<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): July 11, 1997
Commission file number: 0-20923
SUMMIT DESIGN, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 93-1137888
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
</TABLE>
9305 S. W. GEMINI DRIVE,
BEAVERTON, OREGON 97008
(Address of principal executive office)
Registrant's Telephone number, including area code: (503) 643-9281
<PAGE>
SUMMIT DESIGN, INC.
FORM 8-K
INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- ---- -----------
<S> <C> <C>
Item 2. Acquisition or Disposition of Assets 3
Item 7. Financial Statements and Exhibits
Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1997 (unaudited) 4
Pro Forma Condensed Consolidated Statement of Operations
for the three months ended March 31, 1997 (unaudited). 5
Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1996 (unaudited). 6
Notes to Pro Forma Condensed Consolidated Financial Statements. 7
Exhibits 8
2
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 11, 1997, Summit Design, Inc. (the "Company") and its wholly
owned subsidiary, Test Systems Strategies, Inc., an Oregon corporation
("TSSI"), sold substantially all of the assets related to the Company's
business of developing and marketing its Test Development Series ("TDS")
products to Credence Systems Corporation ("CSC") for $5.0 million in cash
pursuant to an Asset Purchase Agreement, dated as of May 19, 1997, among the
Company, CSC, TSSI and Test Systems Strategies, Inc., a Delaware corporation
and wholly-owned subsidiary of CSC. The sale was effective as of July 1,
1997. CSC also assumed certain liabilities, including the Company's
obligations under TDS maintenance contracts entered into prior to the closing.
The Company and CSC also entered into a Software OEM License Agreement
pursuant to which CSC agreed to purchase $16.0 million of Visual Testbench
licenses, and $2.0 million of interface licenses over a 30-month period
subject to specified quarterly maximums and certain additional conditions.
Additionally, CSC entered into an 18-month maintenance agreement for $2.0
million associated with the Visual Testbench product.
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
SUMMIT DESIGN, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 1997
(In thousands)
Summit Design, Inc. Pro Forma Pro Forma
As Reported Adjustments As Adjusted
------------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 19,859 $ 7,000 a $ 26,859
Accounts receivable, less allowance for
doubtful accounts of $375................ 5,888 5,888
Prepaid expenses and other................. 498 (5) a 493
---------- ---------- ----------
Total current assets...................... 26,245 6,995 33,240
Furniture and equipment, net................ 1,908 (348) a 1,560
Deferred taxes.............................. 500 1,828 b 2,328
Deposits and other assets................... 487 487
---------- ---------- ----------
Total assets............................. $ 29,140 $ 8,475 $ 37,615
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES
Current liabilities:
Long-term debt, current portion............ $ 391 $ -- $ 391
Capital lease obligation, current portion.. 34 -- 34
Accounts payable........................... 1,860 1,860
Accrued liabilities........................ 2,773 120 b 2,893
Deferred revenue........................... 2,732 (1,005) a 1,727
---------- ---------- ----------
Total current liabilities................. 7,790 (885) 6,905
Long-term debt, less current portion........ 675 -- 675
Capital lease obligations, less
current portion............................ 92 -- 92
Deferred revenue, less current portion...... 175 -- 175
---------- ---------- ----------
Total liabilities......................... 8,732 (885) 7,847
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $.01 par value. Authorized
30,000 shares; issued and outstanding
13,907 shares at March 31, 1997............. 139 139
Additional paid-in capital.................. 33,249 33,249
Accumulated deficit......................... (12,980) 7,652 a (3,620)
1,708 b
---------- ---------- ----------
Total stockholders' equity................ 20,408 9,360 29,768
---------- ---------- ----------
Total liabilities and stockholders'
equity................................. $ 29,140 $ 8,475 $ 37,615
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the
pro forma consolidated financial statements
4
<PAGE>
SUMMIT DESIGN, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Summit Design, Inc. Pro Forma Pro Forma
As Reported Adjustments As Adjusted
------------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Product licenses............................... $ 4,878 $ (1,090) c $ 5,988
2,200 d
Maintenance and services....................... 1,481 (743) c 1,071
333 d
Other.......................................... 142 (25) c 117
----------- ----------- ----------
Total revenue................................. 6,501 675 7,176
----------- ----------- ----------
Cost of revenue:
Product licenses............................... 185 (33) c 262
110 d
Maintenance and services....................... 109 (39) c 87
17 d
----------- ----------- ----------
Total cost of revenue......................... 294 55 349
----------- ----------- ----------
Gross profit................................. 6,207 620 6,827
----------- ----------- ----------
Operating expenses:
Research and development....................... 1,431 (366) c 1,065
Sales and marketing............................ 2,517 (538) c 1,979
General and administrative..................... 1,177 (25) c 1,152
----------- ----------- ----------
Total operating expenses...................... 5,125 (929) 4,196
----------- ----------- ----------
Income from operations.......................... 1,082 1,549 2,631
Interest expense................................ (7) (7)
Other income (expense), net..................... 218 218
----------- ----------- ----------
Income before income taxes...................... 1,293 1,549 2,842
Income tax provision............................ 80 1,067 e 1,147
----------- ----------- ----------
Net income...................................... $ 1,213 $ 482 $ 1,695
----------- ----------- ----------
----------- ----------- ----------
Net income per share............................ $ 0.08 $ 0.11
----------- ----------
----------- ----------
Number of shares used in per share calculation.. 14,829 14,829
</TABLE>
The accompanying notes are an integral part of the
consolidated pro forma financial statements
5
<PAGE>
SUMMIT DESIGN, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Summit Design, Inc. Pro Forma Pro Forma
As Reported Adjustments As Adjusted
------------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Product licenses............................... $ 15,179 $ (4,235) c $ 22,344
11,400 d
Maintenance and services....................... 4,215 (2,996) c 2,552
1,333 d
Other.......................................... 567 (100) c 467
------------ ------------ ------------
Total revenue................................. 19,961 5,402 25,363
------------ ------------ ------------
Cost of revenue:
Product licenses............................... 571 (158) c 983
570 d
Maintenance and services....................... 439 (180) c 325
66 d
------------ ------------ ------------
Total cost of revenue......................... 1,010 298 1,308
------------ ------------ ------------
Gross profit................................. 18,951 5,104 24,055
------------ ------------ ------------
Operating expenses:
Research and development....................... 5,204 (1,703) c 3,501
Sales and marketing............................ 8,622 (1,410) c 7,212
General and administrative..................... 2,821 (87) c 2,734
------------ ------------ ------------
Total operating expenses...................... 16,647 (3,200) 13,447
------------ ------------ ------------
Income from operations.......................... 2,304 8,304 10,608
Interest expense................................ (97) (97)
Gain on sale of TDS product line................ 6,034 f 6,034
Other income (expense), net..................... 223 223
------------ ------------ ------------
Income before income taxes...................... 2,430 14,338 16,768
Income tax provision (benefit).................. (246) 884 e 638
------------ ------------ ------------
Net income...................................... $ 2,676 $ 13,454 $ 16,130
------------ ------------ ------------
------------ ------------ ------------
Net income per share............................ $ 0.22 $ 1.30
------------ ------------
------------ ------------
Number of shares used in per share calculation.. 12,372 12,372
</TABLE>
The accompanying notes are an integral part of the
consolidated pro forma financial statements
6
<PAGE>
SUMMIT DESIGN, INC. AND SUBSIDIARIES
Footnotes to Pro Forma Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma financial statements have been
prepared to present the effect of the sale by the Company of
substantially all of the assets and certain liabilities related to
its Test Development Series ("TDS") product line. The pro forma
financial statements have been prepared based upon the historical
financial statements of the Company as if the sale had occurred at
January 1, 1996.
The Pro Forma Consolidated Statement of Operations may not be
indicative of the results of operations that actually would have
occurred if the transaction had been in effect as of the beginning
of the period nor do they purport to indicate the results of future
operations of the Company. The pro forma financial statements
should be read in conjunction with the financial statements and
notes thereto included in the Company's 1996 Annual Report on Form
10-K. Management of the Company believes that all adjustments
necessary to present fairly such pro forma financial statements
have been made based on the terms and structure of the transaction.
2. PRO FORMA ADJUSTMENTS
a. To reflect the sale of the net assets of the TDS product
line for a purchase price of $5.0 million and the sale of
$2.0 million of visual interface licenses as if the sale
had occurred on March 31, 1997.
b. To reflect the impact on deferred taxes and accrued income taxes
of the sale of the TDS product line.
c. To reflect the decrease in Sales, Cost of Sales, Research and
Development, Sales and Marketing, and Administrative expenses
related to the TDS product line.
d. To reflect additional Visual Testbench software license sales
pursuant to the Software OEM License Agreement with Credence Systems
Corporation.
e. To reflect an increase in income tax expense due to the inclusion
of the sale of the TDS product line and sales pursuant to the
Software OEM License Agreement. The Company recorded a valuation
allowance against net deferred tax assets at December 31, 1996 and
March 31, 1997. The sale of the TDS product line and the resulting
gain as well as the sales pursuant to the Software OEM License
Agreement results in the recognition of a reduction the valuation
allowance in the Pro Forma Statement of Operations for the year
ended December 31, 1996, thereby decreasing the income tax
provision from the expected rate.
f. To reflect the gain on sale of assets as if the sale had occurred
on January 1, 1996.
7
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS, CONTINUED
Exhibits
2.1 Asset Purchase Agreement, dated as of May 19, 1997, among Summit
Design, Inc., Credence Systems Corporation, Test Systems
Strategies, Inc., an Oregon corporation and wholly-owned
subsidiary of Summit Design Inc., and Test Systems, Strategies,
Inc., a Delaware corporation and wholly-owned subsidiary of
Credence Systems Corporation.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUMMIT DESIGN, INC.
By: /s/ C. ALBERT KOOB
---------------------------------
C. Albert Koob
Vice President - Finance,
Chief Financial Officer and Secretary
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
Date: July 28, 1997
9
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Document
- -------- -----------------------
2.1 Asset Purchase Agreement, dated as of May 19, 1997, among
Summit Design, Inc., Credence Systems Corporation, Test
Systems Strategies, Inc., an Oregon corporation and wholly-
owned subsidiary of Summit Design Inc., and Test Systems,
Strategies, Inc., a Delaware corporation and wholly-owned
subsidiary of Credence Systems Corporation.
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
TEST SYSTEMS STRATEGIES, INC.
(a Delaware corporation),
CREDENCE SYSTEMS CORPORATION,
SUMMIT DESIGN, INC.
AND
TEST SYSTEMS STRATEGIES, INC.
(an Oregon corporation)
Dated as of May 19, 1997
<PAGE>
INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.1 Purchase of Assets . . . . . . . . . . . . . . . . . . . . . -1-
1.2 Consideration. . . . . . . . . . . . . . . . . . . . . . . . -2-
1.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND SUMMIT . . . . . . . -4-
2.1 Organization; Good Standing. . . . . . . . . . . . . . . . . -4-
2.2 Authorization of Seller. . . . . . . . . . . . . . . . . . . -4-
2.3 Financial Statements . . . . . . . . . . . . . . . . . . . . -5-
2.4 Absence of Certain Changes and Events. . . . . . . . . . . . -5-
2.5 Customers and Commitments. . . . . . . . . . . . . . . . . . -6-
2.6 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.7 Title to Assets; Absence of Liens and Encumbrances . . . . . -6-
2.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . -6-
2.9 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.10 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . -7-
2.11 Restrictive Documents or Orders. . . . . . . . . . . . . . .-10-
2.12 Contracts and Commitments. . . . . . . . . . . . . . . . . .-10-
2.13 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . .-10-
2.14 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . .-10-
2.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . .-10-
2.17 Interested Party Relationships . . . . . . . . . . . . . . .-11-
2.18 Books and Records. . . . . . . . . . . . . . . . . . . . . .-11-
2.19 Complete Disclosure. . . . . . . . . . . . . . . . . . . . .-11-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND CSC . . . . . . . . .-11-
3.1 Organization, Standing and Power . . . . . . . . . . . . . .-11-
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . .-12-
3.3 Ability to Perform . . . . . . . . . . . . . . . . . . . . .-12-
3.4 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . .-12-
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING DATE . . . . . . . . . . . . . . . .-12-
4.1 Maintenance of Business. . . . . . . . . . . . . . . . . . .-12-
4.2 No Solicitation. . . . . . . . . . . . . . . . . . . . . . .-13-
4.3 Break-up Fee . . . . . . . . . . . . . . . . . . . . . . . .-13-
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . .-13-
5.1 Access to Information. . . . . . . . . . . . . . . . . . . .-13-
5.2 Confidentiality. . . . . . . . . . . . . . . . . . . . . . .-14-
5.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .-14-
5.4 Public Disclosure. . . . . . . . . . . . . . . . . . . . . .-14-
5.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . .-14-
5.6 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . .-14-
5.7 Notification of Certain Matters. . . . . . . . . . . . . . .-15-
5.8 Additional Documents and Further Assurances. . . . . . . . .-15-
5.9 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . .-15-
5.10 Agreement Not to Hire. . . . . . . . . . . . . . . . . . . .-15-
5.11 Hart-Scott-Rodino Filing . . . . . . . . . . . . . . . . . .-15-
5.12 Cooperation by Seller. . . . . . . . . . . . . . . . . . . .-16-
ARTICLE VI
CONDITIONS TO THE ACQUISITION . . . . . . . . . . . . . . . . . .-16-
6.1 Conditions to Obligations of Each Party to Effect the
Acquisition. . . . . . . . . . . . . . . . . . . . . . . . .-16-
6.2 Additional Conditions to Obligations of Summit and Seller. .-16-
6.3 Additional Conditions to the Obligations of CSC and Buyer. .-17-
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,COVENANTS AND
AGREEMENTS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . .-18-
7.1 Survival of Representations and Warranties . . . . . . . . .-18-
7.2 Obligation of Summit and Seller to Indemnify, Reimburse,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-19-
7.3 Obligation of Buyer to Indemnify, Reimburse, etc . . . . . .-19-
7.4 Notice and Opportunity to Defend Against Third Party Claims.-19-
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.5 Procedure for Indemnification with Respect to Non-Third
Party Claims . . . . . . . . . . . . . . . . . . . . . . . .-20-
7.6 Net Indemnity. . . . . . . . . . . . . . . . . . . . . . . .-20-
7.7 Limits on Indemnification. . . . . . . . . . . . . . . . . .-20-
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . .-21-
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . .-21-
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . .-22-
8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . .-22-
8.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . .-22-
ARTICLE IX
GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .-22-
9.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .-22-
9.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . .-23-
9.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .-23-
9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . .-23-
9.5 Severability . . . . . . . . . . . . . . . . . . . . . . . .-24-
9.6 Other Remedies . . . . . . . . . . . . . . . . . . . . . . .-24-
9.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . .-24-
9.8 Rules of Construction. . . . . . . . . . . . . . . . . . . .-24-
9.9 Disclaimer of Projections. . . . . . . . . . . . . . . . . .-24-
9.10 No Warranty. . . . . . . . . . . . . . . . . . . . . . . . .-24-
9.11 Cooperation and Records Retention. . . . . . . . . . . . . .-25-
9.12 Successors and Assigns . . . . . . . . . . . . . . . . . . .-25-
-iii-
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of May 19, 1997 by and among Credence Systems Corporation, a Delaware
corporation ("CSC"), Test Systems Strategies, Inc., a Delaware corporation
and wholly-owned subsidiary of CSC ("Buyer"), Summit Design, Inc., a Delaware
corporation ("Summit"), and Test Systems Strategies, Inc., an Oregon
corporation and wholly-owned subsidiary of Summit ("Seller").
RECITALS
A. The Boards of Directors of each of Summit, Seller, CSC and Buyer
believe it is in the best interests of each company and their respective
securityholders that Buyer acquire certain listed assets and assume certain
listed liabilities of Seller (the "Acquisition").
B. On the date hereof, Buyer has executed a $2,000,000 irrevocable
purchase order to purchase 400 time-based licenses for Summit's Visual HDL
interfaces for Visual Testbench ("VTB") software on CSC's standard form of
purchase order, which is payable within five (5) business days after the date
hereof.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE ACQUISITION
1.1 PURCHASE OF ASSETS.
(a) PURCHASE AND SALE OF ASSETS. On the terms and subject to the
conditions set forth in this Agreement, Seller will sell, convey, transfer,
assign and deliver to Buyer and Buyer will purchase and acquire from Seller on
the Closing Date (as defined in Section 1.3(a)), all of Seller's right, title
and interest in and to the assets and properties of Seller set forth on Schedule
1.1(a) (collectively, the "Assets") free and clear of all liens, pledges,
charges, claims, actions, suits, proceedings, security interests or other
encumbrances of any sort ("Liens"), other than as set forth on Schedule 2.7.
The Assets do not include Summit's and Seller's VTB software.
(b) NONASSIGNMENT OR SUBCONTRACTING OF CERTAIN ASSETS.
Notwithstanding anything to the contrary in this Agreement, to the extent that
the assignment or subcontracting hereunder of any of the Assets shall require
the consent of any other party (or in the event that any of the same shall be
nonassignable or unable to be subcontracted), neither this Agreement nor any
action taken pursuant to its provisions shall constitute an assignment or
subcontract or an agreement to assign or subcontract if such assignment or
subcontract or attempted assignment or subcontract would constitute a breach
thereof or result in the loss or diminution thereof; PROVIDED, HOWEVER, that in
each such case, Seller shall use its
<PAGE>
commercially reasonable efforts to obtain the consent of such other party to
an assignment to Buyer. If such consent is not obtained by the Closing,
Seller shall cooperate with Buyer in any arrangement designed for Buyer to
perform Seller's obligation with respect to such Asset after the Closing and
for Buyer to receive the benefits under any such Asset after the Closing,
which arrangements may include enforcement, for the account and benefit of
Buyer, of any and all rights of Seller against any other person arising out
of the breach or cancellation by such other person or otherwise, all of such
actions of Seller to be at the direction and expense of Buyer. Seller shall
reimburse or pay Buyer for a portion equal to one-half of all costs and
expenses, including amounts owed as a result of increased obligations under
such instruments, resulting from an inability of Buyer to receive the
benefits of such assignment or subcontract.
(c) ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall only
assume the obligations and liabilities of Seller listed on Schedule 1.1(c) (the
"Assumed Liabilities"). Buyer shall not assume any liabilities or obligations
of Seller or the Assets except for those liabilities and obligations which Buyer
expressly assumes pursuant to this Section 1.1(c) and Seller shall retain those
liabilities of Seller that are not Assumed Liabilities. Other than the Assumed
Liabilities of Seller specifically listed in Schedule 1.1(c), Buyer shall not
assume, nor shall Buyer or CSC or any of their respective affiliates, directors,
employees, stockholders or agents, be deemed to have assumed or guaranteed, or
be responsible for in any way, any liabilities or obligations, whether such
liabilities or obligations are contingent or otherwise, or direct or indirect,
of Seller or Summit.
(d) RISK OF LOSS. In the event any of the Assets are unavailable for
delivery to Buyer on the Closing Date as a result of risks for which such Assets
were insured by Seller, Buyer may at its option elect (i) to require Seller to
deliver to Buyer assignments of such Seller's rights under its insurance
policies, if any, applicable to such Assets and to close on that basis, or (ii)
to not close due to the failure of a condition to closing if the rights
described in (i) above are not fully assignable and the amount of the loss
reasonably can be expected to be in excess of five hundred thousand dollars
($500,000). Seller hereby agrees to use its reasonable best efforts to make
such assignment of rights if Buyer so elects.
1.2 CONSIDERATION.
(a) CONSIDERATION. On the terms and subject to the conditions set
forth in this Agreement, Buyer shall on the Closing Date pay to Seller by wire
transfer of immediately available funds the sum of five million dollars
($5,000,000) in full payment for the transfer of Assets to Buyer and the
assumption of the Assumed Liabilities by Buyer (the "Purchase Price").
(b) TRANSFER TAXES. Buyer and Seller shall each pay and promptly
discharge when due one-half of the entire amount of any and all sales, transfer
and use taxes ("Sales Taxes") imposed or levied by reason of the sale of the
Assets to the Buyer. The parties shall cooperate with each other to the extent
reasonably requested and legally permitted to minimize any such Sales Taxes and
to prepare any documents necessary to satisfy the requirements of any applicable
exemption from such laws. Buyer shall take title to, and possession of, the
Assets in the State of Oregon. Buyer and Seller
-2-
<PAGE>
hereby waive compliance with the Oregon Uniform Commercial Code-Bulk
Transfers and any other applicable state bulk transfer laws. Seller agrees
to indemnify Buyer and CSC against all claims (other than Assumed
Liabilities) brought by a creditor of Seller or Summit against Buyer or CSC
or the Assets based on noncompliance with such laws in connection with the
sale of the Assets.
-3-
<PAGE>
1.3 CLOSING.
(a) CLOSING. Unless this Agreement is earlier terminated pursuant to
Section 8.1, the closing of the transactions contemplated by this Agreement (the
"Closing") shall be held at the offices of Summit, 9305 S.W. Gemini Drive,
Beaverton, Oregon, at 10:00 a.m. on the later of (i) the date which is two
business days following satisfaction or waiver of the last of the conditions to
Closing as set forth in Article VI hereof, and (ii) July 1, 1997, or on such
other time and/or date as the parties agree (the actual date on which the
Closing occurs is referred to herein as the "Closing Date").
(b) DELIVERY. At the Closing:
(i) Buyer shall deliver to Seller:
(A) an instrument of assumption of liabilities by
which Buyer shall assume the Assumed Liabilities as of the Closing;
(B) the Purchase Price; and
(C) the Software OEM License Agreement and the
Software Development Agreement (the "Related Agreements").
(ii) Seller and Summit shall deliver to Buyer:
(A) a good and sufficient bill of sale for the Assets,
selling, delivering, transferring and assigning to Buyer title to all of
Seller's and/or Summit's right, title and interest in and to the Assets,
free and clear of all Liens;
(B) the Related Agreements;
(C) valid assignments for all Contracts (as defined
below) and all other contracts and agreements under which obligations are
owed to Seller or Summit with respect to the Assets and intellectual
property forms for filing with the applicable governmental agencies and
other third party or governmental consents necessary to transfer the
Assets; and
(D) resale certificates for the resale of any items in
inventory.
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(iii) Seller and Buyer shall deliver or cause to be delivered
to one another such other instruments and documents necessary or
appropriate to evidence the due execution, delivery and performance of
this Agreement.
(c) TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after the Closing Date and at Buyer's request, any further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the Buyer
with full right, title and possession to the Assets, Seller and Summit shall,
and shall use their reasonable best efforts to cause Seller's employees, agents
and consultants to, sign, execute and acknowledge any and all documents and to
perform such acts as may be necessary for the purposes of perfecting the
assignment to Buyer of the Assets. The costs related to any of the foregoing
shall be shared equally by Seller and Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND SUMMIT
Summit and Seller, jointly and severally, represent and warrant to Buyer
and CSC, subject to such exceptions as are specifically disclosed in the
disclosure schedules supplied by Seller to Buyer and CSC (the "Seller
Schedules") and dated as of the date hereof, which disclosures shall be deemed
to be representations and warranties hereunder, as follows:
2.1 ORGANIZATION; GOOD STANDING. Each of Seller and Summit are
corporations duly organized, validly existing and in good standing under the
laws of their respective states of organization, and have the corporate power
and authority to own, lease and operate their properties and to carry on their
businesses as the same are now being conducted. Each of Seller and Summit is
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the failure to be so qualified would have a material adverse effect on
the Assets (or Buyer's interest therein or use thereof following the Closing) (a
"Material Adverse Effect"). Seller has property, employees or operations
relating to the Assets only in the jurisdictions set forth on Schedule 2.1.
Summit owns one hundred percent (100%) of the shares of capital stock or other
proprietary interests in Seller.
2.2 AUTHORIZATION OF SELLER. Each of Seller and Summit has full power and
authority to enter into this Agreement and the Related Agreements to which it is
a party, to perform its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby, including, without limitation,
the execution and delivery of this Agreement, general conveyances, bills of
sale, assignments, and other documents and instruments evidencing the conveyance
of the Assets or delivered in accordance with Sections 1.1(b) or 1.3(b)
hereunder (the "Closing Documents") and the Related Agreements to which it is a
party. Each of Seller and Summit has taken all necessary and appropriate
corporate action with respect to the execution and delivery of this Agreement,
the Closing Documents, and the Related Agreements to which it is a party. No
other corporate or securityholder proceedings or action on the part of Seller
or Summit, or their respective securityholders, are necessary to authorize this
Agreement and the Related Agreements or to consummate the transactions
contemplated hereby and
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thereby. This Agreement and the Related Agreements have been duly executed
and delivered by Seller and Summit. This Agreement and the Related
Agreements to which it is a party constitute valid and binding obligations of
Seller and Summit, enforceable in accordance with their terms: (i) except as
limited by applicable bankruptcy, insolvency, moratorium, reorganization, or
other laws affecting creditors' rights and remedies generally, (ii) except as
may be required by the Bulk Sales provisions of applicable state law, and
(iii) except as the indemnification provisions contained in this Agreement
may be limited by principles of public policy. The execution and delivery of
this Agreement and the Related Agreements by Seller and Summit do not, and,
as of the Closing, the consummation of the transactions contemplated hereby
and thereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under (any such event, a "Conflict") (i)
any provision of the Articles or Certificate of Incorporation or Bylaws of
Seller or Summit or (ii) any material mortgage, indenture, lease, contract or
other agreement or material instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Seller or Summit or their properties or assets, except where
such Conflict would not have a Material Adverse Effect.
2.3 FINANCIAL STATEMENTS. Seller has previously furnished Buyer with
copies of the profit and loss statements of Seller for each of the quarters in
the year ended December 31, 1996 and the quarter ended March 31, 1997,
(collectively, the "Seller Financials"). The Seller Financials fairly present
in all material respects the results of operations of Seller for the periods
therein set forth, subject to normal year-end adjustments, in each case in
accordance with generally accepted accounting principles applied on a consistent
basis. Summit's revenue recognition policies with respect to the Seller
Financials have been made in accordance with generally accepted accounting
principles. Summit and Seller maintain an accounting system in accordance with
generally accepted accounting principles. Notwithstanding the foregoing, the
Seller Financials were prepared using an allocation of cost of goods sold based
on Summit's overall cost of goods sold as a percentage of total revenue, using
an allocation of general and administrative expense between Seller's and
Summit's SLDA business, and do not include any allocation for corporate
marketing expenses.
2.4 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since March 31, 1997, there
has not been:
(a) Any material adverse change in the financial condition, results
of operation, assets, liabilities, business, or prospects of Seller or any
occurrence, circumstance, or combination thereof which reasonably could be
expected to result in any such material adverse change;
(b) Any material transaction relating to or involving Seller (other
than the transactions contemplated herein) which was entered into or carried out
by Seller other than in the ordinary and usual course of business;
(c) Any modification, waiver, change, amendment, release, rescission,
accord and satisfaction, or termination of, or with respect to, any term,
condition, or provision of any material contract, agreement, license, or other
instrument to which Seller or Summit is a party and relating to or
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affecting the Assets, other than any satisfaction by performance in
accordance with the terms thereof in the usual and ordinary course of
business and consistent with prior practice;
(d) Any notice (written or unwritten) from any employee of Seller
that such employee has terminated, or intends to terminate, such employee's
employment with Seller;
(e) Any adverse relationships or conditions with vendors or customers
that may have a Material Adverse Effect; or
(f) Any other event or condition of any character which has resulted
in a Material Adverse Effect, or may reasonably be expected to have a Material
Adverse Effect.
2.5 CUSTOMERS AND COMMITMENTS. Neither Summit nor Seller is aware nor has
any reason to believe that any of Seller's five largest customers during the
twelve month period ended March 31, 1997 (determined on the basis of both
revenues and bookings during such period) has terminated, or intends materially
to reduce or terminate, the amount of its business with Seller. Schedule 2.5
contains a true, accurate and complete list of Seller's obligations and
commitments owed to customers or prospective customers and rights of customers
or prospective customers with respect to Seller's products.
2.6 INVENTORY. All inventory of Seller included in the Assets and, to the
knowledge of Seller, all items to be delivered to Seller for such inventory
after the Closing that are subject to purchase commitments outstanding at the
Closing, consist of items that are or upon delivery will be of a quality and
quantity presently usable and saleable in the ordinary course of business.
2.7 TITLE TO ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES. Seller has good
and valid title to all of the Assets, free and clear of any Liens. Seller has
full right and power to (and at the Closing will) sell, convey, assign, transfer
and deliver to Buyer good and valid title to all the Assets, free and clear of
any and all Liens, except (i) for the Assumed Liabilities, (ii) for statutory
liens for taxes not yet due (none of which shall be the obligation of CSC or
Buyer) and (iii) as set forth on Schedule 2.7. The Assets are in good operating
condition and repair, reasonable wear and tear excepted, and are suitable and
adequate for use in the ordinary course of business and conform in all material
respects to all applicable laws. All leases are binding, valid and enforceable
on the Seller in accordance with their terms and, to the knowledge of the
Seller, are enforceable against the other party or parties thereto in accordance
with their terms, in each case subject to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies. Seller is not in default under any lease and there
has not occurred any event which, with the giving of notice or lapse of time or
both, would constitute a material default under any lease. To the knowledge of
Seller, there are no current defaults by any other party to any lease or events
that have occurred which, with the giving of notice or lapse of time or both,
would constitute a material default by such party under any lease. After the
Closing Date, Buyer will be entitled to the continued use and possession of the
personal property leased by it, for the terms specified in such leases and for
the purposes consistent with the past practices of the Seller.
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2.8 COMPLIANCE WITH LAWS. Seller has complied and is in compliance with
all applicable foreign, federal, state, and local laws, statutes, licensing
requirements, rules, and regulations, and judicial or administrative decisions
where the failure to comply could have a Material Adverse Effect. There is no
order issued, investigation, or proceeding pending or notice served on Summit or
Seller or, to Seller's and Summit's knowledge, threatened, with respect to any
violation of any law, ordinance, order, writ, decree, rule, or regulation issued
by any federal, state, local, or foreign court or governmental agency or
instrumentality applicable to the Assets.
2.9 CONSENTS. The execution and delivery of this Agreement by the Seller
and Summit does not, and the performance of this Agreement and the Related
Agreements by the Seller and Summit do not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, or any other third party,
including licensors and lenders, except for applicable requirements, if any, of
bulk sales laws and the notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
2.10 PROPRIETARY RIGHTS.
(a) Seller (i) owns all right, title and interest in, (ii) is
exclusively licensed, or (iii) is otherwise entitled to exercise, without
restriction, all rights to all patents, trademarks, trade names, service marks,
copyrights, mask works, trade secrets and other intellectual property rights,
and any applications or registrations therefor, and all inventions, mask work
layouts, net lists, source code, object code, schematics, technical drawings,
technology, know-how, processes, formulas, algorithms, computer software
programs, documentation, and all other tangible and intangible information or
material in any form which form part of the Assets, without any conflict with or
infringement of the rights of others and free and clear of any Liens
(collectively, the "Intellectual Property Rights"). Seller has the right to
use, sell, license, assign, transfer, convey or dispose of the Intellectual
Property Rights or the products, processes and materials covered thereby.
(b) Schedule 2.10(b) sets forth: (i) all copyrights, patents, patent
applications, trademarks, service marks, tradenames, and other company, product
or service identifiers owned by or licensed to Seller with respect to the
Intellectual Property Rights; (ii) the jurisdiction(s) in which an application
for patent or application for registration, if any, of each Intellectual
Property Right has been made, including the respective application numbers and
dates; (iii) the jurisdiction(s), if any, in which each such Intellectual
Property Right has been patented or registered, including the respective patent
or registration numbers and dates; (iv) all licenses, sublicenses and other
agreements to which Seller is a party and pursuant to which any other party is
authorized to use, exercise, or receive any benefit from the Intellectual
Property Rights (other than to end-user licenses entered into in the ordinary
course of business); and (v) all parties to whom the Seller has delivered copies
of its source code, whether pursuant to an escrow arrangement or otherwise, or
parties who have the right to receive such source code. Seller has delivered to
CSC copies of all licenses, sublicenses, and other agreements identified
pursuant to clause (iv) above. Seller and, to the knowledge of Seller, each
other party thereto, is in compliance with all material terms and conditions of
all such licenses, sublicenses, and other agreements. Seller has no knowledge
of any claim, threatened claim or facts indicating that Seller or any
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other party thereto has breached any material terms or conditions of such
licenses, sublicenses, or other agreements.
(c) Seller has taken all necessary and appropriate steps, including,
without limitation, the filing of copyright, and trademark applications to
perfect and protect its interest in the Intellectual Property Rights in all
countries and other jurisdictions in which the Seller does business, except
where the failure to take such actions or make such applications or filings
would not (i) have a Material Adverse Effect or (ii) materially interfere with
the use or enforcement of the Intellectual Property Rights in the ordinary
course of business. Seller has the exclusive right to file, prosecute, and
maintain such applications and the patents and registrations that issue
therefrom.
(d) To Seller's knowledge, after due inquiry, all patents and
registered trademarks, service marks, and other company, product or service
identifiers and copyrights held by Seller are valid and enforceable.
(e) Seller and Summit have secured valid written assignments from all
consultants and employees who contributed to the creation or development of the
Intellectual Property Rights of the rights to such contributions that the Seller
does not already own by operation of law except where failure to secure such
assignments would not have a Material Adverse Effect.
(f) To Seller's knowledge, there has not been and there is not now
any unauthorized use, infringement or misappropriation of any of the
Intellectual Property Rights by any third party, including, without limitation,
any service provider of Summit or Seller.
(g) Seller has not brought any actions or lawsuits alleging (i)
infringement of any of the Intellectual Property Rights or (ii) breach of any
license, sublicense or other agreement authorizing another party to use the
Intellectual Property Rights. To Seller's knowledge, there do not exist any
facts which could form the basis of any such action or lawsuit. Seller has not
entered into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce rights with
respect to, any of the Intellectual Property Rights.
(h) No person has asserted or, to the knowledge of Seller, threatened
to assert any claims with respect to the Intellectual Property Rights (i)
contesting the right of Seller to use, exercise, sell, license, transfer or
dispose of any of the Intellectual Property Rights or any products, processes or
materials covered thereby or (ii) challenging the ownership, validity or
enforceability of any of the Intellectual Property Rights. No Intellectual
Property Right is subject to any outstanding order, judgment, decree,
stipulation or agreement related to or restricting in any manner the licensing,
assignment, transfer or conveyance thereof by Seller.
(i) Schedule 2.10(i) sets forth: (i) all copyrights, patents, patent
applications, trademarks, service marks, tradenames, trade secrets and other
company, product or service identifiers licensed to Seller ("In-licensed
Intellectual Property Rights") and (ii) all licenses, sublicenses and other
agreements to which Seller is a party and pursuant to which Seller is authorized
to use, exercise, or
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receive any benefit from any In-Licensed Intellectual Property Right (other
than commercially available, I.E., "off-the-shelf" software). Seller has
delivered to CSC copies of all licenses, sublicenses and other agreements
identified pursuant to clause (ii) above. Seller and, to Seller's knowledge,
each other party thereto is in compliance with all material terms and
conditions of all such licenses, sublicenses, and other agreements. Seller
has no knowledge of any claim, threatened claim or the existence of any facts
indicating that Seller or any other party thereto has breached any material
terms or conditions of such licenses, sublicenses, or other agreements.
(j) No In-Licensed Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement related to, or
restricting in any manner, the use or licensing thereof by Seller.
(k) Seller has the right to sell, assign, transfer, and convey all
of its right, title and interest in and to the Intellectual Property Rights
and In-Licensed Intellectual Property Rights to Buyer. Seller is not, nor
will be as a result of the execution and delivery of this Agreement or the
Related Agreements or the consummation of the transactions contemplated
hereby or thereby, in violation of, breach of nor will Seller forfeit,
terminate or in any way impair any material Intellectual Property Right or
In-Licensed Intellectual Property Right whether or not pursuant to any
license, sublicense or agreement with respect to the Intellectual Property
Rights or In-Licensed Intellectual Property Rights set forth or required to
be set forth in the Seller Schedules, or in any way impair the right of Buyer
to use, sell, license or dispose of or to bring any action for the
infringement of, any Intellectual Property Right or In-Licensed Intellectual
Property Right or any products or technology designed, developed,
manufactured, sold or serviced by Seller (collectively, "Products").
(l) To Seller's knowledge, the manufacture, marketing, license,
sale or use of any Products anywhere in the world does not (i) violate any
material license or agreement with any third party, or (ii) infringe on any
intellectual property right of any third party. Neither Summit nor Seller
knows of any claims to the effect that the manufacture, marketing, license,
sale or use of any Product infringes any copyright, patent, trade secret, or
other intellectual property right of any third party or violates any license
or agreement with any third party. Neither Seller nor Summit has received
service of process or been charged in writing as a defendant in any claim,
suit, action or proceeding that alleges that any Asset infringes any patents,
trademarks, service marks, trade secret rights, copyrights or other
intellectual property rights of any third party, which has not been finally
adjudicated prior to the date hereof. Neither Seller nor Summit has any
outstanding restrictions or infringement liability with respect to any
patent, trade secret, trademark, service mark, copyright or other
intellectual property right of another which relates to the Assets.
(m) Seller and Summit have taken all necessary and appropriate
steps to protect and preserve the confidentiality of, and proprietary rights
in, all inventions, algorithms, formulas, schematics, technical drawings,
ideas, know-how, processes not otherwise protected by patents or patent
applications, source code, program listings, and trade secrets ("Confidential
Information"), including, without limitation, marking all such Confidential
Information with appropriate "Proprietary" or "Confidential" legends,
establishing policies for the handling, disclosure, and use of Confidential
Information, and the
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acquisition of valid written nondisclosure agreements from any party
(including Summit and Seller employees) receiving Confidential Information
(the form of which has been provided to CSC and its counsel), except where
failure to take such steps would not have a Material Adverse Effect. All
Confidential Information is presently, and as of the Closing will be, located
at Seller's address as set forth in this Agreement. No person other than
Seller has used, divulged or appropriated Confidential Information except for
the benefit of Seller. No person has used, divulged or appropriated
Confidential Information to the detriment of Seller other than pursuant to
the terms of written agreements between Seller and such other persons.
2.11 RESTRICTIVE DOCUMENTS OR ORDERS. Neither Summit nor Seller is a party
to or bound by any agreement, contract, order, judgment, or decree, or any
similar restriction not of general application which (i) has, or could
reasonably be expected to have, a Material Adverse Effect, or (ii) materially
adversely affects, or could reasonably be expected to materially adversely
affect, the consummation of the transactions contemplated by this Agreement or
the Related Agreements.
2.12 CONTRACTS AND COMMITMENTS.
(a) Schedule 2.12 sets forth a list of all outstanding licenses,
contracts or other agreements, whether or not in writing, to which obligations
are owing by the Seller and which are related to the Assets or pursuant to which
Seller or Summit derives any benefits relating to the Assets (collectively
"Contracts").
(b) Seller has performed all of its obligations under the terms of
each Contract, and is not in default thereunder, in either case, except where
such non-performance or default would have a Material Adverse Effect. No event
or omission has occurred which but for the giving of notice or lapse of time or
both would constitute a default by Seller or, to Seller's knowledge, any other
party thereto under any such Contract where such default by any such party could
have a Material Adverse Effect. Each Contract is valid and binding on the
Seller and, to the knowledge of the Seller, on each other party thereto and is
in full force and effect. Neither Summit nor Seller has received any notice of
default, cancellation, or termination in connection with any Contract.
2.13 ASSETS. Upon or after the Closing, Buyer will have all the
intellectual property that Seller or Summit owned or had the right to use that
was necessary to operate the business of Seller relating to Seller's TDS product
line (but not Seller's Visual Test Bench product line) prior to the Closing.
The Assets are suitable for the purpose or purposes for which they are being
used by Seller prior to the Closing, and are free from any known defects, except
such minor defects as do not interfere with the continued use thereof.
2.14 INSURANCE. Schedule 2.14 sets forth all insurance policies and
fidelity bonds covering the Assets. All such insurance policies and fidelity
bonds will terminate as of the Closing. There is no claim by the Seller pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds.
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2.15 PRODUCT WARRANTIES AND ITS PRODUCT LIABILITY. Seller is not obligated
under any product warranty relating to the Assets, except pursuant to Seller's
standard product license agreement (a form of which is attached hereto as
Schedule 2.15). Seller is not aware of any claim in excess of claims made in
the ordinary course of business.
2.16 LITIGATION. Except as disclosed in documents that Summit has filed
with the Securities and Exchange Commission before the date of this Agreement,
there is no claim, investigation, litigation, action, suit, or administrative or
judicial proceeding pending or threatened against Summit or Seller, or to
Seller's or Summit's knowledge, any officer or director of Summit or Seller, and
involving the Assets. Neither Summit nor Seller has received any complaints from
any of its customers or suppliers within the last year, which complaints could
reasonably be expected individually or in the aggregate, to have a Material
Adverse Effect.
2.17 INTERESTED PARTY RELATIONSHIPS. Neither Summit nor Seller, nor any
officer or director of Summit or Seller has any material financial interest,
direct or indirect, in any material supplier or customer or any party to any
contract that is included in the Assets.
2.18 BOOKS AND RECORDS. The books and records of Summit and Seller to
which CSC, Buyer and their accountants and attorneys have been given access are
the true books and records of Summit and Seller and accurately reflect, when
read together, the underlying information presented therein in all material
respects.
2.19 COMPLETE DISCLOSURE. To the knowledge of Summit's Chief Executive
Officer and Chief Financial Officer, no representations or warranties made by
Summit or Seller in this Agreement, nor any document, written information,
written statement, financial statement, certificate or exhibit prepared and
furnished or to be prepared and furnished by Summit or Seller or its
representatives to CSC or Buyer pursuant hereto or the Related Agreements or
otherwise in connection with the transactions contemplated hereby or thereby,
when read together, contains or will contain any untrue statement of a
material fact, or omits or will have failed to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading; PROVIDED, HOWEVER, that the above mentioned information contains
projections and other forward looking statements. There is no presently
existing event, fact or condition that would have, has or could reasonably be
expected to have a Material Adverse Effect, which has not been set forth in
this Agreement or the Related Agreements or the exhibits hereto or thereto or
otherwise disclosed by Summit or the Seller to CSC or Buyer in writing prior
to or on the Closing Date. Seller and/or Summit, as the case may be, has
prepared such disclosure documents in good faith.
2.20 BACKLOG. Schedule 2.21 sets forth the backlog of orders that the
Seller is to ship and contract work to be performed as of May 1, 1997, and
such schedule will be updated to indicate such backlog as of the Closing.
The Seller either (i) possesses sufficient inventory of Products, materials
and personnel to produce the same within their schedule delivery dates or
(ii) such Products or materials have lead times such that the Seller can
acquire or produce such Products and materials in time to produce and ship
such backlog in accordance with its scheduled shipping date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND CSC
Buyer and CSC, jointly and severally, represent and warrant to Seller and
Summit as follows:
3.1 ORGANIZATION, STANDING AND POWER. Each of Buyer and CSC are
corporations duly organized, validly existing and in good standing under the
laws of Delaware, and have the corporate power and authority to own, lease and
operate their properties and to carry on their businesses as the same are now
being conducted. Each of Buyer and CSC is qualified as a foreign corporation
and is in good standing in each jurisdiction in which the failure to be so
qualified would have a material adverse effect on the ability of Buyer or CSC to
consummate the transactions contemplated by this Agreement and the Related
Agreements.
3.2 AUTHORITY. Each of Buyer and CSC has all requisite corporate power
and authority to enter into this Agreement and the Related Agreements and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Buyer and CSC. This Agreement has
been duly executed and delivered by Buyer and CSC and constitutes the valid and
binding obligation of Buyer and CSC, enforceable in accordance with its terms
(i) except as limited by applicable bankruptcy, insolvency, moratorium,
reorganization, or other laws affecting creditors' rights and remedies
generally, (ii) except as may be required by the Bulk Sales provisions of
applicable state law, and (iii) except as the indemnification provisions
contained in this Agreement may be limited by principles of public policy. The
Related Agreements have been duly executed and delivered by Buyer and CSC and
constitute the valid and binding obligation of Buyer and CSC, enforceable in
accordance with their terms (i) except as limited by applicable bankruptcy,
insolvency, moratorium, reorganization, or other laws affecting creditors'
rights and remedies generally, (ii) except as may be required by the Bulk Sales
provisions of applicable state law, and (iii) except as the indemnification
provisions contained in this Agreement may be limited by principles of public
policy.
3.3 ABILITY TO PERFORM. CSC currently has available, and at the time
payable to Seller pursuant to the terms of this Agreement or to Summit pursuant
to the Related Agreements, CSC and Buyer will have available, sufficient cash to
enable them to perform their obligations under this Agreement and the Related
Agreements.
3.4 NO CONFLICT. The execution and delivery of this Agreement and the
Related Agreements by Buyer and CSC do not, and, as of the Closing, the
consummation of the transactions contemplated hereby and thereby will not give
rise to any Conflict under (i) any provision of the Certificate of Incorporation
or Bylaws of Buyer or CSC or (ii) any material mortgage, indenture, lease,
contract or other agreement or material instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to buyer or their properties or assets except where
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such conflict would not have a material adverse effect on the business of
Buyer. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
by or with respect to Buyer and CSC in connection with the execution and
delivery of this Agreement and the Related Agreements or (except as has been,
or will be, obtained prior to the Closing) the consummation of the
transactions contemplated hereby and thereby.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING DATE
4.1 MAINTENANCE OF BUSINESS. During the period from the date hereof
through the Closing, Seller and Summit shall use their commercially reasonable
efforts (i) to preserve the Assets and maintain all equipment and machinery in
good working order, and (ii) keep available the services of key employees and
preserve relationships with customers and suppliers. During such period, Seller
shall not, without the written consent of CSC (i) terminate the employment of
any engineering or technical personnel or other key employees except for cause;
(ii) alter any employee or personnel benefits; or (iii) dispose of any Assets
(other than in the ordinary course of business and subject to the obligation to
maintain proper inventory levels).
4.2 NO SOLICITATION. Until the Closing Date or the date of termination of
this Agreement pursuant to the provisions of Section 8.1 hereof, as the case may
be, neither Summit nor Seller will (nor will Seller or Summit permit any of
their respective officers, directors, agents, representatives or Affiliates to)
directly or indirectly, take any of the following actions with any party other
than CSC or Buyer and its designees:
(a) solicit, encourage, initiate or participate in any negotiations
or discussions with respect to, any offer or proposal to, directly or
indirectly, acquire all or any portion of the Assets or securities of Seller,
whether by merger, purchase of assets, security issuance or sale or otherwise,
(b) disclose any information not customarily disclosed to any person
other than its attorneys or financial advisors concerning the Assets or afford
to any person or entity access to Seller's properties, books or records, or
(c) assist or cooperate with any person to make any proposal to
purchase all or any part of the Assets or acquire more than 50% of the Seller's
voting securities, other than selling products of Seller in the ordinary course
of business and consistent with past practice.
In the event Summit or Seller shall receive any offer or proposal, directly
or indirectly, of the type referred to in clause (a) or (c) above, or any
request for disclosure or access pursuant to clause (b) above, Summit shall
promptly inform Buyer as to any such offer or proposal. If the Board of
Directors of Seller or Summit is advised by legal counsel that it must consider
such offer or proposal, under applicable law, including fiduciary duties under
applicable law, then the Seller shall provide Buyer with
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all written materials prepared by the Seller or the soliciting party in
connection with such proposal, and shall at all times while such offer or
solicitation is pending, keep Buyer informed as to the status thereof.
4.3 BREAK-UP FEE. Summit agrees to pay to Buyer the sum of two million
dollars ($2,000,000) in the event that the Acquisition is not consummated for
any reason other than a material breach of this Agreement by CSC or Buyer.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 ACCESS TO INFORMATION. Summit and Seller shall afford CSC and Buyer
and their accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Closing Date to (a)
all of Seller's properties, books, contracts, commitments and records, and (b)
all other information concerning the Assets as Buyer may reasonably request.
5.2 CONFIDENTIALITY. Each of the parties hereto hereby agrees to keep
such information or knowledge obtained in any investigation pursuant to Section
5.1, or pursuant to the negotiation and execution of this Agreement and the
Related Agreements or the effectuation of the transactions contemplated hereby
and thereby, confidential; PROVIDED, HOWEVER, that the foregoing shall not apply
to information or knowledge which (a) a party can demonstrate was already
lawfully in its possession prior to the disclosure thereof by the other party,
(b) is generally known to the public and did not become so known through any
violation of law or this Agreement, (c) is disclosed by a third party without
the violation of an obligation to such other party, or (d) is required to be
disclosed by order of court or government agency with subpoena powers; provided,
that such party shall provide reasonable notice to each other party that it is
required to disclose information pursuant to this Section 5.2(d).
5.3 EXPENSES. Whether or not the Acquisition is consummated, all fees and
expenses incurred in connection with the Acquisition including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties incurred by a party in connection with the
negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses; PROVIDED, HOWEVER, that CSC and Summit
shall each bear one-half of: (i) any filing fees required under the HSR Act;
(ii) any fees, taxes and expenses incurred pursuant to Sections 1.1(b), 1.2(b)
and 1.3(c) of this Agreement.
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5.4 PUBLIC DISCLOSURE. Unless otherwise required by law, prior to the
Closing Date, no disclosure (whether or not in response to an inquiry) of the
terms and conditions of this Agreement shall be made by any party hereto unless
approved by CSC and Summit prior to release, provided that such approval shall
not be unreasonably withheld, and subject to Summit's and CSC's obligation to
comply with applicable securities laws. The parties acknowledge and agree that
a press release or releases (in the form and substance mutually satisfactory to
Summit and CSC) relating to the signing of this Agreement shall be issued by the
parties hereto upon the signing of this Agreement.
5.5 CONSENTS. Each party shall use its reasonable best efforts to obtain
all necessary consents, waivers and approvals from any third parties, including,
without limitation, under any of the Contracts as may be required in connection
with the Acquisition and so as to transfer to Buyer all rights in the Assets of
Seller thereunder as of the Closing.
5.6 BEST EFFORTS. Subject to the terms and conditions provided in this
Agreement and to the fiduciary duties of the boards of directors of Summit and
Seller, each party hereto shall use its respective reasonable best efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations: to consummate and make effective the transactions contemplated
hereby and by the Related Agreements, to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings, and to
remove or satisfy any conditions precedent under this Agreement, injunctions or
other impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement and the Related
Agreements for the purpose of securing to the parties hereto the benefits
contemplated hereby and thereby.
5.7 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice
to each other party, of (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of Summit, Seller, CSC or Buyer, respectively, contained in this
Agreement to be untrue or inaccurate at or prior to the Closing Date and (ii)
any failure of Summit, Seller, CSC or Buyer, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 5.7 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
5.8 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
Related Agreements and the transactions contemplated hereby and thereby.
5.9 TAX RETURNS. Seller shall be responsible for and pay when due (i) all
of Seller's Taxes attributable to or levied or imposed upon the Assets relating
or pertaining to the period (or that portion of any period) ending on or prior
to the Closing Date and (ii) all Taxes attributable to, levied or imposed upon,
or incurred in connection with the Seller's business operations prior to the
Closing Date. Seller shall timely file within the time period for filing, or
any extension granted with respect thereto, all of
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Seller's Tax Returns required to be filed in connection with the Assets and
any portion of any such Tax Returns connected therewith shall be true and
correct and completed in accordance with applicable laws.
5.10 AGREEMENT NOT TO HIRE. Other than with the written consent of CSC,
Summit and Seller agree not to solicit or hire any of the individuals hired by
the Buyer within thirty (30) days of the Closing, whether as employees or
otherwise, until the later of (i) termination of their employment with Buyer,
and (ii) two years from the Closing Date. Other than with the written consent
of Summit, Buyer agrees not to solicit or hire any of the persons employed by
Summit or its subsidiaries (other than Seller) as of the Closing Date, whether
as employees or otherwise, until the later of (i) termination of their
employment with Summit or such subsidiaries and (ii) two years from the Closing
Date. Notwithstanding the foregoing, Buyer may offer employment to those
employees of Seller prior to the Closing as Buyer, in its sole and absolute
discretion, shall select, such offers of employment to be contingent on the
Closing.
5.11 HART-SCOTT-RODINO FILING. Seller and Buyer shall promptly file with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice any notification and report required by the HSR Act, and, in the event
that any additional filings are required, and shall cooperate with each other
with respect to the foregoing. The parties shall give each other prior notice
and consult with each other prior to any meeting with the United States Federal
Trade Commission or Department of Justice with respect to their respective
filings under the HSR Act or any review by either of the foregoing agencies.
Each of the parties shall take all reasonable actions necessary to cause the
expiration of the waiting periods under the HSR Act as promptly as possible and
shall promptly file any supplemental information which may be requested in
connection therewith.
5.12 COOPERATION BY SELLER. Seller agrees to use its commercially
reasonable efforts during the six (6) months after the Closing to provide
cooperation between Seller's remaining personnel in Seller's offices and Buyer's
personnel to help assure an orderly transition of customer accounts and to help
assure an orderly transition of the Assets. Buyer shall reimburse Seller for
these services at Seller's cost (including fully burdened labor costs, materials
and reasonable travel costs). Summit agrees to use its commercially reasonable
efforts to cooperate with CSC in the preparation and filing of any necessary
reports with the Securities and Exchange Commission, and shall provide CSC with
such information as CSC shall reasonably request for such purpose.
ARTICLE VI
CONDITIONS TO THE ACQUISITION
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE ACQUISITION.
The respective obligations of each party to this Agreement to effect the
Acquisition shall be subject to the satisfaction or written waiver at or prior
to the Closing Date of the following conditions:
(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other
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legal restraint or prohibition preventing the consummation of the Acquisition
shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending; nor shall there
be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Acquisition, which makes the
consummation of the Acquisition illegal.
(b) CONSENTS AND GOVERNMENTAL APPROVALS. All governmental approvals
and third party consents required to be made or obtained by any party hereto in
connection with the execution and delivery of this Agreement and the Related
Agreements or the consummation of the transactions contemplated hereby or
thereby shall have been made or obtained and be in full force and effect.
Complete and correct copies of all such governmental approvals and such consents
shall have been delivered by each party to each other party. Without limiting
the generality of the foregoing, the notifications of the parties pursuant to
the HSR Act, if any, shall have been made and the applicable waiting period and
any extensions thereof shall have expired or been terminated.
(c) RELATED AGREEMENTS. Buyer, Summit and Seller shall have executed
and delivered the Related Agreements, and the Related Agreements shall be in
full force and effect.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SUMMIT AND SELLER. The
obligations of Summit and Seller to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Seller and Summit, respectively:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of CSC and Buyer in this Agreement not qualified as to
materiality shall be true and correct in all material respects, and the
representations and warranties that are qualified as to materiality shall be
true and correct, on and as of the Closing Date as though such representations
and warranties were made on and as of such time and Buyer shall have performed
and complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Closing Date.
(b) CERTIFICATE OF BUYER AND CSC. Seller shall have been provided
with a certificate executed on behalf of Buyer and CSC by each of their
respective Chief Executive Officers and a Chief Financial Officers to the effect
that, as of the Closing Date:
(i) all representations and warranties made by Buyer and
CSC in this Agreement not qualified as to materiality are true and correct
in all material respects, and the representations and warranties that are
qualified as to materiality shall be true and correct; and
(ii) all covenants, obligations and conditions of this
Agreement and the Related Agreements to be performed by Buyer or CSC on or
before such date have been so performed in all material respects.
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6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF CSC AND BUYER. The
obligations of CSC and Buyer to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which
may be waived, in writing, exclusively by Buyer or CSC, respectively:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of CSC and Seller in this Agreement not qualified as to
materiality shall be true and correct in all material respects, and the
representations and warranties that are qualified as to materiality shall be
true and correct, on and as of the Closing Date as though such representations
and warranties were made on and as of such time and Seller shall have performed
and complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Closing Date.
(b) CERTIFICATE OF SELLER AND SUMMIT. Buyer shall have been provided
with a certificate executed on behalf of Seller and Summit by each of their
respective Chief Executive Officers and a Chief Financial Officers to the effect
that, as of the Closing Date:
(i) all representations and warranties made by Seller and
Summit in this Agreement not qualified as to materiality are true and
correct in all material respects, and the representations and warranties
that are qualified as to materiality shall be true and correct;
(ii) all covenants, obligations and conditions of this
Agreement and the Related Agreements to be performed by Seller or Summit on
or before such date have been so performed in all material respects;
(iii) since the date of signing this Agreement, there
has not occurred any event that would have a Material Adverse Effect.
(c) CLAIMS. There shall not have occurred any claims (whether or not
asserted in litigation) which materially and adversely affect the consummation
of the transactions contemplated hereby or the Assets.
(d) NO INJUNCTIONS OR RESTRAINTS ON CONDUCT OF BUSINESS. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or provision challenging Buyer's proposed acquisition of the Assets,
or limiting or restricting Buyer's conduct or operation of the business related
to the Assets as conducted on the date of this Agreement following the
Acquisition shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
(e) NO MATERIAL ADVERSE EVENT. Since the date of signing this
Agreement, there has not occurred any event that would have a Material Adverse
Effect.
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(f) THIRD PARTY RIGHTS. No third party shall have any right of any
nature whatsoever (including, without limitation, any right to receive royalty
payments) in respect of any of the Assets other than Liens for leased equipment.
(g) SATISFACTORY FORM OF LEGAL MATTERS. The form, scope and
substance of all legal matters contemplated hereby and all closing documents and
other papers delivered hereunder shall be reasonably acceptable to counsel to
Summit and CSC.
(h) CERTAIN ASSIGNMENTS. Seller and/or Summit, as applicable, shall
deliver such assignments of In-Licensed Intellectual Property as are necessary
to transfer the Assets.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each party hereto set forth in this Agreement (as modified by the
Seller Schedules and any Buyer Schedule) shall survive until the date that is
one year after the Closing Date; provided, however, the representations and
warranties contained in Sections 2.8, 2.10, 2.12(a) and 2.13 shall survive until
the date that is three (3) years after the Closing Date. All covenants and
agreements made by the parties to this Agreement which contemplate performance
following the Closing Date shall survive the Closing Date. All other covenants
and agreements, including without limitation Sections 4.2 and 4.3 of this
Agreement, shall not survive the Closing Date and shall terminate as of the
Closing.
7.2 OBLIGATION OF SUMMIT AND SELLER TO INDEMNIFY, REIMBURSE, ETC. Subject
to the limitations set forth in Sections 7.1, 7.5 and 7.6, Summit and Seller and
their successors and assigns, jointly and severally, shall indemnify, reimburse,
defend and hold harmless Buyer and CSC and their respective successors and
assigns and each of their respective directors, officers, employees, Affiliates,
and their respective successors and assigns from and against any claims, losses,
liabilities, damages, causes of action, costs and expenses (including reasonable
attorney's, accountant's, consultant's and expert's fees and expenses)
(collectively "Losses") resulting from, imposed upon, incurred or suffered by
any of them, directly or indirectly, based upon, arising out of or otherwise in
respect of (i) any inaccuracy in or any breach of any representation or warranty
of Summit or Seller (after taking into account the exceptions to such
representations and warranties which are set forth on the Seller Schedules), and
(ii) the nonfulfillment or breach on the part of Summit or Seller of any
unwaived covenant or agreement set forth in this Agreement which survives the
Closing Date in accordance with Section 7.1.
7.3 OBLIGATION OF BUYER TO INDEMNIFY, REIMBURSE, ETC. Subject to the
limitations set forth in Sections 7.1 and 7.5, Buyer and CSC and their
respective successors and assigns, jointly and severally, shall indemnify,
defend and hold harmless Summit and Seller and their respective successors and
assigns and each of their respective directors, officers, employees, Affiliates,
and their respective successors and assigns from and against any Losses
resulting from, imposed upon, incurred or suffered
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by any of them, directly or indirectly, based upon, arising out of or
otherwise in respect of (i) any inaccuracy in or breach of any representation
or warranty of Buyer (after taking into account the exceptions to such
representations and warranties which are set forth on a Buyers' Schedule, if
any, which will be delivered, if applicable, at the Closing) and (ii) the
nonfulfillment on the part of Buyer of any unwaived covenant or agreement set
forth in this Agreement which survives the Closing Date in accordance with
Section 7.1.
7.4 NOTICE AND OPPORTUNITY TO DEFEND AGAINST THIRD PARTY CLAIMS.
(a) Promptly after receipt from any third party by any party hereto
of a written notice of any demand, claim or circumstance that, immediately or
with the lapse of time, would give rise to a claim or the commencement (or
threatened commencement) of any action, proceeding or investigation (an
"Asserted Liability") that may result in Losses for which indemnification may
be sought hereunder, the party seeking indemnification pursuant to Section
7.2 or 7.3 (the "Indemnitee") shall give written notice thereof (the "Claims
Notice") to the party obligated to provide indemnification pursuant to
Section 7.2 or 7.3 (the "Indemnifying Party"), PROVIDED, HOWEVER, that a
failure to give such notice shall not prejudice the Indemnitee's right to
indemnification hereunder except to the extent that the Indemnifying Party is
actually and materially prejudiced thereby. The Claims Notice shall describe
the Asserted Liability in reasonable detail, and shall indicate the amount
(estimated, if necessary) of the Losses that have been or may be suffered by
the Indemnitee when such information is available.
(b) The Indemnifying Party may elect to compromise or defend, at its
own expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall, within
20 business days following its receipt of the Claims Notice (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to provide indemnification under this
Agreement, the Indemnitee may pay, compromise or defend such Asserted Liability
with all reasonable costs and expenses borne by the Indemnifying Party.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim without the consent of the other party,
PROVIDED, HOWEVER, that such consent to settlement or compromise shall not be
unreasonably withheld. In any event, the Indemnitee and the Indemnifying Party
may participate, at their own expense, in the defense of such Asserted
Liability; PROVIDED, HOWEVER, that if the Indemnitee reasonably determines that
there is a conflict of interest between the Indemnified Party and the
Indemnitee, the fees of such counsel shall be borne by the Indemnifying Party.
If the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense.
7.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD PARTY CLAIMS.
In the event that CSC and Buyer, on the one hand, and Summit and Seller, on the
other hand, assert the existence of a claim giving rise to Losses (but excluding
claims resulting from the assertion of liability by third
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parties), Indemnitee shall give write notice to the Indemnifying Party. Such
written notice shall state that it is being given pursuant to this Section
7.5, specify the nature and amount of the claim asserted and indicate the
date on which such assertion shall be deemed accepted and the amount of the
claim deemed a valid claim (such date to be established in accordance with
the next sentence). If Indemnifying Party, within sixty (60) days after the
mailing of notice by Indemnitee, shall not give written notice to Indemnitee
announcing its intent to contest such assertion of Indemnitee, such assertion
shall be deemed accepted and the amount of claim shall be deemed a valid
claim. In the event, however, that Indemnifying Party contests the assertion
of a claim by giving such written notice to Indemnitee within said period,
then the parties shall act in good faith to reach agreement regarding such
claim. In the event that litigation shall arise with respect to any such
claim, the prevailing party shall be entitled to reimbursement of costs and
expenses incurred in connection with such litigation, including attorney's
fees, if the parties hereto, acting in good faith, cannot reach agreement
with respect to such claim within ten (10) days after such notice.
7.6 NET INDEMNITY. The amount of any Losses from and against which either
party is liable to indemnify, reimburse, defend and hold harmless the other
party or any other person pursuant to Section 7.2 or Section 7.3 shall be
reduced by any insurance or other recoveries or any tax benefit that such
indemnified person realizes or may realize as a result of or in connection with
such Loss and increased by any taxes such indemnified person realizes or may
realize in respect of indemnification for such Loss.
7.7 LIMITS ON INDEMNIFICATION. Absent fraud or willful misconduct of any
party (for which there shall be no limitation of liability of any party), no
party shall have any right to seek indemnification under this Agreement (i)
until Losses which would otherwise be indemnifiable hereunder and have been
incurred by such party and other indemnitees associated with or related to such
party exceed $100,000 after insurance or other recoveries and on an after-tax
basis in the aggregate (provided that after such $100,000 amount has been
satisfied, the Indemnitee shall be entitled to recover all Losses, including
such $100,000 amount); or (ii) for an aggregate amount in excess of $5,000,000.
The parties to this Agreement shall have liabilities and obligations for Losses
under this Article VII only with respect to claims submitted or notice of claims
provided during the relevant time period of survivability of the specific
representation, warranty, covenant or agreement as set forth herein.
Notwithstanding the expiration dates of the representations, warranties,
covenants and agreements set forth herein, if any party to this Agreement shall
provide notice to the other parties with respect to the submission of a claim
during the time period of survivability of such representation, warranty,
covenant or agreement, such Indemnifying Party's (as defined herein) liability
or obligation for Losses identified in such notice shall continue in full force
and effect until a final determination of such liability or obligation with
respect to those claims timely made.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Acquisition abandoned at any time prior to the Closing
Date:
(a) by mutual consent of Seller and Buyer;
(b) by CSC or Summit if: (i) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Acquisition; or (ii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Acquisition by any
Governmental Entity that would make consummation of the Acquisition illegal;
(c) by CSC if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Acquisition by any Governmental Entity, which: (i) results in the issuance of
such an order or injunction, or the imposition against any party hereto of
substantial damages if the Acquisition is consummated, (ii) prohibits CSC's or
Buyer's ownership or operation of all or a material portion of the Assets or
compels the Buyer or Seller to dispose of or hold separate all or a material
portion of the Assets of Buyer or Seller as a result of the sale of the Assets,
(iii) materially limits or restricts Buyer's conduct or operation of the Assets
after the Closing, or (iv) renders any party hereto unable to consummate the
sale of the Assets. In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any such
injunction lifted;
(d) by CSC if it is not in material breach of its obligations under
this Agreement or the Related Agreements and there has been a material breach of
any representation, warranty, covenant or agreement contained in this Agreement
or the Related Agreements on the part of Summit or Seller and such breach has
not been cured within ten (10) business days after written notice to Summit and
Seller (provided that, no cure period shall be required for a breach which by
its nature cannot be cured);
(e) by Summit if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement or the Related
Agreements on the part of CSC or Buyer and such breach has not been cured within
ten (10) business days after written notice to CSC and Buyer (provided that, no
cure period shall be required for a breach which by its nature cannot be cured).
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto, or their
respective officers, directors, securityholders or Affiliates, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; and provided further that, the provisions of Sections 4.3, 5.2,
5.3, 5.4, 5.12 and 9.7 of this Agreement shall remain in full force and effect
and survive any termination of this Agreement.
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8.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Closing Date, CSC, on the
one hand, and Summit, on the other, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party or Seller or Buyer, as applicable, contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party and shall not be deemed to be a waiver or extension of any other condition
or breach of any other representation or warranty nor shall the forbearance by
any party to seek a remedy for any noncompliance or breach by any other party
hereto be deemed to be a waiver by such party of any rights or remedies with
respect to such breach or noncompliance.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Buyer, to:
Credence Systems Corporation
215 Fourier Avenue
Fremont, California 94539
Attention: Wilmer R. Bottoms
Telecopy No.: (510) 623-2547
with a copy to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
Attention: Warren T. Lazarow, Esq.
Telecopy No.: (415) 496-2733
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(b) if to Seller or Summit, to:
Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, Oregon 97008
Attention: Larry Gerhard
Telecopy No.: (503) 646-9320
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven V. Bernard, Esq.
Telecopy No.: (415) 493-6811
9.2 INTERPRETATION. When a reference is made in this Agreement to
Schedules or Exhibits, such reference shall be to a Schedule or Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT. This Agreement, the schedules and exhibits hereto
and the Related Agreements: (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder, unless expressly provided
otherwise; and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided.
9.5 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
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9.6 OTHER REMEDIES. Any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy. Other than equitable remedies available to any party or claims
based on fraud, Article VII hereto shall be the sole remedy of any party
hereto for breaches of representations, warranties, covenants and agreements
set forth in this Agreement.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Title to the Assets shall pass in the State of Oregon.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
9.9 DISCLAIMER OF PROJECTIONS. With respect to any of the
representations and warranties contained in Section 2.20 of this Agreement
relating to any financial projection or forecast with respect to the Assets
delivered by or on behalf of Seller or Summit to Buyer, Buyer acknowledges
that to the extent such projections or forecasts were made in good faith: (A)
there are uncertainties inherent in attempting to make such projections and
forecasts; (B) it is familiar with such uncertainties; (C) it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of
all such projections and forecasts so furnished to it; and (D) it shall have
no claim against Seller or Summit with respect to any such projection or
forecast.
9.10 NO WARRANTY ON INVENTORY. WITH RESPECT TO ANY INVENTORY OF SELLER
INCLUDED IN THE ASSETS, BUYER ACKNOWLEDGES THAT SELLER IS TRANSFERING SUCH
INVENTORY "AS IS" WITHOUT ANY REPRESENTATIONS OR WARRANTIES REGARDING
FUNCTIONALITY, PERFORMANCE, USE, OPERATION OR SPECIFICATIONS, AND WITHOUT
EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF ANY KIND, INCLUDING BUT
NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NONINFRINGEMENT (EXCEPT THE EXPRESS REPRESENTATIONS,
WARRANTIES AND COVENANTS SET FORTH HEREIN). IN NO EVENT SHALL SELLER OR
SUMMIT BE LIABLE TO BUYER FOR LOSS OF PROFITS, COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS, OR OTHER SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES WITH
RESPECT TO A DEFECT IN SUCH INVENTORY.
9.11 COOPERATION AND RECORDS RETENTION. The parties hereto shall (i) each
provide the other with such assistance as may reasonably be requested by them in
connection with the preparation of any filing with the Securities and Exchange
Commission or any tax return, statement, report, form or other document
(hereinafter, collectively, a "Tax Return"), or in connection with any audit or
other examination by any taxing authority or any judicial or administrative
proceedings relating to liability for Taxes or filing with the Securities and
Exchange Commission, (ii) each retain and provide the other
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with any records or other information which may be relevant to any such Tax
Return, audit or examination, proceeding or determination, and (iii) each
provide the other with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to
be shown on any Tax Return of the other for any period. Without limiting the
generality of the foregoing, each party hereto shall retain, until the
applicable statute of limitations (including any extensions) have expired,
copies of all Tax Returns, supporting work schedules and other records or
information which may be relevant to such Tax Returns for all tax periods or
portions thereof ending before or including the Closing Date and shall not
destroy or otherwise dispose of any such records without first providing the
other party with a reasonable opportunity to review and copy the same.
9.12 SUCCESSORS AND ASSIGNS. All of the terms and conditions of this
Agreement shall be binding upon, and shall insure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors and
assigns.
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IN WITNESS WHEREOF, CSC, Buyer, Seller and Summit have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
TEST SYSTEMS STRATEGIES, INC.,
a Delaware corporation
By:
------------------------------------
Name:
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Title:
---------------------------------
CREDENCE SYSTEMS CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TEST SYSTEMS STRATEGIES, INC.,
an Oregon corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SUMMIT DESIGN, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
