. If you need advice on such export laws and regulations,
you should contact the U.S. Department of Commerce, Export Division, Washington,
DC 20230, USA, for clarification.
TERMINATION. This agreement is effective until terminated. You may
terminate this agreement at any time by removing from your system and destroying
all copies of the Software and the accompanying documentation. Unauthorized
copying of the software or the accompanying documentation or otherwise failing
to comply with the terms and conditions of this Agreement will result in
automatic termination of this Agreement and will make available to Summit other
legal remedies. Upon termination of this Agreement, the use right granted herein
will terminate and you must immediately destroy the Software and accompanying
documentation;, and all back-up copies thereof.
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U.S. GOVERNMENT RESTRICTED RIGHTS. Any provision of Summit Design, Inc.
Software to the U.S. Government is with "Restricted Rights" as follows: Use,
duplication, or disclosure of the Software and Accompanying documentation by the
Government is subject to restrictions as set forth in subparagraphs (c)(1)(ii)
of the Rights clause in Technical Data and Computer Software -- Restricted
Rights at 48 CFR 52.227-19, as applicable. Contractor/manufacture is Summit
Design, Inc., 9305 S.W. Gemini Drive, Beaverton, Oregon 97005, USA.
MISCELLANEOUS. This is the entire Agreement between the parties relating to
the subject matter hereof and no waiver or modification of the Agreement shall
be valid unless signed by each party. The waiver of a breach of any terms hereof
shall in no way be construed as a waiver of any other term or breach hereof. If
any provision of this Agreement shall be held by a court of competent
jurisdiction to be contrary to law, the remaining provisions of this Agreement
shall remain in full force and effect. This agreement is governed by the laws of
the State of Oregon without reference to conflict of laws principles. All
disputes arising out of this Agreement shall be subject to the exclusive
jurisdiction of the state and federal courts located in Multnomah County,
Oregon, and the parties agree to submit to the personal and exclusive
jurisdiction and venue of these courts. Should you have any question about this
Agreement, or if you desire to contract Summit Design, Inc., please write Summit
Design, Inc., 9305 S.W. Gemini Drive, Beaverton, Oregon 97005 USA (503-643-
9281).
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APPENDIX E
VALUE, PRICE AND PAYMENTS
SII agrees to pay a one time fee of * * * for the exclusive
rights, discounts and conditions provided during the Base Period of this
agreement. Such rights, discounts and conditions are intended to give SII a
superior position in the Japanese market with SUMMIT's products and support. SII
and SUMMIT agree that the annual value and commensurate costs associated with
the Base Period of this agreement are as follows:
Year 1 value is * * *
Year 2 value is * * *
Year 3 value is * * *
SII agrees to make payments to SUMMIT according to the following schedule:
Payment 1, due and payable on February 28, 1996 * * *
Payment 2, due and payable on January 31, 1997 * * *
Payment 3, due and payable on January 31, 1998 * * *
SII and SUMMIT agree that there will be no additional fee for Extension
Periods.
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LETTER AGREEMENT
BETWEEN
SUMMIT DESIGN INC. ("SUMMIT")
AND
SEIKO INSTRUMENTS, INC. ("SII")
Summit has notified Soliton of the termination of Soliton as a Distributor
of Summit products in the territory of Japan. Such termination requires either
ninety (90) days of notification or a mutually agreed date between Summit and
Soliton whichever is sooner. Summit and SII have signed an agreement appointing
SII as the Exclusive Distributor for the Japanese territory according to terms
and conditions of the Summit and SII Distributor Agreement. Summit agrees that
until the effective date of the Soliton termination, Summit and SII shall share
revenue from the sale of products to companies who also have written proposals
from Soliton *** to Summit and *** to SII regardless of the amount of discount
required by the customer.
/s/ Larry Gerhard 2/1/96 /s/ Shinichi Ishibashi 2/1/96
- --------------------------------------- ------------------------------------
Mr. Gerhard, Summit Design, Inc. Mr. Ishibashi, Seiko Instruments,
* Confidential Treatment Requested
<PAGE>
CONFIDENTIAL
Term Sheet Agreement
Agreement between Summit Design Inc. ("SUMMIT")
-----------------------------------------------
and
Seiko Instruments, Inc. ("SII")
Concerning Evaluation Inventory
-------------------------------
Effective Date: February 1, 1996
---------------------------------
SII Evaluation Inventory Purchase:
- ---------------------------------
Under the following terms and conditions, Seiko agrees to purchase 40 units
of products listed below to be used exclusively for on-site customer evaluation.
Authorization codes for these units will be 1, 2 and 3 months timed licenses.
<TABLE>
<CAPTION>
1. Type of Product Price
--------------- ----
<S> <C> <C>
a. Visual HDL 3.1, PC **
b. Visual HDL 3.1, WS **
c. Visual Verilog 3.0, WS **
</TABLE>
2. Payment for these units shall be made no later than March 31, 1996.
3. Evaluation Inventory Upgrades:
a. SII agrees that the completion of customer evaluation each unit
used for this evaluation will be destroyed and SII will purchase
an upgrade to replace the destroyed until.
b. Summit agrees to sell upgrade units to SII for the actual
manufacturing and shipping cost which will not exceed ** for
each upgrade unit.
c. Summit agrees to sell and SII agrees to purchase a major upgrade
for evaluation until for ** per copy when Summit releases a
major upgrade.
/s/ Larry J. Gerhard /s/ Shinichi Ishibashi
- ------------------------------ ---------------------------------------
Mr. Gerhard Mr. Ishibashi,
President, CEO General Manager, EDA Sales Dept.1
Summit Design, Inc. SII EDA Systems Division
* Confidential Treatment Requested
-2-
<PAGE>
Exhibit 10.18
CONFIDENTIAL
SUMMIT
DISTRIBUTOR AGREEMENT
---------------------
This Agreement made and entered into this 23rd day of October, 1995, by and
between Summit Design, Inc., a Delaware corporation organized and existing under
the laws of the state of Delaware and the U.S.A, with its principal place of
business located at 9305 SW Gemini Drive, Beaverton, OR 97008 (hereinafter
referred to as SUMMIT), and ATE Service Co., Ltd., a corporation organized and
existing under the laws of Japan, with its principal place of business located
at 197-1 Higashi-Naganuma, Inagi-Shi, Tokyo 206, Japan (hereinafter referred to
as ATE).
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1.0 Appointment. SUMMIT hereby appoints ATE, as Exclusive Distributor,
-----------
for the sale and support of the SUMMIT Products listed in Appendix A (except for
Visual Test) in the Territory defined in Appendix B, as long as ATE meets the
quarterly quota as specified in Appendix C, and grants to ATE a non-exclusive,
non-transferable license to use and demonstrate the Products to facilitate its
performance of this Agreement, and to sublicense to approved subdistributors and
to the customers in the territory the right to use the Products pursuant to the
SUMMIT Program License Agreement described in Article 4.2 hereof. ATE will have
the right to engage subdistributors in the territory providing notification to
and written agreement by SUMMIT.
1.1 As used in Section 1, Exclusive Distributor shall mean that
SUMMIT may have agreements for distribution of the products listed in Appendix A
with no more than one (1) Tokyo based direct distributors and one (1) Osaka
based direct distributor. Distributors may employ subdistributors if approved
in writing by SUMMIT.
1.2 The list of Products set forth in Appendix A may be changed by
SUMMIT in the event that any of the products listed are abandoned by SUMMIT or
undergo general reconfiguration or price change by SUMMIT. Such changes shall
require a 30 day prior written notice.
2.0 Terms of Agreement. This Agreement shall take effect from the date of
------------------
execution hereof and shall remain in force for a period of three (3) years (base
period), unless and until terminated pursuant to Article 14.0 hereof. This
Agreement may be renewed for an additional three (3) years (extension period),
within a six (6) month period of the existing Agreement expiration date, by
mutual consent of SUMMIT and ATE. Discounts for the base period shall be those
listed in Section 5.5.2 and 5.5.3(c)3 and for the extension periods shall be set
according to Section 5.5.
3.0 Responsibilities of Summit.
--------------------------
3.1 SUMMIT agrees to make every reasonable effort to provide
quantities of the Products sufficient to meet the requirements of ATE.
* Confidential Treatment Requested
<PAGE>
CONFIDENTIAL
3.2 SUMMIT agrees to provide "factory level" technical support to
ATE.
3.3 SUMMIT agrees to ship products upon receipt of a valid Purchase
Order.
4.0 Responsibilities of ATE.
-----------------------
4.1 ATE agrees to use its best efforts to promote the sale of the
Products and to provide technical support to its customers.
4.2 ATE agrees to sell or otherwise provide the Products only in
accordance with SUMMIT's licensing policies, as represented by the terms stated
herein, the SUMMIT Program License Agreement, attached hereto in Appendix D.
ATE may execute with its customers a SUMMIT Program License Agreement written in
Japanese which shall have substantially the same meaning as the SUMMIT Program
License Agreement. No products will be transferred by SUMMIT to ATE, or from
ATE to its' customers without such a license being executed by ATE, a copy
retained and kept on file by ATE, and a copy supplied to SUMMIT.
4.3 ATE agrees to maintain a sales, marketing, and support staff
sufficient to provide for the sales and support of SUMMIT Products in the
Territory. directly and/or through the use of subdistributors.
4.4 ATE agrees to meet at least quarterly with SUMMIT or its
authorized representatives to review the business in the Territory for the
previous quarter, forecast for the coming six (6) months in a format specified
by SUMMIT, experience with service and Product quality and any other activities
which will promote a successful working relationship between the two companies.
4.5 ATE recognizes that SUMMIT and ATE may be required by the laws of
the United States or others to provide information regarding the identity of
purchasers of Products. At the request of SUMMIT, ATE will immediately provide
to SUMMIT copies of all Product sales records, evidencing actual end-user
destinations, product and service prices and discounts; total sales value;
identities and addresses.
4.6 ATE will provide to SUMMIT, at the beginning of each quarter, a
quarterly status report for the previous quarter, a forecast of the next quarter
and, at the beginning of each month, a forecast update. Quarterly status
reports, forecasts and forecast updates shall include the following: customer
names, addresses product sales and service sales per customer. All prices
listed in these reports will be actual sale values.
4.7 ATE agrees to pay to SUMMIT the sum of * * * as a non-refundable
up front license fee for the license described in Section 1. This
fee shall be paid at a rate of * * * per month beginning on November
30, 1995 and continuing for six months, or may be paid in full by ATE as a one
time reduction in ATE inventory at ATE's sole discretion.
* Confidential Treatment Requested
-2-
<PAGE>
CONFIDENTIAL
5.0 Orders, Quotations and Prices.
-----------------------------
5.1 ATE shall place orders to SUMMIT via written Purchase Order.
Each Purchase Order shall be accompanied by the customer purchase order if such
order exists. ATE shall maintain a file of its quotations, offers, acceptances,
and all other correspondence relating to the sale of Products, and shall supply
such information to SUMMIT monthly and quarterly as specified in Section 4.6.
5.2 All prices are F.O.B. Beaverton, Oregon, USA, and exclude duty,
insurance, shipping, local tax, and any use, value-added, or other tax. When
applicable, such items will appear as a separate line item on the invoice.
5.3 Prices.
------
5.3.1 The Product List Price for each product is shown in
Appendix A.
5.3.2 Maintenance, with Upgrades and Technical Support for each
product may be purchased under the following options:
(a) Maintenance - Maintenance prices are * * * of Product
List Price and are paid annually. Annual maintenance includes the following:
(i) Product upgrades released during the current
maintenance period for products purchased.
(ii) Technical Support supplied by ATE.
(iii) Bug Fix Releases supplied by SUMMIT.
(b) Technical Support - Technical Support prices are
* * * of Product List Price, paid annually. Technical support includes the
following:
(i) Technical Support supplied by ATE.
(ii) Bug Fix Releases supplied by SUMMIT.
(c) Upgrades - Product Upgrades will be priced at the
time of release and will normally be priced at * * * of the original Product
List Price.
5.4 End User Discounts and Uplifts.
------------------------------
5.4.1 ATE or its distributors are authorized to offer up to a
* * * discount on products, maintenance and technical support without prior
written approval from SUMMIT.
* Confidential Treatment Requested
-3-
<PAGE>
CONFIDENTIAL
5.4.2 ATE or its distributors may offer discounts greater than
*** on products, maintenance and technical support without prior written
approval from SUMMIT provided that ATE remits cash with the purchase order for
the purchase price of the product. This purchase price shall be equal to the
Product List Price as stated in Appendix A minus the appropriate discount as
listed in Section 5.5.
5.4.3 Uplifts - AU price uplifts beyond *** above Product List
Price for Products, Maintenance, Technical Support and Upgrades must be
consulted with SUMMIT in advance. Such *** limit shall be applied to pricing at
quote time using conversion rates at the time of quote.
5.5 Distributor Purchase Discounts. ATE shall purchase products,
------------------------------
maintenance, technical support and upgrades for sale in the territory. The
purchase price for such products, maintenance, technical support and upgrades
shall be equal to actual selling price minus the appropriate discount as
specified below unless modified as specified in Section 5.4.2.
5.5.1 If Japanese withholding taxes are withheld:
(a) Discount on Products shall be equal to *** of
actual selling price.
(b) Discount on Maintenance shall be equal to *** of
actual selling price.
(c) Discount on Technical Support shall be equal to
*** of actual selling price.
(d) Discount on Upgrades shall be equal to *** of
actual selling price.
5.5.2 If Japanese withholding taxes are not withheld:
(a) Discount on Products shall be equal to *** of
actual sales price.
(b) Discount on Maintenance shall be equal to *** of
actual selling price.
(c) Discount on Technical Support shall be equal to
*** of actual selling price.
(d) Discount on Upgrades shall be equal to *** of
actual selling price.
* Confidential Treatment Requested
-4-
<PAGE>
CONFIDENTIAL
5.6 ATE agrees to support Summit in achieving a review with the
Japanese tax authorities that will eliminate the need for withholding taxes.
6.0 Terms of Payment.
----------------
6.1 Payments for Products, Maintenance, Technical Support and
Upgrades shall be made by ATE within sixty (60) days, after date of invoice.
The preferred method of payments to SUMMIT is wire transfer. All payments made
to SUMMIT must be in United States Dollars (U.S.D.).
6.2 If any payment due SUMMIT from ATE is not paid when due, SUMMIT
may at its option; (a) cease further shipments to ATE until all overdue payments
have been made or (b) make shipments only against an irrevocable letter of
credit acceptable to SUMMIT.
7.0 Delivery. SUMMIT shall use its best effort to fill all orders
--------
promptly upon acceptance thereof. Deliveries shall be made F.O.B SUMMIT's
factory in Beaverton, Oregon, USA SUMMIT shall retain title and bear the risk of
loss until such time as a shipment has been placed on-board a commercial
carrier, at which time title shall pass and the risk of loss shall be borne by
ATE. Such loss shall not exceed the replacement cost of the shipment.
8.0 Advertising and Promotion. ATE shall conduct advertising and
-------------------------
promotional activities deemed appropriate to promote the sale of the Products in
the Territory. SUMMIT shall supply, free of charge, advertising materials of
its own creation for marketing of the Products, such as catalogs, brochures,
pamphlets, and the like. ATE agrees to refrain from making any claim or
representation concerning the Products in excess of or difference from those
made by SUMMIT.
9.0 Import and Export.
-----------------
9.1 An import duties and custom's fees, and all import permits and
licenses, are ATE's and Customer's sole responsibility.
9.2 The licensing of the Products to ATE by SUMMIT is subject to all
laws, regulations, and rules of the United States of America and the State of
Oregon. SUMMIT shall not be bound by terms that are in conflict with such laws.
ATE agrees to fully comply with all applicable U.S. export regulations governing
destination, ultimate end-user programs of internal control and re-export
restraints, and other restrictions relating to Products or the furnishing of
technical information or data in any form covered by this Agreement.
9.3 ATE agrees to establish such programs of internal controls as
required by U.S. Export Regulations.
9.4 ATE agrees not to take any action that will cause it, or SUMMIT
to be in violation of any law of any jurisdiction in the Territory or the United
States, including but not limited
* Confidential Treatment Requested
-5-
<PAGE>
CONFIDENTIAL
to, the U.S. Foreign Corrupt Practices Act of 1977 (FCPA), the U.S. Export
Control Laws, and the U.S. Anti-Boycott Laws.
9.5 ATE understands that SUMMIT is subject to regulations by agencies
of the United States Government, including the U.S. Department of Commerce,
which may prohibit export or diversion of the Products, or Product information
to certain countries. Regardless of any disclosure made by ATE to SUMMIT of an
ultimate destination of the Products or Product information, ATE warrants that
it will not export, either directly or indirectly, any Product or Product
information without first obtaining all necessary approvals from the United
States Department of Commerce and/or any other agency or department of the
United States Government.
10.0 Proprietary Rights and Tradesecrets.
-----------------------------------
10.1 Except as otherwise provided herein, SUMMIT retains all title and
reserves all rights to the documentation, manuals, information, packaging,
promotional materials, or other data furnished by SUMMIT to ATE, or developed by
ATE under this agreement, whether in object, printed hard copy, or other form.
10.2 Both parties acknowledge that the Products, including any
modifications, enhancements, or improvements to the Products contain valuable
trade secret information proprietary to SUMMIT. Both parties agree to exercise
the highest degree of care and control with respect to the safeguard of these
trade secrets.
11.0 Product Warranties.
------------------
11.1 SUMMIT warrants that it owns the copyrights to all software
products sold hereunder, and has the legal right to sell such products.
11.2 SUMMIT's warranty to ATE's customers shall be the standard SUMMIT
warranty for the Products which is in effect on the date of the shipment of
Products to Customer.
11.3 EXCEPT FOR THE EXPRESS WARRANTIES STATED HEREIN, SUMMIT HEREBY
DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, ON ALL PRODUCTS, AND
SPECIFICALLY AND WITHOUT LIMITATION, DISCLAIMS AND PRECLUDES ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
12.0 Infringement.
------------
12.1 SUMMIT, at its expense, will defend ATE against any claim, action
or suit based on an allegation that a product furnished hereunder infringes a
patent or copyright in the Territory, and SUMMIT will pay any resulting costs,
damages, and attorney's fees finally awarded (after exhaustion of appeals, if
SUMMIT files any appeals), against ATE which are attributable to such claim, or
will pay the part of any settlement which is attributable to such claim,
provided that;
* Confidential Treatment Requested
-6-
<PAGE>
CONFIDENTIAL
(a) ATE notifies SUMMIT in writing within seventy-two (72) hours of acquiring
knowledge of the claim (claim includes any writing related to the subject matter
of this subsection); (b) SUMMIT is permitted to control the defense settlement
of the claim, at its sole discretion; and (c) ATE cooperates reasonably in such
defense or settlement.
12.2 In its defense or settlement of any such claim SUMMIT may (a)
procure for ATE the right to continue using the Product; (b) modify the Product
so that it becomes noninfringing; or (c) replace the Product with a
substantially equivalent Product not subject to such claim. If the use of any
Product furnished hereunder is enjoined and none of the preceding alternatives
is reasonably available to SUMMIT, SUMMIT will provide ATE an opportunity to
return the Product and receive a refund of the purchase price paid, less a
reasonable allowance for use.
12.3 Notwithstanding the foregoing, SUMMIT shall have no liability to
defend to indemnify ATE or to pay any costs, damages, or attorney's fees for any
claim based upon the use of any version of software other than the current
unaltered version released by SUMMIT.
12.4 The foregoing states the entire obligation and liability of
SUMMIT with respect to any claims of patent or copyright infringement.
13.0 Termination. This Agreement may be terminated; (a) by an Agreement
-----------
duly signed by the parties hereto; or (b) by either party for cause, upon notice
in writing, given by registered or certified mail to the other party, notifying
the offending party of the cause and allowance of ninety (90) days for such
party to cure such cause.
14.0 Provisions upon Termination.
---------------------------
14.1 Except as otherwise provided herein, neither SUMMIT nor ATE
shall, by reason of the termination, be liable to the other for compensation,
reimbursement, or damages on account of the loss of prospective profits on
anticipated sales, or on account of expenditures, investments, leases, or
commitments made in connection with this Agreement.
14.2 ATE shall immediately refrain from further use of all of SUMMIT's
logos, trademarks and tradenames. ATE shall return all demonstration material,
manuals, literature and brochures.
14.3 Obligations of ATE described in Section 18 of this Agreement,
shall survive termination or expiration of this Agreement.
15.0 Limitation of Liability. THE LIABILITY OF SUMMIT IN ANYWAY ARISING
-----------------------
OUT THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, WHETHER SUCH
LIABILITY BE FOUNDED ON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY, TORT LIABILITY, OR ANY OTHER THEORY, SHALL IN NO EVENT EXCEED,
AND IS SPECIFICALLY LIMITED TO THE AMOUNT PAID FOR THE PRODUCTS RELATED TO SAID
CLAIM. IN NO EVENT SHALL SUMMIT BE LIABLE
* Confidential Treatment Requested
-7-
<PAGE>
CONFIDENTIAL
FOR CONSEQUENTIAL DAMAGES, INCIDENTAL DAMAGES, LOST PROFITS, OR LOSS DUE TO
BUSINESS INTERRUPTION.
16.0 Arbitration. Any and all disputes arising in connection with this
-----------
Agreement shall be settled by Arbitration, unless otherwise mutually agreed by
both parties. The Arbitration shall be held in Portland, Oregon, USA, and set
up in accordance with the Rules of Arbitration and Conciliation of the
International Chamber of Commerce. Any and all Arbitrators appointed pursuant
to the ICC Rules shall be fluent in English and all documents submitted to the
Arbitration panel shall be in English or accompanied by an English translation.
Judgment upon the award may be entered in any court having jurisdiction, or
application may be made to such court for a judicial acceptance of the award and
an order of enforcement, as the case may be.
17.0 Confidentiality, Trademarks and Tradenames.
------------------------------------------
17.1 ATE shall treat as Confidential and shall not disclose any
information concerning SUMMIT, its pricing, business, or assets, its Products or
its markets, or its future Products or markets, or any other material(s) which
are of a proprietary or confidential nature, and agrees to appropriately
safeguard same until such time as the information properly comes into the public
domain.
17.2 ATE recognizes and concedes for all purpose the validity of any
trademark, tradename, or any other proprietary mark applied, or to use by SUMMIT
in reference to the Products, and acknowledges these as the sole property of
SUMMIT, whether registered or not.
17.3 During the term of this Agreement, SUMMIT authorizes ATE to use
SUMMIT's trademarks and tradenames in Territory only for the purpose of the
marketing, and distribution of SUMMIT's Products. ATE agrees that it will use
SUMMIT's name and logo on all packaging, manuals, and materials, and that
SUMMIT's copyright, with its USA address must appear in and on the cover of all
manuals and disk labels, and on the software binary code program. It will be
clearly stated in all manuals, including those translated into any language,
that SUMMIT is the owner of the copyright and ATE will add whatever words,
symbols or marks are required in the Territory, as directed by SUMMIT, to give
effective notice of SUMMIT's rights and to preserve all such legal rights of
SUMMIT. ATE shall acquire no rights to trademarks or tradenames by virtue of
their use.
17.4 ATE is expressly forbidden from altering, removing or modifying
any serial number, identifying number, trademark or other SUMMIT symbol from any
Product or printed materials or software provided under this Agreement.
18.0 Force Majeure. Neither party hereto shall be liable for default of
-------------
any obligation hereunder if such default results from force majeure which
includes; without limitation, governmental acts or directives, strikes, acts of
God, war, insurrection, riot or civil commotion, fires, flooding or water
damage, explosions, embargoes, or delays in delivery, whether of the kind herein
enumerated or otherwise, which are not within the reasonable control of the
party affected.
* Confidential Treatment Requested
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CONFIDENTIAL
19.0 Assignment. This Agreement is not assignable or transferable by
----------
either party in whole or in part, except with the written consent of the other
party.
20.0 Notices. Any notices provided for under this Agreement shall be
-------
deemed effective when delivered in person or ten (10) days after deposit in the
mail by registered or certified mail postage prepaid and addressed to the
respective address listed in the introduction of this Agreement.
21.0 Relationship of the Parties. The parties hereto agree that ATE shall
---------------------------
operate as an independent contractor and not as an agent or employee of SUMMIT.
ATE has no express or implied authorization to incur any obligation or an any
manner otherwise make any commitments on behalf of SUMMIT. ATE shall employ its
own personnel and shall be responsible for them and their acts, and in no way
shall SUMMIT be liable for ATE, its employees, or third parties.
22.0 Entire Agreement and Severability. This Agreement constitutes the
---------------------------------
entire Agreement between the parties, and supersedes any and all prior oral or
written Agreements. Any modifications, renewals, extensions, waivers, or
amendments shall be effective only when in writing signed by both parties.
Should any clause of this Agreement be rendered illegal or unenforceable due to
legislative changes, the remainder of the Agreement shall continue in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above set forth.
SUMMIT DESIGN, INC. ATE SERVICE CO., INC.
/s/ Larry J. Gerhard /s/ Hiro Sasa
- ---------------------------------- --------------------------------------
Authorized Signature Authorized Signature
Larry Gerhard Hiro Sasa
- ---------------------------------- --------------------------------------
Name (Type or Print) Name (Type or Print)
President, CEO Vice President
- ---------------------------------- --------------------------------------
Title Title
4/5/96 4/9/96
- ---------------------------------- --------------------------------------
Date Date
* Confidential Treatment Requested
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<PAGE>
CONFIDENTIAL
APPENDIX B
TERRITORY
ATE is allowed to sell the authorized products to customers and install the
said products within the country of Japan and its territories.
* Confidential Treatment Requested
<PAGE>
CONFIDENTIAL
APPENDIX C
QUARTERLY QUOTA
<TABLE>
<S> <C> <C>
Q4; 95 * * * * * *
Ql; 96 * * *
Q2; 96 * * *
Q3; 96 * * *
Q4; 96 * * * * * *
Ql; 97 * * *
Q2; 97 * * *
Q3; 97 * * *
Q4; 97 * * * * * *
Ql; 97 * * *
Q2; 97 * * *
Q3; 97 * * *
Q4; 97 * * * * * *
</TABLE>
* Confidential Treatment Requested
<PAGE>
CONFIDENTIAL
APPENDIX D
SOFTWARE LICENSE AGREEMENT
WORLDWIDE BINARY SOFTWARE PRODUCT LICENSE AGREEMENT
Summit Design Inc., ("SUMMIT"), a Delaware corporation, hereby grants to
Customer, and Customer hereby accepts, a non-transferable, non-exclusive License
to use the software program(s) described in Section 11 attached (the "Software")
in machine readable form only, (object code only), for Customer's internal
business purposes, and in accordance with the following:
1. Use. The Software, including any portion thereof and subsequent
---
updates, may be used only on the Designated Equipment on which the Software is
first installed. The number of concurrent users of the Software is limited to
that quantity Set forth in Section 11 attached, regardless of the configuration
of the Designated Equipment. The Software may not be used on, accessed from or
transferred to any location or workstation which is more than one (1) kilometer
from the installation location set forth in Section 10 attached. The Software
may not be copied in whole or in part, except for normal and reasonable back-up
purposes. Any such copies must include the SUMMIT copyright notice and any
other SUMMIT proprietary notices accompanying the Software when installed.
2. Substitute Equipment. In the event that an equipment malfunction
--------------------
occurs in the Designated Equipment causing the Software to become inoperable on
the Designated Equipment, the Software or copies thereof may be used on
substitute equipment on a temporary basis during such malfunction. In the event
the Designated Equipment is permanently replaced by a substitute, the Software
may be used on such substitute equipment (which shall then become the Designated
Equipment) upon thirty (30) days written notice to SUMMIT and with payment to
SUMMIT of a Node ID change fee.
3. Restrictions. The Software is confidential and constitutes trade
------------
secrets and confidential information of SUMMIT. Customer shall not make the
Software available in any form to any person or entity other than Customer's
employees or contractors as reasonably necessary for Customer's use of the
Software. Customer shall not modify or enhance the Software. Customer shall
not reverse-assemble, reverse compile, or otherwise reverse-engineer the
Software in whole or in part. Customer shall utilize all reasonable precautions
to preserve and protect the confidentiality of the Software, and exercise the
same degree of care in this regard as Customer uses to protect its own trade
secrets and confidential information, Notwithstanding the provisions of this
section, the following shall not be considered confidential information: (a)
that which is developed by Customer independently of SUMMIT; (b) that which is
publicly known or becomes publicly known without breach of this Agreement or the
negligence of Customer, (c) that which is lawfully received by Customer from a
third party without accompanying disclosure or use restrictions; and (d) that
which is disclosed with the prior written approval of SUMMIT.
* Confidential Treatment Requested
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CONFIDENTIAL
4. Limited Warranty.
----------------
4.1 SUMMIT warrants that the Software will conform to the written
product description supplied by SUMMIT for the Software upon installations in
the U.S. and Canada, and for one (1) year for all other installations. SUMMIT
assumes sole responsibility for any product licensed by SUMMIT; unless expressly
stated in SUMMIT literature, those companies furnishing products which are
supported by SUMMIT's products assume no responsibility for the products sold by
SUMMIT. SUMMIT does not warrant that the software will meet Customer's
requirements for all defects reported to SUMMIT within the warranty period, the
liability of SUMMIT is limited to providing Customer with one (1) copy of
corrections of the Software or next generation release, if any, when reasonably
available, and to respond to Customer's Software problem reports according to
SUMMIT's standard support practices. SUMMIT's obligations under this warranty
shall apply only to the latest SUMMIT Software release and one (1) immediately
preceding release.
4.2 If SUMMIT provides Software to replace the Software containing
defects, such defective Software shall be promptly returned to SUMMIT and shall
become the property of SUMMIT. Defective Software not returned to SUMMIT within
thirty (30) days of receipt of the replacement shall be invoiced to Customer and
Customer shall pay the current list License fees.
4.3 This warranty shall not be valid if: (a) the Software has been
subjected to abuse, misuse, accidental alteration, neglect, or unauthorized
modifications; or (b) the Software has been exposed to conditions beyond
SUMMIT's recommended environmental, power, or operating constraints.
4.4 EXCEPT FOR THE EXPRESS WARRANTIES STATED HEREIN, SUMMIT HEREBY
DISCLAIMS ANY AND ALL WARRANTIES, EXPRESSED OR IMPLIED. FOR ALL SOFTWARE
LICENSED HEREUNDER, AND SPECIFICALLY AND WITHOUT LIMITATION, DISCLAIMS AND
PRECLUDES ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
5. Liability Limit. THE LIABILITY OF SUMMIT IN ANY WAY ARISING OUT OF
---------------
PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, WHETHER SUCH LIABILITY BE
FOUNDED ON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY,
OR ANY OTHER THEORY, SHALL IN NO EVENT EXCEED AND IS SPECIFICALLY LIMITED TO THE
PURCHASE PRICE PAID FOR LICENSE OF THE PRODUCTS RELATED TO SAID CLAIM. IN NO
EVENT SHALL SUMMIT BE LIABLE FOR CONSEQUENTIAL DAMAGES, INCIDENTAL DAMAGES, LOST
PROFITS OR LOSS DUE TO BUSINESS INTERRUPTION.
6. Infringement.
------------
6.1 SUMMIT will defend Customer against any claim that the Software
infringes a patent or copyright of another in any country in which SUMMIT has
previously introduced the Software, and SUMMIT will pay any resulting costs.
damages and attorney's fees finally awarded
* Confidential Treatment Requested
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CONFIDENTIAL
(after exhaustion of appeals, if SUMMIT files any appeals) against Customer
which are attributable to such claim, or will pay the part of any settlement
which is attributable to such claim: (a) Customer notifies SUMMIT in writing
within seventy-two (72) hours of Customer first acquiring knowledge of the
claim; (b) SUMMIT is permitted to control the defense or settlement of the
claim, at its sole discretion; and (c) Customer cooperates reasonably in such
defense or settlement.
6.2 In its defense or settlement of any such claim, SUMMIT may: (a)
procure for Customer the right to continue using the Software; (b) modify the
Software so that it becomes non-infringing; or (c) replace the Software with a
substantially equivalent Software not subject to such claim. If the use of the
Software is enjoined and none of the preceding alternatives is reasonably
available to SUMMIT, SUMMIT will provide Customer an opportunity to return the
Software and receive a refund of License fees paid, less a reasonable allowance
for use.
6.3 Notwithstanding the foregoing, SUMMIT shall have no liability to
defend or indemnify Customer or to pay any costs, damages, or attorney's fees
claim based upon: (a) the use of any version of Software other than the current
unaltered version released by SUMMIT; or (b) the use of Software on equipment
other than the Designated Equipment.
6.4 The foregoing states the entire obligation and liability of
SUMMIT with respect to any claims of patent or copyright infringement.
7. Comparison of Third Party Products. The Software shall not be used
----------------------------------
for testing or evaluating the capabilities of Automated Test Equipment (ATE) or
Computed Aided Engineering (CAE) tools, and is not designed for that purpose.
SUMMIT does not verify the accuracy of the Software for such unpermitted use.
Customer shall indemnify and hold SUMMIT harmless from all damages, claims or
liabilities resulting from Customers violation of this Section 7, including, but
not limited to, all damages, claims or liabilities suffered by or asserted
against Customer, or suffered by or asserted by a third party manufacturer,
seller, or ATE of ATE or CAE tools, or any other party.
8. Termination. SUMMIT shall have the right to terminate: (a) any
-----------
Software License for which the License fee has not been paid; and (b) any or all
of the Software Licenses granted hereunder if Customer fails to comply with
these License Terms and Conditions. Customer agrees, upon notice of such
termination, to immediately return or destroy the Software provided under such
terminated Licenses, all portions and copies thereof, and all related
documentation.
9. General Provisions.
------------------
9.1 Entire Agreement. This License Agreement is the complete and
----------------
exclusive statement of the Agreement between the parties. All prior or
contemporaneous Agreements, written or oral, and all other representations and
communications between the parties relating to the subject of this Agreement are
superseded hereby.
9.2 Modification. This Agreement may not be modified except by a
------------
subsequent written instrument signed by an authorized representative of each
party.
* Confidential Treatment Requested
-3-
<PAGE>
CONFIDENTIAL
9.3 Export. Customer understands that SUMMIT is subject to
------
regulation by agencies of the United States Government including the U.S.
Department of Commerce, which may prohibit export or diversion of the Software
or information about the Software to certain countries. Regardless of any
disclosure made by Customer to SUMMIT of an ultimate destination of the Software
or related information, Customer warrants that it will not export, either
directly or indirectly, any Software or Software information without first
obtaining all necessary approvals from the U.S. Department of Commerce or any
other agency or department of the United States Government.
9.4 Non-Waiver. Failure by either party at any time to require
----------
performance by the other of any of the provisions of the Agreement, shall in no
way affect either's rights to enforce the same, nor shall any Waiver by either
of any breach be held to be a Waiver of any succeeding breach or a Waiver of
this non-Waiver clause.
9.5 Assignment. SUMMIT may assign all or any part of its rights and
----------
liabilities arising under this Agreement. The rights and liabilities of
Customer pursuant to this Agreement may not be assigned, sublicensed, or
otherwise transferred by Customer without the prior written consent of SUMMIT.
Any attempt by Customer to do so without such consent shall be null and void.
9.6 Disputes. The legal relations of the parties hereunder, and all
--------
other matters hereunder, shall be governed by the laws of the State of Oregon,
USA, Unresolved disputes may be resolved in a court of competent jurisdiction in
Washington County, Oregon, USA. Disputes may be resolved in any other
reasonable venue designated by SUMMIT, at SUMMIT's sole discretion, if necessary
to acquire jurisdiction over third parties. Customer consents to the
jurisdiction of such court or courts.
9.7 Equitable Remedies. In addition to all other legal rights and
------------------
remedies, SUMMIT shall be entitled to obtain from any court of competent
jurisdiction all appropriate equitable remedies, including preliminary and
permanent injunctive relief against any actual or threatened violation of any
term hereof without requirement of bond, as well as an equitable accounting of
all profits or benefits arising out of such violation.
9.8 Professional Fees. In case suit or action is instituted to
-----------------
enforce any of the provisions of this Agreement, the prevailing party therein
shall be awarded all reasonable and necessary fees for bookkeepers, accountants
and witnesses (expert or otherwise) incurred by that party in connection with
such suit or action, plus such sums as may be adjudged reasonable for that
party's attorney fees throughout such suit or action, including all hearings,
trials, and appeals. Any such award of fees shall include all fees and expenses
in connection with judgment collection, including post-judgment procedures.
9.9 Severability. If any provision of the Agreement is held invalid,
------------
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be effected or impaired.
* Confidential Treatment Requested
-4-
<PAGE>
CONFIDENTIAL
10. Ownership. SUMMIT retains ownership of: (a) all copyright,
---------
proprietary and other intellectual property rights, and all other interest in
and to all design, engineering details and other data pertaining to the
Software; (b) all discover, inventions, patent rights and other intellectual
property rights arising out of services performed by SUMMIT in connection with
the Software, and with regard to all products developed as a result thereof; and
(c) all modifications, enhancements and derivations of the Software made or
created by Customer, whether or not authorized, including the sole right to
manufacture any and all such products.
* Confidential Treatment Requested
-5-
<PAGE>
CONFIDENTIAL
SECTION 10
----------
Installation Location: Date:
Company Name & Address: Primary Contact:
TEL:( )
FAX: ( )
Serial Number: Alternate Contact:
SECTION 11
----------
SOFTWARE
PRODUCT DESCRIPTION NUMBER OF USERS DESIGNATED EQUIPMENT
- ------------------------ ----------------------- -------------------------------
Platform/Model:
Media:
Operating System Version:
Node ID:
Host Name:
Serial Number:
The undersigned agree to be bound by the International Binary Software
License Agreement to which this Page Six (6)) was/is attached. and which,
Agreement incorporates the information specified in Sections 10 and 11 above.
SUMMIT DESIGN INC. LICENSEE/CUSTOMER
________________________________ ________________________________
Authorized Signature Authorized Signature
________________________________ ________________________________
Name (Type or Print) Name (Type or Print)
________________________________ ________________________________
Title Title
________________________________ ________________________________
Date Date
* Confidential Treatment Requested
<PAGE>
EXHIBIT 11.1
SUMMIT DESIGN, INC.
COMPUTATION OF SHARES USED IN PRO FORMA NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
THREE MONTHS
ENDED
1993 1994 1995 MARCH 31, 1996
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Weighted average shares out-
standing..................... 1,541,922 1,842,108 1,872,508 1,908,627
Common stock issued (1)....... 82,163 82,163 82,163 82,163
Stock options (2)............. 320,103 320,103 320,103 320,103
Preferred shares (3).......... 9,103,346 9,103,346 9,103,346 9,103,346
---------- ---------- ---------- ----------
11,047,534 11,347,720 11,378,120 11,414,239
========== ========== ========== ==========
</TABLE>
- --------
(1) Assumes issuance of all common shares issued within one year of the date of
the initial filing of this Registration Statement as outstanding for all
periods presented.
(2) Assumes exercise of options issued within one year of the date of the
initial filing of this Registration Statement which options are considered
exercised in all periods presented.
(3) Assumes conversion of all preferred shares outstanding as of the date of
the filing of this Registration Statement which shares are considered
outstanding for all periods presented.
<PAGE>
Exhibit 16.1
[LETTERHEAD OF PEAT MARWICK LLP APPEARS HERE]
Securities and Exchange Commissions
450 Fifth Street, N.W.
Washington, D.C. 20540
Gentlemen:
We have read the section entitled Experts in the Registration Statement on Form
S-1 of Summit Design, Inc. and are in agreement with the statements contained in
the first, third, fourth, fifth, sixth and seventh sentences of the second
paragraph therein. We have no basis to agree or disagree with the statements of
the registrant contained in the first paragraph, the remainder of the second
paragraph, or the third paragraph.
/s/ KPMG Peat Marwick LLP
June 11, 1996
<PAGE>
Exhibit 21.1
List of Subsidiaries of Summit Design, Inc.
- -------------------------------------------
1. Summit Design (EDA) Ltd., an Israeli Corporation
2. Test Systems Strategies, Inc., an Oregon Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 (File
No. 333- ) of our report, dated June 18, 1996 on our audits of the
consolidated financial statements and financial statement schedule of Summit
Design, Inc. We also consent to the reference to our firm under the captions
"Experts" and "Selected Consolidated Financial Data."
Coopers & Lybrand, L.L.P.
Portland, Oregon
June 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 592 1,304
<SECURITIES> 0 0
<RECEIVABLES> 5,976 4,774
<ALLOWANCES> (455) (455)
<INVENTORY> 0 0
<CURRENT-ASSETS> 6,432 5,918
<PP&E> 3,263 3,382
<DEPRECIATION> (1,473) (1,689)
<TOTAL-ASSETS> 8,903 8,367
<CURRENT-LIABILITIES> 6,962 6,220
<BONDS> 0 0
0 0
91 91
<COMMON> 19 19
<OTHER-SE> 482 579
<TOTAL-LIABILITY-AND-EQUITY> 8,903 8,367
<SALES> 0 0
<TOTAL-REVENUES> 14,070 4,607
<CGS> 0 0
<TOTAL-COSTS> 1,051 234
<OTHER-EXPENSES> 0 4,068
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (176) (52)
<INCOME-PRETAX> (2,752) 253
<INCOME-TAX> 399 175
<INCOME-CONTINUING> (3,151) 78
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,151) 78
<EPS-PRIMARY> (0.28) .01
<EPS-DILUTED> 0 0
</TABLE>
