<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SUMMIT DESIGN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7372 93-1137888
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
</TABLE>
------------------------------
9305 S.W. GEMINI DRIVE
BEAVERTON, OREGON 97008
(503) 643-9281
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
WILLIAM V. BOTTS
INTERIM CHIEF EXECUTIVE OFFICER
SUMMIT DESIGN, INC.
9305 S.W. GEMINI DRIVE
BEAVERTON, OREGON 97008
(503) 643-9281
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
ALAN K. AUSTIN, ESQ. JOHN A. BURGESS, ESQ.
STEVEN V. BERNARD, ESQ. JOSEPH E. MULLANEY III, ESQ.
DANIEL K. YUEN, ESQ. HALE AND DORR LLP
WILSON SONSINI GOODRICH & ROSATI 60 STATE STREET
650 PAGE MILL ROAD BOSTON, MASSACHUSETTS 02109
PALO ALTO, CALIFORNIA 94304 (617) 526-6000
(650) 493-9300
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon consummation of the business combination described herein.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common stock, $0.01 par value per share..... 16,268,288 shares $0.001 $7,978 $2.22
</TABLE>
(1) Based on the maximum number of shares to be issued in connection with the
business combination, calculated as the product of (a) the sum of (i) the
7,933,377 shares of common stock, par value $0.001 per share, of Viewlogic
Systems, Inc. ("Viewlogic") outstanding on October 21, 1999, (ii) the
11,381,904 shares of Series A Voting Preferred Stock, $0.001 par value per
share, of Viewlogic outstanding on October 21, 1999 and (iii) the 4,618,096
shares of Series A Non-Voting Preferred Stock, $0.001 par value per share of
Viewlogic outstanding on October 21, 1999 and (b) an exchange ratio of
0.67928 shares of the Registrant's common stock for each share of capital
stock of Viewlogic.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act as: $7,978, which equals one-third of
the $0.001 per share par value of the 23,933,377 shares of capital stock of
Viewlogic outstanding on October 21, 1999. The book value of the securities
of Viewlogic to be received by the Registrant is negative.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[SUMMIT LOGO]
9305 S.W. GEMINI DRIVE
BEAVERTON, OREGON 97008
, 1999
Dear fellow stockholder:
You are cordially invited to attend a special meeting of stockholders of
Summit Design, Inc. to be held on , 1999 at p.m., local time,
at the Embassy Suites, 9000 S.W. Washington Square Road, Tigard, Oregon 97223.
At the Summit special meeting, you will vote upon a proposed business
combination between Summit and Viewlogic Systems, Inc. You will also vote on the
related amendments to our corporate charter to authorize an increase in the
number of shares of common stock issuable by Summit and to change our corporate
name to " ." These actions are described in greater detail in the
attached joint proxy statement/prospectus.
Following completion of the proposed business combination with Viewlogic,
the stockholders of Viewlogic will hold approximately 51% of the shares of
common stock of the combined company. The combined company's board of directors
will initially consist of five members:
- two current members of Summit's board of directors;
- two current members of Viewlogic's board of directors; and
- one member designated by the four other directors.
William J. Herman, Viewlogic's current President and Chief Executive Officer and
a member of Viewlogic's board of directors, will be the Chairman of the Board
and Chief Executive Officer of the combined company.
Our board of directors has unanimously approved the proposed issuance of
stock and amendments to our charter and determined that the business combination
is in the best interests of Summit and its stockholders. The board of directors
therefore unanimously recommends that Summit's stockholders vote to APPROVE the
issuance of an aggregate of approximately 16.3 million shares of Summit common
stock to Viewlogic's stockholders, APPROVE the amendment to Summit's charter to
increase by 20 million to 50 million the number of shares of common stock
authorized for issuance by Summit and APPROVE the amendment to Summit's
corporate charter to change our corporate name to " ."
The business combination will become effective as soon as practicable after
we and Viewlogic obtain all necessary regulatory and stockholder approvals and
satisfy other conditions specified in the merger agreement.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE TO ASSURE REPRESENTATION OF YOUR SHARES. YOUR VOTE IS
VERY IMPORTANT.
Sincerely,
/s/ WILLIAM V. BOTTS
William V. Botts
INTERIM CHIEF EXECUTIVE OFFICER
<PAGE>
SUMMIT DESIGN, INC.
9305 S.W. GEMINI DRIVE
BEAVERTON, OREGON 97008
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
------------------------
To the stockholders of Summit Design, Inc:
We will hold a special meeting of stockholders on , 1999 at
p.m., local time, at the Embassy Suites, 9000 S.W. Washington Square Road,
Tigard, Oregon 97223.
At the special meeting you will be asked to consider and vote upon the
following proposals:
- the issuance of shares of our common stock to the stockholders of
Viewlogic pursuant to the agreement and plan of reorganization among
Summit, Viewlogic and Hood Acquisition Corp., a wholly owned subsidiary of
Summit, dated as of September 16, 1999;
- an amendment to our Amended and Restated Certificate of Incorporation
increasing the number of shares of our common stock authorized for
issuance by 20 million shares to 50 million shares, contingent upon
approval of the above stock issuance proposal;
- an amendment to our Amended and Restated Certificate of Incorporation
changing the company's name to " ," contingent and effective upon
completion of the business combination with Viewlogic; and
- to transact all other business that may properly come before the Summit
special meeting, including any motion to adjourn to a later date to permit
further solicitation of proxies, if necessary, to establish a quorum or to
obtain additional votes in favor of the approval of the above proposals,
or to postpone or adjourn the meeting.
The above proposals are described more fully in the accompanying joint proxy
statement/prospectus. Please review carefully the entire joint proxy
statement/prospectus, including the matters discussed under "Risk Factors"
beginning on page 10.
Stockholders of record at the close of business on , 1999 are
entitled to notice of, and to vote at, the special meeting and any adjournments
or postponements thereof, and are cordially invited to attend the special
meeting in person. A complete list of all stockholders entitled to vote at the
special meeting shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during the ten days prior to the special meeting
at our office at 9305 S.W. Gemini Drive, Beaverton, Oregon 97008.
For the Board of Directors
/s/ C. ALBERT KOOB
C. Albert Koob
VICE PRESIDENT OF FINANCE,
CHIEF FINANCIAL OFFICER AND SECRETARY
Beaverton, Oregon
, 1999
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE SUMMIT SPECIAL
MEETING PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR
SHARES. IF THE PROXY CARD IS MAILED IN THE UNITED STATES YOU DO NOT NEED TO
AFFIX POSTAGE TO THE ENCLOSED ENVELOPE.
<PAGE>
[VIEWLOGIC LOGO]
293 BOSTON POST ROAD WEST
MARLBORO, MASSACHUSETTS 01752
, 1999
Dear fellow stockholder:
You are cordially invited to attend a special meeting of stockholders of
Viewlogic Systems, Inc. to be held on , 1999 at a.m., local
time, at the offices of Viewlogic, 293 Boston Post Road West, Marlboro,
Massachusetts 01752. At the special meeting, we will ask you to vote upon a
proposed business combination between Viewlogic and Summit Design, Inc. The
business combination will take the form of a merger of a wholly owned subsidiary
of Summit into Viewlogic and is described in greater detail in the attached
joint proxy statement/prospectus.
In the business combination, you will receive 0.67928 of a share of Summit
common stock for each share of Viewlogic capital stock you own. Summit common
stock is quoted on the Nasdaq National Market under the trading symbol "SMMT."
On , 1999, the last reported sale price of Summit common stock on
the Nasdaq National Market was $ per share. You will receive cash for
any fractional share of Summit common stock which you would otherwise receive in
the business combination. The cash amount you will receive for fractional shares
will be based upon the average of the last reported per share sale price of
Summit common stock for the ten trading days immediately prior to completion of
the business combination.
Following completion of the proposed business combination, the stockholders
of Viewlogic will hold approximately 51% of the shares of common stock of the
combined company. The combined company's board of directors will initially
consist of five members:
- two current members of Viewlogic's board of directors;
- two current members of Summit's board of directors; and
- one member designated by the four other directors.
William J. Herman, Viewlogic's current President and Chief Executive Officer,
will be the Chairman of the Board and Chief Executive Officer of the combined
company.
After careful consideration, our board of directors has unanimously approved
and adopted the merger agreement and the proposed business combination and
determined that the transaction is in the best interests of Viewlogic and its
stockholders. The board of directors therefore unanimously recommends that you
vote to APPROVE and ADOPT the merger agreement and the merger.
We cannot complete the business combination unless the merger agreement and
the merger is approved and adopted by holders of a majority of the outstanding
shares of Viewlogic common stock and Viewlogic Series A Voting Preferred Stock
voting together as a single class. Holders of Viewlogic capital stock who
properly preserve their rights are entitled to seek an appraisal under Delaware
law if the business combination is completed.
On September 16, 1999, some stockholders of Viewlogic entered into voting
agreements with Summit pursuant to which they agreed to vote the Viewlogic
capital stock they own "FOR" approval and adoption of the merger agreement and
the business combination. On the record date for the special meeting of
stockholders, these stockholders aggregately owned and were entitled to vote
approximately 49% of the outstanding shares of Viewlogic common stock and
Viewlogic Series A Voting Preferred Stock, voting together as a single class.
The business combination will become effective as soon as practicable after
Viewlogic and Summit obtain all necessary regulatory and stockholder approvals
and satisfy other conditions specified in the merger agreement.
You should consider the matters discussed under "Risk Factors" beginning on
page 10 of the enclosed joint proxy statement/prospectus before voting. Please
review carefully the entire joint proxy statement/prospectus.
Whether or not you expect to attend the special meeting in person, please
complete, sign and promptly return the enclosed proxy card in the enclosed
postage-prepaid envelope to assure representation of your shares. YOUR VOTE IS
VERY IMPORTANT.
Sincerely,
/s/ WILLIAM J. HERMAN
William J. Herman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
VIEWLOGIC SYSTEMS, INC.
293 BOSTON POST ROAD WEST
MARLBORO, MASSACHUSETTS 01752
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
---------------------
To the stockholders of Viewlogic Systems, Inc.:
We will hold a special meeting of stockholders of Viewlogic Systems, Inc. on
, 1999 at a.m., local time, at the offices of Viewlogic, 293
Boston Post Road West, Marlboro, Massachusetts 01752. At the special meeting you
will be asked to consider and vote upon the following proposals:
- the approval and adoption of the agreement and plan of reorganization by
and among Summit Design, Inc., Hood Acquisition Corp., a wholly owned
subsidiary of Summit, and Viewlogic, pursuant to which Hood will merge
into Viewlogic and each outstanding share of capital stock of Viewlogic
will be converted into the right to receive 0.67928 of a share of Summit
common stock, and the transactions contemplated by the merger agreement,
including the merger; and
- to transact all other business that may properly come before the Viewlogic
special meeting, including any motion to adjourn to a later date to permit
further solicitation of proxies, if necessary, to establish a quorum or to
obtain additional votes in favor of the approval and adoption of the
merger agreement and the transactions contemplated by the merger
agreement, or to postpone or adjourn the meeting.
The proposals above are described in greater detail in the accompanying
joint proxy statement/ prospectus. Please review carefully the entire joint
proxy statement/prospectus, including the matters discussed under "Risk Factors"
beginning on page 10.
A complete list of all stockholders entitled to vote at the special meeting
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during the ten days prior to the special meeting at our offices at
293 Boston Post Road West, Marlboro, Massachusetts 01752.
Holders of record at the close of business on , 1999 of shares
of our common stock or shares of our Series A Voting Preferred Stock are
entitled to notice of, and to vote at, the special meeting and any adjournments
or postponements thereof, and are cordially invited to attend the special
meeting in person.
After careful consideration, the board of directors has unanimously approved
and adopted the proposed merger agreement and the merger and determined that the
transaction is in the best interests of Viewlogic and its stockholders. The
board of directors therefore unanimously recommends that you vote to APPROVE and
ADOPT the merger agreement.
For the Board of Directors
/s/ PETER T. JOHNSON
Peter T. Johnson
VICE PRESIDENT, BUSINESS DEVELOPMENT,
CHIEF LEGAL OFFICER AND SECRETARY
Marlboro, Massachusetts
, 1999
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE VIEWLOGIC
SPECIAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL
IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR
SHARES. IF THE PROXY CARD IS MAILED IN THE UNITED STATES, YOU DO NOT NEED TO
AFFIX POSTAGE TO THE ENCLOSED ENVELOPE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 22, 1999
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS NOT
COMPLETE AND MAY BE CHANGED. WE HAVE FILED A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES WITH THE SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL
THESE SECURITIES UNTIL THAT REGISTRATION STATEMENT IS EFFECTIVE. THIS JOINT
PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND WE ARE
NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
<PAGE>
<TABLE>
<S> <C>
SUMMIT DESIGN, INC.
VIEWLOGIC SYSTEMS, INC. SUMMIT DESIGN, INC.
--------------------- ---------------------
JOINT PROXY STATEMENT PROSPECTUS
</TABLE>
Summit Design, Inc., has agreed to enter into a business combination with
Viewlogic Systems, Inc. The business combination will take the form of a merger
of Hood Acquisition Corp., a wholly owned subsidiary of Summit, with and into
Viewlogic, and is described in greater detail in this joint proxy
statement/prospectus.
Summit is providing this joint proxy statement/prospectus to its
stockholders in connection with the solicitation of proxies by the Summit board
of directors for use at the special meeting of Summit stockholders to be held on
, 1999, at the Embassy Suites, 9000 S.W. Washington Square Road,
Tigard, Oregon 97223, commencing at .m., local time, and at any adjournment or
postponement of the meeting.
Viewlogic is providing this joint proxy statement/prospectus to its
stockholders in connection with the solicitation of proxies by the Viewlogic
board of directors for use at the special meeting of Viewlogic stockholders to
be held on , 1999, at the offices of Viewlogic at 293 Boston Post
Road West, Marlboro, Massachusetts, beginning at p.m., local time, and at
any adjournment or postponement of the meeting.
This joint proxy statement/prospectus is also the prospectus of Summit with
respect to the shares of common stock of Summit to be issued in the business
combination in exchange for outstanding shares of Viewlogic capital stock.
Summit common stock is quoted on the Nasdaq National Market under the symbol
"SMMT." On , 1999, its last reported price was $ per share.
------------------------
THE PROPOSED BUSINESS COMBINATION IS A COMPLEX TRANSACTION. PLEASE READ AND
CONSIDER CAREFULLY THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY,
INCLUDING THE MATTERS DISCUSSED UNDER "RISK FACTORS" BEGINNING ON PAGE 10.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED PURSUANT TO
THIS JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
This joint proxy statement/prospectus and the accompanying proxy cards are
first being mailed to stockholders of Summit and Viewlogic on or about
, 1999.
The date of this joint proxy statement/prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 1
TRADEMARKS................................................................................................. 2
FORWARD-LOOKING STATEMENTS................................................................................. 2
SUMMARY.................................................................................................... 3
The Companies............................................................................................ 3
The Business Combination................................................................................. 3
Voting on the Business Combination....................................................................... 5
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA.............................. 7
RISK FACTORS............................................................................................... 10
Risks Relating to the Business Combination............................................................... 10
Risk Relating to Summit and the Combined Company......................................................... 12
Risk Relating to Viewlogic............................................................................... 22
COMPARATIVE PER SHARE DATA................................................................................. 26
STOCK PRICE DATA........................................................................................... 27
SUMMIT SPECIAL MEETING..................................................................................... 28
Date, Time and Place of Summit Special Meeting........................................................... 28
Purpose.................................................................................................. 28
Record Date and Outstanding Shares....................................................................... 28
Vote Required............................................................................................ 28
Proxies.................................................................................................. 29
Solicitation of Proxies; Expenses........................................................................ 29
Recommendations of Summit Board of Directors............................................................. 29
VIEWLOGIC SPECIAL MEETING.................................................................................. 30
Date, Time and Place of Viewlogic Special Meeting........................................................ 30
Purpose.................................................................................................. 30
Record Date and Outstanding Shares....................................................................... 30
Vote Required............................................................................................ 30
Proxies.................................................................................................. 31
Solicitation of Proxies; Expenses........................................................................ 31
Recommendations of Viewlogic Board of Directors.......................................................... 31
APPROVAL OF THE BUSINESS COMBINATION AND RELATED TRANSACTIONS.............................................. 32
Background of the Business Combination................................................................... 32
Joint Reasons for the Business Combination............................................................... 34
Summit's Reasons for the Business Combination............................................................ 35
Viewlogic's Reasons for the Business Combination......................................................... 37
Opinion of Summit's Financial Advisor.................................................................... 37
Material Federal Income Tax Considerations............................................................... 42
Accounting Treatment..................................................................................... 44
Governmental and Regulatory Approvals.................................................................... 44
Appraisal Rights......................................................................................... 44
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE MERGER AGREEMENT....................................................................................... 48
Representations and Warranties........................................................................... 48
Conduct of Business Before Completion of the Business Combination........................................ 49
No Solicitation of Other Acquisition Proposal............................................................ 50
Treatment of Viewlogic Stock Options..................................................................... 50
Board of Directors and Officers of the Combined Company.................................................. 51
Conditions to Completion of the Business Combination..................................................... 51
Termination of the Merger Agreement...................................................................... 52
Payment of Termination Fee............................................................................... 53
Extension, Waiver and Amendment of the Merger Agreement.................................................. 54
Interests of Summit Management in the Business Combination............................................... 54
Interests of Viewlogic Directors and Management in the Business Combination.............................. 54
Voting Agreements........................................................................................ 55
COMPARISON OF CAPITAL STOCK................................................................................ 56
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION......................................................... 61
INDUSTRY................................................................................................... 69
SUMMIT BUSINESS............................................................................................ 72
SUMMIT SELECTED HISTORICAL AND UNAUDITED FINANCIAL DATA.................................................... 84
SUMMIT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................................................... 85
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................................. 107
SUMMIT DIRECTORS AND EXECUTIVE OFFICERS.................................................................... 108
SUMMIT EXECUTIVE OFFICER COMPENSATION...................................................................... 109
SUMMIT SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT........................................................................................... 112
VIEWLOGIC BUSINESS......................................................................................... 114
VIEWLOGIC SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA....................................... 122
VIEWLOGIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................................................... 123
VIEWLOGIC DIRECTORS AND EXECUTIVE OFFICERS................................................................. 132
VIEWLOGIC EXECUTIVE OFFICER COMPENSATION................................................................... 133
VIEWLOGIC CERTAIN TRANSACTIONS............................................................................. 136
VIEWLOGIC SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT........................................................................................... 137
LEGAL MATTERS.............................................................................................. 139
EXPERTS.................................................................................................... 139
STOCKHOLDER PROPOSALS...................................................................................... 139
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................................................................. F-1
SUMMIT FINANCIAL INFORMATION
Report of Independent Accountants........................................................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 and June 30, 1999 (unaudited)............... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 and for the
Six Months Ended June 30, 1999 (unaudited) and 1998 (unaudited)........................................ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998, 1997 and 1996 and
for the Six Months Ended June 30, 1999 (unaudited)..................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 and for the
Six Months Ended June 30, 1999 (unaudited)............................................................. F-6
Notes to Consolidated Financial Statements............................................................... F-7
VIEWLOGIC FINANCIAL INFORMATION
Report of Independent Accountants........................................................................ F-25
Consolidated Balance Sheets as of January 2, 199 and July, 3 1999 (unaudited)............................ F-26
Statements of Revenues and Direct Expenses for the Year Ended December 31, 1997 and Consolidated
Statements of Operations for the year ended January 2, 1999 and for the Six Months Ended July 4, 1998
(unaudited) and July 3,1999 (unaudited)................................................................ F-27
Consolidated Statements of Comprehensive Income for the year ended January 2, 1999 and for the Six Months
Ended July 4, 1998 (unaudited) and July 3,1999 (unaudited)............................................. F-28
Consolidated Statements of Stockholders' Equity (Deficiency) for the Year Ended January 2, 1999 and for
the Six Months Ended July 3, 1999 (unaudited).......................................................... F-29
Consolidated Statements of Cash Flows for the Year Ended January 2, 1999 and for the Six Months Ended
July 4, 1998 (unaudited) and July 3, 1999 (unaudited).................................................. F-30
Notes to Consolidated Financial Statements............................................................... F-31
Annex A Agreement and Plan of Reorganization
Annex B Form of Viewlogic Voting Agreement
Annex C Fairness Opinion of Dain Rauscher & Wessels
Annex D Section 262 of Delaware General Corporation Law
</TABLE>
iii
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Summit has filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 that registers the distribution of
shares of Summit common stock to Viewlogic stockholders in connection with the
business combination. The registration statement, including the attached
exhibits and schedules, contains additional information about Viewlogic, Summit
and Summit common stock. Wherever Summit or Viewlogic makes reference in this
joint proxy statement/prospectus to any of its respective contracts, agreements
or other documents, the references are not necessarily complete, and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract, agreement or other document. The rules and regulations of the
SEC allow Summit and Viewlogic to omit some information included in the
registration statement from this joint proxy statement/prospectus.
In addition, Summit files reports, proxy statements and other information
with the SEC. You may read and copy this information at the following locations
of the SEC:
<TABLE>
<S> <C> <C>
Chicago Regional
Public Reference Room New York Regional Office Office
500 West Madison
450 Fifth Street, N.W. 7 World Trade Center Street
Room 1024 Suite 1300 Suite 1400
Washington, DC 20549 New York, NY 10048 Chicago, IL 60661
</TABLE>
You may also obtain copies of this information by mail from the public
reference section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, DC
20549, at prescribed rates. You can obtain further information on the operation
of the SEC's public reference room in Washington, DC by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an Internet site that contains reports, proxy
statements and other information about issuers, such as Summit, which file
documents electronically with the SEC. The address of that site is
http://www.sec.gov.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS TO VOTE. NEITHER SUMMIT NOR VIEWLOGIC HAS AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
JOINT PROXY STATEMENT/PROSPECTUS.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED , 1999. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE. THE
MAILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS TO SUMMIT OR VIEWLOGIC
STOCKHOLDERS AND THE ISSUANCE OF SUMMIT COMMON STOCK IN CONNECTION WITH THE
BUSINESS COMBINATION SHOULD NOT CREATE ANY IMPLICATION TO THE CONTRARY.
<PAGE>
TRADEMARKS
This joint proxy statement/prospectus contains trademarks of Summit and
Viewlogic and may contain other trademarks which are the property of their
respective owners.
FORWARD-LOOKING STATEMENTS
Summit and Viewlogic make forward-looking statements in this joint proxy
statement/prospectus that involve substantial risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of Summit, Viewlogic and, if the business
combination is completed, the combined company, as well as statements preceded
by, followed by or that include the words "anticipates," "believes," "expects,"
"intends," "may," "should," "will" or similar expressions. You should understand
that many important factors, in addition to those discussed elsewhere in this
joint proxy statement/prospectus, could affect the future results of Summit,
Viewlogic and, if the business combination is completed, the combined company,
and could cause those results to differ materially from those expressed in these
forward-looking statements. You should carefully review the risks set forth in
this joint proxy statement/prospectus under "Risk Factors" beginning on page 10.
SUMMIT HAS PROVIDED ALL INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS WITH RESPECT TO SUMMIT AND HOOD ACQUISITION CORP. VIEWLOGIC
HAS PROVIDED ALL INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS
WITH RESPECT TO VIEWLOGIC.
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SUMMARY
THE FOLLOWING IS A SUMMARY OF SOME OF THE INFORMATION CONTAINED IN THIS
JOINT PROXY STATEMENT/ PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN A COMPLETE
STATEMENT OF ALL THE IMPORTANT ELEMENTS OF THE PROPOSALS TO BE VOTED ON OR WHICH
YOU MAY BELIEVE TO BE IMPORTANT AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE ACCOMPANYING INFORMATION AND DOCUMENTS.
THE COMPANIES
SUMMIT DESIGN, INC. (PAGE 72)
9305 S.W. Gemini Drive
Beaverton, Oregon 97008
(503) 643-9281
Summit is a leading international supplier of engineering software products
in the areas of high-level design creation, analysis, verification and
optimization. Some of the world's top electronics companies use Summit's
products to increase engineering productivity, decrease time to market and
improve the quality of their products.
VIEWLOGIC SYSTEMS, INC. (PAGE 114)
293 Boston Post Road West
Marlboro, Massachusetts 01752
(508) 480-0881
Viewlogic develops, markets and supports a comprehensive family of
integrated eProduct design software and services for advanced electronic
systems. Viewlogic defines eProducts as products that are differentiated by
their electronic content. Viewlogic is a privately held company with offices in
North America, Europe, Japan and the Far East.
THE BUSINESS COMBINATION
AGREEMENT AND PLAN OF REORGANIZATION (PAGE 48 AND ANNEX A)
Summit, Viewlogic and Hood Acquisition Corp., a wholly owned subsidiary of
Summit, entered into an agreement and plan of reorganization, or merger
agreement, on September 16, 1999. A copy of the merger agreement is attached to
this joint proxy statement/prospectus as Annex A. We urge you to read the merger
agreement carefully and completely.
STRUCTURE OF THE BUSINESS COMBINATION
The business combination is intended to be a tax-free, stock-for-stock
transaction in which a total of approximately 16.3 million shares of Summit
common stock will be issued in exchange for all outstanding shares of Viewlogic
capital stock. Summit will also assume Viewlogic's outstanding stock options.
After completion of the business combination, these options will be exercisable
for up to approximately 2.0 million shares of Summit common stock.
MANAGEMENT OF THE COMBINED COMPANY (PAGE 51)
Following the business combination, the stockholders of Viewlogic will own
approximately 51% of the combined company. The combined company's board of
directors will initially consist of five members, including:
- William Botts and Steven Erwin, each a current member of Summit's board of
directors;
- William J. Herman and Keith Geeslin, each a current member of Viewlogic's
board of directors; and
- Lorne Cooper, who was designated by the four other directors.
William J. Herman, Viewlogic's current President and Chief Executive Officer and
a member of Viewlogic's board of directors, will become the Chairman of the
Board of Directors and Chief Executive Officer of the combined company.
RISK FACTORS (PAGE 10)
The proposed business combination of Summit and Viewlogic involves numerous
risks and uncertainties, including, among others:
- a fixed exchange ratio;
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- potential delays in customers' purchases pending the business combination;
- possible dilution to earnings per share;
- difficulties in integrating Summit, Viewlogic and their respective prior
acquisitions;
- diversion of management's attention; and
- expenses relating to the business combination.
Moreover, each of Summit's and Viewlogic's business involves operating risks
which the combined company will continue to face.
REASONS FOR THE BUSINESS COMBINATION (PAGE 34)
Summit and Viewlogic believe that the business combination will benefit the
companies for various reasons, including, among others, the following:
- product synergies;
- a more comprehensive product line; and
- a larger installed customer base.
CONDITIONS TO COMPLETION OF THE BUSINESS COMBINATION (PAGE 51)
The merger agreement specifies several conditions that have to be met before
Summit and Viewlogic can complete the business combination. These conditions
include, among other things:
- approval by Summit's stockholders of the issuance of approximately 16.3
million shares of Summit common stock and a related corporate charter
amendment to increase the number of authorized shares of common stock
issuable by Summit accordingly; and
- approval and adoption by Viewlogic's stockholders of the merger agreement
and the business combination.
TERMINATION OF THE MERGER AGREEMENT (PAGE 52)
Summit or Viewlogic may terminate the merger agreement under specified
circumstances, including, among others, the following:
- if the business combination is not completed by February 29, 2000; or
- if either Summit's or Viewlogic's stockholders fail to approve the
transactions contemplated by the business combination.
In addition, under some circumstances, termination of the merger agreement
may lead to payment of a $2.5 million termination fee by either Summit or
Viewlogic.
NON-SOLICITATION (PAGE 50)
Until the business combination is completed or the merger agreement is
terminated, Summit and Viewlogic have agreed not to directly or indirectly
solicit other acquisition proposals, subject to some legal requirements,
including, among others, fiduciary obligations of either of the companies'
boards of directors.
TAX TREATMENT (PAGE 42)
The transaction is intended to qualify as a tax-free reorganization for
Summit, Viewlogic and their respective stockholders.
ACCOUNTING TREATMENT (PAGE 44)
Summit and Viewlogic expect that the transaction will be accounted for as a
purchase of Summit by Viewlogic for financial reporting and accounting purposes.
OPINION OF SUMMIT'S FINANCIAL ADVISOR (PAGE 37 AND ANNEX C)
In deciding to approve the business combination, Summit's board of directors
considered many factors, including an opinion from its financial advisor, Dain
Rauscher Wessels, as to the fairness of the exchange ratio from a financial
point of view to Summit and its stockholders. The exchange ratio is the number
of shares of Summit common stock to be issued in exchange for one Viewlogic
share.
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REGULATORY REQUIREMENTS (PAGE 44)
The business combination is subject to the satisfaction of requirements
under federal and state securities laws.
VOTING ON THE BUSINESS COMBINATION
BOARD RECOMMENDATIONS (PAGES 29 AND 31)
SUMMIT. Summit's board of directors has unanimously approved the merger
agreement, the issuance of shares of Summit common stock and the related
amendments to Summit's corporate charter. The Summit board of directors
unanimously recommends that Summit stockholders approve the Summit proposals
described in this joint proxy statement/ prospectus.
VIEWLOGIC. Viewlogic's board of directors has also unanimously approved the
merger agreement and the business combination. The Viewlogic board of directors
unanimously recommends that Viewlogic stockholders approve and adopt the
Viewlogic proposals described in this joint proxy statement/prospectus.
VIEWLOGIC VOTING AGREEMENT (PAGE 55 AND ANNEX B)
To induce Summit to enter into the merger agreement, some stockholders of
Viewlogic, who own an aggregate of shares of Viewlogic capital stock,
representing approximately % of Viewlogic's voting securities as of the record
date, have entered into voting agreements with Summit. These stockholders have
agreed to vote all shares of their Viewlogic capital stock in favor of approval
of the business combination.
SPECIAL MEETINGS OF STOCKHOLDERS (PAGES 28 AND 30)
SUMMIT. A special meeting of the stockholders of Summit will be held at the
Embassy Suites, 9000 S.W. Washington Square Road, Tigard, Oregon 97223, on
, 1999 at p.m. The principal purpose of the special meeting is to
consider and vote upon the business combination, the issuance of Summit common
stock in connection with the business combination and amendments to Summit's
charter to permit this issuance and to change Summit's corporate name to
" ".
VIEWLOGIC. A special meeting of the stockholders of Viewlogic will be held
at the offices of Viewlogic, 293 Boston Post Road West, Marlboro, Massachusetts
01752 on , 1999 at a.m., local time. The principal purpose of the
special meeting is to consider and vote upon the merger agreement and the
business combination.
RECORD DATE AND VOTE REQUIRED (PAGES 28 AND 30)
SUMMIT. Only holders of Summit common stock of record at the close of
business on , 1999 are entitled to notice of and to vote at the
special meeting. The issuance of the shares of Summit common stock to Viewlogic
stockholders will require the affirmative vote of a majority of the total votes
cast regarding the proposal. The related amendments to Summit's charter will
require the affirmative vote of a majority of the total shares outstanding.
VIEWLOGIC. Only holders of Viewlogic common stock and Series A Voting
Preferred Stock of record at the close of business on , 1999 are
entitled to notice of and to vote at the special meeting. The approval and
adoption of the merger agreement and the business combination will require the
affirmative vote of a majority of the outstanding shares of Viewlogic common
stock and Viewlogic Series A Voting Preferred Stock as of the record date,
voting together as a single class.
INTERESTS OF VIEWLOGIC DIRECTORS AND MANAGEMENT IN THE BUSINESS COMBINATION
(PAGE 54)
Viewlogic stockholders should note that a number of directors and officers
of Viewlogic have interests in the business combination as directors or officers
that are different from, or in addition to, those of a Viewlogic stockholder. If
the business combination is completed, indemnification arrangements for current
directors and officers of Viewlogic will be continued and some current officers
of Viewlogic
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will be retained as employees of the combined company.
INTERESTS OF SUMMIT MANAGEMENT IN THE BUSINESS COMBINATION (PAGE 54)
In considering the recommendation of the Summit board of directors in favor
of the business combination and the related amendments to Summit's certificate
of incorporation, stockholders of Summit should be aware that one executive of
Summit has interests different from, or in addition to, those of a Summit
stockholder. If the business combination is completed it is likely that one
executive's stock option will vest in full and that he will receive severance
benefits if his employment is terminated.
APPRAISAL RIGHTS (PAGE 44 AND ANNEX D)
SUMMIT. Stockholders of Summit are not entitled to dissenters' rights under
Delaware law.
VIEWLOGIC. Under Delaware law, stockholders of Viewlogic who oppose the
business combination are entitled to appraisal rights, including, among others,
the right to demand appraisal of their shares.
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SELECTED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA
The following selected historical annual financial data of Summit and
Viewlogic has been derived from their respective audited historical financial
statements and should be read in conjunction with those consolidated financial
statements and related notes thereto. The consolidated financial statements for
Summit for the three fiscal years ended December 31, 1998 and for Viewlogic for
the fiscal years ended December 31, 1997 and January 2, 1999 are included
elsewhere in this joint proxy statement/ prospectus. The fiscal years prior to
the year ended December 31, 1997 for Viewlogic are not presented as it is unable
to create comparable statements of operations and balance sheet information.
(See further discussion in Viewlogic's Management, Discussion and Analysis of
Financial Condition and Results of Operations). The unaudited selected
historical financial information as of June 30, 1999, and for the six month
periods ended June 30, 1999 and 1998, for Summit and for the six months ended
July 3, 1999 and July 4, 1998 for Viewlogic as of and for those periods are
included elsewhere in this joint proxy statement/prospectus, and in the opinion
of Summit's and Viewlogic's respective management, reflect all adjustments
necessary for the fair presentation of the unaudited interim financial
information. The results of operations for those interim periods are not
necessarily indicative of the results to be expected for the entire year.
The transaction will be accounted for under the purchase method of
accounting. Although Summit will be acquiring Viewlogic, Viewlogic will hold a
controlling interest in Summit as a result of the business combination.
Accordingly, the transaction is considered, for accounting purposes, to be a
"reverse acquisition," in which Viewlogic is the "accounting acquirer."
Accordingly, the unaudited pro forma combined condensed balance sheet data at
June 30, 1999 includes the accounts of Viewlogic on a historical cost basis and
the assets and liabilities of Summit at acquisition cost, allocated by relative
estimated fair value as of the date of the acquisition. The estimated purchase
price allocations have been made on a preliminary basis and may change as
additional information becomes known. The unaudited pro forma combined
statements of operations data have been presented as if the transaction took
place at the beginning of the earliest period presented. All of the unaudited
pro forma combined condensed historical financial data has been derived from the
unaudited pro forma combined condensed financial statements and the related
notes thereto included elsewhere in this joint proxy statement/prospectus and
should be read in conjunction with such financial statements and related notes.
The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the business combination had been consummated at the beginning
of the periods indicated, nor is it necessarily indicative of future operating
results or financial position.
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SUMMIT HISTORICAL CONDENSED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR
SIX MONTHS ENDED
AT OR FOR YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue.................................. $ 43,598 $ 31,469 $ 20,314 $ 14,292 $ 13,167 $ 13,998 $ 21,369
Total costs and operating expenses, excluding
in-process technology, amortization of
purchased technology, intangibles and
goodwill and non-recurring costs............. 30,852 23,458 19,413 17,331 14,095 14,658 15,170
In-process technology, amortization of
purchased technology, intangibles and
goodwill and non-recurring costs............. 4,701 13,229 -- -- 647 3,066 1,953
Total costs and operating expenses............. 35,553 36,687 19,413 17,331 14,742 17,724 17,123
Income (loss) from operations.................. 8,045 (5,248) 901 (3,039) (1,575) (3,726) 4,246
Net income (loss).............................. 5,101 431 1,263 (3,611) (2,082) (3,238) 2,857
Net income (loss) per diluted share............ $ 0.32 $ 0.03 $ 0.10 $ (0.33) $ (0.22) $ (0.21) $ 0.18
Number of shares used in computing diluted
earnings (loss) per share.................... 16,115 15,402 13,243 11,085 9,449 15,666 16,240
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 27,693 $ 19,973 $ 19,801 $ 711 $ 1,203 $ 24,028 $ 24,768
Working capital (deficit)...................... 24,255 14,603 17,236 (540) (439) 22,425 10,007
Total assets................................... 50,210 39,670 28,700 9,151 8,097 44,672 44,226
Long-term debt, less current portion........... 791 1,224 916 1,462 743 606 1,320
Stockholders' equity........................... 35,475 26,196 19,151 548 1,224 32,553 29,696
</TABLE>
VIEWLOGIC HISTORICAL CONDENSED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR
AT OR FOR YEAR ENDED SIX MONTHS ENDED
------------------------------------ ------------------------
JANUARY 2, JULY 3, JULY 4,
1999 DECEMBER 31, 1997(1) 1999 1998
-------------- -------------------- ----------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue.................................... $ 55,237 $ 63,987 $ 27,232 $ 26,978
Total costs and operating expenses............... 43,385 65,983 24,985 20,238
Income (loss) from operations.................... 11,852 (1,996) 2,247 6,740
Net income (loss)................................ 5,867 (1,199) 875 3,744
Net income per diluted share..................... $ 0.73 $ 0.04 $ 0.94
Number of shares used in computing diluted
earnings (loss) per share...................... 7,999 20,761 3,966
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit)........................ $ (6,509) $ (7,699)
Total assets..................................... 24,892 24,605
Long-term debt, less current portion............. 15,873 14,630
Redeemable convertible preferred stock........... 32,000 32,000
Stockholders' equity (deficit)................... (47,845) (46,706)
</TABLE>
- ------------------------
(1) Statement of Revenue and Expense Data
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UNAUDITED SUMMIT AND VIEWLOGIC PRO FORMA COMBINED CONDENSED HISTORICAL FINANCIAL
DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
PRO FORMA COMBINED STATEMENT OF INCOME DATA:
Total revenue........................................... $ 98,835 $ 41,230
Total costs and operating expenses...................... 83,611 44,721
Income (loss) from operations........................... 15,224 (3,491)
Net income (loss)....................................... 6,670 (3,629)
Net income (loss) per diluted share..................... $ 0.21 $ (0.11)
Shares used in computing diluted earnings (loss) per
share................................................. 32,350 31,901
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1999
-------------
<S> <C>
PRO FORMA COMBINED CONDENSED BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 26,674
Working capital................................................................ 12,038
Total assets................................................................... 100,266
Long term debt, less current portion........................................... 14,630
Stockholders' equity........................................................... 35,880
</TABLE>
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING
WHETHER TO APPROVE THE BUSINESS COMBINATION AND RELATED PROPOSALS. YOU SHOULD
CONSIDER THESE FACTORS ALONG WITH THE OTHER INFORMATION INCLUDED IN OR
ACCOMPANYING THIS JOINT PROXY STATEMENT/PROSPECTUS.
RISKS RELATING TO THE BUSINESS COMBINATION
THE EXCHANGE RATIO FOR SUMMIT COMMON STOCK TO BE RECEIVED BY VIEWLOGIC
STOCKHOLDERS IN THE BUSINESS COMBINATION IS FIXED AND WILL NOT BE ADJUSTED IN
THE EVENT OF ANY INCREASE OR DECREASE IN STOCK PRICE.
Under the merger agreement, each outstanding share of Viewlogic capital
stock will be converted into the right to receive 0.67928 of a share of Summit
common stock. The exchange ratio is fixed and will not be adjusted in the event
of any increase or decrease in the market price of Summit common stock.
Accordingly, the market value of the consideration to be received by the
stockholders of Viewlogic in the business combination will depend entirely on
the market price of Summit common stock upon the completion of the business
combination. The last reported sale price for Summit common stock on the Nasdaq
National Market on September 16, 1999, the last trading day before public
announcement of the business combination, was $3.56. On , 1999, the
most recent trading day before the printing of this joint proxy
statement/prospectus, the last reported sale price for Summit common stock on
the Nasdaq National Market was $ . The market price of Summit common
stock at the completion of the business combination may vary from its price on
the date the merger agreement was signed, the date of this joint proxy
statement/prospectus and the date of the special meetings. The market price may
vary because of many factors, including:
- changes in the business, operations or prospects of Summit;
- the timing of the completion of the business combination;
- the prospects of post-business combination operations of the combined
company; and
- general market conditions.
THE INHERENT UNCERTAINTY PRIOR TO COMPLETION OF THE BUSINESS COMBINATION MAY
CAUSE SUMMIT'S OR VIEWLOGIC'S CUSTOMERS TO DELAY PURCHASING DECISIONS AND MAY
REDUCE THE LIKELIHOOD OF SUMMIT MEETING THE EXPECTATIONS OF INVESTORS AND
ANALYSTS.
The business combination of two companies can be unsettling to customers.
Summit and Viewlogic believe that a number of their respective customers may
delay their purchase decisions until they have the opportunity to learn more
about the business plans of the combined company. As a result, the quarterly
results of one or both of the companies could fail to meet the expectations of
investors and analysts.
THE SHARES OF SUMMIT COMMON STOCK WHICH ARE ISSUABLE UNDER THE MERGER AGREEMENT
MAY DILUTE SUMMIT'S EARNINGS PER SHARE.
A number of shares equal to approximately 51% of Summit's outstanding common
stock after the business combination will be issued to the stockholders of
Viewlogic upon completion of the business combination. Additionally, shares
equal to approximately 7% of the outstanding Summit common stock after the
business combination will be reserved for issuance upon the exercise of options
to purchase Viewlogic common stock assumed by Summit under the merger agreement.
The issuance of Summit common stock in connection with the business combination
and upon the exercise of Viewlogic options assumed by Summit may cause a
dilution of earnings per share which may negatively impact the price of Summit
common stock.
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IF SUMMIT AND VIEWLOGIC CANNOT BE SUCCESSFULLY INTEGRATED THE ANTICIPATED
SYNERGIES MAY NOT BE REALIZED, IN FULL, IF AT ALL.
The Summit board of directors and the Viewlogic board of directors have each
unanimously approved the merger agreement with the expectation that the business
combination will result in cost savings and beneficial product and operating
synergies. Following the business combination, in order to maintain and increase
profitability the combined company will need to successfully integrate and
streamline overlapping functions. For example, Summit's operations in Beaverton,
Oregon, will be relocated. The desired cost savings may not be achieved and the
integration of Summit's and Viewlogic's operations may not be accomplished
smoothly, expeditiously or successfully. The difficulties of achieving these
goals may be increased by the need to combine two corporate cultures.
THE INTEGRATION OF SUMMIT'S AND VIEWLOGIC'S BUSINESSES MAY DISTRACT MANAGEMENT
FROM ACHIEVING ITS OPERATIONAL OBJECTIVES WHICH COULD LIMIT THE COMBINED
COMPANY'S ABILITY TO RETAIN ITS EMPLOYEES.
The integration of the companies' businesses following the business
combination will require the dedication of management resources, which may
distract management's attention from the day-to-day business of the combined
company. The business of the combined company may also be disrupted by employee
uncertainty and lack of focus during integration. The retention by Viewlogic and
Summit of key employees is critical to ensure continued advancement, development
and support of the companies' technologies as well as on-going sales and
marketing efforts. During the pre-merger and integration phases, competitors may
intensify their efforts to recruit key employees. The combined company may not
be able to retain key technical, sales or marketing personnel after the business
combination which would adversely affect the combined company's business.
THE COMBINED COMPANY MAY NOT SUCCESSFULLY INTEGRATE RECENT BUSINESS ACQUISITIONS
OF SUMMIT AND VIEWLOGIC.
Each of Summit and Viewlogic has recently completed other business
acquisitions. This business combination, if approved, would be the largest for
either company. The difficulties of integrating Summit's and Viewlogic's
businesses may be exacerbated by the size and number of recent acquisitions.
Products, technologies, distribution channels, key personnel and businesses of
previously acquired companies may not effectively integrate into the combined
company's business or product offerings. Moreover, this integration may
adversely affect the combined company's business.
THE COMBINED COMPANY WILL BE MANAGED BY A NEW MANAGEMENT TEAM WHICH WILL HAVE
SIGNIFICANT CONTROL OVER ITS BUSINESS AND DIRECTION.
After the business combination, the current management of Viewlogic will be
able to exert significant control over the combined company, its business and
direction, subject to the oversight of the combined company's board of
directors. The manner in which the new management team conducts the business of
the combined company, and the direction in which the new management team moves
the business, may differ from the manner and direction in which the current
management of Summit would direct the combined company or Summit on a
stand-alone basis. Such control by the new management team, together with the
effects of future market factors and business conditions, could ultimately
evolve into an integration and business strategy that, when implemented, differs
from the strategy and business direction currently recommended by Summit's
current management and board of directors. The new management team, and any
change in business or direction, may not improve, and could adversely impact,
the combined company's financial condition and results of operations.
BOTH COMPANIES WILL INCUR SUBSTANTIAL EXPENSES RELATING TO THE BUSINESS
COMBINATION.
Summit and Viewlogic estimate that the negotiation and implementation of the
business combination will result in aggregate costs of approximately $3.9
million, primarily relating to costs associated with combining the companies and
the fees of attorneys, accountants and Summit's financial advisor. This estimate
may be incorrect, or unanticipated events may substantially increase the costs
of
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combining the operations of the companies. In addition, the combined company
expects to record a non-cash expense of approximately $2.1 million with respect
to the write-off of acquired in-process research and development. In any event,
the companies anticipate that costs associated with the business combination and
the write-off of acquired in-process research and development and goodwill
amortization will negatively impact results of operations in the quarter in
which the business combination is completed. In addition, Summit and Viewlogic
expect to amortize approximately $22.2 million of acquired intangible assets
over a period of three to five years, and this will negatively impact results of
operations for the duration of the period.
RISK RELATING TO SUMMIT AND THE COMBINED COMPANY
SUMMIT'S QUARTERLY RESULTS WILL LIKELY FLUCTUATE AND AFFECT THE MARKET PRICE OF
SUMMIT'S COMMON STOCK.
VARIOUS FACTORS WILL CAUSE SUMMIT'S QUARTERLY RESULTS TO FLUCTUATE.
Summit's quarterly operating results and cash flows have fluctuated in the
past and have fluctuated significantly in certain quarters. These fluctuations
resulted from several factors, including, among others:
- the size and timing of orders;
- large one-time charges incurred as a result of an acquisition or
consolidation;
- seasonal factors;
- the rate of acceptance of new products;
- product, customer and channel mix; and
- lengthy sales cycles.
- level of sales and marketing staff
These fluctuations will likely continue in future periods because of the
above factors. Additional factors potentially causing fluctuations include,
among others:
- corporate acquisitions and consolidations and the integration of acquired
entities and any resulting large one-time charges;
- the timing of new product announcements and introductions by Summit and
Summit's competitors;
- the rescheduling or cancellation of customer orders;
- the ability to continue to develop and introduce new products and product
enhancements on a timely basis;
- the level of competition;
- purchasing and payment patterns, pricing policies of competitors;
- product quality issues;
- currency fluctuations; and
- general economic conditions.
If the business combination is completed, the combined company's quarterly
results will likely continue to fluctuate and effect the market price of its
stock.
SUMMIT'S REVENUE IS DIFFICULT TO FORECAST BECAUSE OF THE TIMING OF REVENUE
RECOGNITION AND UNPREDICTABLE NATURE OF CUSTOMER BEHAVIOR.
Summit's revenue is difficult to forecast for several reasons. Summit
operates with little product backlog because Summit typically ships its products
shortly after it receives orders. Consequently, license backlog at the beginning
of any quarter has in the past represented only a small portion of that
quarter's expected revenue. Correspondingly, license fee revenue in any quarter
is difficult to forecast
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because it is substantially dependent on orders booked and shipped in that
quarter. Moreover, Summit generally recognizes a substantial portion of its
revenue in the last month of a quarter, frequently in the latter part of the
month. Any significant deferral of purchases of Summit's products could have a
material adverse affect on its business, financial condition and results of
operations in any particular quarter. To the extent that significant sales occur
earlier than expected, operating results for subsequent quarters may also be
adversely affected. Quarterly license fee revenue is difficult to forecast also
because Summit's typical sales cycle ranges from six to nine months and varies
substantially from customer to customer. In addition, Summit makes a portion of
its sales through indirect channels, and these sales can be difficult to
predict.
If the business combination is completed, the combined company's revenue
will also be difficult to forecast.
SHORTFALLS IN REVENUE COULD ADVERSELY IMPACT QUARTERLY OPERATING RESULTS.
Summit establishes its expenditure levels for product development, sales and
marketing and other operating activities based primarily on Summit's
expectations as to future revenue. Because a high percentage of Summit's
expenses are relatively fixed in the near term, if revenue in any quarter falls
below expectations, expenditure levels could be disproportionately high as a
percentage of revenue and materially adversely affect Summit's operating
results.
Shortfalls in revenue would adversely impact the quarterly operating results
of the combined company.
SUMMIT'S OPERATING RESULTS WILL LIKELY FLUCTUATE.
Summit believes that its quarterly revenue, expenses and operating results
will likely vary significantly from quarter to quarter, that period-to-period
comparisons of Summit's operating results are not necessarily meaningful and
that, as a result, you should not rely on these comparisons as indications of
Summit's future performance. Additionally, as of December 31, 1998, Credence
Systems Corporation, or CSC, one of Summit's larger customers, had satisfied its
obligation to purchase a minimum number of Visual Testbench licenses pursuant to
an OEM agreement entered into in July 1997, and Summit does not expect to
receive any additional revenue from sales of Visual Testbench to CSC. Summit
will need to replace this revenue, and the failure to replace this revenue would
have a material adverse affect on Summit's operating results. In addition,
Summit operates with high gross margins, and a downturn in revenue has had a
significant impact on income from operations and net income. Summit's results of
operations fell below investors' and market makers' expectations for the quarter
ended June 30, 1999 and could be below investors' and market makers' expectation
in other quarters, which could have a material adverse effect on the market
price of Summit's common stock.
If the business combination is completed, the combined company's operating
results and the market price of Summit's common stock will likely continue to
fluctuate.
SUMMIT DEPENDS ON ITS HLDA PRODUCTS BECAUSE THESE PRODUCTS MAKE UP MOST OF ITS
REVENUE.
Summit's future success depends primarily upon the broad market acceptance
of Summit's existing and future HLDA products. Summit commercially shipped its
first HLDA product, Visual HDL for VHDL, in the first quarter of 1994. For the
years ended December 31, 1998, 1997 and 1996, revenue from HLDA products and
related maintenance contracts represented 100%, 88.8%, and 63.9%, respectively,
of Summit's total revenue. As a result, factors adversely affecting sales of
these products, including increased competition, inability to successfully
introduce enhanced or improved versions of these products, product quality
issues and technological change, could have a material adverse effect on
Summit's business, financial condition and results of operations.
If the business combination is completed, the combined company will continue
to depend on HLDA products, although these products will likely make up a lesser
percentage of the overall revenue.
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SUMMIT MAY NOT GAIN BROAD MARKET ACCEPTANCE OF HLDA PRODUCTS, AND FAILURE TO DO
SO WILL MATERIALLY ADVERSELY AFFECT SUMMIT'S BUSINESS.
Summit's HLDA products incorporate certain unique design methodologies and
thus represent a departure from industry standards for design creation and
verification. Summit believes that broad market acceptance of Summit's HLDA
products will depend on several factors, including, among others:
- the ability to significantly enhance design productivity;
- ease of use;
- interoperability with existing electronic design automation tools;
- price; and
- the customer's assessment of Summit's financial results and Summit's
technical, managerial, service and support expertise.
Summit also depends on its distributors to assist it in gaining market
acceptance of its products. These distributors may not give sufficient priority
to marketing Summit's products. They may even discontinue offering Summit's
products. In addition, Summit's HLDA products may not achieve broad market
acceptance. A decline in the demand for, or the failure to achieve broad market
acceptance of, Summit's HLDA products will have a material adverse effect on
Summit's business, financial condition, results of operations or cash flows.
Although demand for HLDA products has increased in recent years, the market
for HLDA products is still emerging. The market may not continue to grow. Even
if it does grow, businesses may not continue to purchase Summit's HLDA products.
If the market for HLDA products fails to grow or grows more slowly than Summit
currently anticipates, it will materially adversely affect Summit's business,
financial condition, results of operations or cash flows.
Traditionally, electronic design automation customers have been risk averse
in accepting new design methodologies. Because many of Summit's tools use new
design methodologies, this risk aversion on the part of potential customers
presents an ongoing marketing and sales challenge and makes the introduction and
acceptance of new products unpredictable.
If the business combination is completed, the combined company may not gain
broad market acceptance of its HLDA products.
SUMMIT FACES INTENSE COMPETITION IN THE INDUSTRY AND MUST COMPETE SUCCESSFULLY
IN VARIOUS ASPECTS OR ITS BUSINESS MAY SUFFER.
The electronic design automation industry is highly competitive, and Summit
expects competition to increase as other electronic design automation companies
introduce HLDA products. In the HLDA market, Summit principally competes with
Mentor Graphics and a number of smaller firms. Indirectly, Summit also competes
with other firms that offer alternatives to HLDA. These other firms could also
offer more directly competitive products in the future. Some of these companies
have significantly greater financial, technical and marketing resources and
larger installed customer bases than Summit. Some of Summit's current and future
competitors offer a more complete range of electronic design automation
products. They may also distribute products that directly compete with Summit's
HLDA products by selling such products together with their core product line. In
addition, Summit's products perform a variety of functions, and its existing and
future competitors are offering, or may offer in the future, some of the same
functions as separate products or discrete point solutions. For example, some
companies currently offer design entry products without simulators. Such
competition may cause Summit to offer point solutions instead of, or in addition
to, Summit's current software products. Summit would have to price such point
solutions lower than Summit's current product offerings, causing Summit's
average selling prices to decrease. This, in turn, could have a material adverse
effect on Summit's business, financial condition, results of operations, or cash
flows.
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Summit competes on the basis of various factors including, among others:
- product capabilities;
- product performance;
- price;
- support of industry standards;
- ease of use;
- first to market; and
- customer technical support and service.
Summit believes that its products are competitive overall with respect to
these factors. However, in particular cases, Summit's competitors may offer HLDA
products with functionality sought by Summit's prospective customers and which
differs from those Summit offers. In addition, some competitors may achieve a
marketing advantage by establishing formal alliances with other electronic
design automation vendors. Further, the electronic design automation industry in
general has experienced significant consolidation in recent years, and the
acquisition of one of Summit's competitors by a larger, more established
electronic design automation vendor could create a more significant competitor.
Summit may not compete successfully against current and future competitors, and
competitive pressures may have a material adverse effect on Summit's business,
financial condition, results of operations, or cash flows. Summit's current and
future competitors may develop products comparable or superior to Summit's or
more quickly adapt new technologies, evolving industry trends or customer
requirements. Increased competition could result in price reductions, reduced
margins and loss of market share, all of which could have a material adverse
effect on Summit's business, financial condition, results of operations or cash
flows.
If the business combination is completed, the combined company will continue
to face intense competition.
SUMMIT DEPENDS ON THE ELECTRONICS INDUSTRY MARKET TO GENERATE DEMAND FOR ITS
PRODUCTS.
The electronics industry involves rapid technological change, short product
life cycles, fluctuations in manufacturing capacity and pricing and margin
pressures. Correspondingly, certain segments, including the computer,
semiconductor, semiconductor test equipment and telecommunications industries,
have experienced sudden and unexpected economic downturns. During these periods,
capital spending often falls, and the number of design projects often decreases.
Because Summit's sales depend upon capital spending trends and new design
projects, negative factors affecting the electronics industry could have a
material adverse effect on Summit's business, financial condition, results of
operations, or cash flows. A number of electronics companies, including Summit's
customers, have experienced a slowdown in their businesses. Summit's future
operating results may reflect substantial fluctuations from period to period as
a consequence of these industry patterns, general economic conditions affecting
the timing of orders from customers and other factors.
If the business combination is completed, the combined company will continue
to depend on the electronics industry market.
SUMMIT DEPENDS ON THIRD PARTIES FOR PRODUCT INTEROPERABILITY AND MUST GAIN
ACCESS TO THE PRODUCTS OF THESE THIRD PARTIES FOR TIMELY DEVELOPMENT.
Because Summit's products must interoperate, or be compatible, with
electronic design automation products of other companies, particularly
simulation and synthesis products, Summit must have timely access to third party
software to perform development and testing of products. Although Summit has
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established relationships with a variety of electronic design automation vendors
to gain early access to new product information, any of these parties may
terminate these relationships with limited notice. In addition, these
relationships are with companies that are Summit's current or potential future
competitors, including Synopsys, Mentor Graphics and Cadence. If any of these
relationships terminate and Summit were unable to obtain, in a timely manner,
information regarding modifications of third party products, Summit would not
have the ability to modify its software products to interoperate with these
third party products. As a result, Summit could experience a significant
increase in development costs, the development process would take longer,
product introductions would be delayed, and Summit's business, financial
condition, results of operations or cash flows could be materially adversely
affected.
If the business combination is completed, the combined company will continue
to depend on third parties for product interoperability.
SUMMIT MUST DEVELOP NEW PRODUCTS TO KEEP PACE WITH TECHNOLOGICAL CHANGE AND
EVOLVING INDUSTRY STANDARDS.
The electronic design automation industry is characterized by extremely
rapid technological change, frequent new product introductions and evolving
industry standards. The introduction of products with new technologies and the
emergence of new industry standards can render existing products obsolete and
unmarketable. In addition, customers in the electronic design automation
industry require software products that allow them to reduce time to market,
differentiate their products, improve their engineering productivity and reduce
their design errors. Summit's future success will depend upon its ability to
enhance its current products, develop and introduce new products that keep pace
with technological developments and emerging industry standards and address the
increasingly sophisticated needs of Summit's customers. Summit may not succeed
in developing and marketing product enhancements or new products that respond to
technological change or emerging industry standards. It may experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these products. Summit's products may not
adequately meet the requirements of the marketplace and achieve market
acceptance. If Summit cannot, for technological or other reasons, develop and
introduce products in a timely manner in response to changing market conditions,
industry standards or other customer requirements, particularly if Summit has
pre-announced the product releases, its business, financial condition, results
of operations or cash flows will be materially adversely affected.
If the business combination is completed, the combined company must continue
to develop new products to keep pace with technological change and evolving
industry standards.
SUMMIT'S SOFTWARE MAY HAVE DEFECTS.
Summit's software products may contain errors that may not be detected until
late in the products' life cycles. Summit has in the past discovered software
errors in certain of its products and has experienced delays in shipment of
products during the period required to correct these errors. Despite testing by
Summit and by current and prospective customers, errors may persist, resulting
in loss of, or delay in, market acceptance and sales, diversion of development
resources, injury to Summit's reputation or increased service and warranty
costs, any of which could have a material adverse effect on its business,
financial condition, results of operations or cash flows.
If the business combination is completed, the combined company's software
may likewise have defects.
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SUMMIT DEPENDS ON ITS DISTRIBUTORS TO SELL ITS PRODUCTS, ESPECIALLY
INTERNATIONALLY, BUT THESE DISTRIBUTORS MAY NOT DEVOTE SUFFICIENT EFFORTS TO
SELLING SUMMIT'S PRODUCTS.
Summit relies on distributors for licensing and support of Summit's products
outside of North America. Approximately 23%, 29% and 46% of Summit's revenue for
the years ended December 31, 1998, 1997 and 1996, respectively, came from sales
made through distributors. Effective April 1, 1996, Summit entered into a joint
venture with Anam pursuant to which the joint venture corporation, Summit Asia,
acquired exclusive rights to sell, distribute and support all of Summit's
products in the Asia Pacific region, excluding Japan. In April 1998, the joint
venture corporation, Summit Asia, which is headquartered in Korea, was renamed
Asia Design Corporation, or ADC. In May 1998, Summit exchanged a portion of its
ownership in ADC for ownership in another company located in Hong Kong which was
renamed Summit Design Asia, Ltd., or SDA. SDA also has an equity investment in
ADC. In June 1998, Summit and Anam each loaned SDA $750,000, which is guaranteed
by ADC. SDA acquired from ADC the exclusive rights to sell, distribute and
support Summit's products in the Asia Pacific region, excluding Japan. SDA
granted distribution rights to Summit's products to ADC for the Asia Pacific
region, excluding Japan. In December 1998, SDA canceled ADC's distribution
rights in all areas except Korea. In April 1999, SDA granted non-exclusive
distribution rights to Semiconductor Technologies Australia for the Asia Pacific
region, excluding Japan and Korea. This restructuring, however, may not result
in SDA or ADC becoming profitable. Revenue attributable to sales in the Asia
Pacific region, excluding Japan, may not increase either. In addition, in the
first quarter of 1996, Summit entered into a three-year, exclusive distribution
agreement for Summit's HLDA products in Japan with Seiko. The agreement is
renewable for successive five-year terms by mutual agreement of Summit and Seiko
and is terminable by either party for breach. The agreement was renewed for an
additional five-year term which began in February 1999. If Seiko fails to meet
specified quotas for two or more quarterly periods, Summit can terminate the
exclusivity, subject to Seiko's right to pay a specified fee to maintain
exclusivity. Sales through Seiko accounted for 14%, 12%, and 15%, of Summit's
total revenues for the years ended December 31, 1998, 1997, and 1996,
respectively. In June 1999, Summit lowered Seiko's specified quotas due to the
adverse economic conditions in the Asia Pacific Region. As a result, Summit
expects sales through Seiko to decrease for at least the current and following
two quarters and revenue attributable to sales in the Asia Pacific region to
decrease.
Summit's relationships with Seiko, SDA and ADC may not effectively maintain
or increase sales relative to the levels experienced prior to such
relationships. Summit also has independent distributors in Europe and depends on
the continued viability and financial stability of these distributors. Since
Summit's products are used by skilled design engineers, distributors must
possess sufficient technical, marketing and sales resources and must devote
these resources to a lengthy sales cycle, customer training and product service
and support. Only a limited number of distributors possess these resources. In
addition, Seiko, SDA and ADC, as well as Summit's other distributors, may offer
products of several different companies, including Summit's competitors.
Summit's current distributors may not continue to market or service and support
Summit's products effectively. Any distributor may discontinue to sell Summit's
products or devote its resources to products of other companies. The loss of, or
a significant reduction in, revenue from Summit's distributors could have a
material adverse effect on its business, financial condition, results of
operations or cash flows.
If the business combination is completed, the combined company will continue
to depend on its distributors to sell its products.
SUMMIT FACES THE RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS,
INCLUDING ITS BUSINESS ACTIVITIES IN EUROPE AND THE ASIA PACIFIC REGION.
Approximately 36%, 34%, and 50% of Summit's revenue for the years ended
December 31, 1998, 1997 and 1996, respectively, came from sales made outside the
United States, which includes the Asia Pacific region and Europe. Approximately
22%, 22%, and 34% of its revenue for years ended
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December 31, 1998, 1997 and 1996, respectively, came from sales made in the Asia
Pacific region, and approximately 14%, 12% and 16% of Summit's revenue for the
years ended December 31, 1998, 1997 and 1996, respectively, came from sales made
in Europe. Summit expects that international revenue will continue to represent
a significant portion of its total revenue. Summit's international revenue is
currently denominated in U.S. dollars. As a result, increases in the value of
the U.S. dollar relative to foreign currencies could make its products more
expensive and, therefore, potentially less competitive in those markets. Summit
pays the expenses of its international operations in local currencies and does
not engage in hedging transactions with respect to such obligations.
International sales and operations involve numerous risks, including, among
others:
- tariff regulations and other trade barriers;
- requirements for licenses, particularly with respect to the export of
certain technologies;
- collectability of accounts receivable;
- changes in regulatory requirements; and
- difficulties in staffing and managing foreign operations and extended
payment terms.
These factors may have a material adverse effect on Summit's future
international sales and operations and, consequently, on its business, financial
condition, results of operations or cash flows. In addition, financial markets
and economies in the Asia Pacific region have been experiencing adverse
conditions. Demand for and sales of Summit's products in the Asia Pacific region
have decreased, and these adverse economic conditions may worsen. Demand for and
sales of Summit's products in this region may further decrease.
In order to successfully expand international sales, Summit may need to
establish additional foreign operations, hire additional personnel and recruit
additional international distributors. This will require significant management
attention and financial resources and could adversely affect Summit's operating
margins. In addition, to the extent that Summit cannot effect these additions in
a timely manner, Summit can only generate limited growth in international sales,
if any. Summit may not maintain or increase international sales of its products,
and failure to do so could have a material adverse effect on its business,
financial condition, results of operations or cash flows.
If the business combination is completed, the combined company will continue
to face the same risks associated with international operations.
SUMMIT MUST MANAGE GROWTH AND ACQUISITIONS EFFECTIVELY, OR ITS FINANCIAL
CONDITION OR RESULTS OF OPERATIONS MAY SUFFER.
Summit's ability to achieve significant growth will require it to implement
and continually expand its operational and financial systems, recruit additional
employees and train and manage current and future employees. Summit expects any
growth to place a significant strain on its operational resources and systems.
Failure to effectively manage any growth would have a material adverse effect on
Summit's business, financial condition, results of operations or cash flows.
Summit has completed a series of acquisitions, including the acquisition of
TriQuest in February 1997, SimTech in September 1997, and ProSoft in June 1998
and regularly evaluates acquisition opportunities. Summit's future acquisitions
could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and amortization expenses related
to goodwill and other intangible assets, and large one-time charges which could
materially adversely affect Summit's results of operations. Product and
technology acquisitions entail numerous risks, including difficulties in the
assimilation of acquired operations, technologies and products, diversion of
management's attention to other business concern, risks of entering markets in
which Summit has no or limited prior experience and potential loss of key
employees of acquired companies. Summit's
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management has had limited experience in assimilating acquired organizations and
products into its operations. Summit may not integrate successfully the
operations, personnel or products that have been acquired or that might be
acquired in the future, and the failure to do so could have a material adverse
affect on its results of operations.
If the business combination is completed, the combined company must continue
to manage growth and acquisitions effectively.
SUMMIT FACES THE RISKS ASSOCIATED WITH OPERATIONS IN ISRAEL, INCLUDING POLITICAL
AND CURRENCY FLUCTUATION RISKS.
Summit's research and development operations related to Visual HDL products
are located in Israel. Economic, political and military conditions may affect
Summit's operations in that country. Hostilities involving Israel, for example,
could materially adversely affect Summit's business, financial condition and
results of operations. Restrictions on Summit's ability to manufacture or
transfer outside of Israel any technology developed under research and
development grants from the government of Israel further heightens the impact.
See "Summit relies on Israeli research, development and marketing grants for
certain benefits." In addition, while all of Summit's sales are denominated in
U.S. dollars, a portion of its annual costs and expenses in Israel are paid in
Israeli currency. These costs and expenses were approximately $5.2, $4.7 and
$4.3 million in 1998, 1997 and 1996, respectively. Payment in Israeli currency
subjects Summit to foreign currency fluctuations and to economic pressures
resulting from Israel's generally high rate of inflation, approximately 9%, 7%
and 11% during 1998, 1997 and 1996, respectively. Summit's primary expense in
Israeli currency is employee salaries for research and development activities.
As a result, an increase in the value of Israeli currency in comparison to the
U.S. dollar could increase the cost of research and development expenses and
general and administrative expenses. Currency fluctuations, changes in the rate
of inflation in Israel or any of the other aforementioned factors may have a
material adverse effect on Summit's business, financial condition, results of
operations, or cash flows. In addition, coordination with and management of the
Israeli operations requires Summit to address differences in culture,
regulations and time zones. Failure to successfully address these differences
could disrupt Summit's operations.
If the business combination is completed, the combined company will continue
to face the same risks associated with operations in Israel.
SUMMIT CURRENTLY ENJOYS CERTAIN TAX BENEFITS UNDER AN ISRAELI "APPROVED
ENTERPRISE" STATUS WHICH IT MAY NOT ENJOY IN THE FUTURE AND WHICH IN TURN MAY
ADVERSELY AFFECT SUMMIT'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The Israeli government has granted Summit's Israeli production facility the
status of an "Approved Enterprise" under the Israeli Investment Law for the
Encouragement of Capital Investments, 1959. Taxable income of a company derived
from an "Approved Enterprise" is eligible for certain tax benefits, including
significant income tax rate reductions for up to seven years following the first
year in which the "Approved Enterprise" has Israeli taxable income (after using
any available net operating losses). The period of benefits cannot extend beyond
12 years from the year of commencement of operations or 14 years from the year
in which approval was granted, whichever is earlier. The tax benefits derived
from a certificate of approval for an "Approved Enterprise" relate only to
taxable income attributable to such "Approved Enterprise" and are conditioned
upon fulfillment of the conditions stipulated by the Israeli Investment Law, the
related regulations and the criteria set forth in the certificate of approval.
In the event of Summit's failure to comply with these conditions, the tax
benefits could be canceled, in whole or in part, and Summit would have to refund
the amount of the canceled benefits, adjusted for inflation and interest. Summit
has not realized any "Approved Enterprise" tax benefits from Summit's Israeli
operations as of December 31, 1995, since the Israeli operations were still
incurring losses at that time. During 1996, Summit realized income of $1.4
million from Summit's Israeli operations and "Approved Enterprise" tax benefits
of $53,000. During 1997,
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Summit realized income of $2.7 million from its Israeli operations and "Approved
Enterprise" tax benefits of $702,000. During 1998, Summit realized income of
$4.3 million from its Israeli operations and "Approved Enterprise" tax benefits
of $1.9 million. Summit has recently applied for "Approved Enterprise" status
with respect to a new project and intends to apply in the future with respect to
additional projects. Summit's Israeli production facility may not continue to
operate or qualify as an "Approved Enterprise". The benefits under the "Approved
Enterprise" regulations may not continue, or be applicable, in the future.
Summit intends to permanently reinvest earnings of the Israeli subsidiary
outside the United States. If these earnings are remitted to the United States,
Summit may have to pay additional U.S. federal and foreign taxes. The loss of,
or any material decrease in, these income tax benefits could have a material
adverse effect on Summit's business, financial condition, results of operations
or cash flows.
Losing the "Approved Enterprise" status may likewise adversely affect the
combined company's financial condition and results of operations.
SUMMIT DEPENDS ON ITS KEY PERSONNEL AND ITS ABILITY TO HIRE ADDITIONAL QUALIFIED
PERSONNEL.
Summit's future success will depend in large part on its key technical and
management personnel and its ability to continue to attract and retain
highly-skilled technical, sales and marketing and management personnel. Summit
has entered into employment agreements with certain of its executive officers.
These agreements, however, do not guarantee the services of these employees and
do not contain noncompetition provisions.
Competition for personnel in the software industry in general, and the
electronic design automation industry in particular, is intense. Summit has in
the past experienced difficulty in recruiting qualified personnel. Summit may
fail to retain its key personnel or attract and retain other qualified
technical, sales and marketing and management personnel in the future. The loss
of any key employees or the inability to attract and retain additional qualified
personnel may have a material adverse effect on Summit's business, financial
condition, results of operations or cash flows. Additions of new personnel and
departures of existing personnel, particularly in key positions, can be
disruptive and can result in departures of additional personnel, which could
have a material adverse effect on Summit's business, financial condition,
results of operations or cash flows.
If the business combination is completed, the combined company will continue
to depend on its key personnel and its ability to hire additional qualified
personnel.
SUMMIT NEEDS TO EXPAND ITS SALES AND MARKETING ORGANIZATIONS.
Summit's success will depend on its ability to build and expand its sales
and marketing organizations. Summit hired fewer sales and marketing personnel
than planned in the fourth quarter of 1998 and the first two quarters of 1999
and experienced attrition in the existing sales force during the first quarter
of 1999. In part, as a result of the lack of sales people, Summit's revenues for
the fourth quarter of 1998 were lower than expected. In February 1998, Summit's
Senior Vice President of Worldwide Marketing and Sales resigned. Summit's future
success will depend in part on its ability to hire and retain qualified sales
and marketing personnel and the ability of these new persons to rapidly and
effectively transition into their new positions. Competition for qualified sales
and marketing personnel is intense, and Summit may not be able to hire and
retain the number of sales and marketing personnel needed, which would have a
material adverse effect on its business, financial condition, results of
operations or cash flows.
If the business combination is completed, the combined company will need to
expand its sales and marketing organizations.
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SUMMIT RELIES ON ISRAELI RESEARCH, DEVELOPMENT AND MARKETING GRANTS FOR CERTAIN
BENEFITS. FAILURE TO OBTAIN SIMILAR GRANTS AND BENEFITS IN THE FUTURE WILL
ADVERSELY AFFECT SUMMIT'S BUSINESS.
Summit's Israeli subsidiary obtained research and development grants from
the Office of the Chief Scientist in the Israeli Ministry of Industry and Trade
of approximately $232,000 and $608,000 in 1993 and 1995, respectively. As of
December 31, 1997, Summit has repaid all amounts. The terms of the grants
prohibit the manufacture of products developed under these grants outside of
Israel and the transfer of the technology developed pursuant to these grants to
any person, without the prior written consent of the Chief Scientist. Summit has
developed its Visual HDL for VHDL products under grants from the Chief
Scientist. They are, therefore, subject to these restrictions. If Summit were
unable to obtain the consent of the government of Israel, it would be unable to
take advantage of potential economic benefits such as lower taxes, lower labor
and other manufacturing costs and advanced research and development facilities
that may be available if these technology and manufacturing operations could be
transferred to locations outside of Israel. In addition, Summit would be unable
to minimize risks particular to operations in Israel, such as hostilities
involving Israel. Although Summit is eligible to apply for additional grants
from the Chief Scientist, it has no present plans to do so. Summit received a
marketing fund grant from the Israeli Ministry of Industry and Trade for an
aggregate of $423,000. Summit must repay the grant at the rate of 3% of the
increase in exports over the 1993 export level of all Israeli products. As of
December 31, 1998, Summit still owes $187,000 under the grant.
If the business combination is completed, the combined company will continue
to rely on the same grants and benefits from the Israeli government.
SUMMIT DEPENDS ON ITS INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS BUT
PROTECTION OF THESE RIGHTS IS LIMITED.
Summit's success depends in part upon its proprietary technology. Summit
relies on a combination of copyright, trademark and trade secret laws,
confidentiality procedures, licensing arrangements and technical means to
establish and protect its proprietary rights. As part of Summit's
confidentiality procedures, Summit generally enters into non-disclosure
agreements with employees, distributors and corporate partners, and limit access
to, and distribution of, its software, documentation and other proprietary
information. In addition, Summit protects its products with hardware locks and
software encryption techniques designed to deter unauthorized use and copying.
Despite these precautions, a third party may still copy or otherwise obtain and
use Summit's products or technology without authorization, or develop similar
technology independently.
Summit provides its products to end-users primarily under "shrink-wrap"
license agreements included within the packaged software. In addition, Summit
delivers certain of its verification products electronically under an electronic
version of a "shrink wrap" license agreement. These agreements are not
negotiated with or signed by the licensee, and thus may not be enforceable in
certain jurisdictions. In addition, the laws of some foreign countries do not
protect Summit's proprietary rights as fully as do the laws of the United
States. Summit's means of protecting its proprietary rights in the United States
or abroad may not be adequate, and competitors may also independently develop
similar technology.
If the business combination is completed, the combined company will continue
to depend on its intellectual property and proprietary rights.
SUMMIT MAY FACE INFRINGEMENT CLAIMS, AND INTELLECTUAL PROPERTY LITIGATION WILL
BE COSTLY FROM BOTH THE ECONOMIC AND BUSINESS PERSPECTIVES.
Summit could face an increasing number of infringement claims as the number
of products and competitors in Summit's industry segment grows, the
functionality of products in Summit's industry segment overlaps and an
increasing number of software patents are granted by the United States Patent
and Trademark Office. A third party may claim such infringement by Summit with
respect to current or
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future products. Any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product delays or require
Summit to enter into royalty or licensing agreements. These royalty or license
agreements, if required, may not be available on acceptable terms or at all.
Failure to protect Summit's proprietary rights or claims of infringement could
have a material adverse effect on Summit's business, financial condition,
results of operations or cash flows.
If the business combination is completed, the combined company may likewise
face infringement claims.
SUMMIT'S STOCK PRICE MAY FLUCTUATE DRAMATICALLY.
The stock markets have experienced price and volume fluctuations that have
particularly affected technology companies, resulting in changes in the market
prices of the stocks of many companies which may not have been directly related
to the operating performance of those companies. These broad market fluctuations
may adversely affect the market price of Summit's common stock. In addition,
factors such as announcements of technological innovations or new products by
Summit or its competitors, market conditions in the computer software or
hardware industries and quarterly fluctuations in Summit's operating results may
have a significant adverse effect on the market price of Summit's common stock.
If the business combination is completed, the combined company's stock price
may likewise fluctuate dramatically.
SUMMIT MAY FACE YEAR 2000 COMPUTER PROBLEMS.
Summit is currently working to address the potential impact of the Year 2000
on the processing of information by its computerized systems, including
interfaces to significant business partners.
Summit has substantially completed its planned Year 2000 compliance
activities with respect to its products and internal systems, software,
equipment and facilities. Based solely on these activities, management believes
that all products and material internal systems, software, equipment and
facilities are substantially Year 2000 compliant. Summit does not anticipate
that potential Year 2000 issues will have a material adverse impact on its
financial position or operating results.
However, Summit could be adversely impacted if any of its critical business
partners were to experience a severe business interruption due to a failure to
address their internal Year 2000 issues in a timely manner. If a severe
disruption occurs and is not corrected in a timely manner, a revenue or profit
shortfall may result during calendar year 2000. Based solely on responses
received to date from its business partners, Summit has no reason to believe
that there will be such a material adverse impact. However, if the responses
received from its business partners are inaccurate or happen to change, then
there could be such a material adverse impact. Management is evaluating Year
2000 business interruption scenarios and developing appropriate contingency
plans.
If the business combination is completed, the combined company may likewise
face Year 2000 computer problems.
RISKS RELATING TO VIEWLOGIC
If the proposed business combination between Summit and Viewlogic is
completed, Viewlogic would experience all of the same risks as Summit,
including, among others:
- the electronic design automation industry is intensively competitive and
Viewlogic's failure to compete successfully would limit its ability to
increase and retain its market share;
22
<PAGE>
- dependence on the semiconductor and electronic businesses and as a result
layoffs, restructurings, mergers and suspensions of business plans in
these businesses could reduce the aggregate level of purchases of
Viewlogic's products and services;
- if Viewlogic fails to respond to rapid technological changes in the
electronic design automation industry, its products could become obsolete;
- the need to participate in the development of and acquire rights to
electronic design automation industry standard technologies;
- Viewlogic's software may have defects;
- Viewlogic depends on its distributors to sell its products, especially
internationally, but these distributors may not devote sufficient efforts
to selling Viewlogic's products;
- efforts to protect intellectual property may not be adequate to prevent
third parties from misappropriating its intellectual property rights;
- Viewlogic could incur substantial costs defending its intellectual
property from infringement or a claim of infringement;
- Viewlogic's business could be seriously harmed if it lost the services of
its President and Chief Executive Officer, William J. Herman, or if it
fails to attract and retain other key personnel;
- Viewlogic must manage growth effectively, or its financial condition or
results of operationes may suffer;
- risks associated with acquisitions which could limit Viewlogic's ability
to manage and maintain its business, may result in adverse accounting
treatment and may be difficult to integrate into its business;
- Viewlogic needs to expand its sales and marketing organizations; and
- Viewlogic would lose revenues and incur significant costs if the systems
and software it uses are not Year 2000 compliant or if its customers or
potential customers alter their purchasing patterns as a result of the
Year 2000.
For a more detailed explanation of any of the aforementioned risk factors,
please see "Risk Factors--Risks Relating to Summit and the Combined Company".
If the proposed business combination between Summit and Viewlogic is not
completed, Viewlogic could experience all the aforementioned risks and
additional risks.
VIEWLOGIC HAS ONLY BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME AND THEREFORE IT
IS DIFFICULT TO EVALUATE VIEWLOGIC WITH ITS LIMITED OPERATING HISTORY.
Although Viewlogic was originally a part of a much larger business which
dates back to 1984. Viewlogic began its current independent operations in
October 1998. As a result, Viewlogic has only a limited operating history on
which you can base an evaluation of its business and prospects. You must
consider the information in this joint proxy statement/prospectus about
Viewlogic in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in rapidly evolving markets like the electronic design
automation industry. Viewlogic may not be successful in addressing these risks
and uncertainties. Viewlogic's failure to do so could have a material adverse
effect on its business, operating results, financial condition and cash flow.
Some of these risks and uncertainties relate to Viewlogic's ability to:
- attract and maintain customers;
- develop new technology and upgrade current technology;
23
<PAGE>
- establish and maintain strategic relationships;
- respond effectively to competitive and technological developments;
- build an infrastructure, including additional hardware and software,
personnel and facilities, to support its business; and
- maintain the quality of its products and service.
Viewlogic may not successfully address these risks.
VIEWLOGIC MAY NOT HAVE SUFFICIENT FUNDS TO SUCCESSFULLY DEVELOP ITS PRODUCTS AND
ITS PRODUCTS OR TECHNOLOGIES COULD BECOME OBSOLETE.
The industry in which Viewlogic competes experience rapid technological
developments, changes in industry standards, changes in customer requirements
and frequent new product introductions and improvements. If Viewlogic is unable
to respond quickly and successfully to these developments and changes, Viewlogic
may lose its competitive position and its products or technologies may become
uncompetitive or obsolete. In addition, delays in access to technology developed
by competitors and suppliers could slow Viewlogic's design and manufacture of
components and subsystems that distinguish its products. In order to compete
successfully, Viewlogic must develop or acquire new products and improve its
existing products and processes on a schedule that keeps pace with technological
developments in its industries. Viewlogic must also be able to support a range
of changing computer software, hardware platforms and customer preferences. If
Viewlogic does not have the resources or for technological or other reasons does
not develop and introduce new or enhanced products and services in a timely and
effective manner, its business will suffer.
VIEWLOGIC IS FOCUSED ON THE SYSTEM DESIGN PORTION OF THE ELECTRONIC DESIGN
AUTOMATION INDUSTRY.
Since October 1998, Viewlogic has focused on the field programmable gate
array, printed circuit board and system-level design automation markets while
most major competitors have focused their resources on the application-specific
integrated circuits and integrated circuit design automation markets. Viewlogic
has adopted this focus because it believes that the increased complexity of
application-specific intergrated circuits and integrated circuit designs, and
the resultant increase in design time, will cause eProduct manufacturers to
differentiate their products at the system level. Viewlogic's belief may not be
correct.
VIEWLOGIC MUST CONTINUE TO UPDATE ITS CURRENT PRODUCTS TO SERVE ITS INSTALLED
CUSTOMER BASE.
A substantial portion of Viewlogic's revenue is derived from maintenance
agreements for existing products. In order to maintain that revenue, Viewlogic
must continue to offer those customers updates for those products or convert
those customers to new products. Viewlogic may not be able to do so.
VIEWLOGIC MAY NEED ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE, AND WHICH, IF
RAISED, MAY DILUTE YOUR OWNERSHIP INTEREST.
Viewlogic may need to raise additional funds through public or private
equity or debt financings in order to:
- develop new technology and upgrade current technology;
- take advantage of acquisition or expansion opportunities;
- expand its sales and marketing operations; or
- address additional working capital needs.
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<PAGE>
If Viewlogic cannot obtain financing on terms acceptable to it, Viewlogic
may be forced to curtail some or all of these activities. As a result,
Viewlogic's business would likely suffer. Any additional capital raised through
the sale of equity will dilute the ownership interest of, and may be on terms
that are unfavorable to, Viewlogic's stockholders.
VIEWLOGIC FACES RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS THAT COULD HARM
ITS BUSINESS.
Viewlogic derives a substantial portion of its revenue from its
international operations. There are certain risks inherent in doing business in
international markets which could adversely impact the success of Viewlogic's
international operations. These risks include:
- unexpected changes in regulatory requirements;
- export restrictions, tariffs and other trade barriers;
- difficulties in staffing and managing foreign operations;
- continued economic stagnation in Asia;
- political instability;
- fluctuations in currency exchange rates;
- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world; and
- potentially adverse tax consequences.
Additionally, Viewlogic must comply with United States Department of
Commerce regulations in shipping its software products and other technologies
outside the United States. Although Viewlogic has not had any significant
difficulty complying with these regulations to date, any significant future
difficulty in complying could harm Viewlogic's business.
VIEWLOGIC HAS SUBSTANTIAL DEBT.
In connection with Viewlogic's October 1998 recapitalization, Viewlogic
entered into a $24,000,000 credit facility with a commercial bank consisting of
a $6,000,000 revolving line of credit and an $18,000,000 term loan. Borrowings
under the credit facility are secured by substantially all of Viewlogic's
assets. The credit facility contains limitations on additional indebtedness and
capital expenditures, and includes financial covenants, which include but are
not limited to the maintenance of minimum levels of interest and debt service
coverage ratios and maximum leverage ratios. At July 3, 1999, Viewlogic had
borrowings of approximately $17,000,000 outstanding under the credit facility.
Viewlogic was in compliance with the covenants at July 3, 1999. Payments of
principal outstanding under either the line of credit or the term loan may be
made at any time and must be repaid in full by September 30, 2003. To avoid
default under this credit facility, Viewlogic must remain in compliance and make
all required repayments or Viewlogic must obtain replacement financing.
Viewlogic cannot assure investors that it will be able to do so. As of July 3,
1999, Viewlogic had cash and cash equivalents of $2,646,000. Viewlogic also had
an additional $5,500,000 available under its line of credit.
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COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Summit
and Viewlogic and combined per share data on an unaudited pro forma basis after
giving effect to the business combination on a purchase basis of accounting,
assuming that 0.67928 shares of Summit common stock are issued in exchange for
one share of Viewlogic capital stock in the business combination. This data
should be read in conjunction with the selected historical financial data, the
unaudited pro forma combined condensed financial data, and the separate
historical financial statements of Summit and Viewlogic and notes (which are
included elsewhere in this joint proxy statement/prospectus). The pro forma
combined condensed financial data are not necessarily indicative of the
operating results that would have been achieved had the business combination
been consummated as of the beginning of the periods presented and should not be
construed as representative of results for any future period.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------- -----------------
<S> <C> <C>
HISTORICAL--SUMMIT
Earnings/(loss) per share--diluted.......................... $ 0.32 $ (0.21)
Book Value per common share(1).............................. $ 2.30 $ 2.07
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JANUARY 2, JULY 3,
1999 1999
----------- -----------------
<S> <C> <C>
HISTORICAL--VIEWLOGIC
Earnings/(loss) per share--diluted............................ $ 0.73 $ 0.04
Book Value per common share(1)................................ $ (12.06) $ (10.70)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------- -----------------
<S> <C> <C>
PRO FORMA COMBINED EARNINGS (LOSS) PER COMMON SHARE--DILUTED
Per Summit share(2)......................................... $ 0.21 $ (0.11)
Equivalent Viewlogic share(3)............................... $ 0.14 $ (0.07)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999
-----------------
<S> <C>
PRO FORMA COMBINED BOOK VALUE PER COMMON SHARE
Per Summit share(2)........................................................ $ 1.12
Equivalent Viewlogic share(3).............................................. $ 0.76
</TABLE>
- ------------------------
(1) The historical book value per common share is computed by dividing
stockholders' equity by the number of shares of common stock outstanding at
the end of each period.
(2) For purposes of pro forma combined data, Summit's financial data for the
fiscal year ended December 31, 1998 and for the six-months ended June 30,
1999 have been combined with Viewlogic's financial data for the
corresponding periods, including the effects of pro forma adjustments
described elsewhere in this joint proxy statement/prospectus.
(3) The equivalent pro forma combined earnings (loss) per Viewlogic common share
and equivalent pro forma combined book value per Viewlogic common share, on
an as converted basis, are calculated by multiplying the respective pro
forma combined per Summit amounts by an exchange ratio of 0.67928 shares of
Summit common stock for each share of Viewlogic capital stock.
26
<PAGE>
STOCK PRICE DATA
The table below sets forth, for the calendar quarters indicated, the
reported high and low closing sale prices of Summit common stock as reported on
the Nasdaq National Market. Because there is no established trading market for
shares of Viewlogic capital stock, information with respect to the market prices
of Viewlogic's capital stock is omitted.
<TABLE>
<CAPTION>
SUMMIT
COMMON STOCK
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
1997 CALENDAR YEAR
First Quarter............................................................... 11.875 7.375
Second Quarter.............................................................. 9.375 5.25
Third Quarter............................................................... 18.125 7.625
Fourth Quarter.............................................................. 18.75 8.75
1998 CALENDAR YEAR
First Quarter............................................................... 16.625 9.438
Second Quarter.............................................................. 17.125 13.50
Third Quarter............................................................... 15.375 5.875
Fourth Quarter.............................................................. 9.625 4.75
1999 CALENDAR YEAR
First Quarter............................................................... 9.563 3.313
Second Quarter.............................................................. 3.938 2.469
Third Quarter............................................................... 3.625 2.250
Fourth Quarter (through , 1999).................................
</TABLE>
On September 16, 1999, the last full trading day prior to the public
announcement of the execution and delivery of the merger agreement, the last
reported sale price on the Nasdaq National Market was $3.563 per share of Summit
common stock. On , 1999, the last reported price on Nasdaq was $
per share of Summit common stock.
Because the exchange ratio is fixed, changes in the market price of Summit
common stock will affect the dollar value of the Summit common stock to be
received by stockholders of Viewlogic in the business combination. Summit
stockholders and Viewlogic stockholders are urged to obtain current market
quotations for Summit common stock prior to the Summit special meeting and
Viewlogic special meeting, respectively.
DIVIDEND POLICY
In connection with its October 1998 recapitalization, Viewlogic paid to
Synopsys, then its sole stockholder, a cash dividend of an aggregate of
$30,000,000. Other than this cash dividend, Viewlogic has never paid any cash
dividend on shares of its capital stock, nor has Summit. The combined company
currently intends to retain earnings for development of its business and not to
distribute earnings to stockholders as dividends. The declaration and payment by
the combined company of any future dividends and the amount thereof will depend
upon the combined company's results of operations, financial condition, cash
requirements, future prospects, limitations imposed by credit agreements or
senior securities and other factors deemed relevant by the combined company's
board of directors.
27
<PAGE>
SUMMIT SPECIAL MEETING
DATE, TIME AND PLACE OF SUMMIT SPECIAL MEETING
The Summit special meeting will be held at the Embassy Suites, 9000 S.W.
Washington Square Road, Tigard, Oregon 97223, on , 1999 at p.m.
local time.
PURPOSE
The purpose of the Summit special meeting is to consider and vote upon the
following proposals:
- the issuance of shares of Summit common stock to the stockholders of
Viewlogic pursuant to the agreement and plan of reorganization among
Summit, Viewlogic and Hood Acquisition Corp., a wholly owned subsidiary of
Summit, dated as of September 16, 1999;
- an amendment to Summit's certificate of incorporation increasing the
number of shares of Summit common stock authorized for issuance by 20
million shares to 50 million shares, contingent upon approval of the above
stock issuance proposal;
- an amendment to Summit's certificate of incorporation changing the
company's name to " ," contingent and effective upon completion
of the business combination with Viewlogic; and
- to transact all other business that may properly come before the Summit
special meeting, including any motion to adjourn to a later date to permit
further solicitation of proxies, if necessary, to establish a quorum or to
obtain additional votes in favor of the approval of the above proposals,
or to postpone or adjourn the meeting.
RECORD DATE AND OUTSTANDING SHARES
Only Summit stockholders of record on , 1999 are entitled to
notice of and to vote at the Summit special meeting. As of the record date,
there were approximately holders of record holding an aggregate of
approximately shares of Summit common stock.
On or about , 1999, a notice of the Summit special meeting which
complied with the requirements of Delaware law was mailed to all stockholders of
record as of the record date.
VOTE REQUIRED
Under Delaware law, the charter documents of Summit and Nasdaq rules,
approval of the issuance of shares of Summit common stock pursuant to the merger
agreement requires the affirmative vote of a majority of the total votes cast
regarding such proposal, and the amendments to the certificate of incorporation
each requires the affirmative vote of the holders of a majority of the
outstanding shares of Summit common stock, in each case, provided a quorum is
present. BECAUSE SUMMIT CURRENTLY DOES NOT HAVE SUFFICIENT AUTHORIZED SHARES OF
COMMON STOCK TO ISSUE TO VIEWLOGIC STOCKHOLDERS, THE PROPOSAL TO ISSUE SHARES OF
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT IS CONTINGENT UPON THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF SUMMIT COMMON STOCK.
Each stockholder of record of Summit common stock on the Summit record date
is entitled to cast one vote per share, exercisable in person or by properly
executed proxy, on each matter properly submitted for the vote of the
stockholders of Summit at the Summit special meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Summit common stock entitled to vote at
the Summit special meeting shall constitute a quorum. Broker non-votes and
shares held by persons abstaining will be counted in determining whether a
quorum is present at the Summit special meeting. For the first proposal above,
abstentions are counted as votes cast against the proposal whereas broker
non-votes are not counted as votes cast for purposes of determining whether the
proposal has been approved. For the second and third proposals above, the effect
of an abstention or broker non-vote is the same as a vote against the proposal.
28
<PAGE>
As of the Summit record date, offices, directors and affiliates of Summit
owned approximately % of the outstanding shares of Summit common stock.
PROXIES
Each of the persons named in the Summit proxy is an officer of Summit. All
shares of Summit common stock that are entitled to vote and are represented at
the Summit special meeting either in person or by properly executed proxies
received prior to or at the Summit special meeting and not duly and timely
revoked will be voted at the Summit special meeting in accordance with the
instructions indicated on the Summit proxies. If no such instructions are
indicated, such proxies will be voted for:
- the issuance of shares of Summit common stock to the stockholders of
Viewlogic pursuant to the merger agreement;
- the amendment to Summit's corporate charter to increase the number of
shares of our common stock authorized for issuance from 30 million shares
to 50 million shares; and
- the amendment to Summit's corporate charter to change the company's name
to " ".
Any proxy given pursuant to this solicitation by Summit may be revoked by
the person giving it at any time before it is voted. Proxies may be revoked by:
- filing with the Secretary of Summit at or before the taking of the vote at
the Summit special meeting, a written notice of revocation bearing a later
date than the proxy;
- duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of Summit before the taking of the vote at
the Summit special meeting; or
- attending the Summit special meeting and voting in person (although
attendance at the Summit special meeting will not in and of itself
constitute a revocation of a proxy).
Any written notice of revocation or subsequent proxy should be sent so as to
be delivered to Summit at 9305 S.W. Gemini Drive, Beaverton, Oregon 97008,
Attention: Secretary, or hand delivered to the Secretary of Summit, in each case
at or before the taking of the vote at the Summit special meeting.
SOLICITATION OF PROXIES; EXPENSES
The cost of the solicitation of proxies from Summit stockholders will be
borne by Summit. In addition, Summit may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Proxies may also be
solicited by Summit directors, officers and regular employees personally or by
telephone, telegram, letter or facsimile. These persons will not receive
additional compensation, but may be reimbursed for reasonable out-of-pocket
expenses incurred in connection with the solicitation. In addition, Summit has
retained Skinner & Co. to assist in the solicitation of proxies from brokers,
nominees, institutions and individuals at an estimated fee of $10,000 plus
reimbursement of reasonable expenses. Arrangements will also be made with
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by these custodians,
nominees and fiduciaries, and Summit will reimburse these custodians, nominees
and fiduciaries for reasonable expenses.
RECOMMENDATIONS OF SUMMIT BOARD OF DIRECTORS
The Summit board of directors has unanimously approved the proposed business
combination and the merger agreement and determined that the transactions as
contemplated by the merger agreement are in the best interests of Summit and its
stockholders. The Summit board of directors therefore, unanimously recommends
that Summit's stockholders vote to APPROVE the issuance of the aggregate of
approximately 16.3 million shares of Summit common stock to Viewlogic's
stockholders pursuant to the merger agreement and APPROVE each of the proposed
amendments to Summit's certificate of incorporation.
29
<PAGE>
VIEWLOGIC SPECIAL MEETING
DATE, TIME AND PLACE OF VIEWLOGIC SPECIAL MEETING
The Viewlogic special meeting will be held at the offices of Viewlogic, 293
Boston Post Road West, Marlboro, Massachusetts 01752 on , 1999 at
p.m. local time.
PURPOSE
The purpose of the Viewlogic special meeting is to consider and vote upon
the following proposal:
- the approval and adoption of the agreement and plan of reorganization by
and among Summit Design, Inc., Hood Acquisition Corp., a wholly owned
subsidiary of Summit, and Viewlogic, pursuant to which Hood will merge
into Viewlogic and each outstanding share of capital stock of Viewlogic
will be converted into the right to receive 0.67928 of a share of Summit
common stock, and the transactions contemplated by the merger agreement,
including the merger; and
- to transact all other business as may properly come before the Viewlogic
special meeting, including any motion to adjourn to a later date to permit
further solicitation of proxies, if necessary, to establish a quorum or to
obtain additional votes in favor of the approval and adoption of the
merger agreement and the transactions contemplated by the merger
agreement, or to postpone or adjourn the meeting.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record on , 1999 of Viewlogic common stock and
Series A Voting Preferred Stock are entitled to notice of and to vote at the
Viewlogic special meeting. As of the record date, there were approximately
holders of record holding an aggregate of approximately shares of
Viewlogic common stock and shares of Viewlogic's Series A Voting Preferred
Stock.
On or about , 1999, a notice of the Viewlogic special meeting
which complied with the requirements of Delaware law was mailed to all Viewlogic
stockholders of record as of the record date.
VOTE REQUIRED
Under Delaware law and Viewlogic's certificate of incorporation, approval
and adoption of the merger agreement and the business combination requires the
affirmative vote of a majority of the outstanding shares of Viewlogic common
stock and Series A Voting Preferred Stock as of the record date, voting together
as one class.
Each stockholder of record of Viewlogic common stock and Series A Voting
Preferred Stock on the Viewlogic record date is entitled to cast one vote per
share, exercisable in person or by properly executed proxy, on each matter
properly submitted for the vote of the stockholders of Viewlogic at the
Viewlogic special meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Viewlogic common stock and Series A Voting
Preferred Stock entitled to vote at the Viewlogic special meeting will
constitute a quorum. Broker non-votes and shares held by persons abstaining will
be counted in determining whether a quorum is present at the Viewlogic special
meeting. For the proposal above, the effect of an abstention or broker non-vote
is the same as a vote against the proposal.
As of the Viewlogic record date, officers, directors and affiliates of
Viewlogic owned approximately % of the outstanding shares of Viewlogic common
stock and Series A Voting Preferred Stock, voting together as one class.
30
<PAGE>
On September 16, 1999, some stockholders of Viewlogic entered into voting
agreements with Summit pursuant to which they agreed to vote the Viewlogic
voting securities stock they own "FOR" approval and adoption of the merger
agreement and the business combination. On the record date for the special
meeting of stockholders, these stockholders aggregately owned and were entitled
to vote approximately % of the outstanding shares of Viewlogic common stock
and Viewlogic Series A Voting Preferred Stock, voting together as a single
class.
PROXIES
Each of the persons named in the proxy is an officer of Viewlogic. All
shares of Viewlogic common stock and Series A Voting Preferred Stock that are
entitled to vote and that are represented at the Viewlogic special meeting
either in person or by properly executed proxies received prior to or at the
Viewlogic special meeting and not duly and timely revoked will be voted at the
Viewlogic special meeting in accordance with the instructions indicated on such
proxies. If no instructions are indicated, these proxies will be voted for the
approval and adoption of the merger agreement and all other proposals that
properly came before the meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Viewlogic at or before the taking of the vote at the
Viewlogic special meeting, a written notice of revocation bearing a later date
than the proxy; (ii) duly executing a later-dated proxy relating to the same
shares and delivering it to the Secretary of Viewlogic before the taking of the
vote at the Viewlogic special meeting; or (iii) attending the Viewlogic special
meeting and voting in person (although attendance at the Viewlogic special
meeting will not in and of itself constitute a revocation of a proxy). Any
written notice of revocation or subsequent proxy should be sent so as to be
delivered to Viewlogic at 293 Boston Post Road West, Marlboro, Massachusetts
01752, Attention: Secretary, or hand delivered to the Secretary of Viewlogic, in
each case at or before the taking of the vote at the Viewlogic special meeting.
SOLICITATION OF PROXIES; EXPENSES
The cost of the solicitation of proxies from Viewlogic stockholders will be
borne by Viewlogic. In addition, Viewlogic may reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to beneficial owners. Proxies may also be
solicited by Viewlogic directors, officers and regular employees personally or
by telephone, telegram, letter or facsimile. These persons will not receive
additional compensation, but may be reimbursed for reasonable out-of-pocket
expenses incurred in connection with such solicitation. Arrangements will also
be made with custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by those
custodians, nominees and fiduciaries, and Viewlogic will reimburse custodians,
nominees and fiduciaries for their reasonable expenses.
RECOMMENDATIONS OF VIEWLOGIC BOARD OF DIRECTORS
The Viewlogic board of directors has unanimously approved the merger
agreement and the merger and has determined that the business combination is in
the best interests of Viewlogic and its stockholders. After careful
consideration, the Viewlogic board unanimously recommends a vote FOR the
approval and adoption of the merger agreement and the merger.
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<PAGE>
APPROVAL OF THE BUSINESS COMBINATION AND RELATED TRANSACTIONS
THIS SECTION OF THE JOINT PROXY STATEMENT/PROSPECTUS DESCRIBES ELEMENTS OF
THE PROPOSED BUSINESS COMBINATION, INCLUDING THE MERGER AGREEMENT. WHILE WE
BELIEVE THAT THE DESCRIPTION COVERS THE MATERIAL TERMS OF THE BUSINESS
COMBINATION, THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. YOU SHOULD READ THIS ENTIRE DOCUMENT AND THE OTHER DOCUMENTS
WE REFER TO CAREFULLY FOR A MORE COMPLETE UNDERSTANDING OF THE BUSINESS
COMBINATION.
BACKGROUND OF THE BUSINESS COMBINATION
Summit is a leading provider of graphical design entry and verification
software tools. Summit's products assist integrated circuit, or chip, design and
test engineers in meeting the market demands for rapid time to market, increased
product functionality and lower product cost. Summit has endeavored to expand
its product offering to increase its resources both through internal product
development and consideration of strategic relationships.
Viewlogic is a leading provider of products and services that help a broad
range of companies design and deliver products that use electronics as a primary
differentiator, which Viewlogic defines as eProducts. Similar to Summit, since
October 1998, Viewlogic has focused its efforts on expanding its product
offerings through the development of new products and services and external
methods of expanding its product offerings, including acquisitions and entering
into strategic relationships with other companies. Since March 1999, Viewlogic
has acquired two companies with products and services which it believes
complement its product offerings.
In April 1999, James Griffeth, then a strategic consultant to Viewlogic and
now Viewlogic's Vice President of Marketing, contacted Larry J. Gerhard, then
President and Chief Executive Officer of Summit, by telephone to ascertain
Summit's interest in a strategic relationship with Viewlogic. Separately, Mr.
Griffeth also contacted Richard Davenport, President of Summit, for the same
purpose.
On May 4, 1999, Viewlogic's board of directors discussed a strategic
business combination with Summit along with other potential strategic
transactions at a regularly scheduled meeting.
On May 13, 1999, Mr. Herman contacted Mr. Gerhard by telephone to discuss
the possibility of a strategic business combination of Summit and Viewlogic.
On May 20, 1999, members of Summit's and Viewlogic's management met at
Viewlogic's Marlboro, Massachusetts offices. Mr. Davenport, Mr. Loegering, Vice
President, Marketing-- Verification Division of Summit, and C. Albert Koob,
Chief Financial Officer of Summit, represented Summit. Mr. Herman, Mr. Lucier
and Mr. O'Brien represented Viewlogic. During this meeting, the parties
discussed Summit's product offerings in detail and considered the strategic fit
and vision for a combined entity of Viewlogic and Summit.
Throughout May 1999, Mr. Herman periodically kept Keith Geeslin, a director
of Viewlogic, advised on the status of these preliminary discussions.
On June 3, 1999, Mr. Davenport and Mr. Koob met with Mr. Geeslin to discuss
the strategic fit of Summit with Viewlogic and valuation issues. Mr. Herman and
Mr. O'Brien participated in this meeting by telephone.
On June 4, 1999, Mr. Davenport contacted Mr. Herman to discuss follow-up
items from the previous day's conference call. Both parties expressed an
interest in continuing to explore a strategic business combination.
On June 8, 1999, Mr. Herman met with Mr. Geeslin to discuss the outcome of
the June 3, 1999 meeting with Summit and the follow-up call with Mr. Davenport.
Mr. Geeslin and Mr. Herman agreed that Mr. Herman should continue to pursue
discussions concerning a strategic business combination with Summit.
On June 11, 1999, Summit's board of directors was advised of the status and
substance of the foregoing discussions.
32
<PAGE>
On June 14, 1999, Mr. Herman contacted Mr. Davenport by telephone to discuss
employee considerations relevant to a strategic business combination and to
reaffirm their joint vision of a merged entity.
On June 16, 1999, Mr. Herman, Mr. Lucier and Mr. Griffeth met with Mr.
Davenport, Moshe Guy, Chief Technology Officer of Summit and President of Summit
Design (EDA), Ltd., Mr. Loegering and Eric Benhayoun, Vice President and General
Manager--European Operations of Summit, at Summit's facilities in Minneapolis,
Minnesota to discuss sales and marketing issues relevant to a strategic business
combination.
On June 16 and 18, 1999, Summit's board of directors was advised of the
status and substance of the foregoing discussions.
On June 23, 1999, Mr. Herman met with Mr. Davenport in New Orleans,
Louisiana to discuss management and valuation issues relevant to a strategic
business combination.
On June 24, 1999, Mr. Herman contacted Mr. Davenport by telephone regarding
the status of the ongoing discussions and to enhance Viewlogic's understanding
of Summit's operations and structure. Mr. Herman and Mr. Davenport scheduled a
visit by Viewlogic management to Summit's primary development site in Herzlia,
Israel.
On July 16 and 17, 1999, Mr. Herman and Mr. Lucier met with Mr. Davenport,
Mr. Moshe, Mr. Botts and Mr. Amihai Ben-David at Summit's Herzlia, Israel
facilities. Mr. Herman and Mr. Lucier toured these facilities and continued
discussions concerning a strategic business combination.
On July 21, 1999, Summit's board of directors was advised of the status and
substance of the foregoing discussions.
On July 25 and 26, 1999, Summit's board of directors was advised of the
status and substance of the foregoing discussions at a regularly scheduled
meeting.
On July 28, 1999, Mr. Herman contacted Mr. Botts by telephone. Mr. Botts
proposed terms for a business combination between Viewlogic and Summit. Mr.
Botts also described management changes made at Summit during its recent board
meeting.
On August 2, 1999, Mr. Herman contacted Mr. Botts by telephone about the
possible financial terms of a business combination. Mr. Herman and Mr. Botts
shared ideas that each thought would be acceptable to the respective boards of
directors of both companies. Mr. Botts stated that he would schedule a
conference call of the Summit board of directors for August 3 or 4, 1999.
From August 3, 1999 through August 5, 1999, Mr. Herman, Mr. Lucier and
members of Viewlogic's marketing team met with Mr. Moshe and Mr. Rachamim in
Marlboro, Massachusetts to discuss the positioning of the proposed combined
company and possible communication to various constituencies.
On August 4, 1999, Summit's board of directors met telephonically to discuss
the proposed transaction with Viewlogic.
On August 4, 1999, Mr. Botts and Mr. Koob contacted Mr. Herman by telephone
to discuss the reaction of Summit's board of directors with respect to the
possible financial terms of the proposed business combination.
On August 5, 1999, Mr. Herman contacted Mr. Geeslin by telephone to discuss
a response to Summit's proposal. Viewlogic offered a counter-proposal.
On August 5, 1999, Mr. Herman spoke with Mr. Botts telephonically to discuss
Viewlogic's counter-proposal.
On August 5, 1999, certain members of Summit's board of directors discussed
the most recent proposal for each company's ownership in the merged entity.
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<PAGE>
On August 5, 1999, Mr. Botts spoke with Mr. Herman by telephone regarding
the reaction of Summit's board of directors to the most recent proposal.
On August 6, 1999, Mr. Herman contacted Mr. Geeslin by telephone outlining
the most recent terms being discussed between the companies.
On August 6, 1999, Mr. Herman contacted Aart de Geus, Chief Executive
Officer of Synopsys, Inc., a major stockholder of Viewlogic, by telephone during
a previously scheduled call. During this conversation, Mr. Herman and Dr. de
Geus talked about the state of Viewlogic's discussions with Summit.
On August 9, 10, and 11, 1999, Mr. Herman, Mr. Lucier, Mr. Johnson, Mr.
O'Brien and Paula Cassidy, Vice President, Human Resources of Viewlogic, met
with Mr. Botts, Mr. Koob and Ms. Beelart to schedule logistics and to continue
negotiations.
On August 10, 1999, Mr. Kiaski contacted Mr. Davenport by telephone and
discussed the logistics of merging the worldwide sales forces of the companies.
From August 10 through September 13, 1999, management of Summit and
Viewlogic, together with their respective advisors, continued to conduct due
diligence and negotiate the terms of the business combination.
On September 14, 1999, the Summit board of directors held a special meeting.
Dain Rauscher Wessels, Summit's financial advisor, reviewed in detail its
financial analysis of the proposed business combination and the Summit board of
directors received a written opinion from Dain Rauscher Wessels that the equity
consideration to be paid by Summit pursuant to the proposed merger agreement was
fair to Summit and the holders of Summit common stock from a financial point of
view. Summit management reported on the terms of the proposed business
combination, the results of its due diligence review of Viewlogic and the
business synergies, risks, alternatives and assumptions of the proposed business
combination. Summit's legal advisors reviewed terms of the proposed merger
agreement. The Summit board of directors fully discussed the terms of the
proposed merger agreement and the proposed transactions and then unanimously
approved the merger agreement and the issuance of Summit shares in connection
with the business combination.
On September 14, 1999, the Viewlogic board of directors held a special
meeting. The directors reviewed in details the terms of the proposed business
combination, the proposed merger agreement, the results of the due diligence
review conducted by Viewlogic's management and certain expected financial
characteristics of the combined company after the business combination. The
directors unanimously approved the merger agreement and the business
combination.
On September 16, 1999, Summit and Viewlogic executed the merger agreement
and issued a joint press release announcing the proposed business combination.
JOINT REASONS FOR THE BUSINESS COMBINATION
Each of the boards of directors of Summit and Viewlogic believe that by
combining the complementary product offerings of the two companies, the combined
company will have the potential to realize long-term improved operating and
financial results and a stronger position in the electronic design automation
industry. By offering customers a more complete range of electronic design
automation software products for comprehensive, cost effective electronic
product design and development solutions, the combined company may better meet
its customers' requirements. Additionally, Summit and Viewlogic believe that the
business combination will enhance the ability of the combined company to compete
effectively against their competitors.
In particular, Summit and Viewlogic believe that their customers want a
comprehensive set of software tools and linked solutions that enable the design
of complete electronic systems at higher levels of abstraction. As both the
components and the integrated circuits used in electronic products have become
more complex, higher levels of design abstraction are necessary in order to meet
both
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<PAGE>
time to market and design complexity needs. System performance and features,
system layout, system memory requirements (software footprint), embedded
processor configuration, silicon area/cost, product cost, system power/battery
life, system programmability, board layout, cable routing and project schedules
are all very important to product design projects. With time to market becoming
shorter and complexity of electronics becoming greater, tools that involve all
of these considerations have become critical. Both companies believe that the
business combination will allow the combined company to provide a product line
that is better able to address the growing requirements of their customers as
those requirements evolve. Both companies also believe that the business
combination will provide opportunities for the combined company to develop and
introduce new generations of integrated electronic design automation products,
providing the combined company with a range of products and services better able
to meet the needs of its customers in the future.
Each of the boards of directors of Summit and Viewlogic has identified
additional potential mutual benefits of the business combination that they
believe will contribute to the success of the combined company. These potential
benefits include principally the following:
- increased penetration of the served markets with a broader range of
solutions and more cost-effective distribution channels;
- increased sales force efficiency and productivity through having more and
better products and solutions to offer customers;
- greater customer satisfaction as a result of offering a broader range of
solutions with a single source of support and maintenance; and
- greater ability to compete with the major electronic design automation
players whose development and acquisition strategies are moving them from
point tool suppliers to complete solutions providers for the electronic
design automation markets.
Summit and Viewlogic have each identified reasons for the business
combination, which are discussed below. Each board of directors has also
recognized, however, that the potential benefits of the business combination may
not be realized. See "Risk Factors."
SUMMIT'S REASONS FOR THE BUSINESS COMBINATION
At its September 14, 1999 meeting, the Summit board unanimously approved the
merger agreement and the business combination. Summit's board unanimously
recommends that the Summit stockholders vote for the issuance of shares of
Summit common stock pursuant to the merger agreement and the amendments to its
charter. In addition to the anticipated benefits described above, the Summit
board of directors believes that the following are additional reasons the
business combination will be beneficial to Summit and its stockholders:
- acquisition of an experienced and cohesive management team;
- increased Windows-based electronic design automation product offerings to
satisfy a broader range of developmental needs for electronic designers;
- larger combined entity will be better suited to compete in the electronic
design automation environment;
- increased sales force size and distribution;
- access to Viewlogic's installed customer base;
- larger market and increased product visibility;
- the ability to integrate products from both companies that will result in
better tools for the company's customers;
- larger and more comprehensive research and development team; and
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<PAGE>
- the opportunity for Summit stockholders to participate in the potential
for growth of the combined company after the business combination.
The Summit board of directors also considered the following factors relating
to the business combination prior to approving the business combination:
- the strategic benefits of the business combination, including the
potential market, product and sales channel synergies, potential customer
leverage and additional management talent;
- historical information concerning Summit's and Viewlogic's respective
businesses, prospects, financial performance and condition, operations,
technology, management and competitive position;
- Summit management's view of the financial condition, results of operations
and businesses of Summit and Viewlogic before and after giving effect to
the business combination, including financial analysts' expectations for
Summit;
- current financial market conditions and historical market prices,
volatility and trading information with respect to Summit common stock;
- the consideration to be received by Viewlogic stockholders in the business
combination and the relationship between the market value of the Summit
common stock to be issued in exchange for each share of Viewlogic capital
stock and a comparison of comparable business combination transactions;
- the terms of the merger agreement, including the parties' representations,
warranties and covenants, and the conditions to their respective
obligations;
- Summit management's view of Summit's prospects as an independent company;
- the potential for other third parties to enter into strategic
relationships with, or to acquire, Summit or Viewlogic;
- the financial analysis and pro forma and other information with respect to
the business combination presented by Dain Rauscher Wessels to the Summit
board of directors, including an opinion dated September 14, 1999, that,
as of such date, the equity consideration to be paid by Summit pursuant to
the merger agreement was fair to Summit and the holders of Summit common
stock from a financial point of view;
- Summit management's views as to the expected impact of the business
combination on Summit's customers and employees; and
- reports from Summit management, legal and financial advisors as to the
results of their due diligence investigation of Viewlogic.
The Summit board of directors also considered the terms of the merger
agreement regarding Summit's and Viewlogic's respective rights to consider and
negotiate other acquisition proposals in certain circumstances, the possible
effects of the provisions regarding termination fees, voting agreements and
Summit's and Viewlogic's representation on the combined company's board of
directors. Summit's board further considered that, after the merger, the current
management of Viewlogic would be able to exert significant control over the
combined company, its business and direction, subject to the oversight of the
combined company's board of directors, and that such control, together with the
effects of future market factors and business conditions, could ultimately
evolve into an integration and business strategy that, when implemented,
differed from the then-anticipated strategy.
The Summit board of directors also identified and considered a variety of
potentially negative factors in its deliberations concerning the business
combination, including, but not limited to:
- the risk that the potential benefits sought in the business combination
might not be fully realized;
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<PAGE>
- the possibility that the business combination might not be consummated and
the effect of public announcement of the business combination on (a)
Summit's and Viewlogic's sales and operating results, (b) Summit's and
Viewlogic's ability to attract and retain key management, marketing and
technical personnel and (c) progress of certain development projects;
- the potential dilutive effect of the issuance of Summit common stock in
the business combination; and
- the substantial charges to be incurred, primarily in the quarter in which
the business combination closes, in connection with the business
combination, including costs of integrating businesses, transaction
expenses arising from the business combination and on-going amortization
charges associated with purchase accounting.
The Summit board of directors believed that these risks were outweighed by
the potential benefits of the business combination. After considering the
positive and negative factors, including those listed above, and after extensive
discussion of each, the Summit board of directors approved the merger agreement,
the business combination and the charter amendments.
VIEWLOGIC'S REASONS FOR THE BUSINESS COMBINATION
The Viewlogic board of directors unanimously voted to recommend to the
holders of Viewlogic capital stock that the merger agreement and the business
combination be approved and adopted. In addition to the anticipated benefits
described above, the Viewlogic board of directors believes that the business
combination will be beneficial to Viewlogic and its stockholders for the
following reasons:
- the integration of Viewlogic's core Viewdraw design capture and fusion
simulation products with Summit's core VisualHDL product will offer
significant opportunity to leverage the existing customer bases of these
products;
- the integration of Summit's core VisualHDL product with Viewlogic's FPGA
design tools will enable the combined companies to strengthen their joint
position in the field programmable gate array design marketplace;
- Summit's E-Sim software simulation product offers additional opportunities
to develop the SLDA marketplace and enhance Viewlogic's competitive
position;
- Summit's V-CPU product adds hardware/software co-design capabilities to
Viewlogic's product line that will enhance Viewlogic's ability to capture
the systems designer;
- Summit's VisualSLD product line is an ideal platform for the ongoing
development of a multi-domain development environment (hardware, software,
electro-mechanical components);
- Summit's VisualIP and VisualSLD product lines represent a complimentary
environment to Viewlogic's for addressing the needs of the system-level
designer;
- combining Summit's talented and experienced research and development team
with Viewlogic's will create a stronger basis for the development of
future products; and
- the combined company's greater financial strength.
OPINION OF SUMMIT'S FINANCIAL ADVISOR
Dain Rauscher Wessels, or DRW, a division of Dain Rauscher Incorporated, was
retained, pursuant to an engagement letter dated August 12, 1999, to furnish an
opinion as to the fairness, from a financial point of view, as to whether the
consideration, referred to as the business combination consideration, offered in
exchange for all of the issued and outstanding equity securities of Viewlogic,
including options to purchase shares of common stock of Viewlogic, pursuant to
the merger agreement is fair to Summit and its stockholders from a financial
point of view.
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<PAGE>
On September 14, 1999, DRW rendered its oral opinion to the Summit board of
directors that, as of such date and based on the procedures followed, factors
considered and assumption made by DRW and certain other limitations the business
combination consideration was fair to Summit and its stockholders from a
financial point of view. DRW confirmed its oral opinion in a written opinion
dated September 14, 1999. A copy of DRW's written opinion is attached as Annex C
to this joint proxy statement/prospectus. Summit stockholders are urged to read
the DRW opinion in its entirety. The summary of the opinion set forth herein is
qualified in its entirety by reference to the full text of DRW's opinion.
DRW's opinion applies only to the fairness to Summit and its stockholders,
from a financial point of view, of the business combination consideration. DRW's
opinion was provided for the information and assistance of the Summit board of
directors in connection with its consideration of the business combination.
DRW's opinion was not prepared on behalf of, and was not intended to confer
rights or remedies upon, Summit, Viewlogic, any stockholder of Summit or
Viewlogic, or any persons other than the Summit board of directors. DRW's
opinion does not address the relative merits of the business combination and any
other transactions or business strategies discussed by the Summit board of
directors as alternatives to the business combination, or the underlying
business decision of the Summit board of directors to proceed with the business
combination. DRW's opinion and presentation to the Summit board of directors
were only two of many factors taken into consideration by the Summit board of
directors in making its determination to approve the merger agreement. The
opinion does not constitute a recommendation to any stockholder as to how such
stockholder should vote with respect to the business combination. The Summit
board of directors did not impose any limitations on the scope of the
investigation of DRW with respect to rendering its opinion.
In rendering its opinion, DRW assumed and relied upon the accuracy and
completeness of the financial, legal, tax, operating and other information
provided by Summit and Viewlogic including the financial statements and related
notes of Summit and Viewlogic. DRW did not assume responsibility for
independently verifying and did not independently verify this information.
Additionally, DRW was not asked and did not consider the possible effects of
any litigation, other legal claims or any other contingent matters. DRW did not
assume responsibility for and did not perform any independent evaluation or
appraisal of any of the respective assets or liabilities of Summit or Viewlogic,
nor was DRW furnished with any evaluations or appraisals. DRW did not assume any
obligation to conduct, and did not conduct, any physical inspection of the
property or facilities of Summit or Viewlogic. DRW assumed that the business
combination will be treated as a purchase under applicable accounting
principles. DRW's opinion is based on the economic, market and other conditions
as they existed and the information supplied to DRW as of the date of its
opinion. Events occurring after the date of DRW's opinion may materially affect
the assumptions used in preparing the opinion, and DRW assumes no obligation to
update, revise or reaffirm its opinion.
In connection with its review of the business combination, and in arriving
at its opinion, DRW:
- reviewed and analyzed the financial terms of the merger agreement;
- reviewed and analyzed certain publicly available financial and other data
with respect to Summit and Viewlogic made available to DRW from internal
records of Summit and Viewlogic;
- conducted discussions with members of the senior management of Summit and
Viewlogic with respect to the business and prospects of Summit and
Viewlogic;
- reviewed and analyzed Summit's and Viewlogic's contribution to the pro
forma net income of the combined company;
- reviewed the reported prices and trading activity of Summit common stock
and similar information for other companies deemed by DRW to be comparable
to Viewlogic;
- compared the financial performance of Viewlogic with that of publicly
traded companies deemed by DRW to be comparable to Viewlogic; and
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<PAGE>
- reviewed the financial terms, to the extent publicly available, of
comparable business combination transactions.
In addition, DRW has conducted the other analyses and examinations and
considered other financial, economic and market criteria as it deemed necessary
in arriving at its opinion.
For the purpose of rendering its opinion, DRW has assumed that, in all
respects material to its analysis, the representations and warranties of Summit
and Viewlogic contained in the merger agreement are true and correct, Summit and
Viewlogic each will perform all of the covenants and agreements to be performed
by it under the merger agreement, and all conditions to the obligations of each
of Summit and Viewlogic to effect the proposed transaction will be satisfied
without any waiver of any material terms or conditions to any party thereto. DRW
also has assumed that all material governmental, regulatory or other approvals
and consents required in connection with the consummation of the transactions
contemplated by the merger agreement will be obtained and that, in connection
with obtaining any necessary governmental, regulatory or other approvals and
consents, or any amendments, modifications or waivers to any agreements,
instruments or orders to which either Summit or Viewlogic is a party or subject
or by which it is bound, no limitations, restrictions or conditions will be
imposed or amendments, modifications or waivers made that would have a material
adverse effect on Summit and Viewlogic or materially reduce the contemplated
benefits of the business combination to Summit.
The following is a summary of the financial analyses performed and deemed
material by DRW in connection with the delivery of its opinion but is not a
comprehensive description of all analyses performed or factors considered. These
summaries of financial analyses include information presented in tabular format.
In order to fully understand the summary of the financial analyses used by DRW,
the tables must be read together with the text of each summary. The tables alone
do not constitute a complete description of the financial analysis.
COMPARABLE COMPANY ANALYSIS. DRW used a comparable company analysis to
analyze Viewlogic's implied valuation relative to a group of publicly traded
companies that DRW deemed for purposes of its analysis to be comparable to
Viewlogic. In this analysis, DRW compared the value of Viewlogic implied by the
value of the business combination consideration to be issued pursuant to the
merger agreement based on the closing price of Summit's common stock on
September 10, 1999, expressed as a multiple of certain operating data, to the
values of the comparable companies implied by the public trading price of their
common stock, expressed as a multiple of the same operating data.
DRW compared multiples of selected financial data for Viewlogic with those
of the following publicly traded companies: Analogy Inc., Avant! Corp., Cadence
Design Systems, Inc., IKOS Systems, Inc., Mentor Graphics, Inc., and Summit.
Although these companies were considered comparable to Viewlogic for the purpose
of this analysis based on certain characteristics of their respective businesses
and financial performance, none of these companies possesses characteristics
identical to those of Viewlogic.
DRW calculated the following valuation multiples based on an implied equity
value of $54.4 million for Viewlogic based on the last reported sale price of
Summit common stock as of September 10, 1999 and the business combination
consideration specified in the merger agreement and, as to the comparable
companies, on the market prices and other information available as of the same
date. Multiples of future revenue and earnings for Viewlogic were based on
projected revenue and earnings as estimated by Viewlogic's management and, for
the comparable companies, on publicly available estimates.
The following table presents as of September 10, 1999 the mean and median
multiples of enterprise value to the calendar year 1999 and calendar year 2000
estimated revenue for Viewlogic, as
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<PAGE>
implied by the business combination consideration, and the comparable companies.
Enterprise value is defined as market capitalization, or equity value, plus debt
less cash and cash equivalents.
<TABLE>
<CAPTION>
COMPARABLE
COMPANIES VIEWLOGIC
------------------------ (AS IMPLIED BY THE
MEAN MEDIAN MERGER CONSIDERATION)
----- ----------- -----------------------
<S> <C> <C> <C>
Enterprise value as a ratio of:
Projected calendar year 1999 revenue................ 1.4x 1.1x 1.3x
Projected calendar year 2000 revenue................ 1.2x 0.9x 1.1x
</TABLE>
The following table presents as of September 10, 1999 the mean and median
price-to-earnings multiples, excluding any goodwill amortization, for calendar
year 1999 and calendar year 2000 for Viewlogic, as implied by the business
combination consideration, and the comparable companies.
<TABLE>
<CAPTION>
COMPARABLE
COMPANIES VIEWLOGIC
---------------------- (AS IMPLIED BY THE
MEAN MEDIAN MERGER CONSIDERATION)
--------- ----------- -----------------------
<S> <C> <C> <C>
Price as a ratio of:
Projected calendar year 1999 earnings.............. 32.1x 31.0x 41.4x
Projected calendar year 2000 earnings.............. 14.1x 18.0x 21.3x
</TABLE>
COMPARABLE TRANSACTION ANALYSIS. DRW compared multiples of selected
financial data relating to the business combination with multiples paid in
selected business combination and acquisition transactions since January 1997 of
electronic design automation companies with aggregate equity transaction values
less than $500 million. Equity transaction value represents the aggregate value
of the consideration paid and excludes debt and includes cash (and cash
equivalents) of the acquired company. DRW noted that many of these transactions
involved target companies that were small, rapidly growing companies that are
not comparable to Viewlogic. From the 20 transactions analyzed, DRW selected
three transactions in the last year that it deemed more comparable to this
transaction based on the financial and business characteristics of the target
companies in those transactions. The selected transactions were:
- the acquisition of OrCAD Inc. by Cadence Design Systems Inc., announced on
June 14, 1999;
- the acquisition of Quickturn Design Systems Inc. by Cadence Design Systems
Inc., announced on December 9, 1998; and
- the acquisition of the Viewlogic Systems unit of Synopsys, Inc. by the
management of such unit, announced on October 2, 1998.
The following table presents multiples of equity transaction value to latest
12-month revenues and operating incomes for Viewlogic and the selected
comparable transactions.
<TABLE>
<CAPTION>
SELECTED
COMPARABLE
TRANSACTIONS VIEWLOGIC
------------- (AS IMPLIED BY THE
MEAN MERGER CONSIDERATION)
------------- -----------------------
<S> <C> <C>
Equity transaction value as a ratio of:
Latest 12 month revenues............................... 2.1x 1.0x
Latest 12 month operating incomes...................... 15.4x 21.8x
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS. DRW estimated the current value of Viewlogic
through a discounted cash flow analysis using projections of future operating
results obtained from Viewlogic's management. DRW calculated present values of
projected operating cash flows through September 2004 using a discount rate
range of 16.0% to 20.0%, which was in part based on the cost of capital for
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<PAGE>
Summit as derived from the Capital Asset Pricing Model and was deemed
appropriate for a company like Viewlogic. DRW estimated a terminal value
multiple of 6.0 to 8.0 times Viewlogic's projected fiscal year 2004 operating
income. The terminal value was discounted to present value using the same
discount rate as for the cash flows. DRW calculated an implied enterprise
valuation of Viewlogic by adding the present values of the cash flows and the
terminal value. DRW calculated an implied equity valuation of Viewlogic by
subtracting debt and adding cash (and cash equivalents) to the implied
enterprise value of Viewlogic. The range of implied equity values of Viewlogic
based on this analysis was $37.8 to $62.3 million, as shown in the following
summary of DRW's analysis:
<TABLE>
<CAPTION>
TERMINAL OPERATING
INCOME MULTIPLES
-------------------------------
6.0X 7.0X 8.0X
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Discount Rate:
16.0%.............................................................. $ 47.2 $ 55.2 $ 63.2
18.0%.............................................................. $ 42.2 $ 49.6 $ 56.9
20.0%.............................................................. $ 37.8 $ 44.5 $ 51.2
</TABLE>
RELATIVE CONTRIBUTION ANALYSIS. DRW analyzed the relative contribution of
each of Summit and Viewlogic to a number of calendar year 1999 and 2000
financial statement categories of the pro forma combined company. The financial
statement categories included revenue, earnings before interest and taxes, net
income excluding goodwill amortization, net income including goodwill
amortization and book value. DRW compared these relative contributions to the
pro forma ownership percentage of Summit and Viewlogic securityholders in the
pro forma post-business combination combined company. DRW observed that, based
upon the exchange ratio set forth in the merger agreement, the relative
ownership of the combined company by Viewlogic and Summit securityholders would
be 50.8% and 49.2%, respectively, at the close of the business combination. Due
to the different capital structures of each company, DRW emphasized the relative
contribution of each company to calendar years 1999 and 2000 net income, both
including and excluding amortization, as the most meaningful comparison.
Following is a summary of this analysis:
<TABLE>
<CAPTION>
CALENDAR YEAR 1999 CALENDAR YEAR 2000
------------------------ ------------------------
SUMMIT VIEWLOGIC SUMMIT VIEWLOGIC
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (including amortization).................. NM NM 45.9% 54.1%
Net income (excluding amortization).................. 34.7% 65.3% 49.2% 50.8%
Relative ownership post-business combination......... 49.2% 50.8% 49.2% 50.8%
</TABLE>
The preparation of a fairness opinion is a complex process that involves the
application of subjective business judgment in determining the most appropriate
and relevant methods of financial analysis and the application of those methods
to the particular circumstances and, therefore, is not necessarily susceptible
to partial consideration of the analyses or summary description. DRW believes
that its analyses must be considered as a whole and that selecting portions of
the analyses and of the factors considered by it, without considering all
factors and analyses, could create an incomplete or misleading view of the
processes underlying its opinion. In arriving at its fairness determination, DRW
considered the results of all of its analyses as well as qualitative factors,
including the enhanced competitive position of the combined company from a
broader suite of products, the management team of Viewlogic, and the greater
size and critical mass of the combined company.
In view of the wide variety of factors considered in connection with its
evaluation of the fairness of the merger consideration to Summit from a
financial point of view, DRW did not find it practicable to assign relative
weights to the factors considered in reaching its opinion. No single company or
transaction used in the above analyses as a comparison is identical to Summit or
Viewlogic or the proposed business combination. The analyses were prepared
solely for purposes of DRW providing its
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<PAGE>
opinion as to the fairness to Summit and its stockholders of the business
combination consideration and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be sold, which
are inherently subject to uncertainty. In connection with its analyses, DRW
made, and was provided by Summit's management with, numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond Summit's or Viewlogic's control.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond the control of
Summit, Viewlogic or their advisors, none of Summit, DRW or any other person
assumes responsibility if future results or actual values are materially
different from these forecasts or assumptions.
DRW is a nationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and securities in connection with
business combinations and acquisitions, corporate restructurings, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. DRW
regularly publishes research reports regarding the electronic design automation
industry and the businesses and securities of publicly owned companies in that
industry. In the ordinary course of business, DRW and its affiliates may
actively trade securities of Summit for their own account or the account of
their customers and, accordingly, may from time to time hold a long or short
position in those securities. Summit selected DRW to render its opinion based on
DRW's knowledge of the technology industry and its experience in business
combinations and acquisitions and in securities valuation generally.
Pursuant to an engagement letter, Summit paid DRW a nonrefundable fee of
$400,000 upon the rendering of its opinion. Payment of this fee to DRW was not
contingent upon the closing of the business combination. Summit has also agreed
to reimburse DRW for its reasonable out-of-pocket expenses and to indemnify DRW
against certain liabilities relating to or arising out of services performed by
DRW in connection with the business combination. The terms of the engagement
letter, which Summit believes are customary for transactions of this nature,
were negotiated at arms'-length between Summit and DRW, and the Summit board of
directors was aware of this fee arrangement at the time of its approval of the
merger agreement.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes the material United States
federal income tax consequences of the transactions contemplated by the merger
agreement. This discussion is based on the Internal Revenue Code of 1986, as
amended, the related regulations promulgated, existing administrative
interpretations and court decisions, all of which are subject to change,
possibly with retroactive effect. This discussion assumes that Viewlogic
stockholders hold their shares of Viewlogic capital stock as capital assets
within the meaning of Section 1221 of the Internal Revenue Code. This discussion
does not address all aspects of United States federal income taxation that may
be important to you in light of your particular circumstances or if you are
subject to special rules. These special rules include rules relating to:
- stockholders who are not citizens or residents of the United States;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities; and
- stockholders who acquired their shares of Viewlogic capital stock through
the exercise of options or similar derivative securities or otherwise as
compensation.
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Summit's and Viewlogic's obligations to complete the business combination
are conditioned on the delivery of an opinion to Summit from Wilson Sonsini
Goodrich & Rosati, Professional Corporation, and the delivery of an opinion to
Viewlogic from Hale and Dorr LLP, in each case that the business combination
will qualify as a tax free reorganization for United States federal income tax
purposes. Alternatively, this condition will be satisfied upon the delivery of a
tax opinion to Summit and Viewlogic from Wilson Sonsini Goodrich & Rosati or the
delivery of such a tax opinion to Summit and Viewlogic from Hale and Dorr.
Summit and Viewlogic believe, based on the advice of their respective
counsel, that the business combination will be a tax free reorganization and as
a result will have the United States federal income tax consequences discussed
below. The opinions of counsel referred to above will assume the absence of
changes in existing facts and will rely on assumptions, representations and
covenants including those contained in certificates executed by officers of
Summit, Viewlogic and others. The opinions referred to above neither bind the
IRS nor preclude the IRS from adopting a position contrary to that expressed in
the opinions, and no assurance can be given that contrary positions will not be
successfully asserted by the IRS or adopted by a court if the issues are
litigated. Neither Summit nor Viewlogic intends to obtain a ruling from the IRS
with respect to the tax consequences of the business combination.
TAX IMPLICATIONS TO SUMMIT STOCKHOLDERS. Stockholders of Summit will not
recognize gain or loss for United States federal income tax purposes as a result
of the business combination.
TAX IMPLICATIONS TO VIEWLOGIC STOCKHOLDERS. Except as discussed below,
stockholders of Viewlogic will not recognize gain or loss for United States
federal income tax purposes on the exchange of Viewlogic capital stock for
Summit common stock in the business combination. The aggregate tax basis of the
Summit common stock received as a result of the business combination will be the
same as the aggregate tax basis in the Viewlogic capital stock surrendered in
the exchange, reduced by the tax basis of any shares of Viewlogic common stock
for which cash is received instead of fractional shares of Summit common stock.
The holding period of the Summit common stock received as a result of the
exchange will include the period during which the Viewlogic capital stock
exchanged in the business combination was held. Viewlogic stockholders will
recognize gain or loss for United States federal income tax purposes with
respect to the cash they receive instead of a fractional share interest in
Summit common stock. The gain or loss will be measured by the difference between
the amount of cash they receive and the portion of the tax basis of their shares
of Viewlogic capital stock allocable to the shares of Viewlogic capital stock
exchanged for the fractional share interest. This gain or loss will be capital
gain or loss and will be a long-term capital gain or loss if the shares of
Viewlogic capital stock have been held for more than one year at the time the
business combination is completed.
If the Internal Revenue Service were to successfully challenge the
"reorganization" status of the business combination, each Viewlogic stockholder
would recognize taxable gain or loss with respect to the Viewlogic capital stock
surrendered, measured by the difference between (i) the consideration received
in exchange for the stockholder's Viewlogic stock (the fair market value of the
Summit common stock received plus the amount of any cash received in lieu of
fractional shares of Summit common stock) and (ii) the stockholder's tax basis
in the Viewlogic capital stock surrendered in the business combination. In this
event, a stockholder's aggregate basis in the Summit common stock so received
would equal its fair market value as of the time of the business combination and
the holding period for such stock would begin the day after the merger.
TAX IMPLICATIONS TO SUMMIT AND VIEWLOGIC. Summit, including its business
combination subsidiary, and Viewlogic should not recognize gain or loss for
United States federal income tax purposes as a result of the business
combination.
THIS DISCUSSION IS ONLY INTENDED TO PROVIDE YOU WITH A GENERAL SUMMARY, AND
IT IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OR ANY OTHER CONSEQUENCES OF THE
BUSINESS COMBINATION. IN ADDITION, THIS DISCUSSION DOES NOT ADDRESS TAX
CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, YOUR INDIVIDUAL
CIRCUMSTANCES. MOREOVER, THIS DISCUSSION DOES
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NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES
OF THE BUSINESS COMBINATION. ACCORDINGLY, YOU ARE STRONGLY URGED TO CONSULT WITH
YOUR TAX ADVISOR TO DETERMINE THE PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL
OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO YOU OF THE BUSINESS COMBINATION.
ACCOUNTING TREATMENT
The business combination will be accounted for under the purchase method of
accounting. Although Summit will be acquiring Viewlogic, after the transaction,
Viewlogic stockholders will hold a controlling interest in Summit. Accordingly,
for accounting purposes, the acquisition will be a "reverse acquisition" and
Viewlogic will be the "accounting acquirer." As Viewlogic will be the accounting
acquirer, its accounts will be recorded at historical cost and the assets and
liabilities of Summit will be recorded at their estimated fair value as of the
closing date.
Viewlogic intends to record an expense of approximately $2.1 million in the
quarter in which the business combination closes with respect to the write-off
of in-process research and development acquired. In addition, the intangible
assets of approximately $22.2 million recorded with respect to the business
combination are expected to be amortized over a period of three to five years
following the closing of the business combination.
GOVERNMENTAL AND REGULATORY APPROVALS
Summit and Viewlogic are not aware of any governmental or regulatory
approvals required for consummation of the business combination, other than
compliance with the federal securities laws, applicable securities and "blue
sky" laws of the various states and applicable Delaware corporate law.
APPRAISAL RIGHTS
Because the shares of Summit common stock are quoted on the Nasdaq National
Market, Summit's stockholders are not entitled to appraisal rights under
Delaware law.
Delaware law grants appraisal rights in the business combination to the
holders of Viewlogic common and preferred stock. Under Delaware law, Viewlogic
stockholders may object to the business combination, and demand in writing that
Viewlogic pay the fair value of their shares. The determination of fair value
takes into account all relevant factors but excludes any appreciation or
depreciation in anticipation of the applicable business combination.
Stockholders who elect to exercise appraisal rights must comply with all of the
procedures to preserve those rights. We have attached a copy of Section 262 of
the Delaware General Corporation Law, which sets forth the appraisal rights, as
Annex D to this joint proxy statement/prospectus.
Section 262 of the Delaware General Corporation Law sets forth the required
procedure a stockholder seeking appraisal must follow. Making sure that you
actually perfect your appraisal rights can be complicated. The procedural rules
are specific and must be followed completely. Failure to comply with the
procedure may cause a termination of your appraisal rights. We are providing you
only a summary of your rights and the procedure. The following information is
qualified in its entirety by the provisions of Section 262 of the Delaware
General Corporation Law. Please review Section 262 for the complete procedure.
Viewlogic will not give you any notice other than as described in this joint
proxy statement/prospectus and as required by Delaware law.
APPRAISAL RIGHTS PROCEDURES
If you are a Viewlogic stockholder and you wish to exercise your appraisal
rights, you must satisfy the provisions of Section 262 of the Delaware General
Corporation Law. Section 262 requires the following:
- YOU MUST MAKE A WRITTEN DEMAND FOR APPRAISAL: You must deliver a written
demand for appraisal to Viewlogic before the vote on the merger agreement
is taken at the special meeting. This written demand for appraisal must be
separate from your proxy. In other words, a vote against the merger
agreement alone will not constitute demand for appraisal.
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- YOU MUST REFRAIN FROM VOTING FOR APPROVAL OF THE BUSINESS COMBINATION: You
must not vote for approval and adoption of the merger agreement. If you
vote, by proxy or in person, in favor of the merger agreement, this will
terminate your right to seek appraisal. You can also terminate your right
to seek appraisal if you return a signed proxy and fail to vote against
approval of the business combination or fail to note that you are
abstaining from voting. Your appraisal rights will be terminated even if
you previously filed a written demand for appraisal.
- YOU MUST CONTINUOUSLY HOLD YOUR VIEWLOGIC SHARES: You must continuously
hold your shares of Viewlogic capital stock, from the date you make the
demand for appraisal through the completion of the business combination.
If you are the record holder of Viewlogic capital stock on the date the
written demand for appraisal is made but then transfer the shares before
the business combination, you will lose any right to appraisal in respect
of those shares. You should read the paragraphs below for more details on
making a demand for appraisal.
A written demand for appraisal of Viewlogic capital stock is only effective
if it is signed by, or for, the stockholder of record who owns such shares at
the time the demand is made. The demand must be signed as the stockholder's name
appears on each of their stock certificates. If you are the beneficial owner of
Viewlogic capital stock, but not the stockholder of record, you must have the
stockholder of record sign a demand for appraisal.
If you own Viewlogic capital stock in a fiduciary capacity, such as a
trustee, guardian or custodian, you must disclose the fact that you are signing
the demand for appraisal in that capacity.
If you own Viewlogic capital stock with one or more persons, such as in a
joint tenancy or tenancy in common, all of the owners must sign, or have signed
for them, the demand for appraisal. An authorized agent, which could include one
or more of the joint owners, may sign the demand for appraisal for a stockholder
of record; however, the agent must expressly disclose who the stockholder of
record is and that the agent is signing the demand as that stockholder's agent.
If you are a record owner, such as a broker, who holds Viewlogic capital
stock as a nominee for others, you may exercise a right of appraisal with
respect to the shares held for one or more beneficial owners, while not
exercising such right for other beneficial owners. In such a case, you should
specify in the written demand the number of shares as to which you wish to
demand appraisal. If you do not expressly specify the number of shares, we will
assume that your written demand covers all the shares of Viewlogic capital stock
that are in your name.
If you are a Viewlogic stockholder who elects to exercise appraisal rights,
you should mail or deliver by hand a written demand to:
Viewlogic Systems, Inc.
293 Boston Post Road West
Marlboro, Massachusetts 01752
Attention: Secretary
It is important that Viewlogic receive all written demands before the vote
concerning the merger agreement is taken at the Viewlogic special meeting. As
explained above, this written demand should be signed by, or on behalf of, the
stockholder of record. The written demand for appraisal should specify the
stockholder's name and mailing address, the number of shares of capital stock
owned, and that the stockholder is thereby demanding appraisal of that
stockholder's shares.
If you fail to comply with any of these conditions and the business
combination becomes effective, you will only be entitled to receive the business
combination consideration provided in the merger agreement.
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WRITTEN NOTICE. Within ten days after the completion of the business
combination, Viewlogic must give written notice that the business combination
has become effective to each stockholder who has fully complied with the
conditions of Section 262 of the Delaware General Corporation Law.
PETITION WITH THE CHANCERY COURT. Within 120 days after the completion of
the business combination, either the surviving corporation or any stockholder
who has complied with the conditions of Section 262, may file a petition in the
Delaware Court of Chancery. This petition should request that the chancery court
determine the value of the shares of Viewlogic stock held by all of the
stockholders who are entitled to appraisal rights. If you intend to exercise
your rights of appraisal, you should file such a petition in the chancery court.
Viewlogic has no intention at this time to file such a petition. Because
Viewlogic has no obligation to file such a petition, if you do not file such a
petition within 120 days after the completion of the business combination, you
will lose your rights of appraisal.
WITHDRAWAL OF DEMAND. If you change your mind and decide you no longer want
appraisal rights, you may withdraw your demand for appraisal rights at any time
within 60 days after the closing of the business combination. You may also
withdraw your demand for appraisal rights after 60 days after the closing of
your business combination, but only with the written consent of Viewlogic. If
you effectively withdraw your demand for appraisal rights, you will receive the
business combination consideration provided in the merger agreement.
REQUEST FOR APPRAISAL RIGHTS STATEMENT. If you have complied with the
conditions of Section 262, you are entitled to receive a statement from
Viewlogic. The statement will set forth the number of shares held by
stockholders that have demanded appraisal rights, and the number of stockholders
who own those shares. In order to receive this statement, you must send a
written request to Viewlogic within 120 days after the completion of the
business combination. After the business combination, Viewlogic has ten days
after receiving a request to mail you the statement.
CHANCERY COURT PROCEDURES. If you properly file a petition for appraisal in
the chancery court and deliver a copy to Viewlogic, Viewlogic will then have 20
days to provide the chancery court with a list of the names and addresses of all
stockholders who have demanded appraisal rights and have not reached an
agreement with Viewlogic as to the value of their shares. The chancery court
will then send notice to all of the stockholders who have demanded appraisal
rights. If the chancery court thinks it is appropriate, it has the power to
conduct a hearing to determine whether the stockholders have fully complied with
Section 262 of the Delaware General Corporation Law and whether they are
entitled to appraisal rights under Section 262. The chancery court may also
require you to submit your stock certificates to the Registry in Chancery so
that it can note on the certificates that an appraisal proceeding is pending. If
you do not follow the chancery court's directions, you may be dismissed from the
proceeding.
APPRAISAL OF SHARES. After the chancery court determines which stockholders
are entitled to appraisal rights, the chancery court will consider all relevant
factors except for any appreciation or depreciation due to the anticipation or
accomplishment of the business combination. After the chancery court determines
the fair value of the shares, it will direct Viewlogic to pay that value to the
stockholders who are entitled to appraisal rights. The chancery court can also
direct Viewlogic to pay interest, simple or compound, on that value if the
chancery court determines that interest is appropriate. In order to receive your
payment for your shares, you must then surrender your stock certificates to
Viewlogic.
The chancery court could determine that the fair value of shares of stock is
more than, the same as, or less than the business combination consideration. In
other words, if you demand appraisal rights, you could receive less
consideration than you would under the merger agreement. You should also be
aware that an opinion of an investment banking firm that the business
combination is fair is not an opinion that the business combination
consideration is the same as the fair value under Section 262.
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COSTS AND EXPENSES OF APPRAISAL PROCEEDING. The costs and expenses of the
appraisal proceeding may be assessed against Viewlogic and the stockholders
participating in the appraisal proceeding, as the chancery court deems equitable
under the circumstances. You can request that the chancery court determine the
amount of interest, if any, Viewlogic should pay on the value of stock owned by
stockholders entitled to the payment of interest. You may also request that the
chancery court allocate the expenses of the appraisal action incurred by any
stockholder pro rata against the value of all of the shares entitled to
appraisal.
LOSS OF STOCKHOLDER'S RIGHTS. If you demand appraisal rights, after the
completion of the business combination you will not be entitled to:
- vote your shares of stock, for any purpose, for which you have demanded
appraisal rights;
- receive payment of dividends or any other distribution with respect to
such shares, except for dividends or distributions, if any, that are
payable to holders of record as of a record date prior to the effective
time of the business combination; or
- receive the payment of the consideration provided for in the merger
agreement, unless you properly withdraw your demand for appraisal.
If no petition for an appraisal is filed within 120 days after the
completion of the business combination, your right to seek an appraisal will
cease. You may withdraw your demand for appraisal and accept the business
combination consideration by delivering to Viewlogic a written withdrawal of
your demand, except that:
- any attempt to withdraw made more than 60 days after the completion of the
business combination will require the written approval of Viewlogic; and
- an appraisal proceeding in the chancery court cannot be dismissed unless
the chancery court approves.
If you fail to comply strictly with the procedures described above you will
lose your appraisal rights. Consequently, if you wish to exercise your appraisal
rights, we strongly urge you to consult a legal advisor before attempting to
exercise your appraisal rights.
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THE MERGER AGREEMENT
THIS SECTION OF THE JOINT PROXY STATEMENT/PROSPECTUS DESCRIBES THE MERGER
AGREEMENT. WHILE WE BELIEVE THAT THE DESCRIPTION COVERS THE MATERIAL TERMS OF
THE MERGER AGREEMENT, THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT
IS IMPORTANT TO YOU. THE MERGER AGREEMENT IS ATTACHED TO THIS JOINT PROXY
STATEMENT/ PROSPECTUS AS ANNEX A. WE URGE YOU TO READ IT CAREFULLY IN ITS
ENTIRETY.
REPRESENTATIONS AND WARRANTIES
Each of Summit and Viewlogic made a number of representations and warranties
in the merger agreement regarding aspects of their respective businesses,
financial condition, structure and other facts pertinent to the business
combination.
Viewlogic's representations and warranties include:
- Viewlogic's corporate organization and its qualification to do
business;
- Viewlogic's certificate of incorporation and bylaws;
- Viewlogic's capitalization;
- authorization of the merger agreement;
- Viewlogic's financial statements;
- changes in Viewlogic's business since the date of its financial
statements;
- Viewlogic's taxes;
- Viewlogic's title to the properties it owns and leases;
- intellectual property used by Viewlogic;
- permits required to conduct Viewlogic's business and compliance with
those permits;
- litigation involving Viewlogic;
- Viewlogic's employee benefit plans;
- Viewlogic's employee and labor matters;
- environmental laws that apply to Viewlogic;
- Viewlogic's material contracts;
- payments, if any, required to be made by Viewlogic to employees and
directors on account of the business combination;
- information supplied by Viewlogic in this joint proxy
statement/prospectus and the related registration statement filed by
Summit;
- approval by the Viewlogic board; and
- the inapplicability of Viewlogic's stockholders rights agreement or
"poison pill" to the business combination.
Summit's representations and warranties include:
- Summit's corporate organization and its qualification to do business;
- Summit's certificate of incorporation and bylaws;
- Summit's capitalization;
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- authorization of the merger agreement;
- Summit's financial statements;
- changes in Summit's business since the date of its financial
statements;
- Summit's taxes;
- Summit's title to the properties it owns and leases;
- intellectual property used by Summit;
- permits required to conduct Summit's business and compliance with those
permits;
- litigation involving Summit;
- Summit's employee benefit plans;
- Summit's employee and labor matters;
- environmental laws that apply to Summit;
- Summit's material contracts;
- payments, if any, required to be made by Summit to employees and
directors on account of the business combination;
- information supplied by Summit in this joint proxy statement/prospectus
and the related registration statement filed by Summit;
- approval by the Summit board;
- the fairness opinion received by Summit; and
- the inapplicability of Summit's stockholders rights agreement or
"poison pill" to the business combination.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles of the
merger agreement entitled "Representations and Warranties of Viewlogic" and
"Representations and Warranties of Summit and Merger Sub."
CONDUCT OF BUSINESS BEFORE COMPLETION OF THE BUSINESS COMBINATION
Each of Summit and Viewlogic agreed that, until the completion of the
business combination or unless the other party consents in writing, it will use
commercially reasonable efforts consistent with past practices and policies to:
- preserve intact its present business organization;
- keep available the services of its present executive officers and key
employees; and
- preserve its relationships with customers, suppliers, licensors,
licensees, and others with which it has business dealings.
Each also agreed that, until the completion of the business combination or
unless the other party consents in writing, it would conduct its business in
compliance with certain specific restrictions relating to the following:
- the issuance and redemption of securities;
- modification of terms relating to stock options;
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- intellectual property;
- the issuance of dividends, other distributions or stock options;
- modification of certificate of incorporation and bylaws;
- any liquidation, restructuring, or business combination;
- the acquisition and disposition of assets;
- the incurrence of indebtedness;
- employees and employee benefits;
- capital expenditures;
- litigation;
- taxes;
- entrance into or modification of contracts;
- accounting policies and procedures; and
- waiver or release of rights.
The agreements related to the conduct of business in the merger agreement
are complicated and not easily summarized. You are urged to carefully read the
sections of the merger agreement entitled "Conduct of Business Prior to the
Effective Time."
NO SOLICITATION OF OTHER ACQUISITION PROPOSAL
Until the business combination is completed or the merger agreement is
terminated, each of Summit and Viewlogic has agreed not to directly or
indirectly take any of the following actions:
- solicit, initiate, encourage or induce any other acquisition proposal;
- participate in any discussions or negotiations regarding any other
acquisition proposal; and
- approve, endorse or recommend any other acquisition proposal.
However, after receipt of an unsolicited, written, bona fide acquisition
proposal that the applicable company's board of directors reasonably concludes
may result in a transaction more favorable to the company's stockholders from a
financial point of view than the business combination between Summit and
Viewlogic, the board of directors may engage in discussions with respect to the
other acquisition proposal. See "--Payment of Termination Fee."
TREATMENT OF VIEWLOGIC STOCK OPTIONS
Upon completion of the business combination, each outstanding option to
purchase Viewlogic common stock will be converted, in accordance with its terms,
into an option to purchase the number of shares of Summit common stock equal to
0.67928 times the number of shares of Viewlogic common stock which could have
been obtained before the business combination upon the exercise of each option,
rounded down to the nearest whole share. The exercise price will be equal to the
exercise price per share of Viewlogic common stock subject to the option or
warrant before conversion divided by 0.67928, rounded up to the nearest whole
cent. The other terms of each option and the Viewlogic option plans above under
which the options were issued will continue to apply in accordance with their
terms.
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Summit intends to file a registration statement on Form S-8 for the shares
of Summit common stock issuable with respect to options under the Viewlogic
stock option plans and will maintain the effectiveness of that registration
statement for as long as any of the options remain outstanding.
BOARD OF DIRECTORS AND OFFICERS OF THE COMBINED COMPANY
As of the effective time of the business combination, the combined company's
board of directors will consist of the following five members:
- William J. Herman (with a term expiring in 2000);
- Lorne Cooper and Steven Erwin (with terms expiring in 2001); and
- William Botts and Keith Geeslin (with terms expiring in 2002).
The officers of the combined company will consist of the following
individuals:
- William J. Herman--Chairman of the Board and Chief Executive Officer;
- Richard G. Lucier--Executive Vice President and Chief Operating Officer;
- Paula Cassidy--Vice President, Human Resources;
- Peter T. Johnson--Vice President, Business Development and Chief Legal
Officer;
- Gary Kiaski--Vice President, Worldwide Sales;
- Kevin O'Brien--Vice President, Finance and Chief Financial Officer;
- Guy Moshe--Senior Vice President and General Manager of Summit Israel; and
- Eric Benhayoun--Vice President, General Manager European Operations.
CONDITIONS TO COMPLETION OF THE BUSINESS COMBINATION
The respective obligations of Summit and Viewlogic to complete the business
combination and the other transactions contemplated by the merger agreement are
subject to the satisfaction or waiver of each of the following conditions before
completion of the business combination:
- Summit's registration statement as filed with the SEC of which this joint
proxy statement/ prospectus is a part must be effective, no stop order
suspending its effectiveness will be in effect and no proceedings for
suspension of its effectiveness will be pending before or threatened by
the SEC;
- the merger agreement must be approved and adopted by Viewlogic
stockholders;
- the issuance of shares of Summit common stock pursuant to the business
combination and an amendment to Summit's certificate of incorporation to
increase the authorized number of shares of Summit common stock must be
approved by Summit stockholders;
- no law, regulation or order must be enacted or issued which has the effect
of making the business combination illegal or otherwise prohibiting
completion of the business combination substantially on the terms
contemplated by the merger agreement; and
- Summit and Viewlogic must each receive from their respective tax counsel
an opinion to the effect that the business combination will constitute a
tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. However, if counsel to either Summit or Viewlogic
does not render this opinion, this condition will be satisfied if counsel
to the other party renders the opinion.
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Viewlogic's obligations to complete the business combination and the other
transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the business combination:
- Summit's representations and warranties must be true and correct as if
made at and as of such time except (i) to the extent Summit's
representations and warranties address matters only as of a particular
date, they must be true and correct as of that date and (ii) that any
qualification based on "material adverse effect", "material" or similar
phrases shall be disregarded for any applicable representations and
warranties;
- Summit must perform or comply in all material respects with all of its
agreements and covenants required by the merger agreement to be performed
or complied with by Summit at or before completion of the business
combination; and
- the shares of Summit common stock to be issued in connection with the
business combination shall be approved for quotation on the Nasdaq
National Market.
Summit's obligations to complete the business combination and the other
transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the business combination:
- Viewlogic's representations and warranties must be true and correct as if
made at and as of such time except (i) to the extent Viewlogic's
representations and warranties address matters only as of a particular
date, they must be true and correct as of that date and (ii) that any
qualification based on "material adverse effect", "material" or similar
phrases shall be disregarded for any applicable representations and
warranties;
- Viewlogic must perform or comply in all material respects with all of its
agreements and covenants required by the merger agreement to be performed
or complied with by Viewlogic at or before completion of the business
combination; and
- holders of no more than 7.5% of the outstanding Viewlogic capital stock
shall have exercised dissenters' rights.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to completion of
the business combination, whether before or after approval and adoption of the
merger agreement and approval of the business combination by Viewlogic
stockholders and Summit stockholders:
- by mutual consent of Summit and Viewlogic;
- by Summit or Viewlogic, if the business combination is not completed by
the earlier of (1) 75 days after the effective date of this joint proxy
statement/prospectus or (2) February 29, 2000 except that the right to
terminate the merger agreement is not available to any party whose action
or failure to act has been a principal cause of or resulted in the failure
of the business combination to occur and such action or failure to act
constitutes a material breach of the merger agreement;
- by Summit or Viewlogic, if there is any order of a court or governmental
authority having jurisdiction over either company permanently enjoining,
restraining or prohibiting the completion of the business combination
which is final and nonappealable;
- by Summit or Viewlogic, if the requisite stockholder approval contemplated
under this joint proxy statement/prospectus shall not have been obtained,
except that the right to terminate the merger agreement pursuant to this
provision is not available to the party whose action or failure
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to act cause the failure to obtain such stockholder approval and such
action or failure to act constitutes a material breach of the merger
agreement;
- by Summit or Viewlogic, if Viewlogic's board of directors withdraws or
amends or modifies in a manner adverse to Summit its unanimous
recommendation in favor of the adoption and approval of the merger
agreement or the approval of the business combination;
- by Summit or Viewlogic, if Summit's board of directors withdraws or amends
or modifies in a manner adverse to Viewlogic its unanimous recommendation
in favor of the adoption and approval of the merger agreement or the
approval of the business combination;
- by Viewlogic, upon a breach of any representation, warranty, covenant or
agreement on the part of Summit set forth in the merger agreement, or if
any of Summit's representations or warranties are or become untrue so that
the corresponding condition to completion of the business combination
would not be met. However, if the breach or inaccuracy is curable by
Summit through the exercise of its commercially reasonable efforts, and
Summit continues to exercise such commercially reasonable efforts,
Viewlogic may not terminate the merger agreement if the breach or
inaccuracy is being cured by Summit; or
- by Summit, upon a breach of any representation, warranty, covenant or
agreement on the part of Viewlogic set forth in the merger agreement, or
if any of Viewlogic's representations or warranties are or become untrue
so that the corresponding condition to completion of the business
combination would not be met. However, if the breach or inaccuracy is
curable by Viewlogic through the exercise of its commercially reasonable
efforts and Viewlogic continues to exercise such commercially reasonable
efforts Summit may not terminate the merger agreement if the breach or
inaccuracy is being cured by Viewlogic.
PAYMENT OF TERMINATION FEE
Summit is obligated to pay to Viewlogic a termination fee of $2.5 million if
the merger agreement is terminated in any of the following circumstances:
- by Viewlogic, if Summit's board of directors withdraws or amends or
modifies in a manner adverse to Viewlogic its unanimous recommendation in
favor of the adoption and approval of the merger agreement or the approval
of the business combination; or
- by Summit or Viewlogic, if the requisite stockholder approval contemplated
under this joint proxy statement/prospectus shall not have been obtained,
and, among other things, Summit enters into an alternative business
combination transaction within twelve months of such termination.
Viewlogic is obligated to pay to Summit a termination fee of $2.5 million if
the merger agreement is terminated in any of the following circumstances:
- by Summit, if Viewlogic's board of directors withdraws or amends or
modifies in a manner adverse to Summit its unanimous recommendation in
favor of the adoption and approval of the merger agreement or the approval
of the business combination; or
- by Summit or Viewlogic, if the requisite stockholder approval contemplated
under this joint proxy statement/prospectus shall not have been obtained,
and, among other things, Viewlogic enters into an alternative business
combination transaction within twelve months of such termination.
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EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Summit and Viewlogic may amend the merger agreement before completion of the
business combination.
Either of Summit and Viewlogic may extend the other's time for the
performance of any of the obligations or other acts under the merger agreement,
waive any inaccuracies in the other's representations and warranties and waive
compliance by the other with any of the agreements or conditions contained in
the merger agreement other than stockholder approval.
INTERESTS OF SUMMIT MANAGEMENT IN THE BUSINESS COMBINATION
In considering the recommendation of the Summit board of directors in favor
of the business combination and the related amendments to Summit's certificate
of incorporation, stockholders of Summit should be aware that the employment
agreement of Arthur Fletcher, Summit's Treasurer and Director of Investor
Relations, provides that, if Summit's headquarters are relocated from its
present location by more than 50 miles, then the vesting of Mr. Fletcher's
option for 50,000 shares of Summit common stock will accelerate in full. In
addition, Mr. Fletcher will receive certain severance benefits if his employment
is terminated after the relocation. Summit and Viewlogic intend to relocate
Summit's headquarters from Portland, Oregon to Boston, Massachusetts.
Accordingly, the above mentioned provisions will likely be triggered.
INTERESTS OF VIEWLOGIC DIRECTORS AND MANAGEMENT IN THE BUSINESS COMBINATION
In considering the recommendation of the Viewlogic board of directors in
favor of the merger agreement and business combination, stockholders of
Viewlogic should be aware that certain directors and executive officers of
Viewlogic have interests in the business combination as specified in the merger
agreement that are different from, or in addition to, the interests of
stockholders of Viewlogic. These interests relate to or arise from:
- the continued indemnification of current directors and officers of
Viewlogic; and
- the retention of some current officers of Viewlogic as employees of the
combined company.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that Summit will, or will cause the combined
company to, fulfill and honor in all respects the obligations of Viewlogic to
indemnify each person who is or was a director or officer of Viewlogic pursuant
to any indemnification provision of the Viewlogic certificate of incorporation
or bylaws or equivalent constituent documents of Viewlogic as each was in effect
on the date of the merger agreement. The certificate of incorporation and bylaws
of Summit contain substantially the same provisions with respect to
indemnification set forth in the certificate of incorporation and bylaws of
Viewlogic. These indemnification provisions will not be amended, repealed or
otherwise modified for a period of six years after completion of the business
combination, in any manner that would adversely affect the rights of the current
directors or officers of Viewlogic.
VIEWLOGIC EXECUTIVE OFFICERS
After the business combination, the combined company will employ some
current executive officers of Viewlogic, and some directors of Viewlogic will
serve as directors of the combined company.
- Mr. Herman will be employed by the combined company as Chairman of the
Board of Directors and Chief Executive Officer and will serve the combined
company as a director;
- Ms. Cassidy will be employed by the combined company as Vice President,
Human Resources;
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- Mr. Johnson will be employed by the combined company as Vice President,
Business Development, Chief Legal Officer and Secretary;
- Mr. Kiaski will be employed by the combined company as Vice President,
Worldwide Sales;
- Mr. Lucier will be employed by the combined company as Executive Vice
President and Chief Operating Officer;
- Mr. O'Brien will be employed by the combined company as Vice President,
Finance and Chief Financial Officer; and
- Mr. Geeslin will serve as a director of the combined company.
Mr. Herman's and Mr. Lucier's existing employment agreements with Viewlogic
will be assumed by the combined company if the business combination is
completed. In that event, each of Mr. Herman and Mr. Lucier will be entitled to
nine month's base salary and benefits if he is terminated by the combined
company without cause.
VOTING AGREEMENTS
Stockholders of Viewlogic who own an aggregate of shares of Viewlogic
voting securities, representing a approximately % ownership of Viewlogic's
voting securities as of the Viewlogic record date, have entered into voting
agreements with Summit. These stockholders have agreed to vote all shares of
Viewlogic voting securities they have beneficial ownership of and any Viewlogic
voting securities they acquire beneficial ownership of prior to the termination
of the voting agreements in favor of approval of the business combination. In
addition, these stockholders have granted irrevocable proxies to the board of
directors of Summit to vote their voting securities in favor of approval of the
business combination. These voting agreements are irrevocable provided the
merger agreement is not terminated.
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COMPARISON OF CAPITAL STOCK
DESCRIPTION OF SUMMIT CAPITAL STOCK
The authorized capital stock of Summit consists of 30,000,000 shares of
common stock, $0.01 par value per share, and 5,000,000 shares of Preferred
Stock, $0.01 par value per share. At the Summit special meeting, stockholders
will be asked to consider and vote upon a proposal to approve an amendment to
Summit's Amended and Restated Certificate of Incorporation to increase the
authorized capital stock of Summit by 20,000,000 shares to 50,000,000 shares,
contingent upon stockholder approval of the business combination.
SUMMIT COMMON STOCK
As of the Summit record date, there were shares of Summit common stock
outstanding. Summit common stock is quoted on the Nasdaq National Market under
the symbol SMMT. As of the Summit record date, the outstanding Summit common
stock was held of record by approximately stockholders. Stockholders of
Summit common stock are entitled to one vote per share on all matters to be
voted upon by the stockholders. The stockholders do not have a right to take
action by written consent nor may they cumulate votes in connection with the
election of directors. The holders of Summit common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Summit board out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of Summit, the holders of Summit common
stock are entitled to share ratably in all assets remaining after payment of
liabilities. The Summit common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the Summit common stock. All outstanding shares of Summit common
stock are fully paid and non-assessable, and the shares of Summit common stock
to be outstanding upon completion of the business combination will be fully paid
and non-assessable.
SUMMIT PREFERRED STOCK
Summit has 5,000,000 shares of Preferred Stock authorized, of which, as of
the Summit record date, none were outstanding. The Summit board has the
authority to issue these shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions granted to or imposed
upon any unissued and undesignated shares of Preferred Stock and to fix the
number of shares constituting any series and the designations of such series,
without any further vote or action by the stockholders. Although it presently
has no intention to do so, the Summit board, without stockholder approval, can
issue Preferred Stock with voting and conversion rights which could adversely
affect the voting power or other rights of the holders of Summit common stock
and the issuance of Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of Summit.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of the Summit common stock is EquiServe and
its telephone number is (617) 434-2200.
DESCRIPTION OF VIEWLOGIC CAPITAL STOCK
The authorized capital stock of Viewlogic consists of (i) 35,000,000 shares
of common stock, $0.0001 par value per share and (ii) 22,000,000 shares of
preferred stock, $0.001 par value per share, of which 17,000,000 shares have
been designated Series A Voting Preferred Stock and 5,000,000 shares have been
designated Series A-1 Non-Voting Preferred Stock. There is no market for
Viewlogic capital stock.
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VIEWLOGIC COMMON STOCK
CAPITALIZATION
As of the Viewlogic record date, there were shares of Viewlogic
common stock outstanding. As of the Viewlogic record date, the outstanding
Viewlogic common stock was held of record by approximately stockholders.
Viewlogic's certificate of incorporation provides that the number of authorized
shares of Viewlogic common stock may be increased or decreased (but not below
the number then outstanding) by the affirmative vote of the holders of the
majority of the Viewlogic common stock entitled to vote, irrespective of the
provisions of Section 242(b)(2) of the Delaware General Corporation Law.
VOTING RIGHTS, LIQUIDATION AND OTHER RIGHTS
Stockholders of Viewlogic common stock are entitled to one vote for each
share held on matters submitted to a vote of stockholders. Holders of Viewlogic
common stock may take action by written consent. Holders of Viewlogic common
stock do not have cumulative voting rights. Accordingly, holders of a majority
of the shares of Viewlogic common stock entitled to vote in any election of
directors may elect all of the directors standing for election. Upon the
liquidation, dissolution or winding up of Viewlogic, the holders of Viewlogic
common stock are entitled to receive ratably the net assets of Viewlogic
available after the payment of all debts and other liabilities and subject to
the prior rights of any outstanding preferred stock. The Viewlogic common stock
has no preemptive, subscription, redemption or conversion rights. All
outstanding shares of Viewlogic common stock are fully paid and nonassessable.
DIVIDENDS
Holders of Viewlogic common stock are entitled to receive their
proportionate share of any dividends declared by the Viewlogic board of
directors, subject to any preferential dividend rights of outstanding preferred
stock. On October 2, 1998, Viewlogic paid a stock dividend of 3,965.722 shares
of Viewlogic common stock for each of the 1,000 shares of Viewlogic common stock
outstanding on October 1, 1998. Viewlogic also paid a cash dividend of
$7.56291971 per share of Viewlogic common stock outstanding immediately after
that stock dividend.
VIEWLOGIC PREFERRED STOCK
CAPITALIZATION
Viewlogic has 22,000,000 shares of preferred stock authorized. The Viewlogic
board of directors has the authority to issue preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
to or imposed upon any unissued and undesignated shares of preferred stock and
to fix the number of shares constituting any series and the designations of any
series, without any further vote or action by the Viewlogic stockholders. Of the
22,000,000 shares of Viewlogic preferred stock authorized, as of the Viewlogic
record date shares of Series A Voting Preferred Stock were outstanding
and shares of Series A-1 Non-Voting Preferred Stock were outstanding.
As of the Viewlogic record date, the outstanding Viewlogic Series A Voting
Preferred Stock was held of record by approximately stockholders and
the outstanding Viewlogic Series A-1 Non-Voting Preferred stock was held by
stockholder.
CONVERSION
Subject to specified terms, conditions, limitations and adjustments set
forth in Viewlogic's certificate of incorporation, holders of Viewlogic
preferred stock have the right at their option to convert any of those shares,
without the payment of additional consideration, into the number of fully
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paid and nonassessable shares of Viewlogic common stock as is determined by a
formula set forth in Viewlogic's certificate of incorporation. No fractional
shares of Viewlogic common stock may be issued upon conversion of Viewlogic
preferred stock and the number of shares of Viewlogic common stock to be issued
will be rounded to the nearest whole share. As of the Viewlogic record date,
each share of Series A Voting Preferred Stock and Series A Non-Voting Preferred
Stock was convertible into one share of Viewlogic common stock.
VOTING RIGHTS
Holders of Viewlogic Series A Voting Preferred Stock are entitled to cast a
number of votes equal to the number of shares of Viewlogic common stock into
which such Series A Voting Preferred Stock could be converted on matters
submitted to a vote of stockholders. Holders of Viewlogic Series A Voting
Preferred Stock may take action by written consent. As long as at least a
majority of the shares of Viewlogic Series A Voting Preferred Stock originally
issued remain outstanding, the holders of Viewlogic Series A Voting Preferred
Stock are entitled to elect one director of Viewlogic at each annual election of
directors. Except as provided by law, and in specific situations set forth in
Viewlogic's certificate of incorporation, holders of Viewlogic Series A Voting
Preferred Stock vote together with the holders of Viewlogic common stock.
Holders of Viewlogic Series A-1 Non-Voting Preferred Stock are not entitled to
vote or to receive notice of any meeting of stockholders.
DIVIDENDS
Viewlogic's certificate of incorporation provides that the Viewlogic board
of directors may declare and Viewlogic may pay dividends on its capital stock.
The holders of Viewlogic preferred stock are entitled to receive cumulative
dividends at a specified rate, prior and in preference to any payment of any
dividend to holders of Viewlogic common stock. In addition, holders of Viewlogic
preferred stock are entitled to receive any payment of dividends to holders of
Viewlogic common stock in proportion to the number of shares of Viewlogic common
stock which would be held by each holder if all shares of Viewlogic preferred
stock were converted to Viewlogic common stock.
LIQUIDATION
Upon the liquidation, dissolution or winding up of Viewlogic, the holders of
Viewlogic preferred stock are entitled to receive, prior and in preference to
any distribution of any of the assets of Viewlogic to holders of Viewlogic
common stock, an amount per share equal to the sum of the purchase price of each
share of preferred stock, plus the sum of (i) any declared but unpaid dividends
and (ii) other dividends payable in connection with events specified in
Viewlogic's certificate of incorporation. If upon liquidation, dissolution or
winding up of Viewlogic the remaining assets of Viewlogic available for
distribution to its stockholders are insufficient to pay the holders of
Viewlogic preferred stock the full amount to which they are entitled, the
holders of Viewlogic preferred stock will share ratably in any distribution of
the remaining assets and funds of Viewlogic in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them
upon the distribution if all amounts payable on or with respect to such shares
were paid in full.
REDEMPTION
At any time after October 2, 2006, with a written request from the holders
of not less than a majority of the then outstanding Viewlogic Series A Voting
Preferred Stock, Viewlogic will pay in cash holders of Viewlogic preferred stock
specified in the written request a sum per share equal to $2.00 per share plus
all declared but unpaid dividends on that share.
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REGISTRATION RIGHTS
Under an investors' rights agreement, holders of Viewlogic preferred stock
and some holders of Viewlogic common stock collectively holding in the aggregate
approximately 20,000,000 shares of Viewlogic common stock, on an actual and as
converted basis, are entitled, under specified conditions, to demand
registration under the Securities Act of their shares of common stock
then-issued or their shares of common stock issuable upon conversion of their
shares of Viewlogic preferred stock. Additionally, in the event Viewlogic
proposes to register any of its securities under the Securities Act, these
stockholders are entitled to include their shares in the registration, subject
to the right of the underwriter of any underwritten offering to exclude some or
all of their shares from the registration for marketing reasons. Subject to the
terms of voting agreements entered into between Summit and the holders of an
aggregate of 14,000,000 shares of Viewlogic common stock, on an as converted
basis, if the business combination is completed, these registration rights will
remain outstanding and will be applicable to the shares of Summit common stock
received by the holders of these registration rights in the business
combination.
COMPARISON OF CERTAIN RIGHTS
After consummation of the business combination, the holders of Viewlogic
capital stock who receive Summit common stock under the terms of the merger
agreement will become stockholders of the combined company. As stockholders of
Viewlogic, their rights are presently governed by Delaware law, the Viewlogic
certificate of incorporation and the Viewlogic bylaws. As stockholders of the
combined company, their rights will be governed by Delaware law, Summit's
certificate of incorporation and Summit's bylaws. The following discussion
compares the rights of holders of Viewlogic capital stock and holders of Summit
common stock and various provisions of the charters and bylaws of Viewlogic and
Summit. This summary is not complete and is qualified in its entirety by
reference to the Viewlogic certificate of incorporation and Viewlogic bylaws,
the Summit certificate of incorporation and the Summit bylaws and the relevant
provisions of Delaware law.
SPECIAL MEETING OF THE STOCKHOLDERS
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or by any other person authorized to do so in the certificate
of incorporation or the bylaws. The Summit certificate of incorporation provides
that special meetings of the stockholders generally may only be called by the
board of directors. The Viewlogic bylaws provide that special meetings of the
stockholders may be called by the board of directors or Viewlogic's President.
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
Under Delaware law, unless the certificate of incorporation provides
otherwise, any action to be taken by stockholders may be taken without a
meeting, without prior notice, and without a vote, if the stockholders having
the number of votes that would be necessary to take such action at a meeting at
which all stockholders were present and voted consent to the action in writing.
The Summit certificate of incorporation does not allow for actions by written
consent of the stockholders. The Viewlogic bylaws permit actions by written
consent of the stockholders.
CUMULATIVE VOTING
Neither the Summit certificate of incorporation nor the Viewlogic
certificate of incorporation provides for cumulative voting by stockholders in
elections of directors.
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CLASSIFICATION OF THE BOARD OF DIRECTORS
The Summit certificate of incorporation and Summit bylaws provide that the
number of directors shall be five and shall be fixed from time to time by
amendments to the Summit certificate of incorporation or Summit bylaws adopted
by the Summit board or stockholders. The Summit certificate of incorporation
provides for three classes of directors, as nearly equal in size as possible,
with staggered terms. The Viewlogic bylaws provide that the number of directors
shall be fixed from time to time by resolution of either the Viewlogic
stockholders or the Viewlogic board of directors.
REMOVAL OF DIRECTORS
Under Delaware law, the stockholders of a corporation that has a classified
board of directors, such as Summit, may only remove directors for cause. The
Summit bylaws provide that any director or the entire board of directors may be
removed only for cause by the holders of a majority of the then-outstanding
shares of capital stock entitled to vote in the election of directors. The
Viewlogic bylaws provide that any director or the entire board of directors may
be removed with or without cause by holders of a majority of the shares then
entitled to vote in an election of directors, except that the directors elected
by the holders of a particular class or series of stock may be removed without
cause only by vote of the holders of a majority of the outstanding shares of
that class or series.
EXCULPATION OF DIRECTORS
Each of Summit and Viewlogic has included in its certificate of
incorporation a provision which eliminates the personal liability of its
directors from monetary damages resulting from a breach of fiduciary duty as a
director to the fullest extent permitted by the Delaware law.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
The Summit bylaws and the Viewlogic certificate of incorporation and the
Viewlogic bylaws require indemnification of their directors and officers to the
maximum extent and in the manner permitted by Delaware law. The Summit bylaws
also permit Summit to indemnify its employees and agents.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Pursuant to the September 16, 1999 merger agreement between Viewlogic and
Summit, Viewlogic will be merged with and into a wholly owned subsidiary of
Summit. Upon completion of the acquisition, the existing Viewlogic shareholders
will own approximately 51% of the outstanding common stock of the combined
company. Consequently, for accounting purposes, the transaction will be
accounted for as a reverse acquisition with Viewlogic as the acquirer.
Subsequent to consummation of the transaction, the historical financial
statements of Viewlogic will become the historical financial statements of the
combined company. The purchase price will be allocated to the assets and
liabilities of Summit based on their fair values. The purchase price will be
based on the value of Summit's equity using the average market price of Summit's
common stock of $3.075 for the five-day period that includes the date of the
agreement. Based on this price, the purchase price on a pro forma basis as of
June 30, 1999 has been estimated at $54,279,000, which includes the value of the
outstanding Summit common stock, the fair value of outstanding options to
purchase Summit common stock and Viewlogic's estimated direct costs of the
acquisition.
The unaudited pro forma financial information does not give effect to any
cost savings and other synergies that may result from the merger. Viewlogic is
developing its plans for integration of the business but cannot make final
decisions until the merger is complete. For purposes of the pro forma financial
information, Viewlogic has estimated that merger and integration costs,
consisting primarily of severance costs, asset impairments and facility shutdown
costs, will be approximately $2,400,000. Viewlogic will record a liability at
the closing date of approximately $2,574,000, representing the federal and state
taxes expected to be owed upon the repatriation of Summit's foreign earnings.
The purchase price will be allocated to the assets acquired and liabilities
assumed based on their fair values at the closing date. For purposes of the pro
forma financial information, Viewlogic has made a preliminary estimate of the
fair values of identifiable assets and liabilities of Summit at the date of
acquisition.
An independent third party appraisal company conducted a preliminary
valuation of Summit's intangible assets. These intangibles include existing
technology, in-process research and development, the customer base and the
in-place workforce. The preliminary valuation of intangibles included
$16,250,000 for existing technology, $2,050,000 for in-process research and
development, $2,100,000 for the customer base and $3,850,000 for the workforce.
The excess of the purchase price over the fair value of identifiable tangible
and intangible net assets of $13,419,000 will be allocated to goodwill.
Intangible assets are expected to be amortized over periods ranging from 3 to 10
years. The fair value of the in-process research and development, which relates
to Summit's Visual HDL 2000, Visual SLD and Regent 2.0 research projects, will
be recorded as an expense in the period in which the merger is completed.
The valuation of the existing technology and in-process research and
development was determined using the income method. Revenue and expense
projections as well as technology assumptions were prepared through 2009 based
on information provided by Summit management. The projected cash flows were
discounted using a 25% to 30% rate. The valuation of the in-process research and
development was determined separately from all other acquired assets using the
percentage of completion method. The percentage of completion ratio was
calculated by dividing the total expected expenditures for each project by the
total estimated expenditures to achieve technological feasibility.
The value assigned to in-process technology relates primarily to two
research projects, Visual HDL 2000 and Visual SLD. These technologies have not
yet reached technological feasibility and have no alternative future use. The
nature of the efforts required to develop the in-process technologies into
commercially viable products principally relate to the completion of all
planning, designing, prototyping, verification and testing activities that are
necessary to establish that the products can be designed to meet their design
specifications, including function, features and technical performance
requirements. Visual HDL 2000 represents a major rearchitecture of the two
existing Visual HDL products. This new
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generation product will integrate these two existing products along with a newly
developed compiler. The project is approximately 25% complete with an initial
release date expected to occur in the fourth quarter of 2000. The Visual SLD
research project represents the development of an entirely new product targeted
at a customer base not previously approached for the Visual product line. This
project is estimated to be 75% complete and is expected to reach technological
feasibility in the second quarter of 2000.
Based on the timing of the closing of the transaction, the finalization of
the integration plans and other factors, the pro forma adjustments may differ
materially from those presented in the pro forma financial information. A final
appraisal of the intangibles will be performed as of the closing date and the
allocation adjusted accordingly. The income statement effect of these
adjustments will depend on the nature and amount of the assets or liabilities
adjusted.
The pro forma financial information does not purport to represent what the
consolidated financial position or results of operations actually would have
been if the merger in fact had occurred on June 30, 1999 or at the beginning of
the periods presented or to project the consolidated financial position or
results of operations as of any future date or any future period. It should be
read in conjunction with the historical consolidated financial statements of
Viewlogic and Summit, including the related notes, and other financial
information included in this joint proxy statement/prospectus.
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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------ PRO FORMA PRO FORMA
SUMMIT VIEWLOGIC ADJUSTMENTS COMBINED
------- --------- ------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $24,028 $ 2,646 $ 26,674
Accounts receivable, net.................................. 8,533 9,877 18,410
Prepaid expenses and other................................ 585 1,518 2,103
Deferred income taxes..................................... 792 1,568 2,360
------- --------- ---------
Total current assets.................................... 33,938 15,609 49,547
Property and equipment, net............................... 3,834 4,603 $ (600)(A) 7,837
Capitalized software costs--net........................... 2,387 (143)(B) 2,244
Purchased technology, net................................. 980 16,250(A) 17,230
Other intangibles, net.................................... 2,366 -- 2,100(A) 5,950
3,850(A)
(2,366)(A)
Goodwill, net............................................. 1,521 -- 13,419(A) 13,419
(1,521)(A)
Other..................................................... 3,013 1,026 -- 4,039
------- --------- ------------- ---------
Total assets............................................ $44,672 $24,605 $ 30,989 $100,266
------- --------- ------------- ---------
------- --------- ------------- ---------
LIABILITIES
Current liabilities:
Notes payable, current portion............................ $ 92 $ 2,750 $ 2,842
Capital lease obligations, current portion................ 20 176 196
Accounts payable.......................................... 982 1,140 2,122
Accrued liabilities....................................... 4,873 6,493 $ 2,688(A) 14,054
Deferred revenue.......................................... 5,546 12,749 18,295
------- --------- ------------- ---------
Total current liabilities............................... 11,513 23,308 2,688 37,509
Notes payable, long-term portion.......................... -- 13,750 -- 13,750
Line of credit............................................ -- 500 -- 500
Deferred revenue, less current portion.................... 117 -- -- 117
Deferred tax liability.................................... 489 1,373 10,268(A) 12,130
Capital lease obligations, long-term portion.............. -- 380 380
------- --------- ------------- ---------
Total liabilities....................................... 12,119 39,311 12,956 64,386
------- --------- ------------- ---------
Commitments and contingencies...............................
Redeemable, convertible preferred stock..................... -- 32,000 (32,000)(A) --
------- --------- ------------- ---------
STOCKHOLDERS' EQUITY
Common stock.............................................. 156 4 (4)(A) 318
162(A)
Additional paid-in capital................................ 44,354 2,278 40,111(A) 86,743
Deferred compensation..................................... -- (1,636) (1,636)
Accumulated deficit....................................... (11,957) (47,229) 11,957(A) (49,422)
(2,050)(A)
(143)(B)
Accumulated other comprehensive income (loss)............. -- (123) (123)
------- --------- ------------- ---------
Total stockholders' equity.............................. 32,553 (46,706) 50,033 35,880
------- --------- ------------- ---------
Total liabilities and stockholders' equity.............. $44,672 $24,605 $ 30,989 $100,266
------- --------- ------------- ---------
------- --------- ------------- ---------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------ PRO FORMA PRO FORMA
SUMMIT VIEWLOGIC ADJUSTMENTS COMBINED
------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product............................................................. $33,589 $22,683 $ -- $56,272
Maintenance, services and other..................................... 10,009 32,554 -- 42,563
------- --------- ------------- ---------
Total revenues.................................................... 43,598 55,237 98,835
------- --------- ------------- ---------
Cost of revenues:
Product............................................................. 744 5,112 5,856
Maintenance, services and other..................................... 955 5,071 6,026
Amortization of purchased technologies.............................. 661 -- (661)(A) 5,200
5,200(D)
------- --------- ------------- ---------
Total cost of revenues............................................ 2,360 10,183 4,539 17,082
------- --------- ------------- ---------
Gross margin.......................................................... 41,238 45,054 (4,539) 81,753
Operating expenses:
Sales and marketing................................................. 11,713 18,930 (40)(C) 30,603
Research and development............................................ 13,042 10,028 23,070
General and administrative.......................................... 4,398 3,675 (80)(C) 7,993
Stock compensation.................................................. -- 117 117
Amortization of goodwill and other intangibles...................... 2,791 3,045(D) 3,045
(2,791)(A)
Non-recurring charges............................................... 1,249 452 1,701
------- --------- ------------- ---------
Total operating expenses.......................................... 33,193 33,202 134 66,529
------- --------- ------------- ---------
Operating income.................................................. 8,045 11,852 (4,673) 15,224
Interest income..................................................... 171 171
Interest expense.................................................... (4) (342) (346)
Other, net.......................................................... 1,097 (1,761) (664)
------- --------- ------------- ---------
Income before income taxes........................................ 9,138 9,920 (4,673) 14,385
Income tax provision................................................ 4,037 4,053 (2,761)(E) 7,715
46(C)
1,300(F)
1,040(A)
------- --------- ------------- ---------
Net income........................................................ $ 5,101 $ 5,867 $ (4,298) $ 6,670
------- --------- ------------- ---------
------- --------- ------------- ---------
Net income per share--basic:
Net income per share.............................................. $ 0.34 $ 1.48 $ 0.21
------- --------- ---------
------- --------- ---------
Number of shares used in computing basic net income per share..... 15,155 3,966 31,390
------- --------- ---------
------- --------- ---------
Net income per share--diluted:
Net income per share.............................................. $ 0.32 $ 0.73 $ 0.21
------- --------- ---------
------- --------- ---------
Number of shares used in computing diluted net income per share... 16,115 7,999 32,350
------- --------- ---------
------- --------- ---------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------ PRO FORMA PRO FORMA
SUMMIT VIEWLOGIC ADJUSTMENTS COMBINED
------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product............................................................. $ 8,605 $ 13,099 $ -- $21,704
Maintenance, services and other..................................... 5,393 14,133 -- 19,526
------- --------- ------------- ---------
Total revenues.................................................... 13,998 27,232 -- 41,230
------- --------- ------------- ---------
Cost of revenues:
Product............................................................. 258 2,737 -- 2,995
Maintenance, services and other..................................... 606 3,156 -- 3,762
Amortization of purchased technologies.............................. 331 -- (331)(A) 2,275
2,275(D)
------- --------- ------------- ---------
Total cost of revenues............................................ 1,195 5,893 1,944 9,032
------- --------- ------------- ---------
Gross margin.......................................................... 12,803 21,339 (1,944) 32,198
------- --------- ------------- ---------
Operating expenses:
Sales and marketing................................................. 6,087 11,230 (20)(C) 17,297
Research and development............................................ 5,167 5,478 -- 10,645
General and administrative.......................................... 2,540 2,019 (40)(C) 4,519
Amortization of goodwill and other intangibles...................... 1,395 120 1,523(D) 1,643
(1,395)(A)
Stock compensation.................................................. 245 245
Non-recurring charges............................................... 1,340 -- -- 1,340
------- --------- ------------- ---------
Total operating expenses.......................................... 16,529 19,092 68 35,689
------- --------- ------------- ---------
Operating income (loss)........................................... (3,726) 2,247 (2,012) (3,491)
Interest income..................................................... -- 63 -- 63
Interest expense.................................................... -- (655) (655)
Other, net.......................................................... 488 (34) -- 454
------- --------- ------------- ---------
Income (loss) before income taxes................................. (3,238) 1,621 (2,012) (3,629)
Income tax provision................................................ -- 746 (746)(E) --
------- --------- ------------- ---------
Net income (loss)................................................. $(3,238) $ 875 $(1,266) $(3,629)
------- --------- ------------- ---------
------- --------- ------------- ---------
Net income (loss) per share--basic:
Net income(loss) per share........................................ $ (0.21) $ 0.21 $ (0.11)
------- --------- ---------
------- --------- ---------
Number of shares used in computing basic net income per share..... 15,666 4,233 31,901
------- --------- ---------
------- --------- ---------
Net income (loss) per share--diluted:
Net income(loss) per share........................................ $ (0.21) $ 0.04 $ (0.11)
------- --------- ---------
------- --------- ---------
Number of shares used in computing diluted net income per share... 15,666 20,761 31,901
------- --------- ---------
------- --------- ---------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
65
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma combined condensed financial statements give effect
to Summit's acquisition of Viewlogic through a merger and exchange of shares.
The unaudited pro forma combined condensed statements of operations for the year
ended December 31, 1998 and the six months ended June 30, 1999 reflect this
transaction as if it had taken place January 1, 1998. The unaudited pro forma
combined balance sheet gives effect to this transaction as if it had taken place
on June 30, 1999.
Below is a table of the estimated acquisition costs and purchase price
allocation (in thousands):
<TABLE>
<CAPTION>
Estimated acquisition cost:
<S> <C>
Common stock............................................................. $ 48,263
Stock options............................................................ 4,516
Acquisition costs........................................................ 1,500
---------
Total estimated acquisition cost..................................... $ 54,279
---------
---------
</TABLE>
<TABLE>
<CAPTION>
Purchase price allocation:
<S> <C>
Tangible net assets acquired............................................. $ 28,666
Assets impaired by merger................................................ (600)
Deferred income taxes.................................................... (10,268)
Intangible net assets acquired:
Developed technology, assembled workforce, and customer base........... 22,200
Goodwill................................................................. 13,419
In-process research and development...................................... 2,050
Estimated merger related severance and shutdown costs, net of tax
benefits............................................................... (1,188)
---------
Total................................................................ $ 54,279
---------
---------
</TABLE>
Tangible net assets of Summit acquired principally include cash, accounts
receivable, inventory, fixed assets, deferred income taxes, accounts payable,
accrued liabilities and deferred revenue. To determine the value of the
purchased technology, the expected future cash flows attributable to all
existing technology was discounted, taking into account risks related to the
characteristics and applications of the technology, existing and future markets,
and assessments of the life cycle stage of the technology. The valuation of
developed technology represents amounts which have reached technological
feasibility and will therefore be capitalizable. The value of the assembled
workforce was derived by estimating the costs to replace the existing employees,
including recruiting, hiring, and training costs for each category of employee.
The value allocated to projects identified as in-process research and
development of Summit and its wholly owned subsidiaries will be charged to
expense upon consummation of the merger but has not been reflected in the
unaudited pro forma combined condensed statements of operations as it is
nonrecurring in nature. However, this charge has been reflected in the unaudited
pro forma combined condensed balance sheet. The write-off was necessary because
the acquired in-process research and development had not yet reached
technological feasibility and had no future alternative uses. The combined
companies expect that the acquired in-process research and development will be
successfully developed, but these products may not achieve commercial viability.
The nature of the efforts required to develop the purchased in-process research
and development into commercially viable products principally relate to the
completion of all planning, designing, prototyping, verification and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features and technical
performance requirements.
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NOTE 2. PRO FORMA ADJUSTMENTS
(A) To reflect the allocation of the purchase price and reverse acquisition
accounting to be recorded as a result of the merger (see note 1) which
includes:
- record intangible assets and goodwill:
<TABLE>
<CAPTION>
<S> <C>
Purchased technology.............................................................. $ 16,250
Customer base..................................................................... 2,100
Workforce......................................................................... 3,850
Goodwill.......................................................................... 13,419
</TABLE>
- record deferred taxes which relate to the difference between the tax and
book basis of assets acquired ($7.7 million) and unremitted earnings of
foreign subsidiaries ($2.6 million).
- adjustment for merger related impairment of Summit's tangible assets of
$600.
- accrual of Viewlogic's acquisition cost, estimated to be approximately
$2.7 million consisting of $1.5 million in direct transaction costs,
(primarily legal and accounting services) and approximately $1.2 million
in restructuring and severance costs (net of tax benefits of $0.6
million). While the exact amount of the restructuring costs is not known,
management believes that the costs approximate $1.3 million related to
involuntary employee separation benefits and $0.5 million in facilities
consolidations.
- impact of "reverse acquisition" accounting:
<TABLE>
<CAPTION>
<S> <C>
issuance of Summit shares (16.2 million at $0.01 per value option)................ $ 162
elimination of Viewlogic outstanding preferred stock.............................. (32,000)
elimination of Viewlogic common stock............................................. (4)
elimination of Summit's accumulated deficit....................................... 11,957
</TABLE>
- To reflect the write off of in-process research and development of $2,050,
as of June 30, 1999.
- To reflect the elimination of Summit intangibles, goodwill and related
amortization, along with related tax effect of $1,040 for the year ended
December 31, 1998 and $0 for the six months ended June 30, 1999.
(B) To record write off of $143 of Viewlogic capitalized software impaired as a
result of merger.
(C) To reflect a reduction in depreciation expense and related tax expense
related to Summit assets impaired as a result of merger.
(D) To reflect the amortization of purchased technology, other intangible assets
and goodwill recorded as a result of the merger. Amortization has been
estimated based on the following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Purchased technology............................................................... 5 years
Customer base...................................................................... 5 years
Workforce.......................................................................... 3 years
Goodwill........................................................................... 10 years
</TABLE>
Amortization has been calculated on the straight-line method for all
intangibles except purchased technology for which amortization has been
calculated based on the greater of the ratio of revenue per period to total
estimated revenue or the straight-line method.
(E) To reflect the adjustment of deferred taxes and tax expense related to the
intangible assets which were recorded as a result of the merger.
(F) To reflect the tax provision of $1.3 million for the year ended December 31,
1998 related to unremitted earnings of foreign subsidiaries.
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<PAGE>
(I) As required by Article 11 of Regulation S-X, the unaudited pro forma
condensed combined statements of operations exclude material non recurring
charges which result directly from the merger and which will be recorded
within twelve months following the merger. The following schedule shows the
effects of the write-off of the in-process research and development
described in Note 1 above of $2,050 and the write off of capitalized
software of $143 that will become obsolete due to product changes resulting
from the merger:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Net income................................................................. $ 4,477
Net income per share:
Basic.................................................................... 0.14
Diluted.................................................................. 0.14
</TABLE>
NOTE 3. PRO FORMA NET INCOME (LOSS) PER COMMON SHARE
The unaudited pro forma basic and diluted net income (loss) per share are
based on the weighted average number of shares of Summit common stock
outstanding during each period and the number of shares of Summit common stock
to be issued in connection with the Viewlogic merger. Options outstanding have
not been included in the computation of pro forma diluted net loss per share for
the six months ended June 30, 1999 because their effect would be antidilutive.
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<PAGE>
INDUSTRY
INDUSTRY BACKGROUND
Electronic design automation software has played a critical role in
accelerating the dramatic advances in the electronics industry over the past two
decades. For most of this time, the need for increasingly advanced electronic
design automation tools has been driven by the rapid increase in complexity of
integrated circuits, or ICs, compounded by the increasing number of IC design
starts and the scarcity of skilled IC design and verification engineers. The
increase in the complexity of ICs lengthens the development cycle while, at the
same time, competitive pressures shorten product life cycles.
IC development productivity has increased through the evolution of
electronic design automation, but has significantly lagged fabrication
technology in recent years. Fabrication technology has advanced from the ability
to produce chips with over one thousand gates at five micron line-widths in the
1970s, to more than 10,000 gates in the 1980s, to greater than one million gates
at sub 0.5 micron line-widths today. For example, the processor used in the
original IBM PC in 1981 had approximately 10,000 gates and was manufactured
using 3 micron process technology, whereas the Pentium III introduced in 1999
contains more than two million gates.
In contrast to the progress in fabrication technology, the productivity of
the average design engineer has not kept pace. As a result, a greater number of
engineering hours are required to produce many of today's more complex designs,
leading to either longer development schedules or the need for larger design
teams. To address this challenge, organizations with IC design capabilities
continue to search for electronic design automation tools that enable them to
increase their productivity and meet the aggressive development schedules
dictated by competitive forces.
In recent years, lengthening design cycles and significant time-to-market
pressures have caused a shift in the choice of silicon technologies away from
customized ICs, or application-specific ICs, also known as ASICs, to more
fast-turn-around technologies like field-programmable gate arrays, or FPGAs,
application-specific standard parts, or ASSPs, and the use of embedded
processors and software to add capabilities to electronic products. These
silicon choices provide greater flexibility and faster time to market for
eProduct design teams. They also present new design automation challenges,
including design and verification of systems containing significant embedded
software programs.
Further complicating the design task is the effect that faster ICs have on
overall system design. Fast-switching signals are required to achieve the
incredible processor speeds we now take for granted, for example, in personal
computers. These fast signals create electromagnetic problems that can cause a
system to fail if the necessary analysis and verification is not performed
before the printed circuit board, or PCB, goes to fabrication. This reality has
created the need for sophisticated interconnect design, analysis and
verification tools for the PCBs and cabling in electronic products.
According to electronic design automation industry analysts at Dataquest,
for the first time in the history of electronic design automation, these recent
trends have resulted in more growth in the electronic design automation segments
serving board and system-level design applications than for those serving IC
design. The objectives of electronic design automation are to reduce time to
market and the costs associated with product design, entry, analysis,
verification and optimization while permitting the development of a greater
number of designs of higher speed and density chips that can be reliably
manufactured.
ADVANCES IN ELECTRONIC DESIGN AUTOMATION
Electronic design automation tools emerged in the early 1970s with the
introduction of computer aided design, or CAD, software that permitted engineers
to textually enter designs of several thousand gates, and in the early 1980s
evolved to computer aided engineering, or CAE, software that enabled
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<PAGE>
engineers to graphically enter designs of tens of thousands of gates. Despite
the advantages of graphical CAE tools, design at the gate level became
impractical and more error prone as design complexities and gate counts
increased. To address these problems, textual hardware description languages, or
HDLs, logic synthesis and functional level simulation tools were introduced in
the late 1980s, allowing engineers to engage in high level design automation, or
HLDA. To use the HLDA methodology, engineers are required to describe their IC
design in a textual HDL, such as VHDL or Verilog. After the design is coded in
HDL, the HDL description can be executed using simulation software to emulate
the operation of the desired IC, allowing the engineer to debug the design
without building a hardware prototype. The HDL description can be automatically
translated to a gate level description using a synthesis software tool.
LIMITATIONS OF HLDA
HLDA tools have enabled engineers to accelerate IC development schedules and
create more complex chips. However, these tools have some limitations:
- The conventional design flow for IC engineers using HLDA tools is to
represent a design in hand-drawn graphical paradigms such as block
diagrams, state machines, flow charts or truth tables, and then
laboriously translate their hand-drawn graphical designs into a textual
HDL which resembles software program code. This process is time consuming
and error prone, and requires the engineer to master a complex programming
language.
- The numerous lines of HDL code that comprise a design are very difficult
for engineering teams to understand and communicate during design reviews
and equally difficult for engineering management to understand and
evaluate.
- While it would be possible to accelerate time to market by reusing
portions of HDL code where similar functions are needed, reuse of HDL code
is difficult and often avoided because the complex HDL code complicates
understanding the design's functional intent.
- The HLDA methodology is further limiting because textual HDL code
typically must be written in either Verilog or VHDL and according to
strict rules unique to a specific synthesis tool. This limits the ability
of engineers to increase synthesis efficiency by using various HDL
languages and multiple synthesis tools.
- The lack of stylistic restrictions in HDLs often allows designers to
express an IC functional design several different ways. As a result, an
HDL design could comply with HDL programming constraints and yet not be
able to be synthesized. As importantly, the lack of restrictions allows a
designer to produce an HDL description that can be synthesized but that is
not as efficient in terms of the resulting gate count or circuit timing.
Further, the lack of programming consistency between engineers arising
from the lack of stylistic restrictions complicates design team management
and design integration.
In order to meet the market's demands for more powerful, higher density ICs
and to reduce both time to market and cost, IC designers and manufacturers seek
design, analysis, verification and optimization tools that overcome the
limitations of the current HLDA methodologies.
EPRODUCT DESIGN AUTOMATION MARKET OVERVIEW
Electronic design automation has come to mean hardware design automation,
and Viewlogic and Summit believe it is no longer appropriate to describe the
breadth of the market for software to automate the design of eProducts.
Therefore a new term is needed for the industry which captures the true scope of
the automation required to successfully design an electronic product.
Accordingly, Viewlogic and Summit have adopted the term "eProduct Design
Automation," or ePDA, and the scope
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of this market can be defined by the stages of the electronic design process
which it includes, as shown in Figure 1.
FIGURE 1 EPRODUCT DESIGN AUTOMATION MARKET
[GRAPHIC]
The System-Level Design Automation, or SLDA, market is defined here as the
software and services that serve the needs of the electronic/software subsystem
architectural, co-design and partitioning process. This system-level design
involves managing tradeoffs between system performance and features, system
memory requirements (software footprint), embedded processor selection, silicon
area/cost, product cost, system power/battery life, system programmability, and
project schedule. It is also the stage of a project where decisions are usually
made about adopting new design partners, methodologies, policies and tools.
These include embedded software development tools/environment,
"co-design/co-verification" strategies, silicon vendors, IP suppliers, and of
course electronic design automation tool flows. In addition, refinements to
team-based engineering development plans (and supporting tools) and make versus
buy decisions also emerges at this phase of development.
Dataquest has estimated that the SLDA market at $95 million in 1998, growing
at 26% compounded annually to reach $242 million by 2002. The specific
sub-segments of SLDA design are each forecast by Dataquest to grow at more than
20% annually. This growth is being fueled by both IC design teams looking for
the higher-productivity that comes with designing at higher levels of
abstraction, and eProduct teams struggling with architectural design challenges,
embedded software design and verification bottlenecks, and the impact of fast
signal speeds on the overall system.
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SUMMIT BUSINESS
INTRODUCTION
Summit is a leading supplier of software tools designed to solve the
integrated circuit, also called IC or chip, engineering problems caused by
increasing chip complexity and the corporate problem of reusing the highly
valuable intellectual property, or IP, created by IC engineers. The worldwide
community of IC engineers is rapidly moving up in the design hierarchy from
physical design entry to functional level design. This migration is intended to
achieve greater engineering efficiency and shorter time and to market and to
provide an excellent basis for IC intellectual property management. At the
functional level of design, engineers conceptualize designs in graphical
paradigms such as block diagrams, state machines and flow diagrams and then
write programs describing those concepts in a textual language called a Hardware
Descriptive Language, or HDL. There are two standard HDLs: Verilog and VHDL.
There are two levels of functional design, Register Transfer Level, or RTL, and
Behavioral level. The mathematical process to translate from an RTL design to
the physical level of design is called synthesis. With Summit's Visual HDL
product, the IC engineer can draw functional level designs on a workstation or
PC using familiar graphical paradigms such as block diagrams, state machines and
flow diagrams. Visual HDL compiles these graphical representations into correct
by construction, synthesis ready, behavioral or RTL designs. Summit's suite of
RTL simulation, verification and optimization software tools then provide a
highly efficient environment for getting a design from concept to synthesis.
Summit's IP solutions allow the synthesizable design with graphical executable
documentation to be placed in libraries for reuse or to be distributed in a
software model format for early inclusion in future electronic system or product
designs.
Summit offers software products to assist design engineers in meeting the
market demands for rapid time to market, increased product functionality and
lower product cost while providing the corporations that employ these engineers
an efficient way to document, revise and distribute the highly valuable IC
intellectual property they create. In 1994, Summit introduced Visual HDL for
VHDL, its first graphical product, which accelerates the development, analysis
and documentation of single function ICs as well as complete systems on a chip.
Visual HDL products automate manual design entry and verification by enabling IC
systems and design engineers to create and verify IC designs using familiar
graphical paradigms such as block diagrams, state machines, flow charts and
truth tables, rather than less intuitive textual HDL code. Summit's HLDA tools
assist an IC engineer from concept to synthesis in the shortest period of time
and with a design that has been analyzed and verified for correctness and
optimized for IC speed and or area. Visual HDL for VHDL and Verilog has become
an industry leader for graphical design creation, analysis and IP management for
both Workstation and PC based IC engineering. Summit's other HLDA tools include
simulation analysis tools that help the engineer prepare simulation input data,
run simulations and analyze simulation results. HDL Score allows the engineer to
know when the simulation process has tested the entire design. V-CPU provides a
capability that allows a software and hardware engineer to work together at
design time in a highly efficient co-verification environment and E-Sim allows
the engineer to verify embedded systems software prior to the availability of a
hardware prototype.
Summit believes that its products provide the following benefits:
INCREASED DESIGN PRODUCTIVITY
Summit's HLDA products enhance the designers' ability to create, verify and
document HDL designs while managing the HDL development environment. These
products provide the ability to capture, analyze and verify a variety of high
level graphical descriptions and automatically produce a synthesis-ready RTL
design, thus eliminating the need to perform time-consuming and error-prone
manual coding in an HDL. These familiar graphical descriptions are more easily
debugged and more easily communicated among IC engineering team members. The
descriptions also facilitate review and approval by engineering management.
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<PAGE>
DESIGN REUSE, RE-TARGETING AND CONSISTENCY
Summit's HLDA products enable engineers to use libraries of existing VHDL or
Verilog code. This code can be used as HDL inputs or automatically converted
into a graphical format. Due to the widespread ability of engineers to
understand this graphical format, designs can be more easily modified and reused
in future developments. In addition, Summit's products can optimize the design
output for nearly all of the electronic design automation industry's standard
synthesis and simulation tools. In the event the designer requires a different
synthesis or simulation tool, the design can be automatically re-targeted to
optimize the HDL output for the desired tool set. Finally, because each
engineer's work is implemented using Summit's software, which automatically
generates the actual HDL code, design efficiency and consistency is maintained
even when several engineers work on a project.
SUMMIT STRATEGY
Summit's mission is to become the leading supplier of HLDA software and to
achieve wide-spread acceptance of these technologies by expanding the size of
Summit's served market. The key elements of Summit's strategy to achieve this
mission are as follows:
ACCELERATE MARKET ADOPTION OF HLDA
Summit intends to expand market acceptance by focusing on key customer
accounts to ensure their successful adoption of the HLDA methodology. Summit
believes that successful adoption by certain key customers in various industries
will promote adoption by other customers within those industries. Summit also
believes that its joint development and marketing programs with industry leaders
promote awareness and adoption of HLDA. In addition, Summit supports all of the
industry's major synthesis, simulation, layout and test products and continues
to support and complement new standards as they emerge. Summit also targets
student engineers by introducing them to its HLDA products through programs with
various universities.
LEVERAGE SUMMIT'S HLDA TECHNOLOGY
Summit intends to integrate all of its technology into a design environment
that focuses on getting an IC engineer from product conceptualization through
design creation, analysis, verification and optimization. This environment will
provide the most efficient methodology to get a design correct and ready for
synthesis. In addition, Summit's HLDA software environment includes a complete
hardware software coverification capability and the ability for the engineer to
create an encrypted software model of the synthesized design that can be used by
systems and electronic product designers long before a hardware prototype is
available. The products comprising this design environment can be used as a
bundled set or individually with other analysis, verification and simulation
products available from other electronic design automation vendors.
BROADEN THE SCOPE OF SUMMIT'S HLDA SOLUTIONS
Summit will continue to identify challenges facing both IC systems engineers
and IC design engineers in the areas of HLDA and to focus its development
efforts on products to further increase productivity in the creation, analysis,
verification, documentation and optimization of single function ICs and complete
systems on a chip. Summit believes that power, timing, thermal and cost
constraints management and analog circuit design will become increasingly
significant bottlenecks, especially in the area of complete systems on a chip.
Summit believes that in the future its HLDA products will provide a graphical
means for both systems and design engineers to specify the functional intent and
simulate the interoperability of hardware and software, as well as providing the
capability to perform what-if analysis on constraints such as power, speed,
temperature and cost at the front end of the development process.
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SUMMIT PRODUCTS
Electronic design automation software tools aid electronic engineers in the
design of increasingly complex products, and the tools provided by electronic
design automation suppliers must be periodically upgraded to meet the needs of
the engineering community. Although the core technology and functionality remain
essentially the same for the life of a product, electronic design automation
software tools undergo continual maintenance engineering for bug fixes and
quality control. This continuation engineering is provided to Summit's customers
in the form of an upgrade.
Summit attempts to release upgrades for each of its major products on an
annual basis. The date of the last upgrades of these major products was the
third quarter of 1999 for Visual HDL and Text to Graphics and HDL Score. In the
first quarter of 1998, a commercial version of V-CPU, a new product, was
released. In the second quarter of 1998, VirSim 2.2, a substantially
re-architected product, was released.
Visual HDL, Text to Graphics, Visual Testbench, VirSim and V-CPU all made
significant contributions to revenue for the year ended December 31, 1998.
Visual HDL, Text to Graphics and Visual Testbench were also significant
contributors to revenue in 1997. Substantially all of the revenue attributable
to sales of Visual Testbench in 1998 and 1997 were pursuant to an OEM agreement
with Credence Systems Corporation, or CSC. As of December 31, 1998, CSC had
satisfied its obligation to purchase Visual Testbench licenses pursuant to the
OEM agreement and Summit does not expect to receive any additional revenue from
sales of Visual Testbench to CSC. In December 1998, CSC obtained shared
ownership to the Visual Testbench source code and has the right to sell Visual
Testbench licenses based on the source code received from Summit.
Visual HDL for VHDL and Verilog provide system design management, graphical
design creation, graphical level simulation, HDL code generation and high speed
compiled simulation. These products are the result of a focused five-year
development effort of approximately 40 electronic design automation software
development experts. As a result of the acquisitions of TriQuest, Simtech, and
ProSoft, Summit offers analysis, verification, and optimization products which
include Virtual CPU (V-CPU), VirSim, HDL Score, and E-Sim, which provide a
design verification environment for all RTL designs. Visual IP allows the design
engineer to create a software model of an RTL design that has high quality
graphical documentation and can be distributed to other electronic designers to
be used in IC systems and electronic products long before chips are available.
Summit's products are constructed using modern software design methods and
programming languages such as C and C++. Summit's products operate on the
industry's most popular UNIX workstations and, on PCs running Windows 3.1,
Windows 95 and Windows NT.
DESIGN SOLUTION PRODUCTS
Visual HDL for VHDL and Visual HDL for Verilog (collectively called "Visual
HDL") are graphical creation and analysis solutions designed to simplify and
accelerate top-down design. Visual HDL can raise productivity by allowing system
level, behavioral level and functional level design entry using graphical design
methods such as block diagrams, state machines, flow charts and truth tables. As
a result, engineers no longer need to textually program their designs in lines
of VHDL or Verilog code. Once the design is graphically captured, Visual HDL can
then automatically generate synthesizable HDL code that is optimized for
specific synthesis tools.
Visual HDL for VHDL uses VHDL as its internal data format and Visual HDL for
Verilog uses Verilog as its internal data format, allowing both products to
support all the hardware modeling features of both of these standard HDL
languages. Competing products typically use proprietary internal languages
making them more difficult to use because the design engineer must learn an
additional textual language. Such products do not take full advantage of the
functionality of VHDL or Verilog, thus limiting the level of integration that
can be achieved with industry standard simulation and synthesis tools.
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The Visual HDL design environment offers several benefits to top-down
designers, including easier design creation and faster, more complete design
debugging. Because Visual HDL represents HDL code graphically, designers can
better communicate their ideas in a much more intuitive manner. This allows
experienced and novice HDL designers to work together efficiently. Visual HDL
automatically generates HDL code that is optimized for efficient synthesis. It
can also import VHDL or Verilog code and automatically generate graphics from
this source text. Utilizing the graphical representations generated by Visual
HDL, designers are able to quickly determine the original design intent,
allowing them to save time by reusing design components in future designs. An
important aspect of Visual HDL is its graphical simulation and debug
environment. This environment allows designers to view the path of simulation
execution and the simulation results. This gives them the opportunity to shorten
development time by focusing on debugging their circuits instead of debugging
their HDL code. Visual HDL also provides point-and-click functionality which
allows engineers to quickly determine the cause of a bug by highlighting the
specific line of text and the related graphical representation where the error
exists, thereby significantly shortening the time to debug a program.
Text-To-Graphics is now offered as an add-on to Visual HDL. With
Text-To-Graphics, the user can convert any VHDL or Verilog textual description
into graphics and control the process by choosing the resultant graphical
format. Text-To-Block-Diagram now contains the graphic bundling feature (as
described below). Text-To-State Machine converts VHDL/Verilog descriptions into
graphical State Diagrams, and the Text-To-Flow Chart feature converts textual
descriptions of VHDL and Verilog into graphical flowcharts.
Visual HDL operates in both VHDL and Verilog on UNIX workstations and on
PCs. It supports a broad range of HLDA synthesis and simulation products,
including products from Synopsys, Inc., Mentor Graphics, Cadence, Synplicity and
Exemplar. Visual HDL for VHDL was first shipped in the first quarter of 1994,
and Visual HDL for Verilog was first shipped in the fourth quarter of 1995.
As of February 28, 1999, Visual HDL's single seat list price ranged from
$18,000 to $30,000. The actual price for a system varies depending on the
duration of the license and the simulation features included. For example,
because Visual HDL for VHDL generally includes a Summit simulator, its price is
higher than Visual HDL for Verilog, which uses third party Verilog XL
simulators. Finally, the Visual HDL price for a floating license commands a
premium over the node locked version since it offers multi-user flexibility.
Summit introduced Visual IP in 1997, which allows the design engineer to
create a software model of an RTL design that has high quality documentation and
can be distributed to other electronic designers to be used in IC systems and
electronic products long before chips are available. The synthesizable design
with graphical executable documentation can be placed in libraries for reuse or
distribution in an encrypted, executable software model format for early
inclusion in future electronic systems or product design.
VERIFICATION SOLUTION PRODUCTS
Summit's verification products include Virtual-CPU (V-CPU), VirSim, HDL
Score, and E-Sim.
- V-CPU allows embedded-system designers to analyze and validate the
interaction between hardware and software early in the development
process, while design options are still open. Co-verification of software
can begin as soon as there is an executable description of the software
and hardware. This early integration of efforts allows problems to be
detected while they are still easy to fix. With V-CPU, software developers
can test software against simulated hardware at high execution rates, and
hardware developers can validate the system architecture with stimulus
provided by the software.
- VirSim provides an integrated set of advanced debug and analysis tools for
use with the leading Verilog simulators. VirSim is a multi-windowed
product that makes extensive use of graphics. It provides an advanced
graphical debug environment that includes multiple debug windows for
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presenting Verilog design and simulation results in different graphical
views. Outputs from both digital and analog simulation runs are supported
and signal values can be displayed as digital or analog graphical
waveforms. Multiple simulation runs can be debugged at the same time,
allowing signals from different simulations to be compared easily in
graphical and analytical formats.
- HDL Score provides a quantitative measure of the quality of simulation
tests that have been applied to an entire design or to user-selected
portions of a design. Simply stated, HDL Score tells the design engineer
when they have performed an adequate amount of simulation. HDL Score works
with all RTL designs and simulation environments and fits seamlessly into
the design verification process. While using HDL Score prior to synthesis
is the most productive way of using the tool, HDL Score supports coverage
for all levels of design and all HDL language implementations.
- E-Sim is a product which is used by engineers to verify embedded systems
software prior to the availability of a hardware prototype.
Summit's future success depends primarily upon the market acceptance of its
existing and future HLDA products. Summit's HLDA products incorporate certain
unique design methodologies and thus represent a departure from industry
standards for design entry and verification. Summit believes that broad market
acceptance of its HLDA products will depend on several factors, including the
ability to significantly enhance design productivity, ease of use,
interoperability with existing electronic design automation tools, price and the
customer's assessment of Summit's financial resources and its technical,
managerial, service and support expertise. Although demand for HLDA products has
increased in recent years, the market for HLDA products is still emerging and it
may not continue to grow. Even if the market does grow, businesses may not
continue to purchase Summit's HLDA products. A decline in the demand for, or the
failure to achieve broad market acceptance of, Summit's HLDA products will have
a material adverse effect on Summit's business, financial condition, results of
operations or cash flows.
SUMMIT CUSTOMERS
Summit's end-user customers include companies in a wide range of industries,
including semiconductor devices, telecommunications, computer peripherals,
consumer electronics, aerospace defense and other electronics entities. In 1998
and 1997, sales to CSC accounted for 25% and 29% of Summit's total revenue,
respectively. In 1996, no single customer accounted for more than 10% of total
revenue. As of February 28, 1999, Summit had installed more than 4,600 seats of
its Design tools in more than 420 companies, of which more than 285 companies
had entered into support contracts. In addition, as of such date, Summit had
licensed more than 4,500 seats of verification solution tools.
SUMMIT BACKLOG
Summit's backlog was $5.9 million and $7.0 million at December 31, 1998 and
1997, respectively. Such backlog amounts include $5.4 million and $5.7 million
that were reflected in deferred revenue in Summit's financial statements for
December 31, 1998 and 1997, respectively. Backlog consists of orders for which
Summit has received a firm purchase order for products that are currently
shippable, maintenance and support contracts that are expected to be completed
within one year, orders for customer training services that are expected to be
completed within one year, prepaid exclusivity fees that are expected to be
recognized within one year, and shipments made subject to conditions that are
expected to be satisfied within one year. In addition to the backlog amounts
reflected above, at December 31, 1997, Summit had the right to ship up to a
maximum of $8.8 million of Visual Testbench licenses during 1998 to CSC pursuant
to a contract with CSC. During 1998, all obligations pursuant to the contract
with CSC were satisfied such that, at December 31, 1998, CSC had no further
obligation to purchase Visual Testbench licenses. Third-parties to such
commitments may terminate or breach their obligations. Therefore, these revenues
may not be recognized in fiscal 1999 or in any later period.
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SUMMIT MARKETING AND SALES
Summit markets its products to customers worldwide who design or manufacture
ICs for their own use or sale in a wide variety of industries. The primary
objectives of Summit's marketing effort are to increase market awareness of
Summit's products, to promote the adoption of HLDA methodologies, and to
evaluate customer satisfaction and determine additional customer demands. To
increase market awareness, Summit displays its HLDA products at all major
industry trade shows, including the annual Design Automation Conference. Summit
also promotes its products through advertisements in trade journals and by
sponsoring various seminar series. To promote the adoption of its methodologies,
Summit offers its products at a reduced cost to design engineering programs at
several universities so that engineering students may become familiar with
Summit's products and design techniques.
Summit's sales strategy is to employ its direct sales as well as its
independent and affiliated distributors to efficiently and effectively target
individual customer and product market segments. As of December 31, 1998, Summit
had 54 employees in its sales organization and 7 employees in its marketing
group.
DIRECT SALES
Summit employs direct sales teams which combine technically proficient sales
persons with skilled field applications engineers capable of serving the
sophisticated needs of the management and engineering staff of its customers.
Summit assigns selected direct sales personnel to target major accounts, such as
vertically integrated systems design houses like Lucent, IBM, Motorola and
Siemens that produce their own IC designs for their electronic products. Major
accounts receive particular focus because of their size and influence as
industry leaders.
Summit's direct sales force operates in the United States and portions of
Europe, with offices in Arizona, California, Colorado, Florida, Maryland,
Massachusetts, Minnesota, Oregon and Texas, as well as France, Germany, Italy
and the United Kingdom. Approximately 77%, 71% and 54% of Summit's revenue for
the years ended December 31, 1998, 1997 and 1996, respectively, were generated
through Summit's direct sales force.
DISTRIBUTORS
Summit relies on distributors for licensing and support of Summit's products
outside of North America. Approximately 23%, 29% and 46% of Summit's revenue for
the years ended December 31, 1998, 1997 and 1996, respectively, came from sales
made through distributors. Effective April 1, 1996, Summit entered into a joint
venture with Anam pursuant to which the joint venture corporation, Summit Asia,
acquired exclusive rights to sell, distribute and support all of Summit's
products in the Asia Pacific region, excluding Japan. In April 1998, the joint
venture corporation, Summit Asia, which is headquartered in Korea, was renamed
Asia Design Corporation, or ADC. In May 1998, Summit exchanged a portion of its
ownership in ADC for ownership in another company located in Hong Kong which was
renamed Summit Design Asia, Ltd., or SDA. SDA also has an equity investment in
ADC. In June 1998, Summit and Anam each loaned SDA $750,000, which is guaranteed
by ADC. SDA acquired from ADC the exclusive rights to sell, distribute and
support Summit's products in the Asia Pacific region, excluding Japan. SDA
granted distribution rights to Summit's products to ADC for the Asia Pacific
region, excluding Japan. In December 1998, SDA canceled ADC's distribution
rights in all areas except Korea. In April 1999, SDA granted non-exclusive
distribution rights to Semiconductor Technologies Australia for the Asia Pacific
region, excluding Japan and Korea. This restructuring, however, may not result
in SDA or ADC becoming profitable. Revenue attributable to sales in the Asia
Pacific region, excluding Japan, may not increase either. In addition, in the
first quarter of 1996, Summit entered into a three-year, exclusive distribution
agreement for Summit's HLDA products in Japan with Seiko. The agreement is
renewable for successive five-year terms by mutual agreement of Summit and Seiko
and is terminable by either party for breach. The agreement was renewed for an
additional five-year term which began in February 1999. If Seiko fails to meet
specified quotas for two
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or more quarterly periods, Summit can terminate the exclusivity, subject to
Seiko's right to pay a specified fee to maintain exclusivity. Sales through
Seiko accounted for 14%, 12%, and 15%, of its total for the years ended December
31, 1998, 1997, and 1996, respectively. In June 1999, Summit lowered Seiko's
specified quotas due to the adverse economic conditions in the Asia Pacific
Region. As a result, Summit expects sales through Seiko to decrease for at least
the current and following two quarters and revenue attributable to sales in the
Asia Pacific region to decrease.
Summit's relationships with Seiko, SDA and ADC may not effectively maintain
or increase sales relative to the levels experienced prior to such
relationships. Summit also has independent distributors in Europe and depend on
the continued viability and financial stability of Summit's distributors. Since
Summit's products are used by skilled design engineers, distributors must
possess sufficient technical, marketing and sales resources and must devote
these resources to a lengthy sales cycle, customer training and product service
and support. Only a limited number of distributors possess these resources. In
addition, Seiko, SDA and ADC, as well as Summit's other distributors, may offer
products of several different companies, including Summit's competitors.
Summit's current distributors may not continue to market or service and support
Summit's products effectively. Any distributor may discontinue to sell Summit's
products or devote its resources to products of other companies. The loss of, or
a significant reduction in, revenue from Summit's distributors could have a
material adverse effect on its business, financial condition, results of
operations or cash flows.
INTERNATIONAL SALES
Approximately 36%, 34% and 50% of Summit's revenue for the years ended
December 31, 1998, 1997 and 1996, respectively, were attributable to sales made
outside of the United States which includes the Asia Pacific region and Europe.
Approximately 22%, 22% and 34% of Summit's revenue for the years ended December
31, 1998, 1997 and 1996, respectively, were attributable to sales made in the
Asia Pacific region and approximately 14%, 12% and 16% of Summit's revenue for
the years ended December 31, 1998, 1997 and 1996, respectively, were
attributable to sales made in Europe. In order to successfully expand
international sales, Summit may need to establish additional foreign operations,
hire additional personnel and recruit additional international distributors.
This will require significant management attention and financial resources and
could adversely affect Summit's operating margins. In addition, to the extent
that Summit is unable to effect these additions in a timely manner, Summit's
growth, if any, in international sales will be limited. Summit may not be able
to maintain or increase international sales of Summit's products, and failure to
do so could have a material adverse effect on Summit's business, financial
condition, results of operations or cash flows. In addition, financial markets
and economies in the Asia Pacific region have been experiencing adverse economic
conditions. Demand for and sales of Summit's products in the Asia Pacific region
have decreased and may further decrease.
CUSTOMER SERVICES
Technical support is available to customers on both a pre-sale and post-sale
basis. Pre-sale support involves Summit's application engineers working with
Summit's direct sales force and distributors to provide on-site support during
the end user's evaluation and implementation process. Post-sale support is
provided through annual maintenance contracts which provide customers access to
Summit's technical support team via telephone, minor enhancements and any major
upgrades. This program is sold for 15% to 20% of the list price of the product,
depending on the product. Summit provides its customers with a 90-day warranty
that its product media is free from defects.
In addition to its maintenance, technical support and upgrade fees, Summit
also conducts a variety of training programs ranging from introductory level
courses to advanced training on full use of all of its products. Training is
offered at Summit's facilities, at distributors' facilities and at customer
locations worldwide. For the years ended December 31, 1998, 1997 and 1996,
maintenance and services provided approximately 22%, 20% and 21% of Summit's
total revenue, respectively.
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SUMMIT COMPETITION
The electronic design automation industry is highly competitive and Summit
expects competition to increase as other electronic design automation companies
introduce HLDA products. Summit principally competes with Mentor Graphics and a
number of smaller firms. Indirectly, Summit also competes with other firms that
offer alternatives to HLDA and could potentially offer more directly competitive
products in the future. Certain of these companies have significantly greater
financial, technical and marketing resources and larger installed customer bases
than Summit. Some of Summit's current and future competitors offer a more
complete range of electronic design automation products and may distribute
products that directly compete with Summit's HLDA products by bundling such
products with their core product line. In addition, Summit's products perform a
variety of functions, certain of which are, and in the future may be, offered as
separate products or discrete point solutions by Summit's existing and future
competitors. For example, certain companies currently offer design entry
products without simulators. Competition may cause Summit to offer point
solutions instead of, or in addition to, Summit's current software products.
These point solutions would be priced lower than Summit's current product
offerings and could cause Summit's average selling prices to decrease, which
could have a material adverse effect on Summit's business, financial condition,
results of operations or cash flows.
Summit competes on the basis of certain factors including:
- product capabilities;
- product performance;
- price;
- support of industry standards;
- ease of use;
- first to market; and
- customer technical support and service.
Summit believes that it competes favorably overall with respect to these
factors. However, in particular cases, Summit's competitors may offer HLDA
products with functionality which is sought by Summit's prospective customers
and which differs from that offered by Summit. In addition, certain competitors
may achieve a marketing advantage by establishing formal alliances with other
electronic design automation vendors. Further, the electronic design automation
industry in general has experienced significant consolidation in recent years,
and the acquisition of one of Summit's competitors by a larger, more established
electronic design automation vendor could create a more significant competitor.
Summit may not be able to compete successfully against current and future
competitors, and competitive pressures faced by Summit may have a material
adverse effect on its business, financial condition, results of operations or
cash flows. Summit's current and future competitors may be able to develop
products comparable or superior to those developed by Summit or adapt more
quickly than Summit to new technologies, evolving industry trends or customer
requirements. Increased competition could result in price reductions, reduced
margins and loss of market share, all of which could have a material adverse
effect on Summit's business, financial condition, results of operations or cash
flows.
SUMMIT PRODUCT DEVELOPMENT
Development of HLDA products has been performed at Summit's offices in
Israel and at Summit's principal office in Beaverton, Oregon. As the result of
the acquisitions of TriQuest and SimTech during 1997 and ProSoft in 1998, Summit
has added additional research and development facilities in San Jose,
California, New Brighton, Minnesota, and Finland. As of December 31, 1998,
Summit's research and development team consisted of 92 software developers,
dedicated to Summit's products.
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For the years ended December 31, 1998, 1997, and 1996, Summit's research and
development expenditures were approximately $13.0 million, $7.7 million, and
$5.9 million, respectively, which represented approximately 30%, 25%, and 29% of
revenue in each such period. Summit has to date expensed all research and
development costs as incurred. Summit's $13.0 million expenditure in 1998 and
$7.7 million expenditure in 1997 included $3.7 million and $733,000,
respectively, of expense in connection with the acquisition of SimTech in
September 1997. In connection with Summit's acquisition of SimTech in September
1997, Summit recorded a total of $4.4 million of compensation expense for shares
issued as part of the acquisition which were contingent upon continued
employment and were being expensed as the employment obligation lapsed. See
"Summit Management's Discussion and Analysis of Financial Condition and Results
of Operations." Summit's research and development strategy is to be proactive in
determining customer needs and to develop new HLDA products to meet these needs.
Summit believes that system-level definition and design analysis will become
increasingly significant bottlenecks in the IC development process and thus
present product development opportunities. Summit's research and development
efforts are focused on creating products to further increase productivity in the
creation, verification, documentation and the preservation of both IC and system
level designs.
Summit has actively sought to establish cooperative relationships with
certain electronic design automation industry leaders in order to gain early
access to new product information and to better integrate Summit's products with
those supplied by other vendors in the electronic design automation market. For
example, Summit has a relationship with Cadence pursuant to which Cadence helps
specify the integration between Summit's Visual HDL for Verilog and Cadence
Verilog XL simulator. Summit believes that these relationships mutually benefit
Summit and the electronic design automation vendors by fostering development and
facilitating interoperability of Summit's and vendors' complimentary products.
These relationships are informal and may be terminated by either party with
limited notice. In addition, such relationships are with companies that are
current or potential future competitors of Summit. If any of these relationships
were terminated and Summit was unable to obtain in a timely manner information
regarding modifications of third party products necessary for modifying its
software products to interoperate with these third party products, Summit could
experience a significant increase in development costs, the development process
would take longer, product introductions would be delayed and Summit's business,
financial condition, results of operations or cash flows could be materially
adversely affected.
The electronic design automation industry is characterized by extremely
rapid technological change, frequent new product introductions and evolving
industry standards. The introduction of products embodying new technologies and
the emergence of new industry standards can render existing products obsolete
and unmarketable. In addition, customers in the electronic design automation
industry require software products that allow them to reduce time to market,
differentiate their products, improve their engineering productivity and reduce
their design errors. Summit's future success will depend upon its ability to
enhance its current products, develop and introduce new products that keep pace
with technological developments and emerging industry standards and address the
increasingly sophisticated needs of its customers. Summit may not be successful
in developing and marketing product enhancements or new products that respond to
technological change or emerging industry standards. Summit may experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these products, or its new products may not
adequately meet the requirements of the marketplace and achieve market
acceptance. If Summit is unable, for technological or other reasons, to develop
and introduce products in a timely manner in response to changing market
conditions, industry standards or other customer requirements, particularly if
such product releases have been pre-announced, Summit's business, financial
condition, results of operations or cash flows would be materially adversely
affected.
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Software products as complex as those offered by Summit may contain errors
that may be detected at any point in the products' life cycles. Summit has in
the past discovered software errors in certain of its products and has
experienced delays in shipment of products during the period required to correct
these errors. Despite testing by Summit and by current and potential customers,
errors may be found, resulting in loss of, or delay in, market acceptance and
sales, diversion of development resources, injury to Summit's reputation or
increased service and warranty costs, any of which could have a material adverse
effect on Summit's business, financial condition, results of operations or cash
flows.
SUMMIT PROPRIETARY RIGHTS
Summit's success depends upon its proprietary technology. Summit relies on a
combination of copyright, trademark and trade secret laws, confidentiality
procedures, licensing arrangements and technical means to establish and protect
its proprietary rights. As part of its confidentiality procedures, Summit
generally enters into non-disclosure agreements with its employees, distributors
and corporate partners, and limits access to, and distribution of, its software,
documentation and other proprietary information. In addition, Summit's products
are protected by hardware locks and software encryption techniques designed to
deter unauthorized use and copying. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use Summit's products
or technology without authorization, or to develop similar technology
independently. In addition, effective protection of intellectual property rights
may be unavailable or limited in certain foreign countries.
Summit provides its products to end-users primarily under "shrink-wrap"
license agreements included within the packaged software. In addition, Summit
delivers certain of its verification products electronically under an electronic
version of a "shrink-wrap" license agreement. These agreements are not
negotiated with or signed by the licensee, and thus may not be enforceable in
certain jurisdictions. In addition, the laws of some foreign countries do not
protect Summit's proprietary rights as fully as do the laws of the United
States. Summit's means of protecting its proprietary rights in the United States
or abroad may not be adequate , and competitors may independently develop
similar technology. Summit could be increasingly subject to infringement claims
as the number of products and competitors in Summit's industry segment grows,
the functionality of products in its industry segment overlaps and an increasing
number of software patents are granted by the United States Patent and Trademark
Office. Although Summit is not aware of any threatened litigation or
infringement claims, a third party may claim such infringement by Summit with
respect to current or future products. Any such claims, with or without merit,
could be time-consuming, result in costly litigation, cause product delays or
require Summit to enter into royalty or licensing agreements. Such royalty or
license agreements, if required, may not be available on terms acceptable to
Summit or at all. Failure to protect its proprietary rights or claims of
infringement could have a material adverse effect on Summit's business,
financial condition, results of operations or cash flows.
SUMMIT OPERATIONS IN ISRAEL
Summit's research and development operations related to its Visual HDL
products are located in Israel and may be affected by economic, political and
military conditions in that country. Accordingly, Summit's business, financial
condition, results of operations or cash flows could be materially adversely
affected if hostilities involving Israel should occur. This risk is heightened
due to the restrictions on Summit's ability to manufacture or transfer outside
of Israel any technology developed under research and development grants from
the government of Israel as described in "--Israeli Research, Development and
Marketing Grants." In addition, while all of Summit's sales are denominated in
U.S. dollars, a portion of Summit's annual costs and expenses in Israel are paid
in Israeli currency. These costs and expenses were approximately $5.2, $4.7 and
$4.3 million in 1998, 1997 and 1996, respectively. Payment in Israeli currency
subjects Summit to foreign currency fluctuations and to economic pressures
resulting from Israel's generally high rate of inflation, which has been
approximately 9%, 7% and 11%
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during 1998, 1997, and 1996, respectively. Summit's primary expense which is
paid in Israeli currency is employee salaries for research and development
activities. As a result, an increase in the value of Israeli currency in
comparison to the U.S. dollar could increase the cost of research and
development expenses and general and administrative expenses. Currency
fluctuations, changes in the rate of inflation in Israel or any of the other
aforementioned factors may have a material adverse effect on Summit's business,
financial condition, results of operations or cash flows. In addition,
coordination with and management of the Israeli operations requires Summit to
address differences in culture, regulations and time zones. Failure to
successfully address these differences could be disruptive to Summit's
operations.
Summit's Israeli production facility has been granted the status of an
"Approved Enterprise" under the Israeli Investment Law for the Encouragement of
Capital Investments, 1959 (the "Investment Law"). Taxable income of a company
derived from an "Approved Enterprise" is eligible for certain tax benefits,
including significant income tax rate reductions for up to seven years following
the first year in which the "Approved Enterprise" has Israeli taxable income
(after using any available net operating losses). The period of benefits cannot
extend beyond 12 years from the year of commencement of operations or 14 years
from the year in which approval was granted, whichever is earlier. The tax
benefits derived from a certificate of approval for an "Approved Enterprise"
relate only to taxable income attributable to such "Approved Enterprise" and are
conditioned upon fulfillment of the conditions stipulated by the Investment Law,
the regulations promulgated thereunder and the criteria set forth in the
certificate of approval. In the event of a failure by Summit to comply with
these conditions, the tax benefits could be canceled, in whole or in part, and
Summit would be required to refund the amount of the canceled benefits, adjusted
for inflation and interest. No "Approved Enterprise" tax benefits had been
realized by Summit from its Israeli operations as of December 31, 1995 since the
Israeli operations were still incurring losses at that time. During 1996, Summit
realized income of $1.4 million from its Israeli operations and "Approved
Enterprise" tax benefits of $53,000. During 1997, Summit realized income of $2.7
million from its Israeli operations and "Approved Enterprise" tax benefits of
$702,000. During 1998, Summit realized income of $4.3 million from its Israeli
operations and "Approved Enterprise" tax benefits of $1.9 million. Summit has
recently applied for "Approved Enterprise" status with respect to a new project
and intends to apply in the future with respect to additional projects. However,
Summit's Israeli production facility may not continue to operate or qualify as
an "Approved Enterprise", and the benefits under the "Approved Enterprise"
regulations may not continue, or be applicable, in the future. Management of
Summit intends to permanently reinvest earnings of the Israeli subsidiary
outside the U.S. If such earnings were remitted to the U.S., additional U.S.
federal and foreign taxes may be due. The loss of, or any material decrease in,
these income tax benefits could have a material adverse effect on Summit's
business, financial condition, results of operations or cash flows.
ISRAELI RESEARCH, DEVELOPMENT AND MARKETING GRANTS
Summit's Israeli subsidiary obtained research and development grants from
the Office of the Chief Scientist in the Israeli Ministry of Industry and Trade
of approximately $232,000 and $608,000 in 1993 and 1995, respectively. As of
December 31, 1997, all amounts have been repaid. The terms of the grants
prohibit the manufacture of products developed under these grants outside of
Israel and the transfer of the technology developed pursuant to these grants to
any person, without the prior written consent of the Chief Scientist. Summit's
Visual HDL for VHDL products have been developed under grants from the Chief
Scientist and thus are subject to these restrictions. If Summit is unable to
obtain the consent of the government of Israel, Summit would be unable to take
advantage of potential economic benefits such as lower taxes, lower labor and
other manufacturing costs and advanced research and development facilities that
may be available if such technology and manufacturing operations could be
transferred to locations outside of Israel. In addition, Summit would be unable
to minimize risks particular to operations in Israel, such as hostilities
involving Israel. Although Summit is
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eligible to apply for additional grants from the Chief Scientist, it has no
present plans to do so. Summit received a Marketing Fund Grant from the Israeli
Ministry of Industry and Trade for an aggregate of $423,000. The grant must be
repaid at the rate of 3% of the increase in exports over the 1993 export level
of all Israeli products, until repaid. As of December 31, 1998, approximately
$187,000 was outstanding under the grant.
SUMMIT EMPLOYEES
As of June 30, 1999, Summit had 183 employees, 106 of whom were engaged
primarily in research and development and related operations, 46 of whom were
engaged primarily in sales and marketing and 31 of whom were engaged primarily
in corporate management and administration. A total of 102 of these employees
were located in the United States, 63 in Israel and 18 in Europe. Summit's
employees are not represented by any collective bargaining organization and
Summit has never experienced a work stoppage. Summit's future success will
depend, in part, on its ability to continue to attract, retain and motivate
highly qualified technical, marketing and management personnel, who are in great
demand.
SUMMIT PROPERTIES
Summit's principal facility, located in Beaverton, Oregon, consists of
approximately 31,000 square feet of office space leased pursuant to an agreement
which terminates on March 31, 2000. The rent and common area fees payable on
this facility are currently approximately $28,000 per month. This space is used
for Summit's production, sales and marketing and administration. Summit also
leases approximately 12,000 square feet of office space in Herzlia, Israel for
research and development pursuant to a lease that expires on December 8, 2003
with an option to renew for five years. The rent payable on this office space is
currently $24,650 per month.
Additionally, Summit leases approximately 9,300 square feet of office space
in San Jose, California and 16,600 square feet in St. Paul, Minnesota for
research and development and sales activities. The aggregate rent payable for
both facilities is currently approximately $54,000 per month, and the leases
expire in October 2003 and August 2004, respectively.
Summit also leases office space for sales activities throughout the United
States and Europe at an aggregate annual rental of approximately $200,000.
Summit expects that its current facilities will be adequate to serve its
needs for the foreseeable future.
SUMMIT LEGAL PROCEEDINGS
Summit is not a party to any material litigation and is not aware of any
pending or threatened litigation that could have a material adverse effect upon
Summit's business, operating results or financial condition.
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SUMMIT SELECTED HISTORICAL AND UNAUDITED FINANCIAL DATA
The following selected historical financial data of Summit has been derived
from Summit's historical financial statements. Summit's audited balance sheets
as of December 31, 1998 and 1997, its audited statements of operations for each
of the years ended December 31, 1998, 1997 and 1996, its unaudited balance sheet
as of June 30, 1999 and its unaudited statements of operations for the six-month
periods ended June 30, 1999 and 1998 are included elsewhere in this joint proxy
statement/ prospectus and should be read in conjunction with such financial
statements and notes thereto. Summit's other audited financial statements for
1996, 1995 and 1994 are not included herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- -------------------
1998 1997 1996 1995 1994 1999 1998
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue:
Product licenses........................... $33,589 $24,828 $15,446 $10,604 $ 9,327 $ 8,605 $16,775
Maintenance and services................... 9,642 6,161 4,301 2,637 2,323 5,393 4,411
Other...................................... 367 450 567 1,051 1,517 -- 183
------- ------- ------- ------- ------- ------- -------
Total revenue............................ 43,598 31,439 20,314 14,292 13,167 13,998 21,369
------- ------- ------- ------- ------- ------- -------
Cost of revenue:
Product licenses........................... 744 701 573 651 681 258 311
Maintenance and services................... 955 632 466 400 390 606 504
Amortization of purchased technologies..... 661 219 -- -- -- 331 331
------- ------- ------- ------- ------- ------- -------
Total cost of revenue.................... 2,360 1,552 1,039 1,051 1,071 1,195 1,146
------- ------- ------- ------- ------- ------- -------
Gross profit............................... 41,238 29,887 19,275 13,241 12,096 12,803 20,223
Operating expenses:
Research and development................... 13,042 7,749 5,867 5,447 4,751 5,167 5,907
Sales and marketing........................ 11,713 10,591 9,319 7,547 5,947 6,087 6,306
General and administrative................. 4,398 3,785 3,188 3,286 2,326 2,540 2,142
Amortization of intangibles and goodwill... 2,791 942 -- -- -- 1,395 1,395
Non-recurring charges...................... 1,249(1) 379(1) -- -- -- 1,340(1) 227(1)
In-process technology...................... -- 11,689 -- -- 647 -- --
------- ------- ------- ------- ------- ------- -------
Total operating expenses................. 33,193 35,135 18,374 16,280 13,671 16,529 15,977
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations................ 8,045 (5,248) 901 (3,039) (1,575) (3,726) 4,246
Other income (expense), net.................. 1,093 6,619(2) 117 (172) (103) 488 492
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes............ 9,138 1,371 1,018 (3,211) (1,678) (3,238) 4,738
Income tax provision (benefit)............... 4,037 940 (245) 400 404 -- 1,881
------- ------- ------- ------- ------- ------- -------
Net income (loss)............................ $ 5,101 $ 431 $ 1,263 $(3,611) $(2,082) (3,238) 2,857
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Net income (loss) per diluted share.......... $ 0.32 $ 0.03 $ 0.10 $ (0.33) $ (0.22) $ (0.21) $ 0.18
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Number of shares used in per diluted share
calculation................................ 16,115 15,402 13,243 11,085 9,449 15,666 16,240
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents..................... $ 27,693 $ 19,973 $ 19,801 $ 711 $ 1,203 $ 24,028 $ 24,768
Working capital (deficit)..................... 24,255 14,603 17,236 (540) (439) 22,425 10,007
Total assets.................................. 50,210 39,670 28,700 9,151 8,097 44,672 44,226
Long-term obligations, less current portion... 791 1,224 916 1,462 743 606 1,320
Total stockholders' equity.................... 35,475 26,196 19,151 548 1,224 32,553 29,696
</TABLE>
- ------------------------------
(1) During 1997, Summit incurred $379,000 in costs relating to the TriQuest
acquisition. During 1998, Summit incurred $227,000 in costs relating to the
ProSoft acquisition (for the six months ended June 30, 1998) and
approximately $1.0 million related to the terminated acquisition of OrCAD.
Charges of $1.3 million for the six months ended June 30, 1999 relate to
severance obligations to certain management personnel.
(2) Includes a gain of $5.6 million in connection with the sale of the TDS
product line.
84
<PAGE>
SUMMIT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
IMPORTANT NOTE ABOUT FORWARD-LOOKING STATEMENTS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THIS ITEM CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934 THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH FORWARD-LOOKING
STATEMENTS. FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
INCLUDE THOSE SET FORTH UNDER "RISK FACTORS" COMMENCING ON PAGE 10.
OVERVIEW
Summit was founded in December 1993 to act as the holding company for Test
Systems Strategies, Inc., or TSSI, and SEE Technologies, (now Summit Design
(EDA) Ltd.). TSSI was founded in 1979 to develop and market integrated circuit,
also known as IC or chip, manufacturing test products. In January 1993, TSSI
retained a new Chief Executive Officer and began to restructure its senior
management team. Thereafter, Summit broadened its strategy from focusing
primarily on manufacturing test products to include providing HLDA design
creation and verification tools and integrating these with its core technology.
As part of its strategy, in early 1994, TSSI acquired SEE Technologies, an
Israeli company that, through its predecessor, began operations in 1983 and had
operated primarily as a research and development and consulting company focused
on the electronic design automation, or electronic design automation, market. As
a result of the reorganization, TSSI and SEE Technologies became wholly owned
subsidiaries of Summit in the first quarter of 1994.
Prior to the reorganization, Summit's TDS product and related maintenance
revenue accounted for all of Summit's revenue. After the Reorganization and
through June 30, 1997, Summit's revenue was predominantly derived from two
product lines, Visual HDL, which includes Visual HDL for VHDL and Visual HDL for
Verilog, and TDS. As a result of the July 1997 sale of the TDS product line,
Design to Test products are no longer a source of revenue for Summit. With the
acquisition of TriQuest Design Automation, Inc., or TriQuest in February 1997,
Simulation Technologies, Inc., or SimTech, in September 1997, and ProSoft in
June 1998, Summit has also derived revenue from verification products which
include hardware-software co-verification, code coverage, and HDL debugging
products as well as analysis, verification and RTL optimization tools.
Summit generated net losses in 1993, 1994 and 1995, as a result of investing
heavily in research and development as well as developing a direct sales channel
for new products. In 1996, this investment generated increased revenues, which
resulted in net income. Summit operates with high gross margins and, as such, a
downturn in revenue could have a significant impact on income from operations
and net income.
Revenue consists primarily of fees for licenses of Summit's software
products, maintenance and customer training. Product license revenue is derived
from the sale of software licenses to distributors and end-users. Revenue from
the sale of software licenses is recognized upon shipment of the product if
remaining vendor obligations are insignificant and collection of the resulting
receivable is probable, otherwise revenue from such software products is
deferred until such time as vendor obligations are met. Maintenance revenue is
deferred and recognized ratably over the term of the maintenance agreement,
which is typically 12 months. Revenue from customer training is recognized when
the service is performed. Revenue earned on software arrangements involving
multiple elements is allocated to each element based on vendor-specific
objective evidence (VSOE) of the fair value of the various elements within the
arrangement. Summit sells its products through a direct sales force in North
America and selected European countries and through distributors in Summit's
other international markets. Revenue from product sales through distributors is
recognized net of the
85
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associated distributor discount. Fees received for granting distribution rights
are deferred and recognized ratably over the term of the distribution agreement.
Although Summit has not adopted a formal return policy, Summit generally
reimburses customers in full for returned products. Estimated sales returns are
recorded when the related revenue is recognized.
Summit's products perform a variety of functions, certain of which are, and
in the future may be, offered as separate products or discrete point solutions
by Summit's existing and future competitors. For example, certain companies
currently offer design entry products without simulators. There can be no
assurance that such competition will not cause Summit to offer point solutions
instead of, or in addition to, Summit's current software products. Such point
solutions would be priced lower than Summit's current product offerings and
could cause Summit's average selling prices to decrease. Accordingly, based on
these and other factors, Summit expects that average selling prices for its
products may continue to fluctuate in the future.
Summit entered into a joint venture with Anam, effective April 1, 1996,
pursuant to which the joint venture corporation (Summit Asia, Ltd., or Summit
Asia) acquired exclusive rights to sell, distribute and support all of Summit's
products in the Asia-Pacific regions, excluding Japan. Prior to that date, Anam
was an independent distributor of Summit's products in Korea. In April 1998, the
joint venture corporation, Summit Asia, which is headquartered in Korea, was
renamed Asia Design Corporation, or ADC. In May 1998, Summit exchanged a portion
of its ownership in ADC for ownership in another company located in Hong Kong,
SDA. SDA also acquired an equity investment in ADC. In June 1998, Summit and
Anam each loaned SDA $750,000, which is guaranteed by ADC. SDA acquired from ADC
the exclusive rights to sell, distribute and support Summit's products in Asia
Pacific region, excluding Japan. SDA granted distribution rights to Summit's
products to ADC for the Asia Pacific region, excluding Japan. In December 1998,
SDA cancelled ADC's distribution rights in all areas except Korea. In April
1999, SDA granted non-exclusive distribution rights to Semiconductor
Technologies Australia for the Asia Pacific region, excluding Japan and Korea.
For the year ended December 31, 1998 and 1997 and the six months ended June 30,
1999 and 1998, sales through SDA and ADC combined accounted for 1.7%, 1.9%, 1.4%
and 3.1% of Summit's revenue, respectively.
Summit accounts for its ownership interest in SDA and ADC on the equity
method of accounting and, as a result, Summit's share of the earnings and losses
of SDA and ADC are recognized as income or losses in Summit's income statement
in "Other income, net." Summit does not expect SDA or ADC to recognize a profit
for the foreseeable future and thus does not expect to recognize income from its
investment in SDA or ADC for the foreseeable future, if at all. There can be no
assurance that the restructuring will result in SDA or ADC becoming profitable
or that revenue attributable to sales in the Asia Pacific region, excluding
Japan, would increase.
Approximately 36.0%, 34.0%, 50.0%, 47.7%, and 35.1% of Summit's total
revenue for the year ended December 31, 1998, 1997 and 1996 and for the six
months ended June 30, 1999 and 1998, respectively, were attributable to sales
made outside the United States, which includes the Asia Pacific region and
Europe. Approximately, 22.0%, 22.0%, 34.0%, 26.8% and 21.7% of Summit's revenue
for the year ended December 31, 1998, 1997 and 1996, and for the six months
ended June 30, 1999 and 1998, respectively, were attributable to sales made in
the Asia Pacific region. Approximately 14.0%, 12.0%, 16.0%, 20.9%, and 13.4% of
Summit's revenue for the year ended December 31, 1998, 1997 and 1996, and for
the six months ended June 30, 1999 and 1998, respectively, were attributable to
sales made in Europe. The increase in the percentage of revenue from sales made
outside the United States in 1999 is primarily the result of a decrease in
domestic sales made to Credence Systems Corporation, or CSC, in 1998 pursuant to
an OEM agreement. As of December 31, 1998, CSC had satisfied its obligations
under the OEM agreement and Summit will not receive any additional revenue
pursuant to the OEM agreement. Summit expects that international revenue will
continue to represent a significant portion of its total revenue. Summit's
international revenue is currently denominated in U.S. dollars. As a result,
increases in the value of the U.S. dollar relative to foreign currencies could
make Summit's
86
<PAGE>
products more expensive and, therefore, potentially less competitive in those
markets. Summit pays the expenses of its international operations in local
currencies and does not engage in hedging transactions with respect to such
obligations. International sales and operations are subject to numerous risks,
including tariff regulations and other trade barriers, requirements for
licenses, particularly with respect to the export of certain technologies,
collectability of accounts receivable, changes in regulatory requirements,
difficulties in staffing and managing foreign operations and extended payment
terms. There can be no assurance that such factors will not have a material
adverse effect on Summit's future international sales and operations and,
consequently, on Summit's business, financial condition, results of operations
or cash flows. In addition, financial markets and economies in the Asia Pacific
region have been experiencing adverse economic conditions. Demand for and sales
of Summit's products in the Asia Pacific region have continued to decrease and
there can be no assurance that such adverse economic conditions will not worsen.
In June 1999, Summit lowered Seiko's specified quotas due to the adverse
economic conditions in the Asia Pacific Region. As a result, Summit expects
sales through Seiko to decrease for at least the current and following two
quarters and revenue attributable to sales in the Asia Pacific region to
decrease.(1)
On February 28, 1997, Summit completed its acquisition of TriQuest. TriQuest
develops HDL analysis, optimization, and verification tools for the design of
high performance, deep submicron integrated circuits. The transaction has been
accounted for as a pooling of interests in accordance with generally accepted
accounting principles.
Effective July 1, 1997 Summit sold substantially all of the assets used in
its business of developing and marketing its Test Development Series "TDS"
Products to CSC. The increase in Summit's product licenses revenue during the
last twelve months has been primarily due to increased revenue associated with
Summit's HLDA products. Substantially all of Summit's Design to Test product
license revenue and related maintenance and services revenue for the nine months
ended September 30, 1997 were attributable to the TDS products. As of July 1,
1997, TDS products ceased to be a source of such revenues. CSC assumed Summit's
obligations under TDS maintenance contracts entered into prior to the closing
and Summit has not recognized deferred revenue associated with such contracts
since June 30, 1997.
Summit maintained exclusive rights to its Visual Testbench technology and
CSC agreed to purchase a minimum of $16 million of Visual Testbench licenses
over a thirty-month period beginning July 1997, subject to specified quarterly
maximums and certain additional conditions, and $2 million of maintenance over
an eighteen month period beginning July 1997. In December 1998, Summit and CSC
agreed to amend the agreement and as of December 31, 1998, CSC had satisfied its
obligation to purchase $16.0 million of Visual Testbench licenses. CSC also
obtained shared ownership of the Visual Testbench source code in December 1998
and has the right to sell Visual Testbench licenses based on the source code
received from Summit.
On September 9, 1997, Summit acquired SimTech, a company that develops and
distributes hardware-software co-verification, code coverage and HDL debugging
software. The aggregate consideration for the acquisition was 1,256,800 shares
of Summit common stock, 723,200 options to purchase Summit common stock and $3.9
million in cash. The transaction was accounted for using the purchase method of
accounting. Accordingly, SimTech's results of operations for the period from
September 9, 1997 are included in the consolidated statements of operations. The
purchase price was allocated to the net assets acquired based on their estimated
fair market values at the date of acquisition.
- ------------------------
(1) This paragraph contains forward-looking statements reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
87
<PAGE>
After discussion with the staff of the Securities and Exchange Commission,
Summit restated the consolidated financial statements as of and for the quarters
ended September 30, 1997, March 31, 1998, June 30, 1998 and September 30, 1998
and as of and for the year ended December 31, 1997 to reflect a change in the
original accounting treatment to the September 1997 acquisition of SimTech.
In connection with the acquisition of SimTech, Summit repurchased 939,000
shares of common stock in private transactions at an average price of $12.30 per
share for $11.6 million in September 1997.
On December 23, 1997, Summit announced that the Board of Directors had
authorized the repurchase of up to 750,000 shares of Summit's Common Stock. From
January 1, 1998 to May 12, 1998, Summit repurchased 162,500 shares of its common
stock at a cost of $2.3 million. Summit subsequently reissued these shares
through the exercise of stock options during the three months ended June 30,
1998. On June 29, 1998, Summit cancelled this stock repurchase plan.
On June 30, 1998 Summit completed its acquisition of ProSoft. ProSoft
develops software tools used to verify embedded systems software prior to the
availability of a hardware prototype. The aggregate consideration for the
acquisition (including shares of common stock reserved for issuance upon
exercise of ProSoft options which were exchanged for options of Summit) was
248,334 shares of common stock. The transaction has been accounted for as a
pooling of interests in accordance with generally accepted accounting
principles. In compliance with such principles, Summit's financial statements
have been restated to include the accounts of ProSoft as if the acquisition had
occurred at the beginning of the first period presented.
In September 1998, Summit announced its proposed acquisition of OrCAD, Inc.
In February 1999, Summit announced that its planned acquisition of OrCAD, Inc.
had been terminated. During the quarter ended December 31, 1998, Summit incurred
approximately $1.0 million in costs related to the terminated acquisition.
88
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
total revenue represented by selected income statement items.
Income statement data:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1998 1997 1996 1999 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue:
Product licenses.............................................................. 77.1% 79.0% 76.0% 61.5% 78.5%
Maintenance and services...................................................... 22.1 19.6 21.2 38.5 20.6
Other......................................................................... 0.8 1.4 2.8 -- 0.9
----- ----- ----- ----- -----
Total revenue............................................................... 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Product licenses.............................................................. 1.7 2.2 2.8 1.8 1.5
Maintenance and services...................................................... 2.2 2.0 2.3 4.3 2.4
Amortization of purchased technologies........................................ 1.5 0.7 -- 2.4 1.5
----- ----- ----- ----- -----
Total cost of revenue....................................................... 5.4 4.9 5.1 8.5 5.4
----- ----- ----- ----- -----
Gross profit................................................................ 94.6 95.1 94.9 91.5 94.6
Operating expenses:
Research and development...................................................... 29.9 24.7 28.9 36.9 27.6
Sales and marketing........................................................... 26.8 33.7 45.9 43.5 29.5
General and administrative.................................................... 10.1 12.0 15.7 18.1 10.0
Amortization of intangibles and goodwill...................................... 6.4 3.0 -- 10.0 6.5
Non-recurring charges......................................................... 2.9(a) 1.2(a) -- 9.6(b) 1.1(a)
In-process technology......................................................... -- 37.2 --
----- ----- ----- ----- -----
Total operating expenses.................................................... 76.1 111.8 90.5 118.1 74.7
----- ----- ----- ----- -----
Income (loss) from operations................................................... 18.5 (16.7) 4.4 (26.6) 19.9
Other income, net............................................................... 2.5 21.1(c) 0.6 3.5 2.3
----- ----- ----- ----- -----
Income before income taxes...................................................... 21.0 4.4 5.0 (23.1) 22.2
Income tax provision (benefit).................................................. 9.3 3.0 (1.2) 0.0 8.8
----- ----- ----- ----- -----
Net income (loss)............................................................... 11.7% 1.4% 6.2% (23.1) 13.4%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
- ------------------------
(a) Non-recurring charges in 1997 and 1998 relate to costs associated with
business combinations and acquisitions. During 1997, Summit incurred
$379,000 in costs relating to the TriQuest acquisition. For the six months
ended June 30, 1998, Summit incurred $227,000 in costs relating to the
ProSoft acquisition and for the year ended December 31, 1998 Summit incurred
additional costs of approximately $1.0 million related to the terminated
acquisition of OrCAD.
(b) Non-recurring charges of $1.3 million for the six months ended June 30, 1999
relate to severance obligations to certain management personnel.
(c) Includes a gain of $5.6 million (17.7% of revenues) in conjunction with the
sale of the TDS product line
89
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
TOTAL REVENUE
Total revenue decreased by 34.6% from $21.4 million for the six months ended
June 30, 1998 to $14.0 million for the six months ended June 30, 1999. Sales
through one distributor accounted for 23.5%, and 14.1% of Summit's total revenue
for the six months ended June 30, 1999 and 1998, respectively. Sales to CSC
accounted for 27.0% of Summit's total revenue for the six months ended June 30,
1998. Such revenue included $2.9 million of Visual Testbench license sales made
pursuant to an OEM agreement with CSC. As of December 31, 1998, CSC had fully
satisfied its obligation to purchase Visual Testbench Licenses pursuant to the
OEM agreement and Summit does not expect to receive any additional revenue from
sales of Visual Testbench licenses to CSC. Summit did not receive any revenue
from CSC for the six months ended June 30, 1999. Revenue generated pursuant to
another OEM agreement accounted for 12.6%, and 7.2% of Summit's total revenue
for the six months ended June 30, 1999 and 1998, respectively.
PRODUCT LICENSES REVENUE
Summit's product licenses revenue is derived from license fees from Summit's
HLDA products. Product licenses revenue decreased by 48.7% from $16.8 million
for the six months ended June 30, 1998 to $8.6 million for the six months ended
June 30, 1999. The decrease in product licenses revenue was primarily
attributable to Summit ceasing to receive revenue from CSC pursuant to the OEM
Agreement. The decrease was also attributable to decreased sales as a result of
Summit hiring fewer sales and marketing personnel than planned in the fourth
quarter of 1998 and the first two quarters of 1999 and attrition in the existing
sales force during the first two quarters of 1999.
MAINTENANCE AND SERVICES REVENUE
Summit's maintenance and services revenue is derived from maintenance
contracts related to Summit's HLDA products and training classes offered to
purchasers of Summit's software products. Maintenance and services revenue
increased 22.3% from $4.4 million for the six months ended June 30, 1998 to $5.4
million for the six months ended June 30, 1999. This increase is primarily
attributable to maintenance contract renewals by the installed base of HLDA
customers, and to a lesser extent from non-recurring engineering services
provided to one customer, which is not expected to reoccur.
OTHER REVENUE
Other revenue consists of revenue from one-time technology sales and fees
received for granting distribution rights. Other revenue decreased 100% from
$183,000 for the six months ended June 30, 1998 to $0 for the six months ended
June 30, 1999. Although Summit renewed a significant distribution agreement the
renewal did not include additional fees. As a result, the distribution rights
fees paid at the inception of the agreement and amortized into revenue at
$91,000 each quarter over the agreement period were no longer a source of other
revenue as of December 31, 1998.
Cost of Revenue
COST OF PRODUCT LICENSES REVENUE
Cost of product licenses revenue includes product packaging, software
documentation, labor and other costs associated with handling, packaging and
shipping product and other production related costs. The cost of product
licenses revenue decreased 17.0% from $311,000 for the six months ended June 30,
1998 to $258,000 for the six months ended June 30, 1999. As a percentage of
product licenses revenue, the cost of product licenses revenue increased from
1.9% of product license revenue for the six months ended June 30, 1998 to 3.0%
of product license revenue for the six months ended June 30,
90
<PAGE>
1999. This increase as a percentage of product license revenue was primarily due
to fixed costs spread over decreased product license revenue.
COST OF MAINTENANCE AND SERVICES REVENUE
Cost of maintenance and services revenue, which consists primarily of
personnel costs for customer support and training classes offered to purchasers
of Summit's products, increased 20.2% from $504,000 for the six months ended
June 30, 1998 to $606,000 for the six months ended June 30, 1999. As a
percentage of maintenance and services revenue, the cost of maintenance and
services revenue decreased from 11.4% for the six months ended June 30, 1998 to
11.2% for the six months ended June 30, 1999. The decrease in the cost of
maintenance and services revenue as a percent of revenue for the six months
ended June 30, 1999 over the same period in 1998 was primarily the result of
increased maintenance and services revenue in 1999.
AMORTIZATION OF PURCHASED TECHNOLOGIES
Summit recorded $2.4 million of purchased technologies (intangibles) as part
of the SimTech acquisition which are being amortized to cost of revenue on a
straight-line basis over periods ranging from two to five years beginning
September 9, 1997. Summit expensed approximately $331,000 for the six months
ended June 30, 1999 and 1998, respectively.
Operating Expenses
RESEARCH AND DEVELOPMENT
Research and development expenses consist of the engineering and operations
support costs of developing new products and enhancements to existing products
and performing quality assurance activities. Research and development expenses
decreased 12.5% from $5.9 million for the six months ended June 30, 1998 to $5.2
million for the six months ended June 30, 1999. Research and development
expenses for six months ended June 30, 1998 includes $1,100,000 of compensation
expense recorded in connection with Summit's acquisition of SimTech in September
1997.
Summit recorded a total of $4.4 million of compensation expense for shares
issued as part of the acquisition which were contingent upon continued
employment and were being expensed as the employment obligation lapsed. This
expense was being recorded on a straight-line basis over the two year employment
obligation period. However, in December 1998, the employment agreements to which
this contingent compensation related were amended to eliminate the continued
employment obligation and at that time, the remaining unrecorded compensation
was expensed. Excluding the $1,100,000 compensation expense recorded in the six
months ended June 30, 1998, research and development expense increased 7.5% from
$4.8 million for the six months ended June 30, 1998 to $5.2 million for the same
period in 1999.
As a percentage of total revenue, research and development expenses
increased from 27.6% for the six months ended June 30, 1998 to 36.9% for the six
months ended June 30, 1999. The increase in research and development expenses as
a percent of revenue is the result of a decrease in total revenues for the six
months ended June 30, 1999. Summit continues to believe that significant
investment in research and development is required to remain competitive in its
markets, and Summit therefore anticipates that research and development expense
will increase in absolute dollars in future periods, but may vary as a percent
of revenue.(2)
- ------------------------
(2) This sentence is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
91
<PAGE>
SALES AND MARKETING
Sales and marketing expenses, consisting primarily of salaries, commissions
and promotional costs, decreased 3.5% from $6.3 million for the six months ended
June 30, 1998 to $6.1 million for the six months ended June 30, 1999. This
decrease was primarily attributable to Summit hiring fewer sales and marketing
personnel than planned in the fourth quarter of 1998 and the first two quarters
of 1999 and attrition in the existing sales force during the first quarter of
1999.
As a percentage of total revenue, sales and marketing expenses increased
from 29.5% for the six months ended June 30, 1998 to 43.5% for the six months
ended June 30, 1999. The increase as a percentage of total revenue was primarily
attributable to the decrease in total revenue for 1999. In the future, Summit
expects sales and marketing expenses to continue to increase in absolute
dollars, in part due to the hiring of additional sales and marketing
personnel.(2)
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of the corporate,
finance, human resource, information services, administrative, and legal and
accounting expenses of Summit. General and administrative expenses increased
18.6% from $2.1 million for the six months ended June 30, 1998, to $2.5 million
for the six months ended June 30, 1999. As a percentage of total revenue,
general and administrative expenses increased from 10.0% for the six months
ended June 30, 1998 to 18.1% for the six months ended June 30, 1999. The
increase in general and administrative expenses as a percentage of total revenue
and in actual dollars was primarily attributable to the addition of four
positions and the cost of the CEO search.
AMORTIZATION OF INTANGIBLES AND GOODWILL
Summit recorded $4.1 million in intangibles (excluding $2.4 million of
purchased technologies) and $3.8 million of goodwill as part of the SimTech
acquisition which are being amortized to expense on a straight-line basis over
periods ranging from two to five years beginning September 9, 1997. Summit
expensed approximately $1.4 million for the six months ended June 30, 1999 and
1998, respectively.
NON-RECURRING CHARGES
During the six months ended June 30, 1999, Summit recorded $1.3 million in
non-recurring charges related to severance obligations for certain management
personnel. For the six months ended June 30, 1998 Summit incurred one-time
charges of $227,000 related to the acquisition of ProSoft.
INTEREST EXPENSE
Interest expense was $1,000 and $2,000 for the six months ended June 30,
1999 and 1998 respectively. Summit incurred no interest expense associated with
Summit's bank line of credit for the six months ended June 30, 1999 and 1998.
OTHER INCOME, NET
Other income consists of interest income associated with available cash
balances, gains or losses from the sale of property and equipment, Summit's pro
rata share of the earnings and losses of SDA and ADC and foreign exchange rate
differences resulting from paying operating expenses of foreign
- ------------------------
(2) This sentence is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
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operations in the local currency. Other income was approximately $489,000, and
$494,000 for the six months ended June 30, 1998 and 1999, respectively.
INCOME TAX PROVISION
The income tax provision decreased from $1.9 million for the six months
ended June 30, 1998 to $0 for the six months ended June 30, 1999. The 1998
income tax provision reflects Summit's estimated consolidated tax rate for
federal, state and foreign taxes of approximately 40% of taxable income.
Summit's estimated effective rate for the year ending December 31, 1999 is 0%,
as Summit does not expect to generate either taxable income or net operating
losses in 1999.
EFFECTIVE CORPORATE TAX RATES
Prior to 1996, Summit had experienced losses for income tax purposes in the
United States. As of December 31, 1998, Summit has recognized the benefit of its
U.S. net operating loss carryforwards and tax credit carryforwards in their
financial statements.
Summit's Israeli operations are performed entirely by Summit Design (EDA)
Ltd., which is a separate taxable Israeli entity. Summit's existing Israeli
production facility has been granted "Approved Enterprise" status under the
Israeli Investment Law, which entitles Summit to reductions in the tax rate
normally applicable to Israeli companies with respect to the income generated by
its "Approved Enterprise" programs. In particular, the tax holiday covers the
seven year period beginning the first year in which Summit Design (EDA) Ltd.
generates taxable income from its "Approved Enterprise" (after using any
available NOLs), provided that such benefits will terminate in 2006 regardless
of whether the seven year period has expired. The tax holiday provides that,
during such seven year periods, a portion of Summit's taxable income from its
Israeli operations will be taxed at favorable tax rates. Summit has recently
applied for "Approved Enterprise" status with respect to a new project and
intends to apply in the future with respect to additional projects. There can be
no assurance that Summit will be granted any approvals and therefore there can
be no assurance Summit will continue to have favorable tax status in Israel.
Management of Summit intends to permanently reinvest earnings of the Israeli
subsidiary outside the U.S. If such earnings were remitted to the U.S.,
additional U.S. federal and foreign taxes may be due.
Summit has foreign income tax net operating losses of approximately $5.6
million at December 31, 1998. These foreign losses were generated in Israel over
several years and have not yet received final assessment from the Israeli
government. Consequently, management is uncertain as to the availability of a
substantial portion of such foreign loss carryforwards.
Summit is also subject to risk that United States and foreign tax laws and
rates may change in a future period or periods, and that any such changes may
materially adversely affect Summit's tax rate. As a result of the factors
described above and other related factors, there can be no assurance that Summit
will maintain a favorable tax rate in future periods. Any increase in Summit's
effective tax rate, or variations in the effective tax rate from period to
period, could have a material adverse effect on Summit's business, financial
condition, results of operations and cash flows.
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Total Revenue
Summit's revenue is comprised of product licenses revenue, maintenance and
services revenue and other revenue. Total revenue increased by 38.7% from $31.4
million for the year ended December 31, 1997 to $43.6 million for the year ended
December 31, 1998. Sales through one distributor accounted for 14.0% and 12.1%
of Summit's total revenue for the years ended December 31, 1998 and 1997,
respectively. Sales to CSC accounted for 25.1% and 28.6% of Summit's total
revenue for the years
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ended December 31, 1998 and 1997, respectively. Revenues for the years ended
December 31, 1997 and 1998 include $6.2 million and $9.8 million of Visual
Testbench licenses sales made pursuant to an OEM agreement with CSC. As of
December 31, 1998, CSC had fully satisfied its obligation to purchase Visual
Testbench Licenses pursuant to the OEM agreement and Summit does not expect to
receive any additional revenue from sales of Visual Testbench licenses to CSC.
PRODUCT LICENSES REVENUE
Summit's product licenses revenue is derived from license fees from Summit's
HLDA products and, additionally, from Design to Test products through June 30,
1997. Product licenses revenue increased by 35.3% from $24.8 million for the
year ended December 31, 1997 to $33.6 million for the year ended December 31,
1998. Revenue from HLDA and Design to Test products accounted for 91.7% and
8.3%, respectively, of product licenses revenue for the year ended December 31,
1997, respectively, and 100% and 0% of product licenses revenue for the year
ended December 31, 1998, respectively. The decline in revenue from Design to
Test products is a result of the sale of the TDS product line effective July 1,
1997.
HLDA revenue increased 47.5% from $22.8 million for the year ended December
31, 1997 to $33.6 million for the year ended December 31, 1998. Revenues
attributable to products existing in 1997 accounted for 46% of the increase in
HLDA revenues, while revenues from products introduced in 1998 accounted for 54%
of the increase in such revenues. A significant amount of the increase in the
existing products revenue for 1998 over the same period in 1997 was attributable
to sales of Visual Testbench and Visual to one customer. The increase in
revenues from new products was primarily from sales of products developed from
in-process technology acquired in the SimTech acquisition in September 1997.
Design to Test revenue decreased from $2.1 million for the year ended
December 31, 1997 to $0 for the year ended December 31, 1998 as a result of the
sale of all of the assets used in the business of developing and marketing the
TDS Products effective July 1, 1997.
MAINTENANCE AND SERVICES REVENUE
Summit's maintenance and services revenue is derived from maintenance
contracts related to Summit's HLDA and Design to Test products and training
classes offered to purchasers of Summit's software products. Maintenance and
services revenue increased 56.5% from $6.2 million for the year ended December
31, 1997 to $9.6 million for the year ended December 31, 1998. The increase in
maintenance and services revenue was attributable to maintenance contracts for
verification products acquired in the SimTech acquisition, a maintenance
contract with one customer, and additional maintenance revenue related to growth
in the installed base of HLDA customers over the previous year, less a decrease
in Design to Test maintenance revenue of $1.4 million, due to the sale of the
TDS product line.
OTHER REVENUE
Other revenue consists of revenue from one-time technology sales and fees
received for granting distribution rights. Other revenue decreased 18.4% from
$450,000, for the year ended December 31, 1997 to $367,000 for the year ended
December 31, 1998. In May 1997, a distribution agreement expired; and as a
result, the distribution rights fees paid at the inception of the agreement and
amortized into revenue, ($83,000 for the year ended December 31, 1997) were no
longer a source of other revenue.
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Cost of Revenue
COST OF PRODUCT LICENSES REVENUE
Cost of product licenses revenue includes product packaging, software
documentation, labor and other costs associated with handling, packaging and
shipping product and other production related costs plus the amortization of
purchased technology acquired in the SimTech purchase. Cost of product licenses
revenue increased 6.1% from $701,000 for the year ended December 31, 1997 to
$744,000 for the year ended December 31, 1998. As a percentage of product
licenses revenue, the cost of product licenses revenue decreased from 2.8% for
the year ended December 31, 1997 to 2.2% for the year ended December 31, 1998.
This decrease was primarily due to leveraging fixed costs across increased
product licenses revenue.
COST OF MAINTENANCE AND SERVICES REVENUE
Cost of maintenance and services revenue, which consists primarily of
personnel costs for customer support and training classes offered to purchasers
of Summit's products, increased 51.1% from $632,000 for the year ended December
31, 1997 to $955,000 for the year ended December 31, 1998. As a percentage of
maintenance and services revenue, the cost of maintenance and services revenue
decreased from 10.3% for the year ended December 31, 1997 to 9.9% for the year
ended December 31, 1998. The decrease in the cost of maintenance and services
revenue as a percentage of maintenance and services revenue was primarily a
result of the 56.5% increase in maintenance and services revenue for the year
ended December 31, 1998.
AMORTIZATION OF PURCHASED TECHNOLOGIES
Summit recorded $2.4 million of purchased technologies (intangibles) as part
of the SimTech acquisition which are being amortized to cost of revenue on a
straight-line basis over periods ranging from two to five years beginning
September 9, 1997. Summit expensed $219,000 and $661,000 for the years ended
December 31, 1997 and 1998, respectively.
Operating Expenses
RESEARCH AND DEVELOPMENT
Research and development expenses consist of the engineering and operations
support costs of developing new products and enhancements to existing products
and performing quality assurance activities. Research and development expenses
increased 68.3% from $7.7 million for the year ended December 31, 1997 to $13.0
million for the year ended December 31, 1998. As a percentage of total revenue,
research and development expenses increased from 24.7% for the year ended
December 31, 1997 to 29.9% for the year ended December 31, 1998. The majority of
the increase was attributable to compensation expense recorded in connection
with Summit's acquisition of SimTech in September 1997. Summit recorded a total
of $4.4 million of compensation expense for shares issued as part of the
acquisition which were contingent upon continued employment and were being
expensed as the employment obligation lapsed. This expense was being recorded on
a straight-line basis over the two year employment obligation period. However,
in December 1998, the employment agreements to which this contingent
compensation related were amended to eliminate the continued employment
obligation. At that time, the remaining unrecorded compensation was expensed. As
a result, Summit recorded $723,000 and $3.7 million of compensation related to
contingent employment for the years ended December 31, 1997 and 1998,
respectively. The remaining increase in research and development expenses was
primarily attributable to an increase in the number of engineers employed by
Summit. During the second half of 1997, Summit hired 38 additional engineers.
Summit believes that significant investment in research and development is
required to remain competitive in its markets, and Summit,
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therefore, anticipates that research and development expenses will increase in
absolute dollars in future periods, but may vary as a percentage of total
revenue.(2)
Software development costs are accounted for in accordance with Financial
Accounting Standards Board Statement No. 86, under which Summit is required to
capitalize software development costs after technological feasibility has been
established. To date, development costs have been expensed as incurred since
technological feasibility generally has not been established until shortly
before the release of a new product, and no material development costs have been
incurred after establishment of technological feasibility.
SALES AND MARKETING
Sales and marketing expenses, consisting primarily of salaries, commissions
and promotional costs, increased 10.6% from $10.6 million for the year ended
December 31, 1997 to $11.7 million for the year ended December 31, 1998. This
increase was primarily attributable to expenses related to the sales and
marketing of products acquired in the SimTech acquisition in September 1997. As
a percentage of total revenue, sales and marketing expenses decreased from 33.7%
for the year ended December 31, 1997 to 26.9% for the year ended December 31,
1998. The decrease was primarily attributable to the increase in total revenue
for 1998. The decrease was also attributable to Summit hiring fewer sales and
marketing personnel than planned during 1998. Summit expects sales and marketing
expenses to continue to increase in absolute dollars, in part due to the hiring
of additional sales and marketing personnel.(2)
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of the corporate,
finance, human resource, information services, administrative, legal and
auditing expenses of Summit. General and administrative expenses increased 16.2%
from $3.8 million for the year ended December 31, 1997 to $4.4 million for the
year ended December 31, 1998. As a percentage of total revenue, general and
administrative expenses decreased from 12.0% for 1997 to 10.1% for 1998. The
decrease as a percentage of total revenue was primarily attributable to the
increase in total revenue in 1997. Summit expects general and administrative
expenses to increase in absolute dollars to support future sales and
operations.(2)
AMORTIZATION OF INTANGIBLES AND GOODWILL
Summit recorded $4.1 million in intangibles (excluding $2.4 million of
purchased technologies) and $3.8 million of goodwill as part of the SimTech
acquisition which are being amortized to expense on a straight-line basis over
periods ranging from two to five years beginning September 9, 1997. Summit
expensed $942,000 and $2.8 million for the years ended December 31, 1997 and
1998, respectively.
NON-RECURRING CHARGES
Non-recurring charges relate to costs associated with business combinations
and acquisitions. During 1997, Summit incurred $379,000 in costs relating to the
TriQuest acquisition. During 1998, Summit incurred $227,000 in costs relating to
the ProSoft acquisition and approximately $1.0 million related to the terminated
acquisition of OrCAD.
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(2) This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
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IN-PROCESS TECHNOLOGY
For the year ended December 31, 1997, $11.7 million of the purchase price
for the acquisition of SimTech ($25.4 million) was allocated to in-process
technology and, accordingly, was expensed as of the acquisition date (September
9, 1997). The amount allocated to the in-process technology represented the
technology that had not yet reached technological feasibility and had no
alternative future use. Summit had no acquisitions in 1998 that generated a
charge to in-process technology.
The value assigned to purchased in-process technology in 1997 was related
primarily to two research projects for which technological feasibility had not
been established, V-CPU ($8.1 million) and HDL Score ($3.1 million). The value
was determined by estimating the net cash flows from the sale of products
resulting from the completion of such projects, and discounting the net cash
flows back to their present value adjusted for the stage of completion of the
technologies at the date of acquisition.
Summit released the commercial version of the V-CPU hardware/software
co-verification product in the first quarter of 1998, consistent with
expectations at the time of the acquisition. A market requirement for extensive
embedded system component interfaces called bus functional models ("BFM") and
instruction set simulators ("ISS") was underestimated in the introduction
schedule and has caused delays in initial sales of the product. Summit
introduced the HDL Score product in the second quarter of 1998, approximately
four months later than originally anticipated, due to delays in completing the
control logic support functionality that was essential for product introduction
to take place. For 1998, revenues from the sales of the products acquired in
connection with the SimTech acquisition fell short of forecast by 10%. Summit's
forecast of revenues for 1999 reflects that the shortfall of revenues in 1998
related to HDL Score will be realized in 1999 and that V-CPU will have revenues
that are approximately 50% of those originally estimated due to the delays in
availability of BFM's and ISS's.(2) Although these delays affected the timing of
the realization of revenue from these products as originally estimated by
Summit, Summit believes the aggregate revenue streams originally anticipated
from these products will be realized and that there has been no material change
in expected return on investment related to these products.(2) However, there
can be no assurance that Summit will realize revenue for V-CPU and HDL Score in
the amounts estimated, and actual revenue realized from either or both of these
products may be significantly lower than expected.(1)
Interest Expense
Interest expense decreased from $12,000 for the year ended December 31, 1997
to $4,000 for the year ended December 31, 1998 due to the expiration of certain
capital leases obligations.
Other Income, Net
Other income consists of interest income associated with available cash
balances, gains or losses from the sale of property and equipment, Summit's pro
rata share of the earnings and losses of SDA and ADC and foreign exchange rate
differences resulting from paying operating expenses of foreign operations in
the local currency. Other income was $1.1 million for the years ended December
31, 1998 and 1997. Interest income increased approximately $200,000, to $1.3
million for the year ended
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(1) This paragraph contains forward-looking statements reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
(2) This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
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December 31, 1998. This increase was offset by losses recorded on the equity
method which were incurred in SDA and ADC.
Gain on Sale of TDS Product Line
On July 11, 1997 Summit sold substantially all of the assets used in its
business of developing and marketing its Test Development Series "TDS" Products
to CSC for $5 million. CSC assumed certain liabilities, including Summit's
obligations under TDS maintenance contracts entered into prior to the closing.
Summit has recorded a gain on the sale of $5.6 million in 1997.
Income Tax Provision
The income tax provision increased from $940,000 for the year ended December
31, 1997 to $4.0 million for the year ended December 31, 1998. Summit utilized
substantially all its U.S. federal and state net operating loss carryforwards to
offset a considerable portion of U.S. taxable income for the year ended December
31, 1997. The provision of $940,000 for 1997 is comprised of $1.7 million of
Federal, State and foreign taxes payable, less $719,000 of deferred tax benefit
recognized for NOL's available from the TriQuest acquisition as well as research
and development credits and alternative minimum tax credits. The provision of
$4.0 million for 1998 is comprised of $3.4 million of federal, state and foreign
taxes payable, plus $659,000 of deferred tax liabilities. The effective tax rate
decreased from 69% for the year ended December 31, 1997 to 44% for the year
ended December 31, 1998. The 1997 effective tax rate was high primarily due to
the write-off of in-process research and development costs which are not
deductible for tax purposes, reduced by the tax benefit realized in 1997 for
utilizing the net operating loss carryforwards. The 1998 effective tax rate is
higher than the statutory rate due primarily to nondeductible amortization and
contingent stock compensation expense relating to the SimTech acquisition.
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
Total Revenue
Summit's revenue is comprised of product licenses revenue, maintenance and
services revenue and other revenue. Total revenue increased by 54.8% from $20.3
million for the year ended December 31, 1996 to $31.4 million for the year ended
December 31, 1997. Sales through one distributor accounted for 12.1% and 14.7%
of Summit's total revenue for the years ended December 31, 1997 and 1996,
respectively. Revenues for the year ended December 31, 1997 include $6.2 million
of Visual Testbench licenses sales pursuant to an OEM agreement with CSC. Sales
to CSC accounted for 28.6% of Summit's total revenue for the year ended December
31, 1997. No customer accounted for more than 10% of Summit's total revenue for
the year ended December 31, 1996.
PRODUCT LICENSES REVENUE
Summit's product licenses revenue is derived from license fees from Summit's
HLDA products and, additionally, from Design to Test products through June 30,
1997. Product licenses revenue increased by 60.7% from $15.4 million for the
year ended December 31, 1996 to $24.8 million for the year ended December 31,
1997. Revenue from HLDA and Design to Test products accounted for 72.6% and
27.4%, respectively, of product licenses revenue for the year ended December 31,
1996 and 91.7% and 8.3%, respectively, of product licenses revenue for the year
ended December 31, 1997.
HLDA revenue increased 103.2% from $11.2 million for the year ended December
31, 1996 to $22.8 million for the year ended December 31, 1997. Revenue
attributable to products existing in 1996 accounted for 76% of the increase in
HLDA revenues, while revenues from products introduced in 1997 accounted for 23%
of the increase in such revenues. A significant amount of the increase in
revenue from existing products over the same period in 1996 was attributable to
sales of Visual
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Testbench and Visual to one customer. The increase in revenue from new products
was primarily from sales of products added as a result of the SimTech
acquisition.
Design to Test revenue decreased from $4.2 million for the year ended
December 31, 1996 to $2.1 million for the year ended December 31, 1997 as a
result of the sale of all of the assets used in the business of developing and
marketing the TDS Products effective July 1, 1997.
MAINTENANCE AND SERVICES REVENUE
Summit's maintenance and services revenue is derived from maintenance
contracts related to Summit's HLDA and Design to Test products and training
classes offered to purchasers of Summit's software products. Maintenance and
services revenue increased 43.2% from $4.3 million for the year ended December
31, 1996 to $6.2 million for the year ended December 31, 1997. The increase in
maintenance and services revenue was attributable to maintenance contracts for
verification products acquired in the SimTech acquisition, a maintenance
contract with one customer, and additional maintenance revenue related to growth
in the installed base of HLDA customers over the previous year, less a decrease
in Design to Test maintenance revenue of $1.6 million, due to the sale of the
TDS product line.
OTHER REVENUE
Other revenue consists of revenue from one-time technology sales and fees
received for granting distribution rights. Other revenue decreased 20.6% from
$567,000, for the year ended December 31, 1996 to $450,000 for the year ended
December 31, 1997. There was no revenue from one time technology sales during
the years ended December 31, 1996 or 1997. In May 1997, a distribution agreement
expired; and as a result, the distribution rights fees paid at the inception of
the agreement and amortized into revenue at $50,000 each quarter over the
agreement period will no longer be a source of other revenue.
Cost of Revenue
COST OF PRODUCT LICENSES REVENUE
Cost of product licenses revenue includes product packaging, software
documentation, labor and other costs associated with handling, packaging and
shipping product and other production related costs plus the amortization of
purchased technology acquired in the SimTech purchase. Cost of product licenses
revenue increased 22.3% from $573,000 for the year ended December 31, 1996 to
$701,000 for the year ended December 31, 1997. As a percentage of product
licenses revenue, the cost of product licenses revenue decreased from 3.7% for
the year ended December 31, 1996 to 2.8% for the year ended December 31, 1997.
This decrease was primarily due to leveraging fixed costs across increased
product licenses revenue.
COST OF MAINTENANCE AND SERVICES REVENUE
Cost of maintenance and services revenue, which consists primarily of
personnel costs for customer support and training classes offered to purchasers
of Summit's products, increased 35.6% from $466,000 for the year ended December
31, 1996 to $632,000 for the year ended December 31, 1997. As a percentage of
maintenance and services revenue, the cost of maintenance and services revenue
decreased from 10.8% for the year ended December 31, 1996 to 10.3% for the year
ended December 31, 1997. The decrease in the cost of maintenance and services
revenue as a percentage of maintenance and services revenue was primarily a
result of Summit operating below forecasted staffing levels during the first
half of 1997. Summit increased headcount during the second half of 1997.
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AMORTIZATION OF PURCHASED TECHNOLOGIES
Summit recorded $2.4 million of purchased technologies (intangibles) as part
of the SimTech acquisition which are being amortized to cost of revenue on a
straight-line basis over periods ranging from two to five years beginning
September 9, 1997. Summit expensed $219,000 for the year ended December 31,
1997.
Operating Expenses
RESEARCH AND DEVELOPMENT
Research and development expenses consist of the engineering and operations
support costs of developing new products and enhancements to existing products
and performing quality assurance activities. Research and development expenses
increased 32.1% from $5.9 million for the year ended December 31, 1996 to $7.7
million for the year ended December 31, 1997. A significant amount of the
increase was attributable to compensation expense in the amount of $723,000 for
the year ended December 31, 1997 recorded in connection with Summit's
acquisition of SimTech in September 1997. Summit recorded $4.4 million of
compensation expense for shares issued as part of the acquisition which were
contingent upon continued employment and were being expensed as the employment
obligation lapsed. In connection with the sale of the TDS product line on July
1, 1997, Summit's research and development staff decreased by 15 engineers. With
the acquisition of SimTech on September 9, 1997 Summit added 28 engineers.
Additionally, Summit added a net of 25 engineers during 1997. As a percentage of
total revenue, research and development expenses decreased from 28.9% for the
year ended December 31, 1996 to 24.6% for the year ended December 31, 1997
primarily due to the increase in total revenue for 1997. Summit believes that
significant investment in research and development is required to remain
competitive in its markets, and Summit, therefore, anticipates that research and
development expenses will increase in absolute dollars in future periods, but
may vary as a percentage of total revenue.(2)
Software development costs are accounted for in accordance with Financial
Accounting Standards Board Statement No. 86, under which Summit is required to
capitalize software development costs after technological feasibility has been
established. To date, development costs have been expensed as incurred since
technological feasibility generally has not been established until shortly
before the release of a new product, and no material development costs have been
incurred after establishment of technological feasibility.
SALES AND MARKETING
Sales and marketing expenses, consisting primarily of salaries, commissions
and promotional costs, increased 13.6% from $9.3 million for the year ended
December 31, 1996 to $10.6 million for the year ended December 31, 1997. The
increase was primarily attributable to the addition of 8 sales and marketing
personnel and the related increased commissions and travel expenses. As a
percentage of total revenue, sales and marketing expenses decreased from 45.9%
for the year ended December 31, 1996 to 33.7% for the year ended December 31,
1997. The decrease was primarily attributable to the increase in total revenue
for 1997. In the future, Summit expects sales and marketing expenses to continue
to increase in absolute dollars, in part due to the hiring of additional sales
personnel.(2)
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(2) This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
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GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of the corporate,
finance, human resource, information services, administrative, legal and
auditing expenses of Summit. General and administrative expenses increased 18.7%
from $3.2 million for the year ended December 31, 1996 to $3.8 million for the
year ended December 31, 1997. As a percentage of total revenue, general and
administrative expenses decreased from 15.7% for 1996 to 12.0% for 1997. The
decrease as a percentage of total revenue was primarily attributable to the
increase in total revenue in 1997. Summit expects general and administrative
expenses to increase in absolute dollars to support future sales and
operations.(2)
AMORTIZATION OF INTANGIBLES AND GOODWILL
Summit recorded $4.1 million in intangibles (excluding $2.4 million of
purchased technologies) and $3.8 million of goodwill as part of the SimTech
acquisition which are being amortized to expense on a straight-line basis over
periods ranging from two to five years beginning September 9, 1997. Summit
expensed $942,000 for the year ended December 31, 1997.
NON-RECURRING CHARGES
Non-recurring charges relate to costs associated with business combinations
and acquisitions. During 1997, Summit incurred $379,000 in costs relating to the
TriQuest acquisition.
IN-PROCESS TECHNOLOGY
For the year ended December 31, 1997, $11.7 million of the purchase price
for the acquisition of SimTech ($25.4 million) was allocated to in-process
technology and, accordingly, was expensed as of the acquisition date (September
9, 1997). The amount allocated to the in-process technology represented the
technology that had not yet reached technological feasibility and had no
alternative future use.
The value assigned to purchased in-process technology was related primarily
to two research projects for which technological feasibility had not been
established, V-CPU ($8.1 million) and HDL Score ($3.1 million). The value was
determined by estimating the net cash flows from the sale of products resulting
from the completion of such projects, and discounting the net cash flows back to
their present value adjusted for the stage of completion of the technologies at
the date of acquisition.
The nature of the efforts to develop the purchased in-process technology
into commercially viable products principally related to the completion of all
planning, designing, prototyping, verification and testing activities that are
necessary to establish that the product can be produced to meet its design
specification, including function, features and technical performance
requirements. The originally estimated costs to be incurred to develop the
purchased in-process technology into commercially viable products was
approximately $1.8 million. The estimated resulting net cash flows from such
products were based on Summit management's estimates of revenues, costs of
sales, research and development costs, selling, general and administrative
costs, and income taxes from such projects.
The estimated revenues include average compounded annual revenue growth
rates for the V-CPU and HDL Score products of 155% to 88% during 1998 to 2000,
declining slightly in 2001 and declining thereafter as other new products are
expected to enter the market.(2) These projections are based on Summit
management's estimates of market size and growth (which are supported by
independent market data), expected trends in technology and the nature and
expected timing of new product introductions by Summit.
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(2) This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
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Estimated cost of sales of 5% is consistent with Summit's current cost of
sales and future expectations for cost of sales. Sales, marketing and general
administrative costs are expected to be higher than Summit's average costs in
the introduction phase and then stabilize upon introduction at levels that are
expected to be consistent with Summit's expected overall costs in these areas in
future periods. Research and development costs are expected to be higher than
Summit's average costs in the introduction and early phases of product sales and
then decline below Summit's average costs as sales of the products begin to
decline in 2001. This research and development cost pattern is consistent with
Summit's historical experience through product life cycles. Income taxes were
estimated at 30%, which are consistent with Summit's anticipated tax rate for
the foreseeable future.(1)
Summit released the commercial version of the V-CPU hardware/software
coverification product in the first quarter of 1998, consistent with
expectations at the time of the acquisition. A market requirement for extensive
embedded system component interfaces called bus functional models ("BFM") and
instruction set simulators ("ISS") was underestimated in the introduction
schedule and has caused delays in initial sales of the product. Summit
introduced the HDL Score product in the second quarter of 1998, approximately
four months later than originally anticipated, due to delays in completing the
control logic support functionality that was essential for product introduction
to take place. For 1998, revenues from the sales of the products acquired in
connection with the SimTech acquisition fell short of forecast by 10%. Summit's
forecast of revenues for 1999 reflects that the shortfall of revenues in 1998
related to HDL Score will be realized in 1999 and that V-CPU will have revenues
that are approximately 50% of those originally estimated due to the delays in
availability of BFM's and ISS's.(2) Although these delays affected the timing of
the realization of revenue from these products as originally estimated by
Summit, Summit believes the aggregate revenue streams originally anticipated
from these products will be realized and that there has been no material change
in expected return on investment related to these products.(2) However, there
can be no assurance that Summit will realize revenue for V-CPU and HDL Score in
the amounts estimated, and actual revenue realized from either or both of these
products may be significantly lower than expected.(1)
Interest Expense
Interest expense decreased from $101,000 for the year ended December 31,
1996 to $12,000 for the year ended December 31, 1997 due to decreased borrowings
under Summit's bank line of credit and long-term debt and the expiration of
certain capital leases obligations.
Other Income, Net
Other income consists of interest income associated with available cash
balances, gains or losses from the sale of property and equipment, Summit's pro
rata share of the earnings and losses of Summit Design Asia and foreign exchange
rate differences resulting from paying operating expenses of foreign operations
in the local currency. Other income was $218,000 for the year ended December 31,
1996 and $1.1 million for the year ended December 31, 1997. The increase in
other income was primarily due to increased interest earned on Summit's cash
holdings resulting from the initial public offering in October of 1996.
- ------------------------
(1) This paragraph contains forward-looking statements reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
(2) This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
102
<PAGE>
Gain on Sale of TDS Product Line
On July 11, 1997 Summit sold substantially all of the assets used in its
business of developing and marketing its Test Development Series "TDS" Products
to CSC for $5 million. CSC assumed certain liabilities, including Summit's
obligations under TDS maintenance contracts entered into prior to the closing.
Summit has recorded a gain on the sale of $5.6 million in 1997.
Income Tax Provision
The income tax provision increased from a benefit of $245,000 for the year
ended December 31, 1996 to a tax provision of $940,000 for the year ended
December 31, 1997. Summit utilized substantially all its U.S. Federal and State
net operating loss carryforwards to offset a considerable portion of U.S.
taxable income for the year ended December 31, 1997. The provision of $940,000
for 1997 is comprised of $1.7 million of Federal, State and foreign taxes
payable, less $719,000 of deferred tax benefit recognized for NOL's available
from the TriQuest acquisition as well as research and development credits and
alternative minimum tax credits. The provision for 1996 is comprised primarily
of Japanese withholding tax of approximately 10% on Japanese sales through June
1996 and alternative minimum tax. The effective tax rate increased from a
benefit of 24% for the year ended December 31, 1996 to 69% for the year ended
December 31, 1997. The 1996 effective tax rate was substantially lower than the
statutory rate due primarily to the utilization of previously unrecognized
deferred tax assets. The 1997 effective tax rate was high primarily due to the
write-off of in-process technology costs which are not deductible for tax
purposes, reduced by the tax benefit realized in 1997 for utilizing the net
operating loss carryforwards.
Effective Corporate Tax Rates
Prior to 1996, Summit had experienced losses for income tax purposes in the
United States. Summit is now profitable in the United States and expects to pay
income taxes at or near the statutory tax rate on its U.S. taxable earnings. As
of December 31, 1997, Summit has recognized the benefit of its U.S. net
operating loss carryforwards and tax credit carryforwards in its financial
statements.
Summit's Israeli operations are performed entirely by Summit Design (EDA)
Ltd., which is a separate taxable Israeli entity. Summit's existing Israeli
production facility has been granted "Approved Enterprise" status under the
Israeli Investment Law, which entitles Summit to reductions in the tax rate
normally applicable to Israeli companies with respect to the income generated by
its "Approved Enterprise" programs. In particular, the tax holiday covers the
seven year period beginning the first year in which Summit Design (EDA) Ltd.
generates taxable income from its "Approved Enterprise" (after using any
available NOLs), provided that such benefits will terminate in 2006 regardless
of whether the seven year period has expired. The tax holiday provides that,
during such seven year periods, a portion of Summit's taxable income from its
Israeli operations will be taxed at favorable tax rates. Summit has recently
applied for "Approved Enterprise" status with respect to a new project and
intends to apply in the future with respect to additional projects. There can be
no assurance that Summit will be granted any approvals and therefore there can
be no assurance Summit will continue to have favorable tax status in Israel.
Management of Summit intends to permanently reinvest earnings of the Israeli
subsidiary outside the U.S. If such earnings were remitted to the U.S.,
additional U.S. federal and foreign taxes may be due.
Summit has foreign income tax net operating losses of approximately $5.6
million at December 31, 1998. These foreign losses were generated in Israel over
several years and have not yet received final assessment from the Israeli
government. Consequently, management is uncertain as to the availability of a
substantial portion of such foreign loss carryforwards.
Summit is also subject to risk that United States and foreign tax laws and
rates may change in a future period or periods, and that any such changes may
materially adversely affect Summit's effective
103
<PAGE>
tax rate. As a result of the factors described above and other related factors,
there can be no assurance that Summit will maintain a favorable tax rate in
future periods. Any increase in Summit's effective tax rate, or variations in
the effective tax rate from period to period, could have a material adverse
effect on Summit's business, financial condition, results of operations or cash
flows.
LIQUIDITY AND CAPITAL RESOURCES
JUNE 30, 1999
As of June 30, 1999, Summit had approximately $24.0 million in cash and cash
equivalents. Additionally, Summit had a $1.0 million bank line of credit, which
expired on April 30, 1999. At April 30, 1999, Summit had no borrowings
outstanding under this line of credit and subsequently did not renew the line.
Summit is obligated to lend up to $2.7 million to an independent software
company pursuant to a secured loan agreement entered into during July 1997.
Borrowings under the agreement bear interest at prime plus 2%. At June 30, 1999,
$2.4 million had been advanced to the independent software company.
As of June 30, 1999, Summit had working capital of approximately $22.4
million.
For the six months ended June 30, 1999, net cash used in operating
activities was approximately $2.6 million. For the six months ended June 30,
1998, net cash generated by operating activities was approximately $7.4 million.
Cash used in operations for the six months ended June 30, 1999 resulted
primarily from a net loss and an increase in accrued liabilities offset by
depreciation and amortization.
Net cash used in investing activities was approximately $1.2 million and
$2.1 million for the six months ended June 30, 1999 and 1998, respectively. Net
cash used in investing activities was related to the acquisition of furniture
and equipment and a loan to an independent software company for the six months
ended June 30, 1999 and 1998. Net cash used in investing activities also
included a loan to a joint venture for the six months ended June 30, 1998.
Net cash generated by financing activities was approximately $177,000 for
the six months ended June 30, 1999. Net cash used by financing activities was
approximately $505,000 for the six months ended June 30, 1998. For the six
months ended June 30, 1999, financing activity cash was primarily generated by
proceeds from the issuance of common stock through stock options plans, offset
by payments of debt obligations and capital leases. For the six months ended
June 30, 1998 the use of cash was primarily from repurchasing 162,500 shares of
Summit's common stock, less proceeds from the issuance of common stock and a tax
benefit from option exercises.
Summit presently believes that its current cash and cash equivalents,
together with funds expected to be generated from operations, will satisfy
Summit's anticipated working capital and other cash requirements for at least
the next 12 months.(2)
DECEMBER 31, 1998 AND 1997
Summit completed its initial public offering in October 1996, raising $16.2
million, net of offering expenses. Prior to the IPO, Summit had financed its
operations primarily through the private placement of approximately $15.4
million of capital stock, as well as capital equipment leases, borrowings under
its bank line of credit, Israeli research and development grants and cash
generated from operations. As of December 31, 1998, Summit had approximately
$27.7 million in cash and cash equivalents. Additionally,
- ------------------------
(2) This sentence is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
104
<PAGE>
Summit has a $1.0 million bank line of credit with a bank. The line of credit
expires on April 30, 1999 and borrowings thereunder accrue interest at specified
percentages above the prime lending rate based on Summit's ratio of debt to
tangible net worth. Advances under the line of credit are limited to a specified
percentage of eligible accounts receivable (as defined in the line of credit).
Borrowings under the line of credit are collateralized by Summit's accounts
receivable, inventory and general intangible assets, including its intellectual
property rights. As of December 31, 1998, Summit had no borrowings outstanding
under this line of credit.
Summit is obligated to lend up to $2.5 million to an independent software
company pursuant to a secured loan agreement entered into during July 1997.
Borrowings under the agreement bear interest at prime plus 2%. At December 31,
1998, $1.7 million had been advanced to the independent software Summit.
As of December 31, 1998, Summit had working capital of approximately $24.3
million.
Net cash generated by operating activities was approximately $11.9 million,
$12.1 million and $4.7 million for the years ended December 31, 1998, 1997 and
1996, respectively. For the year ended December 31, 1998, cash generated by
operating activities resulted primarily from an increase in profitability, and
to a lesser extent from an increase in accounts payable and accrued liabilities
offset by an increase in accounts receivable. For the year ended December 31,
1997, cash generated by operating activities resulted primarily from improved
collection of accounts receivable, an increase in deferred revenues and accrued
liabilities and profitability during the period. For 1996, cash generated from
operating activities resulted primarily from increases in deferred revenue and
profitability during the period.
Net cash used in investing activities was approximately $4.5 million, $1.3
million, and $855,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. For the year ended December 31, 1998, net cash used was primarily
related to the acquisition of furniture and equipment and loans to an
independent software development company and to an unconsolidated joint venture.
For the year ended December 31, 1997, net cash used was primarily related to the
acquisition of furniture and equipment, the acquisition of SimTech, and a loan
to an independent software development company, which was partially offset by
proceeds from the sale of the TDS product line. During 1996, net cash used in
investing activities was related primarily to the acquisition of furniture and
equipment.
Net cash provided by financing activities was approximately $345,000 and
$15.3 million for the years ended December 31, 1998 and 1996, respectively. Net
cash used in financing activities was approximately $10.6 million for the year
ended December 31, 1997. The net cash provided in 1998 was primarily a result of
the proceeds from the issuance of stock through stock option plans and the
employee stock purchase plan and the tax benefit of option exercises, partially
offset by the repurchase of $2.3 million of Summit's outstanding common stock.
For the year ended December 31, 1997 net cash used in financing activities
resulted primarily from Summit purchasing approximately 939,000 shares of
treasury stock and repayment of debt, less proceeds from the issuance of common
stock. The net cash provided in 1996 was primarily a result of Summit's initial
public offering, partially offset by the repayment of $2.1 million of
outstanding debt and capital lease obligations.
Summit presently believes that its current cash and cash equivalents,
together with funds expected to be generated from operations, will satisfy
Summit's anticipated working capital and other cash requirements for at least
the next 12 months.(2)
- ------------------------
(2) This sentence is a forward-looking statement reflecting current
expectations. There can be no assurance that Summit's actual future
performance will meet Summit's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors" commencing on page
10 for a discussion of factors that could affect future performance.
105
<PAGE>
YEAR 2000
The Year 2000 issue results from computer programs written using two, rather
than four, digits to define the applicable year. These computer programs may
recognize a date using "00" as the year 1900 instead of 2000 and cause system
failures or miscalculations, material disruptions of business operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business operations. If Summit, its
significant customers, suppliers, service providers and other related third
parties fail to take the necessary steps to correct or replace these problematic
computer programs, the Year 2000 issue could have a material adverse effect on
Summit. Summit cannot, however, quantify the impact at this time.
Summit has upgraded or replaced the software packages underlying its
financial, production, communication, desktop and other systems, as appropriate,
to address the Year 2000 issue. It has also performed an in-depth analysis of
all of its products and has determined that all significant products are Year
2000 compliant. Moreover, Summit has contacted all major external third parties
that provide products and services to Summit to assess their readiness for the
Year 2000.
Management believes it has completed the review and assessment phase of
affected systems within Summit and those which are external to Summit. This
assessment indicated that most of Summit's significant internal information
systems could be affected by the Year 2000 issue, and that Summit could be
negatively impacted by non-compliance of related third parties.
Summit's products are subject to periodic upgrades. These upgrades are
typically released to end-users once a year. Management believes its products
are Year 2000 compliant, and will continue to test upgrades for Year 2000
compliance.
Summit has queried its important suppliers and service providers and has
obtained assurances and verification from those selected third parties that they
are or will be Year 2000 complaint. The inability of those parties to complete
their Year 2000 resolution process could materially impact Summit. The effects
of non-compliance by third parties where no system interface exists is not
determinable.
Summit is currently in the process of creating contingency plans for its
internal information technology systems and products and in relation to third
parties with whom it has material relationships. These contingency plans are
expected to be in place during November 1999.
Concurrent with performing the above steps, Summit has made certain
investments in systems, applications and products to address Year 2000 issues.
Summit has not tracked internal resources dedicated to the resolution of the
Year 2000 issue and, therefore, is unable to quantify internal costs incurred to
date that are associated with the Year 2000 issue. Summit has, however, hired
external consultants to resolve internal information system issues related to
the resolution of the Year 2000 issue. Identifiable expenditures for these
consultants were approximately $250,000 through June 30, 1999. Expenditures to
resolve Year 2000 issues have not been, nor are they expected to be, material.
Summit's plans to complete the Year 2000 modifications are based upon
management's best estimates, which were derived utilizing numerous assumptions
of future events including continued availability of certain resources, and
other factors. However, there can be no assurance that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences included the availability and
cost of personnel trained in this area, and the ability to locate and correct
all relevant computer codes.
106
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Summit is exposed to market risk from interest rate changes, foreign
currency fluctuations, and changes in the market values of its investments.
INTEREST RATE RISK. Summit invests its excess cash in debt instruments of
the U.S. Government and its agencies, and in high-quality corporate issuers and,
by policy, limits the amount of credit exposure to any one issue. Summit
attempts to protect and preserve its invested funds by limiting default, market
and reinvestment risk.
Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Due in part to these factors, Summit's future investment income may
fall short of expectations due to changes in interest rates and Summit may
suffer losses in principal if forced to sell securities which have declined in
market value due to changes in interest rates.
FOREIGN CURRENCY RISK. Summit pays the expenses of its international
operations in local currencies. Summit's international operations are subject to
risks typical of an international business, including, but not limited to:
differing economic conditions, changes in political climate, differing tax
structures, other regulations and restrictions, and foreign exchange rate
volatility. Accordingly, Summit's future results could be materially adversely
impacted by changes in these or other factors.
Summit is also exposed to foreign exchange rate fluctuations as they relate
to operating expenses as the financial results of foreign subsidiaries are
translated into U.S. dollars in consolidation. As exchange rates vary, these
results, when translated, may vary from expectations and adversely impact
overall expected profitability. The effect of foreign exchange rate fluctuations
on Summit in 1998 was not material.
INVESTMENT RISK. Summit has made equity investments in ADC and SDA and has
provided loans to ADC and a privately-held, independent software company for
business and strategic purposes. These investments are included in other
long-term assets and are accounted for under the equity method when ownership is
greater than 20% and Summit does not exert control. For these investments in
privately-held companies, Summit's policy is to regularly review the assumptions
underlying the operating performance and cash flow forecasts in assessing the
carrying values. Summit identifies and records impairment losses on long-lived
assets when events and circumstances indicate that such assets might be
impaired.
107
<PAGE>
SUMMIT DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of Summit who will serve as executive
officers and directors of the combined company and their ages as of September
30, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION WITH SUMMIT
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
William V. Botts................... 64 Interim Chief Executive Officer and Chairman of the Board
Guy Moshe.......................... 41 Chief Technology Officer and President of Summit Design (EDA), Ltd.
Eric Benhayoun..................... 45 Vice President, General Manager--European Operations
Steven P. Erwin.................... 55 Director
</TABLE>
William V. Botts has served as a director of Summit since May 1997 and as
Interim Chief Executive Officer and Chairman of the Board since July 1999. Mr.
Botts has been the Interim Chief Executive Officer of California Lifestyles,
Inc., a footwear company, from August 1997 to July 1999. Mr. Botts served as
Chief Executive Officer of Hard Candy, Inc., a cosmetics company, from March
1996 to March 1997. From June 1993 to March 1996, Mr. Botts was the owner and
President of WV Associates, a consulting firm for business combinations,
acquisitions, business turnarounds and strategic planning. From October 1992 to
June 1993, Mr. Botts served as President and Chief Executive Officer of Aurora
Electronics, Inc., a semiconductor company. From March 1992 to September 1992,
Mr. Botts served as President and Chief Executive Officer of Micro-C
Corporation, a semiconductor company that was acquired by Aurora Electronics,
Inc. Mr. Botts served as President and Chief Executive Officer of Vertex Design
Systems, Inc., a computer software company, from September 1988 to March 1992
and as Chairman of the Board, Chief Executive Officer and President of EI
International, Inc., a computer systems, software and consulting company, from
April 1978 to January 1988. Prior to that time, Mr. Botts was a divisional Vice
President of Rockwell International Corporation.
Guy Moshe has served as Chief Technology Officer and President of Summit
Design (EDA), Ltd. Since February 1999 and as Vice President, General Manager
and Chief Operating Officer of the Design Solutions Division of Summit Design,
Inc. since September 1997. From May 1996 to September 1997 Mr. Moshe served as
General Manager of Summit Design (EDA) Ltd. Mr. Moshe served as the Vice
President of Product Marketing for Summit Design Inc. from February 1994 to May
1996. Mr. Moshe was the Director of Marketing and Sales for SEE Technologies
from January 1991 to February 1994. SEE Technologies was the continuation of the
Israeli Design Center of Daisy and the main supplier of electronic design
automation tools for Intergraph. From 1987 to 1991, Mr. Moshe was a Technical
Manager for Daisy Systems. Prior to that time, Mr. Moshe held various
engineering positions with companies in the computer design industry in Israel.
Eric Benhayoun has served as Vice President, General Manager--European
Operations since June 1996 and as Vice President--European Sales Operations from
November 1994 to June 1996. From June 1994 to November 1994, Mr. Benhayoun was
the European Marketing Manager for the Modeling Product Division of Synopsys.
From March 1990 to June 1994, Mr. Benhayoun was the General Manager and Director
of Logic Modeling Corporation France, an SDA provider which was acquired by
Synopsys in January 1994. Prior to that time, he held various European sales and
marketing management positions with Cadnetix Corporation and Daisy Systems, each
an electronic design automation supplier.
Steven P. Erwin has served as a director since May 1997. Mr. Erwin has
served as Executive Vice President and Chief Financial Officer of Foundation
Health Systems, Inc., a managed health care company, since March 1998. Mr. Erwin
was Executive Vice President and Chief Financial Officer of U.S. Bancorp,
Portland, Oregon from July 1994 to July 1997. Prior to that time, Mr. Erwin
served as Treasurer of BayBanks, Inc., Boston, Massachusetts from November 1987
until July 1994.
108
<PAGE>
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid during the last three
fiscal years to each executive officer of Summit who will serve as a director or
executive officer of the combined company.
<TABLE>
<CAPTION>
LONG TERM AWARDS
--------------------------------
ANNUAL COMPENSATION NO. OF
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($) OPTIONS COMPENSATION($)
- ---------------------------------------- --------- ----------- ----------- ----------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
William V. Botts (3).................... 1998 -- -- 25,000(4) 10,000 --
1997 -- -- 15,865(4) 10,000 --
Guy Moshe (6)........................... 1998 170,000 30,000 12,804(5) 1,755 --
Chief Technology Officer 1997 113,392 69,810(7) 10,515(5) 34,152 --
And President of Summit 1996 N/A N/A N/A N/A N/A
Design (EDA), Ltd.
Eric Benhayoun.......................... 1998 154,890 57,109(8) -- -- --
Vice President, General 1997 120,252 26,945(9) -- 32,500 --
Manager-European 1996 125,000 27,549(10) -- -- --
Operations
</TABLE>
- ------------------------
(1) Amounts shown include cash and noncash compensation earned and received by
executive officers as well as amounts earned but deferred at the election of
those officers.
(2) Consists of year-end bonuses paid in February of the following year.
(3) Mr. Botts became Interim Chief Executive Officer of Summit in July 1999.
(4) Consists of director's fee.
(5) Consists of car allowance.
(6) Mr. Moshe became an executive officer of Summit in May 1997.
(7) Consists of $64,000 bonus and $5,810 of commissions.
(8) Consists of commissions, $21,194 of which was paid in 1999.
(9) Consists of commissions, $12,000 of which was paid in 1998.
(10) Consists of commissions, $11,572 of which was paid in 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
during the fiscal year ended December 31, 1998 to each of the executive officer
of Summit who will serve as a director or executive officer of the combined
company.
109
<PAGE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
% OF TOTAL FAIR
NO. OF OPTIONS MARKET
SECURITIES GRANTED TO EXERCISE VALUE ON
UNDERLYING EMPLOYEES IN PRICE($)/ DATE OF EXPIRATION
OPTIONS GRANTED(1) 1998(2) SHARE GRANT($) DATE
------------------ --------------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
William V. Botts........................ 10,000 2.6 14.50 14.50 5/13/08
Guy Moshe............................... 535 0.1 15.88 15.88 4/16/08
1,220 0.3 6.75 6.75 10/19/08
Eric Benhayoun.......................... -- -- -- -- --
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
FOR OPTION
TERM(3)
---------------
5%($) 10%($)
------ -------
<S> <C> <C>
William V. Botts........................ 91,190 231,093
Guy Moshe............................... 5,341 15,536
5,179 13,124
Eric Benhayoun.......................... -- --
</TABLE>
- ------------------------
(1) Options granted in 1998 are either incentive stock options or nonstatutory
stock options and generally vest over four years, with 25% of the option
shares becoming fully vested one year from the grant date and 1/48th vesting
in each successive month, with full vesting occurring on the fourth
anniversary date. Under the terms of the 1994 Stock Plan, the administrator
retains discretion, subject to plan limits, to modify the terms of
outstanding options and to reprice outstanding options. The options have a
term of 10 years, subject to earlier termination in certain situations
related to termination of employment.
(2) Based on a total of 380,599 options granted to all employees and consultants
during 1998.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent Summit's
estimate or projection of the future Summit common stock price.
OPTION EXERCISES AND HOLDINGS
The following table sets forth, as to the executive officer of Summit who
will serve as a director or executive officer of the combined company, certain
information concerning stock options exercised during 1998 and the number of
shares subject to exercisable and unexercisable stock options as of December 31,
1998. The table also sets forth certain information with respect to the value of
stock options held by such individuals as of December 31, 1998.
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1998 AND OPTION VALUES ON
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISABLE THE-MONEY OPTIONS AT FISCAL YEAR
SHARES OPTIONS AT FISCAL YEAR END END ($)(1)
ACQUIRED VALUE -------------------------- --------------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
William V. Botts......................... 0 0 10,000 10,000 0 0
Guy Moshe................................ 761 6,076 18,729 31,417 1,525 0
Eric Benhayoun........................... 47,000 583,625 21,708 22,292 71,875 0
</TABLE>
- ------------------------
(1) These values have been calculated based on the last reported sale price of
Summit common stock on the Nasdaq National Market on December 31, 1998 of
$8.00 per share minus the exercise price.
110
<PAGE>
EMPLOYMENT AGREEMENTS
Effective February 25, 1999, Summit entered into a four-year employment
agreement with Mr. Moshe, pursuant to which he receives an annual base salary,
an annual bonus of up to 25% of his base salary, and all standard benefits
accorded other executives of Summit. In the event Mr. Moshe is terminated other
than for cause, he is entitled to severance equal to his then monthly base
salary plus benefits for a period of fifteen months. In addition, the unvested
portion of the stock option covering 100,000 shares of common stock granted to
Mr. Moshe on February 25, 1999 shall become fully exercisable.
Effective April 1, 1999, Summit entered into a four-year employment
agreement with Mr. Benhayoun pursuant to which he receives an annual base
salary, commissions based on sales revenue generated, and all standard benefits
accorded other executives of Summit. In the event Mr. Benhayoun is terminated
other than for cause, he is entitled to severance equal to his then monthly base
salary plus benefits for a period of twelve months. In addition, the unvested
portion of the stock option covering 75,000 shares of common stock granted to
Mr. Benhayoun on February 25, 1999 shall become fully exercisable upon
termination of Mr. Benhayoun without cause or upon a sale of more than 75% of
the assets of Summit or if more than 50% of the outstanding shares of Summit
have been acquired by another company.
111
<PAGE>
SUMMIT SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Summit common stock, as of September 30, 1999, by (a) each person
known by Summit to be the beneficial owner of more than 5% of the outstanding
shares of Summit common stock, (b) each of the executive officers and directors
of Summit, and (c) all directors and executive officers of Summit as a group.
Unless otherwise noted in the footnotes to the table, Summit believes that the
persons named in the table have sole voting and investing power with respect to
all shares of common stock indicated as being beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) PERCENT OF TOTAL(1)
- ------------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
T. Rowe Price Associates(2).............................................. 1,410,000 9.0%
100 East Pratt Street
Baltimore, MD 21202
MFS Investment Management(3)............................................. 1,318,151 8.4%
500 Boylston Street, 15th Floor
Boston, MA 02116
Geocapital Corporation(4)................................................ 814,000 5.2%
767 Fifth Avenue, 45th Floor
New York, NY 10153
Amihai Ben-David(10)..................................................... 987,730 6.3%
DCL Technologies Ltd.
P.O. Box 544
46105 Herzlia, Israel
DCL Technologies Ltd.(5)................................................. 977,730 6.2%
P.O. Box 544
46105 Herzlia, Israel
Paul J. Schupf Associates(6)............................................. 779,100 5.0%
27 Payne Street
Hamilton, NY 13346
Richard Davenport........................................................ 468,582 3.0%
C. Albert Koob(7)........................................................ 61,643 *
Guy Moshe(8)............................................................. 32,620 *
Eric Benhayoun(9)........................................................ 31,664 *
William Botts(11)........................................................ 22,500 *
Steven P. Erwin(12)...................................................... 25,000 *
Barbara M. Karmel, Ph.D.(13)............................................. 21,000 *
All directors and executive officers as a group (10 persons)(14)......... 1,696,196 10.8%
</TABLE>
- ------------------------
* Represents less than 1% of the total.
(1) Based on 15,701,707 shares of Common Stock outstanding as of September 30,
1999. A person is deemed to be the beneficial owner of securities that can
be acquired by such person within 60 days upon the exercise of options.
Calculations of percentage of beneficial ownership assume the exercise by
only the respective named stockholder of all options for the purchase of
Common Stock held by such stockholder which are exercisable within 60 days.
(2) As indicated in the Schedule 13G filed by T. Rowe Price Associates, Inc.
pursuant to the Exchange Act on August 15, 1999.
(3) As indicated in the Schedule 13G filed by Massachusetts Financial Services
Company pursuant to the Exchange Act on August 15, 1999.
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<PAGE>
(4) As indicated in the Schedule 13G filed by GeoCapital, LLC pursuant to the
Exchange Act on August 15, 1999.
(5) Includes 947,730 shares held by DCL Holding &Investments in Technology
(1993) Ltd., A wholly owned subsidiary of DCL Technologies Ltd. DCL
Technologies Ltd. Is and Israeli public company, the shares of which are
traded on the Tel-Aviv stock exchange. The Company believes that the
following stockholders own at least 5% of the outstanding shares of DCL
Technologies, Ltd.: Comverse Technologies, Inc., ISCAL Holdings Ltd., Uri
Melamed, Bank Hapoalim, Danbar Ltd. and Amihai Ben-David.
(6) As indicated in the Schedule 13G filed by Paul J. Schupf Associates
pursuant to the Exchange Act on August 15, 1999.
(7) Includes 61,643 shares issuable upon exercise of options within sixty (60)
days of September 30, 1999.
(8) Includes 32,620 shares issuable upon exercise of options within sixty (60)
days of September 30, 1999.
(9) Includes 29,155 shares issuable upon exercise of options within sixty (60)
days of September 30, 1999.
(10) Includes 947,730 shares held by DCL Holding & Investments in Technology
(1993) Ltd. and 30,000 shares held by DCL Technologies Ltd. Mr. Ben-David
is the Chief Executive Officer and Chairman of DCL Technologies Ltd. and
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein. Also includes 10,000 shares issuable upon
exercise of options within sixty (60) days of September 30, 1999.
(11) Includes 20,000 shares issuable upon exercise of options within sixty (60)
days of September 30, 1999.
(12) Includes 20,000 shares issuable upon exercise of options within sixty (60)
days of September 30, 1999.
(13) Includes 20,000 shares issuable upon exercise of options within sixty (60)
days of September 30, 1999.
(14) Includes 223,058 shares issuable upon exercise of options within sixty
(60) days of September 30, 1999.
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VIEWLOGIC BUSINESS
INTRODUCTION
Viewlogic offers productivity enhancing software and services for the
electronic design automation market. Viewlogic's products automate the design
entry, analysis and verification of any product differentiated by its electronic
content, or eProducts, including:
- printed circuit boards;
- high-speed components, cabling and interconnects;
- field programmable gate arrays;
- programmable logic devices;
- complex programmable logic devices; and
- entire electronic systems
Viewlogic's service offerings help large organizations developing eProducts
to become more productive, adopt new methodologies and accelerate their adoption
of new software tools.
Viewlogic markets and supports its software and services worldwide through
direct and indirect distribution channels. Viewlogic's primary target markets
are telecommunications, consumer electronics, medical, industrial and
automotive. The eProducts developed by these companies include everything from
cellular telephones and personal organizers to network equipment, PCs and
laptops, modems, ATMs, TVs, VCRs and even automobiles and airplanes.
Viewlogic was originally part of a larger business (also called Viewlogic
Systems, Inc.) which was founded in 1984 and completed its initial public
offering in 1991. The initial focus of the prior Viewlogic was to aid engineers
in the design of complex electronic systems such as printed circuit boards.
Later, that company began to focus heavily on the higher growth application
specific integrated circuit market. In December 1997, Synopsys, Inc., another
electronic design automation company, merged with the prior Viewlogic. Synopsys
formed a new wholly owned subsidiary corporation that contained the products for
the design of printed circuit boards, field programmable gate arrays,
programmable logic devices, complex programmable logic devices and entire
electronic systems. Synopsys operated this new subsidiary as a stand-alone
entity with autonomous sales, support and development functions, from December
1997 until October 1998. In October 1998, Synopsys recapitalized this new
subsidiary and retained for its own use the products for the design of ASICs.
VIEWLOGIC STRATEGY
Viewlogic's strategic objective is to become the leading provider of
eProduct design automation software and services. By eProduct, Viewlogic means
any product that is differentiated by its electronic content. Viewlogic plans to
sell its products and services to eProduct companies worldwide, primarily in the
following industry segments:
- communications and networking;
- consumer electronics;
- computers and peripherals;
- automotive; and
- industrial and medical.
Viewlogic intends to compete in these segments by developing differentiated
products and services that address the special requirements of eProduct design
companies in these industries.
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Two key issues dominate the design of electronic products today. First,
unprecedented design complexity has exceeded man's ability to deal with the
design issues and is driving the need to design at higher levels of abstraction.
Second, design problems are occurring in the gaps between design stages as
indicated in Figure 1 on page 71.
Viewlogic intends to become the leading provider of eProduct design
automation software and services by virtue of its product and market strengths
and its focus on addressing key eProduct design challenges. Addressing ePDA
challenges requires a solution that supports design and verification at higher
levels of abstraction and that integrates across disciplines and design stages.
Viewlogic believes that the highest leverage in producing a competitive eProduct
will not come solely through incremental improvements in the ASIC and IC design
process, but rather by creating an eProduct design environment that enables
design/verification at higher levels of abstraction and across design stages and
engineering disciplines. To achieve this eProduct design automation environment
takes a special focus.
Since October 1998, Viewlogic has chosen to focus on the FPGA, PCB and
system-level design automation markets while most major competitors have focused
their resources on solving the challenges of ASIC and IC design automation.
Viewlogic's market strategy is to focus on the following application
segments:
- System-level design automation (SLDA--including functional design and
verification, architectural exploration, embedded systems co-design and
co-verification);
- Chip-in-System Design (including FPGA, PLD, CPLD, and analog and digital
PCB design);
- Interconnect Design (including PCB interconnect, backplanes, enclosures
and cables); and
- Collaborative Design (including web-enabled work-in-process design data
management, component information management, component library
development and maintenance, design re-use, and integration with
enterprise-level PDM and ERP systems).
From a product and technology standpoint, Viewlogic's strengths include:
- an innovative solution for performing architectural exploration and system
partitioning;
- design entry, analysis and verification solutions for the design of
complex PCBs, systems and FPGAs/PLDs/CPLDs;
- sophisticated signal integrity, timing and EMI solutions for pre- and
post-layout interconnect design, analysis and verification; and
- web-enabled technology which helps design teams to collaborate across
different sites and disciplines throughout the eProduct design cycle.
VIEWLOGIC PRODUCTS
Viewlogic's software products enable electrical engineers to design
state-of-the-art electronic products more efficiently, while reducing
development costs and accelerating the time to get products to market. Its
software allows designers to translate their ideas into designs and verify the
accuracy and manufacturability of those designs.
eProduct Designer, Viewlogic's umbrella design environment, recently
released to replace the previously available Unix based Powerview product line,
offers engineers a user interface based on the familiar Windows environment.
eProduct Designer also has been created as an Internet-aware suite of tools.
This enables design and library data to be located anywhere on the Internet.
Library data can consist of many disparate data sources such as engineering,
purchasing and manufacturing that are merged and presented in an accessible
format through eProduct Designer. Data management tools
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enable versions of designs to be created, and enable teams of engineers to work
simultaneously on the same design data from any site in the world.
Through Viewlogic's eProduct Designer design capture environment, which can
support hierarchical, mixed schematic and language-based designs, engineers can
enter and maintain their design throughout the entire design process.
Viewlogic's tool suites are organized around the specific challenges systems
designers face, including PCB design, field programmable gate array design,
high-speed design, design verification and enterprise integration.
The printed circuit board design portion of Viewlogic's eProduct Designer
environment is based on ViewDraw, used for graphical capture and manipulation of
the design, itself. With ViewDraw, ViewSim, Viewlogic's gate-level simulation
tool, and the company's printed circuit board Netlisters, form the backbone of
Viewlogic's design methodology. Additionally, Viewlogic also offers the Fusion
co-simulation environment, SpeedWave for VHDL simulation, and ViewAnalog for
analog and mixed A/D simulation. Viewlogic also sells and supports Verilog
simulation with products such as VCSi and VCS Express under a license agreement
with Synopsys.
As system clock rates continually increase and edge rates continually drop,
traditional system design methods are no longer adequate. Viewlogic's High-Speed
System Design (HSSD) products allow designers to consider high-speed effects
early and throughout the design process so that they can eliminate this new
class of design errors before being prototyped in manufacturing.
Viewlogic's HSSD product line includes:
- BLAST for static timing analysis of printed circuit boards and field
programmable gate arrays;
- XTK for cross-talk analysis;
- QUIET and QUIET Expert for EMI analysis and planning;
- AC Grade for ground bounce analysis; and
- ISIS preview for pre-layout planning.
Viewlogic's field programmable gate array design solution consists of the
following:
- HDLPad for VHDL and Verilog design;
- ViewDraw for schematic and HDL block diagram entry;
- StateCAD for graphical entry of state machines; and
- Fusion co-simulation of mixed schematic, VHDL and Verilog designs.
For field programmable gate array synthesis, Viewlogic partners with
Synopsys to sell and support FPGA Express, which allows customers to mix
schematics with VHDL and Verilog and target a wide range of vendors and devices.
The IntelliFlow automated process manager pulls the entire field programmable
gate array solution together. With IntelliFlow, users can control their design
flow from a single, easy-to-use graphical interface. IntelliFlow manages the
tools and data throughout the entire field programmable gate array design
process, even running the target silicon vendor's place and route tools.
To enhance productivity in a geographically diverse company or enterprise,
Viewlogic has a set of internet-enabled design data management tools called
Design Exchange. These tools include:
- Dx Databook for component search and selection from a local or corporate
database;
- Dx Library Studio for centralized parts and model management; and
- Dx Data Manager for team-based, work-in-progress design data management.
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<PAGE>
Design Exchange tools allow disperse teams of designers to work together
over the internet or intranet and link to a customer's other systems, so that
design teams can work with the approved library of electronic components and
with manufacturing groups within their company.
New product offerings in eProduct Designer include:
- EPLANNER. A new signal integrity virtual prototyping environment that
leverages proven technology such as XTK to perform pre-layout board and
system planning designed to reduce layout iterations and post-layout
analysis.
- eArchitect. A product for high-level design specification and
architectural prototyping; eArchitect enables system designers to quickly
explore alternative architectures and hardware/ software partitions and
make critical system-level tradeoffs during the early stages of the
eProduct design process.
- DX VARIANT Manager. Provides web-based capabilities that enable base-level
designs to be reused and customized.
Viewlogic recently announced the acquisition of Transcendent Design
Technology, Inc. With this acquisition, Viewlogic plans to merge Transcendent's
TransDesign and TransAnalysis products into Viewlogic's eProduct Designer tools
to provide solutions from concept through the manufacturing of complex systems.
The Transcendent product family includes:
- TransCable, a design capture environment for electromechanical systems;
- TransDatabook, a parts library browser system;
- TransLayout, an interconnect synthesis product;
- interfaces to mechanical CAD systems; and
- TransAnalysis, a product family that includes TranSIT, a 2-D field solver
and transmission line simulator for analyzing signal integrity and
crosstalk effects and estimating electro-magnetic interference of wire
harness and cable systems within eProducts.
VIEWLOGIC CUSTOMERS
End users of Viewlogic's products range from small companies to some of the
world's largest manufacturing organizations. Industries represented include
computers, consumer electronics, semiconductors, telecommunications,
military/defense, aerospace, industrial, medical equipment and universities.
VIEWLOGIC BACKLOG
Viewlogic generally ships its products within 30 days after acceptance of a
customer purchase order and execution of a license agreement. Accordingly,
Viewlogic does not believe that its backlog at any particular point in time is
indicative of future sales levels.
VIEWLOGIC SALES
Viewlogic has developed multiple distribution channels, including a direct
sales organization, telesales, independent distributors, value-added resellers,
and strategic sales alliances with certain significant semiconductor and printed
circuit board layout software vendors.
DIRECT SALES ORGANIZATION. Viewlogic markets its products in North America,
Europe, China and Japan primarily through a direct sales organization, which
consisted of 96 salespersons and application engineers as of September 30, 1999.
Viewlogic currently has 18 sales offices located throughout North America,
Europe, Japan and the Far East.
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Direct Sales teams, generally consisting of one salesperson and one
application engineer, focus on large accounts in assigned territories. These
sales teams are responsible for all sales activities within their assigned
territories and coordinate the activities of distributors and value-added
resellers. Application engineers specializing in certain products are assigned
to each sales territory and support individual sales teams. Each member of
Viewlogic's direct sales and support teams is assigned sales quotas and has a
significant portion of their compensation based on sales performance.
Approximately 50% and 30% of expected compensation for salespersons and
application engineers respectively are typically based on sales performance.
The telesales channel consists of telesales representatives covering
assigned geographic territories in North America and Europe. These
representatives are an inside counterpart to the field, focusing on upgrading
and servicing the installed customer base. They provide sales support for
renewal maintenance, software sales and otherwise upgrade existing customers by
selling additional seats. Approximately 45% of expected compensation for a
telesales representative is based on sales performance.
DISTRIBUTORS. Viewlogic appoints independent distributors to market its
products to customers not served by Viewlogic's direct sales organization.
Viewlogic uses distributors as its principal distribution channel in much of
Asia, and currently has distributors covering Israel, Taiwan, Korea, Australia,
Singapore, China and India. Distributors are also appointed in the United
States, Japan and Europe to supplement Viewlogic's direct sales efforts by
focusing on customers not served by direct sales teams.
VALUE-ADDED RESELLER. Viewlogic has established a broad-based VAR
distribution network. This group primarily focuses on selling Viewlogic's
Workview Office tools to the small and medium size accounts of electronic
engineers in North America.
VIEWLOGIC MARKETING
Viewlogic's marketing organization performs the product marketing, technical
marketing, corporate communications and strategic marketing functions. The group
consists of 19 marketing professionals with specialized technical knowledge and
experience in the design automation software business. The marketing
organization:
- develops strategy and identifies target markets;
- keeps abreast of customer design methodologies;
- identifies customer requirements and new product opportunities;
- establishes product vision and direction for both existing products and
new products;
- provides the sales channel with training, competitive analyses, pricing,
packaging, collateral materials, demonstrations and reference accounts;
and
- provides marketing communications support for branding, visibility and
lead generation through press relations, advertising, direct mail,
promotions, trade shows, seminars and web sites.
VIEWLOGIC COMPETITION
The electronic design automation industry is highly competitive and
Viewlogic expects competition to increase as other electronic design automation
companies introduce software tools used to design products which are
differentiated by their electronic content (ePDA products). Viewlogic
principally competes with Cadence and Mentor Graphics and a number of smaller
firms. Indirectly, Viewlogic also competes with other firms that offer
alternatives to ePDA products and could potentially offer more directly
competitive products in the future. Certain of these companies have
significantly greater financial, technical, sales and marketing resources and a
larger installed customer bases than Viewlogic.
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They also have established relationships with many customers which can increase
the complexity, difficulty and time required to compete for business from these
customers. Some of Viewlogic's current and future competitors offer a more
complete range of electronic design automation products and may distribute
products that directly compete with Viewlogic's ePDA products.
Viewlogic competes on the basis of certain factors including:
- product capabilities;
- product performance and capacity;
- availability of electronic component information;
- price;
- support of industry standards;
- ease of use;
- first to market; and
- customer technical support and service.
Viewlogic believes that it competes favorably overall with respect to these
factors. However, in particular cases, Viewlogic's competitors may offer ePDA
products with functionality which is sought by Viewlogic's prospective customers
and which differs from that offered by Viewlogic. In addition, some competitors
may achieve a marketing advantage by establishing formal alliances with other
electronic design automation vendors and electronic component manufacturers.
Further, the electronic design automation industry in general has experienced
significant consolidation in recent years, and the acquisition of one of
Viewlogic's competitors by a larger, more established electronic design
automation vendor could create a more significant competitor. Viewlogic may not
be able to compete successfully against current and future competitors, and
competitive pressures faced by Viewlogic may have a material adverse effect on
its business, financial condition, results of operations or cash flows.
Viewlogic's current and future competitors may be able to develop products
comparable or superior to those developed by Viewlogic or adapt more quickly
than Viewlogic to new technologies, evolving industry trends or customer
requirements. Increased competition could result in price reductions, reduced
margins and loss of market share, all of which could have a material adverse
effect on Viewlogic's business, financial condition, results of operations or
cash flows.
VIEWLOGIC PRODUCT DEVELOPMENT
Viewlogic's product development efforts are focused on enhancing and
broadening its current line of products, including the development of new
products and the release of improved versions of existing products on a regular
basis. Most of Viewlogic's products to date represent the evolution of its core
Workview Office and Powerview product lines, plus ongoing developments
leveraging resources and technologies gained in recent acquisitions. As of
September 30, 1999, Viewlogic's product development and customer support staff
consisted of 98 persons. Viewlogic's product development staff receives support
from both Viewlogic's consulting services personnel and its product and industry
marketing organization to enable it to develop products that satisfy market
requirements.
Viewlogic maintains cooperative relationships with most major hardware
vendors on which Viewlogic's products operate, as well as with new hardware
vendors who desire Viewlogic to port its products to their systems. Viewlogic
believes that these relationships allow it to design products that respond to
emerging trends in computing, graphics and networking technologies. In certain
instances, these relationships include joint marketing agreements which
primarily outline a procedure for communication between Viewlogic and the vendor
with respect to technology and possible sales leads.
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During the fiscal years ended December 31, 1997 and January 2, 1999 and the
six months ended July 3, 1999, Viewlogic's research and development expenses
were $14,954, $10,028 and $5,478, respectively. Viewlogic believes that it must
continue to commit substantial resources to enhance and extend its product line
to remain competitive. Viewlogic intends to continue to devote substantial
resources to its internally-funded product development and, if appropriate, to
enter into development agreements with third parties.
VIEWLOGIC SERVICE AND SUPPORT
A key part of Viewlogic's strategy to help make its customers successful is
to provide a wide range of support services including on-site and hot-line
support for designers, in-house and on-site training on all products and
consulting services for specialized tool development, tool and methodology
training and design work. Viewlogic believes its focus on customer service has
helped it achieve a high degree of customer satisfaction.
Product support is provided pursuant to maintenance agreements which
generally extend for one year after the expiration of the product warranty,
which is generally thirty days, and are renewable annually thereafter. The
standard annual maintenance fee charged to end-user customers is currently 15%
of the then-current list price for the product. Viewlogic's distributors and
strategic sales partners charge their end-user customers for maintenance and
remit a negotiated portion to Viewlogic. Training and consulting services are
generally not included in Viewlogic's software license or maintenance fees and
are usually provided on a separately negotiated basis.
PRODUCT REVISIONS AND UPGRADES. Customers with maintenance agreements
receive all product revisions without additional charge. Product upgrades, which
add significant new product functionality, are provided to customers for a fee
which is generally equal to the difference between the list price for such
upgrade and the license fee previously paid by the customer for the applicable
product.
ON-SITE AND HOT LINE SUPPORT. Support is available to Viewlogic's software
users on both a pre-and post-sale basis. Application engineers work directly
with Viewlogic's direct sales force to provide on-site support that is often
needed during critical stages of the user's evaluation and design process.
The majority of Viewlogic's customers requiring support contact Viewlogic
through Viewlogic's toll-free hotlines, which put users in touch with engineers
who are knowledgeable in the use of the product. Support is available from 8:30
a.m. to 8:00 p.m., Eastern Standard Time, Monday through Friday, excluding
holidays. In addition to the Viewlogic hotline, questions or suggestions can be
submitted by fax, an electronic bulletin board or the Internet network mail
system.
In addition, post-sales product application support is provided to customers
through a series of automated support channels, including:
- quarterly Technical Support Newsletter providing answers to common
questions;
- electronic bulletin board system providing a forum for exchanging data and
idea; and
- fax-on-demand system enabling customers to retrieve faxes of technical
application notes.
An automatic call distribution system transparently connects North American
support callers with technical support personnel based in Marlboro,
Massachusetts, San Jose, California and Camarillo, California. Additionally,
technical support personnel based in California, Massachusetts, the United
Kingdom and Japan have immediate access to shared, problem-solving technical
information via a sophisticated on-line software support system.
CUSTOMER TRAINING. Viewlogic offers a variety of training programs for
users ranging from introductory, broadbased courses to advanced and specialized
courses. Training is offered at Viewlogic's
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facilities in Marlboro, Massachusetts, San Jose, California, London, Marseilles,
Munich and Tokyo. On-site training is also available.
VIEWLOGIC CONSULTING SERVICES. The Viewlogic Consulting Services Group is a
global consulting organization staffed by experts in electronic design. VCSG's
goal is to meet the diverse and demanding needs of customers designing today's
complex boards and systems. VCSG provides a complete line of consulting services
including training, product jumpstart programs, methodology assessment and re-
engineering, custom software development and partial or full design
implementation. Other specialized services include systems integration, design
database translation and custom library development.
VIEWLOGIC PROPRIETARY RIGHTS
Viewlogic relies on a combination of contracts, patents, copyright and trade
secret laws to establish and protect proprietary rights in its technology.
Viewlogic generally licenses and distributes its products under written
agreements providing for non-exclusive licenses. The licensed software may be
used solely for internal operations on designated computers or networks. The
source code of Viewlogic's products is protected both as a trade secret and as
an unpublished copyrighted work and is not generally made available to third
parties. Despite these precautions, it may be possible to unlawfully copy or
otherwise obtain and use Viewlogic's products or technology without
authorization.
Viewlogic believes that, due to the rapid pace of innovation within the CAE
software industry, factors such as the technological and creative skills of its
personnel are more important to establishing and maintaining a technology
leadership position than are the various legal protections of its technology.
VIEWLOGIC EMPLOYEES
As of September 30, 1999 Viewlogic had 278 employees, including 117 in
marketing and sales, 66 in product research and development, 52 in customer
support, consulting and training, 12 in manufacturing and sales administration
and 31 in general and administrative activities. None of Viewlogic's employees
is represented by a labor union or is subject to a collective bargaining
agreement. Viewlogic has never experienced a work stoppage and believes that its
employee relations are excellent.
VIEWLOGIC PROPERTIES
Viewlogic occupies 74,683 square feet of space at its headquarters in
Marlboro, Massachusetts under a lease expiring in 2002, subject to Viewlogic's
right to extend the lease for up to six additional years. Viewlogic also leases
16,965 square feet in San Jose, California for its Western Sales operations,
21,000 square feet in Camarillo, California for the Advanced Development Group,
13,829 square feet of office space in the United Kingdom and a number of small
sales and support offices in locations in North America, Europe and Asia.
VIEWLOGIC LEGAL PROCEEDINGS
Viewlogic is not a party to any material legal proceedings.
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VIEWLOGIC SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following selected historical financial data of Viewlogic should be read
in conjunction with Viewlogic's consolidated financial statements and the
related notes, "Viewlogic Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the other financial information
included elsewhere in this joint proxy statement/prospectus. The selected
financial data set forth below for Viewlogic for years ended January 2, 1999 and
December 31, 1997 have been derived from, and should be read in conjunction
with, Viewlogic's audited consolidated financial statements and the accompanying
notes, which are contained elsewhere in this joint proxy statement/prospectus.
The data as of July 3, 1999 and for the six month periods ended July 4, 1998 and
July 3, 1999 have been derived from Viewlogic's unaudited consolidated financial
statements and accompanying notes, which are contained elsewhere in this joint
proxy statement/prospectus. Viewlogic believes that the unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, that Viewlogic considers necessary for a fair
presentation of the financial information contained in such financial
statements. Viewlogic's results of operations for the six month periods ended
July 4, 1998 and July 3, 1999 are not necessarily indicative of our results of
operations for the entire year. The fiscal years as required prior to December
31, 1997 are not presented as Viewlogic is unable to create comparable statement
of operations and balance sheet information. See further discussion in
Viewlogic's "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTH ENDED
-------------------------- --------------------
DECEMBER 31, JANUARY 2, JULY 4, JULY 3,
1997 1999 1998 1999
------------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Software........................................................ $ 29,071 $ 22,683 $ 11,132 $ 13,099
Services and other.............................................. 34,916 32,554 15,846 14,133
------------- ----------- --------- ---------
Total revenue................................................. 63,987 55,237 26,978 27,232
------------- ----------- --------- ---------
COSTS AND EXPENSES:
Cost of software................................................ 3,340 5,112 1,965 2,737
Cost of services and other...................................... 7,513 5,071 2,406 3,156
Selling and marketing........................................... 24,897 18,930 8,924 11,230
Research and development........................................ 14,954 10,028 4,899 5,478
General and administrative...................................... 4,054 3,675 2,044 2,019
Amortization of goodwill and other intangibles.................. -- -- -- 120
Stock compensation.............................................. 117 -- 245
Litigation Settlement and related costs......................... 4,500 -- -- --
Restructuring charge............................................ 6,725 -- -- --
Transaction costs............................................... -- 452 -- --
------------- ----------- --------- ---------
Total operating expenses...................................... 65,983 43,385 20,238 24,985
------------- ----------- --------- ---------
INCOME (LOSS) FROM OPERATIONS..................................... (1,996) 11,852 6,740 2,247
------------- ----------- --------- ---------
OTHER INCOME (EXPENSE):
Other income (expense), net................................... (71) (1,932) (368) (626)
------------- ----------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES................................. (2,067) 9,920 6,372 1,621
PROVISION (BENEFIT) FOR INCOME TAXES.............................. (868) 4,053 2,628 746
------------- ----------- --------- ---------
NET INCOME (LOSS)................................................. $ (1,199) $ 5,867 $ 3,744 $ 875
------------- ----------- --------- ---------
------------- ----------- --------- ---------
EARNINGS PER SHARE
Net income per common share
Basic......................................................... $ 1.48 $ 0.94 $ 0.21
----------- --------- ---------
----------- --------- ---------
Diluted....................................................... $ 0.73 $ 0.94 $ 0.04
----------- --------- ---------
----------- --------- ---------
Weighted average shares outstanding
Basic......................................................... 3,966 3,966 4,233
----------- --------- ---------
----------- --------- ---------
Diluted....................................................... 7,999 3,966 20,761
----------- --------- ---------
----------- --------- ---------
BALANCE SHEET DATA
Working capital (deficit)....................................... (6,509) (7,699)
Total assets.................................................... 24,892 24,605
Long-term debt, less current maturities......................... 15,873 14,630
Stockholders' (deficiency)...................................... (47,845) (46,706)
</TABLE>
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VIEWLOGIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
IMPORTANT NOTE ABOUT FORWARD-LOOKING STATEMENTS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THIS ITEM CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934 THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH FORWARD-LOOKING
STATEMENTS. FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
INCLUDE THOSE SET FORTH UNDER "RISK FACTORS" COMMENCING ON PAGE 10.
OVERVIEW
Viewlogic operates in the United States and international markets
developing, marketing and providing technical support for a comprehensive family
of software tools used by engineers in the design of advanced electronic
products and systems. Viewlogic currently markets and sells its products
worldwide through multiple distribution channels, including independent
distributors, value added resellers, a direct sales organization, telesales and
strategic sales alliances with OEM partners.
On December 4, 1997, a company which offered two primary product
lines--tools used by engineers designing integrated circuits (the "ASIC
Business") and tools used by engineers designing printed circuit boards and
complete systems (the "Systems Business")--became a wholly owned subsidiary of
Synopsys, Inc. ("Synopsys") in a transaction accounted for as a pooling of
interests. That company was also called Viewlogic Systems, Inc. and is referred
to herein as the "Prior Viewlogic". On January 1, 1998, the Prior Viewlogic
transferred the ASIC Business and certain other assets to Synopsys leaving only
the Systems Business in the Prior Viewlogic. Synopsys created a new legal entity
to conduct the Systems Business of the Prior Viewlogic, which became Viewlogic
in a corporate reorganization effected March 31, 1998. For the period from
December 4, 1997 through October 2, 1998, Viewlogic operated as a wholly owned
subsidiary of Synopsys and certain treasury services were provided by Synopsys
at no charge. Accordingly, results of operations for the period may not be
indicative of results that would have been achieved had Viewlogic operated on a
stand-alone basis. On October 2, 1998, a group of investors purchased 16,000,000
shares of Viewlogic's preferred stock for $32,000,000 and Viewlogic borrowed
$18,000,000 from a commercial bank. The proceeds from these financings were paid
to Synopsys in a recapitalization of Viewlogic. As a result of these
transactions, the investors owned 80.1% of the capital stock of Viewlogic and
Synopsys owned 19.9%. These transactions have been accounted for as a
recapitalization (see Note 2 of Notes to Viewlogic Consolidated Financial
Statements).
During 1997, the Prior Viewlogic established separate departments to capture
product development, technical support and product marketing expenses of both
the Systems and ASIC Businesses. In addition, the company segregated its revenue
and product costs for each business and created income statements for each.
Before 1997, the Prior Viewlogic did not separate its costs in the same manner
and the necessary information needed to prepare these financial statements is
not available. As a result, Viewlogic is unable to create a comparable statement
of revenue and direct expenses for the Systems Business for years prior to 1997.
The results of operations for the year ended December 31, 1997 represent a
carve-out of the Systems Business from the historical financial statements of
the Prior Viewlogic and excludes the ASIC Business. Prior to December 4, 1997,
certain administrative, marketing and other services were centralized. In
addition, the Prior Viewlogic distributed both its ASIC and Systems products
primarily through one combined sales force. Accordingly, allocations of these
expenses have been made based on revenue, personnel, space, estimates of time
spent to provide services or other appropriate basis. Management of Viewlogic
believes that these allocations were made on a reasonable basis, however they
are not necessarily indicative of the costs that would have been incurred on a
stand-alone basis.
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At the end of 1997, the Prior Viewlogic restructured its operations and, 222
employees were retained by the Systems Business, 291 employees transferred to
Synopsys and 217 people were terminated. During the nine months of calendar year
1998 that Viewlogic was a wholly owned subsidiary of Synopsys, its primary goal
was to optimize short-term profitability. Viewlogic sought to achieve this goal
by reducing its consulting, sales, marketing and research and development
expenditures and focusing its remaining resources primarily on servicing its
installed base of customers. Since October 2, 1998, through September 30, 1999,
Viewlogic increased staffing from 219 to 278. Management of Viewlogic believes
this increase was appropriate in order to build its business for the long term.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
revenue of certain items in Viewlogic's Condensed Consolidated Statements of
Income:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED
------------------------ ------------------------
JAN 2 DEC. 31 JULY 3 JULY 4
1999 1997 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Software......................................................... 41% 45% 48% 41%
Services and other............................................. 59 55 52 59
--- --- --- ---
Total Revenue.................................................... 100 100 100 100
--- --- --- ---
Cost and expenses:
Cost of software................................................. 9 5 10 7
Cost of services and other....................................... 9 12 12 9
Sales and marketing.............................................. 34 39 41 33
Research and development......................................... 18 23 20 18
General and administrative....................................... 7 6 9 7
Amortization..................................................... 0 0 0 0
Stock Compensation............................................... 0 0 1 0
Non-recurring charges............................................ 1 18 0 0
--- --- --- ---
Total cost and expenses.......................................... 78 103 93 75
--- --- --- ---
Income (loss) from operations.................................... 22 (3) 7 25
Other income (expense), net...................................... (3) 0 (2) (1)
--- --- --- ---
Income (loss) before income taxes................................ 19 (3) 5 24
Provision for income taxes....................................... 7 1 3 10
--- --- --- ---
Net income (loss)................................................ 12% (2%) 2% 14%
--- --- --- ---
--- --- --- ---
</TABLE>
SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999
Revenue
For the six months ended July 4, 1998 and July 3, 1999, Viewlogic's total
revenue increased 1% from $26,978,000 to $27,232,000. The increase in revenue
was primarily due to the growth of Viewlogic's software license revenue. As a
percentage of total revenue, software license revenue increased from 41% for the
six months ended July 4, 1998 to 45% for the six months ended July 3, 1999.
Software License revenue for the six months ended July 4, 1998 and July 3, 1999
increased 18% from $11,132,000 to $13,099,000. Since the recapitalization on
October 2, 1998, Viewlogic has increased its direct sales staff and marketing
expenditures. Viewlogic believes that this has led to increased software license
sales, particularly in the number of large dollar orders. Service revenue
decreased from $15,846,000 for the six months ended July 4, 1998 to $14,133,000
for the six months ended July 3, 1999 due to decreased maintenance revenues. The
decrease was primarily attributable to several major
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customers not renewing their maintenance contracts due to the fact they were
using Viewlogic's products in ASIC related applications, which are no longer
fully supported by Viewlogic. In addition, a number of Viewlogic's customers
migrated their products from the Unix version to the NT version, which have
lower maintenance prices. Training and consulting revenues remained relatively
flat for the six months ended July 4, 1998 and July 3, 1999.
Revenue generated from Europe was $4,163,000 and $4,307,000 or 15% and 16%
of total Company revenue, respectively, for the six months ended July 4, 1998
and July 3, 1999. Revenue from Japan was $1,952,000 and $1,960,000,
respectively, for the six months ended July 4, 1998 and July 3, 1999 or 7% of
total Company revenue in each period. No customer accounted for more than 10% of
revenue in either period.
Cost of Revenue
COST OF SOFTWARE REVENUE
Cost of software revenue increased 40% from $1,965,000 for the six months
ended July 4, 1998 to $2,737,000 for the six months ended July 3, 1999,
primarily due to increased royalty costs payable to Synopsys resulting from new
licensing arrangements entered into at the time of the recapitalization. Cost of
software revenue, as a percentage of software revenue decreased from 22% to 21%
for the six months ended July 4, 1998 and July 3, 1999. The decrease was
attributable to the significant rise in software revenues which, because of the
fixed cost components of software revenue cost, resulted in a higher incremental
gross margin. The amortization of capitalized software included in cost of
software revenue for the six months ended July 4, 1998 was $550,000 and $549,000
for the six months ended July 3, 1999.
COST OF SERVICES AND OTHER
Cost of service revenue increased 31% from $2,406,000 to $3,156,000 and, as
a percentage of service revenue, increased from 12% to 22% for the six months
ended July 4, 1998 and July 3, 1999. The increase was primarily due to an
increase in Viewlogic's consulting staff in anticipation of future growth in
this area.
SALES AND MARKETING
Sales and marketing expenses increased 27% from $8,924,000 for the six
months ended July 4, 1998 to $11,230,000 for the six months ended July 3, 1999.
The increase was primarily attributable to higher personnel-related costs due to
an increase in the number of worldwide sales and marketing personnel from 99 in
June 1998 to 111 in June 1999. Another contributing factor was increased
spending on marketing programs. Selling and marketing expenses, as a percentage
of total revenue, increased from 33% to 41% for the six months ended July 4,
1998 and July 3, 1999.
RESEARCH AND DEVELOPMENT
Research and development costs increased 14% from $4,899,000 to $5,478,000
for the six months ended July 4, 1998 and July 3, 1999. The increase in research
and development expenses primarily reflects higher personnel-related costs
associated with Viewlogic's investment in new product development and
enhancement of existing products. This includes the addition of staff associated
with the purchase of certain technology from OmniView, Inc., which was completed
during the first quarter of 1999. Research and development expense as a
percentage of total revenue was 18% for the six months ended July 4, 1998 and
20% for the six months ended July 3, 1999. The amount of software development
costs capitalized for the six months ended July 4, 1998 and July 3, 1999 was
$540,000 and $584,000, respectively, representing 11% of total research and
development costs in each of those years.
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GENERAL AND ADMINISTRATIVE
General and administrative expense decreased slightly from $2,044,000 to
$2,019,000 for the six months ended July 4, 1998 to July 3, 1999. General and
administrative expense was approximately 7% of total Company revenue in both
periods.
AMORTIZATION OF INTANGIBLES
On March 16, 1999, Viewlogic purchased certain assets and intellectual
property of OmniView, Inc. The purchase price consisted of $1,100,000 in cash,
400,000 shares of Viewlogic's common stock and acquisition expenses and was
allocated to the assets based on their fair value, including $1,083,000 for the
purchased technology and $197,000 for the intangible workforce. These
intangibles are being amortized over three years and resulted in $136,000 of
amortization expense for the six months ended July 3, 1999.
STOCK COMPENSATION
From October 2, 1998 through July 3, 1999, Viewlogic issued stock options
covering approximately 5,447,000 shares of Viewlogic's common stock with an
exercise price of $.33 per share. For financial reporting purposes the deemed
fair value of these grants resulted in deferred compensation expense of
$1,998,000. These charges are being recognized over the vesting period and
resulted in stock compensation expense of $245,000 for the six months ended July
3, 1999.
INTEREST EXPENSE NET
Viewlogic incurred interest expense, net of interest income, of $592,000 for
the six months ended July 3, 1999 compared to net interest income received of
$113,000 for the six months ended July 4, 1999, primarily due to increased
borrowings under Viewlogic's credit facility. In addition, during 1999 Viewlogic
entered into a capital lease agreement to finance the purchases of computer
equipment and software increasing its capital lease obligation, which also
contributed to the increase in interest expense.
OTHER INCOME/(EXPENSE), NET
Other income/(expense) consists of gains or losses on the disposal of
property and equipment and foreign currency gains and losses. Other expense was
$481,000 and $34,000 for the six months ended July 4, 1998 and July 3, 1999,
respectively.
INCOME TAXES
The provision for federal and state income taxes decreased 72% from
$2,628,000 to $746,000 for the six months ended July 4, 1998 and July 3, 1999,
primarily due to the drop in income before taxes. The effective tax rates for
the first six months ended July 4, 1998 and July 3, 1999 were 41% and 46%,
respectively. The tax rate for the six months ended July 3, 1999 was higher
primarily due to the $245,000 of stock compensation which is not fully
deductible for income tax purposes.
YEARS ENDED DECEMBER 31, 1997 AND JANUARY 2, 1999
Revenue
Revenue is derived primarily from software license fees, maintenance and
services. Revenue from product or software sales is recognized upon shipment or
delivery of the product provided that the license fee is fixed and determinable
and collection is probable. Service revenues are derived from maintenance,
training and consulting. Maintenance revenue is deferred and recognized ratably
over the maintenance period. Revenue from training and consulting is recognized
as the related services are performed.
Viewlogic's total revenue decreased 14% from $63,987,000 in the year ended
December 31, 1997 to $55,237,000 in the year ended January 2, 1999. This
decrease resulted from a 22% decline in
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software revenue from $29,071,000 for the year ended December 31, 1997 to
$22,683,000 for the year ended January 2, 1999. Viewlogic believes this drop was
a result of the restructuring that occurred after the merger of the Prior
Viewlogic with Synopsys, which significantly reduced the number of direct sales
representatives selling Viewlogic's products, and the amount spent on marketing
programs. At the end of the year ended December 31, 1997, the Prior Viewlogic
had over 78 field sales representatives selling its Systems and ASIC products.
At the beginning of the year ended January 2, 1999, Viewlogic was reorganized
and the number of field sales representatives responsible for selling
Viewlogic's products was reduced to 17. Service revenue decreased 7% from
$34,916,000 for the year ended December 31, 1997 to $32,554,000 for the year
ended January 2, 1999 due to a drop in training and consulting services, a
decrease that was partially offset by an increase in maintenance revenue.
Training and consulting revenue decreased year over year due to a reduction in
Viewlogic's training and consulting resources at the end of 1997. Viewlogic
believes that the maintenance revenue growth in the year ended January 2, 1999
was primarily due to Viewlogic focusing its efforts during 1998 on selling to,
and supporting, its existing installed base of customers. As a percentage of
total revenue, software license revenue decreased from 45% in the year ended
December 31, 1997 to 41% in the year ended January 2, 1999 while service
revenue, as a percentage of total revenue, increased from 55% in 1997 to 59% in
1998 due to the factors discussed above.
Revenue generated in Europe was $10,837,000 and $8,655,000 or 17% and 16% of
total Viewlogic revenue for the years ended December 31, 1997 and January 2,
1999, respectively. Viewlogic believes this decrease was due primarily to the
reduction in staffing described previously. Revenue generated in Japan was
$4,345,000 and $4,915,000 or 7% and 9% of total Viewlogic revenue, respectively,
for the years ended December 31, 1997 and January 2, 1999. Viewlogic believes
this increase was mainly due to much of the revenue in Japan being derived from
sales through distributors and therefore the restructuring did not have a
significant impact. No customer accounted for more than 10% of revenue in the
years ended December 31, 1997 and January 2, 1999.
Cost of Revenue
COSTS OF SOFTWARE REVENUE
Cost of software revenue consists primarily of expenses associated with
product documentation, packaging, royalty costs, amortization of capitalized
software and purchased technology, duplication and order administration.
Cost of software revenue increased 53% from $3,340,000 for the year ended
December 31, 1997 to $5,112,000 for the year ended January 2, 1999. Cost of
software, as a percentage of software revenue increased from 11% to 23% for the
years ended December 31, 1997 and January 2, 1999. The dollar amount and
percentage increases were primarily due to an increase in royalty costs and
amortization of capitalized software. Royalty costs increased approximately
$1,000,000 year over year primarily due to royalties paid to Synopsys during the
year ended January 2, 1999 for products licensed from Synopsys that the Prior
Viewlogic previously owned. Amortization of capitalized software increased
approximately $359 from the year ended December 31, 1997 to the year ended
January 2, 1999. This increase was primarily due to the relatively high amount
of software capitalized during 1997 having a full year impact in 1998. The
amortization of capitalized software included in cost of software revenue for
the years ended December 31, 1997 and January 2, 1999 was $678,000 and
$1,038,000, respectively.
COST OF SERVICES AND OTHER
Cost of services consists primarily of customer support, training expenses
and the expense of consulting services provided to customers. Cost of service
revenue decreased 33% from $7,513,000 for the year ended December 31, 1997 to
$5,071,000 for the year ended January 2, 1999. This decrease was primarily due
to Viewlogic reducing its consulting resources at the end of 1997 and
de-emphasizing the consulting service business in order to achieve higher
margins. Cost of services, as a percentage of service revenue remained constant
at 22% for the years ended December 31, 1997 and January 2, 1999.
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SALES AND MARKETING EXPENSES
Sales and marketing expenses decreased 23% from $24,897,000 for the year
ended December 31, 1997 to $18,930,000 for the year ended January 2, 1999. This
decrease was primarily attributable to the restructuring of Viewlogic at the end
of calendar year 1997, as described above. Selling and marketing expenses, as a
percentage of total revenue, decreased from 39% to 34% for the years ended
December 31, 1997 and January 2, 1999.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased 33% from $14,954,000 for the
year ended December 31, 1997 to $10,028,000 for the year ended January 2, 1999.
The decrease in research and development expenses primarily reflects the effect
of transferring some of Viewlogic's products and related development to Synopsys
at the end of calendar year 1997. Viewlogic now pays a royalty to Synopsys for
these products. In addition, Viewlogic also reduced research and development
spending in other areas in anticipation of lower revenue during the year ended
January 2, 1999. Research and development expenses as a percentage of total
revenues were 23% and 18% for the years ended December 31, 1997 and January 2,
1999, respectively.
Software development costs are accounted for in accordance with SFAS No. 86
under which Viewlogic is required to capitalize software development costs once
technological feasibility has been established. The amount of software
development costs capitalized for the years ended December 31, 1997 and January
2, 1999 was $1,229,000 and $1,157,000, respectively, representing approximately
8% and 12% of total research and development costs in those years. Viewlogic
amortizes such amounts over 4 years. See Note 1 of Notes to Consolidated
Financial Statements.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased 9% from $4,054,000 for the
year ended December 31, 1997 to $3,675,000 for the year ended January 2, 1999.
This decrease was primarily attributable to the restructuring of Viewlogic that
occurred at the end of calendar year 1997, as Viewlogic reduced its
administrative personnel in anticipation of lower overall revenue. As a
percentage of total revenue, general and administrative expense increased from
6% for the year ended December 31, 1997 to 7% for the year ended January 2, 1999
due to the overall drop in revenue.
TRANSACTION COSTS
For the year ended January 2, 1999, Viewlogic paid approximately $452,000 in
professional fees in connection with its recapitalization on October 2, 1998.
STOCK COMPENSATION EXPENSE
From October 2, 1998 through January 2, 1999, Viewlogic issued stock options
covering approximately 5,408,000 shares of Viewlogic's common stock with an
exercise price of $.33 per share. For financial reporting purposes, the deemed
fair value of these grants resulted in deferred compensation expense of
$1,918,000, which is being amortized over the vesting period resulting in stock
compensation expense of $117,000 for the year ended January 2, 1999. See Note 6
of Notes to Consolidated Financial Statements.
LITIGATION SETTLEMENT
During calendar year 1997, at the time of its merger with Synopsys, the
Prior Viewlogic agreed to settle a claim for product royalties alleged to be
owed to a supplier under a licensing agreement. The Prior Viewlogic paid
approximately $4,000,000 to settle the litigation and incurred approximately
$500,000 in related fees.
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RESTRUCTURING CHARGE
The restructuring plan for the Prior Viewlogic included the merger of the
non-Systems businesses to other divisions of Synopsys, a discontinuation of
marketing and sales efforts with certain Systems Business products, and
workforce reductions resulting from these changes in the businesses. A
restructuring charge of approximately $6,700,000 has been included in
Viewlogic's financial statements for the year ended December 31, 1997. The
charge includes approximately $2,344,000 in severance charges, $2,540,000 in
non-cash impairment of capitalized software assets and a $1,368,000 write-off of
other assets associated with discontinued products, and $415,000 of
non-cancelable commitments.
INTEREST EXPENSE AND INTEREST INCOME
On October 2, 1998, in connection with the recapitalization, Viewlogic
entered into a $24,000,000 credit facility consisting of a $6,000,000 revolving
line of credit and an $18,000,000 term loan. As a result of borrowings under the
credit facility, interest expense, net of interest income, increased from
$15,000 to $171,000 for the years ended December 31, 1997 and January 2, 1999,
respectively. See Note 4 of Notes to Consolidated Financial Statements,
OTHER INCOME/(EXPENSE), NET
Other income/(expense) consists of gains or losses on the disposal of
property and equipment and foreign currency gains and losses. Other expense was
$56,000 and $1,800,000 for the years ended December 31, 1997 and January 2,
1999, respectively. During the year ended January 2, 1999, in connection with
the recapitalization, one of Viewlogic's international subsidiaries repaid an
amount that had been previously treated as a long-term investment. The repayment
of this amount resulted in a realized foreign exchange transaction loss of
$1,400,000 that is included in other expense.
INCOME TAXES
Income taxes for the year ended January 2, 1999 was $4,053,000 and Viewlogic
recognized an income tax benefit of $868,000 for the year ended December 31,
1997. The effective tax rates for federal and state income taxes were 42% and
41% for the years ended December 31, 1997 and January 2, 1999, respectively. For
the period from December 5, 1997 through October 2, 1998, Viewlogic was included
in the consolidated tax returns of Synopsys. Prior to December 5, 1997, the
Systems Business was included in the tax returns of the Prior Viewlogic. For
financial statement purposes, Viewlogic has computed the tax provision for the
year ended December 31, 1997, based on the effective tax rate of the Prior
Viewlogic and for the year ended January 2, 1999, as if it had filed separate
tax returns.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Prior to its recapitalization, Viewlogic funded its activities primarily
through operations. In connection with the recapitalization, on October 2, 1998,
Viewlogic entered into a $24,000,000 credit facility with a commercial bank
consisting of a $6,000,000 revolving line of credit ("Line of Credit") and an
$18,000,000 million term loan (the "Term Loan) (together, the "Credit
Facility"). See Note 4 of Notes to Consolidated Financial Statements. Borrowings
under the Credit Facility are collateralized by substantially all of Viewlogic's
assets. The Credit Facility contains certain limitations on additional
indebtedness and capital expenditures, and includes financial covenants, which
include but are not limited to the maintenance of certain minimum levels of
interest and debt service coverage ratios and maximum leverage ratios. At July
3, 1999, Viewlogic had borrowings of approximately $17,000,000 outstanding under
the Credit Facility. Viewlogic was in compliance with the covenants at July 3,
1999. Payments of principal outstanding under either the Line of Credit or the
Term Loan may be made at any time and must be repaid in full by September 30,
2003. As of July 3, 1999, Viewlogic had cash and cash equivalents of $2,646,000.
Viewlogic also had an additional $5,500,000 available under its Line of Credit.
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Viewlogic's operating activities provided cash of approximately $2,867,000
for the year ended January 2, 1999. Cash generated was primarily attributable to
net income of $5,867,000, non-cash depreciation and amortization of $3,205,000,
an increase in deferred revenue of $2,005,000, which were partially offset by a
decrease in accrued compensation and an increase in prepaid expenses and
accounts receivable.
Net cash used in investing activities was approximately $2,817,000 for the
year ended January 2, 1999. The majority of cash used was for the purchase of
property and equipment and capitalized software.
Net cash provided by financing activities for the year ended January 2, 1999
was approximately $3,036,000. This was primarily the result of cash advances
from Synopsys made while Viewlogic was still a wholly owned subsidiary. On
October 2, 1998, a group of investors purchased 16,000,000 shares of Viewlogic's
preferred stock for $32,000,000 and Viewlogic borrowed $18,000,000 from a
commercial bank. The proceeds from these financings were paid to Synopsys in a
recapitalization of Viewlogic. As a result of these transactions, the investors
owned 80.1% of the capital stock of Viewlogic and Synopsys owned 19.9%. These
transactions have been accounted for as a recapitalization (see Note 2 of Notes
to Consolidated Financial Statements.)
Viewlogic's operating activities provided cash of approximately $1,357,000
for the six months ended July 3, 1999. Cash generated for the six months ended
July 3, 1999 was primarily attributable to net income of $875,000, non-cash
depreciation and amortization of $1,760,000, an increase in deferred revenue of
approximately $347,000 and an increase in accrued compensation of $280,000,
which were partially offset by an increase in accounts receivable of $325,000,
and a decrease in deferred income taxes and accounts payable of $1,162,000.
Net cash used in investing activities was approximately $2,036,000 for the
six months ended July 3, 1999. Viewlogic used $1,100,000 in cash for the six
months ended July 3, 1999 for the purchase of certain assets of OmniView and the
remainder being used for property and equipment and capitalized software.
Net cash used in financing activities for the six months ended July 3, 1999
was approximately $1,040,000, primarily to repay long-term debt.
Viewlogic believes that its current cash and cash equivalents combined with
its current line of credit, and together with funds expected to be generated
from operations, will satisfy Viewlogic's anticipated cash requirements for at
least the next twelve months.
YEAR 2000
Many older computer software programs refer to years in terms of their final
two digits only. Such programs may interpret the year 2000 to mean the year 1900
instead. If not corrected, those programs could cause date-related transaction
failures.
Year 2000 problems could affect the manufacture, distribution and use of
Viewlogic's products, communications with its customers and suppliers and
conduct of financial and administrative operations. Viewlogic is making
programming modifications and upgrades to correct or replace the systems
critical to its business, which it has identified as non-Year 2000 compliant.
Viewlogic is testing these systems where appropriate and possible. Viewlogic has
not completed its Year 2000 contingency plan.
Viewlogic has tested the current version of the products it currently plans
to sell and believes the current versions of these products are Year 2000
compliant, when configured and used in accordance with the related
documentation, so long as the underlying operating system of the host machine
and any other software used with or in the host machine or with the products are
also Year 2000 compliant. Older versions of Viewlogic's products may not be Year
2000 compliant, and it encourages users of these versions to upgrade to the
latest version. Viewlogic's customers who have maintenance
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agreements with Viewlogic have the right to receive the latest version of these
products. Viewlogic's customers who do not have maintenance agreements with
Viewlogic may purchase the latest version of these products.
External and internal costs specifically associated with modifying
Viewlogic's products and internal use software for Year 2000 compliance are
expensed as incurred. To date, expenditures related to the Year 2000 problem
have not been material. Viewlogic does not expect the future costs relating to
Year 2000 compliance to have a material effect on its results of operations or
financial condition.
These expectations are subject to uncertainties. For example, if Viewlogic
is unsuccessful in identifying or fixing all Year 2000 problems in our critical
operations, or if it is affected by the failure of suppliers or major customers
to continue operations due to such a problem, its results of operations or
financial condition could be materially and adversely impacted.
The total costs that we incur in connection with the Year 2000 compliance
will be influenced by Viewlogic's successful identification of Year 2000
problems, the nature and amount of programming required to fix affected
programs, the related labor and/or consulting costs for this remediation and the
success of third parties with whom it has business relationships in addressing
their own Year 2000 concerns.
The information presented above is based upon Viewlogic's estimates, which
Viewlogic made using assumptions of future events. Uncontrollable factors such
as the compliance of the systems of third parties and the availability of
resources could materially increase the cost of, or delay, remedying Year 2000
problems. All Year 2000 statements contained herein are designated as "Year 2000
Readiness Disclosures" pursuant to the Year 2000 Information and Readiness
Disclosures Act (P.L. 105-271).
MARKET RISK
Viewlogic is exposed to interest rate risk primarily through its Credit
Facility. On October 3, 1998, as required under the Credit Facility, Viewlogic
entered into a no-fee interest swap agreement with a bank to reduce the impact
of changes in interest rates on its floating rate Credit Facility. This
agreement effectively converts a portion of the floating-rate obligation into a
fixed-rate obligation of 7.2% for a period of 60 months, expiring on September
30, 2003. The notional principal amount of the interest rate-swap agreement is
$9 million as of January 2, 1999. The company is exposed to credit loss in the
event of nonperformance by the counterparties to the interest rate-swap
agreement. Open interest rate contracts are reviewed regularly by Viewlogic to
ensure that they remain effective as hedges of interest rate exposure.
Management believes that the rate-swap agreement approximates fair value. After
taking into consideration the interest swap agreement, a hypothetical 10%
adverse movement in average interest rates, would not have a material effect on
Viewlogic's financial results.
Viewlogic is also exposed to the impact of foreign currency fluctuations.
Since Viewlogic translates foreign currencies into U.S. dollars for reporting
purposes, weakened currencies in our subsidiaries have a negative, though
immaterial, impact on its results. It also believes that the exposure to
currency exchange fluctuation risk is insignificant because its international
subsidiaries sell to customers, and satisfy their financial obligations, almost
exclusively in their local currencies. During fiscal 1998, Viewlogic did not
engage in foreign currency hedging activities. Based on a hypothetical 10%
adverse movement in foreign currency exchange rates, the potential losses in
future earnings, fair value of risk-sensitive instruments, and cash flows are
immaterial, although the actual effects may differ materially from the
hypothetical analysis.
131
<PAGE>
VIEWLOGIC DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of Viewlogic who will serve as
executive officers and directors of the combined company, and their ages as of
September 30, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH VIEWLOGIC
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
William J. Herman.................................... 39 President and Chief Executive Officer and Director
Paula J. Cassidy..................................... 30 Vice President, Human Resources
Peter T. Johnson..................................... 51 Vice President, Business Development, Chief Legal
Officer and Secretary
Gary L. Kiaski....................................... 44 Vice President, Worldwide Sales
Richard G. Lucier.................................... 40 Executive Vice President, Chief Operating Officer and
Director
Kevin P. O'Brien..................................... 43 Vice President, Finance and Chief Financial Officer
Keith B. Geeslin..................................... 46 Director
</TABLE>
WILLIAM J. HERMAN has served as President and Chief Executive Officer and
Director of Viewlogic since October 1998. Prior to serving Viewlogic in these
capacities, from December 1997 to September 1998, Mr. Herman served as President
of the Viewlogic Systems Group of Synopsys, Inc., an electronic design
automation company. From March 1995 to November 1997, Mr. Herman served in
various senior management capacities, most recently as President and Chief
Executive Officer, at the former Viewlogic Systems, Inc., a larger electronic
design automation company which Mr. Herman co-founded in 1984. From February
1994 to February 1995, Mr. Herman served as President of Silerity, Inc., a
computer-aided engineering software company.
PAULA J. CASSIDY has served as Vice President, Human Resources of Viewlogic
since October 1998. Prior to serving Viewlogic in this capacity, from December
1997 to September 1998, Ms. Cassidy served as Vice President of Human Resources
of the Viewlogic Systems Group of Synopsys. From 1989 to November 1997, Ms.
Cassidy served in various capacities, most recently as Manager, Human Resources,
at the former Viewlogic Systems, Inc.
PETER T. JOHNSON has served as Vice President, Business Development and
Chief Legal Officer of Viewlogic since October 1998 and as Secretary since May
1999. Prior to serving Viewlogic in these capacities, from May 1998 to October
1998, Mr. Johnson served as Vice President, Chief Legal Officer and Secretary of
Avid Technology, Inc., a digital media software developer. From December 1997 to
April 1998, Mr. Johnson served as Vice President and General Counsel of the
Viewlogic Systems Group of Synopsys. From June 1995 to November 1997, Mr.
Johnson served as Vice President, General Counsel and Secretary of the former
Viewlogic Systems, Inc. From 1993 to February 1995, Mr. Johnson served as
General Counsel and Secretary of Phoenix Technologies Ltd., a software
development firm.
GARY L. KIASKI has served as Vice President, Worldwide Sales of Viewlogic
since October 1998. Prior to serving Viewlogic in this capacity, from December
1997 to September 1998, Mr. Kiaski served as Vice President of Worldwide Sales
of the Viewlogic Systems Group of Synopsys. From 1988 to November 1997, Mr.
Kiaski served in various capacities, most recently as Vice President, Western
Region Sales, at the former Viewlogic Systems, Inc.
RICHARD G. LUCIER has served as Executive Vice President, Chief Operating
Officer and a director of Viewlogic since October 1998. Prior to serving
Viewlogic in these capacities, from December 1997 to September 1998, Mr. Lucier
served as Senior Vice President of Engineering and Marketing of the
132
<PAGE>
Viewlogic Systems Group of Synopsys. From 1986 to November 1997, Mr. Lucier
served in various capacities, most recently as Group Vice President of the
Systems Group, at the former Viewlogic Systems, Inc.
KEVIN P. O'BRIEN has served as Vice President, Finance and Chief Financial
Officer of Viewlogic since October 1998 and as Secretary from October 1998 to
May 1999. Prior to serving Viewlogic in this capacity, from April 1998 to
September 1998, Mr. O'Brien served as Vice President of Finance of the Viewlogic
Systems Group of Synopsys. From September 1997 to March 1998, Mr. O'Brien served
as an independent management consultant. From October 1995 to August 1997, Mr.
O'Brien served as Chief Financial Officer at SmarTel Communications, Inc., a
telecommunications company. From 1989 to June 1995 Mr. O'Brien served in various
capacities, most recently as Vice President, Finance and Chief Financial
Officer, at Easel Corporation, a client server software developer. Mr. O'Brien
is a certified public accountant.
KEITH B. GEESLIN has served as a director of Viewlogic since October 1998.
Since July 1984, Mr. Geeslin has served in various capacities, most recently as
a general partner, of The Sprout Group, a venture capital firm. In addition, Mr.
Geeslin is a general or limited partner in a series of investment funds
associated with The Sprout Group, a division of DLJ Capital Corporation, which
is a subsidiary of Donaldson, Lufkin & Jenrette. Mr. Geeslin is also a director
of GlobeSpan, Inc., Paradyne Corp., Rhythms NetConnections Inc., SDL, Inc., and
several privately held companies.
VIEWLOGIC EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid during the fiscal year
ended January 2, 1999 to the Chief Executive Officer and the four other most
highly paid executive officers of Viewlogic.
<TABLE>
<CAPTION>
LONG TERM AWARDS
-------------------------------
ANNUAL COMPENSATION NO. OF
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($)(2) OPTIONS COMPENSATION($)(3)
- ------------------------------------- --------- ----------- --------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
William J. Herman.................... 1998 220,000 238,309 6,000 1,266,115 5,028
Richard Lucier....................... 1998 215,000 221,450 6,000 1,000,000 4,829
Gary Kiaski.......................... 1998 128,792 130,157 6,000 266,223 4,686
Kevin O'Brien(4)..................... 1998 95,962 43,854 -- 266,223 1,500
Paula Cassidy........................ 1998 94,769 89,117 -- 66,556 1,638
</TABLE>
- ------------------------
(1) Amounts shown include cash and noncash compensation earned and received by
executive officers as well as amounts earned but deferred at the election of
those officers.
(2) Consists of car allowance.
(3) Consists of Viewlogic's matching contribution under the company's 401(k)
plan.
(4) Mr. O'Brien joined the Company on March 30, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
during the fiscal year ended January 2, 1999 to the Chief Executive Officer and
the four other most highly paid executive officers of Viewlogic.
133
<PAGE>
OPTION GRANTS IN YEAR ENDED JANUARY 2, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
NO. OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO PRICE FAIR MARKET
OPTIONS EMPLOYEES IN ($)/ VALUE ON DATE EXPIRATION
GRANTED(1) 1999(2) SHARE OF GRANT($) DATE
---------- ------------ -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
William J. Herman....................... 1,266,115 23.4% 0.33 0.33 11/23/08
Richard Lucier.......................... 1,000,000 18.5% 0.33 0.33 11/23/08
Gary Kiaski............................. 266,223 4.9% 0.33 0.33 11/23/08
Kevin O'Brien........................... 266,223 4.9% 0.33 0.33 11/23/08
Paula Cassidy........................... 66,556 1.2% 0.33 0.33 11/23/08
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
OPTIONTERM(3)
----------------
5%($) 10%($)
------- -------
<S> <C> <C>
William J. Herman....................... 262,763 665,884
Richard Lucier.......................... 207,535 525,935
Gary Kiaski............................. 55,250 140,016
Kevin O'Brien........................... 55,250 140,016
Paula Cassidy........................... 13,812 35,004
</TABLE>
- ------------------------
(1) Options granted in 1998 are either incentive stock options or nonstatutory
stock options and generally vest over four years, with 25% of the option
shares becoming fully vested one year from the grant date and 1/48th vesting
in each successive month, with full vesting occurring on the fourth
anniversary date. Vesting accelerates to a two year schedule on termination
of employment without cause, and shares become fully vested on termination
of employment without cause or resignation for good reason after a change in
control of the company. The business combination with Summit does not
constitute a change in control for purposes of the vesting of stock options.
The options have a term of 10 years, subject to earlier termination in
specified situations related to termination of employment.
(2) Based on a total of 5,415,517 options granted to all employees and
consultants during 1999.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent Viewlogic's
estimate or projection of the future Viewlogic common stock price.
OPTION EXERCISES AND HOLDINGS
The following table sets forth, as to the Chief Executive Officer and the
four other most highly paid executive officers, information concerning stock
options exercised during fiscal 1998 and the number of shares subject to
exercisable and unexercisable stock options as of January 2, 1999. The table
also sets forth information with respect to the value of stock options held by
these individuals as of January 2, 1999.
AGGREGATED OPTION EXERCISES IN YEAR ENDED JANUARY 2, 1999 AND OPTION VALUES ON
JANUARY 2, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISABLE
OPTIONS AT FISCAL YEAR
SHARES VALUE END(2)
ACQUIRED ON REALIZED ---------------------------
NAME EXERCISE(1) ($) EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- -------- ----------- -------------
<S> <C> <C> <C> <C>
William J. Herman............................ -- -- 1,266,115 --
Richard Lucier............................... -- -- 1,000,000 --
Gary Kiaski.................................. -- -- 266,223 --
Kevin O'Brien................................ -- -- 266,223 --
Paula Cassidy................................ -- -- 66,556 --
<CAPTION>
VALUE OF UNEXERCISED IN-
THE-MONEY OPTIONS AT FISCAL
YEAR END ($)(3)
---------------------------
NAME EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- -------------
<S> <C> <C>
William J. Herman............................ 2,228,362 --
Richard Lucier............................... 1,760,000 --
Gary Kiaski.................................. 468,552 --
Kevin O'Brien................................ 468,552 --
Paula Cassidy................................ 117,139 --
</TABLE>
- ------------------------
(1) Mr. Herman, Mr. Lucier, Mr. O'Brien and Ms. Cassidy exercised their options
in full in August 1999.
134
<PAGE>
(2) Options are fully exercisable immediately, but the shares of common stock
purchased upon exercise are subject to repurchase by the company on
termination of employment pursuant to the vesting schedule set forth in
footnote (1) in the preceeding table.
(3) These values have been calculated based on the average value of $3.075 per
share of Summit common stock for the five trading days prior to the
announcement of the business combination, multiplied by the exchange ratio
of 0.67928.
EMPLOYMENT AGREEMENTS
On October 2, 1998 Viewlogic entered into an employment agreement with Mr.
Herman. Under the terms of this agreement, Mr. Herman's employment will continue
until October 2, 2001 unless Mr. Herman resigns or Viewlogic terminates his
employment. Mr. Herman receives a base salary of $220,000 annually and standard
benefits afforded other employees of Viewlogic. If Viewlogic terminates Mr.
Herman's employment without cause, he will continue to receive his benefits and
base salary for a period of nine months. This agreement includes
post-termination restrictions for a period of one year which restrict Mr. Herman
from competing with Viewlogic and which prohibit him from soliciting Viewlogic's
employees and customers during that period. Mr Herman's compensation is subject
to adjustment after the first year of employment but his base salary may not be
decreased.
On October 2, 1998 Viewlogic entered into an employment agreement with Mr.
Lucier. Under the terms of this agreement, Mr. Lucier's employment will continue
until October 2, 2001 unless Mr. Lucier resigns or Viewlogic terminates his
employment. Mr. Lucier receives a base salary of $215,000 annually and standard
benefits accorded other employees of Viewlogic. If Viewlogic terminates Mr.
Lucier's employment without cause, he will continue to receive his benefits and
base salary for a period of nine months. This agreement includes
post-termination restrictions for a period of one year which restrict Mr. Lucier
from competing with Viewlogic and which prohibit him from soliciting Viewlogic's
employees and customers during that period. Mr Lucier's compensation is subject
to adjustment after the first year of employment but his base salary may not be
decreased.
In November 1998, Viewlogic granted Mr. Kiaski an option to purchase 266,223
shares of Viewlogic common stock at a per share purchase price of $0.33.
Pursuant to the merger agreement, the stock option will be converted into a
stock option to acquire 180,839 shares of Summit common stock at a per share
purchase price of $0.49, but otherwise on the same terms and conditions set
forth in Mr. Kiaski's stock option agreement with Viewlogic. In the event Mr.
Kiaski's employment is terminated prior to October 2, 2002, this stock option
will accelerate (i) as to the first 133,112 shares, if he is terminated without
cause and (ii) in full, if he is terminated without cause or resigns his
employment for good reason in connection with, or within 24 months subsequent
to, a change of control. If completed, the business combination between Summit
and Viewlogic will not constitute a change of control for purposes of this stock
option.
135
<PAGE>
VIEWLOGIC CERTAIN TRANSACTIONS
SERIES A PREFERRED STOCK FINANCING
In October 1998, Viewlogic effected a recapitalization pursuant to which it
ceased to be a wholly owned subsidiary of Synopsys, Inc. This recapitalization
was financed, in part, by a $32,000,000 preferred stock financing. In this
financing, six investment funds affiliated with The Sprout Group purchased an
aggregate of 9,381,904 shares of Viewlogic's Series A Voting Preferred Stock and
4,618,096 shares of Viewlogic's Series A-1 Non-Voting Preferred Stock for an
aggregate of $28,000,000.
In connection with this preferred stock financing, Viewlogic entered into an
investors' rights agreement with the six investment funds affiliated with The
Sprout Group and other stockholders of Viewlogic. Pursuant to the investors'
rights agreement, Viewlogic granted to the investment funds demand and "piggy
back" registration rights. If the business combination is completed, the
registration rights will remain outstanding and will apply to the shares of
Summit common stock received by the investment funds, subject to specific
modifications to the registration rights set forth in voting agreements entered
into between Summit and each of the investment funds in September 1999.
Keith Geeslin, a director of Viewlogic, is a general partner of The Sprout
Group. If the business combination between Summit and Viewlogic is completed,
Mr. Geeslin will be a director of the combined company.
STOCK PLEDGE
In connection with its October 1998 recapitalization, Viewlogic entered into
a $24,000,000 credit facility with a commercial bank consisting of a $6,000,000
revolving line of credit and an $18,000,000 term loan. Borrowings under the
credit facility are secured by substantially all of Viewlogic's assets. In
addition, under the terms of stock pledge agreements between Viewlogic's
commercial bank and six investment funds affiliated with The Sprout Group,
borrowings under the credit facility are secured by the 14,000,000 shares of
Viewlogic's Series A Voting Preferred Stock and Series A-1 Non-Voting Preferred
Stock beneficially owned by The Sprout Group. In the event of specified defaults
by Viewlogic under its credit facility, Viewlogic's commercial bank may enforce
its security interest in those shares of Viewlogic capital stock. If so, a
change in control of Viewlogic may occur.
OPTION EXERCISES
In August 1999, in connection with the exercise of stock options, Viewlogic
issued and sold an aggregate of 2,808,894 shares of common stock to Mr. Herman,
Ms. Cassidy, Mr. Johnson, Mr. Lucier and Mr. O'Brien. This common stock was paid
for by means of promissory notes, bearing no interest and secured by the common
stock, with the principal amount due upon the earliest of (1) August, 2006; (2)
eighteen months after the first date on which Viewlogic's common stock is listed
on a national securities exchange or the Nasdaq stock market; (3) three months
after the termination of employment; or (4) one month before the expiration of
the option. The aggregate amount outstanding pursuant to these secured
promissory notes is $926,935.02
The number of Viewlogic common shares purchased and the principal amount of
the promissory note for each person are as follows:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PRINCIPAL AMOUNT
- --------------------- ----------------- ----------------
<S> <C> <C>
William J. Herman 1,266,115 $ 417,817.95
Paula J. Cassidy 66,556 $ 21,963.48
Peter T. Johnson 210,000 $ 69,300.00
Richard G. Lucier 1,000,000 $ 330,000.00
Kevin P. O'Brien 266,223 $ 87,853.59
</TABLE>
136
<PAGE>
VIEWLOGIC SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of Viewlogic, as of October 2, 1999, of (a) each
beneficial owner of more than 5% of Viewlogic common stock, (b) each of the
executive officers and directors of Viewlogic, and (c) all directors and
executive officers of Viewlogic as a group. Unless otherwise noted in the
footnotes to the table, Viewlogic believes that the stockholders named in the
table have sole voting and investing power with respect to all shares of common
stock indicated as being beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED TOTAL
- ----------------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
The Sprout Group(1)................................................................ 14,000,000 58.6%
300 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Synopsys, Inc...................................................................... 3,966,722 16.6%
700 East Middlefield Road
Mountain View, CA 93404
William J. Herman.................................................................. 1,266,115 5.3%
Viewlogic Systems, Inc.
293 Boston Post Road West
Marlboro, MA 01752
Needham Capital Partners II, L.P.(2)............................................... 1,250,000 5.2%
445 Park Avenue
New York, NY 10022
Richard Lucier..................................................................... 1,000,000 4.2%
Gary Kiaski(3)..................................................................... 266,223 1.1%
Kevin O'Brien...................................................................... 266,233 1.1%
Peter T. Johnson................................................................... 210,000 *
Paula Cassidy...................................................................... 66,556 *
Keith B. Geeslin(4)................................................................ 14,000,000 58.6%
All directors and executive officers as a group (7 persons)........................ 17,075,117 71.4%
</TABLE>
- ------------------------
* Represents less than 1% of the total.
(1) Consists of 1,136,079 shares owned by DLJ ESC II, L.P., 9,481,811 shares
owned by Sprout Capital VIII, L.P., 2,583,906 shares owned by Sprout Growth
II, L.P., 43,095 shares owned by Sprout CEO Fund, L.P., 273,700 shares owned
by DLJ Capital Corp., and 568,909 shares owned by Sprout Venture Capital,
L.P.
(2) Includes 154,532 shares owned by Needham Capital Partners II (Bermuda), L.P.
(3) Consists of 266,233 shares issuable upon the exercise of a stock option held
by Mr. Kiaski.
(4) Consists of 14,000,000 shares beneficially owned by The Sprout Group, as
more fully described in note (1) above. Mr. Geeslin is a general partner of
The Sprout Group. Mr. Geeslin disclaims beneficial ownership of all shares
owned by The Sprout Group.
137
<PAGE>
CHANGES IN CONTROL
The Sprout Group has pledged all of the shares of capital stock beneficially
owned by it to Viewlogic's commercial bank as security under Viewlogic's
$24,000,000 credit facility. In the event of specified defaults by Viewlogic
under its credit facility, Viewlogic's commercial bank may enforce its security
interest in the Viewlogic shares pledged to it by The Sprout Group. If so, a
change in control of Viewlogic may occur. See "Viewlogic Certain
Transactions--Stock Pledge."
138
<PAGE>
LEGAL MATTERS
The validity of the shares of Summit common stock to be issued pursuant to
the business combination and the federal income tax consequences of the business
combination will be passed upon for Summit by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain legal matters in
connection with the business combination and the federal income tax consequences
of the business combination will be passed upon for Viewlogic by Hale and Dorr
LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Summit Design, Inc. as of December
31, 1998 and 1997, and for each of the three years in the period ended December
31, 1998, included in this joint proxy statement/prospectus and the related
financial statement schedule included elsewhere in this registration statement
on Form S-4, have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Viewlogic Systems, Inc. as of January 2, 1999
and for the fiscal year then ended and the statement of revenues and expenses
for the year ended December 31, 1997 included in this joint proxy
statement/prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, Summit stockholders may
present proper proposals for inclusion in Summit's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting such
proposals to Summit in a timely manner. As noted in Summit's proxy statement
relating to its 1999 Annual Meeting of Stockholders, in order to be so included
for the 2000 annual meeting, stockholder proposals must be received by Summit no
later than December , 1999, and must otherwise comply with the requirements of
Rule 14a-8.
139
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SUMMIT
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 and June 30, 1999 (unaudited)................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 and for the Six
Months Ended June 30, 1999 (unaudited) and 1998 (unaudited).............................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998, 1997 and 1996 and
for the Six Months Ended June 30, 1999 (unaudited)....................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 and for the Six
Months Ended June 30, 1999 (unaudited)................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
VIEWLOGIC
Report of Independent Accountants.......................................................................... F-25
Consolidated Balance Sheets as of January 2, 199 and July, 3 1999 (unaudited).............................. F-26
Statements of Revenues and Expenses for the Year Ended December 31, 1997 and Consolidated Statements of
Operations for the year ended January 2, 1999 and for the Six Months Ended July 4, 1998 (unaudited) and
July 3,1999 (unaudited).................................................................................. F-27
Consolidated Statements of Comprehensive Income for the year ended January 2, 1999 and for the Six Months
Ended July 4, 1998 (unaudited) and July 3,1999 (unaudited)............................................... F-28
Consolidated Statements of Stockholders' Equity (Deficiency) for the Year Ended January 2, 1999 and for the
Six Months Ended July 3, 1999 (unaudited)................................................................ F-29
Consolidated Statements of Cash Flows for the Year Ended January 2, 1999 and for the Six Months Ended July
4, 1998 (unaudited) and July 3, 1999 (unaudited)......................................................... F-30
Notes to Consolidated Financial Statements................................................................. F-31
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Summit Design, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Summit Design, Inc. and its subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Portland, Oregon
February 3, 1999, except as to
Note 21, which is as of
September 16, 1999
F-2
<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
JUNE 30, --------- ----------
-----------
1999
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 24,028 $ 27,693 $ 19,973
Accounts receivable, less allowance for doubtful accounts of $467, $511 and
$592...................................................................... 8,533 8,852 5,131
Prepaid expenses and other.................................................. 585 862 540
Deferred income taxes....................................................... 792 792 1,209
----------- --------- ----------
Total current assets...................................................... 33,938 38,199 26,853
Furniture and equipment, net.................................................. 3,834 4,113 2,698
Intangibles, net.............................................................. 2,366 2,870 5,571
Goodwill, net................................................................. 1,521 2,742 3,493
Deposits and other assets..................................................... 3,013 2,286 1,055
----------- --------- ----------
Total assets.............................................................. $ 44,672 $ 50,210 $ 39,670
----------- --------- ----------
----------- --------- ----------
LIABILITIES
Current liabilities:
Long-term debt, current portion............................................. $ 92 $ 54 $ 134
Capital lease obligation, current portion................................... 20 43 49
Accounts payable............................................................ 982 2,520 1,211
Accrued liabilities......................................................... 4,873 5,687 5,182
Deferred revenue............................................................ 5,546 5,640 5,674
----------- --------- ----------
Total current liabilities................................................. 11,513 13,944 12,250
Long-term debt, less current portion.......................................... -- 156 194
Capital lease obligation, less current portion................................ -- -- 43
Deferred revenue, less current portion........................................ 117 146 --
Deferred income taxes......................................................... 489 489 987
----------- --------- ----------
Total liabilities......................................................... 12,119 14,735 13,474
----------- --------- ----------
Commitments and contingencies (Notes 10 and 17)
STOCKHOLDERS' EQUITY
Common stock, $.01 par value. Authorized 30,000; issued and outstanding 15,694
shares at June 30, 1999, 15,457 shares at December 31, 1998 and 15,841
shares at December 31, 1997................................................. 156 155 159
Additional paid-in capital.................................................... 44,354 44,039 51,412
Treasury stock, at cost, 939 shares in 1997................................... -- -- (11,555)
Accumulated deficit........................................................... (11,957) (8,719) (13,820)
----------- --------- ----------
Total stockholders' equity................................................ 32,553 35,475 26,196
----------- --------- ----------
Total liabilities and stockholders' equity................................ $ 44,672 $ 50,210 $ 39,670
----------- --------- ----------
----------- --------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1998 1997 1996 1999 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Product licenses......................................... $ 33,589 $ 24,828 $ 15,446 $ 8,605 $ 16,775
Maintenance and services................................. 9,642 6,161 4,301 5,393 4,411
Other.................................................... 367 450 567 -- 183
--------- --------- --------- --------- ---------
Total revenue.......................................... 43,598 31,439 20,314 13,998 21,369
--------- --------- --------- --------- ---------
Cost of revenue:
Product licenses......................................... 744 701 573 258 311
Maintenance and services................................. 955 632 466 606 504
Amortization of purchased technologies................... 661 219 -- 331 331
--------- --------- --------- --------- ---------
Total cost of revenue.................................. 2,360 1,552 1,039 1,195 1,146
--------- --------- --------- --------- ---------
Gross profit............................................... 41,238 29,887 19,275 12,803 20,223
Operating expenses:
Research and development................................. 13,042 7,749 5,867 5,167 5,907
Sales and marketing...................................... 11,713 10,591 9,319 6,087 6,306
General and administrative............................... 4,398 3,785 3,188 2,540 2,142
Amortization of intangibles and goodwill................. 2,791 942 -- 1,395 1,395
Non-recurring charges related to acquisitions............ 1,249 379 -- 1,340 227
In-process technology.................................... -- 11,689 -- -- --
--------- --------- --------- --------- ---------
Total operating expenses............................... 33,193 35,135 18,374 16,529 15,977
--------- --------- --------- --------- ---------
Income (loss) from operations.............................. 8,045 (5,248) 901 (3,726) 4,246
Interest expense........................................... (4) (12) (101) (1) (2)
Other income, net.......................................... 1,097 1,057 218 489 494
Gain on sale of TDS product line........................... -- 5,574 -- -- --
--------- --------- --------- --------- ---------
Income before income taxes................................. 9,138 1,371 1,018 (3,238) 4,738
Income tax provision (benefit)............................. 4,037 940 (245) -- 1,881
--------- --------- --------- --------- ---------
Net income (loss).......................................... $ 5,101 $ 431 $ 1,263 $ (3,238) $ 2,857
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share--Basic:
Net income per share..................................... $ 0.34 $ 0.03 $ 0.10 $ (0.21) $ 0.19
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Number of shares used in computing basic net income per
share.................................................. 15,155 14,403 12,240 15,666 14,984
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share--Diluted:
Net income per share..................................... $ 0.32 $ 0.03 $ 0.10 $ (0.21) $ 0.18
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Number of shares used in computing diluted net income per
share.................................................. 16,115 15,402 13,243 15,666 16,240
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1995............................................. 9,183,729 $ 535 2,233,260 $ 64
Issuance of convertible Preferred stock................................ 290,938 986
Issuance of common stock in in initial public offering, net of Issuance
costs................................................................ 2,000,000 20
Issuance of common stock under stock option plan and other............. 383,952 6
Conversion of preferred stock to common stock.......................... (9,474,667) (1,521) 9,474,667 95
Repurchase of common stock............................................. (12,737)
Conversion of TriQuest common stock.................................... (44)
Net income.............................................................
--------- ----------- ---------- -----
Balance, December 31, 1996............................................. -- -- 14,079,142 141
Issuance of common stock............................................... 29,733
Issuance of common stock under stock option plan....................... 440,711 5
Issuance of common stock under Employee Stock Purchase plan............ 58,701 1
Repurchase of common stock............................................. (23,760)
Issuance of common stock in conjunction with a business combination.... 1,256,777 12
Purchase of treasury stock.............................................
Tax benefit of option exercises........................................
Amortization of contingent share liability.............................
Net income.............................................................
--------- ----------- ---------- -----
Balance, December 31, 1997............................................. -- -- 15,841,304 159
Issuance of common stock............................................... 14,616
Issuance of common stock under stock option plan....................... 460,590 5
Issuance of common stock under Employee Stock Purchase Plan............ 80,252 1
Purchase of treasury stock.............................................
Reissuance of treasury stock...........................................
Retirement of treasury stock........................................... (939,381) (10)
Amortization of contingent share liability.............................
Tax benefit of option exercises........................................
Net income.............................................................
--------- ----------- ---------- -----
Balance, December 31, 1998............................................. -- -- 15,457,381 155
Issuance of common stock under stock option plan (unaudited)........... 167,034
Issuance of common stock under Employee Stock Purchase Plan
(unaudited).......................................................... 70,001 1
Net loss (unaudited)...................................................
--------- ----------- ---------- -----
Balance, June 30, 1999 (unaudited)..................................... -- $ -- 15,694,416 $ 156
--------- ----------- ---------- -----
--------- ----------- ---------- -----
<CAPTION>
ADDITIONAL TREASURY STOCK
PAID-IN ---------------------- ACCUMULATED
CAPITAL SHARES AMOUNT DEFICIT
----------- --------- ----------- ------------
<S> <C>
Balance, December 31, 1995............................................. $ 15,463 -- $ -- $ (15,514)
Issuance of convertible Preferred stock................................
Issuance of common stock in in initial public offering, net of Issuance
costs................................................................ 16,204
Issuance of common stock under stock option plan and other............. 134
Conversion of preferred stock to common stock.......................... 1,418
Repurchase of common stock............................................. (2)
Conversion of TriQuest common stock.................................... 44
Net income............................................................. 1,263
----------- --------- ----------- ------------
Balance, December 31, 1996............................................. 33,261 -- -- (14,251)
Issuance of common stock............................................... 3
Issuance of common stock under stock option plan....................... 563
Issuance of common stock under Employee Stock Purchase plan............ 349
Repurchase of common stock............................................. (4)
Issuance of common stock in conjunction with a business combination.... 15,538
Purchase of treasury stock............................................. (939,381) (11,555)
Tax benefit of option exercises........................................ 969
Amortization of contingent share liability............................. 733
Net income............................................................. 431
----------- --------- ----------- ------------
Balance, December 31, 1997............................................. 51,412 (939,381) (11,555) (13,820)
Issuance of common stock............................................... 11
Issuance of common stock under stock option plan....................... 994
Issuance of common stock under Employee Stock Purchase Plan............ 602
Purchase of treasury stock............................................. (162,500) (2,330)
Reissuance of treasury stock........................................... (2,330) 162,500 2,330
Retirement of treasury stock........................................... (11,545) 939,381 11,555
Amortization of contingent share liability............................. 3,666
Tax benefit of option exercises........................................ 1,229
Net income............................................................. 5,101
----------- --------- ----------- ------------
Balance, December 31, 1998............................................. 44,039 -- -- (8,719)
Issuance of common stock under stock option plan (unaudited)........... 112
Issuance of common stock under Employee Stock Purchase Plan
(unaudited).......................................................... 203
Net loss (unaudited)................................................... (3,238)
----------- --------- ----------- ------------
Balance, June 30, 1999 (unaudited)..................................... $ 44,354 -- $ -- $ (11,957)
----------- --------- ----------- ------------
----------- --------- ----------- ------------
<CAPTION>
TOTAL
STOCK
HOLDERS'
EQUITY
---------
Balance, December 31, 1995............................................. $ 548
Issuance of convertible Preferred stock................................ 986
Issuance of common stock in in initial public offering, net of Issuance
costs................................................................ 16,224
Issuance of common stock under stock option plan and other............. 140
Conversion of preferred stock to common stock.......................... (8)
Repurchase of common stock............................................. (2)
Conversion of TriQuest common stock.................................... --
Net income............................................................. 1,263
---------
Balance, December 31, 1996............................................. 19,151
Issuance of common stock............................................... 3
Issuance of common stock under stock option plan....................... 568
Issuance of common stock under Employee Stock Purchase plan............ 350
Repurchase of common stock............................................. (4)
Issuance of common stock in conjunction with a business combination.... 15,550
Purchase of treasury stock............................................. (11,555)
Tax benefit of option exercises........................................ 969
Amortization of contingent share liability............................. 733
Net income............................................................. 431
---------
Balance, December 31, 1997............................................. 26,196
Issuance of common stock............................................... 11
Issuance of common stock under stock option plan....................... 999
Issuance of common stock under Employee Stock Purchase Plan............ 603
Purchase of treasury stock............................................. (2,330)
Reissuance of treasury stock........................................... --
Retirement of treasury stock........................................... --
Amortization of contingent share liability............................. 3,666
Tax benefit of option exercises........................................ 1,229
Net income............................................................. 5,101
---------
Balance, December 31, 1998............................................. 35,475
Issuance of common stock under stock option plan (unaudited)........... 112
Issuance of common stock under Employee Stock Purchase Plan
(unaudited).......................................................... 204
Net loss (unaudited)................................................... (3,238)
---------
Balance, June 30, 1999 (unaudited)..................................... $ 32,553
---------
---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- --------------------
1998 1997 1996 1999 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $ 5,101 $ 431 $ 1,263 $ (3,238) $ 2,857
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization................................. 4,649 1,984 870 2,545 2,262
Amortization of contingent share liability.................... 3,666 733 -- -- 1,100
Loss on asset disposition..................................... -- 2 18 34 --
Gain on sale of TDS product line.............................. -- (5,574) -- -- --
Write-off of acquired in-process technology................... -- 11,689 -- -- --
Deferred taxes................................................ (81) (1,044) (500) -- (81)
Equity in losses of and transactions with unconsolidated joint
venture..................................................... 520 77 33 120 350
Changes in assets and liabilities:
Accounts receivable......................................... (3,721) 951 (21) 320 (541)
Prepaid expenses............................................ (322) (13) (157) 276 216
Accounts payable............................................ 1,309 (254) 406 (1,539) 97
Accrued liabilities......................................... 505 1,667 561 (814) 1,066
Deferred revenue............................................ 112 1,601 2,067 (123) (37)
Other, net.................................................. 134 (145) 127 (198) 131
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating activities....... 11,872 12,105 4,667 (2,617) 7,420
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Additions to furniture and equipment............................ (2,619) (1,613) (763) (586) (1,045)
Acquisitions, net of cash received.............................. -- (3,816) -- -- --
Proceeds from sale of TDS product line.......................... -- 4,666 -- -- --
Proceeds from sale of assets.................................... 7 30 8 11 --
Notes receivable advances....................................... (1,210) (565) -- (650) (325)
Notes receivable repayments..................................... 75 -- -- -- --
Investment in and advances to joint venture..................... (750) -- (100) -- (750)
--------- --------- --------- --------- ---------
Net cash used in investing activities..................... (4,497) (1,298) (855) (1,225) (2,120)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Issuance of preferred stock..................................... -- -- 977 -- --
Issuance of common stock, net of expenses....................... 1,613 922 16,364 317 1,046
Tax benefit of option exercises................................. 1,229 969 -- -- 825
Payments to acquire treasury stock.............................. -- (11,555) -- -- (2,329)
Proceeds from notes payable and long-term debt.................. -- -- 96 -- --
Repurchase of common stock...................................... (2,330) (4) (2) -- --
Principal payments of debt obligations.......................... (118) (898) (1,952) (117) (21)
Principal payments of capital lease obligations................. (49) (69) (205) (23) (26)
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities....... 345 (10,635) 15,278 177 (505)
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents.......... 7,720 172 19,090 (3,665) 4,795
Cash and cash equivalents, beginning of period.................... 19,973 19,801 711 27,693 19,973
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period.......................... $ 27,693 $ 19,973 $ 19,801 $ 24,028 $ 24,768
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosure (see Note 16)
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY:
Summit Design, Inc. (Summit or the Company) develops, manufactures and
markets software which enhances and accelerates the creation of electronic
systems and integrated circuits using top-down design methodologies. The Company
provides software products for design specification entry, design analysis and
verification. Subsidiaries of the Company are located in the United States,
Israel and Finland. The Company markets and sells its products in the United
States, Europe, and Asia through its direct sales force and distributor
relationships.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the Company's significant accounting policies:
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Summit Verification, Inc., Summit Design
(EDA) Ltd. and ProSoft OY. Upon consolidation, all intercompany accounts,
transactions and profits have been eliminated.
REVENUE RECOGNITION
Product licenses revenue is derived from the sale of software licenses to
distributors and end-users. Revenue from the sale of product licenses is
recognized upon delivery of the product if remaining vendor obligations are
insignificant and collection of the resulting receivable is probable, otherwise
revenue from such software products is deferred until such time as vendor
obligations are met. Revenue earned on software arrangements involving multiple
elements is allocated to each element based on vendor-specific objective
evidence (VSOE) of the fair value of the various elements within the
arrangement. Revenue from product sales through distributors is recognized net
of the associated distributor discounts. The Company provides a ninety-day
warranty that its products are free from defects. Estimated sales returns and
provisions for insignificant vendor obligations and estimated warranty costs are
recorded when revenue is recognized.
Maintenance and services revenue includes software maintenance and other
service revenue, primarily from training. Software maintenance revenue is
deferred and recognized ratably over the life of the maintenance contract. Other
service revenue is recognized as the related service is performed.
Fees received for granting distribution rights are deferred and recognized
ratably over the term of the distribution agreement.
RESEARCH AND DEVELOPMENT COSTS
Costs related to research, design and development of products are charged to
research and development expense as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established by completion of a working model of the product and ending when a
product is available for general resale to customers. To date, completion of a
working model of the Company's products and general release have substantially
coincided. As a result, the Company has not capitalized any software development
costs since such costs have not been significant.
F-7
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a remaining
maturity of three months or less when purchased to be cash equivalents. At
December 31, 1998 and 1997, substantially all of the Company's cash and cash
equivalents are invested in interest-bearing deposits and other short-term
investments with several major banks.
FURNITURE AND EQUIPMENT
Furniture and equipment, consisting primarily of computer equipment and
office furniture, are stated at cost, net of related depreciation. Maintenance
and repairs are charged to expense as incurred. Depreciation is computed using
the straight-line method over the estimated useful lives of the related assets
ranging from three to seven years. Amortization of equipment under capital
leases is provided using the straight-line method over the shorter of the
related lease terms or economic life of the leased assets. Upon disposal of an
asset subject to depreciation, the cost and related accumulated depreciation are
removed from the accounts and resulting gains and losses are reflected in
operations.
INTANGIBLES AND GOODWILL
Intangibles, which include purchased technologies and other intangibles are
being amortized on a straight-line basis over two to five years for purchased
technologies and two years for other intangibles. Purchased technology
represents acquired software which has been fully developed, achieved
technological feasibility, reached commercial viability, and is generating
revenue. Goodwill, which represents the excess of the purchase price over
identifiable net assets acquired, is being amortized over five years. The
carrying value of intangible assets and goodwill are reviewed whenever
circumstances occur which indicate that the carrying value may not be
recoverable.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting and tax
bases of assets and liabilities and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period of change. Valuation allowances are established when necessary, to reduce
deferred tax assets to the amounts expected to be realized.
CONCENTRATION OF CREDIT RISK
The Company sells its products primarily to commercial end-users across many
industries directly and through independent and affiliated distributors in North
America, Europe and Asia. The Company's end-user customers include companies in
a wide range of industries, including semiconductor devices, semiconductor test
equipment, telecommunications, computer/peripherals, consumer electronics,
aerospace/defense and other electronics entities. The Company performs ongoing
credit evaluations of its customers' financial condition and generally does not
require collateral. The Company maintains allowances for potential losses, and
such losses have been within management's expectations.
F-8
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The Company has made equity investments in ADC and SDA and has provided
loans to ADC and a privately-held, independent software company for business and
strategic purposes. The Company identifies and records impairment losses on
these investments when events and circumstances indicate that such assets might
be impaired.
FOREIGN CURRENCY TRANSLATION
The Company's subsidiaries in Israel and Finland use the U.S. dollar as its
functional currency for financial reporting purposes. The Company's sales to
foreign distributors and customers are denominated in U.S. dollars. Operating
expenses of the Company's subsidiary in Israel and other international
operations are paid in the local currency. Transaction gains and losses, as well
as gains and losses experienced with respect to remeasurement to the functional
currency are recorded in the consolidated statement of operations. As the gains
and losses are insignificant in 1997 and 1998, such amounts were recorded as
other income, net.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of financial instruments including cash and cash
equivalents, accounts receivable, other current assets, accounts payable and
accrued liabilities approximated fair value as of December 31, 1998 and 1997
because of the relatively short maturity of these instruments. The carrying
value of capital lease obligations and long-term debt approximated fair value as
of December 31, 1998 and 1997, based upon the interest rates available to the
Company for similar instruments.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard (SFAS) No. 128 Earnings per SharE
effective for fiscal periods ending after December 15, 1997. Basic EPS is
computed using the weighted average number of shares of common stock outstanding
for the period. Diluted EPS is computed using the weighted average number of
shares of common stock and dilutive common stock equivalents outstanding during
the period. Common equivalent shares from stock options are excluded from the
computation when their effect is antidilutive.
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited financial statements have been prepared by Summit
in accordance with the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with such rules and
regulations. In the opinion of management, the accompanying unaudited financial
statements reflect all
F-9
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company, and its results of
operations and cash flows. The results of operations for the six months ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1999 or any other future interim period, and the
Company makes no representations related thereto.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement changed the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides, the material
countries in which it holds assets and reports revenues, and its major
customers. The statement was effective for fiscal years beginning after December
15, 1997 and has not significantly modified the disclosure of segment
information for the Company.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. The statement suggests
combined formats for presentation of pension and other postretirement benefit
disclosures. The Statement also permits reduced disclosures for nonpublic
entities. This statement is effective for fiscal years beginning after December
15, 1997. The adoption of this statement has not had any effect on the
consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging." This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. This statement is effective for fiscal years beginning
after June 15, 2000. Management does not expect the adoption of this statement
to have any effect on the consolidated financial statements.
During the first quarter of 1998, the Company adopted Statements of Position
(SOP) 97-2, "Software Revenue Recognition" and 98-4, "Deferral of the Effective
Date of a Provision of SOP 97-2, Software Revenue Recognition." The provisions
of SOPs 97-2 and 98-4 have been applied to transactions entered into beginning
January 1, 1998. SOP 97-2 generally requires revenue earned on software
arrangements involving multiple elements to be allocated to each element based
on vendor-specific objective evidence (VSOE) of the fair value of the various
elements in a multiple element arrangement. Revenue from the sale of software
licenses is recognized at the later of the time of shipment or satisfaction of
all acceptance terms. The revenue allocated to maintenance is recognized ratably
over the term of the maintenance agreement and revenue allocated to services is
recognized as the services are performed.
The Company analyzed the elements included in its multiple element
arrangements and determined that the Company has sufficient evidence to allocate
revenue to the license and
F-10
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
maintenance components of its product licenses. The adoption of SOPs 97-2 and
98-4 did not have a significant effect on revenue recognized for the year ended
December 31, 1998.
3. ACQUISITION OF TRIQUEST DESIGN AUTOMATION, INC.:
On February 28, 1997, the Company acquired TriQuest Design Automation, Inc.,
a California corporation ("TriQuest"). TriQuest develops hardware description
language ("HDL") analysis, optimization and verification tools for the design of
high performance, deep submicron integrated circuits. The aggregate
consideration for the acquisition (including shares of common stock reserved for
issuance upon exercise of TriQuest options assumed by the Company) was 775,000
shares of common stock. The transaction was accounted for as a "pooling of
interests" in accordance with generally accepted accounting principles. In
compliance with such principles, the Company's operating results have been
restated to include the results of TriQuest as if the acquisition had occurred
at the beginning of the first period presented.
The following presents the previously separate results of Summit and
TriQuest (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
TWO MONTHS ENDED ----------------- -----------------
FEBRUARY 28, 1997
-------------------
(UNAUDITED)
<S> <C> <C> <C>
Summit
Revenues......................... $ 1,473 $ 20,163 $ 14,292
Net income (loss)................ (921) 2,688 (3,123)
TriQuest
Revenues......................... 199 151 --
Net income (loss)................ 143 (1,425) (488)
</TABLE>
4. SALE OF TDS PRODUCT LINE:
On July 11, 1997 the Company sold substantially all of the assets used in
its business of developing and marketing its Test Development Series "TDS"
Products (the "Asset Sale") to Credence Systems Corporation ("CSC") for $5
million. CSC assumed certain liabilities, including the Company's obligations
under TDS maintenance contracts entered into prior to the closing. CSC also
agreed to purchase $2 million of Visual interface licenses in the second quarter
of 1997. TDS product license, maintenance and services and other revenue for the
years ended December 31, 1995, 1996 and 1997 were $6,978,000, $7,331,000 and
$3,500,000, respectively.
The Company and CSC also entered into a software license agreement ("OEM
Agreement") in which CSC agreed to purchase $16 million of Visual Testbench
licenses over a thirty-month period subject to specified quarterly maximums and
certain additional conditions. Additionally, CSC entered into an 18 month
maintenance agreement for $2 million associated with the Visual Testbench
product.
5. ACQUISITION OF SIMULATION TECHNOLOGIES CORP.
On September 9, 1997, the Company acquired Simulation Technologies Corp.
("SimTech"), a Minnesota Corporation. SimTech develops and distributes
hardware-software co-verification, code coverage and HDL debugging software. The
aggregate consideration for the acquisition was 1,256,800 shares of Summit
common stock, 723,200 options to purchase Summit common stock and $3,875,000 in
F-11
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACQUISITION OF SIMULATION TECHNOLOGIES CORP. (CONTINUED)
cash. An additional $315,000 of direct acquisition costs were also incurred and
included in the purchase price.
After discussion with the staff of the Securities and Exchange Commission
(the "Staff"), the Company restated the consolidated financial statements as of
and for the quarters ended September 30, 1997, March 31, 1998, June 30, 1998 and
September 30, 1998 and as of and for the year ended December 31, 1997 to reflect
a change in the original accounting treatment to the September 1997 acquisition
of SimTech.
The total consideration at estimated fair value is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
ORIGINALLY
REPORTED AS RESTATED
----------- -----------
<S> <C> <C>
Cash................................................................. $ 3,875 $ 3,875
Common stock of Summit............................................... 11,367 14,649
Options to purchase Summit common stock.............................. 5,299 5,299
Other direct acquisition costs....................................... 315 315
----------- -----------
$ 20,856 $ 24,138
----------- -----------
----------- -----------
</TABLE>
The transaction was accounted for using the purchase method of accounting.
Accordingly, the results of operations have been combined with those of Summit
since the date of acquisition. The allocation of the purchase price to the net
assets acquired based upon their estimated fair values as originally reported
and as restated is summarized as follows (in thousands):
<TABLE>
<CAPTION>
ORIGINALLY
REPORTED AS RESTATED
----------- -----------
<S> <C> <C>
Current assets....................................................... $ 937 $ 937
Property and equipment............................................... 377 377
In-process technology................................................ 19,937 11,689
Purchased technology................................................. 1,037 2,390
Identifiable intangibles............................................. 735 4,079
Goodwill............................................................. -- 3,756
Current liabilities assumed.......................................... (707) (707)
Unearned revenue assumed............................................. (1,460) (1,460)
Deferred taxes....................................................... -- (1,322)
Compensation expense contingent upon future employment............... -- 4,399
----------- -----------
$ 20,856 $ 24,138
----------- -----------
----------- -----------
</TABLE>
The amount allocated to in-process technology was written off immediately
subsequent to the acquisition of SimTech as the in-process technology had not
reached technological feasibility and had no probable alternative future use.
The amounts allocated to purchased technology and identifiable intangibles are
being amortized on a straight-line basis over two to five years. Additionally,
the Company recorded a charge to expense for shares issued in the transaction
which were contingent upon continued employment for up to two years from the
acquisition date. A total of $4.4 million of compensation expense was recorded
as the employment obligation lapsed.
F-12
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACQUISITION OF SIMULATION TECHNOLOGIES CORP. (CONTINUED)
The following table reflects unaudited pro forma combined results of
operations of the Company and SimTech on a basis that the acquisition had taken
place at the beginning of the fiscal year for each of the periods presented,
excluding the effect of the one-time charge of in-process technology:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenues............................................... $ 35,278 $ 24,391
Net income (loss)...................................... $ 6,563 $ (4,104)
Basic net income (loss) per share...................... $ 0.43 $ (0.31)
Diluted net income (loss) per share.................... $ 0.40 $ (0.31)
Number of shares used in computing basic net income per
share................................................ 15,268 13,292
------- -------
------- -------
Number of shares used in computing diluted net income
per share............................................ 16,267 13,292
------- -------
------- -------
</TABLE>
In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred had
the acquisition been consummated at the beginning of 1996 or at the beginning of
1997 or under the ownership and management of the Company.
In connection with this transaction the Company also repurchased 939,000
shares of Summit common stock in private transactions at an average price of
$12.30 per share for $11,555,000 in cash.
6. FURNITURE AND EQUIPMENT:
Furniture and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Office furniture and equipment........................................... $ 1,201 $ 596
Computer equipment....................................................... 5,138 3,679
Leasehold improvements................................................... 491 66
--------- ---------
6,830 4,341
Less accumulated depreciation and amortization........................... (2,717) (1,643)
--------- ---------
$ 4,113 $ 2,698
--------- ---------
--------- ---------
</TABLE>
7. NOTE RECEIVABLE:
In July 1997, the Company entered into an agreement to lend up to $2.5
million to an independent software development company pursuant to a loan
agreement which is collateralized by the intellectual property and stock of the
software development company. Borrowings under this agreement bear interest at
prime rate plus 2%. Total amounts due to the Company under this agreement at
December 31, 1998 and 1997 were $1.7 million and $490,000, respectively, and are
included in other non-current assets.
F-13
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. NOTE PAYABLE TO BANK:
The Company has available a $1 million line of credit with U.S. National
Bank of Oregon, which matures April 30, 1999 and is collateralized by accounts
receivable, inventory, chattel paper, general intangibles, patents, trademarks,
copyrights and products and proceeds of the foregoing. Maximum borrowings under
the line shall not exceed 75% of eligible accounts receivable. Interest on the
unpaid balance accrues at prime and is payable monthly. The prime rate at
December 31, 1998 was 7.75%. There was no amount outstanding at December 31,
1998.
The line of credit agreement contains financial covenants, including
covenants relating to maintenance of a minimum level of working capital, net
worth, the ratio of debt to net worth and dividend restrictions. The Company was
in compliance with these covenants at December 31, 1998.
9. ACCRUED LIABILITIES:
Accrued liabilities consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Payroll and related benefits............................................... $ 3,051 $ 2,887
Sales and marketing........................................................ 332 435
Accounting and legal....................................................... 310 260
Federal and state income taxes payable..................................... 1,549 819
Sales taxes payable........................................................ 160 114
Other...................................................................... 285 667
--------- ---------
$ 5,687 $ 5,182
--------- ---------
--------- ---------
</TABLE>
10. LEASES:
The Company is obligated under capital leases for equipment that expire at
various dates during the next three years. The leased assets are included in
equipment at a capitalized amount of $197,000 at December 31, 1998 and 1997.
Related accumulated amortization of $153,000 and $108,000 at December 31, 1998
and 1997 is included in accumulated depreciation.
The Company has entered into significant noncancelable operating leases for
the use of buildings in Beaverton, Oregon, Herzlia, Israel, and San Jose,
California. Rental expense was approximately $653,000, $495,000, and $470,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
F-14
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LEASES: (CONTINUED)
Future minimum lease payments under these operating and capital leases for
the years ending December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
1999..................................................................... $ 45 $ 1,349
2000..................................................................... -- 966
2001..................................................................... -- 953
2002..................................................................... -- 759
2003..................................................................... -- 617
--- -----------
Total minimum lease payments........................................... 45 $ 4,644
-----------
-----------
Less amount representing interest (at 4%).............................. (2)
---
Present value of minimum capital lease payments........................ 43
Current portion of capital lease obligation............................ (43)
---
Capital leases obligation, less current portion........................ $ --
---
---
</TABLE>
11. LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Marketing grant payable to the Israeli government............................. $ 187 $ 261
Other......................................................................... 23 67
--------- ---------
210 328
Current portion............................................................... (54) (134)
--------- ---------
Non-current portion........................................................... $ 156 $ 194
--------- ---------
--------- ---------
</TABLE>
The Chief Scientist grant represents research and development funding of
approximately $232,000 in 1993 and $608,000 in 1995 received from the Israeli
government. The Company repaid both the 1993 and 1995 grants in full during
1997.
The Company received a Marketing Fund grant of $423,000 from the Israeli
Ministry of Industry and Trade through December 31, 1998. This grant is to be
repaid at the rate of 3% of the increase in export sales of all Israeli products
over the base year until repaid.
Future principal payments of debt outstanding for the years ending December
31 are as follows (in thousands):
<TABLE>
<S> <C>
1999................................................................. $ 54
2000................................................................. 156
---------
Total.............................................................. $ 210
---------
---------
</TABLE>
F-15
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCKHOLDERS' EQUITY:
PREFERRED STOCK
Summit has 5,000,000 shares of Preferred Stock authorized, of which there
are no shares outstanding. The Summit Board has the authority to issue these
shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any unissued
and undesignated shares of Preferred Stock and to fix the number of shares
constituting any series and the designations of such series, without any future
vote or action by the stockholders.
1994 INCENTIVE STOCK OPTION PLAN
The Company has an Incentive Stock Option Plan ("1994 Plan") pursuant to
which the Company may grant options to employees and consultants. Under the
terms of the 1994 Plan, the option price is determined as the fair value of the
Company's common stock at the time the option is granted. Under the 1994 Plan,
2,822,000 shares of common stock are authorized for issuance. Options granted
prior to the Company's initial public offering generally became immediately
exercisable. Shares issued are subject to repurchase until vested. Options
granted subsequent to the Company's initial public offering are exercisable upon
vesting. Options generally vest 25% twelve months after the date of grant and
the remainder at 1/48(th) of the grant amount in each successive month
thereafter. Options expire no later than 10 years after the date of grant.
There were 342,026, 2,659, and 366,094 shares of common stock reserved for
the grant of stock options under the 1994 Plan at December 31, 1998, 1997 and
1996, respectively.
1996 DIRECTOR OPTION PLAN
Non-employee directors are entitled to participate in the Company's 1996
Director Option Plan (the "Director Plan"). The Director Plan provides for an
automatic grant of an option to purchase 7,500 shares of common stock to each
non-employee director on the date on which the Director Plan becomes effective
or, if later, an option to purchase 10,000 shares of common stock on the date on
which the person first becomes a non-employee director and 10,000 shares on the
date of the annual meeting of each subsequent year, provided that he or she is
then a non-employee director and, provided further, that on such date he or she
has served on the Board for at least six months. Options granted under the
Director Plan generally become vested and all exercisable 12 months after the
grant date and are granted at an exercise price equal to 100% of the fair market
value per share on the date of the grant. The Company has reserved 150,000
shares of common stock for issuance under the Director Plan. The Company granted
40,000 options under this Director Plan in both 1997 and 1998.
1997 NONSTATUTORY STOCK OPTION PLAN
The Company established the 1997 Nonstatutory Stock Option Plan
("Nonstatutory Plan") in order to provide additional incentive to employees,
directors and consultants. Options granted under the Nonstatutory Plan will be
nonstatutory stock options and are not intended to qualify as incentive stock
options within the meaning of Section 422 of the Internal Revenue Code. Options
generally vest 25% twelve months after the date of grant and the remainder at
1/48(th) of the grant amount in each successive month thereafter. Options expire
no later than 10 years after the grant date. In addition, no more than 25,000
options may be granted to directors and persons considered "officers" by the
NASDAQ Stock Market. The maximum aggregate number of shares of common stock
authorized for issuance is 250,000 shares. The Company granted 101,623 options
under the Nonstatutory Plan in 1998.
F-16
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCKHOLDERS' EQUITY: (CONTINUED)
A summary of the status of the Company's stock option plans as of December
31, 1998, 1997 and 1996 and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
EXERCISE PRICE
OPTIONS RANGE
---------- -------------------
<S> <C> <C>
Balance, December 31, 1995.................................. 1,163,482 $0.02--$ 2.50
Options granted............................................. 722,575 $0.33--$10.50
Options exercised........................................... (345,278) $0.02--$ 2.50
Options canceled............................................ (146,905) $0.02--$10.50
----------
Balance, December 31, 1996.................................. 1,393,874 $0.02--$10.50
Options granted............................................. 1,643,121 $0.08--$17.00
Options exercised........................................... (470,715) $0.02--$ 7.00
Options canceled............................................ (442,906) $0.02--$12.75
----------
Balance, December 31, 1997.................................. 2,123,374 $0.08--$17.00
Options granted............................................. 380,599 $6.75--$15.88
Options exercised........................................... (623,087) $0.08--$ 9.25
Options canceled............................................ (147,773) $1.17--$17.00
----------
Balance, December 31, 1998.................................. 1,733,113 $0.08--$17.00
----------
----------
</TABLE>
The following are the shares exercisable at the corresponding weighted
average exercise price at December 31, 1998, 1997, and 1996, respectively:
780,195 at $5.2121, 949,261 at $2.3119, and 1,186,986 at $2.0662. The weighted
average exercise price per share of options outstanding at December 31, 1998 is
$6.976. The following are the weighted average grant date fair value of options
granted for the years ended December 31, 1998, 1997, and 1996, respectively:
$12.00, $8.96, and $5.95. At December 31, 1998, 127,083 shares are subject to
repurchase.
Effective September 13, 1995, the Board of Directors of the Company approved
an adjustment to the exercise price of the Company's outstanding stock options
with an exercise price in excess of $1.75. All outstanding options subject to
the adjustment were repriced to $1.75, the fair market value at that date as
determined by the Board. Participation by each option holder was voluntary.
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -----------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
SHARES AVERAGE AVERAGE SHARES AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AT 12/31/98 REMAINING LIFE PRICE AT 12/31/98 PRICE
- --------------------------- ----------- ----------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$ 0.08 to $ 0.62........... 318,423 6.59 $ 0.3778 223,916 $ 0.3237
$ 1.17 to $ 1.95........... 250,275 7.25 1.7116 159,203 1.7053
$ 4.67 to $ 7.00........... 94,160 9.08 6.1831 41,712 6.2183
$ 8.13 to $ 9.50........... 642,938 8.57 8.8846 277,025 8.9756
$ 9.63 to $10.50........... 197,000 8.98 9.9194 34,833 9.6522
$12.75 to $17.00........... 230,317 9.24 14.2973 43,506 14.7214
</TABLE>
F-17
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCKHOLDERS' EQUITY: (CONTINUED)
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company has established the 1996 Employee Stock Purchase Plan ("1996
Purchase Plan"). The 1996 Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue code, permits eligible employees of the
Company to purchase common stock through payroll deductions of up to 10% of
their base salary up to a maximum of $25,000 of common stock for all purchase
periods ending within any calendar year. The price of common stock purchased
under the 1996 Purchase Plan will be 85% of the lower of the fair market value
of the common stock on the first day of each 24 month offering period or the
last day of the applicable six-month purchase period. The Company has reserved
385,000 shares of common stock for issuance under the 1996 Purchase Plan. The
Company issued approximately 80,252 shares of common stock under the 1996
Purchase Plan during 1998.
SFAS NO. 123 DISCLOSURE
The Company applies APB No. 25 and related interpretations in accounting for
its plans. However, in accordance with SFAS No. 123, pro forma disclosures as if
the Company adopted the cost recognition requirements under No. SFAS 123 in
1998, 1997 and 1996 are presented below.
The fair value of each option granted during the years ended December 31,
1998, 1997, and 1996 are estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Average dividend yield......................................... 0% 0% 0%
Expected volatility............................................ 57% 44% 46%
Expected life in years......................................... 4 4 5
Risk free interest rate:
Low.......................................................... 4.050% 5.787% 5.546%
High......................................................... 5.665% 6.421% 6.543%
</TABLE>
Had the Company used the fair value methodology for determining compensation
expense, the Company's net income (loss) and net income (loss) per share would
approximate the pro forma amounts below (in thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net income--as reported......................................... $ 5,101 $ 431 $ 1,263
Net income (loss)--pro forma.................................... $ 1,802 $ (1,496) $ 714
Diluted net income per common share--as reported................ $ 0.32 $ 0.03 $ 0.10
Diluted net income (loss) per common share--pro forma........... $ 0.11 $ (0.10) $ 0.05
</TABLE>
The effect of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts.
F-18
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES:
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal......................................................... $ 1,811 $ 765 $ 26
State........................................................... 457 426 4
Foreign......................................................... 1,110 468 225
--------- --------- ---------
3,378 1,659 255
--------- --------- ---------
Deferred:
Federal......................................................... 693 (486) (373)
State........................................................... 93 14 (27)
Foreign......................................................... (127) (247) (100)
--------- --------- ---------
659 (719) (500)
--------- --------- ---------
$ 4,037 $ 940 $ (245)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The difference between the effective income tax rate and the statutory U.S.
federal income tax rate is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax provision (benefit) at statutory rate...................... $ 1,554 $ (452) $ 826
In-process technology.......................................... -- 3,974 --
Amortization of goodwill....................................... 255 101 --
Compensation expense for contingent stock...................... 1,246 282 --
Alternative minimum tax........................................ -- -- 26
Foreign taxes.................................................. 983 221 225
Deferred taxes:
Utilization of net operating losses.......................... -- (3,392) (1,509)
Other.......................................................... (343) (210) 183
State.......................................................... 342 416 4
--------- --------- ---------
$ 4,037 $ 940 $ (245)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The tax provision (benefit) at statutory rate is calculated based on U.S.
income and does not include tax on earnings from foreign operations. Tax on
earnings from foreign operations is included in foreign income and withholding
taxes.
At December 31, 1998, the Company had net operating loss carryforwards for
federal and state income tax purposes which can be used to offset future income
subject to taxes. In addition, there are unused foreign tax credits which may be
available for offset against future federal income taxes after
F-19
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES: (CONTINUED)
use of the loss carryforwards. Such loss carryforwards and tax credits are
summarized below (in thousands):
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATES
--------- ---------------
<S> <C> <C>
Loss carryforwards:
Federal.......................................................... $ 1,035 2009--2010
State............................................................ 1,035 2009--2010
Foreign tax credits (federal only)................................. 625 2000--2001
</TABLE>
Due to the acquisition of TriQuest, the federal and state net operating loss
carryforwards are limited in use to approximately $300,000 annually. The tax
credit carryforwards are also subject to limitation due to the acquisition of
TriQuest.
In addition, the Company has foreign income tax net operating losses of
approximately $5.6 million. These foreign losses were generated in Israel over
several years and have not yet received final assessment from the Israeli
government. Consequently, management is uncertain as to the availability of a
substantial portion of such foreign loss carryforwards and as such has recorded
a valuation allowance against the resulting deferred tax asset. Provision has
not been made for U.S. or additional foreign taxes on undistributed earnings of
the Company's foreign subsidiary, as those earnings are considered to be
permanently reinvested. If such earnings were remitted to the U.S., additional
federal and foreign taxes may be due. It is not practical to determine the
amount of such taxes that might be payable on these foreign earnings.
The approximate effects of temporary differences which give rise to deferred
tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Federal and state net operating loss carryforwards...................... $ 398 $ 548
Foreign operating loss carryforwards.................................... 336 563
Research and experimentation credit carryforwards....................... -- 313
Foreign tax credit carryforwards........................................ 625 727
Other deferred tax items................................................ 271 773
--------- ---------
Total deferred tax assets............................................. 1,630 2,924
Less valuation allowances............................................... (336) (563)
--------- ---------
Net deferred tax assets............................................... 1,294 2,361
--------- ---------
Deferred tax liabilities:
Other deferred tax items................................................ (991) (2,139)
--------- ---------
Total deferred tax liabilities........................................ (991) (2,139)
--------- ---------
Net deferred taxes.................................................... $ 303 $ 222
--------- ---------
--------- ---------
Net deferred income taxes:
Current................................................................. $ 792 $ 1,209
Deferred................................................................ (489) (987)
--------- ---------
$ 303 $ 222
--------- ---------
--------- ---------
</TABLE>
F-20
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES: (CONTINUED)
The Company has established a valuation allowance against a portion of
deferred tax assets due to the uncertainty surrounding the realization of such
assets. Management evaluates on a quarterly basis the recoverability of the
deferred tax assets and the level of the valuation allowance. The net change in
the valuation allowance for the years ended December 31, 1998 and 1997 was a
decrease of approximately $227,000 and $4,455,000, respectively. The decrease in
the valuation allowance for the year ended December 31, 1998 resulted from a
decrease in the effective tax rate in Israel. The decrease in the valuation
allowance for the year ended December 31, 1997 resulted primarily from the
utilization of net operating loss carryforwards and management's evaluation of
the future recoverability of net deferred tax assets due to the likelihood of
future taxable income.
14. RECONCILIATION OF EARNINGS PER SHARE
The following provides a reconciliation of the numerators and denominators
of the basic and diluted per share computations:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------- --------------------
1998 1997 1996 1999 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss).............................. $ 5,101 $ 431 $ 1,263 $ (3,238) $ 2,857
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Denominator:
Denominator for basic earnings per share
weighted average shares...................... 15,155 14,403 12,240 15,666 14,984
Effect of dilutive securities:
Employee stock options....................... 960 999 1,003 -- 1,256
--------- --------- --------- --------- ---------
Denominator for diluted earnings per share
weighted average shares...................... 16,115 15,402 13,243 15,666 16,240
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income (loss) per share--basic............... $ 0.34 $ 0.03 $ 0.10 $ (0.21) $ 0.19
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income (loss) per share--diluted............. $ 0.32 $ 0.03 $ 0.10 $ (0.21) $ 0.18
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
15. 401(k) PLAN:
The Company maintains a tax qualified defined contribution plan that meets
the requirements of Section 401(k) of the Internal Revenue Code (the Plan) and
covers substantially all U.S. employees meeting minimum service requirements.
The Plan was amended in 1997 to include a mandatory Company matching
contribution up to a maximum of 1.5% of employee compensation. At its
discretion, the Company may make additional contributions to the Plan. In
connection with the required match, the Company's contributions to the Plan were
approximately $98,000 and $50,000 in 1998 and 1997, respectively. There were no
contributions in 1996.
F-21
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
------------- --------------------------------
JUNE 30, 1999 1998 1997 1996
------------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Cash paid for interest.......................... $ 2 $ 3 $ 11 $ 111
Cash paid for income taxes...................... $ 1,166 $ 2,108 $ 175 $ 254
Noncash investing and financing activities:
Retirement of treasury stock.................. -- $ 11,555 -- --
Equipment acquired under capital leases....... -- -- -- $ 23
Conversion of preferred stock to common
stock....................................... -- -- -- $ 91
Acquisition of Simulation Technologies:
In-process technology......................... -- -- $ 11,689 --
Purchased technologies, intangibles and
goodwill.................................... -- -- $ 10,225 --
Property and other assets acquired............ -- -- $ 941 --
Deferred revenue assumed...................... -- -- $ (1,460) --
Other liabilities assumed..................... -- -- $ (707) --
Common stock issued........................... -- -- $ (15,550) --
Sale of TDS product line:
Property and other assets sold................ -- -- $ (369) --
Deferred revenue sold......................... -- -- $ 1,213 --
Other liabilities sold........................ -- -- $ 64 --
</TABLE>
17. COMMITMENTS AND CONTINGENCIES:
Summit Design (EDA) Ltd. has registered floating charges on all its assets
as security for compliance with the terms attached to Israeli investment grants
received.
The Company has entered into employment agreements with certain of its
executive officers. These agreements provide for base annual compensation and
certain incentive bonuses and stock options on various vesting schedules as well
as severance compensation in the event of termination without cause.
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the aggregate
will not have a material adverse affect on the Company's consolidated financial
statements.
The Company has guaranteed the rent payments for a software development
company of $4,200 per month for the first 18 months of the lease term beginning
November 1997.
18. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS:
The Company operates in a single industry segment comprising the electronic
design automation industry. Net revenue by geographic region (in thousands) and
as a percentage of total revenue for
F-22
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS: (CONTINUED)
each region outside the United States that constitutes more than 10% of the
Company's total revenue is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Europe..................................... $ 2,922 $ 2,859 $ 6,061 $ 3,582 $ 3,294
Japan...................................... 3,557 3,994 7,373 6,311 6,157
Other Asia Pacific......................... 201 654 2,191 709 698
As a Percentage of Total Revenue:
Europe..................................... 20.9% 13.4% 13.9% 11.4% 16.2%
Japan...................................... 25.4% 18.7% 16.9% 20.0% 30.4%
Other Asia Pacific......................... 1.4% 3.1% 5.0% 2.3% 3.4%
</TABLE>
During 1998 and 1997 one customer accounted for 25.1% and 28.6% of total
revenue, respectively. In 1996, no single customer accounted for more than 10%
of total revenue. Sales through a single distributor accounted for 14.0%, 12.1%
and 14.7% of the Company's total revenue in 1998, 1997 and 1996, respectively.
Foreign operations of Summit Design (EDA) Ltd. accounted for less than 10% of
total revenue of the Company in each of the three years in the period ended
December 31, 1998. Identifiable assets of the Company's Israeli subsidiary were
less than 10% of total assets at December 31, 1998.
The Company entered into an agreement with Seiko Instruments, Inc. (Seiko)
during the first quarter of 1996, which granted to Seiko an exclusive right to
distribute and support certain Summit products in Japan. Under the terms of the
agreement, Seiko will pay the Company a distribution rights fee of $1.1 million
during the period of the agreement which is three years ending February 1999.
The Company received payments from Seiko of $800,000, $200,000 and $100,000 in
1996, 1997 and 1998, respectively. In the years ended December 31, 1996, 1997
and 1998, the Company recognized revenue of $367,000 associated with this
agreement.
19. RELATED PARTIES:
Summit Design (EDA) Ltd. leased its corporate offices from a stockholder
under a four-year sublease agreement which expired in December 1998, on the same
terms and conditions that the stockholder leases such space. Lease expense paid
to the stockholder for the year ended December 31, 1998, 1997 and 1996 were
$180,000, $145,000 and $141,000, respectively.
Effective April 1, 1996, the Company invested $100,000 for a minority
interest in a joint venture corporation which acquired the exclusive rights to
sell, distribute and support all of the Company's products in the Asia-Pacific
region, excluding Japan. The Company has recorded a net loss in equity of the
joint venture of $360,000, $77,000 and $33,000 for the years ended December 31,
1998, 1997 and 1996, respectively. Total product licenses and maintenance
revenue for sales to the joint venture totaled approximately $501,000, $590,000
and $586,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Total accounts receivable, with payment terms similar to other customers in the
Asia-Pacific region, was $67,000 at December 31, 1998.
F-23
<PAGE>
SUMMIT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. QUARTERLY FINANCIAL DATA:
The following table sets forth selected unaudited quarterly financial
information:
<TABLE>
<CAPTION>
THREE-MONTH PERIODS ENDED
------------------------------------------
1997
------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
-------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue................................. $6,520 $7,180 $ 7,909 $9,830
Gross margin............................ 6,225 6,874 7,519 9,269
Net income (loss)....................... 1,193 1,863 (4,508) 1,883
Net income (loss) per share--basic...... $ 0.09 $ 0.13 $ (0.31) $ 0.13
Net income (loss) per share--diluted.... $ 0.08 $ 0.12 $ (0.31) $ 0.12
<CAPTION>
THREE-MONTH PERIODS ENDED
------------------------------------------
1998
------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenue................................. $ 10,357 $11,012 $11,314 $ 10,915
Gross margin............................ 9,774 10,449 10,701 10,314
Net income (loss)....................... 1,402 1,455 1,761 483
Net income (loss) per share--basic...... $ 0.09 $ 0.10 $ 0.12 $ 0.03
Net income (loss) per share--diluted.... $ 0.09 $ 0.09 $ 0.11 $ 0.03
</TABLE>
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED 1999
--------------------
MAR. 31, JUNE 30,
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenue............................................................... $ 6,816 $ 7,182
Gross margin.......................................................... 6,262 6,541
Net income (loss)..................................................... (2,234) (1,004)
Net income (loss) per share--basic.................................... $ (0.14) $ (0.06)
Net income (loss) per share--diluted.................................. $ (0.14) $ (0.06)
</TABLE>
21. SUBSEQUENT EVENTS:
On September 16, 1999, the Company entered into a definitive agreement to
merge with Viewlogic Systems, Inc. ("Viewlogic") a privately held software
company headquartered in Marlboro, Massachusetts under which the Company will
acquire Viewlogic. Each share of Viewlogic Preferred and Common Stock, including
shares reserved for issuance upon exercise of Viewlogic options which will be
assumed by the Company will be exchanged for 0.67928 shares for Summit Common
Stock upon closing of the transaction. The Company intends to account for this
acquisition as a purchase. Although Summit will be acquiring Viewlogic, after
such transaction, Viewlogic stockholders will hold a controlling interest in
Summit. Accordingly, for accounting purposes, the acquisition will be a "reverse
acquisition" and Viewlogic will be the "accounting acquirer". As Viewlogic will
be the accounting acquirer, its accounts will be recorded at historical cost and
the assets and liabilities of Summit will be recorded at their estimated fair
value as of the closing date.
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Viewlogic Systems, Inc.:
We have audited the accompanying consolidated balance sheet of Viewlogic
Systems, Inc. and subsidiaries (the "Company") as of January 2, 1999, and the
related consolidated statements of operations, comprehensive income,
stockholders' equity (deficiency), and cash flows for the year then ended. We
have also audited the consolidated statement of revenues and expenses for the
year ended December 31, 1997 of the Systems Business (Note 1). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of January 2, 1999,
and the results of its operations, comprehensive income and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
Also, in our opinion, the consolidated statement of revenues and expenses
presents fairly, in all material respects, the revenues and expenses of the
Systems Business for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.
As discussed in Note 1, through October 2, 1998, the Company and the Systems
Business were operated as a subsidiary of Synopsys, Inc. or a component of the
Prior Viewlogic, respectively.
Deloitte & Touche LLP
Boston, MA
October 15, 1999
F-25
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 2, 1999 AND JULY 3, 1999 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
JULY 3, STOCKHOLDERS'
1999 EQUITY
JANUARY 2, ----------- (DEFICIENCY)
1999 JULY 3, 1999
----------- (UNAUDITED) -------------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 4,487 $ 2,646
Accounts receivable (less allowances of $1,940 at January 2, 1999
and $1,547 at July 3, 1999)..................................... 9,581 9,877
Prepaid expenses and other........................................ 1,189 1,518
Deferred income taxes............................................. 1,580 1,568
----------- -----------
Total current assets............................................ 16,837 15,609
----------- -----------
PROPERTY AND EQUIPMENT:
Equipment......................................................... 11,259 12,138
Furniture and fixtures............................................ 1,459 1,463
----------- -----------
Total........................................................... 12,718 13,601
Less accumulated depreciation..................................... 7,967 8,998
----------- -----------
PROPERTY AND EQUIPMENT--Net......................................... 4,751 4,603
----------- -----------
OTHER ASSETS:
Capitalized software costs--net................................... 2,310 2,387
Purchased technology--net......................................... -- 980
Other............................................................. 994 1,026
----------- -----------
Total other assets.............................................. 3,304 4,393
----------- -----------
TOTAL............................................................... $ 24,892 $ 24,605
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Note payable--current portion..................................... $ 2,250 $ 2,750
Current portion of capital lease obligations...................... 71 176
Accounts payable.................................................. 1,315 1,140
Accrued compensation.............................................. 3,262 3,542
Accrued expenses.................................................. 3,506 2,950
Due to related party.............................................. 549 1
Deferred revenue.................................................. 12,393 12,749
----------- -----------
Total current liabilities....................................... 23,346 23,308
----------- -----------
LONG-TERM LIABILITIES:
Note payable--long-term portion................................... 15,250 13,750
Line of credit.................................................... 500 500
Deferred tax liability............................................ 1,518 1,373
Capital lease obligations......................................... 123 380
----------- -----------
Total long-term liabilities..................................... 17,391 16,003
----------- -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE, CONVERTIBLE PREFERRED STOCK............................. 32,000 32,000 $ --
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, $.001 par value; authorized, 35,000 shares, issued
3,966 shares at January 2, 1999 and 4,366 shares at July 3,
1999............................................................ 4 4 36
Additional paid-in capital........................................ 1,918 2,278 34,246
Deferred compensation............................................. (1,801) (1,636) (1,636)
Accumulated deficit............................................... (48,104) (47,229) (47,229)
Accumulated other comprehensive income (loss)..................... 138 (123) (123)
----------- ----------- --------
Total stockholders' equity (deficiency)......................... (47,845) (46,706) $ (14,706)
----------- ----------- --------
--------
TOTAL............................................................... $ 24,892 $ 24,605
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1997
AND
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JANUARY 2, 1999
AND FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTH ENDED
------------------------- --------------------
JANUARY 2, JULY 4, JULY 3,
1999 1998 1999
----------- --------- ---------
DECEMBER 31,
1997
------------
(NOTE 1)
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Software....................................................... $ 29,071 $ 22,683 $ 11,132 $ 13,099
Services and other............................................. 34,916 32,554 15,846 14,133
------------ ----------- --------- ---------
Total revenue................................................ 63,987 55,237 26,978 27,232
------------ ----------- --------- ---------
COSTS AND EXPENSES:
Cost of software............................................... 3,340 5,112 1,965 2,737
Cost of services and other..................................... 7,513 5,071 2,406 3,156
Selling and marketing.......................................... 24,897 18,930 8,924 11,230
Research and development....................................... 14,954 10,028 4,899 5,478
General and administrative..................................... 4,054 3,675 2,044 2,019
Amortization of goodwill and other intangibles................. -- -- -- 120
Stock compensation............................................. -- 117 -- 245
Litigation settlement and related costs........................ 4,500 -- -- --
Restructuring charge........................................... 6,725 -- -- --
Transaction costs--recapitalization............................ -- 452 -- --
------------ ----------- --------- ---------
Total operating expenses..................................... 65,983 43,385 20,238 24,985
------------ ----------- --------- ---------
INCOME (LOSS) FROM OPERATIONS.................................... (1,996) 11,852 6,740 2,247
------------ ----------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income................................................ 171 113 63
Interest expense............................................... (15) (342) (655)
Other, net, principally foreign exchange losses................ (56) (1,761) (481) (34)
------------ ----------- --------- ---------
Other income (expense), net.................................. (71) (1,932) (368) (626)
------------ ----------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES................................ (2,067) 9,920 6,372 1,621
PROVISION (BENEFIT) FOR INCOME TAXES............................. (868) 4,053 2,628 746
------------ ----------- --------- ---------
NET INCOME (LOSS)................................................ $ (1,199) $ 5,867 $ 3,744 $ 875
------------ ----------- --------- ---------
------------ ----------- --------- ---------
EARNINGS PER SHARE (Note 1):
Net income per common share--basic............................. $ 1.48 $ 0.94 $ 0.21
----------- --------- ---------
----------- --------- ---------
Net income per common share--diluted........................... $ 0.73 $ 0.94 $ 0.04
----------- --------- ---------
----------- --------- ---------
Weighted average shares outstanding--basic..................... 3,966 3,966 4,233
----------- --------- ---------
----------- --------- ---------
Weighted average shares outstanding--diluted................... 7,999 3,966 20,761
----------- --------- ---------
----------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEAR ENDED JANUARY 2, 1999 AND SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTH ENDED
YEAR ENDED ----------------------
JANUARY 2, JULY 4, JULY 3,
1999 1998 1999
----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
NET INCOME......................................................................... $ 5,867 $ 3,744 $ 875
FOREIGN CURRENCY TRANSLATION ADJUSTMENT............................................ 1,800 (606) (261)
----------- --------- -----
COMPREHENSIVE INCOME............................................................... $ 7,667 $ 3,138 $ 614
----------- --------- -----
----------- --------- -----
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEAR ENDED JANUARY 2, 1999 AND SIX MONTHS ENDED JULY 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED ACCUMULATED
STOCK ADDITIONAL EARNINGS OTHER
COMMON PAR PAID-IN DEFERRED (ACCUMULATED COMPREHENSIVE
SHARES VALUE CAPITAL COMPENSATION DEFICIT) INCOME (LOSS) TOTAL
------- ----- ---------- ------------ ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 AFTER CORPORATE
REORGANIZATION (NOTE 1)............... 3,966 4 $ $ -- $ (3,971) $(1,662) $ (5,629)
Compensation related to stock options... -- -- 1,918 (1,918) -- -- --
Amortization of stock compensation...... -- -- -- 117 -- -- 117
Net income.............................. -- -- -- -- 5,867 -- 5,867
Foreign currency translation
adjustment............................ -- -- -- -- -- 1,800 1,800
Recapitalization payment to
parent................................ -- -- -- -- (50,000) -- (50,000)
------- ----- ---------- ------------ ------------ ------------- --------
BALANCE, JANUARY 2, 1999................ 3,966 4 1,918 (1,801) (48,104) 138 (47,845)
Unaudited:
Issuance of common stock.............. 400 -- 280 -- -- -- 280
Compensation related to stock
options............................. -- -- 80 (80) -- -- --
Amortization of stock compensation.... -- -- -- 245 -- -- 245
Net income............................ -- -- -- -- 875 -- 875
Foreign currency translation
adjustment.......................... -- -- -- -- -- (261) (261)
------- ----- ---------- ------------ ------------ ------------- --------
BALANCE, JULY 3, 1999 (UNAUDITED)....... 4,366 $ 4 $ 2,278 $(1,636) $(47,229) $ (123) $(46,706)
------- ----- ---------- ------------ ------------ ------------- --------
------- ----- ---------- ------------ ------------ ------------- --------
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED JANUARY 2, 1999 AND SIX MONTHS ENDED JULY 3, 1999 AND JULY 3, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED ---------------------
JANUARY 2, JULY 4, JULY 3,
1999 1998 1999
----------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income..................................................................... $ 5,867 $ 3,744 $ 875
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................ 3,205 1,660 1,760
Compensation under stock option agreements................................... 117 -- 245
Loss on disposal of fixed assets............................................. 820 787 --
Change in assets and liabilities:
Accounts receivable........................................................ (668) (1,471) (325)
Prepaid and other assets................................................... (213) (894) (95)
Deferred income taxes...................................................... 220 -- (399)
Accounts payable........................................................... 872 (498) (763)
Accrued compensation....................................................... (2,412) (1,539) 280
Accrued expenses........................................................... (6,946) (10,180) (568)
Deferred revenue........................................................... 2,005 4,681 347
----------- ---------- ---------
Net cash provided by (used in) operating activities...................... 2,867 (3,710) 1,357
----------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............................................. (1,257) (619) (338)
Capitalized software costs..................................................... (1,111) (549) (561)
Purchase of OmniView........................................................... -- -- (1,100)
Other.......................................................................... (449) -- (37)
----------- ---------- ---------
Net cash used in investing activities.................................... (2,817) (1,168) (2,036)
----------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt............................................................... -- -- (1,000)
Proceeds from debt............................................................. 18,000 -- --
Recapitalization payment to Parent............................................. (50,000) -- --
Advances from parent........................................................... 3,100 4,651 --
Proceeds from sales of redeemable convertible preferred stock.................. 32,000 -- --
Repayments of capital lease obligations........................................ (64) (11) (40)
----------- ---------- ---------
Net cash provided by (used in) financing activities...................... 3,036 4,640 (1,040)
----------- ---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH........................................ 1,401 238 (122)
----------- ---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................... 4,487 -- (1,841)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................. -- -- 4,487
----------- ---------- ---------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD................................... $ 4,487 $ -- $ 2,646
----------- ---------- ---------
----------- ---------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest......................................................... $ 341 $ -- $ 655
----------- ---------- ---------
----------- ---------- ---------
Cash paid for income taxes..................................................... $ 90 $ -- $ 905
----------- ---------- ---------
----------- ---------- ---------
Assets acquired under capital leases........................................... $ 89 $ -- $ 378
----------- ---------- ---------
----------- ---------- ---------
Issuance of stock in OmniView acquisition...................................... $ -- $ -- $ 280
----------- ---------- ---------
----------- ---------- ---------
</TABLE>
See notes to consolidated financial statements.
F-30
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF BUSINESS--Viewlogic Systems, Inc. (the "Company") operates in the
United States and international markets developing, marketing and providing
technical support for a comprehensive family of software tools used by engineers
in the design of advanced electronic products and systems.
BASIS OF PRESENTATION--Prior to December 4, 1997, a company also named
Viewlogic Systems, Inc. (the "Prior Viewlogic") offered two primary product
lines, consisting of software tools used by engineers designing integrated
circuits (the "ASIC Business") and software tools used by engineers designing
printed circuit boards and complete systems (the "Systems Business"). On
December 4, 1997, the Prior Viewlogic became a wholly owned subsidiary of
Synopsys, Inc. ("Synopsys") in a transaction accounted for as a pooling of
interests. On January 1, 1998, the Prior Viewlogic transferred the ASIC Business
and certain other assets to Synopsys, leaving only the Systems Business in the
Prior Viewlogic. The Prior Viewlogic operated as the Systems Business through
March 31, 1998 when, in a legal reorganization, the Systems Business was
transferred to a new legal entity, Viewlogic Systems, Inc. The reorganization
was for legal purposes only and there was no substantive change in the
operations of the business.
On October 2, 1998, a group of investors purchased 16,000 shares of the
Company's preferred stock for $32,000 and the Company borrowed $18,000 from a
bank. The proceeds of these financings were paid to Synopsys with the result
that Synopsys' interest in the Company was reduced to 19.9%. This transaction
was accounted for as a recapitalization.
The accompanying consolidated financial statements include the operations of
the Prior Viewlogic through March 31, 1998 and of the Company from April 1, 1998
through January 2, 1999. For the period from January 1, 1998 through the October
2, 1998 recapitalization, certain treasury services were provided by Synopsys at
no charge. Accordingly, results of operations for the six months ended July 4,
1998, and for the year ended January 2, 1999, may not be indicative of results
that would have been achieved on a stand-alone basis. The Company charged
Synopsys $1,386 for transition services for the six months ended July 4, 1998,
and $987, $453, and $153 for occupancy costs for the year ended January 2, 1999,
and the six months ended July 4, 1998, and July 3, 1999, respectively, related
to the transfer of the ASIC Business to Synopsys. The Company does not expect to
charge Synopsys for any additional costs beyond July 3, 1999.
The statement of revenues and expenses for the year ended December 31, 1997
represents a "carve out" of the Systems Business from the historical financial
statements of the Prior Viewlogic. Accordingly, it excludes the ASIC Business
and other operations transferred to Synopsys on January 1, 1998. Prior to
January 1, 1998, certain administrative, marketing, sales, and other services of
the Prior Viewlogic were centralized. Accordingly, allocations of these expenses
have been made primarily based on personnel, revenue, space, direct costs of
related activities or estimates of time spent to provide services. These
allocations include amounts for facilities, marketing, general management,
treasury, audit, legal, financial reporting, benefits administration, insurance,
communication, public affairs, information management, income taxes, termination
costs, and other miscellaneous services.
Management believes that the foregoing allocations were made on a reasonable
basis, however, they are not necessarily indicative of the costs that would have
been incurred on a stand-alone basis.
F-31
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Because the Prior Viewlogic did not account separately for the Systems and ASIC
businesses, it is not practicable to prepare a statement of cash flows for the
year ended December 31, 1997.
UNAUDITED INTERIM FINANCIAL INFORMATION--The balance sheet as of July 3,
1999 and the related statements of operations, stockholders' equity and cash
flows for the six months ended July 4, 1998 and July 3, 1999 are unaudited.
In the opinion of management, all adjustments, consisting of only normal
recurring items, which are necessary for a fair presentation, have been included
in such unaudited interim financial information. The results for interim periods
are not necessarily indicative of results which may be expected for any other
interim period or for the full year and may not necessarily reflect the results
of operations, financial position, changes in equity and cash flows of the
Company in the future.
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY (DEFICIENCY)--The holders of
preferred stock have agreed to convert all of the shares of preferred stock into
shares of common stock upon the closing of the Merger (Note 13). The unaudited
pro forma stockholders' equity (deficiency) reflects the conversion as if had
occurred on July 3, 1999.
FISCAL YEAR--Prior to 1998, the Company's year end was December 31. The
Company has changed its year end to a 52-53-week year ending on the Saturday
closest to December 31.
USE OF ESTIMATES--The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures of certain assets and liabilities at the balance sheet date.
Actual results may differ from such estimates.
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Viewlogic Systems, Inc. and its subsidiaries, all of which are
wholly owned. All significant intercompany balances and transactions have been
eliminated.
FOREIGN CURRENCY TRANSLATION--The functional currency of international
operations is deemed to be the local country's currency. Assets and liabilities
of operations outside the United States are translated into United States
dollars using current exchange rates at the balance sheet date. Results of
operations are translated at average exchange rates prevailing during each
period. Translation adjustments are included in other comprehensive income.
During 1998, one of the Company's international subsidiaries repaid an amount
that had been previously treated as a long-term investment. The repayment of
this amount resulted in a realized transaction loss of $1,400 that is included
in other expense.
REVENUE RECOGNITION--Software revenue is recognized upon the shipment of the
product provided that the license fee is fixed and determinable and collection
is probable. Revenue from maintenance and support contracts is deferred and
recognized ratably over the service period. Revenue from training and consulting
is recognized as the related services are performed. Maintenance and support
revenue included with an initial license fee is unbundled and recognized ratably
over the service period.
CASH EQUIVALENTS--The Company considers all short-term, highly liquid
investments purchased with a remaining maturity of three months or less to be
cash equivalents.
F-32
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives of the related assets (three to five years). Equipment leased under
capital leases is amortized over the lesser of its useful life or the lease
term.
CAPITALIZED SOFTWARE COSTS AND PURCHASED TECHNOLOGY--Certain software costs
for products and product enhancements are capitalized after technological
feasibility has been established. Amortization is provided over estimated lives
of four years on a straight-line basis or based on the ratio of current revenues
to the total expected revenues in a product's life, if greater. Accumulated
amortization was $2,135 and $2,633 at January 2, 1999 and July 3, 1999,
respectively. Amortization expense for the fiscal years ended December 31, 1997
and January 2, 1999 and for the six months ended July 4, 1998 and July 3, 1999
was $678 and $1,057 and $549 and $484, respectively. Research and development
costs and software development costs incurred before technological feasibility
has been established are expensed as incurred. Purchased technology is being
amortized over three years.
OTHER ASSETS--Other assets consist primarily of financing costs incurred in
connection with the Company's long-term financing agreements. These costs are
being amortized over the term of the agreement using the straight-line method.
INCOME TAXES--The Company computes deferred income taxes based on the
differences between the financial statement and tax basis of assets and
liabilities using enacted rates in effect in the years in which the differences
are expected to reverse. The Company establishes valuation allowances to offset
temporary deductible differences, net operating loss carryforwards, and tax
credits, which are not likely to be realized.
For the period from December 5, 1997 through October 3, 1998, the Company
was included in the consolidated returns of Synopsys. Prior to December 5, 1997,
the Systems Business was included in the tax returns of the Prior Viewlogic. For
financial statement purposes, the Company has computed the tax provision for the
year ended December 31, 1997 based on the effective tax rate of the Prior
Viewlogic and for the year ended January 2, 1999 as if it had filed separate
returns.
FOREIGN EXCHANGE CONTRACTS--The Company enters into foreign exchange
contracts as a hedge against certain accounts receivable denominated in foreign
currencies. Market value gains and losses are recognized, and the resulting
credit or debit offsets foreign exchange gains or losses on those receivables.
Realized and unrealized gains and losses on foreign exchange contracts for the
year ended January 2, 1999 were insignificant. There were no open foreign
exchange contracts outstanding as of January 2, 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS--Financial instruments held or used by
the Company include cash and cash equivalents, accounts receivable, accounts
payable, capital lease obligations, notes and line of credit payables, foreign
exchange contracts (if any) and interest rate swap agreements. The fair values
of these instruments, which could change if market conditions change, are based
on management's estimates. Management believes that the carrying value of these
instruments approximates their fair values.
F-33
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
INTEREST RATE SWAP AGREEMENT--The net differential to be paid or received
under the Company's interest rate swap agreement is accrued as interest rates
change and is recognized over the life of the agreement.
STOCK-BASED COMPENSATION--The Company uses the intrinsic value-based method
of Accounting Principles Board Opinion No. 25, as permitted by SFAS No. 123,
"Accounting for Stock-Based Compensation," to account for employee stock-based
compensation plans.
EARNINGS PER SHARE--Basic earnings per share are based on the weighted
average number of common shares outstanding during each period. Diluted earnings
per share are computed based on the weighted average number of common shares
outstanding for basic plus the effect of outstanding stock options (using the
treasury stock method) and preferred stock (using the if converted method). If
the preferred stock had been converted on January 3, 1999, basic earnings per
share for the six months ended July 3, 1999 on a pro forma basis would be the
same as actual diluted earnings per share for that period.
NEW ACCOUNTING PRONOUNCEMENTS--In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities. "SFAS No. 133 as amended establishes new
standards of accounting and reporting for derivative instruments and hedging
activities and will be effective for the Company in fiscal 2001. Management is
currently evaluating the effect of adopting SFAS No. 133 on the consolidated
financial statements.
2. RECAPITALIZATION
On October 2, 1998, a group of investors purchased 16,000 shares of the
Company's Preferred Stock for $32,000 and the Company borrowed $18,000 from a
bank. The proceeds from these financings were paid to Synopsys as part of a
recapitalization which resulted in Synopsys interest in the Company being
reduced to 19.9%. As part of the agreements relating to the sale of the
Preferred Stock (Note 5), the Company agreed not to compete with Synopsys in its
ASIC Business for a period of two years or until the completion of an initial
public offering by the Company, whichever occurs first. In addition, there are
certain conditions limiting changes of control in the Company without the
approval of Synopsys.
3. ACQUISITIONS
On March 1, 1999, the Company purchased certain assets and intellectual
property of OmniView, Inc. ("OmniView"). The purchase price consisted of $1,100
in cash, 400 shares of the
F-34
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. ACQUISITIONS (CONTINUED)
Company's common stock and acquisition expenses. The purchase price has been
allocated to the assets acquired based on their fair values as follows:
<TABLE>
<S> <C>
Purchased technology................................................ $ 1,083
Intangible workforce................................................ 197
Property and equipment.............................................. 146
Prepaid expenses.................................................... 7
---------
Total............................................................. $ 1,433
---------
---------
</TABLE>
The unaudited consolidated results of operations on a pro forma basis as
though the acquisition had occurred as of the beginning of the periods presented
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JANUARY 2, JULY 3,
1999 1999
----------- -----------------
<S> <C> <C>
Revenue........................................................ $ 55,443 $ 27,232
----------- -------
----------- -------
Net income..................................................... $ 4,653 $ 777
----------- -------
----------- -------
Net income per share:
Basic........................................................ $ 1.17 $ 0.18
Diluted...................................................... $ 0.58 $ 0.04
</TABLE>
4. DEBT
CREDIT FACILITY--On October 2, 1998, the Company entered into a $24,000
credit facility with a commercial bank consisting of a $6,000 revolving line of
credit ("Line of Credit") and an $18,000 term loan (the "Term Loan") (together,
the "Credit Facility"). Interest terms on the Line of Credit and the Term Loan
are determined, at the option of the Company, for varying periods. The Company
may elect to have the interest rate based on the bank's prime rate or based on
the LIBOR rate at the time of the election, depending on the Company's leverage
financial ratio as defined in the Credit Facility. The interest rates on the
Line of Credit and the Term Loan at January 2, 1999 and July 3, 1999 were 8.25%
and 7.31%, respectively, and 8.25% and 7.0%, respectively. Payments of principal
outstanding under either the Line of Credit or the Term Loan may be made at any
time and must be repaid in full by September 30, 2003.
Certain information with respect to line of credit borrowings was as
follows:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE
WEIGHTED AVERAGE AMOUNT AMOUNT
INTEREST RATE OUTSTANDING OUTSTANDING
------------------- ----------- -------------
<S> <C> <C> <C>
Period October 2, 1998 to January 2, 1999....... 8.5% $ 500 $ 500
Six months ended July 3, 1999................... 8.25% 1,000 514
</TABLE>
F-35
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
4. DEBT (CONTINUED)
Under the Term Loan, minimum repayments are due as follows (on a quarterly
basis) as of July 3, 1999:
<TABLE>
<CAPTION>
FISCAL YEARS
- -----------------------------------------------------------------------------------
<S> <C>
1999 (Remainder of year)........................................................... $ 1,250
2000............................................................................... 3,125
2001............................................................................... 3,625
2002............................................................................... 4,375
2003............................................................................... 4,125
---------
$ 16,500
---------
---------
</TABLE>
The Credit Facility also calls for other mandatory repayments: (a) after the
end of each fiscal year in the case that cash flow leverage, as defined in the
Credit Facility, is greater than 2.0 times, 50% of the excess cash flow as
defined in the Credit Facility, (b) upon availability of cash from the net
proceeds of any sale of certain of the Company's assets and (c) upon completion
of an initial public offering of common stock.
The Company pays a commitment fee of .50% per annum of the unused portion of
the Line of Credit.
Borrowings under the Credit Facility are collateralized by substantially all
of the Company's assets. The Credit Facility contains certain limitations on
additional indebtedness, capital expenditures, and includes financial covenants
which include, but are not limited to, the maintenance of certain minimum levels
of interest, and debt service coverage ratios and maximum leverage ratios.
On October 3, 1998, as required under the Credit Facility, the Company
entered into a no-fee interest rate swap agreement with a bank to reduce the
impact of changes in interest rates on its floating rate Credit Facility. This
agreement effectively converts a portion of the floating-rate obligation into a
fixed-rate obligation of 7.2% for a period of 60 months, expiring on September
30, 2003. The notional principal amount of the interest rate-swap agreement is
$9,000 as of January 2, 1999. The Company is exposed to credit loss in the event
of nonperformance by the counterparties to the interest rate-swap agreement.
Open interest rate contracts are reviewed regularly by the Company to ensure
that they remain effective as hedges of interest rate exposure. Management
believes that the rate-swap agreement approximates fair value.
CAPITAL LEASE--The Company is party to a capital lease for its phone system.
The lease requires payments of approximately $52 through fiscal year 2001. The
related interest is immaterial. Property and equipment under the capital lease
had a net book value of $131 as of January 2, 1999.
In April 1999, the Company entered into a capital lease agreement for
computer equipment and software for $377. The lease requires annual payments of
approximately $141 through fiscal year 2002.
F-36
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. REDEEMABLE, CONVERTIBLE PREFERRED STOCK
The Company has authorized 22,000 shares of $.001 par value, redeemable,
convertible preferred stock ("Preferred Stock") of which 17,000 are designated
as Series A Voting Preferred Stock ("Series A") and 5,000 are designated as
Non-voting Series A-1 Preferred Stock ("Series A-1"). At January 2, 1999 and
July 3, 1999, 11,382 shares of Series A and 4,618 shares of Series A-1 were
issued and outstanding.
DIVIDENDS--The holders of the Preferred Stock are entitled to cumulative
dividends at a rate of $0.16 per share per year (the "Contingent Dividend") if
the Company fails to achieve 80% of its fiscal year 2000 operating income target
and either (1) a liquidation event occurs in which the holders of the Preferred
Stock receive less than $2.00 per share plus a 35% compound annual return or (2)
the Company completes a public offering of its common stock in which the per
share offering price is less than $2.00 plus an amount equal to a 35% compound
annual return on the Preferred Stock. The holders of the Preferred Stock are
also entitled to receive dividends proportionate to any dividend declared on
common stock based on the number of shares of common stock into which the shares
are then convertible.
CONVERSION--Each share of Preferred Stock is convertible at any time at the
option of the holder into shares of common stock at an initial conversion rate
of one-for-one. The conversion rate is subject to adjustment in the event of
certain dilutive issuances of equity securities. The Preferred Stock will be
automatically converted into common stock upon the closing of a public offering
of the Company's common stock at an equivalent price of $4.00 per share with
aggregate proceeds of $20,000. In connection with the merger (Note 14), the
holders of the Preferred Stock have agreed to convert all of the preferred
shares into common shares.
LIQUIDATION PREFERENCE--In the event of liquidation, the holders of the
Preferred Stock are entitled to receive $2.00 per share plus the Contingent
Dividend, if applicable, prior to any distribution to holders of common stock.
After the holders of common stock have received an amount per share equal to the
amount per share paid to the holders of the Preferred Stock, the holders of the
Preferred Stock participate in the remaining distributions, if any, as if they
had converted their shares into common stock at the then applicable conversion
rate. A liquidation event for purposes of the liquidation preference includes,
among other things, a greater than 50% change in ownership of the Company or the
sale of substantially all of the Company's assets.
REDEMPTION--At any time after October 2, 2006, the holders of a majority of
the then outstanding shares of Preferred Stock may require the Company to redeem
all or a portion of the outstanding shares of Preferred Stock at a price of
$2.00 per share plus all declared but unpaid dividends.
VOTING RIGHTS--The Series A shares have voting rights equal to the number of
common shares into which they are convertible.
F-37
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
6. STOCK OPTIONS
On October 2, 1998, the Company adopted the 1998 Stock Incentive Plan (the
"Plan"). Under the Plan either shares of the Company's common stock or options
to purchase shares of the Company's stock may be issued at the discretion of the
Company's Board of Directors. The initial 6,656 shares authorized to be issued
under the Plan increase automatically by five percent of the original shares
authorized annually during the Plan's existence. No more than 1,300 shares of
stock can be awarded to a single employee in any calendar year. Options
generally vest over a period of four years and expire after ten years. Options
granted to certain officers are exercisable when granted; however, the shares
are subject to repurchase rights by the Company at the exercise price. The
Company's right to repurchase the shares generally lapses ratably over four
years. The following is a summary of all option activity under the Plan:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
----------- -----------------
<S> <C> <C>
Outstanding at January 1, 1998.................................. -- $ --
Granted....................................................... 5,416 0.33
Exercised..................................................... -- --
Forfeited..................................................... (8) 0.33
-----
Outstanding at January 2, 1999.................................. 5,408 0.33
Granted....................................................... 217 0.33
Exercised -- --
Forfeited..................................................... (178) 0.33
-----
Outstanding at July 3, 1999..................................... 5,447 $ 0.33
----- -----
----- -----
</TABLE>
Options outstanding at January 2, 1999 had an exercise price of $.33 per
share and a weighted average remaining life of 9.3 years. The number of shares
as to which options were exercisable was 3,075 shares with an exercise price of
$.33.
For financial reporting purposes, the deemed fair value of the common stock
at the dates of grants resulted in deferred compensation expense of $1,918 for
the year ended January 2, 1999 and $80 for the six months ended July 3, 1999.
These charges are being recognized ratably over the vesting period. Compensation
expense recognized amounted to $117 and $245 for the year ended January 2, 1999
and for the six months ended July 3, 1999, respectively.
The Prior Viewlogic had two stock options plans, the 1991 Restated Stock
Option Plan and the Outside Directors' Stock Option Plan. Under the Company's
1991 Restated Stock Option Plan, non- qualified and incentive stock options to
purchase shares of common stock were granted to certain employees, officers,
consultants and directors at exercise prices not less than fair market value at
the date of grant. Options became exercisable in installments of 25% per year on
each of the first through the fourth anniversaries of the grant date and
continued for the period determined by the Board of Directors but not in excess
of ten years for incentive stock options and five years for incentive stock
options granted to 10% shareholders. The Outside Directors' Stock Option Plan
permitted the granting of non-qualified options to purchase shares of common
stock to non-employee members of the Board of Directors. The exercise price of
the options could not be less than fair market value on the date of
F-38
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
6. STOCK OPTIONS (CONTINUED)
grant. Options under the 1996 Director Plan became exercisable upon grant and
continued for the period determined by the Board of Directors but not in excess
of five years. Effective with the pooling-of-interests by the Prior Viewlogic
and Synopsys on December 4, 1997, all of the options outstanding under these
stock option plans were converted into options to purchase Synopsys common
stock.
No options were granted to employees of the Company under the Synopsys stock
options plans and all options to purchase Synopsys shares held by employees of
the Company as a result of options granted by the Prior Viewlogic expired, if
not exercised, 90 days after the recapitalization transaction described in Note
2.
The Prior Viewlogic accounted for stock options under APB Opinion No. 25 and
all options granted by the Prior Viewlogic were granted at fair market value.
Accordingly, there was no compensation expense recognized with respect to those
options. The number shares as to which options were granted and exercise prices
related to those options is not presented since the information is not
meaningful. The Company has included an allocation related to the Prior
Viewlogic options in the pro forma disclosures below.
PRO FORMA DISCLOSURES--As described in Note 1, the Company applies the
intrinsic value method of Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option plan. Had compensation cost
been determined based on the fair value at the grant dates for awards under the
Plan and the Prior Viewlogic's stock option plans consistent with the method
required by FASB Statement 123, the Company's net income and net income per
share would have been as follows for the years ended:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 2,
1997 1999
------------ -----------
<S> <C> <C>
Net income (loss)................................................. $ (3,457) $ 5,789
Net income per common share:
Basic........................................................... -- $ 1.46
Diluted......................................................... -- $ 0.72
</TABLE>
For purposes of the pro forma disclosures, the fair value of the options
granted under the Company's stock option plans during the year ended January 2,
1999 was estimated on the date of grant using the Black-Scholes option pricing
model. The fair value of employee purchase rights under the Company's stock
purchase plans was also estimated using the Black-Scholes option pricing model.
For the period January 1, 1997 through December 31, 1997, the pro forma
disclosure of net income is based upon an allocation of the fair value of the
options granted under the Prior Viewlogic's option plans for that period.
F-39
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
6. STOCK OPTIONS (CONTINUED)
Key assumptions used to apply this pricing model are as follows for the
years presented:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 2,
1997 1999
------------ -----------
<S> <C> <C>
Risk-free interest rate........................................... 5.7%-6.9% 6%
Expected life of option grants.................................... 4 years 4years
Expected volatility of underlying stock........................... 58% 0%
Expected dividend payment rate.................................... 0% 0%
</TABLE>
7. INCOME TAXES
The components of income before income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 2,
1999
-----------
<S> <C>
Domestic......................................................................... $ 9,503
Foreign.......................................................................... 417
-----------
Total.......................................................................... $ 9,920
-----------
-----------
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 2,
1999
-----------
<S> <C>
Current:
Federal........................................................................ $ 3,475
State.......................................................................... 619
Foreign........................................................................ 75
-----------
Total............................................................................ 4,169
Deferred:
Federal........................................................................ (353)
State.......................................................................... (24)
Foreign........................................................................ 261
-----------
Total provision for income taxes................................................. $ 4,053
-----------
-----------
</TABLE>
F-40
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
7. INCOME TAXES (CONTINUED)
A reconciliation between the statutory U.S. Federal income tax and the
Company's effective tax rate for the respective periods is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 2,
1999
-------------
<S> <C>
U.S. Federal statutory rate...................................................... 35.0%
State taxes--net of Federal tax benefit.......................................... 2.9
Foreign taxes.................................................................... 1.5
Other--net....................................................................... 1.5
---
Total............................................................................ 40.9%
---
---
</TABLE>
For the period from December 5, 1997 through October 3, 1998, the Company
was included in the consolidated tax return of Synopsys. Prior to December 5,
1997, the Systems Business was included in the tax returns of the Prior
Viewlogic. For financial statement purposes, the Company has computed the tax
provision for the year ended December 31, 1997 based on the effective tax rate
of the Prior Viewlogic and for the year ended January 2, 1999 as if it had filed
separate returns.
Deferred tax assets and liabilities consisted of the following:
<TABLE>
<CAPTION>
JANUARY 2,
1999
-----------
<S> <C>
Current assets:
Accounts receivable............................................................. $ 774
Deferred compensation........................................................... 411
Net operating loss carryforward................................................. 229
Other........................................................................... 166
-----------
Total current assets.............................................................. 1,580
-----------
Noncurrent liabilities:
Capitalized software costs...................................................... 891
Depreciation and amortization................................................... 534
Other........................................................................... 93
-----------
Total liabilities................................................................. 1,518
-----------
Total net deferred tax asset...................................................... $ 62
-----------
-----------
</TABLE>
At January 2, 1999, the Company had available foreign net operating loss
carryforwards of approximately $486, which expire in 2003 to 2004. For the six
months ended July 3, 1999, the Company has computed the tax provision based on
the estimated effective rate for the full year.
8. COMMITMENTS AND CONTINGENCIES
LEASES--The Company leases its principal office facilities and certain
computer equipment under noncancelable operating leases expiring on various
dates through 2003. The Company's headquarters
F-41
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
office lease is through 2002. The lease includes three two-year renewal options
to extend the lease through 2008. The lease contains a three-month rental
abatement and a rental escalation clause, the effects of which are being
recognized ratably over the lease term. At January 2, 1999, future minimum lease
payments under these noncancelable leases were approximately as follows: 1999,
$1,625; 2000, $2,209; 2001, $1,872; 2002, $1,819; and 2003, $5. The Company
leases other office facilities under operating lease agreements for which lease
terms are one year or less. Total rent expense was approximately $1,778 and
$2,232 for the years ended December 31, 1997 and January 2, 1999, respectively,
and $1,231 and $1,261 for the six months ended July 4, 1998 and July 3, 1999,
respectively.
CONTINGENCIES--The Company is involved in certain legal proceedings which
have arisen in the ordinary course of business. Management believes the outcome
of these proceedings will not have a material adverse impact on the Company's
consolidated financial condition or operating results.
9. RELATED-PARTY AGREEMENTS
On October 2, 1998, the Company entered into two OEM agreements with
Synopsys pursuant to which the Company has the right to resell certain Synopsys
software. The agreements are for two and three years and are automatically
renewed on a year-to-year basis thereafter. The three-year agreement requires
minimum annual payments of $750. Under a prior agreement, the Company paid
royalties to Synopsys aggregating approximately $713. Under the new agreements,
the Company paid royalties to Synopsys of $400 and $1,260 for the year ended
January 2, 1999 and the six months ended July 3, 1999, respectively. See Note 1
regarding transition services and occupancy costs charged to Synopsys.
10. SEGMENT INFORMATION
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information", requires that public companies report profits and losses and
certain other information on its "reportable operating segments" in its annual
and interim financial statements.
Management has determined that the Company has only one "reportable
operating segment," given the financial information provided to and used by the
"chief decision maker" of the Company to allocate and assess the Company's
performance. Revenue consists of software sales and service and other.
Summarized information about the Company's operations by geographic area for
the periods stated are as follows:
<TABLE>
<CAPTION>
NORTH
AMERICA EUROPE JAPAN CONSOLIDATED
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
January 2, 1999
Revenue....................................... $ 41,667 $ 8,655 $ 4,915 $ 55,237
Long-lived assets............................. 7,109 344 612 8,065
December 31, 1997
Revenue....................................... $ 48,805 $ 10,837 $ 4,345 $ 63,987
Long-lived assets............................. 8,343 634 243 9,220
</TABLE>
F-42
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
10. SEGMENT INFORMATION (CONTINUED)
No customer accounted for more than 10% of revenue for the years ended
January 2, 1999 and December 31, 1997.
11. RETIREMENT SAVINGS PLAN
In 1988, the Company established a qualified 401(k) retirement savings plan
covering substantially all of the Company's domestic employees. As of March 1,
1998 and effective through October 2, 1998, the Company adopted and contributed
to the Synopsys' 401(k) retirement savings plan. On November 1, 1998, the
Company established a new 401(k) retirement savings plan under which domestic
employees are allowed to contribute a certain percentage of their pay. The
Company matches 40% of employee elected pretax contributions, up to an annual
maximum. Employer contributions for all plans amounted to $292 and $361 for the
years ended December 31, 1997 and January 2, 1999, respectively, and $245 and
$211 for the six months ended July 4, 1998 and July 3, 1999, respectively.
12. RESTRUCTURING
The restructuring plan for the Prior Viewlogic included the merger of the
non-Systems businesses to other divisions of Synopsys, a discontinuation of
marketing and sales efforts with certain Systems Business products, and
workforce reductions resulting from these changes in the businesses. A
restructuring charge of approximately $6,700 has been included in the Company's
financial statements for the year ended December 31, 1997. The charge includes
approximately $2,344 in severance charges, $2,540 in non-cash impairment of
capitalized software assets and a $1,368 write-off of other assets associated
with discontinued products, and $415 of non-cancelable commitments. The
severance charge represents a workforce reduction of 108 employees either
directly related to the Systems Business or whose salaries had been allocated to
the Company's financial statements for the year ended December 31, 1997 as
discussed in Note 1. The asset write-offs included furniture and computer
equipment associated with the terminated workforce and discontinued products.
These write-offs also included prepaid royalties for products discontinued by
the Company in the restructuring. The non-cancelable commitments consisted
principally of a contract for phone service. No amounts remained accrued as of
January 2, 1999.
F-43
<PAGE>
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JULY 3, 1999 IS
UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
13. EARNINGS PER SHARE
The calculations for the pro-forma earnings per share fore the fiscal year
ended January 2, 1999 and the six months ended July 4, 1998 and July 3, 1999 are
as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED --------------------
JANUARY 2, JULY 3, JULY 3,
1999 1998 1999
----------- --------- ---------
<S> <C> <C> <C>
Net Income...................................................................... $ 5,867 $ 3,744 $ 875
----------- --------- ---------
----------- --------- ---------
Weighted average number of common shares--basic................................. 3,966 3,966 4,233
Assumed number of shares issued from:
Dilutive effects of stock options............................................. -- -- 528
Assumed conversion of Preferred Stock (Note 1)................................ 4,033 -- 16,000
----------- --------- ---------
Weighted average number of common and common equivalents shares-- diluted....... 7,999 3,966 20,761
----------- --------- ---------
----------- --------- ---------
Net income per share--basic..................................................... $ 1.48 $ 0.94 $ 0.21
----------- --------- ---------
----------- --------- ---------
Net income per share--diluted................................................... $ 0.73 $ 0.94 $ 0.04
----------- --------- ---------
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</TABLE>
14. SUBSEQUENT EVENTS
PROPOSED MERGER WITH TRANSCENDENT DESIGN, INC.--On July 16, 1999, the
Company entered into an Agreement and Plan of Merger (the "Agreement") with
Transcendent Design Technology, Inc. ("Transcendent"). The purchase price
included approximately 724 shares of Viewlogic common stock and the assumption
of approximately 73 options to purchase common stock. The purchase price
approximated $1,200. This transaction will be treated as a purchase for
accounting purposes and is intended to qualify as a tax-free reorganization for
federal income tax purposes.
PROPOSED MERGER WITH SUMMIT, INC.--On September 16, 1999, the Company
entered into an Agreement and Plan of Reorganization (the "Merger") with Summit,
Inc. ("Summit"). Summit is a publicly held company engaged a business similar to
that of the Company. In connection with the Merger, (1) each share of Viewlogic
Common Stock and Preferred stock issued and outstanding at the effective time of
the merger will be converted into 0.67928 (the "Exchange Ratio") of a share of
Summit Common Stock and (2) each option to purchase shares of Viewlogic Common
Stock will be converted into an option to purchase Summit Common Stock based
upon the Exchange Ratio. The Merger is subject to the customary conditions to
closing including the approval of the stockholders of the Company and the
stockholders of Summit.
The Merger will be treated as a purchase for accounting purposes and is
intended to qualify as a tax-free reorganization for federal income tax
purposes. Upon completion of the merger, the Company's shareholders will own a
majority of the outstanding shares of Summit. Consequently, for accounting
purposes the transaction will be accounted for as a reverse acquisition, whereby
the Company will be treated as the accounting acquirer. As a result, the
financial statements of the Company will become the historical financial
statements of the combined company and the assets and liabilities of Summit will
be revalued based on the value of Summit's equity interest at the date of the
agreement.
F-44
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Annex A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
SUMMIT DESIGN, INC.
HOOD ACQUISITION CORP.
AND
VIEWLOGIC SYSTEMS, INC.
DATED AS OF SEPTEMBER 16, 1999
<PAGE>
TABLE OF CONTENTS
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<S> <C> <C>
ARTICLE I THE MERGER..................................................................................... A-1
1.1 The Merger...................................................................................... A-1
1.2 Effective Time; Closing......................................................................... A-1
1.3 Effect of the Merger............................................................................ A-2
1.4 Certificate of Incorporation; Bylaws............................................................ A-2
1.5 Directors and Officers.......................................................................... A-2
1.6 Effect on Capital Stock......................................................................... A-2
1.7 Dissenting Stockholders......................................................................... A-4
1.8 Surrender of Certificates....................................................................... A-4
1.9 No Further Ownership Rights in Viewlogic Capital Stock.......................................... A-5
1.10 Lost, Stolen or Destroyed Certificates.......................................................... A-6
1.11 Tax Consequences................................................................................ A-6
1.12 Taking of Necessary Action; Further Action...................................................... A-6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF VIEWLOGIC................................................... A-6
2.1 Organization of Viewlogic....................................................................... A-6
2.2 Viewlogic Capital Structure..................................................................... A-7
2.3 Obligations With Respect to Capital Stock....................................................... A-7
2.4 Authority....................................................................................... A-8
2.5 Viewlogic Financial Statements.................................................................. A-8
2.6 Absence of Certain Changes or Events............................................................ A-9
2.7 Tax and Other Returns and Reports............................................................... A-10
2.8 Title to Properties; Absence of Liens and Encumbrances.......................................... A-11
2.9 Intellectual Property........................................................................... A-11
2.10 Compliance; Permits; Restrictions............................................................... A-14
2.11 Litigation...................................................................................... A-14
2.12 Brokers' and Finders' Fees...................................................................... A-14
2.13 Employee Matters and Benefit Plans.............................................................. A-14
2.14 Viewlogic Employees; Labor Matters.............................................................. A-17
2.15 Environmental Matters........................................................................... A-17
2.16 Agreements, Contracts and Commitments........................................................... A-18
2.17 Change of Control Payments...................................................................... A-19
2.18 Statements; Joint Proxy Statement/Prospectus.................................................... A-19
2.19 Board Approval.................................................................................. A-20
2.20 Section 203 of the Delaware General Corporation Law Not Applicable.............................. A-20
2.21 Representations Complete........................................................................ A-20
</TABLE>
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF SUMMIT AND MERGER SUB......................................
A-20
3.1 Organization of Summit.......................................................................... A-20
3.2 Summit Capital Structure........................................................................ A-21
3.3 Obligations With Respect to Capital Stock....................................................... A-21
3.4 Authority....................................................................................... A-22
3.5 SEC Filings; Summit Financial Statements........................................................ A-23
3.6 Absence of Certain Changes or Events............................................................ A-24
3.7 Tax and Other Returns and Reports............................................................... A-24
3.8 Title to Properties; Absence of Liens and Encumbrances.......................................... A-25
3.9 Intellectual Property........................................................................... A-26
3.10 Compliance; Permits; Restrictions............................................................... A-28
3.11 Litigation...................................................................................... A-28
3.12 Brokers' and Finders' Fees...................................................................... A-28
3.13 Employee Matters and Benefit Plans.............................................................. A-28
3.14 Summit Employees; Labor Matters................................................................. A-31
3.15 Environmental Matters........................................................................... A-31
3.16 Agreements, Contracts and Commitments........................................................... A-31
3.17 Change of Control Payments...................................................................... A-33
3.18 Statements; Joint Proxy Statement/Prospectus.................................................... A-33
3.19 Board Approval.................................................................................. A-33
3.20 Fairness Opinion................................................................................ A-33
3.21 Section 203 of the Delaware General Corporation Law Not Applicable.............................. A-33
3.22 Representations Complete........................................................................ A-33
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME........................................................... A-34
4.1 Conduct of Business............................................................................. A-34
ARTICLE V ADDITIONAL AGREEMENTS.......................................................................... A-36
5.1 Registration Statement; Other Filings; Board Recommendations.................................... A-36
5.2 Meetings of Stockholders........................................................................ A-37
5.3 Confidentiality; Access to Information.......................................................... A-38
5.4 Non-Solicitation................................................................................ A-38
5.5 Public Disclosure............................................................................... A-39
5.6 Legal Requirements.............................................................................. A-39
5.7 Third Party Consents............................................................................ A-39
5.8 Notification of Certain Matters................................................................. A-39
5.9 Best Efforts and Further Assurances............................................................. A-39
5.10 Stock Options................................................................................... A-40
5.11 Summit Option Plans............................................................................. A-40
</TABLE>
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5.12 Affiliate Agreements............................................................................ A-40
5.13 Form S-8........................................................................................ A-40
5.14 Nasdaq Listing.................................................................................. A-41
5.15 Comfort Letter.................................................................................. A-41
5.16 Board of Directors of the Combined Company...................................................... A-41
5.17 Officers of Combined Company; Executive Committee............................................... A-41
5.18 Indemnification and Insurance................................................................... A-41
ARTICLE VI CONDITIONS TO THE MERGER...................................................................... A-43
6.1 Conditions to Obligations of Each Party to Effect the Merger.................................... A-43
6.2 Additional Conditions to Obligations of Viewlogic............................................... A-43
6.3 Additional Conditions to the Obligations of Summit and Merger Sub............................... A-44
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................................................ A-45
7.1 Termination..................................................................................... A-45
7.2 Notice of Termination; Effect of Termination.................................................... A-46
7.3 Fees and Expenses............................................................................... A-46
7.4 Amendment....................................................................................... A-47
7.5 Extension; Waiver............................................................................... A-47
ARTICLE VIII NO SURVIVAL................................................................................. A-47
8.1 No Survival of Representations and Warranties................................................... A-47
ARTICLE IX GENERAL PROVISIONS............................................................................ A-48
9.1 Notices......................................................................................... A-48
9.2 Interpretation; Knowledge....................................................................... A-48
9.3 Counterparts.................................................................................... A-49
9.4 Entire Agreement; Third Party Beneficiaries..................................................... A-49
9.5 Severability.................................................................................... A-49
9.6 Other Remedies; Specific Performance............................................................ A-49
9.7 Governing Law................................................................................... A-49
9.8 Rules of Construction........................................................................... A-49
9.9 Assignment...................................................................................... A-49
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization is made and entered into as of
September 16, 1999, by and among Summit Design, Inc., a Delaware corporation
("SUMMIT"), Hood Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Summit ("MERGER SUB"), and Viewlogic Systems, Inc., a Delaware
corporation ("VIEWLOGIC").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the General Corporation Law of the State of Delaware ("DELAWARE
LAW"), Summit and Viewlogic intend to enter into a business combination
transaction.
B. The Board of Directors of Viewlogic (the "VIEWLOGIC BOARD") (i) has
determined that the Merger (as defined in Section 1.1) is consistent with and in
furtherance of the long-term business strategy of Viewlogic and fair to, and in
the best interests of, Viewlogic and its stockholders, (ii) has unanimously
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has determined to recommend that the stockholders of
Viewlogic adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of Summit (the "SUMMIT BOARD") (i) has determined
that the Merger is consistent with and in furtherance of the long-term business
strategy of Summit and fair to, and in the best interests of, Summit and its
stockholders, (ii) has unanimously approved this Agreement, the Merger and the
other transactions contemplated by this Agreement and (iii) has determined to
recommend that the stockholders of Summit adopt and approve this Agreement and
approve the Merger and the issuance of shares of Summit Common Stock (as defined
below) to the stockholders of Viewlogic pursuant to the terms of the Merger.
D. Concurrently with the execution of this Agreement, and as a condition and
inducement to Summit's willingness to enter into this Agreement, certain
shareholders of Viewlogic are entering into voting agreements in form and
substance reasonably satisfactory to Summit.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Viewlogic (the "MERGER"), the separate corporate existence of Merger Sub shall
cease and Viewlogic shall continue as the surviving corporation to be governed
by the laws of the State of Delaware. Viewlogic as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "SURVIVING
CORPORATION."
1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "CERTIFICATE OF
MERGER") (the time of such filing (or such later time as may be agreed in
writing by the parties and specified in the Certificate of Merger) being the
"EFFECTIVE TIME") as soon as practicable on or after the Closing Date (as herein
defined). Unless the context otherwise requires, the term "AGREEMENT" as
A-1
<PAGE>
used herein refers collectively to this Agreement and Plan of Reorganization and
the Certificate of Merger. The closing of the Merger (the "CLOSING") shall take
place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, CA, at a time and date to be specified by the parties, which shall be
no later than the third business day after the satisfaction or valid waiver of
the conditions set forth in Article VI, or at such other time, date and location
as the parties hereto agree in writing (the "CLOSING DATE") (other than the
delivery of closing certificates and opinions).
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Viewlogic and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Viewlogic and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; PROVIDED, HOWEVER, that at the Effective Time the
Certificate of Incorporation of the Surviving Corporation shall be amended so
that the name of the Surviving Corporation shall be a name mutually agreed to by
Summit and Viewlogic and set forth in the Joint Proxy Statement (as defined in
Section 2.18 of this Agreement).
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended; PROVIDED, HOWEVER, that as of the
Effective Time, the Bylaws of the Surviving Corporation shall be amended to
provide that the number of directors on the Board of Directors of the Surviving
Corporation shall be one.
1.5 DIRECTORS AND OFFICERS. The initial director of the Surviving
Corporation shall be William J. Herman, until his successor is duly elected or
appointed and qualified. The initial officers of the Surviving Corporation shall
be the officers of Viewlogic immediately prior to the Effective Time, until
their respective successors are duly appointed.
1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Summit, Merger Sub, Viewlogic or the holders of any of the
securities of Summit, Merger Sub or Viewlogic:
(a) CONVERSION OF VIEWLOGIC COMMON STOCK. Each share of Common Stock,
$0.001 par value per share, of Viewlogic (the "VIEWLOGIC COMMON STOCK") issued
and outstanding immediately prior to the Effective Time, (other than any shares
of Viewlogic Common Stock to be canceled pursuant to Section 1.6(c) and any
Dissenting Shares (as defined in Section 1.7)) will be canceled and extinguished
and automatically converted (subject to Sections 1.6(f) and (g)) into the right
to receive, upon surrender of the certificate representing such share of
Viewlogic Common Stock in the manner provided in Section 1.8 (or in the case of
a lost, stolen or destroyed certificate, upon delivery of an affidavit (and
bond, if required) in the manner provided in Section 1.10), such number of fully
paid and nonassessable shares of Common Stock, par value $0.01 per share, of
Summit (the "SUMMIT COMMON STOCK") as is equal to 0.67928 (the "EXCHANGE
RATIO"). Notwithstanding anything contained herein to the contrary, Viewlogic
shall use its commercially reasonable efforts to provide that any right of
repurchase by Viewlogic with respect to any shares of Viewlogic Common Stock in
existence immediately prior to the Effective Time shall remain in full force and
effect in accordance with its terms on and after the Effective Time including,
without limitation, obtaining all necessary consents of existing stockholders to
the assignment and assumption of these rights to Summit or its successors and
A-2
<PAGE>
valid assigns and the amendment or modification of any agreement relating to
these rights; PROVIDED, THAT, Summit shall use its commercially reasonable
efforts to cooperate with Viewlogic to effectuate the assignment of such rights;
and PROVIDED FURTHER THAT, such rights shall then be exercisable only by Summit
or its successors and valid assigns.
(b) CONVERSION OF VIEWLOGIC PREFERRED STOCK.
(i) SERIES A VOTING PREFERRED STOCK. Each share of Series A Voting
Preferred Stock, $0.001 par value per share, of Viewlogic (the "SERIES A
PREFERRED") issued and outstanding immediately prior to the Effective Time
(other than any shares of Series A Preferred that are converted into shares of
Viewlogic Common Stock immediately prior to the Effective Time, any shares of
Series A Preferred to be canceled pursuant to Section 1.6(c) and any Dissenting
Shares) will be canceled and extinguished and automatically converted (subject
to Section 1.6(f) and (g)) into the right to receive, upon surrender of the
certificate representing such share of Series A Preferred in the manner provided
in Section 1.8 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.10), such number of fully paid and nonassessable shares of Summit
Common Stock as is equal to the Exchange Ratio.
(ii) SERIES A-1 NON-VOTING PREFERRED STOCK. Each share of Series A-1
Non-Voting Preferred Stock, $0.001 par value per share, of Viewlogic ("SERIES
A-1 PREFERRED" and, collectively with the Series A Preferred, the "VIEWLOGIC
PREFERRED STOCK") issued and outstanding immediately prior to the Effective Time
(other than any shares of Series A-1 Preferred that are converted into shares of
Series A Preferred, any shares of Series A-1 Preferred that are converted into
shares of Viewlogic Common Stock immediately prior to the Effective Time, any
shares of Series A-1 Preferred to be canceled pursuant to Section 1.6(c) and any
Dissenting Shares) will be canceled and extinguished and automatically converted
(subject to Sections 1.6(f) and (g)) into the right to receive, upon surrender
of the certificate representing such share of Series A-1 Preferred in the manner
provided in Section 1.8 (or in the case of a lost, stolen or destroyed
certificate, upon delivery of an affidavit (and bond, if required) in the manner
provided in Section 1.10), such number of fully paid and nonassessable shares of
Summit Common Stock as is equal to the Exchange Ratio.
(c) CANCELLATION OF VIEWLOGIC-OWNED STOCK. Each share of the Viewlogic
Common Stock and Viewlogic Preferred Stock (together, the "VIEWLOGIC CAPITAL
STOCK") held by Viewlogic or owned by Merger Sub, Summit or any direct or
indirect wholly owned subsidiary of Viewlogic or of Summit immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof.
(d) STOCK OPTIONS. At the Effective Time, all options to purchase
Viewlogic Common Stock then outstanding under Viewlogic's 1998 Stock Incentive
Plan and the Transcendent Design Technology Inc. Stock Option Plan.
(collectively, the "VIEWLOGIC STOCK OPTION PLANS") shall be assumed by Summit in
accordance with Section 5.10 hereof.
(e) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, $0.01 par
value per share, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, $0.01 par
value per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.
(f) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted
to reflect appropriately the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into Summit Common Stock or Viewlogic Capital Stock), reorganization,
recapitalization, reclassification or other like change with respect to Summit
Common Stock or Viewlogic Capital Stock occurring on or after the date hereof
and prior to the Effective Time.
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<PAGE>
(g) FRACTIONAL SHARES. No fractional shares of Summit Common Stock will
be issued by virtue of the Merger, but in lieu thereof each holder of shares of
Viewlogic Capital Stock who would otherwise be entitled to a fraction of a share
of Summit Common Stock (after aggregating all fractional shares of Summit Common
Stock that otherwise would be received by such holder) shall receive from Summit
an amount of cash in U.S. dollars (rounded to the nearest whole cent) equal to
the product of (i) such fraction, MULTIPLIED BY (ii) the average last reported
sale price of one share of Summit Common Stock for the ten (10) most recent days
that Summit Common Stock has traded ending on and including the trading day
immediately prior to the Effective Time, as reported on the Nasdaq National
Market.
1.7 DISSENTING STOCKHOLDERS.
(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of Viewlogic Capital Stock held by a holder who has demanded and
perfected appraisal or dissenters' rights for such shares in accordance with
applicable Delaware Law and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal or dissenters' rights ("DISSENTING SHARES"),
shall not be converted into or represent a right to receive Summit Common Stock
pursuant to Section 1.6, but the holder thereof shall only be entitled to such
rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Viewlogic Capital Stock who demands appraisal of such shares under
Delaware Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Summit Common Stock and
cash in lieu of any fractional shares as provided in Section 1.6, without
interest thereon, upon surrender of the certificate representing such shares of
Viewlogic Capital Stock in the manner provided in Section 1.8 (or in the case of
a lost, stolen or destroyed certificate, upon delivery of an affidavit (and
bond, if required) in the manner provided in Section 1.10).
(c) Viewlogic shall give Summit (i) prompt notice of any written demands
for appraisal of any shares of Viewlogic Capital Stock, withdrawals of such
demands, and any other instruments served pursuant to Delaware Law and received
by Viewlogic and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under Delaware Law. Viewlogic
shall not, except with the prior written consent of Summit, voluntarily make any
payment with respect to any demands for appraisal of shares of capital stock of
Viewlogic or offer to settle or settle any such demands.
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Summit shall select an institution reasonably
acceptable to Viewlogic to act as the exchange agent (the "EXCHANGE AGENT") in
the Merger.
(b) SUMMIT TO PROVIDE COMMON STOCK. At the Effective Time, Summit shall
make available to the Exchange Agent for exchange in accordance with this
Article I, the shares of Summit Common Stock issuable pursuant to Section 1.6 in
exchange for outstanding shares of Viewlogic Capital Stock and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 1.6(g).
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, Summit shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "CERTIFICATES"), which immediately
prior to the Effective Time represented outstanding shares of Viewlogic Capital
Stock whose shares were converted into the right to receive shares of Summit
Common Stock pursuant to Section 1.6 and cash in lieu of any fractional shares
pursuant to Section 1.6(g) the following: (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall contain such other customary
provisions as Summit may
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reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Summit
Common Stock and cash in lieu of any fractional shares pursuant to Section
1.6(g). Upon the proper surrender of Certificates for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by Summit
and reasonably acceptable to Viewlogic, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Summit Common Stock into which their shares of Viewlogic Capital Stock
were converted at the Effective Time pursuant to Section 1.6 and payment in lieu
of fractional shares which such holders have the right to receive pursuant to
Section 1.6(g) and the Certificates so surrendered shall be canceled. Until so
surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, to evidence only the ownership of
the number of whole shares of Summit Common Stock into which such shares of
Viewlogic Capital Stock have been converted and the right to receive an amount
in cash in lieu of the issuance of any fractional shares in accordance with
Section 1.6(g) and shall cease to have any rights with respect to the shares of
Viewlogic Common Stock formerly represented thereby, except as required by
applicable law.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Summit Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Summit Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates in the manner provided in
Section 1.8(c). Subject to applicable law, following surrender of any such
Certificates in the manner provided in Section 1.8(c), the Exchange Agent shall
deliver to the record holders thereof, without interest, certificates
representing whole shares of Summit Common Stock issued in exchange therefor
along with payment in lieu of fractional shares pursuant to Section 1.6(g)
hereof and the amount of any such dividends or other distributions with a record
date after the Effective Time payable with respect to such whole shares of
Summit Common Stock.
(e) TRANSFERS OF OWNERSHIP. If certificates for shares of Summit Common
Stock are to be issued in a name other than that in which the Certificates
surrendered in exchange therefor are registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the persons requesting such
exchange will have paid to Summit or any agent designated by it any transfer or
other taxes required by reason of the issuance of certificates for shares of
Summit Common Stock in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of Summit or any
agent designated by it that such tax has been paid or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.8, neither the Exchange Agent, Summit, Viewlogic, nor the Surviving
Corporation shall be liable to a holder of shares of Summit Common Stock or
Viewlogic Capital Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN VIEWLOGIC CAPITAL STOCK. From and after
the Effective Time, all shares of Summit Common Stock issued in accordance with
the terms hereof (including any cash paid in respect thereof pursuant to Section
1.6(g)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Viewlogic Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Viewlogic Capital Stock that were outstanding immediately prior to the
Effective Time. If after the Effective Time Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
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1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Summit Common Stock
into which the shares of Viewlogic Capital Stock represented by such
Certificates were converted pursuant to Section 1.6 and cash for fractional
shares, if any, as may be required pursuant to Section 1.6(g); PROVIDED,
HOWEVER, that Summit may, in its discretion and as a condition precedent to the
issuance of such certificates representing Summit Common Stock, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Summit, the Surviving Corporation or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
1.11 TAX CONSEQUENCES. The parties hereto intend that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Viewlogic and Merger Sub, the officers and directors of
Summit, Viewlogic and Merger Sub will take all such lawful and necessary action.
Summit shall cause Merger Sub to perform all of its obligations relating to this
Agreement and the transactions contemplated thereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF VIEWLOGIC
Viewlogic represents and warrants to Summit and Merger Sub as of the date
hereof and as of immediately prior to the Closing, subject only to the
exceptions specifically disclosed in writing in the disclosure schedule (which
such exceptions shall specifically reference the appropriate section number of
the representations and warranties of Viewlogic to be qualified by such
exceptions; PROVIDED, THAT, if a reasonable person would determine that any such
exception contains enough information to qualify or otherwise apply to other
representations and warranties of Viewlogic, such exceptions shall qualify or
otherwise apply to such other representations and warranties of Viewlogic)
supplied by Viewlogic to Summit dated as of the date hereof and certified by a
duly authorized officer of Viewlogic (the "VIEWLOGIC SCHEDULES"), the following
are true and correct:
2.1 ORGANIZATION OF VIEWLOGIC.
(a) Viewlogic and each of its subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted; and is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so qualified would not have a Material
Adverse Effect (as defined in Section 2.1(d)) on Viewlogic.
(b) Viewlogic has delivered to Summit a true and complete list of all of
Viewlogic's subsidiaries as of the date of this Agreement, indicating the
jurisdiction of incorporation of each subsidiary and Viewlogic's equity interest
therein.
(c) Viewlogic has delivered or made available to Summit a true and
complete copy of the Certificate of Incorporation and Bylaws of Viewlogic and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither Viewlogic
nor any of its subsidiaries is in violation of any of the provisions of its
charter or bylaws or similar governing instruments.
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(d) When used in connection with Viewlogic, the term "MATERIAL ADVERSE
EFFECT" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Viewlogic and its subsidiaries,
taken as a whole (except for those changes, events and effects that are directly
caused by (i) conditions affecting the United States economy as a whole, (ii)
conditions affecting the industry in which Viewlogic competes as a whole or
(iii) conditions resulting from announcement and pendency of the Merger).
2.2 VIEWLOGIC CAPITAL STRUCTURE. The authorized capital stock of Viewlogic
consists (a) of 35,000,000 shares of Common Stock, $0.001 par value per share,
of which there are 7,899,627 shares issued and outstanding and no shares held in
treasury, and (b) 22,000,000 shares of Preferred Stock, $0.001 par value per
share, of which (x) 17,000,000 shares are designated Series A Voting Preferred
Stock, of which there are 11,381,904 shares issued and outstanding and no shares
held in treasury and (y) 5,000,000 shares are designated Series A-1 Non-Voting
Preferred Stock, of which there are 4,618,096 shares issued and outstanding and
no shares held in treasury. All outstanding shares of Viewlogic capital stock
are duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Viewlogic or any agreement or document to which
Viewlogic is a party or by which it is bound. The Viewlogic Capital Stock is
held of record by the persons and entities and in the amounts set forth in
Section 2.2 of the Viewlogic Schedules. As of the date hereof, Viewlogic had
reserved an aggregate of 3,920,025 shares of Viewlogic Common Stock, net of
exercises, for issuance to employees, consultants and non-employee directors
pursuant to the Viewlogic Stock Option Plans. As of the date hereof, there were
options outstanding to purchase an aggregate of 2,991,468 shares of Viewlogic
Common Stock, issued to employees, consultants and non-employee directors
pursuant to the Viewlogic Stock Option Plans. All shares of Viewlogic Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable. The
Viewlogic Schedules list for each person who holds options to acquire shares of
Viewlogic Common Stock as of the date hereof, the name of the holder of such
option, the exercise price of such option, the number of shares as to which such
option had vested at such date, the vesting schedule for such option and whether
the exercisability of such option will be accelerated in any way by the
transactions contemplated by this Agreement.
2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 2.2 or the Viewlogic Schedules, there are no equity securities,
partnership interests or similar ownership interests of any class of Viewlogic
Capital Stock, or any securities exchangeable or convertible into or exercisable
for such equity securities, partnership interests or similar ownership
interests, issued, reserved for issuance or outstanding. Except for securities
Viewlogic owns, directly or indirectly through one or more subsidiaries, as of
the date of this Agreement, there are no equity securities, partnership
interests or similar ownership interests of any class of any subsidiary of
Viewlogic, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Section 2.2
or the Viewlogic Schedules, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which
Viewlogic or any of its subsidiaries is a party or by which it or any of its
subsidiaries is bound obligating Viewlogic or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
Viewlogic or any of its subsidiaries or obligating Viewlogic or any of its
subsidiaries to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement. As of
the date of this Agreement, except as contemplated by this Agreement, there are
no registration rights and there are no voting trusts, proxies or other
agreements or understandings to which Viewlogic is a party or by which it is
bound with respect to any equity security of any class of
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Viewlogic Capital Stock or with respect to any equity security, partnership
interest or similar ownership interest of any class of any of its subsidiaries.
2.4 AUTHORITY.
(a) Viewlogic has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby,
subject to the requisite approval of the Agreement and the transactions
contemplated hereby by Viewlogic's stockholders. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Viewlogic,
subject only to the approval and adoption of this Agreement and the approval of
the Merger by Viewlogic's stockholders and the filing of the Certificate of
Merger pursuant to Delaware Law. This Agreement has been duly executed and
delivered by Viewlogic and, assuming the due authorization, execution and
delivery by Summit and, if applicable, Merger Sub, constitutes the valid and
binding obligation of Viewlogic, enforceable against Viewlogic in accordance
with its terms, except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity. The execution and delivery of
this Agreement by Viewlogic does not, and the performance of this Agreement by
Viewlogic will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of Viewlogic or the equivalent organizational documents
of any of its subsidiaries, (ii) subject to obtaining the approval and adoption
of this Agreement and the approval of the Merger by Viewlogic's stockholders and
compliance with the requirements set forth in Section 2.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Viewlogic or any of its subsidiaries or by which Viewlogic or any of its
subsidiaries or any of their respective properties is bound or affected, or
(iii) result in any material breach of or constitute a material default (or an
event that with notice or lapse of time or both would become a material default)
under, or impair Viewlogic's rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a material lien or
encumbrance on any of the material properties or assets of Viewlogic or any of
its subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Viewlogic or any of its subsidiaries is a party or by which
Viewlogic or any of its subsidiaries or its or any of their respective
properties are bound or affected. The Viewlogic Schedules list all consents,
waivers and approvals under any of Viewlogic's or any of its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby, which, if
individually or in the aggregate not obtained, would result in a material loss
of benefits or any material liability to Viewlogic, Viewlogic's subsidiaries,
Summit or the Surviving Corporation as a result of the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("GOVERNMENTAL ENTITY"), is required to be obtained or made by Viewlogic in
connection with the execution and delivery of this Agreement or the consummation
of the Merger, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, foreign and state securities (or related) or
antitrust laws and the securities or antitrust laws of any foreign country, and
(iii) such other consents, authorizations, filings, approvals and registrations
which if not obtained or made would not have a Material Adverse Effect on
Viewlogic or would otherwise have a material adverse effect on the ability of
the parties to consummate the Merger.
2.5 VIEWLOGIC FINANCIAL STATEMENTS.
(a) Section 2.5 of the Viewlogic Schedules sets forth Viewlogic's
audited consolidated balance sheet as of October 3, 1998 and the related audited
consolidated statements of operations and cash
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flows for the 39-week period then ended and Viewlogic's unaudited consolidated
balance sheet as of July 3, 1999 and the related unaudited statements of
operations and cash flows for the 39-week period then ended (collectively, the
"VIEWLOGIC FINANCIALS"). The Viewlogic Financials have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
basis consistent throughout the periods indicated and consistent with each other
subject, in the case of the unaudited financial statements, to the absence of
footnotes and normal year-end adjustments, which will not be material in amount.
The Viewlogic Financials present fairly in all material respects the financial
condition and operating results of Viewlogic as of the dates and for the periods
indicated therein. The balance sheet of Viewlogic dated July 3, 1999 is
hereinafter referred to as the "VIEWLOGIC BALANCE SHEET."
(b) Except as disclosed in the Viewlogic Financials or in the Viewlogic
Balance Sheet, since the date of the Viewlogic Balance Sheet neither Viewlogic
nor any of its subsidiaries has any liabilities (absolute, accrued, contingent
or otherwise) of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP which are, individually or in the aggregate, material to the business,
results of operations or financial condition of Viewlogic and its subsidiaries
taken as a whole, except for (i) liabilities identified in the Viewlogic Balance
Sheet, or (ii) liabilities incurred since the date of the Viewlogic Balance
Sheet in the ordinary course of business consistent with past practice and
immaterial in the aggregate.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Viewlogic
Balance Sheet there has not been:
(a) any Material Adverse Effect on Viewlogic and its subsidiaries, taken
as a whole;
(b) any material change by Viewlogic in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP;
(c) any material revaluation by Viewlogic of any of its assets,
including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course of
business;
(d) any material transaction by Viewlogic except in the ordinary course
of business;
(e) any amendments or changes to the Certificate of Incorporation or
Bylaws of Viewlogic;
(f) any capital expenditures or commitments by Viewlogic other than in
the ordinary course of business;
(g) any destruction of, damage to or loss of any material assets,
business or customer of Viewlogic (whether or not covered by insurance);
(h) any declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of Viewlogic, or any direct or
indirect redemption, purchase or other acquisition by Viewlogic of any of its
capital stock;
(i) any sale, lease, license or other disposition of any of the assets
or properties of Viewlogic, except in the ordinary course of business,
consistent with past practices;
(j) any amendment or termination of any material contract, agreement or
license to which Viewlogic is a party or by which it is bound, other than in the
ordinary course of business;
(k) any loan by Viewlogic to any person or entity, incurrence by
Viewlogic of any indebtedness, guarantee by Viewlogic of any indebtedness,
issuance or sale of any debt securities of Viewlogic or guarantee of any debt
securities of others except for advances to employees for travel and business
expenses in the ordinary course of business, consistent with past practice,
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(l) any waiver or release of any material right or claim of Viewlogic,
including any writeoff or other compromise of any account receivable of
Viewlogic,
(m) any issuance or sale by Viewlogic of any of its shares of capital
stock, or securities exchangeable for, convertible or exercisable therefor, or
of any other of its securities,
(n) any negotiation or agreement by Viewlogic or any officers or
employees thereof to do any of the things described in the preceding clauses (a)
through (m) (other than negotiations with Summit and its representatives
regarding the transactions contemplated by this Agreement).
2.7 TAX AND OTHER RETURNS AND REPORTS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX" or,
collectively, "TAXES," means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS. Except as set forth in Section 2.7 of the
Viewlogic Schedules:
(i) Each of Viewlogic and its subsidiaries has prepared and filed
all required federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to any and all Taxes concerning or
attributable to Viewlogic and each of its subsidiaries or their operations and
such Returns are true and correct in all material respects and have been
completed in accordance with applicable law.
(ii) Each of Viewlogic and its subsidiaries (A) has paid or accrued
all Taxes it is required to pay or accrue and (B) has withheld with respect to
its employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) Neither Viewlogic nor any of its subsidiaries has been
delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against Viewlogic or any of its subsidiaries,
nor has Viewlogic or any of its subsidiaries executed any waiver of any statute
of limitations on or extending the period for the assessment or collection of
any Tax.
(iv) No audit or other examination of any Return of Viewlogic or any
of its subsidiaries is presently in progress, nor has Viewlogic or any of its
subsidiaries been notified of any request for such an audit or other
examination.
(v) Neither Viewlogic nor any of its subsidiaries has any material
liability for unpaid federal, state, local or foreign Taxes which has not been
accrued or reserved against in accordance with GAAP on the Viewlogic Balance
Sheet or accrued in accordance with GAAP in the ordinary course of business
since the date of the Viewlogic Balance Sheet, whether asserted or unasserted,
contingent or otherwise, and neither Viewlogic nor any of its subsidiaries has
knowledge of any basis for the assertion of any such liability attributable to
the assets or operations of Viewlogic or any of its subsidiaries.
(vi) Viewlogic has provided to Summit copies of all federal and
state income and all state sales and use Tax Returns for all periods since the
date of Viewlogic's incorporation, except those as to which applicable statues
of limitations have expired and no tolling of the statute of limitations has
been executed.
(vii) There are no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("LIENS") on any of the assets or
properties of Viewlogic or any of its subsidiaries relating to or attributable
to Taxes.
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(viii) Neither Viewlogic nor any of its subsidiaries has knowledge of
any reasonable basis for any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on any of the assets or
properties of Viewlogic or any of its subsidiaries.
(ix) None of Viewlogic's or any of its subsidiaries' assets are
treated as "tax-exempt use property" within the meaning of Section 168(h) of the
Code.
(x) There is no contract, agreement, plan or arrangement, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of Viewlogic or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Section 280G or 162 of the Code.
(xi) Neither Viewlogic nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Viewlogic or any of its
subsidiaries.
(xii) Neither Viewlogic nor any of its subsidiaries is a party to a
tax sharing or allocation agreement nor does Viewlogic nor any of its
subsidiaries owe any amount under any such agreement.
(xiii) Neither Viewlogic nor any of its subsidiaries has been at any
time, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
2.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Viewlogic Schedules list the real property owned by Viewlogic or
any of its subsidiaries as of the date of this Agreement. The Viewlogic
Schedules list all real property leases to which Viewlogic or any of its
subsidiaries is a party as of the date of this Agreement and each amendment
thereto that is in effect as of the date of this Agreement. All such current
leases are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a material claim.
(b) Each of Viewlogic and its subsidiaries has good and valid title to,
or, in the case of leased properties and assets, valid leasehold interests in,
all of its material tangible properties and assets, real, personal and mixed,
used or held for use in its business, free and clear of any Liens, except as
reflected in the Viewlogic Financials and except for liens for taxes not yet due
and payable and such Liens or other imperfections of title and encumbrances, if
any, which are not material in amount and which do not materially detract from
the value, or materially interfere with the present use, of the property subject
thereto or affected thereby.
2.9 INTELLECTUAL PROPERTY. For the purposes of this Agreement, the following
terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights therein: (i) all United States, international and foreign patents
and applications (including provisional applications); (ii) all
inventions (whether patentable or not), invention disclosures, trade
secrets, proprietary information, know how, technology, technical data
and customer lists, and all documentation relating to any of the
foregoing and all improvements thereto; (iii) all copyrights, copyright
registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefor throughout the world that
have not been withdrawn; (v) all trade names, logos, common law
trademarks and service marks, trademark and service mark registrations
and applications therefor throughout the world; (vi) all databases and
data collections and all rights therein throughout the world; and (vii)
any similar or equivalent rights to any of the foregoing anywhere in the
world.
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"VIEWLOGIC INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Viewlogic or any of its
subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications) that have not been withdrawn or abandoned; (ii) registered
trademarks, applications to register trademarks, intent-to-use
applications, or other registrations or applications related to
trademarks that have not been withdrawn, cancelled or abandoned; (iii)
registered copyrights and applications for copyright registration; and
(iv) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued,
filed with, or recorded by any state, government or other public legal
authority.
(a) Section 2.9 of the Viewlogic Schedules lists all of the Registered
Intellectual Property owned by, or filed in the name of, Viewlogic or any of its
subsidiaries (the "VIEWLOGIC REGISTERED INTELLECTUAL PROPERTY") and all patent,
copyright, trademark or industrial design registrations or applications that
have been withdrawn, cancelled or abandoned since January 1, 1998.
(b) Section 2.9 of the Viewlogic Schedules lists all proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office ("PTO") or equivalent authority anywhere in the world) related
to any Viewlogic Intellectual Property.
(c) Viewlogic (or its subsidiaries, as applicable) has complied in all
material respects with all applicable disclosure requirements, and has not
committed any fraudulent act, in the application for and maintenance of any
patent, trademark or copyright of Viewlogic.
(d) Other than restrictions imposed by laws of general applicability or
limitations on use inherent in the content of the registrations themselves, no
Viewlogic Intellectual Property owned by Viewlogic or product or service of
Viewlogic or its subsidiaries is subject to any proceeding or outstanding
decree, order, judgment, agreement or stipulation restricting in any manner the
use, transfer, or licensing thereof by Viewlogic or its subsidiaries, or which
may affect the validity, use or enforceability of such Viewlogic Intellectual
Property.
(e) Each item of Viewlogic Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees currently
due in connection with such Registered Intellectual Property have been paid and
all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(f) Except as set forth in Section 2.9 of the Viewlogic Schedules, to
Viewlogic's knowledge: (i) Viewlogic or a Viewlogic subsidiary owns and has good
and exclusive title to, or has license to, each item of Viewlogic Intellectual
Property, including all Viewlogic Registered Intellectual Property listed in
Section 2.9 of the Viewlogic Schedules, free and clear of any material Lien
(excluding licenses and related restrictions); and (ii) Viewlogic is the
exclusive owner of all material trademarks and trade names used in connection
with the operation or conduct of the business of Viewlogic or its subsidiaries,
including the sale of any products or the provision of any services by Viewlogic
or its subsidiaries, but excluding trademarks and trade names commonly
identified by Viewlogic or its subsidiaries as the property of a third party
(e.g. "Microsoft NT").
(g) Viewlogic owns exclusively, and has good title to, or has an
irrevocable, fully paid license to all copyrighted works that are Viewlogic
products (other than third-party software code to which Viewlogic holds valid
and enforceable distribution licenses) or which Viewlogic otherwise expressly
purports to own.
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(h) To Viewlogic's knowledge, Viewlogic or its subsidiaries owns or has
the right to use all Intellectual Property necessary to the conduct of its
business as it currently is conducted, including, without limitation, the
design, development, manufacture and sale of all products currently manufactured
or sold by Viewlogic or its subsidiaries and the performance of all services
provided by Viewlogic or its subsidiaries.
(i) To the extent that any material work, invention or material has been
developed or created by a third party for Viewlogic, Viewlogic has a written
agreement with such third party with respect thereto and Viewlogic thereby
either (i) has obtained ownership of, and is the exclusive owner of, or (ii) has
obtained a license to all such third party's Intellectual Property in such work,
material or invention by operation of law or by valid assignment, to the extent
it is legally possible to do so.
(j) Except as set forth in Section 2.9 of the Viewlogic Schedules or in
the ordinary course of business, (i) Viewlogic has not transferred ownership of,
or granted any rights to use any of the Viewlogic Intellectual Property; and
(ii) Viewlogic has not granted to any person, nor authorized any person to
retain, any rights in the Viewlogic Intellectual Property.
(k) Section 2.9 of the Viewlogic Schedules lists all material contracts,
licenses and agreements to which Viewlogic is a party (i) with respect to
Viewlogic Intellectual Property licensed or transferred to any third party
(other than end-user licenses in the ordinary course); or (ii) pursuant to which
a third party has licensed or transferred any material Intellectual Property to
Viewlogic.
(l) Following the Closing Date, the Surviving Corporation will be
permitted to exercise all of Viewlogic's material rights under the contracts,
licenses and agreements required to be listed in Section 2.9 of the Viewlogic
Schedules to the same extent Viewlogic would have been able had the consummation
of the transactions contemplated by this Agreement not occurred and without the
payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which Viewlogic would otherwise be required to pay or
which are not material in amount.
(m) Section 2.9 of the Viewlogic Schedules lists or specifically refers
to all contracts, licenses and agreements between Viewlogic and any third party
wherein or whereby Viewlogic has agreed to, or assumed, any obligation or duty
to warrant, indemnify, hold harmless or otherwise assume or incur any obligation
or liability with respect to the infringement or misappropriation by Viewlogic
or such third party of the Intellectual Property of any third party, except such
contracts entered into in the ordinary course of Viewlogic's business.
(n) Viewlogic has not received written notice from any third party that
the operation of the business of Viewlogic or any act, product or service of
Viewlogic, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(o) Except as set forth in Section 2.9 of the Viewlogic Schedules, to
the knowledge of Viewlogic, no person has or is infringing or misappropriating
any Viewlogic Intellectual Property.
(p) Except as set forth in Section 2.9 of the Viewlogic Schedules, there
have been, and are, no claims asserted against Viewlogic or its subsidiaries or,
to its knowledge, against any customer of Viewlogic, related to any product or
service of Viewlogic or its subsidiaries.
(q) Each of Viewlogic and its subsidiaries has and has taken
commercially reasonable steps to enforce a policy requiring each employee and
contractor to execute a proprietary information / confidentiality agreement
substantially in Viewlogic's standard forms for employees and contractors,
respectively, and all current and former employees and contractors of Viewlogic
and its subsidiaries have executed such an agreement, except where the failure
to do so could not reasonably expected to result in a Material Adverse Effect on
Viewlogic.
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2.10 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Except for conflicts, violations and defaults that (individually or
in the aggregate) would not cause Viewlogic or its subsidiaries to lose benefits
aggregating to $250,000 or more, or cause Viewlogic or its subsidiaries to incur
liabilities aggregating to $250,000 or more, neither Viewlogic nor any of its
subsidiaries is, in any material respect, in conflict with, or in default or in
violation of (i) any law, rule, regulation, order, judgment or decree applicable
to Viewlogic or any of its subsidiaries or by which Viewlogic or any of its
subsidiaries or any of their respective properties is bound or affected, or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Viewlogic or any of
its subsidiaries is a party or by which Viewlogic or any of its subsidiaries or
its or any of their respective properties is bound or affected, No investigation
or review by any Governmental Entity is pending or, to Viewlogic's knowledge,
has since January 1, 1998 been threatened against Viewlogic or any of its
subsidiaries, nor, to Viewlogic's knowledge, has any Governmental Entity
indicated an intention to conduct an investigation of Viewlogic or any of its
subsidiaries. There is no material agreement, judgment, injunction, order or
decree binding upon Viewlogic or any of its subsidiaries which has the effect of
prohibiting or materially impairing any business practice of Viewlogic or any of
its subsidiaries, any acquisition of material property by Viewlogic or any of
its subsidiaries or the conduct of business by Viewlogic as currently conducted.
(b) Viewlogic and its subsidiaries hold, to the extent legally required,
all permits, licenses, variances, exemptions, orders and approvals from
governmental authorities that are material to and required for the operation of
the business of Viewlogic as currently conducted (collectively, the "VIEWLOGIC
PERMITS"). Viewlogic and its subsidiaries are in compliance in all material
respects with the terms of the Viewlogic Permits.
2.11 LITIGATION. There is no action, suit, proceeding, claim, arbitration or
investigation pending, and, to Viewlogic's knowledge, threatened against
Viewlogic or any of its subsidiaries which would reasonably be expected to have
a Material Adverse Effect on Viewlogic or which in any manner challenges or
seeks to prevent, enjoin, alter or delay any of the transactions contemplated by
this Agreement. No Governmental Entity has at any time since January 1, 1998
challenged or questioned the legal right of Viewlogic to manufacture, offer or
sell any of its products.
2.12 BROKERS' AND FINDERS' FEES. Viewlogic has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.13 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of "Affiliate" set
forth in Section 2.13(a)(i) below (such definition shall only apply to this
Section 2.13), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "AFFILIATE," as used in this Section 2.13, shall mean any other
person or entity under common control with Viewlogic within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, or any successor statute thereto and the rules and
regulations promulgated thereby;
(iii) "VIEWLOGIC EMPLOYEE PLAN" shall refer to any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3) of
ERISA which is or has
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been maintained, contributed to, or required to be contributed to, by Viewlogic
or any Affiliate for the benefit of any "Viewlogic Employee" (as defined below),
and pursuant to which Viewlogic or any Affiliate has or may have any material
liability contingent or otherwise;
(iv) "VIEWLOGIC EMPLOYEE" shall mean any current, former, or retired
employee, officer or director of Viewlogic or any Affiliate;
(v) "VIEWLOGIC EMPLOYEE AGREEMENT" shall refer to each management,
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between Viewlogic or any Affiliate
and any Viewlogic Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan", as defined in Section 3(37) of ERISA;
and
(viii) "VIEWLOGIC PENSION PLAN" shall refer to each Viewlogic Employee
Plan which is an "employee pension benefit plan", within the meaning of Section
3(2) of ERISA.
(b) SCHEDULE. Section 2.13 of the Viewlogic Schedules contains a true
and complete list of each Viewlogic Employee Plan and each Viewlogic Employee
Agreement, together with a schedule of all liabilities, whether or not accrued,
under each such Viewlogic Employee Plan or Viewlogic Employee Agreement.
Viewlogic does not have any plan or commitment to establish any new Viewlogic
Employee Plan or Viewlogic Employee Agreement, to modify any Viewlogic Employee
Plan or Viewlogic Employee Agreement (except to the extent required by law or to
conform any such Viewlogic Employee Plan or Viewlogic Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Summit in writing, or as required by this Agreement), or to enter into any
Viewlogic Employee Plan or Viewlogic Employee Agreement, nor does it have any
intention or commitment to do any of the foregoing.
(c) DOCUMENTS. Viewlogic has made available to Summit (i) true and
complete copies of all documents embodying or relating to each Viewlogic
Employee Plan and each Viewlogic Employee Agreement, including all amendments
thereto and written interpretations thereof; (ii) the most recent annual
actuarial valuations, if any, prepared for each Viewlogic Employee Plan; (iii)
the three most recent annual reports (Series 5500 and all schedules thereto), if
any, required under ERISA or the Code in connection with each Viewlogic Employee
Plan or related trust; (iv) if Viewlogic Employee Plan is funded, the most
recent annual and periodic accounting of Viewlogic Employee Plan assets; (v) the
most recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Viewlogic Employee Plan; (vi) all IRS determination letters and rulings relating
to Viewlogic Employee Plans and copies of all applications and correspondence to
or from the IRS or the Department of Labor ("DOL") with respect to any Viewlogic
Employee Plan; (vii) all communications material to any Viewlogic Employee or
Viewlogic Employees relating to any Viewlogic Employee Plan and any proposed
Viewlogic Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to Viewlogic; and (viii) all registration statements and
prospectuses prepared in connection with each Viewlogic Employee Plan.
(d) VIEWLOGIC EMPLOYEE PLAN COMPLIANCE. Except as set forth in Section
2.13 of the Viewlogic Schedules, (i) Viewlogic has performed in all material
respects all obligations required to be performed by it under each Viewlogic
Employee Plan and each Viewlogic Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) no "prohibited
transaction", within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Viewlogic Employee Plan; (iii) there are
no actions, suits or claims
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pending, or, to the knowledge of Viewlogic, threatened or anticipated (other
than routine claims for benefits) against any Viewlogic Employee Plan or against
the assets of any Viewlogic Employee Plan; and (iv) each Viewlogic Employee Plan
can be amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Viewlogic, the Surviving
Corporation, Summit or any Affiliates (other than ordinary administration
expenses typically incurred in a termination event and benefits accrued through
the date of such amendment, termination or discontinuance); (v) there are no
inquiries or proceedings pending or, to the knowledge of Viewlogic or any
affiliates, threatened by the IRS or DOL with respect to any Viewlogic Employee
Plan; and (vi) neither Viewlogic nor any Affiliate is subject to any penalty or
tax with respect to any Viewlogic Employee Plan under Section 502(i) of ERISA or
Section 4975 through 4980 of the Code.
(e) VIEWLOGIC PENSION PLANS. Viewlogic does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Viewlogic Pension Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has Viewlogic contributed to or been
required to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in Section 2.13
of the Viewlogic Schedules, no Viewlogic Employee Plan provides, or has any
liability to provide, life insurance, medical or other employee benefits to any
Viewlogic Employee upon his or her retirement or termination of employment for
any reason, except as may be required by statute, and Viewlogic has never
represented, promised or contracted (whether in oral or written form) to any
Viewlogic Employee (either individually or to Viewlogic Employees as a group)
that such Viewlogic Employee(s) would be provided with life insurance, medical
or other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by statute.
(h) EFFECT OF TRANSACTION.
(i) Except as provided in Section 1.6 of this Agreement or as set
forth in Section 2.13 of the Viewlogic Schedules, the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Viewlogic Employee Plan, Viewlogic Employee
Agreement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any Viewlogic Employee.
(ii) Except as set forth in Section 2.13 of the Viewlogic Schedules,
no payment or benefit which will or may be made by Viewlogic or Summit or any of
their respective affiliates with respect to any Viewlogic Employee will be
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code.
(i) EMPLOYMENT MATTERS. Viewlogic and each of its subsidiaries (i) is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
in each location in which Viewlogic or any of its subsidiaries employs persons;
(ii) has withheld all amounts required by law or by agreement to be withheld
from the wages, salaries and other payments to Viewlogic Employees; (iii) is not
liable for any material arrears of wages or any material taxes or any material
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Viewlogic Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice).
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(j) LABOR. No work stoppage, labor strike, material slowdown or lockout
with respect to any of the employees of Viewlogic or its subsidiaries is pending
or, to the knowledge of Viewlogic, threatened. Except as set forth in Section
2.13 of the Viewlogic Schedules, Viewlogic is not involved in or, to the
knowledge of Viewlogic, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Viewlogic Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in material liability to Viewlogic.
Neither Viewlogic nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act which would,
individually or in the aggregate, directly or indirectly result in a material
liability to Viewlogic. Except as set forth in Section 2.13 of the Viewlogic
Schedules, neither Viewlogic nor any of its subsidiaries is presently, nor has
it been in the past, a party to, or bound by, any collective bargaining
agree-ment or union contract with respect to Viewlogic Employees and no
collective bargaining agreement is being negotiated by Viewlogic. To Viewlogic's
knowledge, there are no activities or proceedings of any labor union to organize
any employees of Viewlogic or any of its subsidiaries.
2.14 VIEWLOGIC EMPLOYEES; LABOR MATTERS. To Viewlogic's knowledge, no
employee of Viewlogic has violated any employment contract, patent disclosure
agreement or non-competition agreement between such employee and any former
employer of such employee due to such employee being employed by Viewlogic and
disclosing to Viewlogic trade secrets or proprietary information of such
employer. Viewlogic and its subsidiaries are in compliance in all material
respects with all applicable laws regarding employment practices, terms and
conditions of employment, and wages and hours (including, without limitation,
ERISA, WARN or any similar state or local law).
2.15 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. To Viewlogic's knowledge, except for such
instances as would not reasonably be considered likely to result in Material
Adverse Effect on Viewlogic, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies, (a "HAZARDOUS MATERIAL") are present, as a result of the
actions of Viewlogic or any of its subsidiaries or any affiliate of Viewlogic,
or, to Viewlogic's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that Viewlogic or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. To Viewlogic's knowledge, except for
such instances as would not reasonably be considered likely to result in
Material Adverse Effect on Viewlogic (i) neither Viewlogic nor any of its
subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law, and (ii) neither Viewlogic nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in material violation of any rule, regulation,
treaty or statute promulgated by any Governmental Entity in effect prior to or
as of the date hereof to prohibit, regulate or control Hazardous Materials or
any Hazardous Material Activity.
(c) PERMITS. Viewlogic and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"VIEWLOGIC ENVIRONMENTAL PERMITS") necessary for the conduct of
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Viewlogic's and its subsidiaries' Hazardous Material Activities and other
businesses of Viewlogic and its subsidiaries as such activities and businesses
are currently being conducted. Viewlogic and its subsidiaries are in compliance
in all material respects with the terms of the Viewlogic Environmental Permits.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, claim or injunction is pending, and to
Viewlogic's knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ, claim or injunction has since January 1, 1998 been threatened
by any Governmental Entity against Viewlogic or any of its subsidiaries
concerning any Viewlogic Environmental Permit, Hazardous Material or any
Hazardous Materials Activity of Viewlogic or any of its subsidiaries.
2.16 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in Section
2.16 of the Viewlogic Schedules, neither Viewlogic nor any of its subsidiaries
is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer or member of Viewlogic's Board of Directors, other than those that
are terminable by Viewlogic or any of its subsidiaries on no more than thirty
days notice without material liability or financial obligation, except to the
extent general principles of wrongful termination law may limit Viewlogic's or
any of its subsidiaries' ability to terminate employees at will;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty other than: (i) any
agreement of indemnification or guaranty entered into in the ordinary course of
business, (ii) any agreement of indemnification entered into in connection with
the sale or license of software products in the ordinary course of business,
(iii) any agreement of indemnification entered into in connection with services
performed in the ordinary course of business, and (iv) any indemnification
agreement between Viewlogic or any of its subsidiaries and any of their
respective officers, directors or employees;
(d) any agreement, contract or commitment containing any covenant
limiting in any material respect the right of Viewlogic or any of its
subsidiaries to engage in any line of business which is material to Viewlogic
and its subsidiaries taken as a whole or to compete with any person or granting
any exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by Viewlogic or any of its subsidiaries or
subsequent parent or sister companies after the date of this Agreement of a
material amount of assets not in the ordinary course of business or pursuant to
which Viewlogic has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise;
(f) any joint marketing or development agreement currently in force
under which Viewlogic or any of its subsidiaries have continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without material penalty upon notice of 90 days or less, or any
agreement pursuant to which Viewlogic or any of its subsidiaries have continuing
material obligations to jointly develop any intellectual property that will not
be owned, in whole or in part, by Viewlogic or any of its subsidiaries and which
may not be canceled without material penalty upon notice of 90 days or less;
(g) any agreement, contract or commitment currently in force to provide
source code to any third party for any product or technology that is material to
Viewlogic and its subsidiaries taken as a
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whole, except for (i) any agreement, contract or commitment pursuant to which
source code is provided solely for maintenance purposes, and (ii) any source
code escrow agreement entered into in the ordinary course of business that
solely contains provisions relating to the release of source code if Viewlogic
and/or any of its subsidiaries ceases to do business or fails to provide
appropriate maintenance;
(h) any agreement, contract or commitment currently in force to license
any third party to manufacture or reproduce any Viewlogic product, service or
technology except as a distributor in the ordinary course of business;
(i) any mortgage, indenture, loan or credit agreement, security
agreement or other agreement or instrument relating to the borrowing of money or
extension of credit involving at least $250,000, including guaranties;
(j) any agreement relating to capital expenditures and involving future
payments in excess of $250,000 or
(k) any other agreement that involves $250,000 or more or is not
cancelable without penalty within thirty (30) days.
Each Viewlogic Contract (as defined below) is in full force and effect.
Neither Viewlogic nor any of its subsidiaries, nor to Viewlogic's knowledge, any
other party to a Viewlogic Contract, is in breach, violation or default under,
and neither Viewlogic nor any of its subsidiaries has received notice that it
has breached, violated or defaulted under, any of the material terms or
conditions of any of the agreements, contracts or commitments to which Viewlogic
or any of its subsidiaries is a party or by which it is bound that are required
to be disclosed in the Viewlogic Schedules pursuant to clauses (a) through (k)
above or pursuant to Section 2.9 hereof (any such agreement, contract or
commitment, a "VIEWLOGIC CONTRACT") in such a manner as would permit any other
party to cancel or terminate any such Viewlogic Contract, or would permit any
other party to seek damages, which would be reasonably likely to exceed $250,000
(for any or all of such breaches, violations or defaults, in the aggregate).
2.17 CHANGE OF CONTROL PAYMENTS. Section 2.17 of the Viewlogic Schedules sets
forth each plan or agreement pursuant to which any amounts may become payable
(whether currently or in the future) to current or former employees, officers
and directors of Viewlogic as a result of or in connection with the Merger.
2.18 STATEMENTS; JOINT PROXY STATEMENT/PROSPECTUS. The information supplied
by Viewlogic for inclusion in the Registration Statement (as defined in Section
3.4(b)) will not at the time the Registration Statement is filed with the
Securities and Exchange Commission (the "SEC") and at the time it becomes
effective under the Securities Act of 1933, as amended ("SECURITIES ACT")
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by Viewlogic for inclusion in
the joint proxy statement/prospectus to be sent to the stockholders of both
Viewlogic and Summit in connection with the meeting or action by written consent
of Viewlogic's stockholders (the "VIEWLOGIC STOCKHOLDERS' MEETING") and the
meeting of Summit's stockholders (the "SUMMIT STOCKHOLDERS' MEETING"),
respectively (such joint proxy statement/prospectus as amended or supplemented
is referred to herein as the "JOINT PROXY STATEMENT") will not, on the date the
Joint Proxy Statement is first mailed to Viewlogic's stockholders or Summit's
stockholders or at the time of the Viewlogic Stockholders' Meeting or the Summit
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
content of the Joint Proxy Statement furnished by Viewlogic to Summit for
inclusion in the Joint Proxy Statement will comply as to form in all material
respects with the provisions of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and the rules and regulations thereunder. If at any
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time prior to the Effective Time any event relating to Viewlogic or any of its
affiliates, officers or directors should be discovered by Viewlogic which is
required to be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement, Viewlogic shall promptly inform Summit
of the facts relating to such event. Notwithstanding the foregoing, Viewlogic
makes no representation or warranty with respect to any information supplied by
Summit or Merger Sub which is contained in any of the foregoing documents.
2.19 BOARD APPROVAL. The Viewlogic Board has, as of the date of this
Agreement, determined (i) that the Merger is in the best interests of Viewlogic
and its stockholders, and (ii) subject to the terms and conditions set forth in
this Agreement, to recommend that the stockholders of Viewlogic approve and
adopt this Agreement and approve the Merger.
2.20 SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW NOT APPLICABLE. The
Viewlogic Board has taken all actions so that the restrictions contained in
Section 203 of the Delaware General Corporation Law applicable to a "business
combination" (as defined in such Section 203) will not apply to the execution,
delivery or performance of this Agreement or to the consummation of the Merger
or the other transactions contemplated by this Agreement.
2.21 REPRESENTATIONS COMPLETE. None of the representations or warranties made
by Viewlogic (as modified by the Viewlogic Schedules), nor any statement made in
the Viewlogic Schedules or certificate furnished by Viewlogic pursuant to this
Agreement, or furnished by Viewlogic for inclusion in or in connection with
documents to be mailed or delivered to stockholders of Viewlogic in connection
with soliciting their consent to this Agreement and the transactions
contemplated hereby, contains or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SUMMIT AND MERGER SUB
Summit and Merger Sub represent and warrant to Viewlogic as of the date
hereof and as of immediately prior to the Closing, subject only to the
exceptions specifically disclosed in writing in the disclosure schedule (which
such exceptions shall specifically reference the appropriate section number of
the representations and warranties of Summit to be qualified by such exceptions;
PROVIDED, THAT, if a reasonable person would determine that any such exception
contains enough information to qualify or otherwise apply to other
representations and warranties of Summit, such exceptions shall qualify or
otherwise apply to such other representations and warranties of Summit) supplied
by Summit to Viewlogic dated as of the date hereof and certified by a duly
authorized officer of Summit and, with respect to exceptions as to Merger Sub,
Merger Sub (the "SUMMIT SCHEDULES"), the following are true and correct:
3.1 ORGANIZATION OF SUMMIT.
(a) Summit and each of its subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted; and is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so qualified would not have a Material
Adverse Effect (as defined in Section 3.1(d)) on Summit.
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(b) Summit has delivered to Viewlogic a true and complete list of all of
Summit's subsidiaries as of the date of this Agreement, indicating the
jurisdiction of incorporation of each subsidiary and Summit's equity interest
therein.
(c) Summit has delivered or made available to Viewlogic a true and
complete copy of the Certificate of Incorporation and Bylaws of Summit and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither Summit nor
any of its subsidiaries is in violation of any of the provisions of its charter
or bylaws or similar governing instruments.
(d) When used in connection with Summit, the term "Material Adverse
Effect" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Summit and its subsidiaries,
taken as a whole (except for those changes, events and effects that are directly
caused by (i) conditions affecting the United States economy as a whole, (ii)
conditions affecting the industry in which Summit competes as a whole, or (iii)
conditions resulting from announcement and pendency of the Merger).
3.2 SUMMIT CAPITAL STRUCTURE. The authorized capital stock of Summit
consists of (a) 30,000,000 shares of Common Stock, $0.01 par value per share, of
which there were 15,695,290 shares issued and outstanding and none held in
treasury and (b) 5,000,000 shares of Preferred Stock, $0.01 par value per share,
of which there are no shares issued or outstanding. All outstanding shares of
Summit Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of Summit or any agreement or document to
which Summit is a party or by which it is bound. As of the date hereof, Summit
had reserved an aggregate of 3,408,319 shares of Summit Common Stock, net of
exercises, for issuance to employees, consultants and non-employee directors
pursuant to the Summit Stock Option Plans. As of the date hereof, there were
options outstanding to purchase an aggregate of 2,198,602 shares of Summit
Common Stock, issued to employees, consultants and non-employee directors
pursuant to the Summit Stock Option Plans. All shares of Summit Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, would be duly
authorized, validly issued, fully paid and nonassessable. The Summit Schedules
list for each person who holds options to acquire shares of Summit Common Stock
as of the date hereof, the name of the holder of such option, the exercise price
of such option, the number of shares as to which such option had vested at such
date, the vesting schedule for such option and whether the exercisability of
such option will be accelerated in any way by the transactions contemplated by
this Agreement. The authorized capital stock of Merger Sub consists of 1,000
shares of Common Stock, $0.01 par value per share, of which there are 1,000
shares issued and outstanding, all of which are held by Summit. All outstanding
shares of Merger Sub are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of Merger Sub or any agreement or
document to which Merger Sub is a party or by which it is bound.
3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 3.2 or the Summit Schedules, there are no equity securities, partnership
interests or similar ownership interests of any class of Summit capital stock,
or any securities exchangeable or convertible into or exercisable for such
equity securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for securities Summit owns,
directly or indirectly through one or more subsidiaries, as of the date of this
Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of any subsidiary of Summit, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except as set forth in Section 3.2 or the Summit
Schedules, there are no options, warrants, equity securities, partnership
interests or similar ownership
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interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Summit or any of its subsidiaries is a
party or by which it or any of its subsidiaries is bound obligating Summit or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Summit or any of its
subsidiaries or obligating Summit or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. As of the date of this
Agreement, except as contemplated by this Agreement, there are no registration
rights and there are no voting trusts, proxies or other agreements or
understandings to which Summit is a party or by which it is bound with respect
to any equity security of any class of Summit capital stock or with respect to
any equity security, partnership interest or similar ownership interest of any
class of any of its subsidiaries. With respect to the transactions contemplated
by this Agreement, stockholders of Summit are not entitled to appraisal rights
under applicable state law.
3.4 AUTHORITY.
(a) Summit and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the requisite approval of this Agreement and the
transactions contemplated hereby by Summit's stockholders. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Summit and Merger Sub, subject only to the filing of the Certificate of
Merger pursuant to Delaware Law and the approval of Summit's stockholders of (i)
the increase in the number of authorized shares of common stock under Summit's
Certificate of Incorporation to such amount as is necessary and appropriate to
effect the transactions contemplated by this Agreement, and (ii) the issuance of
shares of Summit Common Stock by virtue of the Merger (collectively, the "Summit
Proposals"). This Agreement has been duly executed and delivered by Summit and
Merger Sub and, assuming the due authorization, execution and delivery by
Viewlogic, constitutes the valid and binding obligation of Summit and Merger
Sub, enforceable against Summit and Merger Sub in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
Summit and Merger Sub does not, and the performance of this Agreement by Summit
and Merger Sub will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of Summit or the equivalent organizational documents of
any of its subsidiaries, (ii) subject to obtaining the approval of Summit's
stockholders of the Summit Proposals as contemplated in Section 5.2 and
compliance with the requirements set forth in Section 3.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Summit or any of its subsidiaries or by which Summit or any of its
subsidiaries or any of their respective properties is bound or affected, or
(iii) result in any material breach of or constitute a material default (or an
event that with notice or lapse of time or both would become a material default)
under, or impair Summit's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a material lien or
encumbrance on any of the material properties or assets of Summit or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Summit or any of its subsidiaries is a party or by which
Summit or any of its subsidiaries or its or any of their respective properties
are bound or affected. The Summit Schedules list all consents, waivers and
approvals under any of Summit's or any of its subsidiaries' agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate not obtained, would result in a material loss of benefits or
any material liability to Summit, Summit's subsidiaries, Viewlogic or the
Surviving Corporation as a result of the Merger.
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(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained or
made by Summit or Merger Sub in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of a Form S-4 (or any similar successor form thereto)
Registration Statement (the "REGISTRATION STATEMENT") with the SEC in accordance
with the Securities Act, (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (iii) the filing of a Joint Proxy
Statement with the SEC in accordance with the Exchange Act, (iv) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal, foreign and state securities (or
related) or antitrust laws and the securities or antitrust laws of any foreign
country, and (v) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a Material Adverse
Effect on Summit or would otherwise have a material adverse effect on the
ability of the parties to consummate the Merger.
3.5 SEC FILINGS; SUMMIT FINANCIAL STATEMENTS.
(a) Summit has filed all forms, reports and documents required to be
filed by Summit with the SEC since October 18, 1996 and has made available to
Viewlogic such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that Summit may file
subsequent to the date hereof) are referred to herein as the "SUMMIT SEC
REPORTS." As of their respective dates, the Summit SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Summit SEC Reports and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Since the date of the
latest filings with the SEC, no event has occurred which would require Summit to
file a current report on Form 8-K under the Exchange Act. None of Summit's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Summit SEC Reports (the
"SUMMIT FINANCIALS"), including any Summit SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (z) fairly
presented in all material respects the consolidated financial position of Summit
and its subsidiaries as at the respective dates thereof and the consolidated
results of Summit's operations and cash flows for the periods indicated and
consistent with each other, subject in the case of unaudited financial
statements, to the absence of footnotes and normal year-end adjustments, which
will not be material in amount. The balance sheet of Summit contained in Summit
SEC Reports as of December 31, 1998 is hereinafter referred to as the "SUMMIT
BALANCE SHEET." Except as disclosed in the Summit Financials or in the
consolidated unaudited balance sheet of Summit as of June 30, 1999 previously
delivered to Viewlogic, since the date of the Summit Balance Sheet neither
Summit nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of Summit and its
subsidiaries taken as a whole, except for (i) liabilities identified in the
Summit Balance Sheet, or (ii) liabilities incurred since the date of the Summit
Balance Sheet in the ordinary course of business consistent with past practice
and immaterial in the aggregate.
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(c) Summit has heretofore furnished to Viewlogic a true and complete
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Summit with the SEC pursuant to
the Securities Act or the Exchange Act.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Summit
Balance Sheet there has not been:
(a) any Material Adverse Effect on Summit and its subsidiaries, taken as
a whole;
(b) any material change by Summit in its accounting methods, principles
or practices, except as required by concurrent changes in GAAP;
(c) any material revaluation by Summit of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business;
(d) any material transaction by Summit except in the ordinary course of
business;
(e) any amendments or changes to the Certificate of Incorporation or
Bylaws of Summit;
(f) any capital expenditures or commitments by Summit other than in the
ordinary course of business;
(g) any destruction of, damage to or loss of any material assets,
business or customer of Viewlogic (whether or not covered by insurance);
(h) any declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of Summit, or any direct or
indirect redemption, purchase or other acquisition by Summit of any of its
capital stock;
(i) any sale, lease, license or other disposition of any of the assets
or properties of Summit, except in the ordinary course of business, consistent
with past practices;
(j) any amendment or termination of any material contract, agreement or
license to which Summit is a party or by which it is bound, other than in the
ordinary course of business;
(k) any loan by Summit to any person or entity, incurrence by Summit of
any indebtedness, guarantee by Summit of any indebtedness, issuance or sale of
any debt securities of Summit or guarantee of any debt securities of others
except for advances to employees for travel and business expenses in the
ordinary course of business, consistent with past practice;
(l) any waiver or release of any material right or claim of Summit,
including any writeoff or other compromise of any account receivable of Summit;
(m) any issuance or sale by Summit of any of its shares of capital
stock, or securities exchangeable for, convertible or exercisable therefor, or
of any other of its securities; and
(n) any negotiation or agreement by Summit or any officers or employees
thereof to do any of the things described in the preceding clauses (a) through
(m) (other than negotiations with Viewlogic and its representatives regarding
the transactions contemplated by this Agreement).
3.7 TAX AND OTHER RETURNS AND REPORTS.
(a) TAX RETURNS AND AUDITS. Except as set forth in Section 3.7 of the
Summit Schedules:
(i) Each of Summit and each of its subsidiaries has prepared and
filed all Returns relating to any and all Taxes concerning or attributable to
Summit and each of its subsidiaries or their operations and such Returns are
true and correct in all material respects and have been completed in accordance
with applicable law.
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(ii) Each of Summit and its subsidiaries (A) has paid or accrued all
Taxes it is required to pay or accrue and (B) has withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) Neither Summit nor any of its subsidiaries has been delinquent
in the payment of any Tax nor is there any Tax deficiency outstanding, proposed
or assessed against Summit or any of its subsidiaries, nor has Summit or any of
its subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Summit or any of
its subsidiaries is presently in progress, nor has Summit or any of its
subsidiaries been notified of any request for such an audit or other
examination.
(v) Neither Summit nor any of its subsidiaries has any material
liability for unpaid federal, state, local or foreign Taxes which has not been
accrued or reserved against in accordance with GAAP on the Summit Balance Sheet
or accrued in accordance with GAAP in the ordinary course of business since the
date of the Summit Balance Sheet, whether asserted or unasserted, contingent or
otherwise, and neither Summit nor any of its subsidiaries has knowledge of any
basis for the assertion of any such liability attributable to the assets or
operations of Summit or any of its subsidiaries.
(vi) Summit has provided to Viewlogic copies of all federal and
state income and all state sales and use Tax Returns for all periods since the
date of Summit's incorporation, except those as to which applicable statues of
limitations have expired and no tolling of the statute of limitations has been
executed.
(vii) There are no Liens on any of the assets or properties of Summit
or any of its subsidiaries relating to or attributable to Taxes.
(viii) Neither Summit nor any of its subsidiaries has knowledge of any
reasonable basis for any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on any of the assets or
properties of Summit or any of its subsidiaries.
(ix) None of Summit's or any of its subsidiaries' assets are treated
as "tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) is no contract, agreement, plan or arrangement, including but
not limited to the provisions of this Agreement, covering any employee or former
employee of Summit or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Section 280G or 162 of the Code.
(xi) Summit nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Summit or any of its subsidiaries.
(xii) Summit nor any of its subsidiaries is a party to a tax sharing
or allocation agreement nor does Summit nor any of its subsidiaries owe any
amount under any such agreement.
(xiii) Summit nor any of its subsidiaries has been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
3.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Summit Schedules list the real property owned by Summit or any
of its subsidiaries as of the date of this Agreement. The Summit Schedules list
all real property leases to which Summit or any of its subsidiaries is a party
as of the date of this Agreement and each amendment thereto that is in effect as
of the date of this Agreement. All such current leases are in full force and
effect, are
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valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default) that
would give rise to a material claim.
(b) Each of Summit and its subsidiaries has good and valid title to, or,
in the case of leased properties and assets, valid leasehold interests in, all
of its material tangible properties and assets, real, personal and mixed, used
or held for use in its business, free and clear of any Liens, except as
reflected in the Summit Financials and except for liens for taxes not yet due
and payable and such Liens or other imperfections of title and encumbrances, if
any, which are not material in, amount, and which do not materially detract from
the value, or materially interfere with the present use, of the property subject
thereto or affected thereby.
3.9 INTELLECTUAL PROPERTY. For the purposes of this Agreement, the following
terms have the following definitions:
"SUMMIT INTELLECTUAL PROPERTY" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, Summit or any of its
subsidiaries.
(a) Section 3.9 of the Summit Schedules lists all of the Registered
Intellectual Property owned by, or filed in the name of, Summit or any of its
subsidiaries (the "SUMMIT REGISTERED INTELLECTUAL PROPERTY") and all patent,
copyright, trademark or industrial design registrations or applications that
have been withdrawn, cancelled or abandoned since January 1, 1998.
(b) Section 3.9 of the Summit Schedules lists all proceedings or actions
before any court, tribunal (including the PTO) or equivalent authority anywhere
in the world) related to any Summit Intellectual Property.
(c) Summit (or its subsidiaries, as applicable) has complied in all
material respects with all applicable disclosure requirements, and has not
committed any fraudulent act, in the application for and maintenance of any
patent, trademark or copyright of Summit.
(d) Other than restrictions imposed by laws of general applicability or
limitations on use inherent in the content of the registrations themselves, no
Summit Intellectual Property owned by Summit or product or service of Summit or
its subsidiaries is subject to any proceeding or outstanding decree, order,
judgment, agreement or stipulation restricting in any manner the use, transfer,
or licensing thereof by Summit or its subsidiaries, or which may affect the
validity, use or enforceability of such Summit Intellectual Property.
(e) Each item of Summit Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees currently
due in connection with such Registered Intellectual Property have been paid and
all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(f) Except as set forth in Section 3.9 of the Summit Schedules, to
Summit's knowledge: (i) Summit or a Summit subsidiary owns and has good and
exclusive title to, or has license to, each item of Summit Intellectual
Property, including all Summit Registered Intellectual Property listed in
Section 3.9 of the Summit Schedules, free and clear of any material Lien
(excluding licenses and related restrictions); and (ii) Summit is the exclusive
owner of all material trademarks and trade names used in connection with the
operation or conduct of the business of Summit or its subsidiaries, including
the sale of any products or the provision of any services by Summit or its
subsidiaries, but excluding trademarks and trade names commonly identified by
Summit or its subsidiaries as the property of a third party (e.g. "Microsoft
NT").
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(g) Summit owns exclusively, and has good title to, or has an
irrevocable, fully paid license to all copyrighted works that are Summit
products (other than third-party software code to which Summit holds valid and
enforceable distribution licenses) or which Summit otherwise expressly purports
to own.
(h) To Summit's knowledge, Summit or its subsidiaries owns or has the
right to use all Intellectual Property necessary to the conduct of its business
as it currently is conducted, including, without limitation, the design,
development, manufacture and sale of all products currently manufactured or sold
by Summit or its subsidiaries and the performance of all services provided by
Summit or its subsidiaries.
(i) To the extent that any material work, invention or material has been
developed or created by a third party for Summit, Summit has a written agreement
with such third party with respect thereto and Summit thereby either (i) has
obtained ownership of, and is the exclusive owner of, or (ii) has obtained a
license to all such third party's Intellectual Property in such work, material
or invention by operation of law or by valid assignment, to the extent it is
legally possible to do so.
(j) Except as set forth in Section 3.9 of the Summit Schedules or in the
ordinary course of business, (i) Summit has not transferred ownership of, or
granted any rights to use any of the Summit Intellectual Property; and (ii)
Summit has not granted to any person, nor authorized any person to retain, any
rights in the Summit Intellectual Property.
(k) Section 3.9 of the Summit Schedules lists all material contracts,
licenses and agreements to which Summit is a party (i) with respect to Summit
Intellectual Property licensed or transferred to any third party (other than
end-user licenses in the ordinary course); or (ii) pursuant to which a third
party has licensed or transferred any material Intellectual Property to Summit.
(l) Following the Closing Date, Summit will be permitted to exercise all
of Summit's material rights under the contracts, licenses and agreements
required to be listed in Section 3.9 of the Summit Schedules to the same extent
Summit would have been able had the consummation of the transactions
contemplated by this Agreement not occurred and without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Summit would otherwise be required to pay or which are not
material in amount.
(m) Section 3.9 of the Summit Schedules lists or specifically refers to
all contracts, licenses and agreements between Summit and any third party
wherein or whereby Summit has agreed to, or assumed, any obligation or duty to
warrant, indemnify, hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement or misappropriation by Summit or such
third party of the Intellectual Property of any third party, except such
contracts entered into in the ordinary course of Summit's business.
(n) Summit has not received written notice from any third party that the
operation of the business of Summit or any act, product or service of Summit,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(o) Except as set forth in Section 3.9 of the Summit Schedules, to the
knowledge of Summit, no person has or is infringing or misappropriating any
Summit Intellectual Property.
(p) Except as set forth in Section 3.9 of the Summit Schedules, there
have been, and are, no claims asserted against Summit or its subsidiaries or, to
its knowledge, against any customer of Summit, related to any product or service
of Summit or its subsidiaries.
(q) Each of Summit and its subsidiaries has and has taken commercially
reasonable efforts to enforce a policy requiring each employee and contractor to
execute a proprietary information/ confidentiality agreement substantially in
Summit's standard forms for employees and contractors, respectively, and all
current and former employees and contractors of Summit and its subsidiaries have
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executed such an agreement, except where the failure to do so could not
reasonably expected to be result in a Material Adverse Effect on Summit.
3.10 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Except for conflicts, violations and defaults that (individually or
in the aggregate) would not cause Summit or its subsidiaries to lose benefits
aggregating to $250,000 or more, or cause Summit or its subsidiaries to incur
liabilities aggregating to $250,000 or more, neither Summit nor any of its
subsidiaries is, in any material respect, in conflict with, or in default or in
violation of (i) any law, rule, regulation, order, judgment or decree applicable
to Summit or any of its subsidiaries or by which Summit or any of its
subsidiaries or any of their respective properties is bound or affected, or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Summit or any of
its subsidiaries is a party or by which Summit or any of its subsidiaries or its
or any of their respective properties is bound or affected. No investigation or
review by any Governmental Entity is pending or, to Summit's knowledge, has
since January 1, 1998 been threatened against Summit or any of its subsidiaries,
nor, to Summit's knowledge, has any Governmental Entity indicated an intention
to conduct an investigation of Summit or any of its subsidiaries. There is no
material agreement, judgment, injunction, order or decree binding upon Summit or
any of its subsidiaries which has the effect of prohibiting or materially
impairing any business practice of Summit or any of its subsidiaries, any
acquisition of material property by Summit or any of its subsidiaries or the
conduct of business by Summit as currently conducted.
(b) Summit and its subsidiaries hold, to the extent legally required,
all permits, licenses, variances, exemptions, orders and approvals from
governmental authorities that are material to and required for the operation of
the business of Summit as currently conducted (collectively, the "SUMMIT
PERMITS"). Summit and its subsidiaries are in compliance in all material
respects with the terms of the Summit Permits.
3.11 LITIGATION. There is no action, suit, proceeding, claim, arbitration or
investigation pending, and to Summit's knowledge, threatened against Summit or
any of its subsidiaries which would reasonably be expected to have a Material
Adverse Effect on Summit or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement.
No Governmental Entity has at any time since January 1, 1998 challenged or
questioned the legal right of Summit to manufacture, offer or sell any of its
products.
3.12 BROKERS' AND FINDERS' FEES. Summit has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.13 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) Definitions. With the exception of the definition of "Affiliate" set
forth in Section 3.13(a)(i) below (such definition shall only apply to this
Section 3.13), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "AFFILIATE," as used in this Section 3.13, shall mean any other
person or entity under common control with Summit within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "SUMMIT EMPLOYEE PLAN" shall refer to any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by Summit or any Affiliate for the benefit
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of any "Summit Employee" (as defined below), and pursuant to which Summit or any
Affiliate has or may have any material liability contingent or otherwise;
(iii) "SUMMIT EMPLOYEE" shall mean any current, former, or retired
employee, officer, or director of Summit or any Affiliate;
(iv) "SUMMIT EMPLOYEE AGREEMENT" shall refer to each management,
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between Summit or any Affiliate and
any Summit Employee or consultant; and
(v) "SUMMIT PENSION PLAN" shall refer to each Summit Employee Plan
which is an "employee pension benefit plan", within the meaning of Section 3(2)
of ERISA.
(b) SCHEDULE. Section 3.13(b) of the Summit Schedules contains a true
and complete list of each Summit Employee Plan and each Summit Employee
Agreement, together with a schedule of all liabilities, whether or not accrued,
under each such Summit Employee Plan or Summit Employee Agreement. Summit does
not have any plan or commitment to establish any new Summit Employee Plan or
Summit Employee Agreement, to modify any Summit Employee Plan or Summit Employee
Agreement (except to the extent required by law or to conform any such Summit
Employee Plan or Summit Employee Agreement to the requirements of any applicable
law, in each case as previously disclosed to Summit in writing, or as required
by this Agreement), or to enter into any Summit Employee Plan or Summit Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
(c) DOCUMENTS. Summit has made available to Summit (i) true and complete
copies of all documents embodying or relating to each Summit Employee Plan and
each Summit Employee Agreement, including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Summit Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Summit Employee Plan or related trust; (iv) if
Summit Employee Plan is funded, the most recent annual and periodic accounting
of Summit Employee Plan assets; (v) the most recent summary plan description
together with the most recent summary of material modifications, if any,
required under ERISA with respect to each Summit Employee Plan; (vi) all IRS
determination letters and rulings relating to Summit Employee Plans and copies
of all applications and correspondence to or from the IRS or the DOL with
respect to any Summit Employee Plan; (vii) all communications material to any
Summit Employee or Summit Employees relating to any Summit Employee Plan and any
proposed Summit Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to Summit; and (viii) all registration statements and
prospectuses prepared in connection with each Summit Employee Plan.
(d) SUMMIT EMPLOYEE PLAN COMPLIANCE. Except as set forth in Section
3.13(d) of the Summit Schedules, (i) Summit has performed in all material
respects all obligations required to be performed by it under each Summit
Employee Plan and each Summit Employee Plan has been established and maintained
in all material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) no "prohibited transaction", within the
meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with
respect to any Summit Employee Plan; (iii) there are no actions, suits or claims
pending, or, to the knowledge of Summit, threatened or anticipated (other than
routine claims for benefits) against any Summit Employee Plan or against the
assets of any Summit Employee Plan; and (iv) each Summit Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Summit, Viewlogic, the Surviving
Corporation or any Affiliates (other than ordinary administration expenses
typically incurred in a termination event and benefits accrued through the date
of such amendment, termination or
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discontinuance); (v) there are no inquiries or proceedings pending or, to the
knowledge of Summit or any affiliates, threatened by the IRS or DOL with respect
to any Summit Employee Plan; and (vi) neither Summit nor any Affiliate is
subject to any penalty or tax with respect to any Summit Employee Plan under
Section 502(i) of ERISA or Section 4975 through 4980 of the Code.
(e) SUMMIT PENSION PLANS. Summit does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Summit Pension Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has Summit contributed to or been
requested to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in Section
3.13(g) of the Summit Schedules, no Summit Employee Plan provides, or has any
liability to provide, life insurance, medical or other employee benefits to any
Summit Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and Summit has never represented,
promised or contracted (whether in oral or written form) to any Summit Employee
(either individually or to Summit Employees as a group) that such Summit
Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of employment, except to
the extent required by statute.
(h) EFFECT OF TRANSACTION.
(i) Except as provided in Section 1.6 of this Agreement or as set
forth on Section 3.13(h)(i) of the Summit Schedules, the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Summit Employee Plan, Summit Employee Agreement,
trust or loan that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any Summit
Employee.
(ii) Except as set forth in Section 3.13(h)(ii) of the Summit
Schedules, no payment or benefit which will or may be made by Summit, Viewlogic
or any of their respective affiliates with respect to any Summit Employee will
be characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(i) EMPLOYMENT MATTERS. Summit and each of its subsidiaries (i) is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
in each location in which Summit or any of its subsidiaries employs persons;
(ii) has withheld all amounts required by law or by agreement to be withheld
from the wages, salaries and other payments to Summit Employees; (iii) is not
liable for any material arrears of wages or any material taxes or any material
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Summit Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice).
(j) LABOR. No work stoppage, labor strike material slow down or lockout with
respect to any of the employees of Summit or its subsidiaries is pending or, to
the knowledge of Summit, threatened. Except as set forth in Section 3.13(j) of
the Summit Schedules, Summit is not involved in or, to the knowledge of Summit,
threatened with, any labor dispute, grievance, or litigation relating to labor,
safety or discrimination matters involving any Summit Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in material liability to Summit. Neither Summit nor any of its
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subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly result in a material liability to Summit. Except as set
forth in Section 3.13(j) of the Summit Schedules, neither Summit nor any of its
subsidiaries is presently, nor has it been in the past, a party to, or bound by,
any collective bargaining agreement or union contract with respect to Summit
Employees and no collective bargaining agreement is being negotiated by Summit.
To Summit's knowledge, there are no activities or proceedings of any labor union
to organize any employees of Summit or any of its subsidiaries.
3.14 SUMMIT EMPLOYEES; LABOR MATTERS. To Summit's knowledge, no employee of
Summit has violated any employment contract, patent disclosure agreement or
non-competition agreement between such employee and any former employer of such
employee due to such employee being employed by Summit and disclosing to Summit
trade secrets or proprietary information of such employer. Summit and its
subsidiaries are in compliance in all material respects with all applicable laws
regarding employment practices, terms and conditions of employment, and wages
and hours (including, without limitation, ERISA, WARN or any similar state or
local law).
3.15 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. To Summit's knowledge, except for such instances
as would not reasonably be considered likely to result in Material Adverse
Effect on Summit, no underground storage tanks and no Hazardous Materials, but
excluding office and janitorial supplies, are present, as a result of the
actions of Summit or any of its subsidiaries or any affiliate of Summit, or, to
Summit's knowledge, as a result of any actions of any third party or otherwise,
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that Summit or any of its subsidiaries has at
any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. To Summit's knowledge, except for
such instances as would not reasonably be considered likely to result in
Material Adverse Effect on Summit (i) neither Summit nor any of its subsidiaries
has transported, stored, used, manufactured, disposed of, released or exposed
its employees or others to Hazardous Materials in violation of any law, and (ii)
neither Summit nor any of its subsidiaries has engaged in any Hazardous
Materials Activities in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.
(c) PERMITS. Summit and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the "SUMMIT
ENVIRONMENTAL PERMITS") necessary for the conduct of Summit's and its
subsidiaries' Hazardous Material Activities and other businesses of Summit and
its subsidiaries as such activities and businesses are currently being
conducted. Summit and its subsidiaries are in compliance in all material
respects with the terms of the Summit Environmental Permits.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, claim or injunction is pending, and to
Summit's knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ, claim or injunction has since January 1, 1998 been threatened
by any Governmental Entity against Summit or any of its subsidiaries concerning
any Summit Environmental Permit, Hazardous Material or any Hazardous Materials
Activity of Summit or any of its subsidiaries.
3.16 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in Section
3.16 of the Summit Schedules, neither Summit nor any of its subsidiaries is a
party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer or director level employee or member of Summit's Board of Directors,
other than those that are terminable by Summit or any of its subsidiaries on no
more than thirty days notice without material liability or financial obligation,
except to the extent general principles of wrongful termination law may limit
Summit's or any of its subsidiaries' ability to terminate employees at will;
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(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty other than: (i) any
agreement of indemnification or guaranty entered into in the ordinary course of
business, (ii) any agreement of indemnification entered into in connection with
the sale or license of software products in the ordinary course of business,
(iii) any agreement of indemnification entered into in connection with services
performed in the ordinary course of business, and (iv) any indemnification
agreement between Summit or any of its subsidiaries and any of their respective
officers, directors or employees;
(d) any agreement, contract or commitment containing any covenant
limiting in any material respect the right of Summit or any of its subsidiaries
to engage in any line of business which is material to Summit and its
subsidiaries taken as a whole or to compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by Summit or any of its subsidiaries or
subsequent parent or sister companies after the date of this Agreement of a
material amount of assets not in the ordinary course of business or pursuant to
which Summit has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise;
(f) any joint marketing or development agreement currently in force
under which Summit or any of its subsidiaries have continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without material penalty upon notice of 90 days or less, or any
agreement pursuant to which Summit or any of its subsidiaries have continuing
material obligations to jointly develop any intellectual property that will not
be owned, in whole or in part, by Summit or any of its subsidiaries and which
may not be canceled without material penalty upon notice of 90 days or less;
(g) any agreement, contract or commitment currently in force to provide
source code to any third party for any product or technology that is material to
Summit and its subsidiaries taken as a whole, except for (i) any agreement,
contract or commitment pursuant to which source code is provided solely for
maintenance purposes, and (ii) any source code escrow agreement entered into in
the ordinary course of business that solely contains provisions relating to the
release of source code if Summit and/or any of its subsidiaries ceases to do
business or fails to provide appropriate maintenance; or
(h) any agreement, contract or commitment currently in force to license
any third party to manufacture or reproduce any Summit product, service or
technology except as a distributor in the ordinary course of business;
(i) any mortgage, indenture, loan or credit agreement, security
agreement or other agreement or instrument relating to the borrowing of money or
extension of credit involving at least $250,000, including guaranties;
(j) any agreement relating to capital expenditures and involving future
payments in excess of $250,000 or
(k) any other agreement that involves $250,000 or more or is not
cancelable without penalty within thirty (30) days.
Each Summit Contract (as defined below) is in full force and effect. Neither
Summit nor any of its subsidiaries, nor to Summit's knowledge any other party to
a Summit Contract, is in breach, violation
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or default under, and neither Summit nor any of its subsidiaries has received
notice that it has breached, violated or defaulted under, any of the material
terms or conditions of any of the agreements, contracts or commitments to which
Summit or any of its subsidiaries is a party or by which it is bound that are
required to be disclosed in the Summit Schedules pursuant to clauses (a) through
(k) above or pursuant to Section 3.9 hereof (any such agreement, contract or
commitment, a "SUMMIT CONTRACT") in such a manner as would permit any other
party to cancel or terminate any such Summit Contract, or would permit any other
party to seek damages, which would be reasonably likely to exceed $250,000 (for
any or all of such breaches, violations or defaults, in the aggregate).
3.17 CHANGE OF CONTROL PAYMENTS. Section 3.18 of the Summit Schedules sets
forth each plan or agreement pursuant to which any amounts may become payable
(whether currently or in the future) to current or former employees, officers
and directors of Summit as a result of or in connection with the Merger.
3.18 STATEMENTS; JOINT PROXY STATEMENT/PROSPECTUS. The information supplied
by Summit and Merger Sub for inclusion in the Registration Statement will not at
the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by Summit and Merger Sub for inclusion in the Joint Proxy
Statement will not, on the date the Joint Proxy Statement is first mailed to
Viewlogic's stockholders or Summit's stockholders or at the time of the
Viewlogic Stockholders' Meeting or the Summit Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The content of the Joint Proxy Statement
furnished by Summit for inclusion in the Joint Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. If at any time prior to the Effective Time any
event relating to Summit or any of its affiliates, officers or directors should
be discovered by Summit is required to be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement, Summit
shall promptly inform Viewlogic of the facts relating to such event.
Notwithstanding the foregoing, neither Summit nor Merger Sub makes any
representation or warranty with respect to any information supplied by Viewlogic
which is contained in any of the foregoing documents.
3.19 BOARD APPROVAL. The Summit and Merger Sub Boards have, as of the date of
this Agreement, determined (i) that the Merger is in the best interests of
Summit and its stockholders, and (ii) subject to the terms and conditions set
forth in this Agreement, to recommend that the stockholders of Summit approve
the issuance of shares of Summit Common Stock by virtue of the Merger.
3.20 FAIRNESS OPINION. Summit's Board of Directors has received a written
opinion from Dain Rauscher Wessels dated as of September 14, 1999, to the effect
that as of the date hereof, the Exchange Ratio is fair to Summit's stockholders
from a financial point of view and has delivered to Viewlogic a copy of such
opinion.
3.21 SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW NOT APPLICABLE. The
Summit Board has taken all actions so that the restrictions contained in Section
203 of the Delaware General Corporation Law applicable to a "business
combination" (as defined in such Section 203) will not apply to the execution,
delivery or performance of this Agreement or to the consummation of the Merger
or the other transactions contemplated by this Agreement.
3.22 REPRESENTATIONS COMPLETE. None of the representations or warranties made
by Summit or Merger Sub (as modified by the Summit Schedules), nor any statement
made in the Summit Schedules or certificate furnished by Summit or Merger Sub
pursuant to this Agreement, or furnished by Summit for inclusion in or in
connection with documents to be mailed or delivered to stockholders of Summit in
connection with soliciting their consent to this Agreement and the transactions
contemplated hereby,
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contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, Viewlogic (which for the purposes of this
Article IV shall include Viewlogic and each of its subsidiaries) and Summit
(which for the purposes of this Article IV shall include Summit and each of its
subsidiaries) shall, except to the extent that the other of them shall otherwise
consent in writing, carry on its business in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, each of Viewlogic and Summit will promptly notify the
other of any material event involving its business or operations.
In addition and without limiting the generality of the foregoing and
notwithstanding the foregoing, except as expressly contemplated or permitted by
the terms of this Agreement, without the prior written consent of the other,
neither Viewlogic nor Summit shall during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, do any of the following and neither
Viewlogic nor Summit shall permit its subsidiaries to do any of the following
(except as otherwise required by law):
(a) Other than as required pursuant to an agreement or document
described in the Viewlogic Schedules or the Summit Schedules or as a result of
the transactions contemplated by this Agreement, waive any stock repurchase
rights, accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant or
director stock plans or authorize cash payments in exchange for any options
granted under any of such plans; PROVIDED, HOWEVER, that Summit shall use its
reasonable best efforts (including without limitation the payment of reasonable
consideration) to cancel (with the written consent of the optionees given for
consideration actually paid, copies of such consents and proof of such payments
to be presented to Viewlogic prior to the Effective Time) options exercisable
for up to 250,000 shares of Common Stock under its option plans at any time
prior to the Effective Time, as set forth in Section 5.11;
(b) grant any severance or termination pay in excess of $10,000 in any
one case or $100,000 in the aggregate to any officer or employee except payments
in amounts consistent with policies and past practices or pursuant to written
agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to the other or made available to the other, or
adopt any new severance plan;
(c) transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights (including, without
limitation, distribution rights) to the Viewlogic Intellectual Property or
products or the Summit Intellectual Property or products, as the case may be, or
enter into grants to future patent rights, other than non-exclusive licenses and
distribution rights in the ordinary course of business and consistent with past
practice;
(d) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in
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substitution for any capital stock other than the issuance, delivery and/or sale
of (i) shares of Viewlogic Common Stock or Summit Common Stock, as the case may
be, pursuant to the exercise of stock options outstanding as of the date of this
Agreement, (ii) options to purchase shares of Viewlogic Common Stock or Summit
Common Stock to be granted at fair market value (determined in accordance with
past practice) in the ordinary course of business consistent with past practice
and in accordance with stock option plans existing on the date hereof to
non-officer employees, provided that options to be granted by Viewlogic shall
not (without the prior written approval of Summit) exceed 10,000 per person or
100,000 in the aggregate and options to be granted by Summit shall not (without
the prior written approval of Viewlogic) exceed 7,500 per person or 75,000 in
the aggregate, (iii) shares of Viewlogic Common Stock or Summit Common Stock, as
the case may be, issuable upon the exercise of the options referred to in clause
(ii), (iv) shares of Summit Common Stock issuable to participants in Summit's
1996 Employee Stock Purchase Plan in accordance with its terms (v) shares of
Viewlogic Capital Stock issuable upon conversion of the shares of Viewlogic
Preferred Stock and (vi) shares of Viewlogic Common Stock issued pursuant to the
transactions contemplated by that certain Agreement and Plan of Merger dated as
of July 16, 1999 by and among Viewlogic, Tech Design, Inc. and Transcendent
Design Technology, Inc.;
(e) repurchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock, except repurchases of unvested shares at cost in
connection with the termination of the employment relationship with any employee
pursuant to agreements in effect as of the date hereof;
(f) issue, grant, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than the
issuance, delivery and/or sale of (i) shares of Viewlogic Common Stock or Summit
Common Stock, as the case may be, pursuant to the exercise of stock options
outstanding as of the date of this Agreement, (ii) options to purchase shares of
Viewlogic Common Stock or Summit Common Stock to be granted at fair market value
(determined in accordance with past practice) in the ordinary course of business
consistent with past practice and in accordance with stock option plans existing
on the date hereof to non-officer employees, provided that options to be granted
by Viewlogic shall not (without the prior written approval of Summit) exceed
10,000 per person or 100,000 in the aggregate and options to be granted by
Summit shall not (without the prior written approval of Viewlogic) exceed 7,500
per person or 75,000 in the aggregate, (iii) shares of Viewlogic Common Stock or
Summit Common Stock, as the case may be, issuable upon the exercise of the
options referred to in clause (ii), (iv) shares of Summit Common Stock issuable
to participants in Summit's 1996 Employee Stock Purchase Plan in accordance with
its terms (v) shares of Viewlogic capital stock issuable upon conversion of the
shares of Viewlogic Preferred Stock and (vi) shares of Viewlogic Common Stock
issued pursuant to the transactions contemplated by that certain Agreement and
Plan of Merger dated as of July 16, 1999 by and among Viewlogic, Tech Design,
Inc. and Transcendent Design Technology, Inc.
(g) cause, permit or propose any amendments to any charter document or
bylaw (or similar governing instruments of any subsidiaries), other than as
contemplated by this Agreement;
(h) acquire or agree to acquire by merging or consolidating with, or by
purchasing, other than in the ordinary course of business, consistent with past
practice, any equity interest in or a material portion of the assets of, or by
any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of Viewlogic or Summit, as the case may be, or
enter into any material joint ventures, strategic partnerships or alliances,
other than Viewlogic's purchase of up to 50,000 shares of Series A Preferred
Stock of Routech, Inc. in exchange for the waiver of royalties of not more than
$300,000;
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(i) sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Viewlogic or Summit, as the case may be, except in the ordinary
course of business consistent with past practice, or lend funds to any third
party (other than intercompany loans in the ordinary course of business);
(j) incur any indebtedness for borrowed money (other than (i) in
connection with the financing of ordinary course trade payables; (ii) pursuant
to existing credit facilities (or any ordinary course modification, renewal or
replacement thereof that does not materially increase the aggregate amount that
can be borrowed thereunder) in the ordinary course of business; or (iii) in
connection with leasing activities in the ordinary course of business) or
guarantee any indebtedness of any person for borrowed money (except that
Viewlogic may guarantee any indebtedness of any subsidiary of Viewlogic, and any
subsidiary of Viewlogic may guarantee any indebtedness of Viewlogic or of any
other subsidiary of Viewlogic, and Summit may guarantee any indebtedness of any
subsidiary of Summit, and any subsidiary of Summit may guarantee any
indebtedness of Summit or of any other subsidiary of Summit), or issue or sell
any debt securities or warrants or rights to acquire debt securities of
Viewlogic or Summit or guarantee any debt securities of others;
(k) adopt or amend any employee benefit plan or employee stock purchase
or employee stock option plan, or enter into any employment contract (other
than: (i) offer letters and letter agreements with employees who are terminable
"at will," or (ii) as required by law), pay any special bonus or special
remuneration to any director or employee (except to the extent contemplated by
Sections 2.13 or 3.13 or pursuant to contracts existing prior to the date of
this Agreement), or increase the salaries or wage rates of its officers or
employees other than, with respect to employees who are not officers, in the
ordinary course of business, consistent with past practice, or change in any
material respect any management policies or procedures (including those relating
to hiring), provided that Viewlogic may grant reasonable increases in the
salaries of its officers in connection with a contemplated annual review on or
about October, 1999;
(l) make any payments outside of the ordinary course of business for
purposes of settling any dispute;
(m) commence any litigation other than in the ordinary course of
business;
(n) other than in the ordinary course of business, make or change any
material election in respect of Taxes, adopt or change any material accounting
method in respect of Taxes, file any material Tax Return or any amendment to a
material Tax Return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(o) revalue any assets, including writing down the value of inventory or
writing off notes or accounts receivable, other than in the ordinary course of
business consistent with past practices;
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 REGISTRATION STATEMENT; OTHER FILINGS; BOARD RECOMMENDATIONS.
(a) As promptly as practicable after the execution of this Agreement,
Viewlogic and Summit will prepare, and file with the SEC, the Joint Proxy
Statement and Summit will prepare and file with the SEC the Registration
Statement in which the Joint Proxy Statement will be included as a prospectus.
Each of Viewlogic and Summit will respond to any comments of the SEC, will use
its respective reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing and will cause the Joint Proxy Statement to be mailed to their
respective stockholders at the earliest practicable time after being declared
effective by the SEC. As promptly as practicable after the date of this
Agreement, each of Viewlogic and
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Summit will prepare and file any other documents required to be filed by it
under the Exchange Act, the Securities Act or any other federal, state, foreign
or Blue Sky or related laws relating to the Merger and the transactions
contemplated by this Agreement (the "OTHER FILINGS"). Each of Viewlogic and
Summit will notify the other promptly upon the receipt of any comments from the
SEC or its staff or any other government officials and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Registration Statement, the Joint Proxy Statement or any Other Filing or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Joint Proxy Statement, the
Merger or any Other Filing. Each of Viewlogic and Summit will cause all
documents that it is responsible for filing with the SEC or other regulatory
authorities under this Section 5.1(a) to comply in all material respects with
all applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs that is required to be set forth in an
amendment or supplement to the Joint Proxy Statement, the Registration Statement
or any Other Filing, Viewlogic or Summit, as the case may be, will promptly
inform the other of such occurrence and cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to stockholders of
Viewlogic or Summit, such amendment or supplement.
(b) The Joint Proxy Statement will include (x) the unanimous
recommendation of the Summit Board in favor of the Summit Proposals (except that
notwithstanding anything to the contrary contained in this Agreement, the Summit
Board may withdraw, modify or refrain from making such recommendation or
recommend a Superior Proposal (as defined in Section 5.4 of this Agreement) to
the extent that the Summit Board determines, in good faith, after consultation
with, and with the advice of, outside legal counsel, that such action is
necessary for the Summit Board to comply with its fiduciary duties to its
stockholders under applicable law) and (y) the unanimous recommendation of the
Viewlogic Board in favor of the adoption and approval of the Agreement and the
adoption of the Merger (except that notwithstanding anything to the contrary
contained in this Agreement, the Viewlogic Board may withdraw, modify or refrain
from making such recommendation or recommend a Superior Proposal to the extent
that the Viewlogic Board determines, in good faith, after consultation with, and
with the advice of, outside legal counsel, that such action is necessary for the
Viewlogic Board to comply with its fiduciary duties to its stockholders under
applicable law.)
5.2 MEETINGS OF STOCKHOLDERS.
(a) Promptly after the date hereof, Summit will take all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to convene the Summit Stockholders' Meeting to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law)
within 45 days after the declaration of effectiveness of the Registration
Statement, for the purpose of approving the Summit Proposals. Unless the Summit
Board withdraws, modifies or refrains from making the recommendation set forth
in Section 5.1(b) or recommends a Superior Proposal, either in accordance with
Section 5.1(b), Summit will use its best efforts to solicit from its
stockholders proxies in favor of the Summit Proposals and will take all other
action necessary or advisable to secure the vote or consent of its stockholders
required by the rules of the National Association of Securities Dealers, Inc. or
Delaware Law to obtain such approvals.
(b) Promptly after the date hereof, Viewlogic will take all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to convene the Viewlogic Stockholders' Meeting to be held as promptly
as practicable, and in any event (to the extent permissible under applicable
law) within 45 days after the declaration of effectiveness of the Registration
Statement, for the purpose of voting upon the adoption and approval of the
Agreement and the adoption of the Merger. Unless the Viewlogic Board withdraws,
modifies or refrains from making the recommendation set forth in Section 5.1(b)
or recommends a Superior Proposal, either in accordance with Section 5.1(b),
Viewlogic will use its best efforts to solicit from its stockholders proxies in
favor of the adoption
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and approval of the Agreement and the approval of the Merger and will take all
other action necessary or advisable to secure the vote or consent of its
stockholders required by Delaware Law to obtain such approvals.
5.3 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) The parties acknowledge that Viewlogic and Summit have previously
executed a Letter Agreement, dated as of August 27, 1999 (the "NON-DISCLOSURE
AGREEMENT"). The parties agree that the Non-Disclosure Agreement (excluding the
fifth paragraph thereof, which is superseded by the provisions of this
Agreement) will continue in full force and effect in accordance with its terms.
(b) Viewlogic will afford Summit and its accountants, counsel and other
representatives reasonable access at Summit's expense during normal business
hours to the properties, books, records and personnel of Viewlogic during the
period prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations, financial condition and personnel of Viewlogic, as Summit
may reasonably request. Summit will afford Viewlogic and its accountants,
counsel and other representatives reasonable access at Viewlogic's expense
during normal business hours to the properties, books, records and personnel of
Summit during the period prior to the Effective Time to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations, financial condition and personnel of Summit,
as Viewlogic may reasonably request. No information or knowledge obtained by
either Summit or Viewlogic in any investigation pursuant to this Section 5.3
will affect or be deemed to modify any representation or warranty contained in
this Agreement.
5.4 NON-SOLICITATION.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in accordance with Section
7.1, neither Viewlogic nor Summit shall, directly or indirectly, through any
officer, director, employee, representative or agent, (i) solicit, initiate or
knowingly encourage any proposals that constitute, or could reasonably be
expected to result in, a proposal or offer for a merger, consolidation, share
exchange, business combination, sale of substantial assets, sale of shares of
capital stock (including without limitation pursuant to a tender offer) or
similar transaction or series of transactions (but specifically excluding the
purchase by Viewlogic of 50,000 shares of Series A Preferred Stock from Routech,
Inc.) involving Viewlogic or Summit, respectively, other than the transactions
contemplated by this Agreement (any of the foregoing proposals being referred to
in this Agreement as an "ACQUISITION PROPOSAL"), or (ii) engage in negotiations
or discussions concerning, or provide any non-public information regarding
Viewlogic or Summit, as applicable, to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to, approve or recommend to its
stockholders any Acquisition Proposal; PROVIDED, HOWEVER, that nothing contained
in this Agreement shall prevent Viewlogic or its Board of Directors or Summit or
its Board of Directors, as the case may be, from (A) furnishing non-public
information to, or entering into discussions or negotiations with, any person or
entity in connection with an unsolicited bona fide written Acquisition Proposal
by such person or entity (including a new and unsolicited Acquisition Proposal
received by Viewlogic or Summit after the execution of this Agreement from a
person or entity whose initial contact with Viewlogic or Summit may have been
solicited by Viewlogic or Summit, respectively, prior to the execution of this
Agreement) or recommending such an unsolicited bona fide written Acquisition
Proposal to the stockholders of Viewlogic or Summit, respectively, if and only
to the extent that (1) the Board of Directors of Viewlogic or the Board of
Directors of Summit, as the case may be, believes in good faith (after
consultation with its financial advisors) that such Acquisition Proposal would,
if consummated, result in a transaction more favorable to Viewlogic stockholders
or Summit stockholders, respectively, from a financial point of view than the
transaction contemplated by the Agreement (any such more favorable Acquisition
Proposal being referred to in this Agreement as a "SUPERIOR PROPOSAL") and the
Board of Directors of Viewlogic or the Board of Directors of Summit determines
in
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good faith after consultation with, and with the advice of, its outside legal
counsel that such action is necessary for the Board of Directors of Viewlogic or
the Board of Directors of Summit, as the case may be, to comply with its
fiduciary duties to its stockholders under applicable law and (2) prior to
furnishing such non-public information to, or entering into discussions or
negotiations with, such person or entity, such Board of Directors receives from
such person or entity an executed non-disclosure agreement with terms no less
favorable to such party than those contained in the Non-Disclosure Agreement or
(B) complying with Rules 14d-9 and 14e-2 promulgated under the Exchange Act of
1934, as amended, with regard to an Acquisition Proposal.
5.5 PUBLIC DISCLOSURE. Summit and Viewlogic will consult with each other,
and agree, before issuing any press release or otherwise making any public
statement with respect to the Merger and this Agreement, and will not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with a national
securities exchange or the Nasdaq National Market System. The parties have
agreed to the text of the joint press release announcing the signing of this
Agreement.
5.6 LEGAL REQUIREMENTS. Each of Summit, Merger Sub and Viewlogic will take
all reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals by or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such filings with or investigations by any
Governmental Entity, and any other such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. Summit will use its commercially
reasonable efforts to take such steps as may be necessary to comply with the
securities and Blue Sky laws of all jurisdictions that are applicable to the
issuance of shares of Summit Common Stock pursuant hereto. Viewlogic will use
its reasonable best efforts to assist Summit as may be necessary to comply with
the securities and Blue Sky laws of all jurisdictions which are applicable in
connection with the issuance of shares of Summit Common Stock pursuant hereto.
5.7 THIRD PARTY CONSENTS. As soon as practicable following the date hereof,
Summit and Viewlogic will each use its commercially reasonable efforts to obtain
any material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
5.8 NOTIFICATION OF CERTAIN MATTERS. Summit and Merger Sub will give prompt
notice to Viewlogic, and Viewlogic will give prompt notice to Summit, after
obtaining knowledge of (a) the occurrence, or non-occurrence, of any event that
would be reasonably likely to cause (x) any representation or warranty contained
in this Agreement and made by it to be untrue or inaccurate in any material
respect at any time from the date of this Agreement to the Effective Time such
that the conditions set forth in Section 6.2(a) or 6.3(a), as the case may be,
would not be satisfied as a result thereof or (y) any material failure of Summit
or Merger Sub or Viewlogic, as the case may be, or to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement such that the conditions set forth in
Section 6.2(b) or 6.3(b), as the case may be, would not be satisfied as a result
thereof, or (b) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement. Notwithstanding the foregoing,
the delivery of any notice pursuant to this section will not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
5.9 BEST EFFORTS AND FURTHER ASSURANCES. Subject to the respective rights
and obligations of Summit and Viewlogic under this Agreement, each of the
parties to this Agreement will use its reasonable best
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efforts to effectuate the Merger and the other transactions contemplated hereby
and to fulfill and cause to be fulfilled the conditions to closing under this
Agreement; PROVIDED, THAT, neither Summit nor Viewlogic nor any subsidiary or
affiliate thereof will be required to agree to any divestiture by itself or any
of its affiliates of shares of capital stock or of any business, assets or
property, or the imposition of any material limitation on the ability of any of
them to conduct their businesses or to own or exercise control of such assets,
properties and stock. Subject to the foregoing, each party hereto, at the
reasonable request of another party hereto, will 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 the transactions
contemplated hereby.
5.10 STOCK OPTIONS.
(a) At the Effective Time, each outstanding option to purchase shares of
Viewlogic Common Stock (each a "VIEWLOGIC STOCK OPTION") under the Viewlogic
Stock Option Plans, whether or not exercisable, will be assumed by Summit. Each
Viewlogic Stock Option so assumed by Summit under this Agreement will continue
to have, and be subject to, the same terms and conditions (including vesting
conditions and repurchase rights) set forth in the applicable Viewlogic Stock
Option Plan or related agreements immediately prior to the Effective Time and
the Viewlogic Stock Option by which it is evidenced, except that (i) each
Viewlogic Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Summit Common
Stock equal to the product of the maximum number of shares of Viewlogic Common
Stock that could be issuable upon exercise of such Viewlogic Stock Option if all
vesting conditions are satisfied multiplied by the Exchange Ratio, rounded down
to the nearest whole share of Summit Common Stock and (ii) the per share
exercise price for the Summit Common Stock issuable upon exercise of such
assumed Viewlogic Stock Option will be equal to the quotient determined by
dividing the exercise price per share of Viewlogic Common Stock at which such
Viewlogic Stock Option was exercisable immediately prior to the Effective Time
by the Exchange Ratio, rounded up to the nearest whole cent. After the Effective
Time, Summit will issue to each holder of an outstanding Viewlogic Stock Option
a notice describing the foregoing assumption of such Viewlogic Stock Option by
Summit. It is intended that Viewlogic Stock Options assumed by Summit shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent Viewlogic Stock Options qualified as
incentive stock options immediately prior to the Effective Time and the
provisions of this Section 5.10 shall be applied consistent with such intent.
(b) Summit will reserve sufficient shares of Summit Common Stock for
issuance under Section 5.10 and under Section 1.6 hereof.
5.11 SUMMIT OPTION PLANS. Notwithstanding anything contained in this
Agreement to the contrary, Summit shall use its reasonable best efforts
(including without limitation the payment of reasonable consideration) to cancel
(with the written consent of the optionees given for consideration actually
paid, copies of such consents and proof of such payments to be presented to
Viewlogic prior to the Effective Time) options for up to 250,000 shares of
Common Stock under its option plans at any time prior to the Effective Time.
5.12 AFFILIATE AGREEMENTS. Section 5.12 of the Viewlogic Schedules sets forth
those persons who, in Viewlogic's reasonable judgment, are or may be
"affiliates" (as that term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act) of Viewlogic (collectively, the "AFFILIATES"). The parties
acknowledge and agree that Summit shall place appropriate restrictive legends
related to Rule 145 under the Securities Act on the certificates evidencing any
Summit Common Stock to be received by Affiliates, and to issue appropriate stop
transfer instructions to the transfer agent for Summit Common Stock.
5.13 FORM S-8. Summit will file a Registration Statement on Form S-8 for the
shares of Summit Common Stock issuable with respect to assumed Viewlogic Stock
Options as soon as reasonably
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practical after the Effective Time and will use its reasonable best efforts to
maintain the effectiveness of such registration statement thereafter for so long
as any of such options remain outstanding.
5.14 NASDAQ LISTING. Summit agrees (i) to have the shares of Summit Common
Stock issuable, and those required to be reserved for issuance, in connection
with the Merger, approved for quotation on the Nasdaq National Market System
subject only to official notice of issuance and (ii) to continue the inclusion
of the Summit Common Stock on the Nasdaq National Market until the Effective
Time.
5.15 COMFORT LETTER. Viewlogic shall use reasonable best efforts to cause
Deloitte & Touche, certified public accountants to Viewlogic, to provide a
letter reasonably acceptable to Summit, relating to their review of the
financial statements relating to Viewlogic contained in or incorporated by
reference in the Registration Statement. Summit shall use reasonable best
efforts to cause PriceWaterhouseCoopers, certified public accountants to Summit,
to provide a letter reasonably acceptable to Viewlogic, relating to their review
of the financial statements relating to Summit contained in or incorporated by
reference in the Registration Statement.
5.16 BOARD OF DIRECTORS OF THE COMBINED COMPANY. The Board of Directors of
Summit will take all actions necessary to cause the Board of Directors of
Summit, as of the Effective Time, to (i) consist of the following five persons:
William J. Herman, Keith Geeslin, William Botts, Steven Erwin and as fifth
director to be mutual chosen by these four directors and (ii) be classified as
follows:
<TABLE>
<CAPTION>
<S> <C>
Class I directors:
(Term expiring in 2001) Steven Erwin and Lorne Cooper
Class II directors:
(Term expiring in 2002) William Botts and Keith Geeslin
Class III directors:
(Term expiring in 2000) William J. Herman
</TABLE>
5.17 OFFICERS OF COMBINED COMPANY; EXECUTIVE COMMITTEE. As of the Effective
Time, the Board of Directors of Summit will take all actions necessary to elect
the following individuals as officers of Summit to hold the offices set forth
opposite their names below pursuant to the bylaws of Summit:
<TABLE>
<CAPTION>
<S> <C>
William J. Herman Chairman of the Board of Directors and Chief Executive
Officer
Richard G. Lucier Executive Vice President and Chief Operating Officer
Paula Cassidy Vice President, Human Resources
Peter T. Johnson Vice President, Business Development and Chief Legal
Officer
Gary Kiaski Vice President, Worldwide Sales
Kevin O'Brien Vice President, Finance and Chief Financial Officer
Guy Moshe Vice President, Chief Technology Officer and President
of Summit Israel
Eric Benhayoun Vice President, General Manager European Operations
</TABLE>
5.18 INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, Summit will, or will cause the
Surviving Corporation to, fulfill and honor in all respects the obligations of
Summit and Viewlogic pursuant to their respective certificates of incorporation
and bylaws and any indemnification agreements between Summit, Viewlogic and each
of its respective directors and officers existing prior to the Effective Time.
The Certificate of Incorporation and By laws of each of Summit and the Surviving
Corporation will contain
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the provisions with respect to indemnification set forth in the Certificate of
Incorporation and By-laws of Summit and Viewlogic, respectively, prior to the
Effective Time, which provisions will not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who, immediately
prior to the Effective Time, were directors, officers, employees or agents of
Summit or Viewlogic, unless such modification is required by law.
(b) From and after the Effective Time, Summit will, and will cause the
Surviving Corporation, to the fullest extent permitted under applicable law or
under Summit's and the Surviving Corporation's respective Certificate of
Incorporation or By laws, to indemnify and hold harmless, each director or
officer of Summit and Viewlogic (collectively, the "INDEMNIFIED PARTIES")
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, to the extent arising out of
or pertaining to any action or omission in his or her capacity as a director or
officer of Summit or Viewlogic, respectively, for a period of six years after
the date hereof. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time must be reasonably satisfactory to Summit and the Surviving Corporation,
(ii) after the Effective Time, Summit will, and will cause the Surviving
Corporation, to pay the reasonable fees and expenses of such counsel, promptly
after statements therefor are received and (iii) Summit will, and will cause the
Surviving Corporation to cooperate in the defense of any such matter; PROVIDED,
HOWEVER, that neither Summit nor the Surviving Corporation will be liable for
any settlement effected without its written consent (which consent will not be
unreasonably withheld); and PROVIDED, FURTHER, that, in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims will
continue until the disposition of any and all such claims; PROVIDED, FURTHER,
that any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under Delaware
Law, Summit's or Viewlogic's respective certificate of incorporation or bylaws
or such agreements, as the case may be, shall be made by independent legal
counsel selected by the Indemnified Party and reasonably acceptable to Summit;
and PROVIDED, FURTHER, that nothing in this Section 5.18 shall impair any rights
or obligations of any present or former employees, agents, directors or officers
of Summit or Viewlogic. The Indemnified Parties as a group may retain only one
law firm (in addition to local counsel) to represent them with respect to any
single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties. In the event Summit or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.18, proper provision shall be made so that the successors and assigns of
Summit and Viewlogic assume the obligations set forth in this Section 5.18 and
none of the actions described in clause (i) or (ii) shall be taken until such
provision is made.
(c) For a period of six years after the Effective Time, Summit will, and
will cause the Surviving Corporation to, use its commercially reasonable efforts
to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by Summit's and
Viewlogic's directors' and officers' liability insurance policies on terms at
least comparable to those in effect on the date hereof.
(d) This Section 5.18 will survive any termination of this Agreement and
the consummation of the Merger at the Effective Time, is intended to benefit
Summit, Viewlogic, the Surviving
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Corporation and the Indemnified Parties, and will be binding on all successors
and assigns of Summit, Viewlogic and the Surviving Corporation.
(e) Without limiting any other provision of this Section 5.18, Summit
shall use its best efforts to cause its existing director and officer insurance
policy to be renewed effective upon the October 1999 expiration date for the
existing policy.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions:
(a) STOCKHOLDER APPROVAL OF VIEWLOGIC. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of Viewlogic.
(b) STOCKHOLDER APPROVAL OF SUMMIT. The Summit Proposals shall each have
been duly approved, by the requisite vote under applicable law and the rules of
the National Association of Securities Dealers, Inc. by the stockholders of
Summit.
(c) REGISTRATION STATEMENT EFFECTIVE; JOINT PROXY STATEMENT. The SEC
shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Joint Proxy Statement, shall have been initiated or
threatened in writing by the SEC.
(d) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(e) TAX OPINIONS. Summit and Viewlogic shall each have received
substantially identical written opinions from their respective tax counsel
(Wilson Sonsini Goodrich & Rosati, P.C. and Hale and Dorr LLP, respectively), in
form and substance reasonably acceptable Summit or Viewlogic, as the case may
be, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and such opinions shall not have been
withdrawn; PROVIDED, HOWEVER, that if the counsel to either Summit or Viewlogic
does not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders such
opinion to such party. The parties to this Agreement agree to make such
reasonable and customary representations as may be requested by such counsel for
the purpose of rendering such opinions.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF VIEWLOGIC. The obligation of
Viewlogic to consummate and effect the Merger 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 Viewlogic:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Summit and Merger Sub contained in this Agreement shall have been true and
correct as of the date of this Agreement and as of the Closing Date except (i)
to the extent that the failure of such representations and warranties (other
than the representation in Sections 3.2, 3.3 and 3.5) to be true and correct in
each case or in the aggregate does not constitute a Material Adverse Effect on
Summit, (ii) for changes contemplated by this Agreement and (iii) for those
representations and warranties which address matters only as of the date of this
Agreement or any other particular date (which shall have been true and correct
as of such
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particular date except to the extent that the failure of such representations
and warranties to have been true and correct as of such particular date does not
constitute a Material Adverse Effect on Summit) (it being understood that, for
purposes of determining the accuracy of such representations and warranties all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded). Viewlogic shall have received a certificate
with respect to the foregoing signed on behalf of Summit by the Chief Executive
Officer and the Chief Financial Officer of Summit.
(b) AGREEMENTS AND COVENANTS. Summit and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date, and Viewlogic shall have received a certificate to such effect
signed on behalf of Summit by the Chief Executive Officer and the Chief
Financial Officer of Summit.
(c) NASDAQ NATIONAL MARKET LISTING. The shares of Summit Common Stock
issuable to stockholders of Viewlogic pursuant to this Agreement and such other
shares of Summit Common Stock required to be reserved for issuance in connection
with the Merger shall have been approved for quotation on the Nasdaq National
Market System subject only to official notice of issuance.
(d) RESIGNATIONS. Viewlogic shall have received copies of the
resignations effective as of the Effective Time, of each director and officer of
Summit set forth on Schedule 6.2(d) attached hereto.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF SUMMIT AND MERGER SUB. The
obligations of Summit and Merger Sub to consummate and effect the Merger 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
Summit:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Viewlogic contained in this Agreement shall have been true and correct as of
the date of this Agreement and as of the Closing Date except (i) to the extent
that the failure of such representations and warranties (other than the
representations in Sections 2.2, 2.3 and 2.5) to be true and correct in each
case or in the aggregate does not constitute a Material Adverse Effect on
Viewlogic, (ii) for changes contemplated by this Agreement and (iii) for those
representations and warranties which address matters only as of the date of this
Agreement or any other particular date (which shall have been true and correct
as of such particular date except to the extent that the failure of such
representations and warranties to be true and correct as of such particular date
does not constitute a Material Adverse Effect on Viewlogic) (it being understood
that, for purposes of determining the accuracy of such representations and
warranties all "Material Adverse Effect" qualifications and other qualifications
based on the word "material" or similar phrases contained in such
representations and warranties shall be disregarded). Summit shall have received
a certificate with respect to the foregoing signed on behalf of Viewlogic by the
Chief Executive Officer and the Chief Financial Officer of Viewlogic.
(b) AGREEMENTS AND COVENANTS. Viewlogic shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Summit shall have received a certificate to such effect signed on
behalf of Viewlogic by the Chief Executive Officer and the Chief Financial
Officer of Viewlogic.
(c) NO DISSENTERS. Holders of no more than 7.5% of the outstanding
Viewlogic Capital Stock shall have exercised dissenters' rights with respect to
the transactions contemplated by this Agreement.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the
stockholders of Viewlogic or the approval of the Summit Proposals by the
stockholders of Summit:
(a) by mutual written consent duly authorized by the respective Boards
of Directors of Summit and Viewlogic;
(b) by either party 75 days after the Joint Proxy Statement is declared
effective by the Securities and Exchange Commission; PROVIDED, HOWEVER, that,
notwithstanding the time, if any, the Joint Proxy Statement has been declared
effective by the Securities and Exchange Commission, this Agreement may be
terminated by either Viewlogic or Summit, if the Effective Time has not occurred
by February 29, 2000; and PROVIDED, FURTHER, that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement;
(c) by either Viewlogic or Summit if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Viewlogic or Summit if the required approvals of the
stockholders of Viewlogic or the stockholders of Summit contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain the
required vote at a meeting of stockholders duly convened therefor or at any
adjournment thereof (or, in the case of Viewlogic, an action by written consent
of stockholders) (PROVIDED that the right to terminate this Agreement under this
Section 7.1(d) shall not be available to any party where the failure to obtain
approval by such party's stockholders shall have been caused by the action or
failure to act of such party and such action or failure to act constitutes a
breach by such party of this Agreement);
(e) by Summit or Viewlogic, as the case may be, at any time prior to the
approval of the Merger by Viewlogic's stockholders, if the Viewlogic Board shall
have withheld, withdrawn or modified in a manner adverse to Summit its
recommendation in favor of adoption and approval of this Agreement and approval
of the Merger in accordance with Section 5.1(b);
(f) by Viewlogic or Summit, as the case may be, at any time prior to the
approval of the Merger by Summit's stockholders, if the Summit Board shall have
withheld, withdrawn or modified in a manner adverse to Viewlogic its
recommendation in favor of the issuance of shares of Summit Common Stock by
virtue of the Merger in accordance with Section 5.1(b);
(g) by Viewlogic, upon a breach of any representation, warranty,
covenant or agreement on the part of Summit set forth in this Agreement, or if
any representation or warranty of Summit shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, PROVIDED that if such
inaccuracy in Summit's representations and warranties or breach by Summit is
curable by Summit through the exercise of its commercially reasonable efforts by
the date identified in Section 7.1(b), then Viewlogic may not terminate this
Agreement under this Section 7.1(g) before that date, provided Summit continues
to exercise such commercially reasonable efforts to cure such breach up until
that date (it being understood that Viewlogic may not terminate this Agreement
pursuant to this Section 7.1(g) if it shall have materially breached this
Agreement and its breach is the proximate cause of Summit's breach or
inaccuracy); or
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(h) by Summit, upon a breach of any representation, warranty, covenant
or agreement on the part of Viewlogic set forth in this Agreement, or if any
representation or warranty of Viewlogic shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) or Section 6.3(b) would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided, that if such inaccuracy in
Viewlogic's representations and warranties or breach by Viewlogic is curable by
Viewlogic through the exercise of its commercially reasonable efforts by the
date identified in Section 7.1(b), then Summit may not terminate this Agreement
under this Section 7.1(h) before that date, provided Viewlogic continues to
exercise such commercially reasonable efforts to cure such breach up until that
date (it being understood that Summit may not terminate this Agreement pursuant
to this Section 7.1(h) if it shall have materially breached this Agreement and
its breach is the proximate cause of Viewlogic's breach or inaccuracy).
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in Section 5.3, this Section 7.2 and Section 7.3 and Article IX (General
Provisions), each of which shall survive the termination of this Agreement, and
(ii) nothing herein shall relieve any party from liability for any breach of
this Agreement. No termination of this Agreement shall affect the obligations of
the parties contained in the Non-Disclosure Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
7.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated; PROVIDED, HOWEVER, that Summit and Viewlogic shall share
equally all fees and expenses, other than attorneys' and accountants fees and
expenses, incurred in relation to the printing and filing (with the SEC) of the
Joint Proxy Statement (including any preliminary materials related thereto) and
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) Viewlogic shall pay Summit a cash termination fee of $2.5 million
upon the earliest to occur of the following events: (i) the termination of this
Agreement by Summit or Viewlogic pursuant to Section 7.1(e); or (ii) the
termination of this Agreement by Summit pursuant to Section 7.1(d) as a result
of the failure of Viewlogic to receive the required approval by the stockholders
of Viewlogic at the Viewlogic Stockholders Meeting if (x) prior to such
termination there shall have been announced or commenced an Alternative
Transaction (as defined below) with respect to Viewlogic, (y) the Viewlogic
Board of Directors shall not have recommended against such Alternative
Transaction affirmatively and (z) within 12 months following such termination
Viewlogic shall have executed an agreement to engage in such Alternative
Transaction. The fees, if applicable, payable pursuant to this Section 7.3(b)
shall be paid within ten (10) business days after the first to occur of the
events (inclusive of any applicable cure period) described in Section 7.3(b)(i)
or (ii) above; PROVIDED, HOWEVER, that in no event shall Viewlogic be required
to pay any termination fee, if applicable, to Summit, if (i) immediately prior
to the termination of this Agreement, Summit was in material breach of any of
its material obligations set forth in Articles IV and V under this Agreement or
(ii) the Board of Directors of Summit shall have withdrawn or modified its
recommendation of the Summit Proposals in a manner materially adverse to
Viewlogic or shall have publicly announced its intention to do any of the
foregoing.
(c) Summit shall pay Viewlogic a cash termination fee of $2.5 million
upon the earliest to occur of the following events: (i) the termination of this
Agreement by Viewlogic or Summit pursuant to Section 7.1(f); or (ii) the
termination of this Agreement by Viewlogic pursuant to Section 7.1(d) as a
result of the failure of Summit to receive the required approval by the
stockholders of Summit at the
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<PAGE>
Summit Stockholders Meeting if (x) there shall have been announced or commenced
an Alternative Transaction with respect to Summit, (y) the Summit Board of
Directors shall not have recommended against such Alternative Transaction
affirmatively and (z) within 12 months following such termination Summit shall
have executed an agreement to engage in such an Alternative Transaction. The
fee, if applicable, payable pursuant to this Section 7.3(c) shall be paid within
ten (10) business days after the first to occur of the events (inclusive of any
applicable cure period) described in Section 7.3(c)(i) or (ii) above; PROVIDED,
HOWEVER, that in no event shall Summit be required to pay any termination fee,
if applicable, to Viewlogic, if (i) immediately prior to the termination of this
Agreement, Viewlogic, if applicable, was in material breach of any of its
material obligations set forth in Articles IV and V under this Agreement or (ii)
the Board of Directors of Viewlogic shall have withdrawn or modified its
recommendation of the Viewlogic Proposals in a manner materially adverse to
Summit or shall have publicly announced its intention to do any of the
foregoing.
(d) As used in this Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any person (or group of persons) other than,
with respect to Viewlogic, Summit or its affiliates, or with respect to Summit,
Viewlogic or its affiliates, (a "Third Party"), acquires more than 20% of the
outstanding shares of Viewlogic capital stock or Summit capital stock,
respectively, pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger or other business combination involving Viewlogic or Summit pursuant to
which any Third Party acquires more than 20% of the outstanding equity
securities of Viewlogic or Summit or the entity surviving such merger or
business combination, (iii) any other transaction pursuant to which any Third
Party acquires control of assets (including for this purpose the outstanding
equity securities of subsidiaries of Viewlogic or Summit, and the entity
surviving any merger or business combination including any of them) of Viewlogic
or Summit having a fair market value (as determined by the Board of Directors of
Viewlogic or Summit in accordance with recent practice) equal to more than 20%
of the fair market value of all the assets of Viewlogic or Summit immediately
prior to such transaction ("Material Assets"), or (iv) any public announcement
of a proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(e) Payment of the fees described in Sections 7.3(b) and 7.3(c) above
shall not be in lieu of damages incurred, in the event of breach of this
Agreement.
7.4 AMENDMENT. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time only by execution of an instrument in writing
signed on behalf of each of the parties hereto.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties 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 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. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
NO SURVIVAL
8.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of Viewlogic's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Viewlogic Schedules) and all
of Summit's and Merger Sub's representations and warranties in this Agreement or
in any instrument delivered pursuant to this Agreement (each as modified by the
Summit Schedules) shall terminate at the Effective Time.
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<PAGE>
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 sent via facsimile (receipt confirmed) to the parties at
the following addresses or facsimile numbers (or at such other address or
facsimile numbers for a party as shall be specified by like notice):
(a) if to Summit or Merger Sub, to:
Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, Oregon 97008
Attention: Chief Executive Officer
Telephone No.: (503) 643-9281
Facsimile No.: (503) 646-9320
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Steven V. Bernard
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to Viewlogic, to:
Viewlogic Systems, Inc.
293 Boston Post
Road West
Marlboro, Massachusetts 01752
Attention: Chief Executive Officer
Telephone No.: (508) 480-0881
Facsimile No.: (508) 480-0888
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: John A. Burgess, Esq.
Telephone No.: (617) 526-6000
Facsimile No.: (617) 526-5000
9.2 INTERPRETATION; KNOWLEDGE.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of 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. When reference is
made herein to "THE BUSINESS OF" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity.
A-48
<PAGE>
(b) For purposes of this Agreement (i) as it relates to Summit, the term
"KNOWLEDGE" means, with respect to any matter in question, the actual knowledge
of any of the persons listed in Section 9.2(b) of the Summit Schedules and (ii)
as it relates to Viewlogic, the term "KNOWLEDGE" means, with respect to any
matter in question, the actual knowledge of any of the persons listed in Section
9.2(b) of the Viewlogic Schedules.
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; THIRD PARTY BENEFICIARIES. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Viewlogic Schedules and the
Summit Schedules (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Non-Disclosure Agreement
shall continue in full force and effect until the Effective Time and shall
survive any termination of this Agreement; and (b) except with respect to
Section 5.19, are not intended to confer upon any other person any rights or
remedies hereunder.
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.
9.6 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof.
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 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
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<PAGE>
IN WITNESS WHEREOF, Summit, Merger Sub and Viewlogic have caused this
Agreement to be executed by their duly authorized respective officers as of the
date first written above.
SUMMIT DESIGN, INC.
By: /s/
--------------------------------------
Name:
Title:
HOOD ACQUISITION CORP.
By: /s/
--------------------------------------
Name:
Title:
VIEWLOGIC SYSTEMS, INC.
By: /s/
--------------------------------------
Name:
Title:
A-50
<PAGE>
Annex B
VIEWLOGIC VOTING AGREEMENT
This Voting Agreement ("AGREEMENT") is made and entered into as of September
16, 1999, between Summit Design, Inc., a Delaware corporation ("SUMMIT"), and
the undersigned stockholder ("STOCKHOLDER") of Viewlogic Systems, Inc., a
Delaware corporation (the "COMPANY").
RECITALS
A. Concurrently with the execution of this Agreement, Summit, the Company
and Hood Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Summit ("MERGER SUB"), are entering into an Agreement and Plan of
Reorganization (the "MERGER AGREEMENT") which provides for the merger (the
"MERGER") of Merger Sub with and into the Company. Pursuant to the Merger, all
of the shares of capital stock of the Company will be converted into the right
to receive shares of Common Stock of Summit on the basis described in the Merger
Agreement.
B. The Stockholder is the record holder and beneficial owner of such number
of shares of the outstanding capital stock of the Company as is indicated on the
final page of this Agreement (the "SHARES").
C. As a material inducement to enter into the Merger Agreement, Summit
desires the Stockholder to agree, and the Stockholder is willing to agree, to
vote the Shares and any New Shares (as defined in Section 1.2 of this Agreement)
so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
1. AGREEMENT TO VOTE SHARES; ADDITIONAL PURCHASES.
1.1 AGREEMENT TO VOTE SHARES. At every meeting of the stockholders of
the Company called with respect to any of the matters set forth in clause
(x) or (y) of this Section 1.1, and at every adjournment thereof, and on
every action or approval by written consent of the stockholders of the
Company with respect to any of the matters set forth in clause (x) or (y) of
this Section 1.1, Stockholder shall vote the Shares and any New Shares (as
defined below) in favor of (x) approval of the Merger Agreement and the
Merger and (y) any matter that could reasonably be expected to facilitate
the Merger.
1.2 ADDITIONAL PURCHASES. Stockholder agrees that any shares of capital
stock of the Company that Stockholder purchases or with respect to which
Stockholder otherwise acquires beneficial ownership after the execution of
this Agreement and prior to the termination of this Agreement in accordance
with Section 6 ("NEW SHARES") shall be subject to the terms and conditions
of this Agreement to the same extent as if they constituted Shares.
2. IRREVOCABLE PROXY. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Summit a proxy in the form attached hereto as
Annex A (the "PROXY"), which shall be irrevocable, with respect to the Shares.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. Stockholder
represents and warrants that he, she or it: (i) is the beneficial owner of the
Shares, which at the date hereof are free and clear of any liens, claims,
options, charges or other encumbrances; (ii) does not beneficially own any
shares of capital stock of the Company other than the Shares (excluding shares
as to which Stockholder currently disclaims beneficial ownership in accordance
with applicable law); and (iii) has full power and authority to make, enter into
and carry out the terms of this Agreement.
B-1
<PAGE>
4. ADDITIONAL DOCUMENTS. Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Summit, to carry out the intent of this Agreement.
5. CONSENTS AND WAIVERS. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreements to which Stockholder is a party or pursuant to any rights
Stockholder may have and acknowledges that immediately prior to, as of and after
the Effective Time (as defined in the Merger Agreement), if the Effective Time
occurs, the Stockholder will have only those rights relating to the Shares as
are held by an ordinary holder of shares of common stock; PROVIDED, THAT, the
Stockholder shall retain its registration rights as set forth in Section 1 of
that certain Investors' Rights Agreement dated as of October 2, 1998 (the
"Rights Agreement"), subject to the following limitations: (i) the undersigned
may request only up to an aggregate of two registrations pursuant to Sections
1.2 and 1.4 of the Rights Agreement (the "Demand Registrations"); (ii) the
undersigned may not request a Demand Registration until after the date six
months after the Effective Time; (iii) the undersigned may request the
registration of no more than 50% of the total shares of SSS Common Stock (as
defined in the Merger Agreement) issued to the undersigned pursuant to the
Merger in any one Demand Registration; and (iv) upon the effectiveness of a
registration statement filed with the Securities and Exchange Commission
pursuant to a Demand Registration, the undersigned may not request another
Demand Registration until the date six months after the date of such
effectiveness.
6. TERMINATION. This Agreement shall terminate and shall have no further
force or effect as of the earlier to occur of: (i) the date and time on which
the Merger shall become effective in accordance with the terms and provisions of
the Merger Agreement and (ii) the date and time the Merger Agreement is
terminated in accordance with its terms.
7. MISCELLANEOUS.
7.1 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
7.2 BINDING EFFECT AND ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other. Stockholder
acknowledges and agrees that, until termination of this Agreement pursuant to
Section 6 hereof, Stockholder shall only transfer Shares and New Shares, if any,
to persons who shall have first agreed in writing to be bound by the terms of
this Agreement and who shall have executed an irrevocable proxy in the form
attached hereto as Annex A.
7.3 AMENDMENTS AND MODIFICATION. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by each of the parties hereto.
7.4 SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The parties hereto
acknowledge that Summit will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Summit upon any such violation, Summit
shall have the right to seek to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means available to
Summit at law or in equity.
7.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered in person, by telegram or facsimile, or sent by
B-2
<PAGE>
mail (registered or certified mail, postage prepaid, return receipt requested)
or overnight courier (prepaid) to the respective parties as follows:
<TABLE>
<C> <S>
If to Summit: Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, OR 97008
Attn: Chief Executive Officer
Fax: 503-646-9320
With a copy to: Wilson Sonsini Goodrich & Rosati,
P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Steven V. Bernard
Fax: (650) 493-6811
If to the Stockholder: To the address for notice set forth on
the last page hereof.
With a copy to: Hale & Dorr LLP
60 State Street
Boston, MA 02109
Attn: John A. Burgess
Fax: (617) 526-5000
</TABLE>
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
7.6 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of Delaware
(without regard to conflicts of laws principles thereof).
7.7 ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties in respect of the subject matter hereof, and supersedes all
prior negotiations and understandings between the parties with respect to
such subject matter.
7.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
7.9 EFFECT OF HEADINGS. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
B-3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be duly
executed as of the date and year first above written.
<TABLE>
<S> <C> <C>
SUMMIT DESIGN, INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
STOCKHOLDER
Stockholder Name:
By:
-------------------------------------
Signatory Name:
Title:
Stockholder's Address for Notice:
</TABLE>
B-4
<PAGE>
ANNEX A TO VIEWLOGIC VOTING AGREEMENT
IRREVOCABLE PROXY
The undersigned stockholder of Viewlogic Systems, Inc., a Delaware
corporation (the "COMPANY"), hereby irrevocably appoints the members of the
Board of Directors of Summit Design, Inc., a Delaware corporation ("SUMMIT"),
and each of them, as the sole and exclusive attorneys and proxies of the
undersigned, with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to the shares of capital stock
of the Company beneficially owned by the undersigned, which shares are listed on
the final page of this Irrevocable Proxy (the "SHARES"), and any and all other
securities or shares of capital stock of the Company that the undersigned
purchases or with respect to which the undersigned otherwise acquires beneficial
ownership on or after the date hereof and prior to the date this proxy
terminates, until the earlier to occur of (i) such time as the transactions
contemplated by that certain Agreement and Plan of Reorganization dated as of
September 16, 1999 (the "MERGER AGREEMENT"), among Summit, Hood Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Summit ("MERGER
SUB"), and the Company, including the Merger (as defined in the Merger
Agreement), are effective and (ii) the date that the Merger Agreement is
terminated in accordance with its terms. Upon the execution hereof, all prior
proxies given by the undersigned with respect to the Shares and any and all
other securities or shares of capital stock of the Company that the undersigned
purchases or with respect to which the undersigned otherwise acquires beneficial
ownership on or after the date hereof are hereby revoked and no subsequent
proxies will be given until such time as this proxy shall be terminated in
accordance with its terms.
This proxy is irrevocable, is granted pursuant to the Voting Agreement dated
as of September 16, 1999 between Summit and the undersigned stockholder (the
"VOTING AGREEMENT"), and is granted in consideration of Summit entering into the
Merger Agreement. Summit and the undersigned stockholder agree and acknowledge
that the grant of this irrevocable proxy is a material inducement for Summit to
enter into the Merger Agreement, and is therefore coupled with an interest and
irrevocable. The attorneys and proxies named above will be empowered at any time
prior to termination of the Merger Agreement to exercise all voting and other
rights (including, without limitation, the power to execute and deliver written
consents with respect to the Shares) of the undersigned in favor of approval of
the Merger and the Merger Agreement and any matter that could reasonably be
expected to facilitate the Merger at every annual, special or adjourned meeting
of the Company stockholders, and in every written consent in lieu of such a
meeting, or otherwise. This proxy will terminate upon the termination of the
Voting Agreement in accordance with its terms.
The attorneys and proxies named above may only exercise this proxy to vote
the Shares and other securities subject hereto at any time prior to termination
of the Merger Agreement at every annual, special or adjourned meeting of the
stockholders of the Company and in every written consent in lieu of such
meeting, in favor of approval of the Merger and the Merger Agreement and any
matter that could reasonably be expected to facilitate the Merger. The
undersigned stockholder may vote the Shares and other securities subject hereto
on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
B-A-1
<PAGE>
Dated: September , 1999
Name of Stockholder:
By:
-------------------------------------------------
Print Name of Signatory:
Title of Signatory:
Number of Shares of Common Stock Beneficially Owned:
Number of Shares of Preferred Stock Beneficially Owned:
B-A-2
<PAGE>
Annex C
September 14, 1999
CONFIDENTIAL
Board of Directors
Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, OR 97008
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding capital stock of Summit Design, Inc.
("Summit") of the Aggregate Merger Consideration (as defined below) to be issued
by Summit pursuant to the terms of the Agreement and Plan of Reorganization, as
of September 14, 1999 (the "Merger Agreement"), providing for the merger (the
"Merger") of a wholly owned subsidiary of Summit with Viewlogic Systems, Inc.
("Viewlogic"). The Merger will result in Viewlogic becoming a wholly owned
subsidiary of Summit. Pursuant to the terms of the Merger Agreement, all of the
issued and outstanding equity securities of Viewlogic, including options to
purchase common stock of Viewlogic, will be converted into the right to receive
18,317,580 shares of common stock of Summit (the "Aggregate Merger
Consideration"). We understand that the Merger will be accounted for as a
purchase under applicable accounting principles. We have assumed that the Merger
will qualify as a tax-free reorganization for U.S. federal income tax purposes.
The terms and conditions of the Merger are set forth more fully in the Merger
Agreement.
Dain Rauscher Wessels, a division of Dain Rauscher Incorporated ("Dain Rauscher
Wessels"), as part of its investment banking services, is regularly engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, corporate restructurings, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Dain Rauscher Wessels will receive
a fee for our services in connection with the rendering of this opinion.
In connection with our review of the Merger, and in arriving at our opinion, we
have: (i) reviewed and analyzed the financial terms of the Merger Agreement;
(ii) reviewed and analyzed certain financial and other data with respect to
Viewlogic made available to us from Viewlogic; (iii) reviewed and analyzed
certain financial and other data with respect to Summit made available to us
from Summit; (iv) conducted discussions with members of the senior management of
Viewlogic and Summit with respect to the business and prospects of Viewlogic and
Summit; (v) reviewed and discussed with management the potential cost savings
and other synergies that may be achieved in the Merger; (vi) analyzed the pro
forma impact of the Merger on Summit's earnings per share and balance sheet;
(vii) reviewed the reported prices and trading activity of Summit Common Stock
and similar information for certain other companies deemed by us to be
comparable to Summit; (viii) compared the financial performance of Viewlogic and
Summit with that of certain other publicly-traded companies deemed by us to be
comparable to both companies; and (ix) reviewed the financial terms, to the
extent publicly available, of certain comparable merger transactions. In
addition, we have conducted such other analyses and examinations and considered
such other financial, economic and market criteria as we have deemed necessary
in arriving at our opinion.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial, legal, tax, operating and other information
provided to us by Viewlogic and Summit (including without limitation the
financial statements and related notes thereto of Viewlogic and
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<PAGE>
The Board of Directors
September 14, 1999
Page 2
Summit), and have not assumed responsibility for independently verifying and
have not independently verified such information. We have not assumed any
responsibility to perform, and have not performed, an independent evaluation or
appraisal of any of the respective assets or liabilities of Viewlogic or Summit
and we have not been furnished with any such valuations or appraisals. In
addition, we have not assumed any obligation to conduct, and have not conducted,
any physical inspection of the property or facilities of Viewlogic or Summit.
With respect to the financial forecast information and the expected cost savings
and other synergies furnished to or discussed with us by Summit and Viewlogic,
we have assumed that such information has been reasonably prepared and reflects
the best currently available estimates and judgment of Summit's or Viewlogic's
management as to the expected future financial performance of Summit or
Viewlogic, as the case may be, and as to the expected cost savings and other
synergies. Additionally, we have not been asked and did not consider the
possible effects of any litigation, other legal claims or any other contingent
matters.
Our opinion speaks only as of the date hereof, is based on the conditions as
they exist and information which we have been supplied as of the date hereof,
and is without regard to any market, economic, financial, legal or other
circumstance or event of any kind or nature which may exist or occur after such
date. The opinion expressed herein is provided for the information and
assistance of the Board of Directors of Summit in connection with its
consideration of the transaction contemplated by the Merger Agreement and such
opinion does not constitute a recommendation to any stockholder as to how such
stockholder should vote with respect to the Merger. Further, our opinion does
not address the merits of the underlying decision by Summit to engage in such
transaction. In addition, we are not expressing any opinion herein as to the
price at which common stock of Summit will trade at any point in the future.
Except as provided in our engagement letter, this opinion shall not be published
or otherwise used, nor shall references to us be made, without our prior written
approval.
Based on our experience as investment bankers and subject to the foregoing,
including the various assumptions and limitations set forth herein, it is our
opinion that, as of the date hereof, the Aggregate Merger Consideration to be
issued by Summit in connection with the Merger is fair, from a financial point
of view, to the stockholders of Summit.
Very truly yours,
/s/ DAIN RAUSCHER WESSELS
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
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<PAGE>
Annex D
SECTION 262
OF
GENERAL CORPORATION LAW
OF THE
STATE OF DELAWARE
262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor commented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) if this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to Sections 251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
D-1
<PAGE>
c. Cash in lieu of fractional shares or fractions depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
SUCH STOCKHOLDER'S shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of SUCH
STOCKHOLDER'S shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of SUCH STOCKHOLDER'S shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holders shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify stockholders of the effective date of the
merger or consolidation, either (i) each such constituent corporation shall send
a second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of
D-2
<PAGE>
stock of such constituent corporation that are entitled to appraisal rights of
the effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the first notice, such
second notice need only be sent to each stockholder who is entitled to appraisal
rights and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw SUCH
STOCKHOLDER'S demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and 9d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
SUCH STOCKHOLDER'S written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
D-3
<PAGE>
(h) After determining the stockholders entitled to appraisal, the Court
shall apraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger of
consolidation, together with a fair rate of interest, in any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
SUCH STOCKHOLDER'S certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that SUCH STOCKHOLDER is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
D-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended. The Registrant's Certificate of Incorporation and Bylaws provide for
indemnification of its directors, officers, employees and other agents to the
maximum extent permitted by the Delaware law. In addition, the Registrant has
entered into Indemnification Agreements with its officers and directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
2.1** Agreement and Plan of Reorganization dated as of September 16, 1999 between Summit, Viewlogic and
Hood Acquisition Corp.
2.2*** Form of Viewlogic Voting Agreement.
3.1 Amended and Restated Certificate of Incorporation.(1)
3.2 Amended and Restated Bylaws.(3)
4.1 Specimen Common Stock Certificate of Company.(1)
4.2 Investors' Rights Agreement between the Registrant and the parties named therein dated February 10,
1994, as amended.(1)
5.1**** Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
8.1**** Tax Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
8.2**** Tax Opinion of Hale and Dorr LLP
10.1 Form of Indemnification Agreement between Registrant and its executive officers and directors(1)
10.2* 1994 Stock Plan, as amended.(1)
10.3* 1996 Employee Stock Purchase Plan.(1)
10.4* 1996 Director Option Plan.(1)
10.5* Employment Agreement between the Registrant and Larry J. Gerhard dated February 25, 1999.(10)
10.6* Employment Agreement between the Registrant and C. Albert Koob dated July 30, 1999.(12)
10.7* Employment agreement between the Registrant and Richard Davenport dated September 9, 1997.(14)
10.8* Employment agreement between the Registrant and Arthur Fletcher dated July 1, 1997.(7)
10.9* Employment Agreement between the Registrant and Eric Benhayoun dated February 25, 1999.(12)
10.10* Employment Agreement between the Registrant and Moshe Guy dated February 25, 1999.(12)
10.11* Employment Agreement between the Registrant and Joseph Masarich dated December 22, 1997.(7)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.12+ Software OEM License Agreement between the Registrant, Test System Strategies Inc. and Credence
Systems Corporation dated May 19, 1997.(3)
10.13 Lease Agreement between the Registrant and Petula Associates Ltd. And Koll Creekside Associates II
dated October 26, 1993, as amended.(1)
10.14 Sublease Agreement, dated as of January 1993 between DCL Technologies, Ltd. and SEE Technologies,
Ltd.(1)
10.15 Bank Line of Credit Agreement between Registrant and U.S. National Bank of Oregon dated June 24,
1997.(4)
10.16* Employment Agreement between the Registrant and Sharon L. Beelart dated January 5, 1998.(10)
10.17+ Distributor Agreement between the Registrant and Seiko Instruments, Inc., dated February 1, 1996.(1)
10.18 Option Exchange Agreement dated as of June 30, 1998 among the Registrant, ProSoft Oy, and
Optionholders of ProSoft Oy.(8)
10.19* First Amendment to Employment Agreement between the Registrant and Richard Davenport dated December
21, 1998.(10)
10.20 Loan Agreement between the Registrant and Moshe Guy dated May 20, 1997.(3)
10.21 Loan Agreement between the Registrant and Dasys, Inc. dated July 26, 1997.(4)
10.22* TriQuest Design Automation, Inc. 1995 Stock Option Plan.(2)
10.23* Simulation Technologies 1994 Stock Option Plan and form of agreement thereto.(5)
10.24* 1997 NonStatutory Stock Option Plan and for of agreement thereto.(6)
10.25 Amendment to the Distributor Agreement between the Registrant and Seiko Instruments, Inc.(7)
10.26++ Amendment to Software OEM License Agreement between the Registrant and Credence Systems Corporation
dated December 18, 1998.(14)
10.27 Shareholders Agreement between the Registrant and Summit Design Asia, Ltd. dated May 12, 1998.(9)
10.28 Shareholders Agreement between the Registrant and Asia Design Corporation, Ltd. dated May 12,
1998.(9)
10.29+ Distributor Agreement between the Registrant and Summit Design Asia, Ltd. dated May 12, 1998.(9)
10.30 Loan Agreement between the Registrant and Summit Design Asia, Ltd. dated June 2, 1998.(9)
10.31 Joint Escrow Agreement between the Registrant, Perkins Coie (Hong Kong) Limited, Summit Design Asia,
Ltd. and Asia Design Corporation, Ltd.(13)
10.32 Guarantee Agreement between the Registrant and Asia Design Corporation, Ltd. dated May 12, 1998.(9)
10.33 Security Agreement between the Registrant and Asia Design Corporation, Ltd. dated May 12, 1998.(9)
10.34 First Amendment to Employment Agreement between the Registrant and Larry J. Gerhard dated February
29, 1999.(11)
10.35 Viewlogic 1998 Stock Incentive Plan, as amended, and form of agreements thereto.
10.36 Transcendent Design Technology, Inc. Restricted Stock Plan and form of agreements thereto.
10.37 Transcendent Design Technology, Inc. Stock Option Plan and form of agreements thereto.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.38 Employment Agreement between Viewlogic and Richard G. Lucier dated October 2, 1998.
10.39 Employment Agreement between Viewlogic and William J. Herman dated October 2, 1998.
10.40 Investors' Rights Agreement between Viewlogic and the parties named therein dated October 2, 1998.
10.41 VCS OEM Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.42 FPGA OEM Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.43 Software Assignment and License Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.44 Patent Assignment and Cross-License Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.45 Blast Software License and Assignment Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.46 Loan Agreement, Secured Term Loan and Secured Revolving Credit Loan between Viewlogic parties named
therein, as amended, dated October 2, 1998.
10.47 Office Lease Agreement between Viewlogic and Rosewood III Associates Limited Partnership, as amended,
dated November 16, 1989.
10.48 Secured Promissory Note by Paula J. Cassidy and John F. Cassidy in favor of Viewlogic dated August
11, 1999.
10.49 Secured Promissory Note by Peter T. Johnson and Andrea R. Johnson in favor of Viewlogic dated August
11, 1999.
10.50 Secured Promissory Note by William J. Herman in favor of Viewlogic dated August 11, 1999.
10.51 Secured Promisory Note by Richard G. Lucier in favor of Viewlogic dated August 12, 1999.
10.52 Secured Promissory Note by Kevin P. O'Brien in favor of Viewlogic dated August 11, 1999.
21.1 List of Subsidiaries.
23.1**** Opinion of Wilson Sonsini Goodrich & Rosati, P.C. (included in opinions filed as exhibits 5.1 and
8.1).
23.2**** Opinion of Hale and Dorr LLP (included in opinion filed as exhibit 8.2).
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Deloitte & Touche LLP.
24.1 Power of attorney, see page II-6.
99.1 Form of Summit Proxy Card.
99.2 Form of Viewlogic Proxy Card.
</TABLE>
- ------------------------
(1) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 333-06445) as declared effective by the Securities and Exchange
Commission October 17, 1996.
(2) Incorporated by reference to the Registration Statement on Form S-8 (File
No. 333-32551) as filed on July 31, 1997.
(3) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997.
(4) Incorporated by reference to the Registrant's Quarterly Report on From 10-Q
for the quarter ended September 30, 1997.
(5) Incorporated by reference to the Registration Statement on Form S-8 (File
No. 333-47481) as filed on March 6, 1998.
II-3
<PAGE>
(6) Incorporated by reference to the Registration Statement on Form S-8 (File
No. 333-47545) as filed on March 9, 1998.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year-ended December 31, 1997.
(8) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 30, 1998.
(9) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998.
(10) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year-ended December 31, 1998.
(11) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999.
(12) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
+ Documents for which confidential treatment has been granted.
++ Documents for which confidential treatment has been requested.
* Indicates management compensatory plan, contract or arrangement.
** Filed as Annex A to the joint proxy statement/prospectus constituting part
of this registration statement and incorporated herein by reference.
*** Filed as Annex B to the joint proxy statement/prospectus constituting part
of this registration statement and incorporated herein by reference.
**** To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Registrant
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not required, not applicable or is shown in
the financial statements or is included elsewhere.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-4
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(6) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(7) To supply by means of a post-effective amendment all required
information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration statement
when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Beaverton, state of
Oregon, on October 22, 1999.
<TABLE>
<S> <C> <C>
SUMMIT DESIGN, INC.
By: /s/ WILLIAM V. BOTTS
-----------------------------------------
INTERIM CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William V. Botts and C. Albert Koob and each of
them jointly and severally, as his or her attorneys-in-fact each with full power
of substitution and resubstitution, for him or her, in any and all capacities to
sign the Registration Statement filed herewith and any or all amendments to said
Registration Statement (including post-effective amendments), and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission granting unto said attorneys-in-fact
and agents and full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the foregoing, as full to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities stated on October 22, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ ------------------------------------ -------------------
<C> <S> <C>
/s/ WILLIAM V. BOTTS Interim Chief Executive Officer and
- ------------------------------ Chairman of the Board (Principal October 22, 1999
William V. Botts Executive Officer)
Vice President of Finance, Chief
/s/ C. ALBERT KOOB Financial Officer and Secretary
- ------------------------------ (Principal Financial and October 22, 1999
C. Albert Koob Accounting Officer)
/s/ AMIHAI BEN-DAVID
- ------------------------------ Director October 22, 1999
Amihai Ben-David
/s/ STEVEN P. ERWIN
- ------------------------------ Director October 22, 1999
Steven P. Erwin
/s/ BARBARA M. KARMEL
- ------------------------------ Director October 22, 1999
Barbara M. Karmel
</TABLE>
II-6
<PAGE>
SUMMIT DESIGN, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS/
(CREDITS)
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts.................................. $ 455 $ 3 $ 25 $ 433
Year ended December 31, 1997:
Allowance for doubtful accounts.................................. 433 270 111 592
Year ended December 31, 1998:
Allowance for doubtful accounts.................................. 592 (63) 18 511
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of
Summit Design, Inc.
Our report on the consolidated financial statements of Summit Design, Inc.
and subsidiaries is included on page F-2 of this Registration Statement on Form
S-4. In connection with our audits of such financial statements, we have also
audited the related financial statement schedule on page S-1 of this Form S-4.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
PRICEWATERHOUSECOOPERS LLP
Portland, Oregon
February 3, 1999
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
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<C> <S>
2.1** Agreement and Plan of Reorganization dated as of September 16, 1999 between Summit, Viewlogic and
Hood Acquisition Corp.
2.2*** Form of Viewlogic Voting Agreement.
3.1 Amended and Restated Certificate of Incorporation.(1)
3.2 Amended and Restated Bylaws.(3)
4.1 Specimen Common Stock Certificate of Company.(1)
4.2 Investors' Rights Agreement between the Registrant and the parties named therein dated February 10,
1994, as amended.(1)
5.1**** Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
8.1**** Tax Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
8.2**** Tax Opinion of Hale and Dorr LLP
10.1 Form of Indemnification Agreement between Registrant and its executive officers and directors(1)
10.2* 1994 Stock Plan, as amended.(1)
10.3* 1996 Employee Stock Purchase Plan.(1)
10.4* 1996 Director Option Plan.(1)
10.5* Employment Agreement between the Registrant and Larry J. Gerhard dated February 25, 1999.(10)
10.6* Employment Agreement between the Registrant and C. Albert Koob dated July 30, 1999.(12)
10.7* Employment agreement between the Registrant and Richard Davenport dated September 9, 1997.(14)
10.8* Employment agreement between the Registrant and Arthur Fletcher dated July 1, 1997.(7)
10.9* Employment Agreement between the Registrant and Eric Benhayoun dated February 25, 1999.(12)
10.10* Employment Agreement between the Registrant and Moshe Guy dated February 25, 1999.(12)
10.11* Employment Agreement between the Registrant and Joseph Masarich dated December 22, 1997.(7)
10.12+ Software OEM License Agreement between the Registrant, Test System Strategies Inc. and Credence
Systems Corporation dated May 19, 1997.(3)
10.13 Lease Agreement between the Registrant and Petula Associates Ltd. And Koll Creekside Associates II
dated October 26, 1993, as amended.(1)
10.14 Sublease Agreement, dated as of January 1993 between DCL Technologies, Ltd. and SEE Technologies,
Ltd.(1)
10.15 Bank Line of Credit Agreement between Registrant and U.S. National Bank of Oregon dated June 24,
1997.(4)
10.16* Employment Agreement between the Registrant and Sharon L. Beelart dated January 5, 1998.(10)
10.17+ Distributor Agreement between the Registrant and Seiko Instruments, Inc., dated February 1, 1996.(1)
10.18 Option Exchange Agreement dated as of June 30, 1998 among the Registrant, ProSoft Oy, and
Optionholders of ProSoft Oy.(8)
10.19* First Amendment to Employment Agreement between the Registrant and Richard Davenport dated December
21, 1998.(10)
10.20 Loan Agreement between the Registrant and Moshe Guy dated May 20, 1997.(3)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
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<C> <S>
10.21 Loan Agreement between the Registrant and Dasys, Inc. dated July 26, 1997.(4)
10.22* TriQuest Design Automation, Inc. 1995 Stock Option Plan.(2)
10.23* Simulation Technologies 1994 Stock Option Plan and form of agreement thereto.(5)
10.24* 1997 NonStatutory Stock Option Plan and for of agreement thereto.(6)
10.25 Amendment to the Distributor Agreement between the Registrant and Seiko Instruments, Inc.(7)
10.26++ Amendment to Software OEM License Agreement between the Registrant and Credence Systems Corporation
dated December 18, 1998.(14)
10.27 Shareholders Agreement between the Registrant and Summit Design Asia, Ltd. dated May 12, 1998.(9)
10.28 Shareholders Agreement between the Registrant and Asia Design Corporation, Ltd. dated May 12,
1998.(9)
10.29+ Distributor Agreement between the Registrant and Summit Design Asia, Ltd. dated May 12, 1998.(9)
10.30 Loan Agreement between the Registrant and Summit Design Asia, Ltd. dated June 2, 1998.(9)
10.31 Joint Escrow Agreement between the Registrant, Perkins Coie (Hong Kong) Limited, Summit Design Asia,
Ltd. and Asia Design Corporation, Ltd.(13)
10.32 Guarantee Agreement between the Registrant and Asia Design Corporation, Ltd. dated May 12, 1998.(9)
10.33 Security Agreement between the Registrant and Asia Design Corporation, Ltd. dated May 12, 1998.(9)
10.34 First Amendment to Employment Agreement between the Registrant and Larry J. Gerhard dated February
29, 1999.(11)
10.35 Viewlogic 1998 Stock Incentive Plan, as amended, and form of agreements thereto.
10.36 Transcendent Design Technology, Inc. Restricted Stock Plan and form of agreements thereto.
10.37 Transcendent Design Technology, Inc. Stock Option Plan and form of agreements thereto.
10.38 Employment Agreement between Viewlogic and Richard G. Lucier dated October 2, 1998.
10.39 Employment Agreement between Viewlogic and William J. Herman dated October 2, 1998.
10.40 Investors' Rights Agreement between Viewlogic and the parties named therein dated October 2, 1998.
10.41 VCS OEM Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.42 FPGA OEM Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.43 Software Assignment and License Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.44 Patent Assignment and Cross-License Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.45 Blast Software License and Assignment Agreement between Viewlogic and Synopsys dated October 2, 1998.
10.46 Loan Agreement, Secured Term Loan and Secured Revolving Credit Loan between Viewlogic parties named
therein, as amended, dated October 2, 1998.
10.47 Office Lease Agreement between Viewlogic and Rosewood III Associates Limited Partnership, as amended,
dated November 16, 1989.
10.48 Secured Promissory Note by Paula J. Cassidy and John F. Cassidy in favor of Viewlogic dated August
11, 1999.
10.49 Secured Promissory Note by Peter T. Johnson and Andrea R. Johnson in favor of Viewlogic dated August
11, 1999.
</TABLE>
<PAGE>
<TABLE>
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EXHIBIT NO.
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<C> <S>
10.50 Secured Promissory Note by William J. Herman in favor of Viewlogic dated August 11, 1999.
10.51 Secured Promisory Note by Richard G. Lucier in favor of Viewlogic dated August 12, 1999.
10.52 Secured Promissory Note by Kevin P. O'Brien in favor of Viewlogic dated August 11, 1999.
21.1 List of Subsidiaries.
23.1**** Opinion of Wilson Sonsini Goodrich & Rosati, P.C. (included in opinions filed as exhibits 5.1 and
8.1).
23.2**** Opinion of Hale and Dorr LLP (included in opinion filed as exhibit 8.2).
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Deloitte & Touche LLP.
24.1 Power of attorney, see page II-6.
99.1 Form of Summit Proxy Card.
99.2 Form of Viewlogic Proxy Card.
</TABLE>
- ------------------------
(1) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 333-06445) as declared effective by the Securities and Exchange
Commission October 17, 1996.
(2) Incorporated by reference to the Registration Statement on Form S-8 (File
No. 333-32551) as filed on July 31, 1997.
(3) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997.
(4) Incorporated by reference to the Registrant's Quarterly Report on From 10-Q
for the quarter ended September 30, 1997.
(5) Incorporated by reference to the Registration Statement on Form S-8 (File
No. 333-47481) as filed on March 6, 1998.
(6) Incorporated by reference to the Registration Statement on Form S-8 (File
No. 333-47545) as filed on March 9, 1998.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year-ended December 31, 1997.
(8) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 30, 1998.
(9) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998.
(10) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year-ended December 31, 1998.
(11) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999.
(12) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
+ Documents for which confidential treatment has been granted.
++ Documents for which confidential treatment has been requested.
* Indicates management compensatory plan, contract or arrangement.
** Filed as Annex A to the joint proxy statement/prospectus constituting part
of this registration statement and incorporated herein by reference.
<PAGE>
*** Filed as Annex B to the joint proxy statement/prospectus constituting part
of this registration statement and incorporated herein by reference.
**** To be filed by amendment.
<PAGE>
EXHIBIT 10.35
VIEWLOGIC SYSTEMS, INC.
1998 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1998 Stock Incentive Plan (the "Plan") of Viewlogic
Systems, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's
stockholders. Except where the context otherwise requires, the term "Company"
shall include any of the Company's present or future subsidiary corporations
as defined in Section 424(f) of the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder (the "Code") and any
other business venture (including, without limitation, joint venture or
limited liability company) in which the Company has a significant interest,
as determined by the Board of Directors of the Company (the "Board").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered
by the Board. The Board shall have authority to grant Awards and to adopt,
amend and repeal such administrative rules, guidelines and practices relating to
the Plan as it shall deem advisable. The Board may correct any defect, supply
any omission or reconcile any inconsistency in the Plan or any Award in the
manner and to the extent it shall deem expedient to carry the Plan into effect
and it shall be the sole and final judge of such expediency. All decisions by
the Board shall be made in the Board's sole discretion and shall be final and
binding on all persons having or claiming any interest in the Plan or in any
Award. No director or person acting pursuant to the
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authority delegated by the Board shall be liable for any action or
determination relating to or under the Plan made in good faith.
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 8 hereof,
Awards may be made under the Plan for up to 6,655,574 shares (the "Authorized
Shares") of common stock, $0.001 par value per share, of the Company (the
"Common Stock"), which number of Authorized Shares shall automatically increase
by five percent of the original number of Authorized Shares (as adjusted
pursuant to Section 8 hereof) annually, for the Plan Term (as defined in Section
10(c) hereof), on the anniversary of the adoption of the Plan by the Board. If
any Award expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any Common
Stock not being issued, the unused Common Stock covered by such Award shall
again be available for the grant of Awards under the Plan, subject, however, in
the case of Incentive Stock Options (as hereinafter defined), to any limitation
required under the Code. Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 8, for
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the maximum number of
shares of Common Stock with respect to which an Award may be granted to any
Participant under the Plan shall be 1,300,000 per calendar year. The
per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
5. STOCK OPTIONS
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(a) GENERAL. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) EXERCISE OF OPTION. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise
provide in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price;
(3) when the Common Stock is registered under the Exchange Act, by
delivery of shares of Common Stock owned by the Participant valued at their fair
market value as determined by (or in a manner approved by) the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant at
least six months prior to such delivery;
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(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (ii) payment of such other lawful consideration as
the Board may determine; or
(5) by any combination of the above permitted forms of payment.
6. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
(a) CHANGES IN CAPITALIZATION. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or
4
<PAGE>
other similar change in capitalization or event, or any distribution to
holders of Common Stock other than a normal cash dividend, (i) the number and
class of securities available under this Plan, (ii) the per-Participant limit
set forth in Section 4(b), (iii) the number and class of securities and
exercise price per share subject to each outstanding Option, (iv) the
repurchase price per share subject to each outstanding Restricted Stock
Award, and (v) the terms of each other outstanding Award shall be
appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such
an adjustment (or substitution) is necessary and appropriate. If this
Section 8(a) applies and Section 8(c) also applies to any event, Section 8(c)
shall be applicable to such event, and this Section 8(a) shall not be
applicable.
(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation
or dissolution on any Restricted Stock Award or other Award granted under the
Plan at the time of the grant of such Award.
(c) ACQUISITION EVENTS
(1) DEFINITION. An "Acquisition Event" shall mean: (a) any merger
or consolidation of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a statutory share exchange
transaction.
(2) CONSEQUENCES OF AN ACQUISITION EVENT ON OPTIONS. Upon the
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an Option shall be considered to be assumed if,
following consummation of the Acquisition Event, the Option confers the right to
purchase, for each share of Common Stock subject to the Option immediately prior
to the consummation of the Acquisition Event, the consideration (whether cash,
securities or other property) received as a result of the Acquisition Event by
holders of Common Stock for each share of Common Stock held immediately prior to
the consummation of the Acquisition Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Acquisition Event is not solely common
stock of the acquiring or succeeding corporation (or an affiliate thereof), the
Company may, with the consent of the acquiring or
5
<PAGE>
succeeding corporation, provide for the consideration to be received upon the
exercise of Options to consist solely of common stock of the acquiring or
succeeding corporation (or an affiliate thereof) equivalent in fair market
value to the per share consideration received by holders of outstanding
shares of Common Stock as a result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or substitute
for, such Options, then the Board shall, upon written notice to the
Participants, provide that all then unexercised Options will become exercisable
in full as of a specified time prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the Participants before the consummation of such Acquisition
Event; provided, however, that in the event of an Acquisition Event under the
terms of which holders of Common Stock will receive upon consummation thereof a
cash payment for each share of Common Stock surrendered pursuant to such
Acquisition Event (the "Acquisition Price"), then the Board may instead provide
that all outstanding Options shall terminate upon consummation of such
Acquisition Event and that each Participant shall receive, in exchange therefor,
a cash payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the aggregate exercise
price of such Options.
(3) CONSEQUENCES OF AN ACQUISITION EVENT ON RESTRICTED STOCK AWARDS.
Upon the occurrence of an Acquisition Event, the repurchase and other rights of
the Company under each outstanding Restricted Stock Award shall inure to the
benefit of the Company's successor and shall apply to the cash, securities or
other property which the Common Stock was converted into or exchanged for
pursuant to such Acquisition Event in the same manner and to the same extent as
they applied to the Common Stock subject to such Restricted Stock Award.
(4) CONSEQUENCES OF AN ACQUISITION EVENT ON OTHER AWARDS. The Board
shall specify the effect of an Acquisition Event on any other Award granted
under the Plan at the time of the grant of such Award.
9. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
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(b) DOCUMENTATION. Each Award shall be evidenced by a written instrument
in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award. The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may satisfy such tax obligations in whole or in part by delivery of
shares of Common Stock, including shares retained from the Award creating the
tax obligation, valued at their Fair Market Value. The Company may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to a Participant.
(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
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(h) ACCELERATION. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of restrictions in full or in part or that any other
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
10. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant designated by the Board as subject to Section 162(m) of the Code by
the Board shall become exercisable, vested or realizable, as applicable to such
Award, unless and until the Plan has been approved by the Company's stockholders
to the extent stockholder approval is required by Section 162(m) in the manner
required under Section 162(m) (including the vote required under Section
162(m)). No Awards shall be granted under the Plan after the completion of ten
years from the earlier of (i) the date on which the Plan was adopted by the
Board or (ii) the date the Plan was approved by the Company's stockholders, but
Awards previously granted may extend beyond that date (the "Plan Term").
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m) of the Code, no Award granted to a Participant designated as
subject to Section 162(m) by the Board
8
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after the date of such amendment shall become exercisable, realizable or
vested, as applicable to such Award (to the extent that such amendment to the
Plan was required to grant such Award to a particular Participant), unless
and until such amendment shall have been approved by the Company's
stockholders as required by Section 162(m) (including the vote required under
Section 162(m)).
(e) GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors
on October 2, 1998
Approved by the sole Stockholder
on October 2, 1998
9
<PAGE>
VIEWLOGIC SYSTEMS, INC.
AMENDMENT NO. 1 TO
1998 STOCK INCENTIVE PLAN
The following amendments to the 1998 Stock Incentive Plan (the "Plan") of
Viewlogic Systems, Inc., a Delaware corporation, are hereby effected:
1. Section 5(c) of the Plan is deleted in its entirety and the following
is substituted in lieu thereof:
(c) EXERCISE PRICE. The Board shall establish the exercise
price at the time each Option is granted and specify it in the
applicable option agreement; PROVIDED, THAT, no Option shall have an
exercise price of less than (i) 85% of the Fair Market Value of a
share of Common Stock on the date of grant, or (ii) in the case of an
Option granted to a Participant who is, at the time of the grant of
such Option, the owner of stock possessing more than 10% of the total
combined voting power of all classes of outstanding stock of the
Company (a A10% Stockholder@), 110% of the Fair Market Value of a
share of Common Stock on the date of grant.
2. Section 5(d) of the Plan is deleted in its entirety and the following
is substituted in lieu thereof:
(d) DURATION OF OPTIONS. Each Option shall be exercisable at
such times and subject to such terms and conditions as the Board may
specify in the applicable option agreement; PROVIDED, THAT, (i)
Options granted to Participants who are not officers or directors of,
or consultants to, the Company shall become exercisable at least as
rapidly as 20% per year over the five-year period commencing on the
date of grant and (ii) no Option shall have a term in excess of ten
years from the date of grant.
3. Section 6(b) of the Plan is deleted in its entirety and the following
is substituted in lieu thereof:
(b) TERMS AND CONDITIONS. The Board shall determine the terms
and conditions of any such Restricted Stock Award, including the
conditions for repurchase (or forfeiture) and the issue price, if any;
PROVIDED, THAT, the issue price of any shares of Common Stock subject
to a Restricted Stock Award shall not be less than (i) 85% of the Fair
Market Value of a share of Common Stock on the
<PAGE>
date of grant, or (ii) in the case of a Restricted Stock Award
granted to a 10% Stockholder, 100% of the Fair Market Value of a
share of Common Stock on the date of grant. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered
in the name of the Participant and, unless otherwise determined by
the Board, deposited by the Participant, together with a stock
power endorsed in blank, with the Company (or its designee). At
the expiration of the applicable restriction periods, the Company
(or such designee) shall deliver the certificates no longer subject
to such restrictions to the Participant or if the Participant has
died, to the beneficiary designated, in a manner determined by the
Board, by a Participant to receive amounts due or exercise rights
of the Participant in the event of the Participant's death (the
"Designated Beneficiary"). In the absence of an effective
designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
4. Section 7 of the Plan is deleted in its entirety and the following is
substituted in lieu thereof:
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon
the Common Stock having such terms and conditions as the Board may
determine, including the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and
the grant of stock appreciation rights; PROVIDED, THAT, the price of
any shares of Common Stock subject to any such other stock-based Award
or upon which any such other stock-based Award is based, shall not be
less than (i) 85% of the Fair Market Value of a share of Common Stock
on the date of grant, or (ii) in the case of an other stock-based
Award granted to a 10% Stockholder, 100% of the Fair Market Value of a
share of Common Stock on the date of grant..
5. Section 9(a) of the Plan is deleted in its entirety and the following
is substituted in lieu thereof:
(a) NONTRANSFERABILITY OF AWARDS. Awards shall not be sold,
assigned, transferred, pledged or otherwise encumbered by the person
to whom they are granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution, and, during
the life of the Participant, shall be exercisable only by the
Participant. References to a Participant, to the extent relevant in
the context, shall include references to authorized transferees.
6. Section 9(d) of the Plan is deleted in its entirety and the following
is substituted in lieu thereof:
-2-
<PAGE>
(d) TERMINATION OF STATUS. The Board shall determine the effect
on an Award of the disability, death, retirement, authorized leave of
absence or other change in the employment or other status of a
Participant and the extent to which, and the period during which, the
Participant, the Participant's legal representative, conservator,
guardian or Designated Beneficiary may exercise rights under such
Award; PROVIDED, THAT, at the minimum, following the termination of
employment, an Option shall remain exercisable for at least (i) six
months, if such termination is a result of disability or death, or
(ii) 30 days, if such termination is for any reason other than
disability, death or cause. Notwithstanding the foregoing, in no
event shall any extension of an Option under this Section 9(d) permit
the exercise of such Option subsequent to the date of such Option=s
expiration pursuant to its terms or the terms of Section 5(d) hereof.
7. The following Section 9(i) is added to the Plan and inserted therein
immediately subsequent to Section 9(h) of the Plan:
(h) RESTRICTIONS ON TRANSFER OF SHARES AND MINIMUM VESTING. Any
shares of Common Stock issued pursuant to Awards shall be subject to
such special forfeiture conditions, rights of repurchase, rights of
first refusal and other transfer restrictions as the Board may
determine. Such restrictions shall be set forth in the applicable
Award and shall apply in addition to any restrictions that may apply
to holders of shares of Common Stock generally. In the case of a
Participant who is not an officer or a director of, or a consultant
to, the Company, any right, upon termination of the Participant=s
employment or other status with the Company, to repurchase at the
original purchase price (if any) shares of Common Stock issued to such
Participant pursuant to an Award shall lapse at least as rapidly as
20% per year of the five-year period commencing on the date of grant
of such Award. Any such right may be exercised only within 90 days
after the termination of the Participant=s employment or other status
with the Company (or, in the case of Common Stock issued upon the
exercise of Options after the date of termination, within 90 days
after the date of exercise) for cash or for cancellation of
indebtedness incurred in purchasing such shares of Common Stock.
8. The following Section 9(j) is added to the Plan and inserted therein
immediately subsequent to Section 9(i) of the Plan:
(j) FINANCIAL REPORTS. Each year, the Company shall furnish to
each Participant who is holding an outstanding Award or who is a
stockholder of the Company its balance sheet and income statement,
unless such Participant is a key employee of the Company whose duties
with the Company assure him access to equivalent information. Such
balance sheet and income statement need not be audited.
-3-
<PAGE>
9. Section 10(c) of the Plan is deleted in its entirety and the following
is substituted in lieu thereof:
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become
effective on the date on which it is adopted by the Board, but no
Award granted to a Participant designated by the Board as subject to
Section 162(m) of the Code shall become exercisable, vested or
realizable, as applicable to such Award, unless and until the Plan has
been approved by the Company's stockholders to the extent stockholder
approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)). In
the event that the Company=s stockholders fail to approve the Plan
within 12 months after its adoption by the Board, any grants of Awards
that have already occurred shall be rescinded, and no additional
Awards shall be granted thereafter under the Plan. No Awards shall be
granted under the Plan and the Plan shall automatically terminate ten
years after the earlier of (i) the date on which the Plan was adopted
by the Board or (ii) the date the Plan was approved by the Company=s
stockholders (the APlan Term@), but Awards previously granted may
extend beyond that date .
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in the Plan.
This Amendment No. 1 to 1998 Stock Incentive Plan shall be effective upon
and as of the date of its adoption by the Board.
Adopted by the Board of Directors
on November 23, 1998
-4-
<PAGE>
VIEWLOGIC SYSTEMS, INC.
INCENTIVE STOCK OPTION AGREEMENT
GRANTED UNDER 1998 STOCK INCENTIVE PLAN
1. GRANT OF OPTION.
This agreement evidences the grant by Viewlogic Systems, Inc., a Delaware
corporation (the "Company"), on the effective date set forth in the attached
Notice of Grant of Stock Option and Option Agreement (the "Grant Date") to the
person named in the attached Notice of Grant of Stock Option and Option
Agreement, an employee of the Company (the "Participant"), of an option to
purchase, in whole or in part, on the terms provided herein and in the Company's
1998 Stock Incentive Plan (the "Plan"), a total of the number of shares set
forth in the attached Notice of Grant of Stock Option and Option Agreement (the
"Shares") of common stock, $0.001 par value per share, of the Company ("Common
Stock") at the price per Share set forth in the attached Notice of Grant of
Stock Option and Option Agreement. Unless earlier terminated, this option shall
expire on the tenth anniversary of the Grant Date (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. VESTING SCHEDULE.
This option will become exercisable ("vest") according to the schedule set
forth in the attached Notice of Grant of Stock Option and Option Agreement;
PROVIDED THAT, in no event may the aggregate of all vested Shares, whether
exercised or not exercised, exceed the original number of Shares under this
option.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all Shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan. This option
shall expire upon, and will not be exercisable after, the Final Exercise Date.
3. EXERCISE OF OPTION.
(a) FORM OF EXERCISE. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share or for fewer than ten whole shares.
1
<PAGE>
(b) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has been
at all times since the Grant Date, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the Participant
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), PROVIDED THAT this option shall be exercisable only to the extent that
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the
Final Exercise Date, violates the non-competition or confidentiality provisions
of any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant by the
Participant; PROVIDED THAT (1) this option shall be exercisable only to the
extent that this option was exercisable by the Participant on the date of his or
her death or disability and (2) this option shall not be exercisable after the
Final Exercise Date. If the Participant has been, for a period of six
continuous months prior to the Final Exercise Date and while he or she also has
been an Eligible Participant, unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
(and such impairment does not constitute "disability" within the meaning of
Section 22(e)(3) of the Code), and the Participant's employment is terminated by
the Company (other than for "cause" as specified in paragraph (e) below), this
option shall be exercisable by the Participant within the period of six months
following the termination of Participant's employment by the Company, PROVIDED
THAT (1) this option shall be exercisable only to the extent that this option
was exercisable by the Participant on the date of termination of his or her
employment, (2) this option shall not be exercisable after the Final Exercise
Date and (3) the exercise of this option more than three months after the
termination of Participant's employment shall cause this option to lose its
status as an incentive stock option as defined in Section 422 of the Code.
(e) DISCHARGE FOR CAUSE. If the Participant, prior to the Final
Exercise Date, is discharged by the Company for "cause" (as defined below),
the right to exercise this option shall terminate immediately upon the
effective date of such discharge. "Cause" shall mean willful misconduct by
the Participant or willful failure by the Participant to perform his or her
responsibilities to the Company (including, without limitation, breach by the
Participant of any provision of any employment, consulting, advisory,
nondisclosure, non-competition or other similar agreement between the
Participant and the Company), as determined by the Company,
2
<PAGE>
which determination shall be conclusive. The Participant shall be considered
to have been discharged for "Cause" if the Company determines, within 30 days
after the Participant's resignation, that discharge for cause was warranted.
4. RIGHT OF FIRST REFUSAL.
(a) If the Participant proposes to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively, "transfer") any Shares acquired upon exercise of this option,
then the Participant shall first give written notice of the proposed transfer
(the "Transfer Notice") to the Company. The Transfer Notice shall name the
proposed transferee and state the number of such Shares the Participant proposes
to transfer (the "Offered Shares"), the price per share and all other material
terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the Company
shall have the option to purchase all (but not less than all) of the Offered
Shares at the price and upon the terms set forth in the Transfer Notice. In the
event the Company elects to purchase all of the Offered Shares, it shall give
written notice of such election to the Participant within such 30-day period.
Within 10 days after his receipt of such notice, the Participant shall tender to
the Company at its principal offices the certificate or certificates
representing the Offered Shares, duly endorsed in blank by the Participant or
with duly endorsed stock powers attached thereto, all in a form suitable for
transfer of the Offered Shares to the Company. Upon receipt of such certificate
or certificates, the Company shall deliver or mail to the Participant a check in
payment of the purchase price for the Offered Shares; PROVIDED THAT if the
terms of payment set forth in the Transfer Notice were other than cash against
delivery, the Company may pay for the Offered Shares on the same terms and
conditions as were set forth in the Transfer Notice.
(c) At and after the time at which the Offered Shares are required to be
delivered to the Company for transfer to the Company pursuant to subsection (b)
above, the Company shall not pay any dividend to the Participant on account of
such Shares or permit the Participant to exercise any of the privileges or
rights of a stockholder with respect to such Offered Shares, but shall, in so
far as permitted by law, treat the Company as the owner of such Offered Shares.
(d) If the Company does not elect to acquire all of the Offered Shares,
the Participant may, within the 30-day period following the expiration of the
option granted to the Company under subsection (b) above, transfer the Offered
Shares to the proposed transferee, PROVIDED THAT such transfer shall not be on
terms and conditions more favorable to the transferee than those contained in
the Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.
3
<PAGE>
(e) The following transactions shall be exempt from the provisions of this
Section 4:
(1) any transfer of Shares to or for the benefit of any spouse, child
or grandchild of the Participant, or to a trust for their benefit;
(2) any transfer pursuant to an effective registration statement
filed by the Company under the Securities Act of 1933, as amended (the
"Securities Act"); and
(3) any transfer of the Shares pursuant to the sale of all or
substantially all of the business of the Company;
PROVIDED, HOWEVER, that in the case of a transfer pursuant to clause (1) above,
such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.
(f) The Company may assign its rights to purchase Offered Shares in any
particular transaction under this Section 4 to one or more persons or entities.
(g) The provisions of this Section 4 shall terminate upon the earlier of
the following events:
(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
(2) the sale of all or substantially all of the capital stock, assets
or business of the Company, by merger, consolidation, sale of assets or
otherwise.
(h) The Company shall not be required (a) to transfer on its books any of
the Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Section 4, or (b) to treat as owner of such Shares
or to pay dividends to any transferee to whom any such Shares shall have been so
sold or transferred.
5. AGREEMENT IN CONNECTION WITH PUBLIC OFFERING.
The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
4
<PAGE>
6. WITHHOLDING.
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
7. NONTRANSFERABILITY OF OPTION.
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. DISQUALIFYING DISPOSITION.
If the Participant disposes of Shares acquired upon exercise of this option
within two years from the Grant Date or one year after such Shares were acquired
pursuant to exercise of this option, the Participant shall notify the Company in
writing of such disposition.
9. PROVISIONS OF THE PLAN.
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
VIEWLOGIC SYSTEMS, INC.
Dated: _________________, 1999 By:
--------------------------
Name: William J. Herman
Title: President
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1998 Stock Incentive Plan.
Option Grant Date: See the Attached Notice of Grant of Stock Option and Option
Agreement
Number of Shares: See the attached Notice of Grant of Stock Option and Option
Agreement
Option Exercise Price: See the attached Notice of Grant of Stock Option and
Option Agreement
PARTICIPANT
______________________________
(Signature)
______________________________
(Print Name)
Address:______________________
6
<PAGE>
VIEWLOGIC SYSTEMS, INC.
EXECUTIVE INCENTIVE STOCK OPTION AGREEMENT
GRANTED UNDER 1998 STOCK INCENTIVE PLAN
1. GRANT OF OPTION.
This agreement evidences the grant by Viewlogic Systems, Inc., a
Delaware corporation (the "Company"), on the effective date set forth in the
attached Notice of Grant of Stock Option and Option Agreement (the "Grant
Date") to the person named in the attached Notice of Grant of Stock Option
and Option Agreement, an employee of the Company (the "Participant"), of an
option to purchase, in whole or in part, on the terms provided herein and in
the Company's 1998 Stock Incentive Plan (the "Plan"), a total of the number
of shares set forth in the attached Notice of Grant of Stock Option and
Option Agreement (the "Shares") of common stock, $0.001 par value per share,
of the Company ("Common Stock") at the price per Share set forth in the
attached Notice of Grant of Stock Option and Option Agreement. Unless
earlier terminated, this option shall expire on the tenth anniversary of the
Grant Date (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code
of 1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used
in this option, shall be deemed to include any person who acquires the right
to exercise this option validly under its terms.
2. EXERCISE, VESTING SCHEDULE.
This option shall be exercisable in full or in part at any time and
from time to time after the Grant Date. The right of exercise shall be
cumulative so that to the extent the option is not exercised at any time for
the total number of Shares covered by this option it shall continue to be
exercisable, in whole or in part, with respect to all Shares for which this
option has not been exercised, until the earlier of the Final Exercise Date
or the termination of this option under the Plan or this Section 2. This
option shall expire upon, and will not be exercisable after, the Final
Exercise Date.
(a) FORM OF EXERCISE. Each election to exercise this option shall
be in writing, signed by the Participant, and received by the Company at its
principal office, accompanied by this agreement, and payment in full in the
manner provided in the Plan, including without limitation delivery of a
promissory note of the Participant to the Company on terms determined by the
Company's Board of Directors (the "Board"), provided that such note shall be
secured only by the Shares purchased by Participant and shall be non-recourse
to the extent of fifty percent of the principal amount of such note. The
Participant may purchase less than the number of Shares
1
<PAGE>
covered hereby, provided that no partial exercise of this option may be for
any fractional share or for fewer than ten whole shares.
(b) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as
otherwise provided in this Section 2, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has
been at all times since the Grant Date, an employee, officer or director of,
or consultant or advisor to, the Company or any parent or subsidiary of the
Company as defined in Section 424(e) or (f) of the Code (an "Eligible
Participant").
(c) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the
Participant ceases to be an Eligible Participant for any reason, then, except
as provided in paragraphs (d) and (e) below, the right to exercise this
option shall terminate three months after such cessation (but in no event
after the Final Exercise Date), PROVIDED THAT this option shall be
exercisable only to the extent that the Shares are not subject to the
Purchase Option set forth in Section 3 below.
(d) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Participant
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
prior to the Final Exercise Date while he or she is an Eligible Participant
and the Company has not terminated such relationship for "cause" as defined
in paragraph 3 below, this option shall be exercisable, within the period of
one year following the date of death or disability of the Participant by the
Participant; PROVIDED THAT this option shall not be exercisable after the
Final Exercise Date and PROVIDED THAT this option shall be exercisable only
to the extent that the Shares are not subject to the Purchase Option set
forth in Section 3 below. If the Participant has been, for a period of six
continuous months prior to the Final Exercise Date and while he or she also
has been an Eligible Participant, unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment (and such impairment does not constitute "disability" within the
meaning of Section 22(e)(3) of the Code), and the Participant's relationship
with the Company is terminated by the Company (other than for "cause" as
defined in paragraph 3 below), this option shall be exercisable by the
Participant within the period of six months following the termination of
Participant's relationship with the Company, PROVIDED THAT (1) this option
shall not be exercisable after the Final Exercise Date and (2) the exercise
of this option more than three months after the termination of Participant's
employment shall cause this option to lose its status as an incentive stock
option as defined in Section 422 of the Code and (3) this option shall be
exercisable only to the extent that the Shares are not subject to the
Purchase Option set forth in Section 3 below.
(e) DISCHARGE FOR CAUSE. If the Participant, prior to the Final
Exercise Date, is discharged by the Company for "cause" (as defined in
Section 3 (a) below), the right to exercise this option shall terminate
immediately upon the effective date of such discharge. The Participant shall
be considered to have been discharged for "cause" if the Company determines,
within 30 days after the Participant's resignation, that discharge for cause
was warranted.
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<PAGE>
3. PURCHASE OPTION.
The Participant agrees that the Shares purchased upon the exercise of
this option shall be subject to the Purchase Option set forth in this Section
3, the right of first refusal set forth in Section 6 of this Agreement and
the restrictions on transfer set forth in Section 5 of this Agreement.
In the event that the Participant ceases to be an Eligible Participant
for any reason or no reason, with or without cause, prior to October 2, 2002,
the Company shall have the right and option (the "Purchase Option") to
purchase from the Participant, for the same price per share as paid by the
Participant for such Shares (the "Option Price"), some or all of the Unvested
Shares (as defined below). For the purposes of this Agreement, "cause" for
termination shall be deemed to exist upon a reasonable determination by the
Company of willful misconduct by the Participant or willful failure by the
Participant to perform his responsibilities to the Company (including,
without limitation, a material breach by the Participant of any employment,
consulting, advisory, nondisclosure, noncompetition or other similar
agreement between the Participant and the Company). The Participant shall be
considered to have been discharged for "cause" if the Company determines,
within 30 days after the Participant's resignation, that discharge for cause
was warranted.
"Unvested Shares" means the total number of Shares multiplied by the
Applicable Percentage at the time the Purchase Option becomes exercisable by
the Company. The "Applicable Percentage" shall be:
(1) zero percent (0%), if in connection with or within 24 months
subsequent to a change in control (as defined below) the Participant's
employment with the Company is terminated by the Company without cause or
by the Participant for good reason (as defined below), with ten (10) days
prior written notice given by the Participant to the Company in the case
of termination by the Participant for good reason;
(2) (i) 50% during the 24 month period ending October 2, 2000, (ii)
50% less 2.08334% for each full one month of the Participant being an
Eligible Participant from and after October 2, 2000, and (iii) 0% on and
after October 2, 2002; if the Participant ceases to be an Eligible
Participant as a result of the Company's actions without cause prior to
and not in connection with a change in control; and
(3) (i) 100% during the 12 month period ending October 2, 1999, (ii)
75% less 2.08334% for each full one month of the Participant being an
Eligible Participant from and after October 2, 1999, and (iii) 0% on and
after October 2, 2002; if the Participant ceases to be an Eligible
Participant for reasons other than as applicable under clauses 3 (1) and
(2) above.
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For the purposes of this Agreement, "good reason" shall mean
the occurrence, without the Participant's prior written consent, of any of
the events or circumstances set forth in clauses (i) through (vi) below.
Notwithstanding the occurrence of any such event or circumstance, such
occurrence shall not be deemed to constitute good reason if, prior to the
date of termination, such event or circumstance has been fully corrected and
the Participant has been reasonably compensated for any losses or damages
resulting therefrom (provided that such right of correction by the Company
shall only apply to the first notice of termination at the election of the
Participant for good reason).
(i) Any significant diminution in the Participant's
duties, responsibilities or authority in effect immediately prior to the
earliest to occur of (A) the date on which a change in control of the Company
occurs, (B) the date of the execution of an initial written agreement or
instrument providing for a change in control of the Company or (C) the date
of the adoption by the Board of a resolution providing for a change in
control of the Company (with the earliest to occur of such dates referred to
herein as the "Measurement Date").
(ii) Any reduction in the annual base salary as in
effect on the Measurement Date or as the same may be increased from time to
time thereafter.
(iii) The failure by the Company to (A) continue in
effect any material compensation or benefit plan or program (each, a "Benefit
Plan") in which the Participant participates or which is applicable to the
Participant immediately prior to the Measurement Date, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan or
reasonable cash compensation in lieu thereof) has been made with respect to
such plan or program, (B) continue the Participant's participation in a
Benefit Plan (or in such substitute or alternative plan or make reasonable
cash compensation in lieu thereof) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Participant's participation relative to other participants, than the basis
existing immediately prior to the Measurement Date or (C) award cash bonuses
to the Participant in amounts and in a manner substantially consistent with
past practice in light of the Company's financial performance.
(iv) A change by the Company in the location at which
the Participant performs the Participant's principal duties for the Company
to a new location that is either (A) outside a radius of 35 miles from the
Participant's principal residence immediately prior to the Measurement Date
or (B) more than 30 miles from the location at which the Participant performs
his or her principal duties for the Company immediately prior to the
Measurement Date and (C) which results in an increase of at least fifteen
miles in the Participant's daily commuting distance; or a requirement by the
Company that the Participant travel on Company business to a substantially
greater extent than required immediately prior to the Measurement Date.
(v) The failure by the Company to obtain the
agreement, in a form reasonably satisfactory to the Participant, from any
successor to the Company to assume and
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agree to perform this Agreement to the same extent that the Company would be
required to perform it if no such succession had taken place.
(vi) Any failure of the Company to pay or provide to
the Participant any portion of the Participant's compensation or benefits due
under any Benefit Plan within seven days of the date such compensation or
benefits are due, or any material breach by the Company of any employment
agreement with the Participant.
For purposes of this Agreement, "change in control" shall mean
the occurrence of any of the events or circumstances set forth in clauses (I)
through (IV) below.
(I) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) 50% or more of either (A) the
then-outstanding shares of Common Stock (the "Outstanding Common Stock") or
(B) the combined voting power of the then-outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities") provided, however, that for such purposes,
the following acquisitions shall not constitute a Change in Control: (v) any
acquisition directly from the Company, (w) any acquisition by any of the
holders of the Company's Series A Voting Preferred Stock, $0.001 par value
per share, or Series A-1 Non-Voting Preferred Stock, $0.001 par value per
share, on the date hereof, (x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(z) any acquisition by any corporation pursuant to a transaction which
complies with all of clauses (A), (B) and (C) of subparagraph (III) of this
Section 3.
(II) Individuals who, as of the date hereof,
constitute the members of the Board (the "Incumbent Directors") ceasing for
any reason to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the Incumbent Directors then in
office shall be deemed to be an Incumbent Director (except that this proviso
shall not apply to any individual whose initial election as a director occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board).
(III) The consummation of a reorganization,
recapitalization, merger or consolidation involving the Company or a sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), unless, immediately following such Business
Combination, each of the following three conditions is satisfied: (A) all or
substantially all of the individuals and entities who were the beneficial owners
of the
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Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more
than 50% of the then-outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, respectively of the resulting or
acquiring corporation in such Business Combination (which shall include,
without limitation, a corporation which as a result of such transaction owns
the Company or substantially all of the Company's assets either directly or
through one or more subsidiaries) (such resulting or acquiring corporation is
referred to herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Common Stock and Outstanding Voting
Securities, respectively, (B) no Person (excluding the Acquiring Corporation
or any employee benefit plan (or related trust) maintained or sponsored by
the Company or the Acquiring Corporation) beneficially owns, directly or
indirectly, 50% or more of the then outstanding shares of common stock of the
Acquiring Corporation or of the combined voting power of the then-outstanding
voting securities of such corporation (except to the extent that such
ownership existed prior to the Business Combination) and (C) a majority of
the members of the board of directors of the Acquiring Corporation were
Incumbent Directors at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination.
(IV) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
4. EXERCISE OF PURCHASE OPTION AND CLOSING.
(a) The Company may exercise the Purchase Option by delivering or
mailing to the Participant (or his estate), within 60 days after the
Participant ceases to be an Eligible Participant, a written notice of
exercise of the Purchase Option (the "Notice of Exercise"). The Notice of
Exercise shall specify the number of Shares to be purchased. If and to the
extent the Purchase Option is not so exercised by the giving of the Notice of
Exercise within such 60-day period, the Purchase Option shall automatically
expire and terminate effective upon the expiration of such 60-day period.
(b) Within 10 days after receipt by the Participant of the Notice
of Exercise, the Participant (or his estate) shall tender to the Company at
its principal offices the certificate or certificates representing the Shares
which the Company has elected to purchase in accordance with the terms of
this Agreement, duly endorsed in blank or with duly endorsed stock powers
attached thereto, all in form suitable for the transfer of such Shares to the
Company. Immediately upon receipt of such certificate or certificates, the
Company shall (i) pay to the Participant the aggregate Option Price for such
Shares and (ii) issue to the Participant one or more certificates registered
in the name of the Participant for that number of Shares not purchased by the
Company pursuant to such Notice of Exercise.
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<PAGE>
(c) The Option Price may be payable, at the option of the Company,
in cancellation of all or a portion of any outstanding indebtedness of the
Participant to the Company or in cash (by certified check) or both.
(d) The Company shall not purchase any fraction of a Share upon
exercise of the Purchase Option, and any fraction of a Share resulting from a
computation made pursuant to Section 3 of this Agreement shall be rounded to
the nearest whole Share (with any one-half Share being rounded upward).
5. RESTRICTIONS ON TRANSFER.
The Participant shall not sell, assign, transfer, pledge, hypothecate
or otherwise dispose of, by operation of law or otherwise (collectively
"transfer"):
(a) any Shares, or any interest therein, that are subject to the
Purchase Option or with respect to which the Purchase Option may become
exercisable, except that the Participant may transfer such Shares to or for
the benefit of any spouse, child or grandchild, or to a trust for any of
their benefit, PROVIDED that such Shares shall remain subject to this
Agreement (including, without limitation, the restrictions on transfer set
forth in this Section 5, the Purchase Option and the right of first refusal
set forth in Section 6 below) and such permitted transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Agreement; or
(b) any Shares, or any interest therein, that are no longer subject
to the Purchase Option, except in accordance with Section 6 below.
6. RIGHT OF FIRST REFUSAL.
(a) If the Participant proposes to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively, "transfer") any Shares acquired upon exercise of this option,
then the Participant shall first give written notice of the proposed transfer
(the "Transfer Notice") to the Company. The Transfer Notice shall name the
proposed transferee and state the number of such Shares the Participant
proposes to transfer (the "Offered Shares"), the price per share and all
other material terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the
Company shall have the option to purchase all (but not less than all) of the
Offered Shares at the price and upon the terms set forth in the Transfer
Notice. In the event the Company elects to purchase all of the Offered
Shares, it shall give written notice of such election to the Participant
within such 30-day period. Within 10 days after his receipt of such notice,
the Participant shall tender to the Company at its principal offices the
certificate or certificates representing the Offered Shares, duly endorsed in
blank by the Participant or with duly endorsed stock powers attached thereto,
all in a form suitable for transfer of the Offered Shares to the Company.
Upon receipt of such
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<PAGE>
certificate or certificates, the Company shall deliver to the Participant a
certified check in payment of the purchase price for the Offered Shares;
provided THAT if the terms of payment set forth in the Transfer Notice were
other than cash against delivery, the Company may pay for the Offered Shares
on the same terms and conditions as were set forth in the Transfer Notice.
(c) At and after the time at which the Offered Shares are required
to be delivered to the Company for transfer to the Company pursuant to
subsection (b) above, the Company shall not pay any dividend to the
Participant on account of such Shares or permit the Participant to exercise
any of the privileges or rights of a stockholder with respect to such Offered
Shares, but shall, in so far as permitted by law, treat the Company as the
owner of such Offered Shares.
(d) If the Company does not elect to acquire all of the Offered
Shares, the Participant may, within the 30-day period following the
expiration of the option granted to the Company under subsection (b) above,
transfer the Offered Shares to the proposed transferee, PROVIDED THAT such
transfer shall not be on terms and conditions more favorable to the
transferee than those contained in the Transfer Notice. Notwithstanding any
of the above, all Offered Shares transferred pursuant to this Section 6 shall
remain subject to the right of first refusal set forth in this Section 6 and
such transferee shall, as a condition to such transfer, deliver to the
Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 6.
(e) The following transactions shall be exempt from the provisions
of this Section 6:
(1) any transfer of Shares to or for the benefit of any
spouse, child or grandchild of the Participant, or to a trust for their
benefit;
(2) any transfer pursuant to an effective registration
statement filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act"); and
(3) any transfer of the Shares pursuant to the sale of all
or substantially all of the business of the Company;
PROVIDED, HOWEVER, that in the case of a transfer pursuant to clause (1)
above, such Shares shall remain subject to the right of first refusal set
forth in this Section 6 and such transferee shall, as a condition to such
transfer, deliver to the Company a written instrument confirming that such
transferee shall be bound by all of the terms and conditions of this Section
6.
(f) The Company may assign its rights to purchase Offered Shares in
any particular transaction under this Section 6 to one or more persons or
entities.
(g) The provisions of this Section 6 shall terminate upon the
earlier of the following events:
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(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
(2) the sale of all or substantially all of the capital
stock, assets or business of the Company, by merger, consolidation, sale of
assets or otherwise.
7. AGREEMENT IN CONNECTION WITH PUBLIC OFFERING.
The Participant agrees, in connection with the initial underwritten
public offering of the Company's securities pursuant to a registration
statement under the Securities Act, (i) not to sell, make short sale of,
loan, grant any options for the purchase of, or otherwise dispose of any
shares of Common Stock held by the Participant (other than those shares
included in the offering) without the prior written consent of the Company or
the underwriters managing such initial underwritten public offering of the
Company's securities, for a period of 180 days (or such shorter period as is
required generally by the managing underwriter at the time of such initial
public offering) from the effective date of such registration statement, and
(ii) to execute any agreement reflecting clause (i) above as may be requested
by the Company or the managing underwriters at the time of such offering.
8 WITHHOLDING.
No Shares will be issued pursuant to the exercise of this option
unless and until the Participant pays to the Company, or makes provision
satisfactory to the Company for payment of, any federal, state or local
withholding taxes required by law to be withheld in respect of this option.
The Participant acknowledges that he has been informed of the
availability of making an election in accordance with Section 83(b) of the
Internal Revenue Code of 1986, as amended; that such election must be filed
with the Internal Revenue Service within 30 days of the transfer of shares to
the Participant; and that the Participant is solely responsible for making
such election.
9. NONTRANSFERABILITY OF OPTION.
This option may not be sold, assigned, transferred, pledged or
otherwise encumbered by the Participant, either voluntarily or by operation
of law, except by will or the laws of descent and distribution, and, during
the lifetime of the Participant, this option shall be exercisable only by the
Participant.
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10. DISQUALIFYING DISPOSITION.
If the Participant disposes of Shares acquired upon exercise of this
option within two years from the Grant Date or one year after such Shares
were acquired pursuant to exercise of this option, the Participant shall
notify the Company in writing of such disposition.
11. EFFECT OF PROHIBITED TRANSFER.
The Company shall not be required (a) to transfer on its books any of
the Shares which shall have been sold or transferred in violation of any of
the provisions set forth in this Agreement, or (b) to treat as owner of such
Shares, or to pay dividends to, any transferee to whom any such Shares shall
have been sold or transferred in violation of any of the provisions set forth
in this Agreement.
12. RESTRICTIVE LEGENDS.
All certificates representing Shares shall have affixed thereto
legends in substantially the following form, in addition to any other legends
that may be required under federal or state securities laws:
"The shares of stock represented by this certificate are subject
to restrictions on transfer and an option to purchase set forth in
a certain Executive Incentive Stock Option Agreement between the
corporation and the registered owner of these shares (or his
predecessor in interest), and such Agreement is available for
inspection without charge at the office of the Secretary of the
corporation."
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be sold, transferred or otherwise disposed of in the absence
of an effective registration statement under such Act or an
opinion of counsel satisfactory to the corporation to the effect
that such registration is not required."
13. SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, and each other provision of this Agreement shall be severable
and enforceable to the extent permitted by law.
14. WAIVER.
Any provision for the benefit of the Company contained in this
Agreement may be waived, either generally or in any particular instance, by
the Board.
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15. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Company and the Participant and their respective heirs, executors,
administrators, legal representatives, successors and assigns, subject to the
restrictions on transfer and Purchase Option set forth in Sections 3, 5 and 6
of this Agreement.
16. NOTICE.
All notices required or permitted hereunder shall be in writing and
deemed effectively given upon personal delivery or five days after deposit in
the United States Post Office, by registered or certified mail, postage
prepaid, addressed to the other party hereto at the address shown beneath his
or its respective signature to this Agreement, or at such other address or
addresses as either party shall designate to the other in accordance with
this Section 16.
17. PRONOUNS.
Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural, and vice versa.
18. ENTIRE AGREEMENT.
This Agreement and the Plan constitute the entire agreement between
the parties, and supersede all prior agreements and understandings, relating
to the subject matter of this Agreement.
19. AMENDMENT.
This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Participant.
20. GOVERNING LAW.
This Agreement shall be construed, interpreted and enforced in
accordance with the internal laws of the State of Delaware without regard to
any applicable conflicts of laws.
21. PROVISIONS OF THE PLAN.
This option is subject to the provisions of the Plan, a copy of which
is furnished to the Participant with this option.
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IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall
take effect as a sealed instrument.
VIEWLOGIC SYSTEMS, INC.
Dated: November 23, 1998 By:
----------------------------
Name: William J. Herman
Title: President
Address: 293 Boston Post Road West
Marlboro, MA 01752
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of
a copy of the Company's 1998 Stock Incentive Plan.
Option Grant Date: November 23, 1998
Number of Shares: See the attached Notice of Grant of Stock Option and Option
Agreement Option Exercise Price: See the attached Notice of Grant of Stock
Option and Option Agreement
PARTICIPANT
--------------------------------
(Signature)
--------------------------------
(Print Name)
Address:
------------------------
------------------------
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VIEWLOGIC SYSTEMS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
GRANTED UNDER 1998 STOCK INCENTIVE PLAN
1. GRANT OF OPTION.
This agreement evidences the grant by Viewlogic Systems, Inc., a
Delaware corporation (the "Company"), on the effective date set forth in the
attached Notice of Grant of Stock Option and Option Agreement (the "Grant
Date") to the person named in the attached Notice of Grant of Stock Option
and Option Agreement, an employee, consultant or director of the Company (the
"Participant"), of an option to purchase, in whole or in part, on the terms
provided herein and in the Company's 1998 Stock Incentive Plan (the "Plan"),
a total of the number of shares set forth in the attached Notice of Grant of
Stock Option and Option Agreement (the "Shares") of common stock, $0.001 par
value per share, of the Company ("Common Stock") at the price per Share set
forth in the attached Notice of Grant of Stock Option and Option Agreement.
Unless earlier terminated, this option shall expire on the tenth anniversary
of the Grant Date (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall not
be an incentive stock option as defined in Section 422 of the Internal
Revenue Code of 1986, as amended and any regulations promulgated thereunder
(the "Code"). Except as otherwise indicated by the context, the term
"Participant", as used in this option, shall be deemed to include any person
who acquires the right to exercise this option validly under its terms.
2. VESTING SCHEDULE.
This option will become exercisable ("vest") according to the schedule
set forth in the attached Notice of Grant of Stock Option and Option
Agreement; PROVIDED THAT, in no event may the aggregate of all vested Shares,
whether exercised or not exercised, exceed the original number of Shares
under this option.
The right of exercise shall be cumulative so that to the extent the
option is not exercised in any period to the maximum extent permissible it
shall continue to be exercisable, in whole or in part, with respect to all
shares for which it is vested until the earlier of the Final Exercise Date or
the termination of this option under Section 3 hereof or the Plan. This
option shall expire upon, and will not be exercisable after, the Final
Exercise Date.
3. EXERCISE OF OPTION.
(a) FORM OF EXERCISE. Each election to exercise this option shall be
in writing, signed by the Participant, and received by the Company at its
principal office, accompanied by this agreement, and payment in full in the
manner provided in the Plan. The Participant may purchase
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<PAGE>
less than the number of shares covered hereby, provided that no partial
exercise of this option may be for any fractional share or for fewer than ten
whole shares.
(b) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has
been at all times since the Grant Date, an employee, officer or director of,
or consultant or advisor to, the Company or any parent or subsidiary of the
Company as defined in Section 424(e) or (f) of the Code (an "Eligible
Participant").
(c) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the
Participant ceased to be an Eligible Participant for any reason, then, except
as provided in paragraphs (d) and (e) below, the right to exercise this
option shall terminate three months after such cessation (but in no event
after the Final Exercise Date), PROVIDED THAT this option shall be
exercisable only to the extent that the Participant was entitled to exercise
this option on the date of such cessation. Notwithstanding the foregoing, if
the Participant, prior to the Final Exercise Date, violates the
non-competition or confidentiality provisions of any employment contract,
confidentiality and nondisclosure agreement or other agreement between the
Participant and the Company, the right to exercise this option shall
terminate immediately upon such violation.
(d) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Participant
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
prior to the Final Exercise Date while he or she is an Eligible Participant
and the Company has not terminated such relationship for "cause" as specified
in paragraph (e) below, this option shall be exercisable, within the period
of one year following the date of death or disability of the Participant, by
the Participant, PROVIDED THAT (1) this option shall be exercisable only to
the extent that this option was exercisable by the Participant on the date of
his or her death or disability and (2) this option shall not be exercisable
after the Final Exercise Date. If the Participant has been, for a period of
six continuous months prior to the Final Exercise Date and while he or she
also has been an Eligible Participant, unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment (and such impairment does not constitute "disability" within the
meaning of Section 22(e)(3) of the Code), and the Participant's employment is
terminated by the Company (other than for "cause" as specified in paragraph
(e) below), this option shall be exercisable by the Participant within the
period of six months following the termination of Participant's employment by
the Company, PROVIDED THAT (1) this option shall be exercisable only to the
extent that this option was exercisable by the Participant on the date of
termination of his or her employment and (2) this option shall not be
exercisable after the Final Exercise Date.
(e) DISCHARGE FOR CAUSE. If the Participant, prior to the Final
Exercise Date, is discharged by the Company for "cause" (as defined below), the
right to exercise this option shall terminate immediately upon the effective
date of such discharge. "Cause" shall mean willful misconduct by the
Participant or willful failure by the Participant to perform his or her
responsibilities to the Company (including, without limitation, breach by the
Participant of any provision of any employment, consulting, advisory,
nondisclosure, non-competition or other similar agreement between the
Participant and the Company), as determined by the Company,
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which determination shall be conclusive. The Participant shall be considered
to have been discharged for "Cause" if the Company determines, within 30 days
after the Participant's resignation, that discharge for cause was warranted.
4. RIGHT OF FIRST REFUSAL.
(a) If the Participant proposes to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively, "transfer") any Shares acquired upon exercise of this option,
then the Participant shall first give written notice of the proposed transfer
(the "Transfer Notice") to the Company. The Transfer Notice shall name the
proposed transferee and state the number of such Shares the Participant
proposes to transfer (the "Offered Shares"), the price per share and all
other material terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the
Company shall have the option to purchase all (but not less than all) of the
Offered Shares at the price and upon the terms set forth in the Transfer
Notice. In the event the Company elects to purchase all of the Offered
Shares, it shall give written notice of such election to the Participant
within such 30-day period. Within 10 days after his receipt of such notice,
the Participant shall tender to the Company at its principal offices the
certificate or certificates representing the Offered Shares, duly endorsed in
blank by the Participant or with duly endorsed stock powers attached thereto,
all in a form suitable for transfer of the Offered Shares to the Company.
Upon receipt of such certificate or certificates, the Company shall deliver
or mail to the Participant a check in payment of the purchase price for the
Offered Shares; PROVIDED THAT if the terms of payment set forth in the
Transfer Notice were other than cash against delivery, the Company may pay
for the Offered Shares on the same terms and conditions as were set forth in
the Transfer Notice.
(c) At and after the time at which the Offered Shares are required
to be delivered to the Company for transfer to the Company pursuant to
subsection (b) above, the Company shall not pay any dividend to the
Participant on account of such Shares or permit the Participant to exercise
any of the privileges or rights of a stockholder with respect to such Offered
Shares, but shall, in so far as permitted by law, treat the Company as the
owner of such Offered Shares.
(d) If the Company does not elect to acquire all of the Offered
Shares, the Participant may, within the 30-day period following the
expiration of the option granted to the Company under subsection (b) above,
transfer the Offered Shares to the proposed transferee, PROVIDED THAT such
transfer shall not be on terms and conditions more favorable to the
transferee than those contained in the Transfer Notice. Notwithstanding any
of the above, all Offered Shares transferred pursuant to this Section 4 shall
remain subject to the right of first refusal set forth in this Section 4 and
such transferee shall, as a condition to such transfer, deliver to the
Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.
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(e) The following transactions shall be exempt from the provisions
of this Section 4:
(1) any transfer of Shares to or for the benefit of any
spouse, child or grandchild of the Participant, or to a trust for their
benefit;
(2) any transfer pursuant to an effective registration
statement filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act"); and
(3) any transfer of the Shares pursuant to the sale of all
or substantially all of the business of the Company;
PROVIDED, HOWEVER, that in the case of a transfer pursuant to clause (1)
above, such Shares shall remain subject to the right of first refusal set
forth in this Section 4 and such transferee shall, as a condition to such
transfer, deliver to the Company a written instrument confirming that such
transferee shall be bound by all of the terms and conditions of this Section
4.
(f) The Company may assign its rights to purchase Offered Shares in
any particular transaction under this Section 4 to one or more persons or
entities.
(g) The provisions of this Section 4 shall terminate upon the
earlier of the following events:
(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
(2) the sale of all or substantially all of the capital
stock, assets or business of the Company, by merger, consolidation, sale of
assets or otherwise.
(h) The Company shall not be required (a) to transfer on its books
any of the Shares which shall have been sold or transferred in violation of
any of the provisions set forth in this Section 4, or (b) to treat as owner
of such Shares or to pay dividends to any transferee to whom any such Shares
shall have been so sold or transferred.
5. AGREEMENT IN CONNECTION WITH PUBLIC OFFERING.
The Participant agrees, in connection with the initial underwritten
public offering of the Company's securities pursuant to a registration
statement under the Securities Act, (i) not to sell, make short sale of,
loan, grant any options for the purchase of, or otherwise dispose of any
shares of Common Stock held by the Participant (other than those shares
included in the offering) without the prior written consent of the Company or
the underwriters managing such initial underwritten public offering of the
Company's securities for a period of 180 days from the effective date of such
registration statement, and (ii) to execute any agreement reflecting clause
(i) above as may be requested by the Company or the managing underwriters at
the time of such offering.
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6. WITHHOLDING.
No Shares will be issued pursuant to the exercise of this option
unless and until the Participant pays to the Company, or makes provision
satisfactory to the Company for payment of, any federal, state or local
withholding taxes required by law to be withheld in respect of this option.
7. NONTRANSFERABILITY OF OPTION.
This option may not be sold, assigned, transferred, pledged or
otherwise encumbered by the Participant, either voluntarily or by operation
of law, except by will or the laws of descent and distribution, and, during
the lifetime of the Participant, this option shall be exercisable only by the
Participant.
8. PROVISIONS OF THE PLAN.
This option is subject to the provisions of the Plan, a copy of which
is furnished to the Participant with this option.
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IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall
take effect as a sealed instrument.
VIEWLOGIC SYSTEMS, INC.
Dated: , 1999 By:
--------------------- --------------------------------
Name: William J. Herman
Title: President
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of
a copy of the Company's 1998 Stock Incentive Plan.
Option Grant Date: See the attached Notice of Grant of Stock Option and
Option Agreement
Number of Shares: See the attached Notice of Grant of Stock Option and Option
Agreement
Option Exercise Price: See the attached Notice of Grant of Stock Option and
Option Agreement
PARTICIPANT
-----------------------------------
(Signature)
-----------------------------------
(Print Name)
Address:
---------------------------
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VIEWLOGIC SYSTEMS, INC.
EXECUTIVE NONSTATUTORY STOCK OPTION AGREEMENT
GRANTED UNDER 1998 STOCK INCENTIVE PLAN
1. GRANT OF OPTION.
This agreement evidences the grant by Viewlogic Systems, Inc., a
Delaware corporation (the "Company"), on the effective date set forth in the
attached Notice of Grant of Stock Option and Option Agreement (the "Grant
Date") to the person named in the attached Notice of Grant of Stock Option
and Option Agreement, an employee, consultant or director of the Company (the
"Participant"), of an option to purchase, in whole or in part, on the terms
provided herein and in the Company's 1998 Stock Incentive Plan (the "Plan"),
a total of the number of shares set forth in the attached Notice of Grant of
Stock Option and Option Agreement (the "Shares") of common stock, $0.001 par
value per share, of the Company ("Common Stock") at the price per Share set
forth in the attached Notice of Grant of Stock Option and Option Agreement.
Unless earlier terminated, this option shall expire on the tenth anniversary
of the Grant Date (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall not
be an incentive stock option as defined in Section 422 of the Internal
Revenue Code of 1986, as amended and any regulations promulgated thereunder
(the "Code"). Except as otherwise indicated by the context, the term
"Participant", as used in this option, shall be deemed to include any person
who acquires the right to exercise this option validly under its terms.
2. EXERCISE, VESTING SCHEDULE.
This option shall be exercisable in full or in part at any time and
from time to time after the Grant Date. The right of exercise shall be
cumulative so that to the extent the option is not exercised at any time for
the total number of Shares covered by this option it shall continue to be
exercisable, in whole or in part, with respect to all Shares for which this
option has not been exercised, until the earlier of the Final Exercise Date
or the termination of this option under the Plan or this Section 2. This
option shall expire upon, and will not be exercisable after, the Final
Exercise Date.
(a) FORM OF EXERCISE. Each election to exercise this option shall be
in writing, signed by the Participant, and received by the Company at its
principal office, accompanied by this agreement, and payment in full in the
manner provided in the Plan, including without limitation delivery of a
promissory note of the Participant to the Company on terms determined by the
Company's Board of Directors (the "Board"), provided that such note shall be
secured only by the Shares purchased by Participant and shall be non-recourse to
the extent of fifty percent of the principal amount of such note. The
Participant may purchase less than the number of Shares
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covered hereby, provided that no partial exercise of this option may be for
any fractional share or for fewer than ten whole shares.
(b) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as
otherwise provided in this Section 2, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has
been at all times since the Grant Date, an employee, officer or director of,
or consultant or advisor to, the Company or any parent or subsidiary of the
Company as defined in Section 424(e) or (f) of the Code (an "Eligible
Participant").
(c) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the
Participant ceases to be an Eligible Participant for any reason, then, except
as provided in paragraphs (d) and (e) below, the right to exercise this
option shall terminate three months after such cessation (but in no event
after the Final Exercise Date), PROVIDED THAT this option shall be
exercisable only to the extent that the Shares are not subject to the
Purchase Option set forth in Section 3 below.
(d) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Participant
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
prior to the Final Exercise Date while he or she is an Eligible Participant
and the Company has not terminated such relationship for "cause" as defined
in paragraph 3 below, this option shall be exercisable, within the period of
one year following the date of death or disability of the Participant by the
Participant; PROVIDED THAT this option shall not be exercisable after the
Final Exercise Date and PROVIDED THAT this option shall be exercisable only
to the extent that the Shares are not subject to the Purchase Option set
forth in Section 3 below. If the Participant has been, for a period of six
continuous months prior to the Final Exercise Date and while he or she also
has been an Eligible Participant, unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment (and such impairment does not constitute "disability" within the
meaning of Section 22(e)(3) of the Code), and the Participant's relationship
with the Company is terminated by the Company (other than for "cause" as
defined in paragraph 3 below), this option shall be exercisable by the
Participant within the period of six months following the termination of
Participant's relationship with the Company, PROVIDED THAT this option shall
not be exercisable after the Final Exercise Date and PROVIDED THAT this
option shall be exercisable only to the extent that the Shares are not
subject to the Purchase Option set forth in Section 3 below.
(e) DISCHARGE FOR CAUSE. If the Participant, prior to the Final
Exercise Date, is discharged by the Company for "cause" (as defined in
Section 3 (a) below), the right to exercise this option shall terminate
immediately upon the effective date of such discharge. The Participant shall
be considered to have been discharged for "cause" if the Company determines,
within 30 days after the Participant's resignation, that discharge for cause
was warranted.
3. PURCHASE OPTION.
The Participant agrees that the Shares purchased upon the exercise of
this option shall be subject to the Purchase Option set forth in this Section
3, the right of first refusal set forth in
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Section 6 of this Agreement and the restrictions on transfer set forth in
Section 5 of this Agreement.
In the event that the Participant ceases to be an Eligible Participant
for any reason or no reason, with or without cause, prior to October 2, 2002,
the Company shall have the right and option (the "Purchase Option") to
purchase from the Participant, for the same price per share as paid by the
Participant for such Shares (the "Option Price"), some or all of the Unvested
Shares (as defined below). For the purposes of this Agreement, "cause" for
termination shall be deemed to exist upon a reasonable determination by the
Company of willful misconduct by the Participant or willful failure by the
Participant to perform his responsibilities to the Company (including,
without limitation, a material breach by the Participant of any employment,
consulting, advisory, nondisclosure, noncompetition or other similar
agreement between the Participant and the Company). The Participant shall be
considered to have been discharged for "cause" if the Company determines,
within 30 days after the Participant's resignation, that discharge for cause
was warranted.
"Unvested Shares" means the total number of Shares multiplied by the
Applicable Percentage at the time the Purchase Option becomes exercisable by
the Company. The "Applicable Percentage" shall be:
(1) zero percent (0%), if in connection with or within 24 months
subsequent to a change in control (as defined below) the Participant's
employment with the Company is terminated by the Company without cause or
by the Participant for good reason (as defined below), with ten (10) days
prior written notice given by the Participant to the Company in the case
of termination by the Participant for good reason;
(2) (i) 50% during the 24 month period ending October 2, 2000, (ii)
50% less 2.08334% for each full one month of the Participant being an
Eligible Participant from and after October 2, 2000, and (iii) 0% on and
after October 2, 2002; if the Participant ceases to be an Eligible
Participant as a result of the Company's actions without cause prior to
and not in connection with a change in control; and
(3) (i) 100% during the 12 month period ending October 2, 1999, (ii)
75% less 2.08334% for each full one month of the Participant being an
Eligible Participant from and after October 2, 1999, and (iii) 0% on and
after October 2, 2002; if the Participant ceases to be an Eligible
Participant for reasons other than as applicable under clauses 3 (1) and
(2) above.
For the purposes of this Agreement, "good reason" shall mean
the occurrence, without the Participant's prior written consent, of any of
the events or circumstances set forth in clauses (i) through (vi) below.
Notwithstanding the occurrence of any such event or circumstance, such
occurrence shall not be deemed to constitute good reason if, prior to the
date of termination, such event or circumstance has been fully corrected and
the Participant has been
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<PAGE>
reasonably compensated for any losses or damages resulting therefrom
(provided that such right of correction by the Company shall only apply to
the first notice of termination at the election of the Participant for good
reason).
(i) Any significant diminution in the Participant's
duties, responsibilities or authority in effect immediately prior to the
earliest to occur of (A) the date on which a change in control of the Company
occurs, (B) the date of the execution of an initial written agreement or
instrument providing for a change in control of the Company or (C) the date
of the adoption by the Board of a resolution providing for a change in
control of the Company (with the earliest to occur of such dates referred to
herein as the "Measurement Date").
(ii) Any reduction in the annual base salary as in
effect on the Measurement Date or as the same may be increased from time to
time thereafter.
(iii) The failure by the Company to (A) continue in
effect any material compensation or benefit plan or program (each, a "Benefit
Plan") in which the Participant participates or which is applicable to the
Participant immediately prior to the Measurement Date, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan or
reasonable cash compensation in lieu thereof) has been made with respect to
such plan or program, (B) continue the Participant's participation in a
Benefit Plan (or in such substitute or alternative plan or make reasonable
cash compensation in lieu thereof) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Participant's participation relative to other participants, than the basis
existing immediately prior to the Measurement Date or (C) award cash bonuses
to the Participant in amounts and in a manner substantially consistent with
past practice in light of the Company's financial performance.
(iv) A change by the Company in the location at which
the Participant performs the Participant's principal duties for the Company
to a new location that is either (A) outside a radius of 35 miles from the
Participant's principal residence immediately prior to the Measurement Date
or (B) more than 30 miles from the location at which the Participant performs
his or her principal duties for the Company immediately prior to the
Measurement Date and (C) which results in an increase of at least fifteen
miles in the Participant's daily commuting distance; or a requirement by the
Company that the Participant travel on Company business to a substantially
greater extent than required immediately prior to the Measurement Date.
(v) The failure by the Company to obtain the
agreement, in a form reasonably satisfactory to the Participant, from any
successor to the Company to assume and agree to perform this Agreement to the
same extent that the Company would be required to perform it if no such
succession had taken place.
(vi) Any failure of the Company to pay or provide to the
Participant any portion of the Participant's compensation or benefits due under
any Benefit Plan within
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<PAGE>
seven days of the date such compensation or benefits are due, or any material
breach by the Company of any employment agreement with the Participant.
For purposes of this Agreement, "change in control" shall mean
the occurrence of any of the events or circumstances set forth in clauses (I)
through (IV) below.
(I) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) 50% or more of either (A) the
then-outstanding shares of Common Stock (the "Outstanding Common Stock") or
(B) the combined voting power of the then-outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities") provided, however, that for such purposes,
the following acquisitions shall not constitute a Change in Control: (v) any
acquisition directly from the Company, (w) any acquisition by any of the
holders of the Company's Series A Voting Preferred Stock, $0.001 par value
per share, or Series A-1 Non-Voting Preferred Stock, $0.001 par value per
share, on the date hereof, (x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(z) any acquisition by any corporation pursuant to a transaction which
complies with all of clauses (A), (B) and (C) of subparagraph (III) of this
Section 3.
(II) Individuals who, as of the date hereof,
constitute the members of the Board (the "Incumbent Directors") ceasing for
any reason to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the Incumbent Directors then in
office shall be deemed to be an Incumbent Director (except that this proviso
shall not apply to any individual whose initial election as a director occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board).
(III) The consummation of a reorganization,
recapitalization, merger or consolidation involving the Company or a sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), unless, immediately following such Business
Combination, each of the following three conditions is satisfied: (A) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Common Stock and Outstanding Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of the then-outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, respectively of the resulting or
acquiring corporation in such Business Combination (which shall include, without
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<PAGE>
limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or
through one or more subsidiaries) (such resulting or acquiring corporation is
referred to herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Common Stock and Outstanding Voting
Securities, respectively, (B) no Person (excluding the Acquiring Corporation
or any employee benefit plan (or related trust) maintained or sponsored by
the Company or the Acquiring Corporation) beneficially owns, directly or
indirectly, 50% or more of the then outstanding shares of common stock of the
Acquiring Corporation or of the combined voting power of the then-outstanding
voting securities of such corporation (except to the extent that such
ownership existed prior to the Business Combination) and (C) a majority of
the members of the board of directors of the Acquiring Corporation were
Incumbent Directors at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination.
(IV) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
4. EXERCISE OF PURCHASE OPTION AND CLOSING.
(a) The Company may exercise the Purchase Option by delivering or
mailing to the Participant (or his estate), within 60 days after the
Participant ceases to be an Eligible Participant, a written notice of
exercise of the Purchase Option (the "Notice of Exercise"). The Notice of
Exercise shall specify the number of Shares to be purchased. If and to the
extent the Purchase Option is not so exercised by the giving of the Notice of
Exercise within such 60-day period, the Purchase Option shall automatically
expire and terminate effective upon the expiration of such 60-day period.
(b) Within 10 days after receipt by the Participant of the Notice
of Exercise, the Participant (or his estate) shall tender to the Company at
its principal offices the certificate or certificates representing the Shares
which the Company has elected to purchase in accordance with the terms of
this Agreement, duly endorsed in blank or with duly endorsed stock powers
attached thereto, all in form suitable for the transfer of such Shares to the
Company. Immediately upon receipt of such certificate or certificates, the
Company shall (i) pay to the Participant the aggregate Option Price for such
Shares and (ii) issue to the Participant one or more certificates registered
in the name of the Participant for that number of Shares not purchased by the
Company pursuant to such Notice of Exercise.
(c) The Option Price may be payable, at the option of the Company,
in cancellation of all or a portion of any outstanding indebtedness of the
Participant to the Company or in cash (by certified check) or both.
(d) The Company shall not purchase any fraction of a Share upon
exercise of the Purchase Option, and any fraction of a Share resulting from a
computation made pursuant to
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Section 3 of this Agreement shall be rounded to the nearest whole Share (with
any one-half Share being rounded upward).
5. RESTRICTIONS ON TRANSFER.
The Participant shall not sell, assign, transfer, pledge, hypothecate
or otherwise dispose of, by operation of law or otherwise (collectively
"transfer"):
(a) any Shares, or any interest therein, that are subject to the
Purchase Option or with respect to which the Purchase Option may become
exercisable, except that the Participant may transfer such Shares to or for
the benefit of any spouse, child or grandchild, or to a trust for any of
their benefit, PROVIDED that such Shares shall remain subject to this
Agreement (including, without limitation, the restrictions on transfer set
forth in this Section 5, the Purchase Option and the right of first refusal
set forth in Section 6 below) and such permitted transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Agreement; or
(b) any Shares, or any interest therein, that are no longer subject
to the Purchase Option, except in accordance with Section 6 below.
6. RIGHT OF FIRST REFUSAL.
(a) If the Participant proposes to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively, "transfer") any Shares acquired upon exercise of this option,
then the Participant shall first give written notice of the proposed transfer
(the "Transfer Notice") to the Company. The Transfer Notice shall name the
proposed transferee and state the number of such Shares the Participant
proposes to transfer (the "Offered Shares"), the price per share and all
other material terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the
Company shall have the option to purchase all (but not less than all) of the
Offered Shares at the price and upon the terms set forth in the Transfer
Notice. In the event the Company elects to purchase all of the Offered
Shares, it shall give written notice of such election to the Participant
within such 30-day period. Within 10 days after his receipt of such notice,
the Participant shall tender to the Company at its principal offices the
certificate or certificates representing the Offered Shares, duly endorsed in
blank by the Participant or with duly endorsed stock powers attached thereto,
all in a form suitable for transfer of the Offered Shares to the Company.
Upon receipt of such certificate or certificates, the Company shall deliver
to the Participant a certified check in payment of the purchase price for the
Offered Shares; provided THAT if the terms of payment set forth in the
Transfer Notice were other than cash against delivery, the Company may pay
for the Offered Shares on the same terms and conditions as were set forth in
the Transfer Notice.
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(c) At and after the time at which the Offered Shares are required
to be delivered to the Company for transfer to the Company pursuant to
subsection (b) above, the Company shall not pay any dividend to the
Participant on account of such Shares or permit the Participant to exercise
any of the privileges or rights of a stockholder with respect to such Offered
Shares, but shall, in so far as permitted by law, treat the Company as the
owner of such Offered Shares.
(d) If the Company does not elect to acquire all of the Offered
Shares, the Participant may, within the 30-day period following the
expiration of the option granted to the Company under subsection (b) above,
transfer the Offered Shares to the proposed transferee, PROVIDED THAT such
transfer shall not be on terms and conditions more favorable to the
transferee than those contained in the Transfer Notice. Notwithstanding any
of the above, all Offered Shares transferred pursuant to this Section 6 shall
remain subject to the right of first refusal set forth in this Section 6 and
such transferee shall, as a condition to such transfer, deliver to the
Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 6.
(e) The following transactions shall be exempt from the provisions
of this Section 6:
(1) any transfer of Shares to or for the benefit of any
spouse, child or grandchild of the Participant, or to a trust for their
benefit;
(2) any transfer pursuant to an effective registration
statement filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act"); and
(3) any transfer of the Shares pursuant to the sale of all
or substantially all of the business of the Company;
PROVIDED, HOWEVER, that in the case of a transfer pursuant to clause (1)
above, such Shares shall remain subject to the right of first refusal set
forth in this Section 6 and such transferee shall, as a condition to such
transfer, deliver to the Company a written instrument confirming that such
transferee shall be bound by all of the terms and conditions of this Section
6.
(f) The Company may assign its rights to purchase Offered Shares in
any particular transaction under this Section 6 to one or more persons or
entities.
(g) The provisions of this Section 6 shall terminate upon the
earlier of the following events:
(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
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(2) the sale of all or substantially all of the capital
stock, assets or business of the Company, by merger, consolidation, sale of
assets or otherwise.
7. AGREEMENT IN CONNECTION WITH PUBLIC OFFERING.
The Participant agrees, in connection with the initial underwritten
public offering of the Company's securities pursuant to a registration
statement under the Securities Act, (i) not to sell, make short sale of,
loan, grant any options for the purchase of, or otherwise dispose of any
shares of Common Stock held by the Participant (other than those shares
included in the offering) without the prior written consent of the Company or
the underwriters managing such initial underwritten public offering of the
Company's securities, for a period of 180 days (or such shorter period as is
required generally by the managing underwriter at the time of such initial
public offering) from the effective date of such registration statement, and
(ii) to execute any agreement reflecting clause (i) above as may be requested
by the Company or the managing underwriters at the time of such offering.
8 WITHHOLDING.
No Shares will be issued pursuant to the exercise of this option
unless and until the Participant pays to the Company, or makes provision
satisfactory to the Company for payment of, any federal, state or local
withholding taxes required by law to be withheld in respect of this option.
The Participant acknowledges that he has been informed of the
availability of making an election in accordance with Section 83(b) of the
Internal Revenue Code of 1986, as amended; that such election must be filed
with the Internal Revenue Service within 30 days of the transfer of shares to
the Participant; and that the Participant is solely responsible for making
such election.
9. NONTRANSFERABILITY OF OPTION.
This option may not be sold, assigned, transferred, pledged or
otherwise encumbered by the Participant, either voluntarily or by operation
of law, except by will or the laws of descent and distribution, and except
that the Participant may transfer this option to or for the benefit of any
spouse, child or grandchild, or to a trust for any of their benefit.
10. EFFECT OF PROHIBITED TRANSFER.
The Company shall not be required (a) to transfer on its books any of
the Shares which shall have been sold or transferred in violation of any of
the provisions set forth in this Agreement, or (b) to treat as owner of such
Shares, or to pay dividends to, any transferee to whom any such Shares shall
have been sold or transferred in violation of any of the provisions set forth
in this Agreement.
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11. RESTRICTIVE LEGENDS.
All certificates representing Shares shall have affixed thereto
legends in substantially the following form, in addition to any other legends
that may be required under federal or state securities laws:
"The shares of stock represented by this certificate are subject
to restrictions on transfer and an option to purchase set forth in
a certain Executive Nonstatutory Stock Option Agreement between
the corporation and the registered owner of these shares (or his
predecessor in interest), and such Agreement is available for
inspection without charge at the office of the Secretary of the
corporation."
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be sold, transferred or otherwise disposed of in the absence
of an effective registration statement under such Act or an
opinion of counsel satisfactory to the corporation to the effect
that such registration is not required."
12. SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, and each other provision of this Agreement shall be severable
and enforceable to the extent permitted by law.
13. WAIVER.
Any provision for the benefit of the Company contained in this
Agreement may be waived, either generally or in any particular instance, by
the Board.
14. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Company and the Participant and their respective heirs, executors,
administrators, legal representatives, successors and assigns, subject to the
restrictions on transfer and Purchase Option set forth in Sections 3, 5 and 6
of this Agreement.
15. NOTICE.
All notices required or permitted hereunder shall be in writing and
deemed effectively given upon personal delivery or five days after deposit in
the United States Post Office, by registered or certified mail, postage
prepaid, addressed to the other party hereto at the address
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shown beneath his or its respective signature to this Agreement, or at such
other address or addresses as either party shall designate to the other in
accordance with this Section 15.
16. PRONOUNS.
Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural, and vice versa.
17. ENTIRE AGREEMENT.
This Agreement and the Plan constitute the entire agreement between
the parties, and supersede all prior agreements and understandings, relating
to the subject matter of this Agreement.
18. AMENDMENT.
This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Participant.
19. GOVERNING LAW.
This Agreement shall be construed, interpreted and enforced in
accordance with the internal laws of the State of Delaware without regard to
any applicable conflicts of laws.
20. PROVISIONS OF THE PLAN.
This option is subject to the provisions of the Plan, a copy of which
is furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall
take effect as a sealed instrument.
VIEWLOGIC SYSTEMS, INC.
Dated: November 23, 1998 By:
-------------------------------
Name: William J. Herman
Title: President
Address: 293 Boston Post Road West
Marlboro, MA 01752
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PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of
a copy of the Company's 1998 Stock Incentive Plan.
Option Grant Date: November 23, 1998
Number of Shares: See the attached Notice of Grant of Stock Option and Option
Agreement Option Exercise Price: See the attached Notice of Grant of Stock
Option and Option Agreement
PARTICIPANT
-------------------------------
(Signature)
-------------------------------
(Print Name)
Address:
------------------------
------------------------
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EXHIBIT 10.36
RESTRICTED STOCK PLAN
1. PURPOSE
The purpose of this Restricted Stock Plan (the "Plan") is to enhance
the ability of Transcendent Design Technology, Inc. (the "Company") to
attract and retain competent personnel by providing participating officers
and other key employees long-term incentive for their performance and efforts
through the issuance of shares of stock of the Company (the "Restricted
Stock").
2. SHARES SUBJECT TO THE PLAN
Subject to the adjustments as provided in Section 6(e), the Restricted
Stock to be issued under the Plan shall be shares of the Company's authorized
but unissued Common Stock and Non-Voting Common Stock. The aggregate amount
of Common Stock to be issued under the Plan shall not exceed 4,000,000
shares, and the aggregate amount of Non-Voting Common Stock to be issued
under the Plan shall not exceed 4,000,000 shares, subject to adjustment as
set forth in Section 6(e). If any Restricted Stock issued under the Plan is
reacquired by the Company under the terms hereof, such Restricted Stock shall
again be available for issuance under the Plan.
3. PARTICIPATION
Officers and other key employees of the Company or of any subsidiary
shall be eligible for selection to participate in the Plan upon approval by
the Committee (as defined below); provided, however, that members of the
Committee shall not, while members of the Committee, be eligible to purchase
Restricted Stock under the Plan (this limitation shall not apply if the Board
rather than a Committee administers the Plan). An individual who has been
issued Restricted Stock (a "Participant") may, if otherwise eligible, be
issued additional Restricted Stock if the Committee shall so determine.
4. RESTRICTED STOCK
(a) PURCHASE PRICE. The purchase price of the Restricted Stock
shall be determined by the Committee. The purchase price of the Restricted
Stock shall be paid in full in cash or by check.
(b) VESTING. Shares of Restricted Stock issued to a Participant
shall become vested and nonforfeitable after the Participant has remained in
the continuous employ of the Company for such periods of time as shall be
determined by the Committee.
(c) NONTRANSFERABILITY. Restricted Stock issued under the Plan shall,
by its
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terms, be nontransferable by the Participant until it has become vested. Any
attempted transfer of Restricted Stock prior to vesting shall be void and
shall not be given any effect by the Company. All certificates representing
shares of Restricted Stock shall bear a legend containing the restrictions on
transfer required under the Plan and any agreement to issue Restricted Stock.
(d) TERMINATION OF EMPLOYMENT. If a Participant's employment with
the Company terminates for any reason, the Company shall have the option to
repurchase the Restricted Stock as is not then vested at the price at which
it was issued.
5. ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee"). The
Committee shall consist of not less than one member of the Board of Directors
("Board") of the Company designated by the Board. Subject to the express
provisions of the Plan, the Committee shall have the authority to construe
and interpret the Plan and to define the terms used herein, to prescribe,
amend and rescind rules relating to administration of the Plan and to make
all other determinations necessary or advisable for administration of the
Plan. Subject to the express provisions of the Plan, the Committee shall
determine from the eligible participants the individuals who shall be
entitled to purchase Restricted Stock, the restrictions thereon and the terms
and provisions of any agreement to issue Restricted Stock (which need not be
identical). No member of the Committee shall be liable for any action,
failure to act, determination or interpretation made in good faith with
respect to the Plan or any transaction hereunder. The determinations of the
Committee shall be conclusive and binding on all parties. If the Board does
not appoint a Committee, the Board shall administer the Plan and shall have
all the powers and duties granted to the Committee.
6. MISCELLANEOUS
(a) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or in
any issue of Restricted Stock pursuant to the Plan shall confer any right
with respect to continuance of employment by the Company or interfere in any
way with the right of the Company to terminate a Participant's employment at
any time for any reason whatsoever, with or without cause.
(b) AMENDMENT AND TERMINATION. The Board may at any time suspend,
amend or terminate the Plan and may, with the consent of the persons holding
Restricted Stock, make such modifications of the terms and conditions of such
Restricted Stock as it shall deem advisable. The suspension, amendment or
termination of the Plan shall not, without the consent of the holder of the
affected Restricted Stock, alter or impair any rights or obligations under
any Restricted Stock theretofore issued under the Plan.
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In addition to Board approval of an amendment, if the amendment would
materially increase the benefits accruing to Participants, materially
increase the number of securities issuable under the Plan, or materially
modify the requirements for eligibility, then such amendment shall be
approved by the holders of a majority of the Company's outstanding capital
stock entitled to vote.
(c) EFFECTIVE DATE. The Plan shall become effective upon the date
of its adoption by the Board and the shareholders of the Company.
(d) WITHHOLDING. The Company shall have the right to deduct from
payments of any kind otherwise due Participant any sums that federal, state
or local tax law requires to be withheld with respect to the issuance or
vesting of Restricted Stock, or as otherwise may be required by such laws.
The Company may require as a condition to issuing shares of Restricted Stock
that the Participant pay any sums that federal, state or local tax law
requires to be withheld with respect to the issuance or vesting of Restricted
Stock.
(e) RECLASSIFICATION, REORGANIZATION, MERGER, ETC. In the event of
a reclassification of the outstanding shares of Common Stock of the Company
or a reorganization, recapitalization, reclassification, stock split, stock
dividend, combination of shares, merger, consolidation or any change in the
capital structure of the Company, or otherwise, an appropriate and
proportionate adjustment shall be made in the number and kind of shares of
Restricted Stock issued or issuable under the Plan and the price therefor.
Adjustments under this Section 6(e) shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive, subject to any additional terms of an
agreement with respect to the issuance of Restricted Stock.
(f) SECURITIES LAW COMPLIANCE. Upon the Company's agreement to
issue Restricted Stock at a time when there is not in effect under the
Securities Act of 1933 a registration statement relating to the Restricted
Stock, a Participant shall represent and warrant in writing to the Company
that the shares are being acquired for investment for the Participant's
account only and not with a view to the distribution thereof. No shares
shall be issued unless and until there shall have been full compliance with
any applicable requirements of the Securities and Exchange Commission, the
California Department of Corporations or other regulatory agencies having
jurisdiction and any exchanges upon which Common Stock may be listed.
(g) TERMINATION. Unless previously terminated by the Board, the
Plan shall terminate at the close of business on December 31, 2007, and no
Restricted Stock shall be issued under the Plan thereafter, but such
termination shall not affect any Restricted Stock theretofore issued.
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RESTRICTED STOCK PURCHASE AGREEMENT
This RESTRICTED STOCK PURCHASE AGREEMENT is made and entered into
this ____ day of _________, 1998, by and between Transcendent Design
Technology, Inc., a Delaware corporation (the "Company"), and
__________________, an employee of the Company ("Employee").
RECITALS
A. The Company desires to sell and issue to Employee, and
Employee desires to purchase and acquire from the Company, shares of the
Company's Common Stock (the "Common Stock").
B. The Company further desires to provide for certain
restrictions on transfer and for the purchase by the Company of the Common
Stock owned by Employee in certain circumstances.
AGREEMENT
Accordingly, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. SHARE PURCHASE
The Company hereby sells to Employee, and Employee hereby purchases
from the Company, _________ shares of the Company's Common Stock (the
"Shares") at a purchase price of $________ per share. The Company
acknowledges receipt of the purchase price by check made payable to the order
of the Company, and agrees to issue certificates in the name of Employee for
the Shares purchased.
2. SECURITIES LAW COMPLIANCE
In connection with the purchase of the Shares, Employee covenants,
represents and acknowledges the following:
(a) Employee is aware of the Company's business and financial
condition and has acquired and has been afforded access to sufficient
information about the Company and its prospects to reach an informed and
knowledgeable decision to acquire the Shares and to evaluate the merits and
risks of an investment in the Shares.
(b) Employee is purchasing the Shares for investment for
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Employee's own account and not with a view to or for sale in connection with
any distribution thereof. Employee understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), by
reason of Rule 701 under the 1933 Act for stock issuances under compensatory
benefit plans, and have not been qualified under the California Corporate
Securities Law of 1968 by reason of Section 25102(f) of the California
Corporations Code. Employee acknowledges receipt of a copy of the Company's
Restricted Stock Plan, pursuant to which the Shares have been issued by the
Company.
(c) Employee has had sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the purchase of the Shares and to make an informed investment decision with
respect to that purchase. Employee can afford a complete loss of the value
of the Shares and is able to bear the economic risk of holding the Shares for
an indefinite period.
(d) Employee understands that the Shares must be held
indefinitely unless they are subsequently registered under the 1933 Act or an
exemption from such registration is available. Moreover, Employee
understands that certificate(s) evidencing the Shares will be imprinted with
a legend, which prohibits the transfer of the Shares unless they are
registered or such transfer is exempt from registration.
(e) Employee understands that the Shares constitute
"restricted securities" within the meaning of Rule 144 under the 1933 Act,
and that after satisfaction of the requisite holding period, and assuming a
market for the Shares then exists, any sale of the Shares which might be made
by Employee in reliance upon Rule 144 may be made only in limited amounts in
accordance with the terms and conditions of that Rule and that Employee may
not be able to sell the Shares at the time or in the amount he so desires.
(f) Employee hereby agrees that Employee shall make no
disposition of the Shares unless and until Employee shall have provided the
Company with written assurances, in form and substance satisfactory to the
Company, that the proposed disposition does not require registration of the
Shares under the 1933 Act, or that all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule 144)
has been taken.
3. VESTING AND TRANSFER RESTRICTIONS
3.1 GENERAL RESTRICTION. Employee shall not sell, transfer,
assign, pledge, hypothecate or otherwise dispose of any of the Shares, or any
right or interest therein, without the prior written consent of the Company
or except as otherwise provided in this Agreement.
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3.2 REPURCHASE OPTION. All of the Shares purchased by
Employee pursuant to this Agreement are initially subject to the Repurchase
Option (as defined below) and are therefore "Unvested Shares". Shares which
become free of the Repurchase Option are referred to as "Vested Shares". On
the first day of the first calendar month following Employee's first six full
calendar months of employment with the Company, a number of Shares equal to
2% of the Shares shall become Vested Shares and on the first day of each
month thereafter a number of Unvested Shares equal to 2% of the Shares shall
become Vested Shares. In addition, any Unvested Shares for which the
Repurchase Option has become exercisable but has not been exercised within
the requisite time period shall become Vested Shares after the lapse of the
Repurchase Option. The Board of Directors shall have the right at its sole
discretion to accelerate vesting of the Shares. Without limiting the
generality of the foregoing sentence, all Unvested Shares shall become Vested
Shares on the consummation of the acquisition of the Company through a
merger, sale of all or substantially all the Company's assets, or sale of all
or substantially all the Company's outstanding capital stock.
If Employee's employment with the Company terminates for any
reason (including without limitation Employee's death, incapacity,
resignation or termination by the Company with or without cause), then the
Company shall have the option (the "Repurchase Option"), exercisable at any
time within 90 days following termination of Employee's employment with the
Company, to purchase from Employee or the legal representative of the
deceased Employee all or any portion of Employee's Unvested Shares at the
price per share paid by Employee under Section 1 hereof. To exercise its
Repurchase Option, the Company shall give written notice to Employee or such
legal representative of its exercise and shall pay the purchase price for the
Unvested Shares within 30 days after giving such notice.
Employee or such legal representative shall deliver the
certificate(s) representing any Shares to be sold to the Company under this
Section 3.2, duly endorsed in blank or accompanied by duly executed stock
powers, against receipt of the purchase price for such Shares, on the date
and at the time selected by the Company, at the principal office of the
Company.
3.3 PERMITTED TRANSFERS. A transfer of Vested Shares or
Unvested Shares may be made by Employee INTER VIVOS or by will or according
to the laws of descent and distribution, to Employee's spouse or issue, or to
a trust for Employee's or their benefit, provided that the Shares shall be
and remain subject to all of the provisions and restrictions of this
Agreement, including without limitation Section 3.2, and all references
herein to Employee shall include such transferee(s). As a condition to the
transfer of the Shares on the Company's books, such transferee shall execute
and deliver to the Company a writing, in form and substance satisfactory to
the Company, obligating himself/herself to comply with this Agreement.
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3.4 MARKET STAND-OFF. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an
effective registration statement filed under the 1933 Act, including the
Company's initial public offering, Employee shall not sell, make any short
sale of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any
of the foregoing transactions with respect to, any Shares without the prior
written consent of the Company or its underwriters, provided that the
officers and directors of the Company are also subject to similar
arrangements. Such limitation shall be in effect for such period of time
from and after the effective date of such registration statement as may be
requested by the Company or such underwriters, provided that in no event
shall such period exceed 180 days. The limitation of this Section 3.4 shall
remain in effect for the two-year period immediately following the effective
date of the Company's initial public offering and shall thereafter terminate
and cease to have any force or effect. In order to enforce the limitations
of this Section 3.4, the Company may impose stop-transfer instructions with
respect to the Shares until the end of the applicable stand-off period.
3.5 SALES SUBJECT TO RIGHT OF FIRST REFUSAL. In the event
Employee at any time or from time to time desires to sell, transfer, assign,
pledge, hypothecate or otherwise dispose of any of the Vested Shares or any
interest therein, Employee may do so, provided that Employee first has
offered such Shares or interest therein to the Company as follows:
(a) Employee shall deliver to the Secretary of the
Company a written notice (the "Sales Notice") specifying the name and address
of the proposed purchaser, the number of the Shares to be sold and the terms
and conditions of the proposed sale. The Company shall have the right to
purchase, at the price and on the terms and conditions set forth in the Sales
Notice, all, but not less than all, of the Shares specified in the Sales
Notice, by giving written notice thereof and the number of Shares as to which
such right is exercised to Employee within 45 days after the delivery of the
Sales Notice.
(b) In the event all of the Shares specified in the
Sales Notice are not purchased by the Company under this Section 3.5, such
Shares may be sold to the person named in the Sales Notice for any
consideration not less in value than that specified in said notice and at any
time within 90 days of the delivery of the Sales Notice. Such Shares shall
be and remain subject to all of the provisions and restrictions of this
Agreement, and all references herein to Employee shall include such person.
As a condition to the transfer of such Shares on the Company's books, such
person shall execute and deliver to the Company a writing obligating
himself/herself to comply with this Agreement. In the event the Shares are
not so transferred within such 90-day period, the prior rights of the Company
again shall become operative in accordance with the terms hereof.
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(c) Any purchase and sale under this Section 3.5 shall
occur on the date and at the time selected by the Company, within 75 days
after the delivery to the Company of the Sales Notice, at the principal
office of the Company. At such time, Employee shall deliver to the Company
certificates representing the Shares to be purchased and sold, duly endorsed
in blank or accompanied by duly executed stock powers, and in proper form and
order for transfer, against receipt of the purchase price, payable by the
Company's check.
(d) The right of first refusal provided for in this
Section 3.5 shall lapse and cease to have effect on the closing of a
bona-fide, firm-commitment underwritten public offering of the Company's
Common Stock pursuant to a registration statement declared effective under
the Securities Act of 1933 resulting in aggregate proceeds to the Company of
at least $10,000,000 at a public offering price of more than $5.00 per share,
adjusted to reflect any stock dividend, stock split or other recapitalization
of the Company effected after the date of this Agreement. The right of first
refusal shall also lapse and cease to have effect on the closing of a merger
of the Company with another entity that is publicly traded on NASDAQ or a
national securities exchange, where the Company is not the surviving entity.
3.6 RESTRICTIVE LEGEND. Each certificate representing Shares
shall bear the following restrictive legend:
The securities represented by this certificate are
subject to restrictions on transfer and to repurchase
by the corporation pursuant to the provisions of a
Restricted Stock Purchase Agreement between the
corporation and the registered holder of the
securities. Among other things, such Agreement grants
certain repurchase rights to the corporation in the
event the registered holder terminates his/her
employment with the corporation. A copy of such
agreement is on file at the principal office of the
corporation.
4. MISCELLANEOUS
4.1 WITHHOLDING. Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind otherwise due to
Employee any sums that federal, state or local tax law require by law to be
withheld with respect to the issuance or vesting of Restricted Stock, or as
otherwise may be required by such laws.
4.2 SECTION 83(b) ELECTION. Employee understands that under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
differ-
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ence between the purchase price paid for the Shares and their fair market
value on the date any forfeiture restrictions applicable to such Shares lapse
will be reportable as ordinary income at that time. For this purpose, the
term "forfeiture restrictions" includes the right of the Company to
repurchase the Shares pursuant to the Repurchase Option provided in Section
3.2. Employee understands that Employee may elect to be taxed at the time
the Shares are acquired hereunder, rather than when and as such Shares cease
to be subject to such forfeiture restrictions, by filing an election under
Section 83(b) of the Code with the Internal Revenue Service within 30 days
after purchase of the Shares. Even if the fair market value of the Shares at
the date of purchase equals the purchase price paid (and thus no tax is
payable), the election must be made to avoid potential adverse tax
consequences in the future. Employee understands that failure to make this
filing within the 30 day period will result in the recognition of ordinary
income by Employee as the forfeiture restrictions lapse. EMPLOYEE
ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF EMPLOYEE
REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON EMPLOYEE'S
BEHALF.
4.3 DEPOSIT OF CERTIFICATES. Employee hereby acknowledges
receipt and delivery of the certificate(s) evidencing the Shares and
acknowledges that Employee has purchased the Shares and is the owner thereof.
Pursuant to Sections 8313 and 8314 of the California Commercial Code,
Employee hereby designates the Company as the entity to acquire and retain
possession of such certificate(s) on Employee's behalf. The Company will
retain such certificate(s) on behalf of Employee for so long as the Shares
evidenced thereby are subject to this Agreement. In the event of a transfer
pursuant to the terms of this Agreement, the Shares so transferred shall be
and remain subject to this Section 4.3, and all references herein to Employee
shall include such transferee.
Simultaneously with the execution and delivery of this
Agreement, Employee has executed and delivered to the Company stock power(s)
executed in blank for the Shares, and hereby authorizes the Secretary of the
Company, pursuant to Section 8206 of the California Commercial Code, to
complete such stock power(s) for the purpose of effecting any transfer
consistent with the terms and conditions of this Agreement.
4.4 AUTOMATIC CANCELLATION. If the Company shall tender, at
the time and place and in the amount provided in this Agreement, the purchase
price for the Shares to be repurchased in accordance with the provisions of
this Agreement, then from and after such time Employee shall no longer have
any rights as a holder of such Shares (other than the right to receive
payment of such purchase price in accordance with the applicable provisions
hereof or thereof), and the Company (or its assigns) shall be deemed the
owner and holder of such Shares, whether or not the certificates therefor
have been delivered as required by this Agreement.
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4.5 FURTHER ACTION. Employee hereby agrees to take whatever
additional action and execute whatever additional documents the Company may
in its judgment deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on either Employee or
the Shares pursuant to this Agreement.
4.6 RECLASSIFICATION, REORGANIZATION, MERGER, ETC. In the
event of a reclassification of the Shares, or a reorganization,
recapitalization, stock-split, stock dividend, combination of shares, merger,
consolidation or any change in the capital structure of the Company, all
securities obtained as a result thereof by Employee in addition to, in
exchange for or with respect to the Shares also shall be subject to this
Agreement (and shall be considered "Shares" for purposes of this Agreement),
and the purchase price therefor under the Repurchase Option in Section 3.2
shall be adjusted as appropriate. Employee shall cause any certificate(s)
representing such securities, if not otherwise in the possession of the
Company, to be deposited with the Company pursuant to Section 4.3.
4.7 NOTICES. Any notice or communication required or
permitted by this Agreement shall be deemed sufficiently given if in writing
and when delivered personally or 72 hours after deposit with the United
States Postal Service, registered or certified mail, postage prepaid, and
addressed as follows:
If to the Company:
Transcendent Design Technology, Inc.
1385 Del Norte Road
Camarillo, California 93010
If to Employee:
-----------------------------
-----------------------------
-----------------------------
or to such other address as a party to whom notice is to be given has
furnished to the other party in the manner provided above.
4.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single agreement.
4.9 AMENDMENT AND WAIVER. This Agreement may be amended,
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modified or supplemented only by a writing executed by each of the parties.
Any party may in writing waive any provision of this Agreement to the extent
such provision is for the benefit of the waiving party. The failure of the
Company (or its assigns) in any instance to exercise the options granted
under Sections 3.2 or 3.5 shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Company and Employee. No waiver by any party of a breach of any provision of
this Agreement shall be construed as a waiver of any subsequent or different
breach, and no forbearance by a party to seek a remedy for noncompliance or
breach by another party shall be construed as a waiver of any right or remedy
with respect to such noncompliance or breach.
4.10 HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
4.11 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties pertaining to the subject
matter of this Agreement and supersedes all prior agreements, understandings,
negotiations and representations and discussions, whether verbal or written,
of the parties pertaining to that subject matter and the acquisition of stock
of the Company. There are no provisions, terms, conditions or obligations of
the parties pertaining to that subject matter other than as contained in this
Agreement.
4.12 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and Employee and Employee's legal representatives,
heirs, legatees, distributees, assigns and transferees by operation of law,
whether or not any such person shall have become a party to this Agreement
or shall have agreed in writing to be bound by the terms and conditions
hereof.
4.13 GOVERNING LAW. The validity, construction and
performance of this Agreement shall be governed by the laws, without regard
to the laws as to choice or conflict of laws, of the State of California.
4.14 ASSIGNMENT. The Company may assign its Repurchase Option
to any person or entity selected by the Company's Board of Directors,
including (without limitation) one or more shareholders of the Company. If
the assignee of the Repurchase Option is other than a parent or subsidiary
corporation of the Company, then such assignee must make a cash payment to
the Company, upon the assignment of the Repurchase Option, in an amount equal
to the excess (if any) of the fair market value of the Unvested Shares at the
time subject to the Repurchase Option and the aggregate purchase price
payable for such Unvested Shares.
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4.15 NO RIGHT TO CONTINUED EMPLOYMENT. THIS AGREEMENT AND THE
PURCHASE OF THE SHARES SHALL NOT CONFER UPON EMPLOYEE ANY RIGHT WITH RESPECT
TO CONTINUANCE OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY
WAY WITH THE RIGHT OF THE COMPANY TO TERMINATE EMPLOYEE'S EMPLOYMENT AT ANY
TIME FOR ANY REASON WHATSOEVER, WITH OR WITHOUT CAUSE.
4.16 SHAREHOLDER RIGHTS. Except as provided in Sections 3 and
4.4, Employee shall have all the rights of a shareholder with respect to the
Shares, whether or not Employee's interest in the Shares is at the time
vested. Accordingly, Employee shall have the right to vote the Shares and to
receive any cash dividends or other distributions paid or made with respect
to the Shares.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
TRANSCENDENT DESIGN TECHNOLOGY, INC.
By
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EMPLOYEE
------------------------------------------
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CONSENT OF SPOUSE
The undersigned has read the Restricted Stock Purchase Agreement dated
___________, 1998, between Transcendent Design Technology, Inc., a Delaware
corporation (the "Company"), and ____________________, and is aware of,
understands, consents and agrees to its terms and conditions, including
his/her spouse's obligation to transfer, assign and deliver to the Company
all of the shares of stock of the Company standing in the name of such
spouse, including the community property or other interest of the undersigned
therein, if any. The execution and delivery of this Consent, however, shall
not be deemed to evidence or imply the existence of any such community
property or other interest where none would otherwise exist.
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<PAGE>
RESTRICTED STOCK PURCHASE AGREEMENT
This RESTRICTED STOCK PURCHASE AGREEMENT is made and entered into
this ____ day of _________, 1998, by and between Transcendent Design
Technology, Inc., a Delaware corporation (the "Company"), and
__________________, an employee of the Company ("Employee").
RECITALS
A. The Company desires to sell and issue to Employee, and
Employee desires to purchase and acquire from the Company, shares of the
Company's Non-Voting Common Stock (the "Non-Voting Common Stock").
B. The Company further desires to provide for certain
restrictions on transfer and for the purchase by the Company of the
Non-Voting Common Stock owned by Employee in certain circumstances.
AGREEMENT
Accordingly, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. SHARE PURCHASE
The Company hereby sells to Employee, and Employee hereby purchases
from the Company, _________ shares of the Company's Non-Voting Common Stock
(the "Shares") at a purchase price of $________ per share. The Company
acknowledges receipt of the purchase price by check made payable to the order
of the Company, and agrees to issue certificates in the name of Employee for
the Shares purchased.
2. SECURITIES LAW COMPLIANCE
In connection with the purchase of the Shares, Employee covenants,
represents and acknowledges the following:
(a) Employee is aware of the Company's business and financial
condition and has acquired and has been afforded access to sufficient
information about the Company and its prospects to reach an informed and
knowledgeable decision to acquire the Shares and to evaluate the merits and
risks of an investment in the Shares.
(b) Employee is purchasing the Shares for investment for
Employee's own account and not with a view to or for sale in connection with any
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distribution thereof. Employee understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), by
reason of Rule 701 under the 1933 Act for stock issuances under compensatory
benefit plans, and have not been qualified under the California Corporate
Securities Law of 1968 by reason of Section 25102(f) of the California
Corporations Code. Employee acknowledges receipt of a copy of the Company's
Restricted Stock Plan, pursuant to which the Shares have been issued by the
Company.
(c) Employee has had sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the purchase of the Shares and to make an informed investment decision with
respect to that purchase. Employee can afford a complete loss of the value
of the Shares and is able to bear the economic risk of holding the Shares for
an indefinite period.
(d) Employee understands that the Shares must be held
indefinitely unless they are subsequently registered under the 1933 Act or an
exemption from such registration is available. Moreover, Employee
understands that certificate(s) evidencing the Shares will be imprinted with
a legend, which prohibits the transfer of the Shares unless they are
registered or such transfer is exempt from registration.
(e) Employee understands that the Shares constitute
"restricted securities" within the meaning of Rule 144 under the 1933 Act,
and that after satisfaction of the requisite holding period, and assuming a
market for the Shares then exists, any sale of the Shares which might be made
by Employee in reliance upon Rule 144 may be made only in limited amounts in
accordance with the terms and conditions of that Rule and that Employee may
not be able to sell the Shares at the time or in the amount he so desires.
(f) Employee hereby agrees that Employee shall make no
disposition of the Shares unless and until Employee shall have provided the
Company with written assurances, in form and substance satisfactory to the
Company, that the proposed disposition does not require registration of the
Shares under the 1933 Act, or that all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule 144)
has been taken.
3. VESTING AND TRANSFER RESTRICTIONS
3.1 GENERAL RESTRICTION. Employee shall not sell, transfer,
assign, pledge, hypothecate or otherwise dispose of any of the Shares, or any
right or interest therein, without the prior written consent of the Company or
except as otherwise provided in this Agreement.
3.2 REPURCHASE OPTION. All of the Shares purchased by
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Employee pursuant to this Agreement are initially subject to the Repurchase
Option (as defined below) and are therefore "Unvested Shares". Shares which
become free of the Repurchase Option are referred to as "Vested Shares". On
the first day of the first calendar month following Employee's first six full
calendar months of employment with the Company, a number of Shares equal to
2% of the Shares shall become Vested Shares and on the first day of each
month thereafter a number of Unvested Shares equal to 2% of the Shares shall
become Vested Shares. In addition, any Unvested Shares for which the
Repurchase Option has become exercisable but has not been exercised within
the requisite time period shall become Vested Shares after the lapse of the
Repurchase Option. The Board of Directors shall have the right at its sole
discretion to accelerate vesting of the Shares. Without limiting the
generality of the foregoing sentence, all Unvested Shares shall become Vested
Shares on the consummation of the acquisition of the Company through a
merger, sale of all or substantially all the Company's assets, or sale of all
or substantially all the Company's outstanding capital stock.
If Employee's employment with the Company terminates for any
reason (including without limitation Employee's death, incapacity,
resignation or termination by the Company with or without cause), then the
Company shall have the option (the "Repurchase Option"), exercisable at any
time within 90 days following termination of Employee's employment with the
Company, to purchase from Employee or the legal representative of the
deceased Employee all or any portion of Employee's Unvested Shares at the
price per share paid by Employee under Section 1 hereof. To exercise its
Repurchase Option, the Company shall give written notice to Employee or such
legal representative of its exercise and shall pay the purchase price for the
Unvested Shares within 30 days after giving such notice.
Employee or such legal representative shall deliver the
certificate(s) representing any Shares to be sold to the Company under this
Section 3.2, duly endorsed in blank or accompanied by duly executed stock
powers, against receipt of the purchase price for such Shares, on the date
and at the time selected by the Company, at the principal office of the
Company.
3.3 NONTERMINABLE REPURCHASE OPTION. At any time after the
date of this Agreement, whether the Employee is at the time employed by the
Company or not, and whether all the Shares have become Vested Shares or not,
the Company will have the option (the "Nonterminable Repurchase Option") to
purchase all or any portion of the Shares (including both Unvested Shares and
Vested Shares), for a purchase price of $0.0215 per share, in the event that
the Employee is in material breach of any provision of the Employment and
Trade Secrets Agreement between the Company and the Employee. The Company, in
its sole discretion, shall determine whether the Employee is in material
breach of the Employment and Trade Secrets Agreement, and the Company's
decision shall be final and binding on the Employee for the purposes of this
Section 3.3. To exercise its Nonterminable Repurchase Option, the Company
shall give written notice to
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the Employee and shall pay the purchase price for the number of Shares being
purchased within 120 days after giving such notice. Employee shall deliver
the certificates representing any Shares to be sold to the Company under this
Section 3.3, if such certificates are then in the Employee's possession, duly
endorsed in blank or accompanied by duly executed stock powers, against
receipt of the purchase price for such Shares, on the date and at the time
selected by the Company. The Nonterminable Repurchase Option shall expire
upon the consummation of a sale of all or substantially all the assets of the
Company, or the sale or transfer of more than 49% of the voting stock of the
Company to individuals or entities not, at the time of the transfer, existing
shareholders of the Company.
3.4 PERMITTED TRANSFERS. A transfer of Vested Shares or
Unvested Shares may be made by Employee INTER VIVOS or by will or according
to the laws of descent and distribution, to Employee's spouse or issue, or to
a trust for Employee's or their benefit, provided that the Shares shall be
and remain subject to all of the provisions and restrictions of this
Agreement, including without limitation Sections 3.2 and 3.3, and all
references herein to Employee shall include such transferee(s). As a
condition to the transfer of the Shares on the Company's books, such
transferee shall execute and deliver to the Company a writing, in form and
substance satisfactory to the Company, obligating himself/herself to comply
with this Agreement.
3.5 MARKET STAND-OFF. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an
effective registration statement filed under the 1933 Act, including the
Company's initial public offering, Employee shall not sell, make any short
sale of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any
of the foregoing transactions with respect to, any Shares without the prior
written consent of the Company or its underwriters, provided that the
officers and directors of the Company are also subject to similar
arrangements. Such limitation shall be in effect for such period of time
from and after the effective date of such registration statement as may be
requested by the Company or such underwriters, provided that in no event
shall such period exceed 180 days. The limitation of this Section 3.5 shall
remain in effect for the two-year period immediately following the effective
date of the Company's initial public offering and shall thereafter terminate
and cease to have any force or effect. In order to enforce the limitations
of this Section 3.5, the Company may impose stop-transfer instructions with
respect to the Shares until the end of the applicable stand-off period.
3.6 SALES SUBJECT TO RIGHT OF FIRST REFUSAL. In the event
Employee at any time or from time to time desires to sell, transfer, assign,
pledge, hypothecate or otherwise dispose of any of the Vested Shares or any
interest therein, Employee may do so, provided that Employee first has
offered such Shares or interest therein to the Company as follows:
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(a) Employee shall deliver to the Secretary of the
Company a written notice (the "Sales Notice") specifying the name and address
of the proposed purchaser, the number of the Shares to be sold and the terms
and conditions of the proposed sale. The Company shall have the right to
purchase, at the price and on the terms and conditions set forth in the Sales
Notice, all, but not less than all, of the Shares specified in the Sales
Notice, by giving written notice thereof and the number of Shares as to which
such right is exercised to Employee within 45 days after the delivery of the
Sales Notice.
(b) In the event all of the Shares specified in the
Sales Notice are not purchased by the Company under this Section 3.6, such
Shares may be sold to the person named in the Sales Notice for any
consideration not less in value than that specified in said notice and at any
time within 90 days of the delivery of the Sales Notice. Such Shares shall
be and remain subject to all of the provisions and restrictions of this
Agreement, and all references herein to Employee shall include such person.
As a condition to the transfer of such Shares on the Company's books, such
person shall execute and deliver to the Company a writing obligating
himself/herself to comply with this Agreement. In the event the Shares are
not so transferred within such 90-day period, the prior rights of the Company
again shall become operative in accordance with the terms hereof.
(c) Any purchase and sale under this Section 3.6 shall
occur on the date and at the time selected by the Company, within 75 days
after the delivery to the Company of the Sales Notice, at the principal
office of the Company. At such time, Employee shall deliver to the Company
certificates representing the Shares to be purchased and sold, duly endorsed
in blank or accompanied by duly executed stock powers, and in proper form and
order for transfer, against receipt of the purchase price, payable by the
Company's check.
(d) The right of first refusal provided for in this
Section 3.6 shall lapse and cease to have effect on the closing of a
bona-fide, firm-commitment underwritten public offering of the Company's
Common Stock pursuant to a registration statement declared effective under
the Securities Act of 1933 resulting in aggregate proceeds to the Company of
at least $10,000,000 at a public offering price of more than $5.00 per share,
adjusted to reflect any stock dividend, stock split or other recapitalization
of the Company effected after the date of this Agreement. The right of first
refusal shall also lapse and cease to have effect on the closing of a merger
of the Company with another entity that is publicly traded on NASDAQ or a
national securities exchange, where the Company is not the surviving entity.
3.7 RESTRICTIVE LEGEND. Each certificate representing Shares
shall bear the following restrictive legend:
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The securities represented by this certificate are
subject to restrictions on transfer and to repurchase
by the corporation pursuant to the provisions of a
Restricted Stock Purchase Agreement between the
corporation and the registered holder of the
securities. Among other things, such Agreement grants
certain repurchase rights to the corporation in the
event the registered holder terminates his/her
employment with the corporation. A copy of such
agreement is on file at the principal office of the
corporation.
4. MISCELLANEOUS
4.1 WITHHOLDING. Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind otherwise due to
Employee any sums that federal, state or local tax law require by law to be
withheld with respect to the issuance or vesting of Restricted Stock, or as
otherwise may be required by such laws.
4.2 SECTION 83(b) ELECTION. Employee understands that under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
difference between the purchase price paid for the Shares and their fair
market value on the date any forfeiture restrictions applicable to such
Shares lapse will be reportable as ordinary income at that time. For this
purpose, the term "forfeiture restrictions" includes the right of the Company
to repurchase the Shares pursuant to the Repurchase Option provided in
Section 3.2. Employee understands that Employee may elect to be taxed at the
time the Shares are acquired hereunder, rather than when and as such Shares
cease to be subject to such forfeiture restrictions, by filing an election
under Section 83(b) of the Code with the Internal Revenue Service within 30
days after purchase of the Shares. Even if the fair market value of the
Shares at the date of purchase equals the purchase price paid (and thus no
tax is payable), the election must be made to avoid potential adverse tax
consequences in the future. Employee understands that failure to make this
filing within the 30 day period will result in the recognition of ordinary
income by Employee as the forfeiture restrictions lapse. EMPLOYEE
ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF EMPLOYEE
REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON EMPLOYEE'S
BEHALF.
4.3 DEPOSIT OF CERTIFICATES. Employee hereby acknowledges
receipt and delivery of the certificate(s) evidencing the Shares and
acknowledges that Employee has purchased the Shares and is the owner thereof.
Pursuant to Sections 8313 and 8314 of the California Commercial Code, Employee
hereby designates the Company as the entity to acquire and retain possession of
such certificate(s) on Employee's behalf.
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The Company will retain such certificate(s) on behalf of Employee for so long
as the Shares evidenced thereby are subject to this Agreement. In the event
of a transfer pursuant to the terms of this Agreement, the Shares so
transferred shall be and remain subject to this Section 4.3, and all
references herein to Employee shall include such transferee.
Simultaneously with the execution and delivery of this
Agreement, Employee has executed and delivered to the Company stock power(s)
executed in blank for the Shares, and hereby authorizes the Secretary of the
Company, pursuant to Section 8206 of the California Commercial Code, to
complete such stock power(s) for the purpose of effecting any transfer
consistent with the terms and conditions of this Agreement.
4.4 AUTOMATIC CANCELLATION. If the Company shall tender, at
the time and place and in the amount provided in this Agreement, the purchase
price for the Shares to be repurchased in accordance with the provisions of
this Agreement, then from and after such time Employee shall no longer have
any rights as a holder of such Shares (other than the right to receive
payment of such purchase price in accordance with the applicable provisions
hereof or thereof), and the Company (or its assigns) shall be deemed the
owner and holder of such Shares, whether or not the certificates therefor
have been delivered as required by this Agreement.
4.5 FURTHER ACTION. Employee hereby agrees to take whatever
additional action and execute whatever additional documents the Company may
in its judgment deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on either Employee or
the Shares pursuant to this Agreement.
4.6 RECLASSIFICATION, REORGANIZATION, MERGER, ETC. In the
event of a reclassification of the Shares, or a reorganization,
recapitalization, stock-split, stock dividend, combination of shares, merger,
consolidation or any change in the capital structure of the Company, all
securities obtained as a result thereof by Employee in addition to, in
exchange for or with respect to the Shares also shall be subject to this
Agreement (and shall be considered "Shares" for purposes of this Agreement),
and the purchase price therefor under the Repurchase Option in Section 3.2
and the Nonterminable Repurchase Option in Section 3.3 shall be adjusted as
appropriate. Employee shall cause any certificate(s) representing such
securities, if not otherwise in the possession of the Company, to be
deposited with the Company pursuant to Section 4.3.
4.7 NOTICES. Any notice or communication required or
permitted by this Agreement shall be deemed sufficiently given if in writing
and when delivered personally or 72 hours after deposit with the United
States Postal Service, registered or
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certified mail, postage prepaid, and addressed as follows:
If to the Company:
Transcendent Design Technology, Inc.
1385 Del Norte Road
Camarillo, California 93010
If to Employee:
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or to such other address as a party to whom notice is to be given has
furnished to the other party in the manner provided above.
4.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single agreement.
4.9 AMENDMENT AND WAIVER. This Agreement may be amended,
modified or supplemented only by a writing executed by each of the parties.
Any party may in writing waive any provision of this Agreement to the extent
such provision is for the benefit of the waiving party. The failure of the
Company (or its assigns) in any instance to exercise the options granted
under Sections 3.2, 3.3 or 3.6 shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Company and Employee. No waiver by any party of a breach of any provision of
this Agreement shall be construed as a waiver of any subsequent or different
breach, and no forbearance by a party to seek a remedy for noncompliance or
breach by another party shall be construed as a waiver of any right or remedy
with respect to such noncompliance or breach.
4.10 HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
4.11 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties pertaining to the subject matter
of this Agreement and supersedes all prior agreements, understandings,
negotiations and representations and discussions, whether verbal or written, of
the parties pertaining to that subject matter and the acquisition of stock of
the Company. There are no provisions,
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terms, conditions or obligations of the parties pertaining to that subject
matter other than as contained in this Agreement.
4.12 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and Employee and Employee's legal representatives,
heirs, legatees, distributees, assigns and transferees by operation of law,
whether or not any such person shall have become a party to this Agreement
or shall have agreed in writing to be bound by the terms and conditions
hereof.
4.13 GOVERNING LAW. The validity, construction and
performance of this Agreement shall be governed by the laws, without regard
to the laws as to choice or conflict of laws, of the State of California.
4.14 ASSIGNMENT. The Company may assign its Repurchase Option
and/or its Nonterminable Repurchase Option to any person or entity selected
by the Company's Board of Directors, including (without limitation) one or
more shareholders of the Company. If the assignee of the Repurchase Option
is other than a parent or subsidiary corporation of the Company, then such
assignee must make a cash payment to the Company, upon the assignment of the
Repurchase Option, in an amount equal to the excess (if any) of the fair
market value of the Unvested Shares at the time subject to the Repurchase
Option and the aggregate purchase price payable for such Unvested Shares.
4.15 NO RIGHT TO CONTINUED EMPLOYMENT. THIS AGREEMENT AND THE
PURCHASE OF THE SHARES SHALL NOT CONFER UPON EMPLOYEE ANY RIGHT WITH RESPECT
TO CONTINUANCE OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY
WAY WITH THE RIGHT OF THE COMPANY TO TERMINATE EMPLOYEE'S EMPLOYMENT AT ANY
TIME FOR ANY REASON WHATSOEVER, WITH OR WITHOUT CAUSE.
4.16 SHAREHOLDER RIGHTS. Except as provided in Sections 3 and
4.4, Employee shall have all the rights of a shareholder with respect to the
Shares, whether or not Employee's interest in the Shares is at the time
vested. Accordingly, Employee shall have the right to vote the Shares and to
receive any cash dividends or other distributions paid or made with respect
to the Shares.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
TRANSCENDENT DESIGN TECHNOLOGY, INC.
By
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EMPLOYEE
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CONSENT OF SPOUSE
The undersigned has read the Restricted Stock Purchase Agreement dated
___________, 1998, between Transcendent Design Technology, Inc., a Delaware
corporation (the "Company"), and ____________________, and is aware of,
understands, consents and agrees to its terms and conditions, including
his/her spouse's obligation to transfer, assign and deliver to the Company
all of the shares of stock of the Company standing in the name of such
spouse, including the community property or other interest of the undersigned
therein, if any. The execution and delivery of this Consent, however, shall
not be deemed to evidence or imply the existence of any such community
property or other interest where none would otherwise exist.
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<PAGE>
RESTRICTED STOCK PURCHASE AGREEMENT
This RESTRICTED STOCK PURCHASE AGREEMENT is made and entered into
this ____ day of _________, 1998, by and between Transcendent Design
Technology, Inc., a Delaware corporation (the "Company"), and
__________________, an employee of the Company ("Employee").
RECITALS
A. The Company desires to sell and issue to Employee, and
Employee desires to purchase and acquire from the Company, shares of the
Company's Non-Voting Common Stock (the "Non-Voting Common Stock").
B. The Company further desires to provide for certain
restrictions on transfer and for the purchase by the Company of the
Non-Voting Common Stock owned by Employee in certain circumstances.
AGREEMENT
Accordingly, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. SHARE PURCHASE
The Company hereby sells to Employee, and Employee hereby purchases
from the Company, _________ shares of the Company's Non-Voting Common Stock
(the "Shares") at a purchase price of $________ per share. The Company
acknowledges receipt of the purchase price by check made payable to the order
of the Company, and agrees to issue certificates in the name of Employee for
the Shares purchased.
2. SECURITIES LAW COMPLIANCE
In connection with the purchase of the Shares, Employee covenants,
represents and acknowledges the following:
(a) Employee is aware of the Company's business and financial
condition and has acquired and has been afforded access to sufficient
information about the Company and its prospects to reach an informed and
knowledgeable decision to acquire the Shares and to evaluate the merits and
risks of an investment in the Shares.
(b) Employee is purchasing the Shares for investment for
Employee's own account and not with a view to or for sale in connection with
any
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distribution thereof. Employee understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), by
reason of Rule 701 under the 1933 Act for stock issuances under compensatory
benefit plans, and have not been qualified under the California Corporate
Securities Law of 1968 by reason of Section 25102(f) of the California
Corporations Code. Employee acknowledges receipt of a copy of the Company's
Restricted Stock Plan, pursuant to which the Shares have been issued by the
Company.
(c) Employee has had sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the purchase of the Shares and to make an informed investment decision with
respect to that purchase. Employee can afford a complete loss of the value
of the Shares and is able to bear the economic risk of holding the Shares for
an indefinite period.
(d) Employee understands that the Shares must be held
indefinitely unless they are subsequently registered under the 1933 Act or an
exemption from such registration is available. Moreover, Employee
understands that certificate(s) evidencing the Shares will be imprinted with
a legend, which prohibits the transfer of the Shares unless they are
registered or such transfer is exempt from registration.
(e) Employee understands that the Shares constitute
"restricted securities" within the meaning of Rule 144 under the 1933 Act,
and that after satisfaction of the requisite holding period, and assuming a
market for the Shares then exists, any sale of the Shares which might be made
by Employee in reliance upon Rule 144 may be made only in limited amounts in
accordance with the terms and conditions of that Rule and that Employee may
not be able to sell the Shares at the time or in the amount he so desires.
(f) Employee hereby agrees that Employee shall make no
disposition of the Shares unless and until Employee shall have provided the
Company with written assurances, in form and substance satisfactory to the
Company, that the proposed disposition does not require registration of the
Shares under the 1933 Act, or that all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule 144)
has been taken.
3. VESTING AND TRANSFER RESTRICTIONS
3.1 GENERAL RESTRICTION. Employee shall not sell, transfer,
assign, pledge, hypothecate or otherwise dispose of any of the Shares, or any
right or interest therein, without the prior written consent of the Company
or except as otherwise provided in this Agreement.
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3.2 REPURCHASE OPTION. All of the Shares purchased by
Employee pursuant to this Agreement are initially subject to the Repurchase
Option (as defined below) and are therefore "Unvested Shares". Shares which
become free of the Repurchase Option are referred to as "Vested Shares". On
the first day of the first calendar month following Employee's first six full
calendar months of employment with the Company, a number of Shares equal to
2% of the Shares shall become Vested Shares and on the first day of each
month thereafter a number of Unvested Shares equal to 2% of the Shares shall
become Vested Shares. In addition, any Unvested Shares for which the
Repurchase Option has become exercisable but has not been exercised within
the requisite time period shall become Vested Shares after the lapse of the
Repurchase Option. The Board of Directors shall have the right at its sole
discretion to accelerate vesting of the Shares.
If Employee's employment with the Company terminates for any
reason (including without limitation Employee's death, incapacity,
resignation or termination by the Company with or without cause), then the
Company shall have the option (the "Repurchase Option"), exercisable at any
time within 90 days following termination of Employee's employment with the
Company, to purchase from Employee or the legal representative of the
deceased Employee all or any portion of Employee's Unvested Shares at the
price per share paid by Employee under Section 1 hereof. To exercise its
Repurchase Option, the Company shall give written notice to Employee or such
legal representative of its exercise and shall pay the purchase price for the
Unvested Shares within 30 days after giving such notice.
Employee or such legal representative shall deliver the
certificate(s) representing any Shares to be sold to the Company under this
Section 3.2, duly endorsed in blank or accompanied by duly executed stock
powers, against receipt of the purchase price for such Shares, on the date
and at the time selected by the Company, at the principal office of the
Company.
3.3 NONTERMINABLE REPURCHASE OPTION. At any time after the
date of this Agreement, whether the Employee is at the time employed by the
Company or not, and whether all the Shares have become Vested Shares or not,
the Company will have the option (the "Nonterminable Repurchase Option") to
purchase all or any portion of the Shares (including both Unvested Shares and
Vested Shares), for a purchase price of $0.0215 per share, in the event the
Employee is in material breach of any provision of the Employment and Trade
Secrets Agreement between the Company and the Employee. The Company, in its
sole discretion, shall determine whether the Employee is in material breach
of the Employment and Trade Secrets Agreement, and the Company's decision
shall be final and binding on the Employee for the purposes of this Section
3.3. To exercise its Nonterminable Repurchase Option, the Company shall give
written notice to the Employee and shall pay the purchase price for the
number of Shares being purchased within 120 days after giving such notice.
Employee shall deliver the certificates
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representing any Shares to be sold to the Company under this Section 3.3, if
such certificates are then in the Employee's possession, duly endorsed in
blank or accompanied by duly executed stock powers, against receipt of the
purchase price for such Shares, on the date and at the time selected by the
Company. The Nonterminable Repurchase Option shall expire upon the
consummation of a sale of all or substantially all the assets of the Company,
or the sale or transfer of more than 49% of the voting stock of the Company
to individuals or entities not, at the time of the transfer, existing
shareholders of the Company.
3.4 PERMITTED TRANSFERS. A transfer of Vested Shares or
Unvested Shares may be made by Employee INTER VIVOS or by will or according
to the laws of descent and distribution, to Employee's spouse or issue, or to
a trust for Employee's or their benefit, provided that the Shares shall be
and remain subject to all of the provisions and restrictions of this
Agreement, including without limitation Sections 3.2 and 3.3, and all
references herein to Employee shall include such transferee(s). As a
condition to the transfer of the Shares on the Company's books, such
transferee shall execute and deliver to the Company a writing, in form and
substance satisfactory to the Company, obligating himself/herself to comply
with this Agreement.
3.5 MARKET STAND-OFF. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an
effective registration statement filed under the 1933 Act, including the
Company's initial public offering, Employee shall not sell, make any short
sale of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any
of the foregoing transactions with respect to, any Shares without the prior
written consent of the Company or its underwriters, provided that the
officers and directors of the Company are also subject to similar
arrangements. Such limitation shall be in effect for such period of time
from and after the effective date of such registration statement as may be
requested by the Company or such underwriters, provided that in no event
shall such period exceed 180 days. The limitation of this Section 3.5 shall
remain in effect for the two-year period immediately following the effective
date of the Company's initial public offering and shall thereafter terminate
and cease to have any force or effect. In order to enforce the limitations
of this Section 3.5, the Company may impose stop-transfer instructions with
respect to the Shares until the end of the applicable stand-off period.
3.6 SALES SUBJECT TO RIGHT OF FIRST REFUSAL. In the event
Employee at any time or from time to time desires to sell, transfer, assign,
pledge, hypothecate or otherwise dispose of any of the Vested Shares or any
interest therein, Employee may do so, provided that Employee first has
offered such Shares or interest therein to the Company as follows:
(a) Employee shall deliver to the Secretary of the
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Company a written notice (the "Sales Notice") specifying the name and address
of the proposed purchaser, the number of the Shares to be sold and the terms
and conditions of the proposed sale. The Company shall have the right to
purchase, at the price and on the terms and conditions set forth in the Sales
Notice, all, but not less than all, of the Shares specified in the Sales
Notice, by giving written notice thereof and the number of Shares as to which
such right is exercised to Employee within 45 days after the delivery of the
Sales Notice.
(b) In the event all of the Shares specified in the
Sales Notice are not purchased by the Company under this Section 3.6, such
Shares may be sold to the person named in the Sales Notice for any
consideration not less in value than that specified in said notice and at any
time within 90 days of the delivery of the Sales Notice. Such Shares shall
be and remain subject to all of the provisions and restrictions of this
Agreement, and all references herein to Employee shall include such person.
As a condition to the transfer of such Shares on the Company's books, such
person shall execute and deliver to the Company a writing obligating
himself/herself to comply with this Agreement. In the event the Shares are
not so transferred within such 90-day period, the prior rights of the Company
again shall become operative in accordance with the terms hereof.
(c) Any purchase and sale under this Section 3.6 shall
occur on the date and at the time selected by the Company, within 75 days
after the delivery to the Company of the Sales Notice, at the principal
office of the Company. At such time, Employee shall deliver to the Company
certificates representing the Shares to be purchased and sold, duly endorsed
in blank or accompanied by duly executed stock powers, and in proper form and
order for transfer, against receipt of the purchase price, payable by the
Company's check.
(d) The right of first refusal provided for in this
Section 3.6 shall lapse and cease to have effect on the closing of a
bona-fide, firm-commitment underwritten public offering of the Company's
Common Stock pursuant to a registration statement declared effective under
the Securities Act of 1933 resulting in aggregate proceeds to the Company of
at least $10,000,000 at a public offering price of more than $5.00 per share,
adjusted to reflect any stock dividend, stock split or other recapitalization
of the Company effected after the date of this Agreement. The right of first
refusal shall also lapse and cease to have effect on the closing of a merger
of the Company with another entity that is publicly traded on NASDAQ or a
national securities exchange, where the Company is not the surviving entity.
3.7 RESTRICTIVE LEGEND. Each certificate representing Shares
shall bear the following restrictive legend:
The securities represented by this certificate are
subject
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to restrictions on transfer and to repurchase
by the corporation pursuant to the provisions of a
Restricted Stock Purchase Agreement between the
corporation and the registered holder of the
securities. Among other things, such Agreement grants
certain repurchase rights to the corporation in the
event the registered holder terminates his/her
employment with the corporation. A copy of such
agreement is on file at the principal office of the
corporation.
4. MISCELLANEOUS
4.1 WITHHOLDING. Employee acknowledges and agrees that the
Company has the right to deduct from payments of any kind otherwise due to
Employee any sums that federal, state or local tax law require by law to be
withheld with respect to the issuance or vesting of Restricted Stock, or as
otherwise may be required by such laws.
4.2 SECTION 83(b) ELECTION. Employee understands that under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
difference between the purchase price paid for the Shares and their fair
market value on the date any forfeiture restrictions applicable to such
Shares lapse will be reportable as ordinary income at that time. For this
purpose, the term "forfeiture restrictions" includes the right of the Company
to repurchase the Shares pursuant to the Repurchase Option provided in
Section 3.2. Employee understands that Employee may elect to be taxed at the
time the Shares are acquired hereunder, rather than when and as such Shares
cease to be subject to such forfeiture restrictions, by filing an election
under Section 83(b) of the Code with the Internal Revenue Service within 30
days after purchase of the Shares. Even if the fair market value of the
Shares at the date of purchase equals the purchase price paid (and thus no
tax is payable), the election must be made to avoid potential adverse tax
consequences in the future. Employee understands that failure to make this
filing within the 30 day period will result in the recognition of ordinary
income by Employee as the forfeiture restrictions lapse. EMPLOYEE
ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF EMPLOYEE
REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON EMPLOYEE'S
BEHALF.
4.3 DEPOSIT OF CERTIFICATES. Employee hereby acknowledges
receipt and delivery of the certificate(s) evidencing the Shares and
acknowledges that Employee has purchased the Shares and is the owner thereof.
Pursuant to Sections 8313 and 8314 of the California Commercial Code,
Employee hereby designates the Company as the entity to acquire and retain
possession of such certificate(s) on Employee's behalf. The Company will
retain such certificate(s) on behalf of Employee for so long as the Shares
evidenced thereby are subject to this Agreement. In the event of a transfer
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pursuant to the terms of this Agreement, the Shares so transferred shall be
and remain subject to this Section 4.3, and all references herein to Employee
shall include such transferee.
Simultaneously with the execution and delivery of this
Agreement, Employee has executed and delivered to the Company stock power(s)
executed in blank for the Shares, and hereby authorizes the Secretary of the
Company, pursuant to Section 8206 of the California Commercial Code, to
complete such stock power(s) for the purpose of effecting any transfer
consistent with the terms and conditions of this Agreement.
4.4 AUTOMATIC CANCELLATION. If the Company shall tender, at
the time and place and in the amount provided in this Agreement, the purchase
price for the Shares to be repurchased in accordance with the provisions of
this Agreement, then from and after such time Employee shall no longer have
any rights as a holder of such Shares (other than the right to receive
payment of such purchase price in accordance with the applicable provisions
hereof or thereof), and the Company (or its assigns) shall be deemed the
owner and holder of such Shares, whether or not the certificates therefor
have been delivered as required by this Agreement.
4.5 FURTHER ACTION. Employee hereby agrees to take whatever
additional action and execute whatever additional documents the Company may
in its judgment deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on either Employee or
the Shares pursuant to this Agreement.
4.6 RECLASSIFICATION, REORGANIZATION, MERGER, ETC. In the
event of a reclassification of the Shares, or a reorganization,
recapitalization, stock-split, stock dividend, combination of shares, merger,
consolidation or any change in the capital structure of the Company, all
securities obtained as a result thereof by Employee in addition to, in
exchange for or with respect to the Shares also shall be subject to this
Agreement (and shall be considered "Shares" for purposes of this Agreement),
and the purchase price therefor under the Repurchase Option in Sections 3.2
and the Nonterminable Repurchase Option in Section 3.3 shall be adjusted as
appropriate. Employee shall cause any certificate(s) representing such
securities, if not otherwise in the possession of the Company, to be
deposited with the Company pursuant to Section 4.3.
4.7 NOTICES. Any notice or communication required or
permitted by this Agreement shall be deemed sufficiently given if in writing
and when delivered personally or 72 hours after deposit with the United
States Postal Service, registered or certified mail, postage prepaid, and
addressed as follows:
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If to the Company:
Transcendent Design Technology, Inc.
1385 Del Norte Road
Camarillo, California 93010
If to Employee:
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or to such other address as a party to whom notice is to be given has
furnished to the other party in the manner provided above.
4.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single agreement.
4.9 AMENDMENT AND WAIVER. This Agreement may be amended,
modified or supplemented only by a writing executed by each of the parties.
Any party may in writing waive any provision of this Agreement to the extent
such provision is for the benefit of the waiving party. The failure of the
Company (or its assigns) in any instance to exercise the options granted
under Sections 3.2, 3.3 or 3.6 shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Company and Employee. No waiver by any party of a breach of any provision of
this Agreement shall be construed as a waiver of any subsequent or different
breach, and no forbearance by a party to seek a remedy for noncompliance or
breach by another party shall be construed as a waiver of any right or remedy
with respect to such noncompliance or breach.
4.10 HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
4.11 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties pertaining to the subject
matter of this Agreement and supersedes all prior agreements, understandings,
negotiations and representations and discussions, whether verbal or written,
of the parties pertaining to that subject matter and the acquisition of stock
of the Company. There are no provisions, terms, conditions or obligations of
the parties pertaining to that subject matter other than as contained in this
Agreement.
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4.12 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and Employee and Employee's legal representatives,
heirs, legatees, distributees, assigns and transferees by operation of law,
whether or not any such person shall have become a party to this Agreement
or shall have agreed in writing to be bound by the terms and conditions
hereof.
4.13 GOVERNING LAW. The validity, construction and
performance of this Agreement shall be governed by the laws, without regard
to the laws as to choice or conflict of laws, of the State of California.
4.14 ASSIGNMENT. The Company may assign its Repurchase Option
and/or its Nonterminable Repurchase Option to any person or entity selected
by the Company's Board of Directors, including (without limitation) one or
more shareholders of the Company. If the assignee of the Repurchase Option
is other than a parent or subsidiary corporation of the Company, then such
assignee must make a cash payment to the Company, upon the assignment of the
Repurchase Option, in an amount equal to the excess (if any) of the fair
market value of the Unvested Shares at the time subject to the Repurchase
Option and the aggregate purchase price payable for such Unvested Shares.
4.15 NO RIGHT TO CONTINUED EMPLOYMENT. THIS AGREEMENT AND THE
PURCHASE OF THE SHARES SHALL NOT CONFER UPON EMPLOYEE ANY RIGHT WITH RESPECT
TO CONTINUANCE OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY
WAY WITH THE RIGHT OF THE COMPANY TO TERMINATE EMPLOYEE'S EMPLOYMENT AT ANY
TIME FOR ANY REASON WHATSOEVER, WITH OR WITHOUT CAUSE.
4.16 SHAREHOLDER RIGHTS. Except as provided in Sections 3 and
4.4, Employee shall have all the rights of a shareholder with respect to the
Shares, whether or not Employee's interest in the Shares is at the time
vested. Accordingly, Employee shall have the right to vote the Shares and to
receive any cash dividends or other distributions paid or made with respect
to the Shares.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
TRANSCENDENT DESIGN TECHNOLOGY, INC.
By
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EMPLOYEE
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CONSENT OF SPOUSE
The undersigned has read the Restricted Stock Purchase Agreement dated
___________, 1998, between Transcendent Design Technology, Inc., a Delaware
corporation (the "Company"), and ____________________, and is aware of,
understands, consents and agrees to its terms and conditions, including
his/her spouse's obligation to transfer, assign and deliver to the Company
all of the shares of stock of the Company standing in the name of such
spouse, including the community property or other interest of the undersigned
therein, if any. The execution and delivery of this Consent, however, shall
not be deemed to evidence or imply the existence of any such community
property or other interest where none would otherwise exist.
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EXHIBIT 10.37
TRANSCENDENT DESIGN TECHNOLOGY, INC.
STOCK OPTION PLAN
1. PURPOSE
The purposes of the Transcendent Design Technology, Inc. Stock
Option Plan are to assist Transcendent Design Technology, Inc. in attracting,
motivating and retaining key employees, directors and consultants, and to
provide incentives that will further its development and success and will
unify the interests of key employees, directors, consultants and shareholders
through increased employee and director stock ownership.
2. DEFINITIONS
For purposes of this Plan:
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Stock Option Committee appointed pursuant to
Section 13 of this Plan.
"COMPANY" means Transcendent Design Technology, Inc., a Delaware
corporation.
"CONSULTANT" means any person who is performing services for the
Company as an independent contractor.
"DIRECTOR" means any person who is a member of the Board.
"EMPLOYEE" means any person who is an employee of the Company or
of any Parent Corporation or Subsidiary Corporation.
"INCENTIVE STOCK OPTION" means an Option that is designated by the
Committee as an "incentive stock option" within the meaning of
Code Section 422.
"NONSTATUTORY OPTION" means an Option that is designated by the
Committee as such or that is not designated by the Committee as an
Incentive Stock Option.
"OPTION" means an option granted under this Plan to purchase
shares of Stock. An "Option" may be either an Incentive Stock
Option or a Nonstatutory Option.
"PARENT CORPORATION" shall have the meaning set forth in Code
Section 424(e).
"PARTICIPANT" means a person to whom an Option is granted under
this Plan.
<PAGE>
"PERMANENT DISABILITY" means permanent and total disability within
the meaning of Code Section 22(e)(3), which reads, in pertinent
part, as follows:
An individual is permanently and totally
disabled if he is unable to engage in any
substantial gainful activity by reason of any
medically determinable physical or mental
impairment which can be expected to result in
death or which has lasted or can be expected
to last for a continuous period of not less
than 12 months.
"PLAN" means this Transcendent Design Technology, Inc. Stock
Option Plan.
"RETIREMENT" means normal retirement of an Employee under policies
established by his or her employer.
"STOCK" means the Non-Voting Common Stock of the Company. Unless
the context expressly indicates otherwise, "shares" means shares
of Stock.
"SUBSIDIARY CORPORATION" shall have the meaning set forth in Code
Section 424(f).
"TEN PERCENT SHAREHOLDER" means an Employee who on the date of
grant of the Option owns (within the meaning of Code Section
424(d)) more than 10% of the total combined voting power of all
classes of stock of the Company, any Subsidiary Corporation or any
Parent Corporation.
3. SHARES SUBJECT TO PLAN
Options may be granted under this Plan to acquire an aggregate
of up to 2,000,000 shares of Stock, subject to adjustment as provided in
Section 7 of this Plan. If Options terminate, expire or are canceled without
having been fully exercised, the number of shares subject to such Options
(but only to the extent not exercised prior to termination, expiration or
cancellation) may again be subject to Options granted under this Plan.
4. ELIGIBILITY
Any key Employee, any key Consultant and any Director shall be
eligible to become a Participant and to acquire an Option to purchase Stock.
Additional Options may be granted to a Participant while such Participant
continues as an Employee, Consultant or Director. The Committee may exclude
otherwise eligible persons.
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5. GRANT OF OPTIONS
The Committee shall, from time to time and in its absolute
discretion, determine which Employees are key Employees, which Consultants
are key Consultants and which eligible persons shall become Participants.
Either Incentive Stock Options or Nonstatutory Options, as determined by the
Committee in its absolute discretion, may be granted to Employees, and only
Nonstatutory Options may be granted to Directors who are not Employees and to
Consultants. The Committee also shall determine the number of shares of Stock
to be subject to each Option and the price, terms and conditions, consistent
with this Plan, of each Option.
Without limiting the generality of the preceding paragraph, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition to the grant of an Option to a Employee, Consultant or
Director, that the Employee, Consultant or Director surrender for
cancellation some or all of any unexercised Options which have been
previously granted to the Employee, Consultant or Director. An Option, the
grant of which is conditioned upon such surrender, may have an option price
lower or higher than the option price of the surrendered Option, may cover
the same, or a lesser or greater, number of shares as the surrendered Option,
may contain such other terms as the Committee deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, option period or any other term or condition of the
surrendered Option.
Notwithstanding any other provision of this Plan, the aggregate
fair market value (determined as of the dates of their respective grants) of
shares as to which incentive stock options (within the meaning of Code
Section 422(b)) granted or assumed by the Company, any Parent Corporation and
any Subsidiary Corporation first become exercisable by a Participant in any
calendar year shall not exceed $100,000. The excess, if any, shall be
treated as Nonstatutory Options.
6. OPTION TERMS
Each Option shall be evidenced by a written Stock Option
Agreement in a form approved by the Committee. Each Stock Option Agreement
shall be executed by the Company and by the Participant receiving the Option.
Each Option shall be subject to the following terms and conditions and to
such other terms and conditions as the Committee may deem appropriate:
6.1 TYPE OF OPTION; NUMBER OF SHARES
Each Stock Option Agreement shall indicate whether the
Option is an Incentive Stock Option or a Nonstatutory Option and shall
specify the number of shares of Stock subject to the Option.
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6.2 OPTION PRICE
The price of the shares subject to each Option shall be
determined by the Committee and shall be set forth in the Stock Option
Agreement, provided that the price per share shall not be less than the fair
market value of such share on the day the Option is granted; and provided
further that, in the case of an Incentive Stock Option granted to a Ten
Percent Shareholder, the price per share shall not be less than 110% of the
fair market value of such share at the time such Option is granted.
For purposes of this Plan, the fair market value of a
share on a given date shall be: (a) if the Stock is traded on one or more
securities exchanges, the mean between the high and low sale price of a share
on such date on the principal exchange on which the shares are traded or, if
no shares were traded on such date, then the next preceding trading day (not
more than ten) on which trading occurred; or (b) if the Stock is not traded
on a securities exchange but is quoted on NASDAQ or a successor interdealer
quotation system, the mean between the high and low sale price (if a National
Market System security) or the mean between the representative bid and asked
prices (in all other cases) on such date as reported by NASDAQ or such
successor quotation system or, if no shares were traded or quoted on such
date, then the next preceding day (not more than ten) on which trading or
such quotations occurred; or (c) if the Stock is otherwise traded in the
over-the-counter market, the mean between the high and low bid quotations on
such date; or, if there are no bid quotations on such date, then the next
preceding trading day (not more than ten) on which such quotations occurred;
or (d) if the Stock is not publicly traded on a securities exchange or traded
or quoted in the over-the-counter market or, if traded or quoted, there are
no transactions or quotations within the last ten trading days or trading has
been halted for extraordinary reasons, the fair market value shall be
determined in good faith by the Committee with reference to the rules and
principles of valuation set forth in Section 20.2031-2 of the Treasury
Regulations (concerning the valuation of stocks and bonds for purposes of
Code Section 2031).
6.3 PERIOD OF EXERCISE
No Option shall be exercisable in whole or in part after
ten years from the date of grant. Notwithstanding the foregoing, no
Incentive Stock Option granted to a Ten Percent Shareholder may be
exercisable after five years from the date such Option is granted. Subject
to the foregoing limitations and Sections 6.5 and 8 of this Plan, Options
shall become exercisable at such times and in such installments (which may be
cumulative) as the Committee shall provide in each Stock Option Agreement.
The Committee may in its absolute discretion, and on
such terms and conditions as it considers appropriate, accelerate the times
at which an Option may be exercised in whole or in part.
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6.4 MANNER AND CONDITIONS OF EXERCISE
To exercise an Option or any portion thereof, the
Participant or other person then entitled to exercise such Option or portion
thereof shall deliver to the Secretary of the Company a notice in writing
signed by the Participant or such other person stating that such Option or
portion is exercised, specifying the number of shares to be acquired upon
exercise and complying with all applicable rules established by the
Committee, together with the following:
(a) Full payment (in cash or bank cashiers' check) for
the shares with respect to which such Option or portion is being
exercised; or
(b) With the consent of the Committee, shares of Stock
owned by the Participant, duly endorsed for transfer to the
Company, with a fair market value (as determinable under Section
6.2 of this Plan) on the date of exercise equal to the aggregate
purchase price of the shares with respect to which such Option or
portion is being exercised; or
(c) With the consent of the Committee, a full recourse
promissory note in a form, bearing interest (at a rate at least
equal to the minimum rate necessary to avoid imputed interest
under the Code) and payable upon such terms as may be prescribed
by the Committee; or
(d) Any combination of the consideration provided in the
foregoing subsections (a), (b) and (c).
No such exercise shall be effective unless and until a proper notice and
payment have been delivered as provided above. No fractional shares shall be
issued under this Plan.
In the event that an Option or portion thereof shall be
exercised pursuant to Sections 6.5 or 6.6 of this Plan by any person or
persons other than the Participant, appropriate proof of the right of such
person or persons to exercise the Option or portion thereof shall be
delivered to the Company.
The Committee may require, as a condition to the
exercise of an Option, such representations and covenants as it, in its
absolute discretion, deems necessary to effect compliance with the Securities
Act of 1933, as amended, any state securities laws or rules and regulations
thereunder. The Committee may also require, as a condition to the exercise of
an Option, that the Participant execute and deliver a buy-sell agreement or
other agreement restricting transfer of shares issued on exercise of an
Option and providing the Company with an option to purchase such shares in
certain circumstances, in such form as the Committee shall determine in its
discretion.
The Participant, as a condition to exercising an Option,
shall also make any arrangements determined by the Committee to be necessary or
appropriate to satisfy any federal
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and state withholding tax obligation resulting from the exercise of an
Option, from a disposition described in Section 9 of this Plan or from the
termination or partial termination of any restriction applicable to any share
acquired on exercise of an Option, including the retention of shares by the
Company or the delivery of shares to the Company equal in amount to all or a
portion of the withholding tax obligation pursuant to such arrangements as
may be established by the Committee. Any shares retained by or delivered to
the Company under this Section shall be valued at the date of exercise in the
same manner as provided under Section 6.2 of this Plan.
To insure that such exercise and any resales are made in
compliance with the Securities Act of 1933, as amended, and the Certificate
of Incorporation and Bylaws of the Company, the Company may imprint an
appropriate legend on certificates representing shares acquired on the
exercise of an Option and issue appropriate stop-transfer orders to its
transfer agents. Any stock certificate evidencing shares of Stock issued
pursuant to the exercise of an Option shall bear such other legends as the
Committee, in the exercise of its absolute discretion, shall require.
6.5 CESSATION OF EMPLOYMENT OR SERVICE AS DIRECTOR OR
CONSULTANT
If a Participant who is an Employee or a Consultant but
is not a Director ceases to be an Employee or a Consultant other than by
reason of Retirement, death or Permanent Disability, the Participant shall be
permitted to exercise his or her Option, to the extent it was exercisable at
the date of cessation, until 60 days after such date, but in no event after
its stated expiration date.
If a Participant who is a Director but not an Employee
ceases to be a Director, other than by reason of death, the Participant shall
be permitted to exercise his or her Option, to the extent it was exercisable
at the date of cessation, until 60 days after such date, but in no event
after its stated expiration date.
If a Participant who is an Employee or a Consultant but
not a Director ceases to be an Employee or a Consultant because of
Retirement, the Participant shall be permitted to exercise his or her Option,
to the extent it was exercisable at the date of Retirement, until three
months after such date, but in no event beyond its stated expiration date.
If a Participant who is an Employee or a Consultant but
not a Director ceases to be an Employee or a Consultant because of Permanent
Disability, the Participant shall be permitted to exercise his or her Option,
to the extent it was exercisable at the date of cessation of employment,
until one year after the date he or she ceases to be an Employee, but in no
event after its stated expiration date.
If a Participant dies while an Employee, a Consultant or
a Director or within three months after (i) ceasing to be an Employee because
of Retirement or Permanent Disability, or (ii) ceasing to be a Consultant
because of Permanent Disability, his or her Option may be exercised by the
Participant's estate or any person who acquired the right to exercise the
Option by Will or the
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<PAGE>
laws of descent and distribution, to the extent it was exercisable at the
date of cessation of employment or cessation of service as a Consultant,
until one year after the date of death, but in no event after its stated
expiration date.
If a Participant who is both an Employee and a Director
ceases to be an Employee but remains a Director, or ceases to be a Director
but remains an Employee, then all of the Participant's Nonstatutory Options
shall remain in effect and, if the Participant ceases to be an Employee, all
of the Participant's Incentive Stock Options shall become Nonstatutory
Options 30 days after the date of cessation.
Transfers of employment between the Company and any
Subsidiary Corporation or between Subsidiary Corporations shall not be deemed
cessation of employment for purposes of any Option granted hereunder.
6.6 NONTRANSFERABILITY
During the lifetime of a Participant, his or her Option
shall be exercisable only by the Participant and no Option shall be
transferable other than by Will or the laws of descent and distribution. No
interest of any Participant under this Plan or in any Option shall be subject
to attachment, execution, garnishment, sequestration, the laws of bankruptcy
or any other legal or equitable process.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event of any change in the Stock by reason of any stock
dividend, recapitalization, split-up, combination or exchange of shares, or
by reason of any similar change affecting the Stock (but not the issuance of
additional shares, securities convertible into shares or options or rights to
acquire shares of Stock or the Company's repurchase of shares), the number
and class of shares which thereafter may be acquired on exercise of Options
under this Plan and the number and class of shares subject to outstanding
Options and the exercise price of each such share shall be appropriately
adjusted consistent with such change in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Participants. Any such adjustment shall be
final and binding on each Participant.
8. MERGER, CONSOLIDATION, ETC.
In its absolute discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide by the terms of any Option
that such Option cannot be exercised after the merger or consolidation of the
Company with or into another corporation, the acquisition by another
corporation or person of all or substantially all of the Company's assets or
the liquidation or dissolution of the Company; and if the Committee so
provides, it may, in its absolute discretion and on such terms and conditions
as it deems appropriate, also provide, either by the terms of such Option or
by a resolution adopted prior to the occurrence of such merger,
consolidation, acquisition, liquidation or dissolution, that, for some period
of time prior to such event, such Option
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shall become exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in Section 6.3 of this Plan or any installment
provisions of such Option.
9. DISQUALIFYING DISPOSITIONS
If a Participant makes a "disposition" (within the meaning of
Code Section 424(c)) of any shares issued upon exercise of an Incentive Stock
Option within two years after the date the Incentive Stock Option is granted
or within one year after shares are issued to the Participant pursuant to the
exercise of the Incentive Stock Option, the Participant shall notify the
Committee in writing of such disposition within 20 days thereafter.
10. NO RIGHTS AS A SHAREHOLDER
No Participant shall have any rights or privileges as a
shareholder with respect to any shares subject to Options prior to the date
of issuance to him or her of a certificate for such shares.
11. NO RIGHT TO CONTINUED RELATIONSHIP
Neither this Plan nor any Option granted under this Plan shall
confer upon any Participant or any other person any right to continued
employment, engagement or directorship by or with the Company or any Parent
Corporation or Subsidiary Corporation, nor shall it interfere in any way with
the right of his or her employer or its shareholders to terminate his or her
employment, engagement or directorship at any time for any reason whatsoever,
with or without cause.
12. COMPLIANCE WITH LAWS AND REGULATIONS
This Plan, the grant and exercise of Options under this Plan
and the obligation of the Company to sell and deliver shares under Options
shall be subject to all applicable federal and state laws, rules and
regulations and to any approvals by any government or regulatory agency as
may be required. The Company shall not be required to issue or deliver any
certificate for shares of Stock either (a) prior to (i) the listing of such
shares on any stock exchange on which the Stock may then be listed or
inclusion on any interdealer quotation system on which the Stock may be
quoted, and (ii) the completion of any registration or qualification of such
shares which is required under any federal or state law, or any ruling or
regulation of any government body, and which the Company shall, in its sole
discretion, determine to be necessary or advisable, or (b) until exemptions
from such registration and qualification requirements are established to the
reasonable satisfaction of the Company and its counsel.
13. ADMINISTRATION
The Board shall appoint a Stock Option Committee consisting of at
least one Director to administer this Plan. The Committee member(s) shall serve
at the pleasure of the
-8-
<PAGE>
Board. If the Board does not appoint a Committee, the Board shall administer
this Plan and shall have the powers and duties granted to the Committee in
this Plan.
If Stock is registered under Section 12 of the Securities
Exchange Act of 1934, as amended, no Director shall be appointed to, or shall
serve on, the Committee unless he or she shall be a "disinterested person"
within the meaning of Rule 16b-3 under such Act as presently in effect or
hereafter amended. No Options may be granted to a Committee member during
his or her tenure on the Committee.
The Committee shall administer this Plan in accordance with its
provisions and shall have full authority to interpret this Plan, prescribe,
amend and rescind any rules and regulations necessary or appropriate for the
administration of this Plan and make such other determinations and take such
other action as it deems necessary or advisable, except as otherwise
expressly reserved to the Board in this Plan. Without limiting the
generality of the preceding sentence, the Committee may, in its discretion,
determine that for Option purposes a Participant remains an Employee during
all or any portion of a leave of absence approved by the Company. Any
interpretation, determination, or other action made or taken by the Committee
shall be final and binding upon all Participants.
No member of the Committee and no officer of the Company shall
be personally liable for any action, determination or interpretation made in
good faith with respect to this Plan or any Option, and all such persons
shall be fully indemnified and protected by the Company, to the full extent
that the Company is permitted to provide such indemnification and protection,
in respect to any such action, determination or interpretation.
14. EFFECTIVE DATE
This Plan shall be effective as of the date of adoption by the
Board.
15. APPROVAL BY SHAREHOLDERS
This Plan will be submitted for the approval by holders of a
majority of the shares of stock voting thereon within twelve months after the
Board's adoption of this Plan. Options may be granted prior to such
shareholder approval, provided that such Options shall not be exercisable
prior to the time when the Plan is approved by shareholders and, if such
approval is not obtained by the end of the twelve-month period, all Options
previously granted shall thereupon be canceled and this Plan shall terminate.
16. AMENDMENT AND DISCONTINUANCE
The Board may from time to time amend, suspend or discontinue this
Plan; provided that, without approval of the holders of a majority of the shares
of stock voting thereon, no action of the Board shall (a) increase the number of
shares reserved for Options pursuant to Section 3 of this Plan, (b) permit the
grant of any Option at a price less than that determined in
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<PAGE>
accordance with Section 6.2 of this Plan, or (c) permit the grant of Options
which expire beyond the periods provided for in Section 6.3 of this Plan.
Without the written consent of a Participant, no such amendment, suspension
or discontinuance of this Plan shall alter or impair any Option previously
granted to such Participant pursuant to this Plan.
17. TERM
Unless terminated earlier pursuant to Section 15 of this Plan,
this Plan shall expire on, and no further Options shall be granted pursuant
to this Plan on or after, ten years after the date of adoption of this Plan
by the Board.
-10-
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
No. of Shares Subject to Option: __________ Date of Grant: __________,
199__
This INCENTIVE STOCK OPTION AGREEMENT (the "Agreement") is made and
entered into as of this ______ day of ________________, 199__, by and between
Transcendent Design Technology, Inc., a Delaware corporation (the "Company"),
and _______________________ (the "Participant").
RECITALS
A. The Board of Directors of the Company has adopted the
Transcendent Design Technology, Inc. Stock Option Plan (the "Plan"), which
provides for the grant of Incentive Stock Options and Nonstatutory Options to
selected key employees of the Company and any Parent Corporation or
Subsidiary Corporation and of Nonstatutory Options to key consultants and
directors of the Company.
B. The Committee has authorized the grant of an Incentive Stock
Option to the Participant, who is an employee of the Company and/or a Parent
Corporation or Subsidiary Corporation, pursuant to the terms of the Plan and
this Agreement.
AGREEMENT
Accordingly, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. RECEIPT AND BINDING NATURE OF PLAN. The Participant
acknowledges receipt of a copy of the Plan and that the Plan contains
provisions that materially affect the rights and obligations of the
Participant. The Participant agrees to abide by and to be bound by the terms
and conditions of the Plan.
2. DEFINITIONS. For purposes of this Agreement:
"Date of Grant" means the day and year first above written.
"Expiration Date" shall have the meaning set forth in Section 4(a)
below.
"Option" means the Incentive Stock Option granted under this
Agreement.
"Option Price" shall have the meaning set forth in Section 3
below.
<PAGE>
"Stock" means the Non-Voting Common Stock of the Company.
Unless otherwise defined herein, capitalized terms in this
Agreement shall be as defined in the Plan.
3. GRANT OF OPTION. The Company hereby grants to the Participant,
subject to the terms and conditions of the Plan and of this Agreement, an
Incentive Stock Option to purchase from the Company all or part of an
aggregate of __________ shares of Stock at the price of $______ per share
(the "Option Price").
4. TERMS AND CONDITIONS. The Option evidenced hereby is subject
to the following terms and conditions:
(a) PERIOD OF EXERCISE. Subject to Sections 4(c) and 6 of
this Agreement, the Option shall expire ten years from the Date of Grant at
5:00 p.m., California time (the "Expiration Date"), and shall become
exercisable as follows: On the first day of the first calendar month
following Participant's first six full calendar months of employment with the
Company, options with respect to a number of shares equal to 2% of the total
number of shares covered by this Option shall become exercisable, and on the
first day of each month thereafter options with respect to a number of shares
equal to 2% of the total number of shares covered by this Option shall become
exercisable, subject to all other terms set forth in this Section 4.
No portion of this Option which is unexercisable at the
time the Participant ceases to be an Employee or, if the Participant is both
an Employee and a Director at the Date of Grant, at the time the Participant
ceases to be both an Employee and a Director, shall thereafter become
exercisable.
(b) MANNER OF EXERCISE. To exercise the Option or any
portion thereof, the Participant or any other person or persons entitled to
exercise the Option or portion thereof shall deliver to the Secretary of the
Company a notice in writing signed by the Participant or such other person
stating that the Option or portion thereof is exercised, specifying the
number of shares to be acquired upon exercise and complying with all
applicable rules and conditions to exercise as may be established by the
Committee. The notice shall be accompanied by:
(i) Full payment (in cash or bank cashiers' check) for the
shares with respect to which the Option or portion thereof is being
exercised; or
(ii) With the consent of the Committee, shares of Stock owned by
the Participant, duly endorsed for transfer to the Company, with a fair
market value on
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<PAGE>
the date of exercise equal to the aggregate Option Price of the shares
with respect to which the Option or portion thereof is being exercised;
or
(iii) With the consent of the Committee, a full recourse
promissory note in a form, bearing interest (at a rate at least equal to
the minimum rate necessary to avoid imputed interest under the Code) and
payable upon such terms as may be prescribed by the Committee; or
(iv) Any combination of the consideration provided in the
foregoing subsections (i), (ii) and (iii).
No such exercise shall be effective unless and until a proper notice has been
received by the Secretary of the Company, payment has been made and all other
conditions have been met as provided in this Agreement. No fractional shares
shall be issued on exercise of an Option or portion thereof under this
Agreement.
In the event that the Option or portion thereof shall be
exercised under Sections 4(c) or 4(d) of this Agreement by any person or
persons other than the Participant, appropriate proof of the right of such
person or persons to exercise the Option or portion thereof shall be
delivered to the Company.
(c) EXERCISE UPON DEATH OR CESSATION OF EMPLOYMENT.
If the Participant ceases to be an Employee other than
by reason of death or Permanent Disability, the Participant may exercise the
Option, to the extent it was exercisable at the date of cessation, until 60
days after such date, but in no event after the Expiration Date.
If the Participant ceases to be an Employee because of
Permanent Disability, the Participant may exercise the Option, to the extent
it was exercisable at the date of cessation of employment, until three months
after the date he or she ceases to be an Employee, but in no event after the
Expiration Date.
If the Participant dies while an Employee or within
three months after ceasing to be an Employee because of Permanent Disability,
the Option may be exercised by the Participant's estate or any person who
acquired the right to exercise the Option by Will or the laws of descent and
distribution, to the extent it was exercisable at the date of death, until
one year after such date, but in no event after the Expiration Date.
-3-
<PAGE>
If the Participant is both an Employee and a Director on
the Date of Grant and ceases to be an Employee but remains a Director, then
subject to this Section 4(c) the Option shall become a Nonstatutory Option 30
days after the date of cessation.
Transfers of employment between the Company and any
Parent Corporation or Subsidiary Corporation or between Subsidiary
Corporations shall not be deemed cessation of employment for purposes of the
Option granted hereunder.
(d) NONTRANSFERABILITY. During the lifetime of the
Participant, the Option shall be exercisable only by the Participant and
shall not be transferable other than by Will or the laws of descent and
distribution. No interest of the Participant under the Plan or in the Option
shall be subject to attachment, execution, garnishment, sequestration, the
laws of bankruptcy or any other legal or equitable process.
(e) INVESTMENT REPRESENTATION. If requested by the
Committee, the Participant shall deliver to the Committee at the time of
exercise of the Option or any portion thereof a written representation that
the shares to be acquired upon such exercise will be acquired for investment
and not for resale or with a view to the distribution thereof. Delivery of
such representation shall be a condition precedent to the issuance of a
certificate for the Stock to be acquired upon such exercise.
(f) BUY-SELL AGREEMENT. If requested by the Committee, the
Participant shall execute and deliver to the Company at the time of exercise
of the Option or any portion thereof a buy-sell or other agreement
restricting the transfer of shares issued on exercise of the Option and
providing the Company with an option to purchase such shares in certain
circumstances, including without limitation in the event of a breach of any
employment or trade secrets agreement between Participant and the Company, in
such form as the Committee shall determine in its discretion.
5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of
any change in the Stock by reason of any stock dividend, recapitalization,
split-up, combination or exchange of shares, or by reason of any similar
change affecting the Stock (but not the issuance of additional shares,
securities convertible into shares or options or rights to acquire shares of
Stock or the Company's repurchase of shares), the number and class of shares
which thereafter may be acquired on exercise of the Option and the Option
Price shall be appropriately adjusted consistent with such change in such
manner as the Committee may deem equitable to prevent substantial dilution or
enlargement of the rights granted to, or available for, the Participant. Any
such adjustment shall be final and binding on the Participant.
-4-
<PAGE>
6. MERGER, CONSOLIDATION, ETC. In the event the Company merges
with or consolidates into another corporation, or sells or transfers all or
substantially all of its assets, or distributes all or substantially all of
its assets to its shareholders in liquidation, or dissolves and terminates
its corporate existence (other than a merger in which the Company is the
surviving corporation and under the terms of which the Stock outstanding
immediately prior to the merger remains outstanding), the Participant shall
have the right, immediately prior to such merger, consolidation, sale or
transfer of assets, liquidation or dissolution, to exercise the Option
whether or not then exercisable, except to the extent that any agreement or
undertaking of any party to any such merger, consolidation or sale or
transfer of assets, or any plan pursuant to which such liquidation or
dissolution is effected, make specific provision with respect to assumption
of or substitution for the Option. To the extent that the Participant's
right to exercise is accelerated in accordance with this Section 6: (i) the
exercise shall be contingent upon the consummation of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution, and
(ii) if such merger, consolidation, sale or transfer of assets, liquidation
or dissolution is consummated and the Option is not exercised immediately
before such event, the Option shall expire and thereafter shall cease to be
exercisable. The Committee shall notify the Participant of the provisions of
any such merger, consolidation, sale or transfer of assets, liquidation or
dissolution, not less than 10 days prior to the effective date thereof.
7. DISQUALIFYING DISPOSITIONS. The anticipated tax treatment to
the Participant and to the Company will be affected if the Participant makes
a disposition, within the meaning of Code Section 424(c), of any shares
issued upon exercise of the Option within two years after the Date of Grant
or within one year after shares are issued to the Participant pursuant to
exercise of the Option. Accordingly, the Participant shall notify the
Committee within 20 days after any such disposition. The Committee may cause
an appropriate legend to be affixed to any certificates evidencing shares of
Stock issued on exercise of the Option or any portion thereof to enable it to
receive notice of any such disposition.
8. NO RIGHTS AS A SHAREHOLDER. The Participant shall have no
rights or privileges as a shareholder with respect to any shares subject to
the Option prior to the date of issuance to him or her of a certificate or
certificates for such shares.
9. NO RIGHT TO CONTINUED RELATIONSHIP. Neither the Plan nor the
Option shall confer upon the Participant any right to continued employment or
directorship by the Company or any Parent Corporation or Subsidiary
Corporation, nor shall it interfere in any way with the right of the Company
or any Parent Corporation or Subsidiary Corporation or its shareholders to
terminate the Participant's employment or directorship at any time for any
reason whatsoever, with or without cause.
-5-
<PAGE>
10. COMPLIANCE WITH LAW AND REGULATIONS. The Option and the
obligation of the Company to sell and deliver shares under the Option, shall
be subject to all applicable federal and state laws, rules and regulations
and to any approvals by any government or regulatory agency as may be
required. The Company shall not be required to issue or deliver any
certificate for shares of Stock either (a) prior to (i) the listing of such
shares on any stock exchange on which the Stock may then be listed or
inclusion on any interdealer quotation system on which the Stock may be
quoted, and (ii) the completion of any registration or qualification of such
shares which is required under any federal or state law, or any ruling or
regulation of any government body, and which the Company shall, in its sole
discretion, determine to be necessary or advisable, or (b) until exemptions
from such registration and qualification requirements are established to the
reasonable satisfaction of the Company and its counsel. Any and all
certificates issued evidencing shares of Stock issued on exercise of the
Option or a portion thereof shall bear a legend as required by the Committee.
11. ARRANGEMENT FOR TAX PAYMENT. The Participant, as a condition
to exercising the Option, or any portion thereof, shall make any arrangements
determined by the Committee to be necessary or appropriate to satisfy any
federal and state withholding tax obligation resulting from the exercise of
an Option, from a disposition described in Section 7 of this Agreement or
from the termination or partial termination of any restriction applicable to
any shares acquired on exercise of an Option, including the retention of
shares by the Company or the delivery of shares to the Company equal in
amount to all or a portion of the withholding tax obligation pursuant to such
arrangements as may be established by the Committee. Any shares retained by
or delivered to the Company under this Section shall be valued at the date of
exercise at their fair market value as determined by the Committee.
12. NOTICES. Any notice or other communication required or
permitted by this Agreement shall be deemed delivered when delivered in
person or 48 hours after deposit with the United States Postal Service as
registered or certified mail, postage prepaid and addressed, if to the
Company, to Transcendent Design Technology, Inc., 1383 Del Norte Road,
Camarillo, California 93010, or, if to the Participant, to the Participant at
his or her most recent address as it appears in the Company's records,
subject to the right of either party to designate at any time hereafter in
writing some other address by giving notice to the other party.
13. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute one and the same instrument.
14. GOVERNING LAW. The parties hereto agree that the validity,
construction and interpretation of this Agreement shall be governed by the
laws of the State of California.
-6-
<PAGE>
15. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions,
and this Agreement shall be construed in all respects as if any invalid or
unenforceable provisions were omitted, but only to the extent invalid or
unenforceable under the circumstances.
16. ENTIRE AGREEMENT. This Agreement and the Plan together
constitute the entire agreement between the Company and the Participant
pertaining to the Option and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, among them pertaining
to the subject matter of this Agreement.
17. AMENDMENT OR WAIVER. No amendment of any provision of this
Agreement shall be effective unless and until an instrument reflecting the
amendment has been executed and delivered by the Company and the Participant.
No waiver of any provision of this Agreement shall be effective unless and
until an instrument reflecting the waiver has been executed and delivered by
the party waiving such provision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRANSCENDENT DESIGN TECHNOLOGY, INC.
By
--------------------------------------
PARTICIPANT
--------------------------------------
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<PAGE>
SCHEDULE I -- NOTATIONS AS TO PARTIAL EXERCISE
<TABLE>
<CAPTION>
Number of Balance of
Date of Purchased Shares on Authorized Notation
Exercise Shares Option Signature Date
- -------- --------- ---------- --------- --------
<S> <C> <C> <C> <C>
</TABLE>
-8-
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
No. of Shares Subject to Option: ________ Date of Grant: __________, 199__
This INCENTIVE STOCK OPTION AGREEMENT (the "Agreement") is made and
entered into as of this ______ day of ________________, 199__, by and between
Transcendent Design Technology, Inc., a Delaware corporation (the "Company"),
and _______________________ (the "Participant").
RECITALS
A. The Board of Directors of the Company has adopted the
Transcendent Design Technology, Inc. Stock Option Plan (the "Plan"), which
provides for the grant of Incentive Stock Options and Nonstatutory Options to
selected key employees of the Company and any Parent Corporation or
Subsidiary Corporation and of Nonstatutory Options to key consultants and
directors of the Company.
B. The Committee has authorized the grant of an Incentive Stock
Option to the Participant, who is an employee of the Company and/or a Parent
Corporation or Subsidiary Corporation, pursuant to the terms of the Plan and
this Agreement.
AGREEMENT
Accordingly, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. RECEIPT AND BINDING NATURE OF PLAN. The Participant
acknowledges receipt of a copy of the Plan and that the Plan contains
provisions that materially affect the rights and obligations of the
Participant. The Participant agrees to abide by and to be bound by the terms
and conditions of the Plan.
2. DEFINITIONS. For purposes of this Agreement:
"Date of Grant" means the day and year first above written.
"Expiration Date" shall have the meaning set forth in Section
4(a) below.
"Option" means the Incentive Stock Option granted under this
Agreement.
"Option Price" shall have the meaning set forth in Section 3
below.
<PAGE>
"Stock" means the Non-Voting Common Stock of the Company.
Unless otherwise defined herein, capitalized terms in this
Agreement shall be as defined in the Plan.
3. GRANT OF OPTION. The Company hereby grants to the Participant,
subject to the terms and conditions of the Plan and of this Agreement, an
Incentive Stock Option to purchase from the Company all or part of an
aggregate of __________ shares of Stock at the price of $0.37 per share (the
"Option Price").
4. TERMS AND CONDITIONS. The Option evidenced hereby is subject
to the following terms and conditions:
(a) PERIOD OF EXERCISE. Subject to Sections 4(c) and 6 of
this Agreement, the Option shall expire ten years from the Date of Grant at
5:00 p.m., California time (the "Expiration Date"), and shall become
exercisable as follows: On the first day of the calendar month following six
full calendar months from the Date of Grant, options with respect to a number
of shares equal to 2% of the total number of shares covered by this Option
shall become exercisable, and on the first day of each month thereafter
options with respect to a number of shares equal to 2% of the total number of
shares covered by this Option shall become exercisable, subject to all other
terms set forth in this Section 4.
No portion of this Option which is unexercisable at the
time the Participant ceases to be an Employee or, if the Participant is both
an Employee and a Director at the Date of Grant, at the time the Participant
ceases to be both an Employee and a Director, shall thereafter become
exercisable.
(b) MANNER OF EXERCISE. To exercise the Option or any
portion thereof, the Participant or any other person or persons entitled to
exercise the Option or portion thereof shall deliver to the Secretary of the
Company a notice in writing signed by the Participant or such other person
stating that the Option or portion thereof is exercised, specifying the
number of shares to be acquired upon exercise and complying with all
applicable rules and conditions to exercise as may be established by the
Committee. The notice shall be accompanied by:
(i) Full payment (in cash or bank cashiers' check) for the
shares with respect to which the Option or portion thereof is being
exercised; or
(ii) With the consent of the Committee, shares of Stock owned by
the Participant, duly endorsed for transfer to the Company, with a fair
market value on
-2-
<PAGE>
the date of exercise equal to the aggregate Option Price of the shares
with respect to which the Option or portion thereof is being exercised;
or
(iii) With the consent of the Committee, a full recourse
promissory note in a form, bearing interest (at a rate at least equal to
the minimum rate necessary to avoid imputed interest under the Code) and
payable upon such terms as may be prescribed by the Committee; or
(iv) Any combination of the consideration provided in the
foregoing subsections (i), (ii) and (iii).
No such exercise shall be effective unless and until a proper notice has been
received by the Secretary of the Company, payment has been made and all other
conditions have been met as provided in this Agreement. No fractional shares
shall be issued on exercise of an Option or portion thereof under this
Agreement.
In the event that the Option or portion thereof shall be
exercised under Sections 4(c) or 4(d) of this Agreement by any person or
persons other than the Participant, appropriate proof of the right of such
person or persons to exercise the Option or portion thereof shall be
delivered to the Company.
(c) EXERCISE UPON DEATH OR CESSATION OF EMPLOYMENT.
If the Participant ceases to be an Employee other than
by reason of death or Permanent Disability, the Participant may exercise the
Option, to the extent it was exercisable at the date of cessation, until 60
days after such date, but in no event after the Expiration Date.
If the Participant ceases to be an Employee because of
Permanent Disability, the Participant may exercise the Option, to the extent
it was exercisable at the date of cessation of employment, until three months
after the date he or she ceases to be an Employee, but in no event after the
Expiration Date.
If the Participant dies while an Employee or within
three months after ceasing to be an Employee because of Permanent Disability,
the Option may be exercised by the Participant's estate or any person who
acquired the right to exercise the Option by Will or the laws of descent and
distribution, to the extent it was exercisable at the date of death, until
one year after such date, but in no event after the Expiration Date.
-3-
<PAGE>
If the Participant is both an Employee and a Director on
the Date of Grant and ceases to be an Employee but remains a Director, then
subject to this Section 4(c) the Option shall become a Nonstatutory Option 30
days after the date of cessation.
Transfers of employment between the Company and any
Parent Corporation or Subsidiary Corporation or between Subsidiary
Corporations shall not be deemed cessation of employment for purposes of the
Option granted hereunder.
(d) NONTRANSFERABILITY. During the lifetime of the
Participant, the Option shall be exercisable only by the Participant and
shall not be transferable other than by Will or the laws of descent and
distribution. No interest of the Participant under the Plan or in the Option
shall be subject to attachment, execution, garnishment, sequestration, the
laws of bankruptcy or any other legal or equitable process.
(e) INVESTMENT REPRESENTATION. If requested by the
Committee, the Participant shall deliver to the Committee at the time of
exercise of the Option or any portion thereof a written representation that
the shares to be acquired upon such exercise will be acquired for investment
and not for resale or with a view to the distribution thereof. Delivery of
such representation shall be a condition precedent to the issuance of a
certificate for the Stock to be acquired upon such exercise.
(f) BUY-SELL AGREEMENT. If requested by the Committee, the
Participant shall execute and deliver to the Company at the time of exercise
of the Option or any portion thereof a buy-sell or other agreement
restricting the transfer of shares issued on exercise of the Option and
providing the Company with an option to purchase such shares in certain
circumstances, including without limitation in the event of a breach of any
employment or trade secrets agreement between Participant and the Company, in
such form as the Committee shall determine in its discretion.
5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of
any change in the Stock by reason of any stock dividend, recapitalization,
split-up, combination or exchange of shares, or by reason of any similar
change affecting the Stock (but not the issuance of additional shares,
securities convertible into shares or options or rights to acquire shares of
Stock or the Company's repurchase of shares), the number and class of shares
which thereafter may be acquired on exercise of the Option and the Option
Price shall be appropriately adjusted consistent with such change in such
manner as the Committee may deem equitable to prevent substantial dilution or
enlargement of the rights granted to, or available for, the Participant. Any
such adjustment shall be final and binding on the Participant.
-4-
<PAGE>
6. MERGER, CONSOLIDATION, ETC. In the event the Company merges
with or consolidates into another corporation, or sells or transfers all or
substantially all of its assets, or distributes all or substantially all of
its assets to its shareholders in liquidation, or dissolves and terminates
its corporate existence (other than a merger in which the Company is the
surviving corporation and under the terms of which the Stock outstanding
immediately prior to the merger remains outstanding), the Participant shall
have the right, immediately prior to such merger, consolidation, sale or
transfer of assets, liquidation or dissolution, to exercise the Option
whether or not then exercisable, except to the extent that any agreement or
undertaking of any party to any such merger, consolidation or sale or
transfer of assets, or any plan pursuant to which such liquidation or
dissolution is effected, make specific provision with respect to assumption
of or substitution for the Option. To the extent that the Participant's
right to exercise is accelerated in accordance with this Section 6: (i) the
exercise shall be contingent upon the consummation of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution, and
(ii) if such merger, consolidation, sale or transfer of assets, liquidation
or dissolution is consummated and the Option is not exercised immediately
before such event, the Option shall expire and thereafter shall cease to be
exercisable. The Committee shall notify the Participant of the provisions of
any such merger, consolidation, sale or transfer of assets, liquidation or
dissolution, not less than 10 days prior to the effective date thereof.
7. DISQUALIFYING DISPOSITIONS. The anticipated tax treatment to
the Participant and to the Company will be affected if the Participant makes
a disposition, within the meaning of Code Section 424(c), of any shares
issued upon exercise of the Option within two years after the Date of Grant
or within one year after shares are issued to the Participant pursuant to
exercise of the Option. Accordingly, the Participant shall notify the
Committee within 20 days after any such disposition. The Committee may cause
an appropriate legend to be affixed to any certificates evidencing shares of
Stock issued on exercise of the Option or any portion thereof to enable it to
receive notice of any such disposition.
8. NO RIGHTS AS A SHAREHOLDER. The Participant shall have no
rights or privileges as a shareholder with respect to any shares subject to
the Option prior to the date of issuance to him or her of a certificate or
certificates for such shares.
9. NO RIGHT TO CONTINUED RELATIONSHIP. Neither the Plan nor the
Option shall confer upon the Participant any right to continued employment or
directorship by the Company or any Parent Corporation or Subsidiary
Corporation, nor shall it interfere in any way with the right of the Company
or any Parent Corporation or Subsidiary Corporation or its shareholders to
terminate the Participant's employment or directorship at any time for any
reason whatsoever, with or without cause.
-5-
<PAGE>
10. COMPLIANCE WITH LAW AND REGULATIONS. The Option and the
obligation of the Company to sell and deliver shares under the Option, shall
be subject to all applicable federal and state laws, rules and regulations
and to any approvals by any government or regulatory agency as may be
required. The Company shall not be required to issue or deliver any
certificate for shares of Stock either (a) prior to (i) the listing of such
shares on any stock exchange on which the Stock may then be listed or
inclusion on any interdealer quotation system on which the Stock may be
quoted, and (ii) the completion of any registration or qualification of such
shares which is required under any federal or state law, or any ruling or
regulation of any government body, and which the Company shall, in its sole
discretion, determine to be necessary or advisable, or (b) until exemptions
from such registration and qualification requirements are established to the
reasonable satisfaction of the Company and its counsel. Any and all
certificates issued evidencing shares of Stock issued on exercise of the
Option or a portion thereof shall bear a legend as required by the Committee.
11. ARRANGEMENT FOR TAX PAYMENT. The Participant, as a condition
to exercising the Option, or any portion thereof, shall make any arrangements
determined by the Committee to be necessary or appropriate to satisfy any
federal and state withholding tax obligation resulting from the exercise of
an Option, from a disposition described in Section 7 of this Agreement or
from the termination or partial termination of any restriction applicable to
any shares acquired on exercise of an Option, including the retention of
shares by the Company or the delivery of shares to the Company equal in
amount to all or a portion of the withholding tax obligation pursuant to such
arrangements as may be established by the Committee. Any shares retained by
or delivered to the Company under this Section shall be valued at the date of
exercise at their fair market value as determined by the Committee.
12. NOTICES. Any notice or other communication required or
permitted by this Agreement shall be deemed delivered when delivered in
person or 48 hours after deposit with the United States Postal Service as
registered or certified mail, postage prepaid and addressed, if to the
Company, to Transcendent Design Technology, Inc., 1383 Del Norte Road,
Camarillo, California 93010, or, if to the Participant, to the Participant at
his or her most recent address as it appears in the Company's records,
subject to the right of either party to designate at any time hereafter in
writing some other address by giving notice to the other party.
13. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute one and the same instrument.
14. GOVERNING LAW. The parties hereto agree that the validity,
construction and interpretation of this Agreement shall be governed by the
laws of the State of California.
-6-
<PAGE>
15. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions,
and this Agreement shall be construed in all respects as if any invalid or
unenforceable provisions were omitted, but only to the extent invalid or
unenforceable under the circumstances.
16. ENTIRE AGREEMENT. This Agreement and the Plan together
constitute the entire agreement between the Company and the Participant
pertaining to the Option and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, among them pertaining
to the subject matter of this Agreement.
17. AMENDMENT OR WAIVER. No amendment of any provision of this
Agreement shall be effective unless and until an instrument reflecting the
amendment has been executed and delivered by the Company and the Participant.
No waiver of any provision of this Agreement shall be effective unless and
until an instrument reflecting the waiver has been executed and delivered by
the party waiving such provision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRANSCENDENT DESIGN TECHNOLOGY, INC.
By
------------------------------
PARTICIPANT
--------------------------------
-7-
<PAGE>
SCHEDULE I -- NOTATIONS AS TO PARTIAL EXERCISE
<TABLE>
<CAPTION>
Number of Balance of
Date of Purchased Shares on Authorized Notation
Exercise Shares Option Signature Date
- -------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C>
</TABLE>
-8-
<PAGE>
NONSTATUTORY STOCK OPTION AGREEMENT
No. of Shares Subject to Option: ______ Date of Grant: _______, 199__
This NONSTATUTORY STOCK OPTION AGREEMENT (the "Agreement") is made and
entered into as of this _______ day of _____________, 199__, by and between
Transcendent Design Technology, Inc., a Delaware corporation (the "Company"),
and __________________ (the "Participant").
RECITALS
A. The Board of Directors of the Company has adopted the
Transcendent Design Technology, Inc. Stock Option Plan (the "Plan"), which
provides for the grant of Incentive Stock Options and Nonstatutory Options to
selected key employees of the Company and any Parent Corporation or
Subsidiary Corporation and of Nonstatutory Options to key consultants and
directors of the Company.
B. The Committee has authorized the grant of a Nonstatutory Stock
Option to the Participant, who is an employee or a consultant of the Company
and/or a Parent Corporation or Subsidiary Corporation, and/or a director of
the Company, pursuant to the terms of the Plan and this Agreement.
AGREEMENT
Accordingly, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. RECEIPT AND BINDING NATURE OF PLAN. The Participant
acknowledges receipt of a copy of the Plan and that the Plan contains
provisions that materially affect the rights and obligations of the
Participant. The Participant agrees to abide by and to be bound by the terms
and conditions of the Plan.
2. DEFINITIONS. For purposes of this Agreement:
"Date of Grant" means the day and year first above written.
"Expiration Date" shall have the meaning set forth in Section
4(a) below.
"Option" means the Nonstatutory Stock Option granted under this
Agreement.
<PAGE>
"Option Price" shall have the meaning set forth in Section 3
below.
"Stock" means the Non-Voting Common Stock of the Company.
Unless otherwise defined herein, capitalized terms in this
Agreement shall be as defined in the Plan.
3. GRANT OF OPTION. The Company hereby grants to the Participant,
subject to the terms and conditions of the Plan and of this Agreement, a
Nonstatutory Stock Option to purchase from the Company all or part of an
aggregate of ________ shares of Stock at the price of $______ per share (the
"Option Price").
4. TERMS AND CONDITIONS. The Option evidenced hereby is subject
to the following terms and conditions:
(a) PERIOD OF EXERCISE. Subject to Sections 4(c) and 6 of
this Agreement, the Option shall expire ten years from the Date of Grant at
5:00 p.m., California time (the "Expiration Date"), and shall be immediately
exercisable, subject to all other terms set forth in this Section 4.
(b) MANNER OF EXERCISE. To exercise the Option or any
portion thereof, the Participant or any other person or persons entitled to
exercise the Option or portion thereof shall deliver to the Secretary of the
Company a notice in writing signed by the Participant or such other person
stating that the Option or portion thereof is exercised, specifying the
number of shares to be acquired upon exercise and complying with all
applicable rules and conditions to exercise as may be established by the
Committee. The notice shall be accompanied by:
(i) Full payment (in cash or bank cashiers' check) for the
shares with respect to which the Option or portion thereof is being
exercised; or
(ii) With the consent of the Committee, shares of Stock owned by
the Participant, duly endorsed for transfer to the Company, with a fair
market value on the date of exercise equal to the aggregate Option Price
of the shares with respect to which the Option or portion thereof is
being exercised; or
(iii) With the consent of the Committee, a full recourse
promissory note in a form, bearing interest (at a rate at least equal to
the minimum rate necessary to avoid imputed interest under the Code) and
payable upon such terms as may be prescribed by the Committee; or
-2-
<PAGE>
(iv) Any combination of the consideration provided in the
foregoing subsections (i), (ii) and (iii).
No such exercise shall be effective unless and until a proper notice has been
received by the Secretary of the Company, payment has been made and all other
conditions have been met as provided in this Agreement. No fractional shares
shall be issued on exercise of an Option or portion thereof under this
Agreement.
In the event that the Option or portion thereof shall be
exercised under Sections 4(c) or 4(d) of this Agreement by any person or
persons other than the Participant, appropriate proof of the right of such
person or persons to exercise the Option or portion thereof shall be
delivered to the Company.
(c) EXERCISE UPON DEATH OR CESSATION OF PERFORMANCE OF
SERVICES.
If the Participant was an Employee or a Consultant on
the Date of Grant and subsequently ceases to be an Employee or a Consultant
other than by reason of death or Permanent Disability, the Participant may
exercise the Option, to the extent it was exercisable at the date of
cessation, until 60 days after such date, but in no event after the
Expiration Date.
If the Participant was a Director on the Date of Grant
and subsequently ceases to be a Director, other than by reason of death, the
Participant may exercise the Option, to the extent it was exercisable at the
date of cessation, until 60 days after such date, but in no event after the
Expiration Date.
If the Participant was an Employee or a Consultant on
the Date of Grant and subsequently ceases to be an Employee or a Consultant
because of Permanent Disability, the Participant may exercise the Option, to
the extent it was exercisable at the date of cessation, until three months
after the date of cessation, but in no event after the Expiration Date.
If the Participant was an Employee or a Consultant on
the Date of Grant and subsequently dies while an Employee or a Consultant or
within three months after ceasing to be an Employee or a Consultant because
of Permanent Disability, or was a Director on the Date of Grant and
subsequently dies while a Director, the Option may be exercised by the
Participant's estate or any person who acquired the right to exercise the
Option by Will or the laws of descent and distribution, to the extent it was
exercisable at the date of death, until one year after the date of death, but
in no event after the Expiration Date.
-3-
<PAGE>
If the Participant was both (i) an Employee or a
Consultant and (ii) a Director on the Date of Grant and subsequently ceases
to be an Employee or a Consultant but remains a Director or ceases to be a
Director but remains an Employee or a Consultant, then subject to this
Section 4(c) the Option shall remain in effect.
Transfers of employment between the Company and any
Parent Corporation or Subsidiary Corporation or between Subsidiary
Corporations shall not be deemed cessation of employment for purposes of the
Option granted hereunder.
(d) NONTRANSFERABILITY. During the lifetime of the
Participant, the Option shall be exercisable only by the Participant and
shall not be transferable other than by Will or the laws of descent and
distribution. No interest of the Participant under the Plan or in the Option
shall be subject to attachment, execution, garnishment, sequestration, the
laws of bankruptcy or any other legal or equitable process.
(e) INVESTMENT REPRESENTATION. If requested by the
Committee, the Participant shall deliver to the Committee at the time of
exercise of the Option or any portion thereof a written representation that
the shares to be acquired upon such exercise will be acquired for investment
and not for resale or with a view to the distribution thereof. Delivery of
such representation shall be a condition precedent to the issuance of a
certificate for the Stock to be acquired upon such exercise.
(f) BUY-SELL AGREEMENT. If requested by the Committee, the
Participant shall execute and deliver to the Company at the time of exercise
of the Option or any portion thereof a buy-sell or other agreement
restricting the transfer of shares issued on exercise of the Option and
providing the Company with an option to purchase such shares in certain
circumstances, including without limitation in the event of a breach of any
employment or trade secrets agreement between Participant and the Company, in
such form as the Committee shall determine in its discretion.
5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of
any change in the Stock by reason of any stock dividend, recapitalization,
split-up, combination or exchange of shares, or by reason of any similar
change affecting the Stock (but not the issuance of additional shares,
securities convertible into shares or options or rights to acquire shares of
Stock or the Company's repurchase of shares), the number and class of shares
which thereafter may be acquired on exercise of the Option and the Option
Price shall be appropriately adjusted consistent with such change in such
manner as the Committee may deem equitable to prevent substantial dilution or
enlargement of the rights granted to, or available for, the Participant. Any
such adjustment shall be final and binding on the Participant.
-4-
<PAGE>
6. MERGER, CONSOLIDATION, ETC. In the event the Company merges
with or consolidates into another corporation, or sells or transfers all or
substantially all of its assets, or distributes all or substantially all of
its assets to its shareholders in liquidation, or dissolves and terminates
its corporate existence (other than a merger in which the Company is the
surviving corporation and under the terms of which the Stock outstanding
immediately prior to the merger remains outstanding), the Participant shall
have the right, immediately prior to such merger, consolidation, sale or
transfer of assets, liquidation or dissolution, to exercise the Option
whether or not then exercisable, except to the extent that any agreement or
undertaking of any party to any such merger, consolidation or sale or
transfer of assets, or any plan pursuant to which such liquidation or
dissolution is effected, make specific provision with respect to assumption
of or substitution for the Option. To the extent that the Participant's
right to exercise is accelerated in accordance with this Section 6: (i) the
exercise shall be contingent upon the consummation of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution, and
(ii) if such merger, consolidation, sale or transfer of assets, liquidation
or dissolution is consummated and the Option is not exercised immediately
before such event, the Option shall expire and thereafter shall cease to be
exercisable. The Committee shall notify the Participant of the provisions of
any such merger, consolidation, sale or transfer of assets, liquidation or
dissolution, not less than 10 days prior to the effective date thereof.
7. NO RIGHTS AS A SHAREHOLDER. The Participant shall have no
rights or privileges as a shareholder with respect to any shares subject to
the Option prior to the date of issuance to him or her of a certificate or
certificates for such shares.
8. NO RIGHT TO CONTINUED RELATIONSHIP. Neither the Plan nor the
Option shall confer upon the Participant any right to continued employment,
engagement or directorship by the Company or any Parent Corporation or
Subsidiary Corporation, nor shall it interfere in any way with the right of
the Company or any Parent Corporation or Subsidiary Corporation or its
shareholders to terminate the Participant's employment, engagement or
directorship at any time for any reason whatsoever, with or without cause.
9. COMPLIANCE WITH LAW AND REGULATIONS. The Option and the
obligation of the Company to sell and deliver shares under the Option, shall
be subject to all applicable federal and state laws, rules and regulations
and to any approvals by any government or regulatory agency as may be
required. The Company shall not be required to issue or deliver any
certificate for shares of Stock either (a) prior to (i) the listing of such
shares on any stock exchange on which the Stock may then be listed or
inclusion on any interdealer quotation system on which the Stock may be
quoted, and (ii) the completion of any registration or qualification of such
shares which is required under any federal or state law, or any ruling or
regulation of any government body, and which the Company shall, in its sole
discretion, determine to be necessary or advisable, or (b) until exemptions
from such registration and qualification requirements are established to the
reasonable satisfaction of
-5-
<PAGE>
the Company and its counsel. Any and all certificates issued evidencing
shares of Stock issued on exercise of the Option or a portion thereof shall
bear a legend as required by the Committee.
10. ARRANGEMENT FOR TAX PAYMENT. The Participant, as a condition
to exercising the Option, or any portion thereof, shall make any arrangements
determined by the Committee to be necessary or appropriate to satisfy any
federal and state withholding tax obligation resulting from the exercise of
an Option or from the termination or partial termination of any restriction
applicable to any shares acquired on exercise of an Option, including the
retention of shares by the Company or the delivery of shares to the Company
equal in amount to all or a portion of the withholding tax obligation
pursuant to such arrangements as may be established by the Committee. Any
shares retained by or delivered to the Company under this Section shall be
valued at the date of exercise at their fair market value as determined by
the Committee.
11. NOTICES. Any notice or other communication required or
permitted by this Agreement shall be deemed delivered when delivered in
person or 48 hours after deposit with the United States Postal Service as
registered or certified mail, postage prepaid and addressed, if to the
Company, to Transcendent Design Technology, Inc., 1383 Del Norte Road,
Camarillo, California 93010, or, if to the Participant, to the Participant at
his or her most recent address as it appears in the Company's records,
subject to the right of either party to designate at any time hereafter in
writing some other address by giving notice to the other party.
12. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute one and the same instrument.
13. GOVERNING LAW. The parties hereto agree that the validity,
construction and interpretation of this Agreement shall be governed by the
laws of the State of California.
14. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions,
and this Agreement shall be construed in all respects as if any invalid or
unenforceable provisions were omitted, but only to the extent invalid or
unenforceable under the circumstances.
15. ENTIRE AGREEMENT. This Agreement and the Plan together
constitute the entire agreement between the Company and the Participant
pertaining to the Option and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, among them pertaining
to the subject matter of this Agreement.
-6-
<PAGE>
16. AMENDMENT OR WAIVER. No amendment of any provision of this
Agreement shall be effective unless and until an instrument reflecting the
amendment has been executed and delivered by the Company and the Participant.
No waiver of any provision of this Agreement shall be effective unless and
until an instrument reflecting the waiver has been executed and delivered by
the party waiving such provision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRANSCENDENT DESIGN TECHNOLOGY, INC.
By
-------------------------------
PARTICIPANT
-------------------------------
-------------------------------
-7-
<PAGE>
SCHEDULE I -- NOTATIONS AS TO PARTIAL EXERCISE
<TABLE>
<CAPTION>
Number of Balance of
Date of Purchased Shares on Authorized Notation
Exercise Shares Option Signature Date
- -------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C>
</TABLE>
-8-
<PAGE>
EXHIBIT 10.38
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), made this 2nd day of October,
1998, is entered into by Viewlogic Systems, Inc., a Delaware corporation with
its principal place of business at 293 Boston Post Road West, Marlboro,
Massachusetts (the "Company"), and Richard G. Lucier, residing at 10 Bertis
Adams Way, Westboro, MA 01581 (the "Employee").
PRELIMINARY STATEMENT
The Company desires to employ the Employee, and the Employee desires
to provide such services upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound
hereby, agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby agrees to employ the
Employee, and the Employee hereby accepts employment with the Company, upon
the terms set forth in this Agreement. The period of such employment will
commence on October 2, 1998 (the "Commencement Date") and conclude on October
2, 2001 and thereafter will be automatically renewed annually for successive
one-year terms (such period, as automatically renewed hereby and as it may be
otherwise extended, the "Employment Period") unless (i) either party provides
written notice to the other party not less than three months prior to the end
of the initial three year period or any such successive one-year period, as
appropriate, that any such automatic renewal shall no longer be effective or
(ii) sooner terminated in accordance with the provisions of Section 4 hereof.
2. TITLE; CAPACITY. The Employee shall serve as Executive Vice
President or in such other position as the Company or its Board of Directors
(the "Board") may determine from time to time and shall have the duties,
responsibilities and authority which normally attend such position (or such
other position determined by the Board) in a corporation similar in size and
character to the Company. The Employee shall be based at the Company's
headquarters in Marlboro, Massachusetts, or such place or places in the
continental United States as the Board shall determine. The Employee shall
be subject to the supervision of, and shall have such authority as is
delegated to him by, the Board or such officer of the Company as may be
designated by the Board.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board or its designee shall from time to time reasonably
assign to him. The Employee agrees to devote his entire business time,
attention and energies to the business and interests of the Company during the
Employment Period. The Employee agrees to abide by the rules, regulations,
instructions, personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the Company. The Employee
<PAGE>
acknowledges receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. The Company shall pay the Employee an annual
base salary, payable in accordance with the Company's normal payroll
practice, of $215,000, subject to withholding and other applicable taxes, for
the one-year period commencing on the Commencement Date. Such salary shall
be subject to adjustment thereafter as determined by the Board; PROVIDED THAT
in no event shall the Employee's base salary be decreased.
3.2 BENEFITS. In addition to the other compensation payable
to the Employee hereunder, the Company shall provide the Employee with such
other benefits as may be approved by the Board, and the Employee shall be
entitled to participate in all bonus and benefit programs that the Company
establishes and makes available to its employees, if any, to the extent that
the Employee's position, tenure, salary, age, health and other qualifications
make him eligible to participate. The Employee shall be entitled to five
weeks of paid vacation per year, to be taken at such times as may be approved
by the Board.
3.3 REIMBURSEMENT OF EXPENSES. The Company shall reimburse
the Employee for all reasonable expenses incurred or paid by the Employee in
connection with, or related to, the performance of his duties,
responsibilities or services, including without limitation, travel,
communications and entertainment expenses.
4. EMPLOYMENT TERMINATION. The employment of the Employee by the
Company pursuant to this Agreement shall terminate upon the occurrence of any
of the following:
4.1 Unless affirmatively extended by written agreement of
the Company and the Employee, the expiration of the Employment Period in
accordance with Section 1 hereof;
4.2 At the election of the Company, for cause, immediately
upon written notice by the Company to the Employee. For the purposes of this
Section 4.2, cause for termination shall be deemed to exist upon a reasonable
determination by the Company of willful misconduct by the Employee or willful
failure by the Employee to perform his or her responsibilities to the Company
(including without limitation, material breach by the Employee of any
employment, consulting advisory, nondisclosure, noncompetition or other
similar agreement between the Employee and the Company);
4.3 Thirty days subsequent to the delivery of written notice
by the Company to the Employee (or the Employee's estate) of a determination
pursuant to the terms of this Section 4.3 of the death or disability of the
Employee. As used in this Agreement, the term "disability" shall mean the
inability of the Employee, due to a physical
-2-
<PAGE>
or mental disability, for a period of at least six consecutive months to
perform the services contemplated under this Agreement. A determination of
disability shall be made by a physician satisfactory to both the Employee and
the Company, PROVIDED THAT if the Employee and the Company do not agree on a
physician, the Employee and the Company shall each select a physician and
these two together shall select a third physician, whose determination as to
disability shall be binding on all parties; or
4.4 At the election of either party, upon written notice of
termination. Any notice provided by either party to the other party pursuant
to the terms of Section 1 hereof that any automatic renewal of the Employment
Period shall no longer be effective shall be deemed to be a termination of
the employment of the Employee by the Company at the election of the party
providing such notice.
5. EFFECT OF TERMINATION.
5.1 TERMINATION FOR CAUSE OR AT ELECTION OF THE EMPLOYEE.
In the event the Employee's employment is terminated for cause pursuant to
Section 4.2 hereof, or at the election of the Employee pursuant to Section
4.4 hereof, the Company shall pay to the Employee the compensation and
benefits otherwise payable to him under Section 3 hereof through the last day
of his actual employment by the Company.
5.2 TERMINATION FOR DEATH OR DISABILITY. If the Employee's
employment is terminated by death or because of disability pursuant to
Section 4.3 hereof, the Company shall pay to the estate of the Employee or to
the Employee, as the case may be, the compensation which would otherwise be
payable to the Employee up to the end of the month in which the termination
of his employment because of death or disability occurs.
5.3 TERMINATION AT THE ELECTION OF THE COMPANY. If the
Employee's employment is terminated at the election of the Company pursuant
to the terms of Section 4.4 hereof, the Company shall pay to the Employee the
compensation and benefits otherwise payable to him under Section 3 hereof
through the last day of his actual employment by the Company and for the
succeeding nine calendar months.
5.4 SURVIVAL. The provisions of Sections 6 and 7 hereof
shall survive the termination of this Agreement.
6. NONCOMPETITION.
(a) During the Employment Period and for a period of one
year after the termination or expiration thereof, the Employee will not
directly or indirectly:
(i) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, consultant, or in any
other capacity whatsoever
-3-
<PAGE>
(other than as the holder of not more than one percent of the combined voting
power of the outstanding stock of a publicly held company), develop, design,
produce, market, sell or render (or assist any other person in developing,
designing, producing, marketing, selling or rendering) products or services
competitive with those developed, designed, produced, marketed, sold or
rendered by the Company while the Employee was employed by the Company; or
(ii) recruit, solicit or hire any employee of the Company, or
induce or attempt to induce any employee of the Company to terminate his/her
employment with, or otherwise cease his/her relationship with, the Company; or
(iii) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
(b) If any restriction set forth in this Section 6 is found
by any court of competent jurisdiction to be unenforceable because it extends
for too long a period of time or over too great a range of activities or in
too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which it
may be enforceable.
(c) The restrictions contained in this Section 6 are
necessary for the protection of the business and goodwill of the Company and
are considered by the Employee to be reasonable for such purpose. The
Employee agrees that any breach of this Section 6 will cause the Company
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the
Company shall have the right to seek specific performance and injunctive
relief.
7. PROPRIETARY INFORMATION AND DEVELOPMENTS.
7.1 PROPRIETARY INFORMATION.
(a) The Employee agrees that all information, whether or not
in writing, of a private, secret or confidential nature concerning the
Company's business, business relationships or financial affairs
(collectively, "Proprietary Information") is and shall be the exclusive
property of the Company. By way of illustration, but not limitation,
Proprietary Information may include inventions, products, processes, methods,
techniques, formulas, compositions, compounds, projects, developments, plans,
research data, clinical data, financial data, personnel data, computer
programs, customer and supplier lists, and contacts at or knowledge of
customers or prospective customers of the Company. The Employee will not
disclose any Proprietary Information to any person or entity other than
employees of the Company or use the same for any purposes (other than in the
performance of his/her duties as
-4-
<PAGE>
an employee of the Company) without written approval by an officer of the
Company, either during or after his/her employment with the Company, unless
and until such Proprietary Information has become public knowledge without
fault by the Employee.
(b) The Employee agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, or other tangible material
containing Proprietary Information, whether created by the Employee or
others, which shall come into his/her custody or possession, shall be and are
the exclusive property of the Company to be used by the Employee only in the
performance of his/her duties for the Company. All such materials or copies
thereof and all tangible property of the Company in the custody or possession
of the Employee shall be delivered to the Company, upon the earlier of (i) a
request by the Company or (ii) termination of his/her employment After such
delivery, the Employee shall not retain any such materials or copies thereof
or any such tangible property.
(c) The Employee agrees that his/her obligation not to
disclose or to use information and materials of the types set forth in
paragraphs (a) and (b) above, and his/her obligation to return materials and
tangible property, set forth in paragraph (b) above, also extends to such
types of information, materials and tangible property of customers of the
Company or suppliers to the Company or other third parties who may have
disclosed or entrusted the same to the Company or to the Employee.
7.2 DEVELOPMENTS.
(a) The Employee will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, whether patentable or not, which are
created, made, conceived or reduced to practice by him/her or under his/her
direction or jointly with others during his/her employment by the Company,
whether or not during normal working hours or on the premises of the Company
(all of which are collectively referred to in this Agreement as
"Developments").
(b) The Employee agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his/her right,
title and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this paragraph
2(b) shall not apply to Developments which do not relate to the present or
planned business or research and development of the Company and which are made
and conceived by the Employee not during normal working hours, not on the
Company's premises and not using the Company's tools, devices, equipment or
Proprietary Information. The Employee understands that, to the extent this
Agreement shall be construed in accordance with the laws of any state which
precludes a requirement in an employee agreement to assign certain classes of
inventions made by an employee, this paragraph 2(b) shall be interpreted not to
apply to any invention which a court rules and/or
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the Company agrees falls within such classes. The Employee also hereby
waives all claims to moral rights in any Developments.
(c) The Employee agrees to cooperate fully with the Company,
both during and after his/her employment with the Company, with respect to
the procurement, maintenance and enforcement of copyrights, patents and other
intellectual property rights (both in the United States and foreign
countries) relating to Developments. The Employee shall sign all papers,
including, without limitation, copyright applications, patent applications,
declarations, oaths, formal assignments, assignments of priority rights, and
powers of attorney, which the Company may deem necessary or desirable in
order to protect its rights and interests in any Development. The Employee
further agrees that if the Company is unable, after reasonable effort, to
secure the signature of the Employee on any such papers, any executive
officer of the Company shall be entitled to execute any such papers as the
agent and the attorney-in-fact of the Employee, and the Employee hereby
irrevocably designates and appoints each executive officer of the Company as
his/her agent and attorney-in-fact to execute any such papers on his/her
behalf, and to take any and all actions as the Company may deem necessary or
desirable in order to protect its rights and interests in any Development,
under the conditions described in this sentence.
7.3 OTHER AGREEMENTS. The Employee hereby represents that,
except as the Employee has disclosed in writing to the Company, the Employee
is not bound by the terms of any agreement with any previous employer or
other party to refrain from using or disclosing any trade secret or
confidential or proprietary information in the course of his/her employment
with the Company or to refrain from competing, directly or indirectly, with
the business of such previous employer or any other party. The Employee
further represents that his/her performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information, knowledge or data
acquired by the Employee in confidence or in trust prior to his/her
employment with the Company, and the Employee will not disclose to the
Company or induce the Company to use any confidential or proprietary
information or material belonging to any previous employer or others.
7.4 UNITED STATES GOVERNMENT OBLIGATIONS. The Employee
acknowledges that the Company from time to time may have agreements with the
other persons or with the United States Government or agencies thereof, which
impose obligations or restrictions on the Company regarding inventions made
during the course of work under such agreements or regarding the confidential
nature of such work. The Employee agrees to be bound by all such obligations
and restrictions which are made known to the Employee and to take all action
necessary to discharge the obligations of the Company under such agreements.
7.5 INSURANCE. The Company may purchase insurance on the life
of the Employee, and if it does so, the Employee shall cooperate fully by
performing all the requirements of the life insurer which are necessary
conditions precedent to the issuance of the life insurance policy issued by it.
Notwithstanding the foregoing, if at the time of
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<PAGE>
termination for any reason (other than death), the Company is maintaining a
life insurance policy on the Employee which has a cash surrender value, then
to the extent permitted under such policy the Employee may purchase such
policy from the Company by paying to the Company the cash surrender value
thereof.
8. NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or
at such other address or addresses as either party shall designate to the
other in accordance with this Section 8.
9. PRONOUNS. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular forms of nouns and pronouns shall include the
plural, and vice versa.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, between the Employee and the Company
relating to the subject matter of this Agreement.
11. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
12. GOVERNING LAW. This Agreement is governed by and shall be
construed, interpreted and enforced in accordance with the laws of the
Commonwealth of Massachusetts.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may
be merged or which may succeed to its assets or business, provided, however,
that the obligations of the Employee are personal and shall neither be
assigned nor delegated by him.
14. MISCELLANEOUS.
14.1 No delay or omission by the Company in exercising any
right under this Agreement shall operate as a waiver of that or any other
right. A waiver or consent given by the Company on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.
14.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope
or substance of any section of this Agreement.
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<PAGE>
14.3 In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
VIEWLOGIC SYSTEMS, INC.
By: /s/ William J. Herman
----------------------------
William J. Herman
President and Chief Executive Officer
EMPLOYEE
/s/ Richard G. Lucier
----------------------------
Richard G. Lucier
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<PAGE>
EXHIBIT 10.39
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), made this 2nd day of
October, 1998, is entered into by Viewlogic Systems, Inc., a Delaware
corporation with its principal place of business at 293 Boston Post Road
West, Marlboro, Massachusetts (the "Company"), and William J. Herman,
residing at 8 Cobblestone Place, Sudbury, MA 01776 (the "Employee").
PRELIMINARY STATEMENT
The Company desires to employ the Employee, and the Employee desires
to provide such services upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound
hereby, agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby agrees to employ the
Employee, and the Employee hereby accepts employment with the Company, upon
the terms set forth in this Agreement. The period of such employment will
commence on October 2, 1998 (the "Commencement Date") and conclude on October
2, 2001 and thereafter will be automatically renewed annually for successive
one-year terms (such period, as automatically renewed hereby and as it may be
otherwise extended, the "Employment Period") unless (i) either party provides
written notice to the other party not less than three months prior to the end
of the initial three year period or any such successive one-year period, as
appropriate, that any such automatic renewal shall no longer be effective or
(ii) sooner terminated in accordance with the provisions of Section 4 hereof.
2. TITLE; CAPACITY. The Employee shall serve as President and
Chief Executive Officer or in such other position as the Company or its Board
of Directors (the "Board") may determine from time to time and shall have the
duties, responsibilities and authority which normally attend such position
(or such other position determined by the Board) in a corporation similar in
size and character to the Company. The Employee shall be based at the
Company's headquarters in Marlboro, Massachusetts, or such place or places in
the continental United States as the Board shall determine. The Employee
shall be subject to the supervision of, and shall have such authority as is
delegated to him by, the Board or such officer of the Company as may be
designated by the Board.
The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other
duties and responsibilities as the Board or its designee shall from time to
time reasonably assign to him. The Employee agrees to devote his entire
business time, attention and energies to the business and interests of the
Company during the Employment Period. The Employee agrees to abide by the
rules, regulations, instructions, personnel practices and policies of the
Company and any changes therein which may be adopted from time to time by the
Company. The Employee
<PAGE>
acknowledges receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. The Company shall pay the Employee an annual
base salary, payable in accordance with the Company's normal payroll
practice, of $220,000, subject to withholding and other applicable taxes, for
the one-year period commencing on the Commencement Date. Such salary shall
be subject to adjustment thereafter as determined by the Board; PROVIDED THAT
in no event shall the Employee's base salary be decreased.
3.2 BENEFITS. In addition to the other compensation payable
to the Employee hereunder, the Company shall provide the Employee with such
other benefits as may be approved by the Board, and the Employee shall be
entitled to participate in all bonus and benefit programs that the Company
establishes and makes available to its employees, if any, to the extent that
the Employee's position, tenure, salary, age, health and other qualifications
make him eligible to participate. The Employee shall be entitled to five
weeks of paid vacation per year, to be taken at such times as may be approved
by the Board.
3.3 REIMBURSEMENT OF EXPENSES. The Company shall reimburse
the Employee for all reasonable expenses incurred or paid by the Employee in
connection with, or related to the performance of his duties,
responsibilities or services, including without limitation, travel,
communications and entertainment expenses.
4. EMPLOYMENT TERMINATION. The employment of the Employee by the
Company pursuant to this Agreement shall terminate upon the occurrence of any
of the following:
4.1 Unless affirmatively extended by written agreement of
the Company and the Employee, the expiration of the Employment Period in
accordance with Section 1 hereof;
4.2 At the election of the Company, for cause, immediately
upon written notice by the Company to the Employee. For the purposes of this
Section 4.2, cause for termination shall be deemed to exist upon a reasonable
determination by the Company of willful misconduct by the Employee or willful
failure by the Employee to perform his or her responsibilities to the Company
(including without limitation, material breach by the Employee of any
employment, consulting advisory, nondisclosure, noncompetition or other
similar agreement between the Employee and the Company);
4.3 Thirty days subsequent to the delivery of written notice by
the Company to the Employee (or the Employee's estate) of a determination
pursuant to the terms of this Section 43 of the death or disability of the
Employee. As used in this
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Agreement, the term "disability" shall mean the inability of the Employee,
due to a physical or mental disability, for a period of at least six
consecutive months to perform the services contemplated under this Agreement.
A determination of disability shall be made by a physician satisfactory to
both the Employee and the Company, PROVIDED THAT if the Employee and the
Company do not agree on a physician, the Employee and the Company shall each
select a physician and these two together shall select a third physician,
whose determination as to disability shall be binding on all parties; or
4.4 At the election of either party, upon written notice of
termination. Any notice provided by either party to the other party pursuant
to the terms of Section 1 hereof that any automatic renewal of the Employment
Period shall no longer be effective shall be deemed to be a termination of
the employment of the Employee by the Company at the election of the party
providing such notice.
5. EFFECT OF TERMINATION.
5.1 TERMINATION FOR CAUSE OR AT ELECTION OF THE EMPLOYEE.
In the event the Employee's employment is terminated for cause pursuant to
Section 4.2 hereof, or at the election of the Employee pursuant to Section
4.4 hereof, the Company shall pay to the Employee the compensation and
benefits otherwise payable to him under Section 3 hereof through the last day
of his actual employment by the Company.
5.2 TERMINATION FOR DEATH OR DISABILITY. If the Employee's
employment is terminated by death or because of disability pursuant to
Section 4.3 hereof, the Company shall pay to the estate of the Employee or to
the Employee, as the case may be, the compensation which would otherwise be
payable to the Employee up to the end of the month in which the termination
of his employment because of death or disability occurs.
5.3 TERMINATION AT THE ELECTION OF THE COMPANY. If the
Employee's employment is terminated at the election of the Company pursuant
to the terms of Section 4.4 hereof, the Company shall pay to the Employee the
compensation and benefits otherwise payable to him under Section 3 hereof
through the last day of his actual employment by the Company and for the
succeeding nine calendar months.
5.4 SURVIVAL. The provisions of Sections 6 and 7 hereof
shall survive the termination of this Agreement.
6. NONCOMPETITION.
(a) During the Employment Period and for a period of one
year after the termination or expiration thereof, the Employee will not
directly or indirectly:
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<PAGE>
(i) as an individual proprietor, partner, stockholder,
officer, employee, director, joint venturer, investor, lender, consultant, or
in any other capacity whatsoever (other than as the holder of not more than
one percent of the combined voting power of the outstanding stock of a
publicly held company), develop, design, produce, market, sell or render (or
assist any other person in developing, designing, producing, marketing,
selling or rendering) products or services competitive with those developed,
designed, produced, marketed, sold or rendered by the Company while the
Employee was employed by the Company; or
(ii) recruit, solicit or hire any employee of the Company, or
induce or attempt to induce any employee of the Company to terminate his/her
employment with, or otherwise cease his/her relationship with, the Company; or
(iii) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
(b) If any restriction set forth in this Section 6 is found
by any court of competent jurisdiction to be unenforceable because it extends
for too long a period of time or over too great a range of activities or in
too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which it
may be enforceable.
(c) The restrictions contained in this Section 6 are
necessary for the protection of the business and goodwill of the Company and
are considered by the Employee to be reasonable for such purpose. The
Employee agrees that any breach of this Section 6 will cause the Company
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the
Company shall have the right to seek specific performance and injunctive
relief.
7. PROPRIETARY INFORMATION AND DEVELOPMENTS.
7.1 PROPRIETARY INFORMATION.
(a) The Employee agrees that all information, whether or not
in writing, of a private, secret or confidential nature concerning the
Company's business, business relationships or financial affairs
(collectively, "Proprietary Information") is and shall be the exclusive
property of the Company. By way of illustration, but not limitation,
Proprietary Information may include inventions, products, processes, methods,
techniques, formulas, compositions, compounds, projects, developments, plans,
research data, clinical data, financial data, personnel data, computer
programs, customer and supplier lists, and contacts at or knowledge of
customers or prospective customers of the Company. The Employee will not
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<PAGE>
disclose any Proprietary Information to any person or entity other than
employees of the Company or use the same for any purposes (other than in the
performance of his/her duties as an employee of the Company) without written
approval by an officer of the Company, either during or after his/her
employment with the Company, unless and until such Proprietary Information
has become public knowledge without fault by the Employee.
(b) The Employee agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, or other tangible material
containing Proprietary Information, whether created by the Employee or
others, which shall come into his/her custody or possession, shall be and are
the exclusive property of the Company to be used by the Employee only in the
performance of his/her duties for the Company. All such materials or copies
thereof and all tangible property of the Company in the custody or possession
of the Employee shall be delivered to the Company, upon the earlier of (i) a
request by the Company or (ii) termination of his/her employment. After such
delivery, the Employee shall not retain any such materials or copies thereof
or any such tangible property.
(c) The Employee agrees that his/her obligation not to
disclose or to use information and materials of the types set forth in
paragraphs (a) and (b) above, and his/her obligation to return materials and
tangible property, set forth in paragraph (b) above, also extends to such
types of information, materials and tangible property of customers of the
Company or suppliers to the Company or other third parties who may have
disclosed or entrusted the same to the Company or to the Employee.
7.2 DEVELOPMENTS.
(a) The Employee will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, whether patentable or not, which are
created, made, conceived or reduced to practice by him/her or under his/her
direction or jointly with others during his/her employment by the Company,
whether or not during normal working hours or on the premises of the Company
(all of which are collectively referred to in this Agreement as
"Developments").
(b) The Employee agrees to assign and does hereby assign to
the Company (or any person or entity designated by the Company) all his/her
right, title and interest in and to all Developments and all related patents,
patent applications, copyrights and copyright applications. However, this
paragraph 2(b) shall not apply to Developments which do not relate to the
present or planned business or research and development of the Company and
which are made and conceived by the Employee not during normal working hours,
not on the Company's premises and not using the Company's tools, devices,
equipment or Proprietary Information. The Employee understands that, to the
extent this Agreement shall be construed in accordance with the laws of any
state which precludes a requirement in an
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employee agreement to assign certain classes of inventions made by an
employee, this paragraph 2(b) shall be interpreted not to apply to any
invention which a court rules and/or the Company agrees falls within such
classes. The Employee also hereby waives all claims to moral rights in any
Developments.
(c) The Employee agrees to cooperate fully with the Company,
both during and after his/her employment with the Company, with respect to
the procurement, maintenance and enforcement of copyrights, patents and other
intellectual property rights (both in the United States and foreign
countries) relating to Developments. The Employee shall sign all papers,
including, without limitation, copyright applications, patent applications,
declarations, oaths, formal assignments, assignments of priority rights, and
powers of attorney, which the Company may deem necessary or desirable in
order to protect its rights and interests in any Development. The Employee
further agrees that if the Company is unable, after reasonable effort, to
secure the signature of the Employee on any such papers, any executive
officer of the Company shall be entitled to execute any such papers as the
agent and the attorney-in-fact of the Employee, and the Employee hereby
irrevocably designates and appoints each executive officer of the Company as
his/her agent and attorney-in-fact to execute any such papers on his/her
behalf, and to take any and all actions as the Company may deem necessary or
desirable in order to protect its rights and interests in any Development,
under the conditions described in this sentence.
7.3 OTHER AGREEMENTS. The Employee hereby represents that,
except as the Employee has disclosed in writing to the Company, the Employee
is not bound by the terms of any agreement with any previous employer or
other party to refrain from using or disclosing any trade secret or
confidential or proprietary information in the course of his/her employment
with the Company or to refrain from competing, directly or indirectly, with
the business of such previous employer or any other party. The Employee
further represents that his/her performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information, knowledge or data
acquired by the Employee in confidence or in trust prior to his/her
employment with the Company, and the Employee will not disclose to the
Company or induce the Company to use any confidential or proprietary
information or material belonging to any previous employer or others.
7.4 UNITED STATES GOVERNMENT OBLIGATIONS. The Employee
acknowledges that the Company from time to time may have agreements with the
other persons or with the United States Government, or agencies thereof,
which impose obligations or restrictions on the Company regarding inventions
made during the course of work under such agreements or regarding the
confidential nature of such work. The Employee agrees to be bound by all
such obligations and restrictions which are made known to the Employee and to
take all action necessary to discharge the obligations of the Company under
such agreements.
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<PAGE>
7.5 INSURANCE. The Company may purchase insurance on the
life of the Employee, and if it does so, the Employee shall cooperate fully
by performing all the requirements of the life insurer which are necessary
conditions precedent to the issuance of the life insurance policy issued by
it. Notwithstanding the foregoing, if at the time of termination for any
reason (other than death), the Company is maintaining a life insurance policy
on the Employee which has a cash surrender value, then to the extent
permitted under such policy the Employee may purchase such policy from the
Company by paying to the Company the cash surrender value thereof.
8. NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or
at such other address or addresses as either party shall designate to the
other in accordance with this Section 8.
9. PRONOUNS. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular forms of nouns and pronouns shall include the
plural, and vice versa.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, between the Employee and the Company
relating to the subject matter of this Agreement.
11. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
12. GOVERNING LAW. This Agreement is governed by and shall be
construed, interpreted and enforced in accordance with the laws of the
Commonwealth of Massachusetts.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may
be merged or which may succeed to its assets or business, provided, however,
that the obligations of the Employee are personal and shall neither be
assigned nor delegated by him.
14. MISCELLANEOUS.
14.1 No delay or omission by the Company in exercising any
right under this Agreement shall operate as a waiver of that or any other
right. A waiver or consent given by the Company on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.
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<PAGE>
14.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope
or substance of any section of this Agreement.
14.3 In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
VIEWLOGIC SYSTEMS, INC.
By: /s/ Kevin P. O'Brien
---------------------------------
Kevin P. O'Brien
Secretary, Vice President Finance
and Chief Financial Officer
EMPLOYEE
/s/ William J. Herman
---------------------------------
William J. Herman
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<PAGE>
EXHIBIT 10.40
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 2nd day of October,
1998, by and among Viewlogic Systems, Inc., a Delaware corporation (the
"Company"), Synopsys, Inc., a Delaware corporation ("Synopsys") and the
investors listed on Schedule A hereto, each of which is herein referred to as an
"Investor."
RECITALS
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement of even date herewith (the "Series A
Agreement");
WHEREAS, in order to induce the Company and Synopsys to approve the
issuance by the Company of its Series A Voting Preferred Stock and Series A-1
Non-Voting Preferred Stock (collectively, the "Series A Preferred Stock") and to
induce the Investors to invest funds in the Company pursuant to the Series A
Agreement, the Investors, Synopsys and the Company hereby agree that this
Agreement shall govern the rights of the Investors and Synopsys to cause the
Company to register shares of Common Stock of the Company (the "Common Stock")
issued or issuable to them and certain other matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.11 hereof.
(d) The term "Initial Offering" means the Company's first bona
fide firm commitment underwritten public offering of its Common Stock under the
Act with aggregate gross proceeds in excess of $20,000,000.
(e) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
<PAGE>
(f) The term "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(g) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock; (ii) the
3,966,722 shares of Common Stock issued to Synopsys; and (iii) any Common Stock
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security that is issued as) a dividend or other distribution with respect
to, or in exchange for, or in replacement of, the shares referenced in (i) and
(ii) above, excluding in all cases, however, any Registrable Securities sold by
a person in a transaction in which his rights under this Section 1 are not
assigned provided, however, that shares of Common Stock which are Registrable
Securities shall cease to be Registrable Securities upon (A) any sale pursuant
to a Registration Statement or Rule 144(k) under the Securities Act or (ii) any
sale or transfer in any manner to a person or entity which, by virtue of Section
1.14 of this Agreement is not entitled to the rights provided for herein.
(h) The number of shares of "Registrable Securities" outstanding
shall be determined by the number of shares of Common Stock outstanding that are
Registrable Securities (assuming conversion into Common Stock of all outstanding
Series A Preferred Stock).
(i) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 REQUEST FOR REGISTRATION.
(a) REQUEST RIGHTS OF SYNOPSYS. Subject to the conditions of
this Section 1.2, if the Company shall receive at any time not less than 180
days after the effective date of the Initial Offering, a written request from
Synopsys that the Company file a registration statement under the Act, then the
Company shall, within twenty (20) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 1.2, use all reasonable efforts to effect, as soon as practicable, the
registration under the Act of all Registrable Securities that the Holders
request to be registered in a written request received by the Company within
twenty (20) days of the mailing of the Company's notice pursuant to this
Section 1.2(a).
(b) REQUEST RIGHTS OF THE SERIES A HOLDERS. Subject to the
conditions of this Section 1.2, if the Company shall receive at any time not
less than 180 days after the effective date of the Initial Offering, a written
request from the Holders of thirty percent (30%) or more of the Registrable
Securities then outstanding (the "Initiating Series A Holders") that the Company
file a registration statement under the Act, then the Company shall, within
twenty (20) days of the receipt thereof, give written notice of such request to
all Holders, and subject to the
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limitations of this Section 1.2, use all reasonable efforts to effect, as soon
as practicable, the registration under the Act of all Registrable Securities
that the Holders request to be registered in a written request received by the
Company within twenty (20) days of the mailing of the Company's notice pursuant
to this Section 1.2(b).
(c) If the Initiating Series A Holders or Synopsys intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 1.2 and the Company shall include such information in
the written notice referred to in Section 1.2(a) or 1.2(b). In such event the
right of any Holder to include its Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Series A Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company (which underwriter or
underwriters shall be reasonably acceptable to a majority in interest of the
Initiating Series A Holders). Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Company that marketing factors
require a limitation of the number of securities underwritten (including
Registrable Securities), then the Company shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of shares that may be included in the underwriting shall be allocated
to the Holders of such Registrable Securities on a pro rata basis based on the
number of Registrable Securities held by all such Holders (including the
Initiating Series A Holders). Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from the registration.
(d) The Company shall not be required to effect a registration
pursuant to this Section 1.2:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, unless the Company is already subject to service in
such jurisdiction and except as may be required under the Act; or
(ii) after the Company has effected two (2) registrations
pursuant to this Section 1.2 in any twelve month period, and such registrations
have been declared or ordered effective; or
(iii) if the request covers the registration of
Registrable Securities with an anticipated aggregate offering price of less than
$5,000,000; or
(iv) during the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of the filing of,
and ending on a date one
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hundred eighty (180) days following the effective date of, a Company-initiated
registration subject to Section 1.3(a) below, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(v) if Synopsys or the Initiating Series A Holders, as
the case may be, propose to dispose of Registrable Securities that may be
registered on Form S-3 pursuant to Section 1.4 hereof; or
(vi) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 1.2, a certificate signed by the
Company's Chief Executive Officer or Chairman of the Board stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be effected at such time, in which event the Company shall have the
right to defer such filing for a period of not more than ninety (90) days after
receipt of the request of Synopsys or the Initiating Series A Holders, as
applicable, provided that such right to delay a request shall be exercised by
the Company not more than once in any twelve (12)-month period.
(e) The Company shall not be required to effect a registration
pursuant to Section 1.2(a) after the Company has effected six (6) registrations
pursuant to Section 1.2(a), and such registrations have been declared or ordered
effective.
(f) The Company shall not be required to effect a registration
pursuant to Section 1.2(b) after the Company has effected two (2) registrations
pursuant to Section 1.2(b), and such registrations have been declared or ordered
effective.
1.3 PIGGY-BACK REGISTRATION RIGHTS.
(a) COMPANY REGISTRATIONS.
(i) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its stock or other
securities under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan, a registration relating to a corporate
reorganization or other transaction under Rule 145 of the Act, a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities, or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 4.5, the Company shall, subject to the provisions of
Section 1.3(a)(iii), use all
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reasonable efforts to cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
(ii) RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.3 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The expenses
of such withdrawn registration shall be borne by the Company in accordance with
Section 1.7 hereof.
(iii) UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall so advise the Holders in the written notice delivered pursuant to
Section 1.3(a) hereof. In such event the right of any Holders to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriters or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 1.3, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities underwritten,
then the Company shall so advise all Holders of Registrable Securities that
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders; PROVIDED, HOWEVER, that in no event shall
the amount of securities of the selling Holders included in such offering be
reduced to an amount less than 20% of the total amount of securities included in
such offering unless such offering is the Initial Offering, in which case the
selling Holders may be excluded if the underwriters make the determination
described above and no other stockholder's securities are included.
(b) OTHER REGISTRATIONS.
(i) If the Company proposes to register any of its stock
or other securities under the Act pursuant to Section 1.2, the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 4.5, the Company shall,
subject to the provisions of Section 1.3(b)(iii), use all reasonable efforts to
cause to be registered under the Act all of the Registrable Securities that each
such Holder has requested to be registered.
(ii) RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.3 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities
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in such registration. The expenses of such withdrawn registration shall be
borne by the Company in accordance with Section 1.7 hereof.
(iii) UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall so advise the Holders in the written notice delivered pursuant to
Section 1.3(a) hereof. In such event the right of any Holders to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriters or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 1.3, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities underwritten,
then the Company shall so advise all Holders of Registrable Securities that
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders; PROVIDED, HOWEVER, that in no event shall
the amount of securities of the selling Holders included in such offering be
reduced to an amount less than 20% of the total amount of securities included in
such offering unless such offering is the Initial Offering, in which case the
selling Holders may be excluded if the underwriters make the determination
described above and no other stockholder's securities are included.
1.4 FORM S-3 REGISTRATION. If the Company shall receive at any time
not less than 180 days after the effective date of the Initial Offering, a
written request from the Holders of thirty percent (30%) or more of the
Registrable Securities then outstanding a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company shall:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) use all reasonable efforts to effect, as soon as
practicable, such registration and all such qualifications and compliances as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Holders' Registrable Securities as are specified
in such request, together with all or such portion of the Registrable Securities
of any other Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice from
the Company; PROVIDED, HOWEVER, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 1.4:
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(i) if Form S-3 is not available for such offering by
the Holders;
(ii) if the Holders propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$1,000,000;
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer or Chairman of the Board of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than one hundred twenty (120)
days after receipt of the request of the Holder or Holders under this
Section 1.4; PROVIDED, HOWEVER, that the Company shall not utilize this right
more than once in any twelve month period;
(iv) if the Company has, within the six-month period
preceding the date of such request, already effected one registration on
Form S-3 for the Holders pursuant to this Section 1.4; or
(v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as requests for registration effected pursuant
to Sections 1.2.
1.5 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed;
(b) prepare and file with the SEC such amendments and
supplements to such registration
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statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement;
(c) furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
(d) use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions;
(e) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act or the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(g) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and
(h) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
1.6 INFORMATION FROM HOLDER. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.7 EXPENSES OF REGISTRATION. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 1.2, 1.3 and 1.4, including (without
limitation) all registration, filing and qualification
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fees, printers' and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the selling
Holders shall be borne by the Company. Notwithstanding the foregoing, the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses pro rata based upon the number of Registrable
Securities that were to be requested in the withdrawn registration), unless, in
the case of a registration requested under Section 1.2, the Holders of a
majority of the Registrable Securities agree to forfeit their right to one
demand registration pursuant to Section 1.2; PROVIDED, HOWEVER, that if at the
time of such withdrawal, the Holders have learned of a material adverse change
in the condition, business, or prospects of the Company from that known to the
Holders at the time of their request and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 1.2.
1.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners or officers, directors and
stockholders of each Holder, legal counsel and accountants for each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages or liabilities (joint or several) to
which they may become subject under the Act, the 1934 Act or any state
securities laws, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities laws or any rule or regulation promulgated under the Act, the
1934 Act or any state securities laws; and the Company will reimburse each such
Holder, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section l.9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably
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withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person; provided
further, however, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Holder or
underwriter, or any person controlling such Holder or underwriter, from whom the
person asserting any such losses, claims, damages or liabilities purchased
shares in the offering, if a copy of the prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Holder or underwriter to
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the shares to such person, and if the
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability.
(b) To the extent permitted by law, each selling Holder will,
severally and not jointly, indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, legal
counsel and accountants for the Company, any underwriter, any other Holder
selling securities in such registration statement and any controlling person of
any such underwriter or other Holder, against any losses, claims, damages or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Act, the 1934 Act or any state securities laws, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
person intended to be indemnified pursuant to this Section l.9(b), for any legal
or other expenses reasonably incurred by such person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section l.9(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder (which consent shall not be unreasonably withheld), provided that in no
event shall any indemnity under this Section l.9(b) exceed the gross proceeds
from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
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with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 1.9, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after 90 days from the
effective date of the Initial Offering;
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(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.
1.11 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities that (i) is a subsidiary, parent, partner, limited
partner, retired partner or stockholder of a Holder, (ii) is a Holder's family
member or trust for the benefit of an individual Holder, or (iii) after such
assignment or transfer, holds (A) with respect to any Holder, at least 1,000,000
shares of Registrable Securities or (B) with respect to Synopsys, after such
assignment or transfer, holds at least 50% of the shares held by Synopsys on the
date hereof (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations), provided: (a) the Company
is, within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
Section 1.13 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act.
1.12 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of 66-2/3% of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company that would grant such holder or prospective holder
registration rights with respect to such securities unless under the terms of
such agreement, such rights are subordinate to those granted herein.
1.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it
will not, without the prior written consent of the managing underwriter, during
the period commencing on the date of the final prospectus relating to the
Company's initial public offering and ending on the date specified by the
Company and the managing underwriter (such period not to exceed one hundred
eighty (180) days) (i) lend, offer, pledge, sell, contract to sell, sell any
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option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (whether such shares or any
such securities are then owned by the Holder or are thereafter acquired), or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The underwriters in connection with the Company's initial public
offering are intended third party beneficiaries of this Section 1.13 and shall
have the right, power and authority to enforce the provisions hereof as though
they were a party hereto.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.14 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled
to exercise any right provided for in this Section 1 after three (3) years
following the consummation of the Initial Offering or, as to any Holder, such
earlier time at which all Registrable Securities held by such Holder (and any
affiliate of the Holder with whom such Holder must aggregate its sales under
Rule 144) can be sold in any three (3)-month period without registration in
compliance with Rule 144 of the Act.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
Synopsys or any Investor or transferee or assignee of Synopsys who acquires at
least 50% of the shares held by Synopsys on the date hereof or any Investor that
holds at least fifty percent (50%) of the shares held by such person or entity
on the date hereof (a "Major Stockholder"):
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited income statement, statement of cash flows for
such fiscal quarter and an unaudited balance sheet as of the end of such fiscal
quarter;
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(c) within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flows and balance sheet for and
as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event at least thirty
(30) days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including balance sheets,
income statements and statements of cash flows for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company certifying that such financials
were prepared in accordance with GAAP consistently applied with prior practice
for earlier periods (with the exception of footnotes that may be required by
GAAP) and fairly present the financial condition of the Company and its results
of operation for the period specified, subject to year-end audit adjustment; and
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as a Major Stockholder
may from time to time request, provided, however, that the Company shall not be
obligated under this subsection (f) or any other subsection of Section 2.1 to
provide information that it deems in good faith to be a trade secret or similar
confidential information.
2.2 INSPECTION. The Company shall permit each Major Stockholder, at
such Major Stockholder's expense, to visit and inspect the Company's properties,
to examine its books of account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable times
as may be requested by the Major Stockholder; provided, however, that the
Company shall not be obligated pursuant to this Section 2.2 to provide access to
any information that it reasonably considers to be a trade secret or similar
confidential information.
2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. The
covenants set forth in Sections 2.1 and 2.2 shall terminate as to Major
Stockholders and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated or when the Company first becomes subject to
the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.4, the Company hereby grants to each Major
Stockholder a right of first offer with respect to future sales by the Company
of its Shares (as hereinafter defined). For purposes of this Section 2.4, Major
Stockholder includes any general partners and affiliates of a Major
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Stockholder. A Major Stockholder shall be entitled to apportion the right of
first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exchangeable or exercisable for any shares of, any class of
its capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Major Stockholder in accordance with the following provisions.
(a) The Company shall deliver a notice in accordance with
Section 3.5 ("Notice") to the Major Stockholders stating (i) its bona fide
intention to offer such Shares, (ii) the number of such Shares to be offered,
and (iii) the price and terms upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within
twenty (20) calendar days after the Major Stockholder's receipt of the Notice,
the Major Stockholder may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares that equals the
proportion that the number of shares of Common Stock issued and held by such
Major Stockholder (assuming conversion into Common Stock of any Preferred Stock
and any convertible securities) bears to the total number of shares of Common
Stock of the Company then issued and outstanding and held by all the Major
Stockholders (assuming conversion into Common Stock of any Preferred Stock and
any convertible securities). The Company shall promptly, in writing, inform
each Major Stockholder that elects to purchase all the shares available to it (a
"Fully-Exercising Investor") of any other Major Stockholder's failure to do
likewise. During the ten (10) day period commencing after such information is
given, each Fully-Exercising Investor may elect to purchase that portion of the
Shares for which Major Stockholders were entitled to subscribe but were not so
subscribed equal to the proportion that (i) the number of shares of Common Stock
issued and held by such Fully-Exercising Investor (assuming conversion into
Common Stock of any Preferred Stock and any convertible securities) bears to
(ii) the total number of shares of Common Stock issued and outstanding and then
held, by all Fully-Exercising Investors who wish to purchase some of the
unsubscribed shares (assuming conversion into Common Stock of any Preferred
Stock and any convertible securities).
(c) If all Shares that the Major Stockholders are entitled to
obtain pursuant to Section 2.4(b) are not elected to be obtained as provided in
Section 2.4(b) hereof, the Company may, during the ninety (90) day period
following the expiration of the period provided in Section 2.4(b) hereof, offer
the remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not complete the sale of the
Shares within such period, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first reoffered to the Major
Stockholders in accordance herewith.
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(d) The right of first offer in this Section 2.4 shall not be
applicable to (i) the issuance or sale of shares of Common Stock (or options
therefor) under employee benefit plans as in existence on the date hereof to
employees, directors and consultants for the primary purpose of soliciting or
retaining their services; (ii) the issuance of securities pursuant to a bona
fide, firmly underwritten public offering of shares of Common Stock, registered
under the Act, at an offering price of at least $5.00 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
and resulting in proceeds to the Company of at least $20 million in the
aggregate; (iii) the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities; or (iv) the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise.
2.5 KEY-MAN INSURANCE. The Company shall obtain and maintain in full
force and effect for a period of five (5) years from the date of Closing term
life insurance in the amounts of $5,000,000 and $2,000,000 on the lives of
William J. Herman and Richard G. Lucier, respectively, with proceeds payable to
the Company until such time as the Board of Directors determines that such
insurance should be discontinued.
2.6 TERMINATION OF CERTAIN COVENANTS. The covenants set forth in
Sections 2.4, 2.5 and 2.6 shall terminate and be of no further force or effect
upon the consummation of the sale of securities pursuant to a bona fide, firmly
underwritten public offering of shares of common stock, registered under the
Act, at an offering price of at least $5.00 per share (appropriately adjusted
for any stock split, dividend, combination or other recapitalization) and
resulting in proceeds to the Company of at least $20 million.
3. NONCOMPETITION.
3.1 AGREEMENT OF COMPANY. The Company agrees, for itself and its
successors, assigns, and any entity which it controls, that, in consideration of
Synopsys' approval, as the sole stockholder of Company, of the investments being
made by the Investors and the other transactions contemplated in connection
therewith, the Company will be bound to the restrictions described in this
Section 3.1.
(a) During the Restriction Period (as defined in Section 3.5
hereof), the Company will not, anywhere in the world in any capacity (whether as
an agent, consultant, advisor, independent contractor, partner or otherwise) (i)
develop, sell, license, market, distribute or support any EDA product or
service, (ii) provide training or consulting services involving EDA, or (iii)
run, own, manage, operate, control or invest in any company or other entity that
engages in any activity involving EDA; provided, however, that (x) in the event
the Company is acquired in a transaction permitted by Section 3.3 hereof, this
prohibition shall not apply to (I) the EDA activities of the acquiror as they
existed on the date of such acquisition or (II) additional EDA activities
commenced by the acquiror after the date of such acquisition if such activities
are conducted entirely by persons who were not employees or officers of the
Company on or before the date of such acquisition and without any use of any
patent, trademark, copyright or other intellectual property or other asset owned
by the Company on or before
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the date of such acquisition, (y) this section shall not prohibit the Company
from owning less than a 20% equity interest in a company that derives less than
20% of its revenues from EDA activities, and (z) anything to the contrary in
this Section 3.1 notwithstanding, the Company may acquire a company which
derives more than 20% of its revenues from EDA activities, provided that (a)
Synopsys consents to the acquisition, which consent shall not be unreasonably
withheld or delayed, and (b) the Company, with reasonable promptness, terminates
such EDA activities through commercially reasonable means including, but not
limited to, asset sales. Synopsys acknowledges that the Company is not in
violation of this Section 3.1 on the date hereof.
(b) (i)"EDA" shall mean electronic design automation products
and services (including, without limitation, logic synthesis, test and timing
analysis, verification, emulation, simulation, modeling, design reuse, physical
design and hardware-software co-verification) for integrated circuits (including
systems-on-a-chip) or circuit sub-elements contained therein; provided, however,
that EDA does not include Systems Level products, services or other activities
or FPGA Analysis products, services or other activities.
(ii) "Systems Level" means the design, test and timing analysis, verification,
simulation, and emulation of systems comprising multiple discrete integrated
circuit components and associated electrical interconnections; provided,
however, that the term "Systems Level" excludes the design, test and timing
analysis, verification, simulation, and emulation of individual application
specific integrated circuits, as that term is understood in the industry on the
date hereof ("ASICs") or circuit sub-elements contained therein.
Notwithstanding the foregoing, nominal or incidental capabilities or
applicability of software to EDA shall not be deemed to render otherwise Systems
Level products, services or other activities within the definition of EDA.
(iii) "FPGA Analysis" means designing, evaluating,
configuring, programming, verifying, simulating and analyzing one or more field
programmable gate arrays, as that term is understood in the industry on the date
hereof ("FPGAs"), that are components of a system comprising multiple discrete
integrated circuit components and associated electrical interconnections.
(c) (1) Anything to the contrary in this Section 3.1
notwithstanding, until the earlier of (i) the end of the initial term of the VCS
OEM Agreement and (ii) the termination of the VCS OEM Agreement by Synopsys for
a reason other than a breach of such Agreement by the Company, the Company will
not (directly or indirectly and whether as an agent, consultant, advisor,
independent contractor, partner or otherwise) develop, sell, license, market,
distribute or support a Verilog simulator with functionality overlapping the
functionality of VCS, unless Synopsys is in material breach of the VCS OEM
Agreement and the Company has given notice of termination.
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(2) The restrictions contained in this subsection will not
apply to the distribution by the Company of a third party Verilog simulation
product with functionality overlapping that of VCS (a "Replacement Simulator")
if (I) there is a price increase for the product made available under the VCS
OEM Agreement that renders such product non-competitive given the functionality
of such product; (II) there is a reduction in the functionality of the product
made available under the VCS OEM Agreement, and the resulting product is not
competitive at the price Synopsys proposes to charge the Company; (III) there is
significant enhancement in the functionality of Verilog simulators available for
distribution by the Company compared to the functionality of the product offered
under the VCS OEM Agreement, with the result that the product offered under the
VCS OEM Agreement is not competitive or (IV) Synopsys ceases to support the
version of VCS made available to the Company's customers under the VCS OEM
Agreement. Prior to entering into any agreement to distribute a Replacement
Simulator (w) the Company must provide written notice to Synopsys that it
believes one of the foregoing events has occurred, (x) Synopsys is given 30 days
to review such notice; (y) the parties meet and discuss in good faith potential
remedies for the situation and (z) if such discussions fail Synopsys has the
opportunity to take the matter before a mutually acceptable impartial third
party, and if Synopsys elects to do so such third party determines that the
Company is justified in invoking the preceding sentence. The Company agrees
that as of the date of this Agreement the functionality and price of the product
made available under the VCS OEM Agreement are competitive.
(d) (1) Anything to the contrary in this Section 3.1
notwithstanding, until the earlier of (i) date of end of initial term of the
FPGA Express Agreement and (ii) the termination of the FPGA Express OEM
Agreement by Synopsys for a reason other than a breach of such Agreement by the
Company, the Company will not anywhere in the world (directly or indirectly and
whether as an agent, consultant, advisor, independent contractor, partner or
otherwise) (i) develop a logic synthesis tool for ASICs or (ii) develop, sell,
license, market, distribute or support any product or service having the logic
synthesis or logic analysis functionality implemented in FPGA Express, unless
Synopsys is in material breach of the FPGA Express OEM Agreement.
(2) The restrictions contained in this subsection will not
apply to the distribution by the Company of a third party product having the
logic synthesis or logic analysis functionality implemented in FPGA Express (a
"Replacement Synthesis Product") if (I) there is price increase for the product
made available under the FPGA Express OEM Agreement that renders such product
non-competitive given the functionality of such product; (II) there is a
reduction in the functionality of the product made available under the FPGA
Express OEM Agreement, and the resulting product is not competitive at the price
Synopsys proposes to charge the Company; (III) there is significant enhancement
in the functionality of FPGA synthesis products available for distribution by
the Company compared to the functionality of the product offered under the FPGA
Express OEM Agreement, with the result that the product offered under the FPGA
Express OEM Agareement is not competitive or (IV) Synopsys ceases to support the
version of FPGA Express made available to the Company's customers under the FPGA
Express
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<PAGE>
OEM Agreement. Prior to entering into any agreement to distribute a Replacement
Syntheses Product (w) the Company must provide written notice to Synopsys that
it believes one of the foregoing events has occurred, (x) Synopsys is given 30
days to review such notice; (y) the parties meet and discuss in good faith
potential remedies for the situation and (z) if such discussions fail Synopsys
has the opportunity to take the matter before a mutually acceptable impartial
third party, and if Synopsys elects to do so such third party determines that
the Company is justified in invoking the preceding sentence. The Company agrees
that as of the date of this Agreement the functionality and price of FPGA
Express are competitive.
(e) During the Restricted Period, the Company will not anywhere
in the world (directly or indirectly and whether as an agent, consultant,
advisor, independent contractor, partner or otherwise) develop, sell, license,
market, distribute or support any product or service that performs FPGA
Analysis, and that is not being offered by the Company on the date of execution
of this Agreement, unless the Company shall have first offered to Synopsys the
opportunity to provide the Company with such product or service and Synopsys
shall have declined to provide such a product or service to the Company or to
develop such a product for the Company on commercially reasonable terms. The
Company agrees that if Synopsys proposes to replace any of the Company's FPGA
Analysis products or capabilities with products or capabilities developed by
Synopsys (e.g., timing analysis functionality currently offered by Blast), the
Company will evaluate such replacement proposal in good faith and, upon the
negotiation of commercially reasonable terms, will replace or substitute such
products or capabilities with the products or capabilities offered by Synopsys;
provided, however, that nothing set forth in this Section 3.1(d) shall require
the Company to replace or substitute any products, capabilities or technologies
existing on the date that Synopsys makes commercially available such product,
capability, or technology, or to replace or postpone future upgrades to existing
products, capabilities or technologies.
3.2 NONSOLICITATION. The Company further agrees that it will not
during the Restriction Period:
(a) personally or through others, encourage, induce, attempt to
induce, solicit or attempt to solicit (on their own behalf or on behalf of any
other person or entity) any employee of Synopsys or any of Synopsys'
subsidiaries to leave his or her employment with Synopsys or any of Synopsys'
subsidiaries;
(b) personally or through others, interfere or attempt to
interfere with the relationship or prospective relationship of Synopsys or any
of Synopsys' subsidiaries with any person or entity that is, was or is expected
to become a customer or client of Synopsys or any of Synopsys subsidiaries.
3.3 PROHIBITIONS ON SALE. During the Restricted Period with respect
to Cadence (as defined herein) and for a period of six months from the date
hereof with respect to any other person or entity, the Company will not, and
will instruct its respective directors,
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officers, employees, representatives, investment bankers, agent, and affiliates
not to, directly or indirectly (i) solicit or encourage submission of any
Acquisition Proposal (as defined herein) by Cadence Design Systems, Inc., its
subsidiaries, or affiliates (collectively, "Cadence") or any other person or
entity or (ii) participate in any discussion or negotiations with, or disclose
any non-public information concerning the Company to, or afford access to the
properties, books, or records of the Company to, or otherwise assist or
facilitate to, or afford access to the properties, books, or records of the
Company to, or otherwise assist or facilitate, or enter into any agreement or
understanding with Cadence or any other person or entity in connection with any
Acquisition Proposal. For purposes of this Agreement, an "Acquisition Proposal"
means any proposal or offer relating to (i) any merger, consolidation, sale or
license of substantial assets or similar transactions involving the Company or
any affiliate of the Company and Cadence or any other person or entity or (ii)
sales by the Company or any affiliate of the Company of any shares of its
capital stock or other ownership interests to Cadence or any other person or
entity. The Company will (i) promptly notify Synopsys if it receives any
proposal or written inquiry or written request for information in connection
with an Acquisition Proposal or potential Acquisition Proposal involving Cadence
or any other person or entity and (ii) notify Synopsys of all terms and
conditions of such Acquisition Proposal. In addition, during the Restricted
Period or the period ending six months from date hereof, as applicable, the
Company will not, and will instruct its directors, officers, employees,
representatives, investment bankers, agents, and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation, or
solicitation of any Acquisition Proposal made by Cadence or any other person or
entity.
3.4 OPTION PLAN. During the Restricted Period, the Company will not
approve any increase in the number of shares reserved for issuance under its
1998 Stock Incentive Plan.
3.5 RESTRICTION PERIOD. For purposes of this Agreement, the
"Restriction Period" shall mean the period beginning on date of this Agreement
and ending on the earlier to occur of (i) two years from the date hereof and
(ii) the closing of the Initial Offering.
3.6 AGREEMENT OF INVESTORS. Each Investor agrees, for itself and its
successors, assigns, and any entity which it controls that, in consideration of
Synopsys' approval of the investments being made by the Investors, it will use
its reasonable best efforts consistent with its status as a stockholder of the
Company (or to the extent such Investor is entitled to appoint or elect a member
of the Company's Board of Directors, shall cause such director) to cause the
Company to comply with the provisions of this Section 3. Without limiting the
foregoing, each Investor further agrees that at any meeting of stockholder or
pursuant to the solicitation of any written consent (i) relating to an
Acquisition Proposal involving the Company and Cadence (if such vote is
solicited prior to the end of the Restricted Period) or involving the Company
and any other person or entity (if such vote is solicited prior to the end of
six months from the date of this Agreement), it will vote all shares of the
Company's voting securities held by such Investor against such Acquisition
Proposal and (ii) relating to any increase in the number of shares reserved for
issuance under the Company's 1998 Stock Incentive Plan that would result in a
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<PAGE>
violation of Section 3.4 above, it will vote all shares of the Company's voting
securities held by such Investor against approval of any such increase.
3.7 PERMITTED INVESTMENTS. Nothing in this Section 3 shall prevent
any Investor from investing in, becoming a security holder of, or otherwise
taking an active management or investment interest in any entity (other than the
Company) that competes with Synopsys (other than any investment interest in
Cadence that would result from approval of any Acquisition Proposal involving
the Company and Cadence).
4. MISCELLANEOUS.
4.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
4.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission, nationally recognized overnight
courier service, or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
4.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
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<PAGE>
4.7 ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof. Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and a majority-in-interest of the Investors provided,
however, that in the event that such amendment or waiver adversely affects the
obligations and/or rights of Synopsys in a different manner than the other
Holders, such amendment or waiver shall also require the written consent of
Synopsys. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Registrable Securities each future
holder of all such Registrable Securities, and the Company.
4.8 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
4.9 AGGREGATION OF STOCK. All Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS IMMEDIATELY]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
VIEWLOGIC SYSTEMS, INC.
By:
----------------------------------
Title:
SYNOPSYS, INC.
By:
----------------------------------
Title:
INVESTORS:
DLJ Capital Corp.
By:
----------------------------------
Keith B. Geeslin, Attorney-in-Fact
Address:
30000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
[SIGNATURE PAGE TO INVESTOR'S RIGHTS AGREEMENT DATED OCTOBER ___, 1998]
<PAGE>
INVESTORS:
DLJ ESC II, L.P.
By: DLJ LBO Plans
Management Corporation
Its: Manager
By:
----------------------------------
Keith B. Geeslin, Attorney-in-Fact
Address:
30000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Sprout Capital VIII, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By:
----------------------------------
Keith B. Geeslin, Attorney-in-Fact
Address:
30000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Sprout Venture Capital, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By:
----------------------------------
Keith B. Geeslin, Attorney-in-Fact
Address:
30000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
[SIGNATURE PAGE TO INVESTOR'S RIGHTS AGREEMENT DATED OCTOBER ___, 1998]
<PAGE>
INVESTORS:
Sprout Growth II, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By:
----------------------------------
Keith B. Geeslin, Attorney-in-Fact
Address:
30000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
The Sprout CEO Fund, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By:
----------------------------------
Keith B. Geeslin, Attorney-in-Fact
Address:
3000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Needham Capital Partners II, L.P.
By:
----------------------------------
John C. Michaelson
Its: General Partner
Address:
445 Park Avenue
New York, NY 10022
[SIGNATURE PAGE TO INVESTOR'S RIGHTS AGREEMENT DATED OCTOBER ___, 1998]
<PAGE>
Needham Capital Partners II (Bermuda), L.P.
By:
----------------------------------
John C. Michaelson
Its: General Partner
Address:
445 Park Avenue
New York, NY 10022
Marquette Venture Partners III, L.P.
By: Marquette III, L.L.C.
Its: General Partner
By:
----------------------------------
James E. Daverman or Lloyd D. Ruth
Its: Authorized Signatory
Address:
520 Lake Cook Road
Deerfield, IL 60015
--------------------------------------
Niel R. Hammer
Address:
441 Shamrock Boulevard
Venice, FL 34293-1723
--------------------------------------
John Barr
Address:
380 Shelborne Terrace
Ridgewood, NJ 07540
[SIGNATURE PAGE TO INVESTOR'S RIGHTS AGREEMENT DATED OCTOBER ___, 1998]
<PAGE>
EXHIBIT 10.41
OEM AGREEMENT
BETWEEN
SYNOPSYS, INC.
AND
VIEWLOGIC SYSTEMS, INC.
(VCS)
This OEM Agreement ("Agreement") is entered into and effective this 2nd day of
October, 1998 ("Effective Date"), by and between Synopsys, Inc., a Delaware
corporation with principal offices at 700 E. Middlefield Road, Mountain View,
California 94043-4033 ("Synopsys"), and Viewlogic Systems, Inc., a Delaware
corporation, with principal offices at 293 Boston Post Road, Marlboro MA,
01752-4615 (OEM Partner).
RECITALS
Synopsys is a leader in the design, development and marketing of electronic
design automation software. Synopsys desires to enter into an OEM relationship
with OEM Partner whereby OEM Partner shall be authorized to sell an OEM version
of Synopsys' VCS, VCSi, and VCS Express products integrated with the Fusion
product line. OEM Partner wishes to enter into such a relationship.
In consideration of the mutual promises contained herein, the parties agree as
follows:
AGREEMENT
1. DEFINITIONS
1.1 "BUG FIX" means an embodiment of the Licensed Software that corrects
Errors.
1.2 "CONFIDENTIAL INFORMATION" means any information disclosed by one party
to the other pursuant to this Agreement, which is in written, graphic,
machine-readable or other tangible form and is marked "Confidential,"
"Proprietary" or in some other manner to indicate its confidential
nature. Confidential Information may also include oral information
disclosed by one party to the other pursuant to this Agreement,
provided that such information is designated as confidential at the
time of disclosure and reduced to a written summary by the disclosing
party, within thirty (30) days after its oral disclosure, which is
marked in a manner to indicate its confidential nature and delivered to
the receiving party. Notwithstanding any failure to so identify it,
however, all source code will be deemed "Confidential Information" of
Synopsys, and all information contained in the reports and documents
furnished by OEM Partner to Synopsys hereunder shall be deemed
"Confidential Information" of OEM Partner hereunder. Notwithstanding
the above, Confidential Information shall not include
CONFIDENTIAL
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information which: (i) was generally known and available at the time it
was disclosed or becomes generally known and available through no fault
of the receiver; (ii) was known to the receiver, without restriction,
at the time of disclosure as shown by the files of the receiver in
existence at the time of disclosure; (iii) is disclosed with the prior
written approval of the discloser; (iv) was independently developed by
the receiver without any use of the Confidential Information and by
employees or other agents of the receiver who have not been exposed to
the Confidential Information, provided that the receiver can
demonstrate such independent development by documented evidence
prepared contemporaneously with such independent development; (v)
becomes known to the receiver, without restriction, from a source other
than the disclosed without breach of this Agreement by the receiver and
otherwise not in violation of the discloser's rights; or (vi) is
disclosed pursuant to the order or requirement of a court,
administrative agency, or other governmental body, provided, that the
receiver shall provide prompt, advance notice thereof to enable the
discloser to seek a protective order or otherwise prevent such
disclosure.
1.3 "DOCUMENTATION" means any user manuals, reference manuals, release,
application and methodology notes, written utility programs and other
materials in any form provided for use with the Licensed Software.
1.4 "END USER" means the person authorized to use the Licensed Software
without the right to further distribute as an OEM or reseller.
1.5 "ERROR" means a defect which causes the Licensed Software not to
perform substantially in accordance with the specification set forth in
Synopsys' Documentation, or otherwise to produce materially erroneous
results.
1.6 "INTELLECTUAL PROPERTY RIGHTS" means all patents, patent rights,
copyrights, trade secrets, service marks, maskworks and trademarks, and
any applications for any of the foregoing, in all countries in the
world.
1.7 "LICENSED SOFTWARE" means OEM versions of Synopsys' VCS, VCSi, and VCS
Express products which are integrated with the Fusion product line as
more fully described in Exhibit A (as may be amended from time to time)
together with all Bug Fixes and Updates and any Upgrades made available
by Synopsys hereunder. The term "Licensed Product" shall be deemed to
be synonymous with the term Licensed Software.
1.8 "OEM Version" means a version of the Licensed Software which includes
all of the features and functionality of the Synopsys version of the
VCS, VCSi and VCS Express products as of the Effective Date, plus
updates and enhancements which may be made thereto, but excluding: (i)
features specific to other Synopsys OEM partners; (ii) interfaces or
features specific to integration with other Synopsys products; (iii)
features
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specific to integration with circuit design; (iv) the IPX
module; (v) the Synopsys graphical user interface; and/or (vi) any
other features which, in Synopsys reasonable determination, deems not
applicable to the systems design market. During the term of this
Agreement, OEM Partner may request the addition to the OEM Version of
any excluded features and Synopsys agrees to discuss the same in good
faith.
1.9 "RESELLER" means a distributor, original equipment manufacturer,
systems integrator or reseller who is authorized to resell or
distribute software.
1.10 "UPDATES" means an embodiment of the Licensed Software that delivers
minor improvement, incremental features or enhancements of existing
features, and/or functionality to the Licensed Software.
1.11 "UPGRADE" means an embodiment of the Licensed Software that delivers
substantial performance improvements, architectural changes or new
features and/or functionality to the Licensed Software for which
Synopsys may charge a separate license fee.
2. OEM PARTNER'S RIGHTS TO THE LICENSED SOFTWARE
2.1 APPOINTMENT. Subject to the terms and conditions set forth in this
Agreement, Synopsys grants OEM Partner the nonexclusive,
nontransferable (except as specifically set forth herein), worldwide
right to reproduce, market, promote, sublicense, demonstrate, bundle,
and distribute the Licensed Software in object code form, and the
Documentation, in accordance with the restrictions set forth herein
directly, and except for the Fusion VCS Licensed Product which may only
be distributed by OEM Partner, or indirectly through any and all OEM
Partner normal distribution channels. Except for the Licensed Product
Fusion VCS, OEM Partner may distribute the Licensed Software to or
through any other OEM Partner Reseller, or any other entity that might
integrate or incorporate the Licensed Software with other systems,
software, hardware, or other components. OEM Partner agrees to enter
into written agreements with OEM Partner Resellers binding them to all
relevant restrictions contained herein. The parties intend that
Synopsys shall be a third party beneficiary of such agreements.
2.2 SOFTWARE LICENSE AND OTHER RESTRICTION.
(a) The Licensed Software is subject to license and not sale. Each
reference in this Agreement to a "purchase" or "sale" of the Licensed
Software, or like terms, shall mean a "license" of the Licensed
Software. Synopsys shall retain full title to the Licensed Software
(including all Intellectual Property Rights embodied therein) and all
copies thereof.
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(b) End Users may use the Licensed Software only in accordance with
provisions of a license agreement substantially in the form of that
attached hereto as Exhibit C.
(c) OEM Partner will not remove or alter any proprietary notices on or in
the Licensed Software. OEM Partner agrees to abide by the restrictions
set forth in Exhibits A and B in connection with each item of Licensed
Software.
2.3 DEMONSTRATION AND EVALUATION. OEM Partner will be entitled to
distribute, itself or through OEM Partner Resellers (except for the
Fusion VCS Licensed Product which may only be distributed by OEM
Partner), a time-limited version of the Licensed Software for
demonstration and evaluation purposes at no charge. This demonstration
and evaluation version will have all of the features and functionality
of the Licensed Software, except that the use of such version will be
limited to evaluation and demonstration use and will be limited to such
use for a period of not more than seventy-five (75) days.
2.4 NO IMPLIED LICENSES. No rights or licenses are granted to OEM Partner
by implication, estoppel, or otherwise, other than the rights and
licenses expressly granted herein.
3. PAYMENTS
3.1 TERMS AND CONDITIONS. All purchases of Licensed Software by OEM Partner
from Synopsys during the term of this Agreement shall be subject to the
terms and conditions of this Agreement.
3.2 FEES. The license fees for the Licensed Software and maintenance
("Fees") shall be as set forth in Exhibit B hereto. Synopsys has the
right at any time to revise the Suggested List Prices in Exhibit B with
ninety (90) days' advance written notice to OEM Partner. Such revisions
shall apply to all orders received by OEM Partner after the effective
date of revision. Fee increases shall not affect unfulfilled purchase
orders accepted by OEM Partner prior to the effective date of the price
increase. In the event of a price increase, OEM Partner may request
that Synopsys honor the previous pricing beyond the 90-day period, on a
case-by-case basis, and Synopsys shall not unreasonably withhold its
consent. To be valid, any such request and consent must be in writing.
Fee decreases shall apply to pending purchase orders accepted by OEM
Partner prior to the effective date of the decrease but not yet
shipped.
3.3 TAXES. Synopsys' Fees do not include any federal, state, local, or
foreign taxes that May be applicable to sales by OEM Partner of the
Licensed Software and related maintenance, and OEM Partner shall be
responsible for the same (excluding taxes based on Synopsys' net
income). When Synopsys has the legal obligation to collect such taxes,
the appropriate amount shall be added to OEM Partner's invoice and paid
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by Synopsys unless OEM Partner provides Synopsys with a valid tax
exemption certificate authorized by the appropriate taxing authority.
3.4 PAYMENT. Full payment of Synopsys' Fees for the Licensed Software and
maintenance (including any taxes or other applicable costs initially
paid by Synopsys but to be borne by OEM Partner) shall be made by OEM
Partner to Synopsys in U.S. dollars within thirty (30) days after the
date of the end of each calendar quarter, as further set forth in
Exhibit B. Any amount not paid when due shall be subject to a service
charge equal to the lesser of one and one-half percent (1.5%) per month
or the maximum amount permitted by law.
3.5 MANUFACTURING AND DISTRIBUTION. Manufacturing and distribution of the
Licensed Software and Documentation to OEM Partner's End Users shall be
the responsibility of OEM Partner. Synopsys shall provide master copies
of the Licensed Software and Documentation including available design
examples and application notes published for End Users. Unless
otherwise agreed to in writing by the parties, OEM Partner shall employ
a software license key system in connection with each copy of the
Licensed Software distributed by it. Documentation will be provided in
machine-readable form for adaptation by OEM Partner. Final OEM Partner
documentation adapted from Synopsys Documentation will acknowledge
Synopsys as the source. OEM Partner shall provide Synopsys; with copies
of all Documentation for review and approval prior to distribution. OEM
Partner will use reasonable commercial efforts to provide the review
copies of the Documentation in time to allow Synopsys thirty (30) days
to review and approve or provide feedback on said Documentation.
3.6 REPORTING REQUIREMENTS. OEM Partner shall deliver quarterly reports to
Synopsys within thirty (30) days following the end of each calendar
quarter during the Term of this Agreement. These reports shall include
the number and configuration of the Licensed Software and maintenance
or maintenance renewal sold during the period, and End User information
as described in Exhibit B. In addition, OEM Partner shall deliver a
quarterly statement to Synopsys together with the payment of the Fees
as described in Section 3.4 above.
3.7 AUDIT. No more than twice during any 12-month period, Synopsys may
cause an independent certified public accounting firm to audit OEM
Partner's relevant records to verify the accuracy of the Fees paid by
OEM Partner during the preceding 12-month period. OEM Partner will have
the right to review and contest the findings of the auditors. The costs
and expenses of such audit shall be borne by Synopsys, unless OEM
Partners has underpaid the relevant Fees by at least ten percent (10%),
in which case OEM Partner shall pay the costs and expenses of such
audit. Any such audit may be conducted upon reasonable notice during
regular business hours at OEM
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Partner's offices and in such manner as not to significantly interfere
with normal business activities at such locations.
3.8 END USER PRICING. OEM Partner shall be free hereunder to distribute the
Licensed Software and Documentation to End Users and Resellers at any
charge or no charge, and shall not be required to use or make reference
to Synopsys' list or suggested prices.
4. LIMITED WARRANTY
4.1 LIMITED WARRANTY. Synopsys warrants for a period of ninety (90) days
from delivery of the Licensed Software to OEM Partner that such
Licensed Software, as delivered, will be free from defects in the media
and will substantially conform to the specifications in the Licensed
Software Documentation. In the event of nonconformance of the Licensed
Software, OEM Partner shall promptly notify Synopsys; and provide
Synopsys with all available information in written or electronic form
so that Synopsys can reproduce the Error. Synopsys' sole obligation is
to undertake reasonable commercial efforts to correct the Errors
reported to Synopsys in writing or in electronic form during the
warranty period. SYNOPSYS' SOLE LIABILITY AND OEM PARTNER'S EXCLUSIVE
REMEDY WITH RESPECT TO BREACH OF THE FOREGOING LIMITED WARRANTY WILL BE
LIMITED TO ERROR CORRECTION OR PRODUCT REPLACEMENT, OR IF NEITHER IS IN
SYNOPSYS' REASONABLE DETERMINATION COMMERCIALLY FEASIBLE, REFUND OF THE
LICENSE FEE RECEIVED BY SYNOPSYS FROM OEM PARTNER.
4.2 HARMFUL CODE. Synopsys represents and warrants that, to its knowledge,
the Licensed Software available in production release is free from all
computer viruses, and other harmful or malicious code.
4.3 INTELLECTUAL PROPERTY. Synopsys represents and warrants that, to its
knowledge, neither the Licensed Software nor the Documentation infringe
upon the Intellectual Property Rights of any third party, and Licensor
has not misappropriated the Intellectual Property Rights of any third
party in developing the Licensed Software.
4.4 DISCLAIMER. EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, SYNOPSYS
AND ITS LICENSORS MAKE NO OTHER WARRANTIES EXPRESS, IMPLIED, STATUTORY
OR OTHERWISE REGARDING THE LICENSED SOFTWARE OR DOCUMENTATION. SYNOPSYS
AND ITS LICENSORS SPECIFICALLY DISCLAIM ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM A
COURSE OF DEALING OR USAGE OF TRADE.
5. SYNOPSYS MAINTENANCE AND SUPPORT
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5.1 DEMONSTRATION, ENGINEERING AND SUPPORT COPIES. OEM Partner shall be
entitled to make a reasonable number of copies (to be mutually agreed)
of the Licensed Software and Documentation pursuant to all relevant
terms and conditions of Synopsys' End User License Agreement for
engineering and End User support purposes. These copies of the Licensed
Software may be used by OEM Partner and OEM Partner's Resellers for
such purposes at no charge.
5.2 TRAINING. Synopsys shall provide necessary training to OEM Partner
engineering and customer support personnel as reasonably required to
engineer, market, and support the Licensed Software for initial product
introduction and for each product Update.
5.3 UPDATES AND BUG FIXES. Maintenance Agreements are required for the
first year on all new Licensed Software sold. Subsequent maintenance
renewal is optional. OEM Partner shall pay Synopsys the maintenance
fees set forth in Exhibit B. Updates and Bug Fixes shall be provided to
OEM Partner in regular maintenance releases. Maintenance releases will
be provided every six (6) months or whenever Synopsys, using reasonable
commercial efforts, issues them. Only End Users who have entered into
maintenance agreements may receive maintenance releases. Upgrades are
not automatically included in maintenance releases. Critical bugs (to
be defined by the parties) reported by OEM Partner will be addressed by
Synopsys' engineering support team on a high priority basis. Bug Fixes
will be delivered to OEM Partner at the earliest possible date for OEM
Partner to provide to End Users; provided, however, that Synopsys will
provide such Bug Fixes to OEM Partner when it makes them generally
available to its other resellers and OEM partners.
OEM Partner will be entitled, directly or indirectly through OEM
Partner's Resellers, to distribute Bug Fixes and Updates to each End
User of OEM Partner or OEM Partner's Reseller who is a party to a
maintenance Agreement for the same, or Bug Fixes to each such end User
to whom a warranty obligation is owed.
5.4 EARLY NOTICE. Synopsys shall provide OEM Partner with early notice of
Licensed Product release schedules and product plans and will keep OEM
Partner apprised of its development and enhancement efforts with regard
to the Licensed Software. Synopsys will notify OEM Partner as early as
possible, but in no event later than such time as it makes such
information generally available to its other resellers and OEM
partners, of the development, testing and estimated release dates of
each Upgrade and Update. OEM Partner shall be entitled to receive
copies of all generally available beta and early release versions of
the Licensed Software.
6. OEM PARTNER SUPPORT RESPONSIBILITIES
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6.1 OEM PARTNER SOFTWARE INTEGRATION. OEM Partner shall be responsible for
all integration and testing of the Licensed Software with OEM Partner's
software and Synopsys shall have no obligations related thereto.
6.2 END USER SUPPORT. End User support, and training and technical support
to OEM Partner Resellers, shall be provided by OEM Partner. At no time
shall OEM Partner direct its End Users or Resellers to Synopsys'
support organization. Synopsys shall designate a corporate applications
engineer as an OEM Partner point of contact for backup technical
support and to assist with OEM Partner technical concerns regarding the
Licensed Software.
7. TERM AND TERMINATION
7.1 TERM. This Agreement shall commence as of the Effective Date for an
initial two (2) year term and shall automatically renew for successive
one (1) year renewal terms, unless terminated earlier as provided
herein, or unless either party shall have given the other party written
notice of non-renewal at least one hundred eighty (180) days prior to
the end of the then current term.
7.2 TERMINATION FOR CAUSE. Either party has the right to terminate this
Agreement immediately upon written notice at any time if the other
party materially breaches any obligation hereunder, which material
breach is incapable of cure or which, being capable of cure, has not
been cured with thirty (30) days after receipt of written notice from
the nondefaulting party or within such additional cure period as the
nondefaulting party may authorize; or
7.3 TERMINATION BY SYNOPSYS
(a) Synopsys has the right to terminate this Agreement upon thirty (30)
days written notice at any time if OEM Partner sells all or
substantially all of its assets to any direct competitor of Synopsys.
(b) In addition, Synopsys has the right to terminate this Agreement upon
ninety (90) days written notice at any time if OEM Partner sells all or
substantially all of its assets or implements or suffers any material
change in management or control (which such change is evidenced by a
substantial change in OEM Partner's board of directors); however, in
such event Synopsys agrees, in good faith, to meet with OEM Partner
and the third party buying all or substantially all of OEM Partner's
assets or assuming day-to-day management or control of OEM Partner to
discuss the possible continuation of this Agreement as between Synopsys
and such third party.
7.4 EFFECT OF TERMINATION. Upon termination of this Agreement in accordance
with Sections 7.2 or 7.3(a), OEM Partner shall immediately cease all
manufacturing and
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distribution of the Licensed Software and all outstanding monies due to
Synopsys for Licensed Software will be accelerated so they become due
and payable on the effective date of termination. If expiration or
termination occurs for reasons other than under Section 7.2 or 7.3(a),
there shall be a phase-out period of between six (6) months and one (1)
year, (the exact time period to be mutually agreed upon), after
expiration to allow for reasonable transition. During the phase-out
period OEM Partner may continue to sell the Licensed Software pursuant
to the terms and conditions of this Agreement, but will not receive
Updates, only Bug Fixes. Termination will not relieve either party from
any liability arising from any breach of this Agreement. Neither party
will be liable to the other for damages of any sort solely as a result
of terminating this Agreement in accordance with its terms. Termination
of this Agreement will be without prejudice to any other right or
remedy of either party. The provisions of Sections 3, 7, 8, 9, 11, and
12 shall survive the expiration or termination of this Agreement for
any reason. All End User sublicenses in effect prior to the date of
expiration or termination of this Agreement shall survive. All other
fights and obligations of the parties shall cease upon expiration or
termination of this Agreement.
8. LIMITATION OF LIABILITY
8.1 DIRECT DAMAGE. EACH PARTY'S LIABILITY ARISING OUT OF THIS AGREEMENT
AND/OR SALE OF THE LICENSED SOFTWARE SHALL BE LIMITED TO THE CUMULATIVE
AMOUNTS PAID BY OEM PARTNER FOR THE LICENSED SOFTWARE.
8.2 CONSEQUENTIAL DAMAGES. EXCEPT AS SET FORTH IN SECTION 11, UNDER NO
CIRCUMSTANCES, SHALL SYNOPSYS AND/OR ITS THIRD PARTY LICENSORS BE
LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING IN
ANY WAY OUT OF THIS AGREEMENT OR THE USE OF THE LICENSED SOFTWARE AND
DOCUMENTATION, HOWEVER CAUSED, (WHETHER ARISING UNDER A THEORY OF
CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE), INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOST PROFITS, LOSS OF DATA, OR COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES. THE LIMITATIONS ON
SYNOPSYS' AND ITS LICENSORS' LIABILITY SET FORTH IN THIS SECTION 8
SHALL APPLY NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY OF
THE LIMITED REMEDIES SET FORTH IN SECTION 4.1 ABOVE. EXCEPT FOR
BREACHES OF SECTIONS 2 OR 3.1, or 3.5 OF THIS AGREEMENT, UNDER NO
CIRCUMSTANCES SHALL OEM PARTNER BE LIABLE FOR ANY SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT
HOWEVER CAUSED, (WHETHER ARISING UNDER A THEORY OF CONTRACT, TORT
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(INCLUDING NEGLIGENCE) OR OTHERWISE), INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR LOST PROFITS, OR LOSS OF DATA.
9. CONFIDENTIALITY
9.1 CONFIDENTIALITY. Each party shall treat as confidential all
Confidential Information of the other party, shall not use such
Confidential Information except as expressly set forth herein or
otherwise authorized in writing, shall implement reasonable procedures
to prohibit the disclosure, unauthorized duplication, misuse or removal
of the other party's Confidential Information and shall not disclose
such Confidential Information to any third party without the prior
written consent of the disclosing party. Without limiting the
foregoing, each party shall use at least the same procedures and degree
of care that it uses to prevent the disclosure of its own Confidential
Information of like importance to prevent the disclosure of
Confidential Information disclosed to it by the other party under this
Agreement, but in no event less than reasonable care.
9.2 NO BENCHMARKS. OEM Partner agrees not to disclose or publish
performance benchmarking results involving the Licensed Software
without the express prior written consent of Synopsys.
10. MARKETING
10.1 TRADEMARK USE. During the term of this Agreement, OEM Partner is
authorized by Synopsys to use on a non-exclusive basis the trademarks
Synopsys uses for the standard Licensed Software only in connection
with OEM Partner's and OEM Partner's Resellers' advertisement,
promotion and distribution of the Licensed Software. Any use of such
trademarks will be in accordance with applicable law and Synopsys'
documented policies concerning trademark usage, which it shall have
provided to OEM Partner from time to time. Upon request by Synopsys,
OEM Partner shall promptly provide Synopsys with a reasonable number of
demonstration copies of Licensed Software products bearing such
trademarks and samples of each use of the applicable logo by OEM
Partner and/or its distributors and resellers to ensure compliance with
the quality and trademark obligations herein. If Synopsys reasonably
determines that: i) such use conflicts with applicable law or the
applicable documented Synopsys policy; or ii) the Licensed Products
distributed by OEM Partner are not of at least the same quality as the
corresponding products distributed by Synopsys under the applicable
marks and OEM Partner has not corrected the issues documented by
Synopsys within 30 days of receipt of Synopsys' notice, OEM Partner
shall employ commercially reasonable efforts to cease subsequent use of
the Synopsys trademarks and shall cease all such use within one hundred
twenty (120) days of such notice. The goodwill associated with the use
of any Synopsys trademarks by OEM Partner shall inure solely to the
benefit of Synopsys.
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10.2 PROMOTION. OEM Partner shall prominently display and promote the
Licensed Software. OEM Partner and Synopsys will cooperate in product
promotions, press releases, trade shows and the like. The parties agree
to jointly coordinate all press releases issued under this Agreement.
Each party must review and agree to the text of any public announcement
related to this Agreement prior to its release, which agreement will
not be unreasonably withheld.
10.3 PRINTED MATERIAL. OEM Partner may purchase at the price paid by
Synopsys reasonable quantities of printed marketing materials,
collateral, product data sheets and other materials relating to the
marketing of the Licensed Software that Synopsys provides to its other
Resellers ("Printed Materials"), or to provide OEM Partner with source
information for such Printed Materials if they are generated for
Synopsys, by a third party. Subject to availability, Synopsys will, at
OEM Partner's request, provide, at no charge, electronic versions of
the Printed Materials in a format suitable for reproduction by OEM
Partner. OEM Partner and its Resellers shall have the right to
distribute, reproduce, translate, modify and create derivative works of
the Printed Materials. OEM Partner shall display Synopsys' trademarks
and/or copyright notifications, as applicable, on copies of the Printed
Materials that are created or modified by OEM Partner which include any
Synopsys trademarks or copyrighted materials.
11. INFRINGEMENT INDEMNITY
11.1 INDEMNITY. Synopsys agrees, at its own expense, to defend or, at its
option, to settle, any claim or action brought against OEM Partner to
the extent it is based on a claim that the Licensed Software as
delivered to OEM Partner infringes or violates any United States,
European, or Japanese patent, or any copyright, trademark, trade secret
or other proprietary right of a third party which is claimed under the
laws of a Berne Convention member country, and Synopsys, will indemnify
and hold OEM Partner harmless from and against any damages, costs and
fees reasonably incurred (including reasonable attorneys' fees) that
are attributable to such claim or action and which are assessed against
Licensee in a final judgment or settlement. OEM Partner will provide
Synopsys with: (i) prompt written notification of the claim or action;
(ii) sole control and authority over the defense or settlement thereof;
and (iii) all available information, assistance and authority to settle
and/or defend any such claim or action.
11.2 LIMITED REMEDIES. If the Licensed Software becomes, or in the opinion
of Synopsys, is likely to become, the subject of an infringement claim
or action, Synopsys may at its sole option: (i) procure, at no cost to
OEM Partner, the right to continue using the Licensed Software; (ii)
replace or modify the Licensed Software to render it noninfringing
provided there is no material loss of functionality; or (iii) if, in
Synopsys' reasonable opinion, neither (i) nor (ii) above are
commercially feasible, terminate the license and refund the amounts OEM
Partner paid for such Licensed.
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11.3 EXCEPTIONS. Synopsys will have no liability under this Section 11 for
any claim or action to the extent that: (i) such claim or action would
have been avoided but for modifications of the Licensed Software, or
portions thereof, made by Synopsys or any party authorized by Synopsys
to make such modification on behalf of Synopsys after delivery to OEM
Partner; (ii) such claim or action would have been avoided but for the
combination or use of the Licensed Software, or portions thereof, with
other products, processes or materials not specified by Synopsys in the
Documentation; (iii) OEM Partner continues allegedly infringing
activity after being notified thereof or after being informed of
modifications offered by Synopsys, free of charge or under its support
program that would have avoided the alleged infringement; or (iv) OEM
Partner's use of the Licensed Software is not in accordance with the
material terms of this Agreement and such use is related to the
infringement or alleged infringement.
11.4 DISCLAIMER. THE FOREGOING PROVISIONS OF THIS SECTION 11 STATE THE
ENTIRE LIABILITY AND OBLIGATIONS OF SYNOPSYS AND ITS LICENSORS, AND THE
EXCLUSIVE REMEDY OF OEM PARTNER, WITH RESPECT TO ANY ACTUAL OR ALLEGED
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS BY THE LICENSED
SOFTWARE AND DOCUMENTATION.
12. GENERAL PROVISIONS
12.1 CHOICE OF LAW. The rights and obligations of the parties under this
Agreement shall not be governed by the 1980 U.N. Convention on
Contracts for the International Sale of Goods. This Agreement will in
all respects be interpreted and construed in accordance with, and
governed by, the laws of the Commonwealth of Massachusetts excepting
that body of Massachusetts law concerning conflicts of law provisions,
regardless of the place of execution or performance of this Agreement.
12.2 ASSIGNMENT. This Agreement may not be assigned by OEM Partner without
the prior written consent of Synopsys, which consent shall not be
unreasonably withheld. In the event OEM Partner sells all or
substantially all of its assets, or implements or suffers any material
change in management or control (which such change is evidenced by a
substantial change in OEM Partner's board of directors) and such sale
or change in management or control is not to a direct competitor of
Synopsys, Synopsys agrees, in good faith, to meet with OEM Partner and
the third party buying all or substantially all of OEM Partner's assets
or assuming day-to-day management or control of OEM Partner to discuss
the possible continuation of this Agreement as between Synopsys and
such third party. OEM Partner may not delegate its duties hereunder
without the prior written consent of Synopsys.
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12.3 NOTICES. Any notice, report, approval or consent required or permitted
hereunder shall be in writing and will be deemed to have been duly
given if delivered personally, by facsimile, or mailed by first-class,
registered or certified mail, postage prepaid to the respective
addresses of the parties as set forth in this Agreement. If to
Synopsys, Attention: General Counsel.
12.4 NO WAIVER. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or
any other provision.
12.5 INDEPENDENT CONTRACTORS. The relationship of Synopsys and OEM Partner
established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed (i) to give
either party the power to direct or control the day-to-day activities
of the other or (ii) to constitute the parties as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking.
12.6 SEVERABILITY. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to the
maximum extent permissible so as to effect the intent of the parties,
and the remainder of this Agreement will continue in full force and
effect.
12.7 ATTORNEYS' FEES. The prevailing party in any action to enforce the
Agreement shall be entitled to recover costs and expenses including,
without limitation, reasonable attorneys' fees.
12.8 INJUNCTIVE RELIEF. The parties agree that a material breach of this
Agreement adversely affecting either party's Intellectual Property
Rights would cause irreparable injury for which monetary damages would
not be an adequate remedy and the non-breaching party shall be entitled
to equitable relief in addition to any remedies it may have hereunder
or at law.
12.9 FORCE MAJEURE. Notwithstanding anything else in this Agreement, no
default, delay, or failure to perform on the part of either party shall
be considered a breach of this Agreement if such default, delay or
failure to perform is shown to be due to causes beyond the reasonable
control of the party charged with a default, including, but not limited
to, causes such as strikes, lockouts, or other labor disputes, riots,
civil disturbances, actions or inactions of governmental authorities or
suppliers, epidemics, war, embargoes, severe weather, fire,
earthquakes, acts of God, or the public enemy, nuclear disasters, or
default of a common carrier.
12.10 EXPORT CONTROLS. OEM Partner agrees and certifies that neither the
Licensed Software, nor any other technical data received from Synopsys
will be exported or re-exported
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outside the United States except as authorized and as permitted by the
laws and outside regulations of the United States.
12.11 ENTIRE AGREEMENT. This Agreement, including all Exhibits, constitutes
the entire agreement between the parties with respect to the subject
matter hereof, and supersedes all prior agreements or representations,
oral or written, regarding such subject matter. This Agreement may not
be modified or amended except in a writing signed by a duly authorized
representative of both parties.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives:
VIEWLOGIC SYSTEMS, INC. SYNOPSYS, INC.
By: /s/ William J. Herman By: /s/ Steven K. Shevick
--------------------------- -----------------------------
Name: William J. Herman Name: Steven K. Shevick
-------------------------- -----------------------------
Title: President Title: Vice President General Counsel
------------------------ -------------------------------
Date: 10-2-98 Date: 10-2-98
------- -------
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EXHIBIT A
LICENSED SOFTWARE DESCRIPTION AND SPECIFICATIONS
1. Licensed Software shall consist of the following components:
FUSION VCS (EXCLUDING THE IPX MODULE)
FUSION VCS EXPRESS
FUSION VCSI
2. WITH REGARD TO THE FUSION VCS LICENSED PRODUCT:
OEM Partner may sell a maximum of five (5) seats of Fusion VCS per
end-user purchase order and the total Fusion VCS list price must be
less than fifty percent (50%) of the total dollar value of such
purchase order.
On a quarterly basis, OEM Partner must provide Synopsys with end-user
names and installation addresses for each Fusion VCS license sold
during said quarter.
All Fusion VCS orders require Synopsys' approval prior to acceptance.
Fusion VCS licenses may only be sold directly by OEM Partner.
OEM Partner will provide the GUI for the Fusion VCS Licensed Product.
Node-Locked versions of Fusion VCS may only be sold for the PC
Platform.
3. WITH REGARD TO THE FUSION VCSi LICENSED PRODUCT:
Licenses of Fusion VCSi for the PC may be sold bundled or unbundled.
Fusion VCSi for the UNIX environment may only be sold bundled with
Workview Office, Intelliflow, ISIS, Powerview or Fusion (and OEM
Partner's successor products).
OEM Partner will provide the GUI for the Fusion VCSi Licensed Product.
Fusion VCSi licenses may be sold by OEM Partner's resellers or
distributors.
Node-Locked versions of Fusion VCSi may only he sold for the PC
Platform.
4. WITH REGARD TO THE FUSION VCS EXPRESS LICENSED PRODUCT:
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Licenses of Fusion VCS Express may be sold for the PC platform only and
may be sold unbundled.
Fusion VCS Express licenses may be sold by OEM Partner's resellers or
distributors.
OEM Partner will supply the GUI for this product.
Node-Locked versions of Fusion VCS Express may only be sold for the PC
Platform.
5. ADDITIONAL PRODUCTS. Additional products may be added to this Agreement
upon mutual agreement of the parties. In the event additional products
are added to this Agreement by mutual written agreement of the parties
hereto, they shall be included in the definition of Licensed Software.
CONFIDENTIAL
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<PAGE>
EXHIBIT B
LICENSED SOFTWARE AND MAINTENANCE FEES
1. OEM Partner agrees to pay to Synopsys the following royalties for all
sales of the Licensed Software and maintenance.
FOR THE FUSION VCS LICENSED SOFTWARE AND MAINTENANCE:
OEM Partner shall pay Synopsys a royalty of seventy percent (70%) of
the then current Synopsys Suggested List Price for the Licensed
Software and Maintenance.
FOR THE FUSION VCSi LICENSED SOFTWARE AND MAINTENANCE:
For the Fusion VCSi Licensed Software, OEM Partner shall pay Synopsys
the greater of (a) a royalty of forty percent (40%) of the amount
received by OEM Partner for the Licensed Software; or (b) thirty-two
percent of the Synopsys Suggested List Price set forth below. For
Maintenance for all new and renewal End Users, OEM Partner shall pay
Synopsys six percent (6%) of the Synopsys Suggested List Price for the
VCSi Licensed Software.
FOR THE FUSION VCS EXPRESS LICENSED SOFTWARE AND MAINTENANCE:
For the Fusion VCS Express Licensed Software, OEM Partner shall pay
Synopsys a royalty of the greater of: (i) forty percent (40%) of the
amount received by OEM Partner; or (ii) twenty-eight percent (28%) of
the Synopsys Suggested List Price set forth below. For Maintenance for
all new and renewal End Users, OEM Partner shall pay Synopsys, six
percent (6%) of the Synopsys Suggested List Price for the VCS Express
Licensed Software.
2. REPORTING. OEM Partner shall prepare a quarterly report detailing all
sales during each fiscal quarter of this Agreement and shall provide
such report to Synopsys and make quarterly payments to Synopsys, in
the amounts described in this Exhibit and the Agreement, for all sales
of the Licensed Software and Maintenance during the previous fiscal
quarter, within thirty (30) days of the end of each fiscal quarter,
identifying each Licensed Product sold or distributed, the purchase
order number, the date of the transaction, the OEM Partner catalog
number, the price paid for the transaction and the fee paid to
Synopsys for each such license, except that OEM Partner must
additionally provide Synopsys with end-user names and installation
addresses for each Fusion VCS license sold during said quarter. In
addition, OEM Partner must provide Synopsys with end- user names and
locations for confirmation purposes for any upgrades made by Synopsys
under Section 5 of this Exhibit.
CONFIDENTIAL
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3. UNIVERSITIES. At OEM partner's option, and for the Fusion VCS Express
product only, from the Effective Date until March 31, 1999, OEM Partner
will not owe Synopsys royalties for any Fusion VCS Express product
provided to universities who agree to use such Fusion VCS Express for
educational purposes only ("Educational Users").
Thereafter, OEM Partner will have the opportunity to provide an
unlimited number of copies of the Fusion VCS Express to Educational
Users during the Term of this Agreement for a fee of Ten Thousand
Dollars ($10,000) per calendar quarter, payable quarterly, in advance.
OEM Partner will provide Synopsys with quarterly reports identifying
the universities to which the Fusion VCS Express is provided. OEM
Partner will provide Synopsys with 90 days prior notice of its
intention not to renew this option.
There will be no discounts on the sale of the Fusion VCSi or Fusion VCS
products to universities.
4. UPGRADES. In the event that (a) an End User who licensed a copy of
Fusion VCSi from OEM Partner or one of its Resellers licenses an
upgrade to VCS from Synopsys, or (b) an End User who licensed a copy
of Fusion VCS Express from OEM Partner or one of its Resellers
licenses an upgrade to VCS or VCSi from Synopsys, or (c) an End User
who licensed the Node-Locked version of Licensed Software from OEM
Partner or one of its Resellers licenses an upgrade to the Floating
version of the Licensed Software from Synopsys, then Synopsys will
give such End User a credit on such purchase for the full amount paid
by OEM Partner or its Reseller for the lower version of such Licensed
Software.
In the event that the End User licenses the upgrade from OEM Partner or
its Reseller, then OEM Partner's royalty to Synopsys for the higher
version will be reduced by any amount already paid to Synopsys in
respect of the lower version.
5. LIST PRICES. As of the date of this Agreement, Synopsys' North America
Suggested List Prices for the Licensed Software are as follows:
<TABLE>
<CAPTION>
PRODUCT NODE-LOCKED FLOATING
<S> <C> <C>
Fusion VCS $30,000 $40,000
Fusion VCSi $15,000 $20,000
Fusion VCS Express $8,000 $12,000
</TABLE>
CONFIDENTIAL
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For sales made outside of North America, OEM Partner shall increase the
Synopsys North America Suggested List Prices proportionately in
accordance with the percentage of OEM Partner's international uplift.
CONFIDENTIAL
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<PAGE>
EXHIBIT C
VIEWLOGIC END USER LICENSE AGREEMENT
(SEE ATTACHED)
CONFIDENTIAL
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MASTER SOFTWARE LICENSE AGREEMENT
Licensee: _____________________________________________________________________
Address: _____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
By: _____________________________________________________________________
Name: _____________________________________________________________________
Title: _____________________________________________________________________
Date: _____________________________________________________________________
Viewlogic Systems, Inc.
By: ____________________________________________________________________
Name: ____________________________________________________________________
Title: ____________________________________________________________________
Date: ____________________________________________________________________
This Master Software License Agreement ("Agreement") with an effective date of
_______________ is made by and between Viewlogic Systems, Inc., a Delaware
corporation and an Equal Opportunity and Affirmative Action Employer and its
subsidiaries (collectively "Viewlogic") and Licensee. This Agreement shah govern
all licensing of Software, Peripherals and Documentation as those items are
defined in this Agreement.
A complete description of the Licensed Products is contained in the Product
Description Addendum described below and incorporated herein.
A complete description of the software support services provided under this
Agreement is contained in the Software Maintenance Agreement Addendum described
below and incorporated herein.
1. DEFINITIONS.
1.1 "Designated Equipment" means the equipment as set forth in the Product
Description Addendum, or any temporary substitute as specified at
Section 3.6 below. Any transfer of the Designated Equipment shall be
subject to the provisions of Sections 3.4 & 3.5.
1.2 "Designated Location" means the specific address of the Designated
Equipment as set forth in the Product Description Addendum. Any change
in the Designated Location shall be subject to the provisions of
Sections 3.4 & 3.5.
1.3 "Documentation" means the documentation for the Software.
1.4 "Licensed Products" means two products licensed under this
Agreement described in to Product Description Addendum attached hereto.
Generally, the term shall include the Documentation, Peripherals and
Software.
1.5 "Peripherals" means the mouse, software code block and cable furnished
to Licensee under this Agreement for use with the Software.
1.6 "Product Description Addendum" or Addenda is one or more documents
attached hereto, and my additions after the effective date of this
Agreement, that specifies the Licensed Products for use on the
Designated Equipment at the Designated Location. This Addendum may be
the Viewlogic quotation or any other suitable document accepted by
Viewlogic which contains the required information.
1.7 "Proprietary Information" means: (a) manufacturing processes, (b)
marketing, business or other strategies or plans; and (c) any other
trade secrets disclosed in writing and marked appropriately or
identified as proprietary or confidential. "Proprietary information"
includes the internal design and implementation techniques of the
Licensed Products, and the source code of the Software. Excluded is any
information that the receiving party can establish was: (d) in the
public domain; (e) already in its possession, or rightfully known prior
to receipt; (f) rightfully learned from a third party not in violation
of any others proprietary rights; or (g) developed independently.
1.8 "Software" means the computer program or programs in machine readable
form furnished to Licensee under this Agreement. Such software may
include software provided by Viewlogic's suppliers for sublicensing
hereunder, as well as software that Viewlogic owns. In accordance with
the Software Maintenance Agreement Addendum attached hereto, "Software"
shall also include any update or upgrade programs furnished thereunder.
1.9 "Software Maintenance Agreement" means that agreement for software
support services, if any, set forth in the Software Maintenance
Agreement Addendum attached hereto and
incorporated herein.
1.10 "Territory" means the country of the Designated Location.
1.11 "Updates" are now releases of a particular Software program.
1.12 "Upgrades" are programs with a higher Viewlogic series
number or greater capability than the program to be
upgraded.
1.13 "Use" includes copying all or any portion of the Software into a
computer or transmitting it to a computer for processing of its
instructions, and/or displaying any portion of the Software in
connection with the processing of such machine instructions.
2. PAYMENT, DELIVERY AND INSTALLATION.
2.1 Prices. Unless otherwise agreed in writing, prices will be as set forth
an Viewlogic's price list in effect for the Designated Equipment and
the Designated Location. Any subsequent change in the Designated
Equipment or Location may be subject to new pricing per Section 3.4.
2.2 Payment. Unless otherwise agreed in writing, Licensee shall pay
Viewlogic in full for all Licensed Products within thirty (30) days of
the invoice date.
2.3 Installments. Licensee shall pay for each installment delivery of
Licensed Products as a separate transaction.
2.4 Delivery. Viewlogic and/or its suppliers will deliver the Licensed
Products FOB origin under a mutually agreed delivery schedule at
Licensee's expense.
2.5 Installation. Licensee shall be solely responsible to install the
Licensed Products unless otherwise agreed upon in writing.
3. LICENSE GRANT.
3.1 Grant. Viewlogic hereby grants, and Licensee accepts, a
nontransferable, nonsublicensable, perpetual, nonexclusive, fully paid,
limited license to use the Licensed Products in machine readable form
on the Designated Equipment at the Designated Location for Licensee's
internal, normal business use only. The
1 DECEMBER 1995
22
<PAGE>
Licensed Products are not for use in a computer service business,
rental or commercial timesharing arrangement.
3.2 Intellectual Property Rights. All intellectual property rights in and
to the Licensed Products, other than those granted under this
Agreement, shall remain the sole and exclusive property of Viewlogic
and/or its supplies as appropriate.
3.3 Use on Designated Equipment. Use is restricted to the Designated
Equipment at the Designated Location, whether a single computer or a
network. Accessing the Licensed Products from any location other than
the Designated Location via wide area networking technology or any
other means is prohibited unless authorized by the Product Description
Addendum. The addition of any networked computer beyond that specified
in the Product Description Addendum or a change in the Designated
Location unless authorized in advance by Viewlogic as provided in
Section 3.4 shall breach this Agreement.
3.4 Transfers. Viewlogic may, at its sole option, grant Licensee's request
for a change in the Designated Equipment or Designated Location within
the Territory. Licensee must pay Viewlogic an administrative fee for
any change granted by Viewlogic.
3.5 Licensee to Certify Equipment and Location. Licensee shall, upon
request from Viewlogic certify to Viewlogic in writing the current
Designated Equipment and Designated Location.
3.6 Substitute Designated Equipment. In the event that the Designated
Equipment becomes inoperative due to malfunction, repair, servicing or
other like cause, and the terms of the Software Maintenance Agreement
remain in effect, Viewlogic shall use it commercially reasonable
efforts to assist Licensee upon Licensee's request in the transfer to
and use of the Licensed Products on a substitute system at the
Designated Location. The substitute system shall be deemed the
Designated Equipment during its use. If the Software Maintenance
Agreement or its equivalent is not then in effect, Licensee shall pay
Viewlogic's list price transfer fee.
3.7 Automatic License; Payment. Licensee acknowledges and agrees that any
use of the Licensed Products on other than the Designated Equipment at
the Designated Location will materially breach this Agreement. However,
Viewlogic may elect not to terminate, but to give notice to Licensee
that Licensee is deemed to order and accept a license for each
breaching use. Licensee shall then become liable to pay Viewlogic the
applicable list price license and support fees under the payment terms
of Section 2 effective as of the date of such breach.
4. PROTECTION OF PROPRIETARY INFORMATION.
4.1 Confidentiality. The Propriety Information of Viewlogic shall remain
confidential and proprietary to Viewlogic.
4.2 Source Code. Licensee agrees not to attempt to reverse engineer,
decompile, or disassemble the Software or any portion thereof, or
otherwise derive its source code.
4.3 Copies. Licensee may make backup and archival copies of the Software
and Documentation solely for its internal use, retaining on all copies
Viewlogic's and/or its suppliers' copyright, trademark, or other
proprietary notices.
4.4 Destruction of Copies. Licensee shall erase the Software from the
storage media of any Designated Equipment prior to disposing of or
refiring such equipment from active use or in the event of termination
of this Agreement. Licensee also must destroy all other copies upon
such termination.
4.5 Inclusion With Other Software. Licensee may use the Software within or
in conjunction with any other software, but must comply with Section
4.4 above upon any termination of this Agreement, or change of the
Designated Equipment or Location, and any use shall always remain
subject to this Agreement. Licensee shall display Viewlogic's or its
suppliers' copyright trademark or other proprietary notices an any
portion of the Software used.
4.6 Protect Confidentiality. Licensee agrees not to disclose, provide or
otherwise make available the Proprietary Information of Viewlogic to
any person other than authorized employees without Viewlogic's prior
written consent. Licensee agrees to protect the Proprietary Information
through instructions to its employees, access limitations and the like,
no less securely than if it were the Licensee's own intellectual
property. No media containing the Software, or any Documentation shall
be transferred, reproduced or used in any way other than as provided by
this Agreement.
4.7 Certify Protection. Viewlogic shall give Licensee written notice if
Viewlogic reasonably deems itself insecure with respect to Licensee's
compliance with the protections of Sections 3 and 4. Licensee shall
then, within ten (10) days of the notice, either certify in writing by
a duly authorized representative that it has complied with the terms of
those Sections or give Viewlogic access to its facilities in a manner
that is sufficient to enable Viewlogic to verify compliance.
5. SOFTWARE MAINTENANCE.
Viewlogic shall provide, and Licensee shall accept, software
maintenance services under the Software Maintenance Agreement Addendum
at Viewlogic's then current maintenance fee for an initial term of one
year after expiration of the Software warranty period, renewable year
to year until termination occurs under the said Software Maintenance
Agreement. Termination will end any support obligations of Viewlogic,
and Licensee shall incur reinstatement charges in the event of a lapse
and subsequent renewal.
6. WARRANTY.
6.1 Software. Viewlogic warrants that the Software will conform
substantially to its Documentation for thirty (30) days from delivery.
If Viewlogic confirms a defect reported by Licensee, in the unaltered
Software, Viewlogic shall use commercially reasonable efforts to remedy
to nonconformance. Viewlogic does not warrant that the operation of any
of the Licensed Products will be uninterrupted or error free, nor does
it guarantee that its remedial efforts will correct any nonconformance.
6.2 Media and Peripherals. Viewlogic warrants that the media containing the
Software and the Peripherals will be free of defects in materials and
workmanship under normal use and service for (30) days from delivery.
Viewlogic's entire liability and Licensee's sole remedy for defective
media or Peripherals shall be for Viewlogic to replace any returns
within the warranty period. Viewlogic will not replace failures that
are not returned or that we caused by accident, abuse, or
misapplication. Any replacements will be warranted for the remainder of
the original warranty period.
6.3 DISCLAIMER. VIEWLOGIC MAKES NO WARRANTY OF ANY KIND, WHETHER EXPRESSED
OR IMPLIED, WRITTEN OR ORAL, EXCEPT AS EXPRESSLY STATED IN THIS SECTION
6. SPECIFICALLY, VIEWLOGIC MAKES NO IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR FREEDOM FROM
INFRINGEMENT FOR THE LICENSED PRODUCTS.
7. INFRINGEMENT.
7.1 Viewlogic to Defend. Viewlogic will defend, at its own expense, any
action against Licensee based upon the claim that the
1 DECEMBER 1995
23
<PAGE>
Licensed Products infringe a United States patent or copyright or
involve misappropriation of a trade secret. Viewlogic will pay such
damages or costs as are finally awarded against Licensee for such
infringement or misappropriation provided that Licensee gives
Viewlogic: (a) prompt written notice of any such action and of an prior
related claims; (b) sole control of the defense and/or settlement of
such action; and (c) cooperates fully in any defense or settlement.
Viewlogic shall not be liable for any fees, costs or damages incurred
without such prior notice.
7.2 Obtain Permission or Modify. Should any Licensed Product become, or in
Viewlogic's opinion be likely to become, the subject of a claim of
infringement or trade secret misappropriation, Viewlogic shall, at its
option and expense: (a) obtain for Licensee the right to continue using
the Licensed Product; (b) replace or modify the Licensed Product so its
use becomes noninfringement or otherwise lawful; or (c) terminate the
licenses granted hereunder with respect to the infringing Licensed
Products and refund the amounts paid by Licensee for the infringing
Licensed Products, less a reasonable allowance for use.
7.3 Disclaimer. Notwithstanding the foregoing. Viewlogic shall have no
liability for any claim of patent or copyright infringement or trade
secret misappropriation based upon the operation or use of any Licensed
Products: (a) on a computer for which it was not designed; (b) with any
other software not supplied by Viewlogic; (c) in any manner or purpose
for which the Licensed Products were not designed or recommended by
Viewlogic; (d) if the infringement or misappropriation would have been
avoided by Licensee's use of the most current version of the Licensed
Product; or (e) which have been modified by anyone other than
Viewlogic.
8. LIMITATION OF REMEDIES.
8.1 No Other Liability. Except as otherwise stated in this Agreement,
Viewlogic's entire liability to Licensee and Licensee's sole remedy for
any cause whatsoever, regardless of the form of the action, whether in
contract tort or strict liability, shall be limited to the amounts paid
to Viewlogic by Licensee for the Licensed Products that: (a) caused the
damages; (b) are the subject matter of the action; or (c) we directly
related to the cause of action.
8.2 NO CONSEQUENTIAL, ETC. DAMAGES. IN NO EVENT SHALL VIEWLOGIC OR ANY OF
ITS SUPPLIERS BE LIABLE FOR DAMAGES RESULTING FROM LOSS OF DATA, LOSS
OF PROFITS IN CONNECTION WITH USE OF ANY LICENSED PRODUCTS OR OTHER
ITEMS PROVIDED UNDER THIS AGREEMENT, NOR FOR COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS, PROPERTY DAMAGE, PERSONAL INJURY, OR ANY OTHER
SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT WHETHER IN BREACH OF WARRANTY,
CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE EVEN IF VIEWLOGIC HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8.3 Limitations Period. Neither party may bring any action under this
Agreement for any cause whatsoever more than two (2) years after the
occurrence giving rise to such cause of action, provided however that
this Section 8.3 shall not apply to any action brought by Viewlogic for
violations of Section 3 or Section 4 of this Agreement and/or actions
brought by Viewlogic to protect its intellectual property rights.
9. DEFAULT AND TERMINATION.
9.1 Default. Viewlogic may, by written notice to Licensee, terminate this
Agreement including its license of the Licensed Products it any of the
following events occurs: (a) the failure or neglect of Licensee to pay
Viewlogic any sums or amounts due to Viewlogic if payment is not
rendered within thirty (30) days after written demand; (b) any breach
of the material terms and obligations of this Agreement are not
remedied within thirty (30) days after written demand; (c) any material
breach of Section 3 (License Grant) or Section 4 (Protection of
Proprietary Information) effective immediately upon notice from
Viewlogic; or (d) in the event of insolvency.
9.2 Termination. Licensee's right to use the Licensed Products shall cease
upon termination without further action of the parties. Within seven
(7) days of termination, Licensee shall return to Viewlogic the
Licensed Products, including the original and all copies of the
Documentation, Peripherals, and the Software and any Updates or
Upgrades thereto, together with a certification by a duly authorized
representative of Licensee that any copies of the Software not returned
have been destroyed.
9.3 No Waiver. Termination shall be in addition to, rather than a
waiver of, any remedy at law or equity under this Agreement.
<PAGE>
9.4 Survival. Notwithstanding the foregoing, the provisions of Sections 4
("Protection of Proprietary Information"), 6.3 ("[Warranty]
Disclaimer"), 7 ("Infringement"), & 8 ("Limitation of Remedies"), shall
survive termination.
10. GENERAL
10.1 Prior Agreements Superseded. This Agreement along with the Software
Maintenance Agreement Addendum supersedes all Prior agreements and
understandings between the parties related to the subject matter
herein, and is intended to be the complete and exclusive statement of
their agreement.
10.2 Headings. The headings in this Agreement are for convenience only, and
shall be disregarded when interpreting the terms hereof.
10.3 Export Controls. Licensee shall not attempt to export the Licensed
Products without the prior written consent of Viewlogic. Any attempt to
export the Licensed Products without Viewlogic's consent will be cause
for immediate termination of this Agreement.
10.4 No Assignment. Viewlogic may assign all or any part of its rights and
duties under this Agreement. This Agreement and the Licensee's rights
and duties under this Agreement may not be assigned by Licensee without
the prior written consent of Viewlogic. Licensee agrees that this
Agreement binds Licensee and each of its employees, agents, and persons
associated with it, including Licensee's affiliated and subsidiary
firms, corporations and other organizations.
10.5 Force Majeure. Viewlogic shall not be liable for any failure or delay
in performing services or any other obligation under this Agreement or
for any damages suffered by Licensee by reason of such failure or delay
which is, indirectly or directly, caused by strike, riot, natural
catastrophe or other act of God, or any cause beyond Viewlogic's
reasonable control.
10.6 No Waiver. If either party fails to perform any of its obligations
hereunder and the other party fails to enforce the provisions relating
thereto, such party's failure to enforce this Agreement shall not
prevent its later enforcement.
10.7 Severability. If any provision of this Agreement is held invalid,
illegal or unenforceable, that provision shall be construed so as to
most closely reflect the original intent of the parties, but still be
enforceable, and the remaining provisions shall continue tin full force
and effect.
1 DECEMBER 1995
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<PAGE>
10.8 Notices. Any notice or report shall be considered given if delivered
personally or if sent by first class mail, postage prepaid, addressed
to the address specified below and specifically addressed to the person
to whom notices are to be sent as follows:
If to Licensee: Attn: ______________________________________
If to Viewlogic: Attn: Contracts Administration
The parties may change such addresses by providing notice to the other.
10.9 Governing Law. This Agreement and all transactions hereunder
shall be governed by the laws of the Commonwealth of
Massachusetts.
10.10 Attorney Fees and Costs. If any legal action is brought in connection
with this Agreement, the prevailing party shall be entitled to receive
its reasonable attorney fees and court costs in addition to any other
relief it may receive.
10.11 Modifications. No modifications of this Agreement shall be binding upon
either party unless made in writing executed by an authorized
representative of Viewlogic and Licensee.
10.12 Government Use. If the Software is being supplied to the Department of
Defense (DOD), the Software is classified as "Commercial Computer
Software" and the Government is acquiring only "limited rights" to the
Software, and concerning the documentation the government is acquiring
only "limited rights" (as defined in DFARS Clause 252.227-7013). If the
Software is being supplied to an agency or unit of the Government other
than DOD, the Software is classified as "Commercial Computer Software"
and the Government is acquiring only "restricted rights" to the
Software and Documentation (as defined in FAR Clause 52.227-19).
IN WITNESS WHEREOF the parties have executed this Agreement by their duly
authorized representatives as of the effective date.
1 DECEMBER 1995
25
<PAGE>
EXHIBIT 10.42
OEM AGREEMENT
BETWEEN
SYNOPSYS, INC.
AND
VIEWLOGIC SYSTEMS, INC.
(FPGA)
This OEM Agreement ("Agreement") is entered into and effective this 2nd of
October, 1998 ("Effective Date") by and between Synopsys, Inc., a Delaware
corporation with principal offices at 700 E. Middlefield Road, Mountain View,
California 94043-4033 ("Synopsys"), and Viewlogic Systems, Inc., a Delaware
corporation, with principal offices at 293 Boston Post Road, Marlboro MA,
01752-4615 ("OEM Partner").
RECITALS
Synopsys is a leader in the design, development and marketing of electronic
design automation software. Synopsys, desires to enter into an OEM relationship
with OEM Partner whereby OEM Partner shall be authorized to sell Synopsys' FPGA
Express product. OEM Partner wishes to enter into such a relationship.
In consideration of the mutual promises contained herein, the parties agree as
follows:
AGREEMENT
1. DEFINITIONS
1.1 "BUG FIX" means an embodiment of the Licensed Software that corrects
Errors.
1.2 "CONFIDENTIAL INFORMATION" means any information disclosed by one party
to the other pursuant to this Agreement, which is in written, graphic,
machine-readable or other tangible form and is marked "Confidential,"
"Proprietary" or in some other manner to indicate its confidential
nature. Confidential Information may also include oral information
disclosed by one party to the other pursuant to this Agreement,
provided that such information is designated as confidential at the
time of disclosure and reduced to a written summary by the disclosing
party, within thirty (30) days after its oral disclosure, which is
marked in a manner to indicate its confidential nature and delivered to
the receiving party. Notwithstanding any failure to so identify it,
however, all source code will be deemed "Confidential Information" of
Synopsys, and all information contained in the reports and document
furnished by OEM Partner to Synopsys hereunder shall be deemed
"Confidential Information" of OEM Partner hereunder. Notwithstanding
the above, Confidential Information shall not include information
which: (i) was generally known and available at the time it was
disclosed or becomes generally known and available through no fault of
the receiver; (ii) was
CONFIDENTIAL
1
<PAGE>
known to the receiver, without restriction, at the time of disclosure
as shown by the files of the receiver in existence at the time of
disclosure; (iii) is disclosed with the prior written approval of the
discloser; (iv) was independently developed by the receiver without any
use of the Confidential Information and by employees or other agents of
the receiver who have not been exposed to the Confidential Information,
provided that the receiver can demonstrate such independent development
by documented evidence prepared contemporaneously with such independent
development; (v) becomes known to the receiver, without restriction,
from a source other than the discloser without breach of this Agreement
by the receiver and otherwise not in violation of the discloser's
rights; or (vi) is disclosed pursuant to the order or requirement of a
court, administrative agency, or other governmental body, provided,
that the receiver shall provide prompt, advance notice thereof to
enable the discloser to seek a protective order or otherwise prevent
such disclosure.
1.3 "DOCUMENTATION" means any user manuals, reference manuals, release,
application and methodology notes, written utility programs and other
materials in any form provided by Synopsys for use with the Licensed
Software.
1.4 "END USER" means the person authorized to use the Licensed Software
without the right to further distribute as an OEM or reseller.
1.5 "ERROR" means a defect which causes the Licensed Software not to
perform substantially in accordance with the specification set forth in
Synopsys' Documentation, or otherwise to produce materially erroneous
results.
1.6 "INTELLECTUAL PROPERTY RIGHTS" means all patents, patent rights,
copyrights, trade secrets, service marks, maskworks and trademarks, and
any applications for any of the foregoing, in all countries in the
world.
1.7 "LICENSED SOFTWARE" means Synopsys' FPGA synthesis product as more
fully described in Exhibit A (as may be amended from time to time)
together with all Bug Fixes and Updates and any Upgrades made available
by Synopsys hereunder. It shall consist of the core synthesis engine,
input/output file interfaces, and architecture optimizers. It shall
contain all the features and device support of Synopsys' standard FPGA
Express product. The term "Licensed Product" shall be deemed to be
synonymous with the term Licensed Software. The Licensed Software does
not include any features which are unique to FPGA Compiler II.
1.8 "RESELLER" means a distributor, original equipment manufacturer,
systems integrator or reseller who is authorized to resell or
distribute software.
CONFIDENTIAL
2
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1.9 "UPDATES" means an embodiment of the Licensed Software that delivers
minor improvements, incremental features or enhancements of existing
features, and/or functionality to the Licensed Software.
1.10 "UPGRADE" means an embodiment of the Licensed Software that delivers
substantial performance improvements, architectural changes or new
features and/or functionality to the Licensed Software for which
Synopsys may charge a separate license fee.
2. OEM PARTNER'S RIGHTS TO THE LICENSED SOFTWARE
2.1 APPOINTMENT. Subject to the terms and conditions set forth in this
Agreement, Synopsys grants OEM Partner the nonexclusive,
nontransferable (except as specifically set forth herein), worldwide
right to reproduce, market, promote, sublicense, demonstrate, bundle,
and distribute the Licensed Software in object code form, and the
Documentation, in accordance with the restrictions set forth herein,
directly or indirectly, through any and all OEM Partner Resellers. OEM
Partner may distribute the Licensed Software to or through any OEM
Partner Reseller or any other entity that might integrate or
incorporate the Licensed Software with other systems, software,
hardware, or other components. OEM Partner agrees to enter into written
agreements with OEM Partner Resellers binding them to all relevant
restrictions contained herein. The parties intend that Synopsys shall
be a third party beneficiary of such agreements.
2.2 SOFTWARE LICENSE AND OTHER RESTRICTIONS.
(a) The Licensed Software is subject to license and not sale. Each
reference in this Agreement to a "purchase" or "sale" of the Licensed
Software, or like terms, shall mean a "license" of the Licensed
Software. Synopsys shall retain full title to the Licensed Software
(including all Intellectual Property Rights embodied therein) and all
copies thereof.
(b) End Users may only use the Licensed Software only in accordance with
the provisions of a license agreement substantially in the form of that
attached hereto as Exhibit C. OEM Partner will not remove or alter any
proprietary notices on or in the Licensed Software.
(c) OEM Partner agrees that the Licensed Software for the UNIX platform (i)
will only be sold into a software tool environment that includes OEM
Partner UNIX-based products. Licensed Software on the PC platform
purchased under this Agreement may be sold standalone or in combination
with other OEM Partner products. OEM Partner may sell the Licensed
Software as an add-on or synthesis upgrade to existing installed OEM
Partner customers, but not to otherwise target any marketing to
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existing installed customers of Xilinx, Inc. or any other existing or
future silicon resellers of Synopsys.
(d) OEM Partner and its Resellers shall not sell or distribute the Licensed
Software in Taiwan until the earlier of: (i) the first anniversary of
the Effective Date; or (2) the depletion by Cache Technologies of all
of its inventory of Licensed Software as of the Effective Date.
Synopsys agrees to notify OEM Partner within thirty (30) days after
becoming aware that Cache has depleted said inventory of Licensed
Software. Synopsys, in its sole discretion, may approve exceptions to
this provision deemed critical by OEM Partner on a case-by-case basis,
in writing. Notwithstanding the foregoing, OEM Partner shall be
entitled to distribute the Licensed Software to End Users in Taiwan
only for purposes of upgrading existing install-base customers from the
Aurora product to FPGA Express.
2.3 DEMONSTRATION AND EVALUATION. OEM Partner will be entitled to
distribute, itself or through OEM Partner Resellers, a time-limited
version of the Licensed Software for demonstration and evaluation
purposes at no charge. This demonstration and evaluation version will
have all of the features and functionality of the Licensed Software,
except that the use of such version will be limited to evaluation and
demonstration use and will be limited to such use for a period of not
more than seventy-five (75) days.
2.4 NO IMPLIED LICENSES. No rights or licenses are granted to OEM Partner
by implication, estoppel, or otherwise, other than the rights and
licenses expressly granted herein.
3. PAYMENTS
3.1 TERMS AND CONDITIONS. All purchases of Licensed Software by OEM Partner
from Synopsys during the term of this Agreement shall be subject to the
terms and conditions of this Agreement.
3.2 FEES. The license fees for the Licensed Software and maintenance
("Fees"), including the Minimum Purchase Commitment for each annual
Term of this Agreement, shall be as set forth in Exhibit B hereto.
Synopsys has the right at any time to revise the suggested list prices
in Exhibit B with ninety (90) days' advance written notice to OEM
Partner. Such revisions shall apply to all orders received by OEM
Partner after the effective date of revision. Fee increases shall not
affect unfulfilled purchase orders accepted by OEM Partner prior to the
effective date of the price increase. In the event of a price increase,
OEM Partner may request that Synopsys honor the previous pricing beyond
the 90-day period, on a case-by-case basis, and Synopsys shall not
unreasonably withhold its consent. To be valid, any such request and
consent must be
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in writing. Fee decreases shall apply to pending purchase orders
accepted by OEM Partner prior to the effective date of the decrease but
not yet shipped.
3.3 TAXES. Synopsys' Fees do not include any federal, state, local, or
foreign taxes that may be applicable to sales by OEM Partner of the
Licensed Software and related maintenance, and OEM Partner shall be
responsible for the same (excluding taxes based on Synopsys' net
income). When Synopsys has the legal obligation to collect such taxes,
the appropriate amount shall be added to OEM Partner's invoice and paid
by Synopsys unless OEM Partner provides Synopsys with a valid tax
exemption certificate authorized by the appropriate taxing authority.
3.4 PAYMENT. Full payment of Synopsys' Fees for the Licensed Software and
maintenance (including any taxes or other applicable costs initially
paid by Synopsys but to be borne by OEM Partner) shall be made by OEM
Partner to Synopsys in U.S. dollars within thirty (30) days after the
date of the end of each calendar quarter, as further set forth in
Exhibit B. The annual fees for the first Term of this Agreement for OEM
Partners' three (3) Distributors identified in Exhibit B, as well as
for OEM Partners university program, are also due as set forth in
Exhibit B. Any amount not paid when due shall be subject to a service
charge equal to the lesser of one and one-half percent (1.5%) per month
or the maximum amount permitted by law.
3.5 MANUFACTURING AND DISTRIBUTION. Manufacturing and distribution of the
Licensed Software and Documentation to OEM Partner's End Users shall be
the responsibility of OEM Partner. Synopsys shall provide master copies
of the Licensed Software and Documentation including available design
examples and application notes published for End Users. Unless
otherwise agreed to in writing by the parties, OEM Partner shall employ
a software license key system in connection with each copy of the
Licensed Software distributed by it. Documentation will be provided in
machine-readable form for adaptation by OEM Partner. Final OEM Partner
documentation adapted from Synopsys Documentation will acknowledge
Synopsys as the source. OEM Partner shall provide Synopsys with copies
of all Documentation for review and approval prior to distribution. OEM
Partner will use reasonable commercial efforts to provide the review
copies of the Documentation in time to allow Synopsys thirty (30) days
to review and approve or provide feedback on said Documentation.
3.6 REPORTING REQUIREMENTS. OEM Partner shall deliver quarterly reports to
Synopsys within thirty (30) days following the end of each calendar
quarter during the Term of this Agreement. These reports shall include
the number and configuration of the Licensed Software, including
additional optimizers, second language options, and maintenance or
maintenance renewal sold during the period, and End User information
described in Exhibit B. In addition, OEM Partner shall deliver a
quarterly
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statement to Synopsys together with the payment of the Fees as
described in Section 3.4 above.
3.7 AUDIT. No more than twice during any 12-month period, Synopsys may
cause an independent certified public accounting firm to audit OEM
Partner's relevant records to verify the accuracy of the Fees paid by
OEM Partner during the preceding 12-month period. OEM Partner will have
the right to review and contest the findings of the auditors. The costs
and expenses of such audit shall be borne by Synopsys, unless OEM
Partners has underpaid the relevant Fees by at least ten percent (10%),
in which case OEM Partner shall pay the costs and expenses of such
audit. Any such audit may be conducted upon reasonable notice during
regular business hours at OEM Partner's offices and in such manner as
not to significantly interfere with normal business activities at such
locations.
3.8 END USER PRICING. OEM Partner shall be free hereunder to distribute the
Licensed Software and Documentation to End Users and Resellers at any
charge or no charge, and shall not be required to use or make reference
to Synopsys' list or suggested prices.
4. LIMITED WARRANTY
4.1 LIMITED WARRANTY. Synopsys warrants for a period of ninety (90) days
from delivery of the Licensed Software to OEM Partner that such
Licensed Software, as delivered, will be free from defects in the media
and will substantially conform to the specifications in the Licensed
Software Documentation. In the event of nonconformance of the Licensed
Software, OEM Partner shall promptly notify Synopsys and provide
Synopsys with all available information in written or electronic form
so that Synopsys can reproduce the Error. Synopsys' sole obligation is
to undertake reasonable commercial efforts to correct the Errors
reported to Synopsys in writing or in electronic form during the
warranty period. SYNOPSYS' SOLE LIABILITY AND OEM PARTNER'S EXCLUSIVE
REMEDY WITH RESPECT TO BREACH OF THE FOREGOING LIMITED WARRANTY WILL BE
LIMITED TO ERROR CORRECTION OR PRODUCT REPLACEMENT, OR IF NEITHER IS IN
SYNOPSYS' REASONABLE DETERMINATION COMMERCIALLY FEASIBLE, REFUND OF THE
LICENSE FEE RECEIVED BY SYNOPSYS FROM OEM PARTNER.
4.2 HARMFUL CODE. Synopsys represents and warrants that, to its knowledge,
the Licensed Software available in production release is free from all
computer viruses, and other harmful or malicious code.
4.3 INTELLECTUAL PROPERTY. Synopsys represents and warrants that, to its
knowledge, neither the Licensed Software nor the Documentation infringe
upon the Intellectual Property
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Rights of any third party, and Licensor has not misappropriated the
Intellectual Property Rights of any third party in developing the
Licensed Software.
4.4 DISCLAIMER. EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, SYNOPSYS
AND ITS LICENSORS MAKE NO OTHER WARRANTIES EXPRESS, IMPLIED, STATUTORY
OR OTHERWISE REGARDING THE LICENSED SOFTWARE OR DOCUMENTATION. SYNOPSYS
AND ITS LICENSORS SPECIFICALLY DISCLAIM ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM A
COURSE OF DEALING OR USAGE OF TRADE.
5. SYNOPSYS MAINTENANCE AND SUPPORT
5.1 DEMONSTRATION, ENGINEERING AND SUPPORT COPIES. OEM Partner shall be
entitled to make a reasonable number of copies (to be mutually agreed)
of the Licensed Software and Documentation pursuant to all relevant
terms and conditions of Synopsys' End User License Agreement for
demonstration, engineering and End User support purposes. These copies
of the Licensed Software may be used by OEM Partner and OEM Partner's
Resellers for such purposes at no charge.
5.2 TRAINING. Synopsys shall provide necessary training to OEM Partner
engineering and customer support personnel as reasonably required to
engineer, market, and support the Licensed Software for initial product
introduction and for each major product Update.
5.3 UPDATES AND BUG FIXES. Maintenance Agreements are required for the
first year on all new Licensed Software sold. Subsequent maintenance
renewal is optional. OEM Partner shall pay Synopsys the maintenance
fees set forth in Exhibit B. Updates and Bug Fixes shall be provided to
OEM Partner in regular maintenance releases. Maintenance releases will
be provided every six (6) months or whenever Synopsys, using reasonable
commercial efforts, issues them. Only End Users who have entered into
Maintenance Agreements may receive maintenance releases. Upgrades are
not automatically included in maintenance releases. Critical bugs (to
be defined by the parties) reported by OEM Partner will be addressed by
Synopsys' engineering support team on a high priority basis. Bug Fixes
will be delivered to OEM Partner at the earliest possible date for OEM
Partner to provide to End Users: provided, however, that Synopsys will
provide such Bug Fixes to OEM Partner when it makes them generally
available to its other resellers and OEM partners. OEM Partner will be
entitled, directly or indirectly through OEM Partner's Resellers, to
distribute Bug Fixes and Updates to each End User of OEM Partner or OEM
Partner's Reseller who is a party to a maintenance Agreement for the
same, or Bug Fixes to each such end User to whom a warranty obligation
is owed.
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5.4 EARLY NOTICE. Synopsys shall provide OEM Partner with early notice of
FPGA Express product plans and release schedules and will keep OEM
Partner apprised of its development and enhancement efforts with regard
to the Licensed Software. Synopsys will notify OEM Partner as early as
possible, but in no event later than such time as it makes such
information generally available to its other resellers and OEM
partners, of the development, testing and estimated release dates of
each Upgrade and Update. OEM Partner shall be entitled to receive
copies of all generally available beta and early release versions of
the Licensed Software.
6. OEM PARTNER SUPPORT RESPONSIBILITIES
6.1 OEM PARTNER SOFTWARE INTEGRATION. OEM Partner shall be responsible for
all integration and testing of the Licensed Software with OEM Partner's
software and Synopsys shall have no obligations related thereto.
6.2 END USER SUPPORT. End User support, and training and technical support
to OEM Partner Resellers, shall be provided by OEM Partner. At no time
shall OEM Partner direct its End Users or OEM Partner Resellers to
Synopsys' support organization. Synopsys shall designate a corporate
applications engineer as an OEM Partner point of contact, by telephone
and e-mail, for backup technical support and to assist with OEM Partner
technical concerns regarding the Licensed Software.
7. TERM AND TERMINATION
7.1 TERM. This Agreement shall commence as of the Effective Date for an
initial three (3) year term and shall automatically renew for
successive one (1) year renewal terms, unless terminated earlier as
provided herein, or unless either party shall have given the other
party written notice of non-renewal at least one hundred eighty (180)
days prior to the end of the then current term.
7.2 TERMINATION FOR CAUSE. Either party has the right to terminate this
Agreement immediately upon written notice at any time if the other
party materially breaches any obligation hereunder, which material
breach is incapable of cure or which, being capable of cure, has not
been cured with thirty (30) days after receipt of written notice from
the nondefaulting party or within such additional cure period as the
nondefaulting party may authorize.
7.3 TERMINATION BY SYNOPSYS.
(a) Synopsys has the right to terminate this Agreement upon thirty (30)
days written notice at any time if OEM Partner sells all or
substantially all of its assets to any direct competitor of Synopsys.
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(b) In addition, Synopsys has the right to terminate this Agreement upon
ninety (90) days written notice at any time if OEM Partner sells all or
substantially all of its assets, or implements or suffers any material
change in management or control (which such change is evidenced by a
substantial change in OEM Partner's board of directors); however, in
such event Synopsys agrees, in good faith, to meet with OEM Partner and
the third party buying all or substantially all of OEM Partner's assets
or assuming day-to-day management or control of OEM Partner to discuss
the possible continuation of this Agreement as between Synopsys and
such third party.
(c) EFFECT OF TERMINATION. Upon termination of this Agreement in accordance
with Sections 7.2 or 7.3(a), OEM Partner shall immediately cease all
manufacturing and distribution of the Licensed Software and all
outstanding monies due to Synopsys for Licensed Software (excluding
minimum payments for periods-that have not yet occurred) will be
accelerated so they become due and payable on the effective date of
termination. If expiration or termination occurs for reasons other than
under Section 7.2 or 7.3(a), there shall be a phase-out period of
between six (6) months and one (1) year, (the exact time period to be
mutually agreed upon), after expiration to allow for reasonable
transition. During the phase-out period OEM Partner may continue to
sell the Licensed Software pursuant to the terms and conditions of this
Agreement, but will not receive Updates, only Bug Fixes. Termination
will not relieve either party from any liability arising from any
breach of this Agreement. Neither party will be liable to the other for
damages of any sort solely as a result of terminating this Agreement in
accordance with its terms. Termination of this Agreement will be
without prejudice to any other right or remedy of either party. The
provisions of Sections 3, 7, 8, 9, 11, and 12 shall survive the
expiration or termination of this Agreement for any reason. All End
User sublicenses in effect prior to the date of expiration or
termination of this Agreement shall survive. All other rights and
obligations of the parties shall cease upon expiration or termination
of this Agreement.
8. LIMITATION OF LIABILITY
8.1 DIRECT DAMAGES. EACH PARTY'S LIABILITY ARISING OUT OF THIS AGREEMENT
AND/OR SALE OF THE LICENSED SOFTWARE SHALL BE LIMITED TO THE CUMULATIVE
AMOUNTS PAID BY OEM PARTNER FOR THE LICENSED SOFTWARE.
8.2 CONSEQUENTIAL DAMAGES. EXCEPT AS SET FORTH IN SECTION 11, UNDER NO
CIRCUMSTANCES, SHALL SYNOPSYS AND ITS THIRD PARTY LICENSORS BE LIABLE
FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING IN ANY
WAY OUT OF THIS AGREEMENT OR THE USE OF THE LICENSED SOFTWARE AND
DOCUMENTATION, HOWEVER CAUSED, (WHETHER ARISING UNDER A THEORY OF
CONTRACT, TORT (INCLUDING NEGLIGENCE); OR OTHERWISE), INCLUDING,
WITHOUT
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LIMITATION, DAMAGES FOR LOST PROFITS, LOSS OF DATA, OR COSTS
OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES. THE
LIMITATIONS ON SYNOPSYS' AND ITS LICENSORS' LIABILITY SET FORTH
IN THIS SECTION 8 SHALL APPLY NOTWITHSTANDING THE FAILURE OF
ESSENTIAL PURPOSE OF ANY OF THE LIMITED REMEDIES SET FORTH IN
SECTION 4.1 ABOVE.
EXCEPT FOR BREACHES OF SECTIONS 2 OR 3.1, or 3.5 OF THIS AGREEMENT,
UNDER NO CIRCUMSTANCES SHALL OEM PARTNER BE LIABLE FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING IN ANY WAY OUT OF THIS
AGREEMENT HOWEVER CAUSED, (WHETHER ARISING UNDER A THEORY OF CONTRACT,
TORT (INCLUDING NEGLIGENCE); OR OTHERWISE), INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOST PROFITS, OR LOSS OF DATA.
9. CONFIDENTIALITY
9.1 CONFIDENTIALITY. Each party shall treat as Confidential Information of
the other party, shall not use such Confidential Information except as
expressly set forth herein or otherwise authorized in writing, shall
implement reasonable procedures to prohibit the disclosure,
unauthorized duplication, misuse or removal of the other party's
Confidential Information and shall not disclose such Confidential
Information to any third party without the prior written consent of
the disclosing party. Without limiting the foregoing, each party shall
use at least the same procedures and degree of care that it uses to
prevent the disclosure of its own Confidential Information of like
importance to prevent the disclosure of Confidential Information
disclosed to it by the other party under this Agreement, but in no
event less than reasonable care.
9.2 NO BENCHMARKS. OEM Partner agrees not to disclose or publish
performance benchmarking results involving the Licensed Software
without the express prior written consent of Synopsys.
10. MARKETING
10.1 TRADEMARK USE. During the term of this Agreement, OEM Partner is
authorized by Synopsys to use on a non-exclusive basis the trademarks
Synopsys uses for the standard Licensed Software only in connection
with OEM Partner's and, as permitted, OEM Partner's Resellers'
advertisement, promotion and distribution of the Licensed Software. Any
use of such trademarks will be in accordance with applicable law and
Synopsys, documented policies concerning trademark usage, which it
shall have provided to OEM Partner from time to time. Upon request by
Synopsys, OEM Partner shall promptly provide Synopsys with a reasonable
number of demonstration copies of Licensed Software products bearing
such trademarks and samples of each use
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of the "FPGA Express" logo by OEM Partner and/or its distributors and
resellers to ensure compliance with the quality and trademark
obligations herein. If Synopsys reasonably determines that: i) such use
conflicts with applicable law or the applicable documented Synopsys
policy; or ii) the Licensed Products distributed by OEM Partner are not
of at least the same quality as the corresponding products distributed
by Synopsys under the applicable marks and OEM Partner has not
corrected the issues documented by Synopsys within 30 days of receipt
of Synopsys' notice, OEM Partner shall employ commercially reasonable
efforts to cease subsequent use of the Synopsys trademarks and shall
cease all such use within one hundred twenty (120) days of such notice.
The goodwill associated with the use of any Synopsys trademarks by OEM
Partner shall inure solely to the benefit of Synopsys.
10.2 PROMOTION. OEM Partner shall prominently display and promote the
Licensed Software. OEM Partner and Synopsys will cooperate in product
promotions, press releases, trade shows and the like. The parties agree
to jointly coordinate all press releases issued under this Agreement.
Each party must review and agree to the text of any public announcement
related to this Agreement prior to its release, which agreement will
not be unreasonably withheld.
10.3 PRINTED MATERIALS. OEM Partner may purchase at the price paid by
Synopsys reasonable quantities of printed marketing materials,
collateral, product data sheets and other materials relating to the
marketing of the Licensed Software that Synopsys provides to its other
Resellers ("Printed Materials"), or to provide OEM Partner with source
information for such Printed Materials if they are generated for
Synopsys by a third party. Subject to availability, Synopsys will, at
OEM Partner's request, provide, at no charge, electronic versions of
the Printed Materials in a format suitable for reproduction by OEM
Partner. OEM Partner and its Resellers shall have the right to
distribute, reproduce, translate, modify and create derivative works of
the Printed Materials. OEM Partner shall display Synopsys' trademarks
and/or copyright notifications, as applicable, on copies of the Printed
Materials that are created or modified by OEM Partner which include any
Synopsys trademarks or copyrighted materials.
11. INFRINGEMENT INDEMNITY
11.1 INDEMNITY. Synopsys agrees, at its own expense, to defend or, at its
option, to settle, any claim or action brought against OEM Partner to
the extent it is based on a claim that the Licensed Software as
delivered to OEM Partner infringes or violates any United States,
European, or Japanese patent, or any copyright, trademark, trade secret
or other proprietary right of a third party which is claimed under the
laws of a Berne Convention member country, and Synopsys will indemnify
and hold OEM Partner harmless from and against any damages, costs and
fees reasonably incurred (including reasonable attorneys' fees) that
are attributable to such claim or action and which are
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assessed against Licensee in a final judgment or settlement. OEM
Partner will provide Synopsys with: (i) prompt written notification of
the claim or action; (ii) sole control and authority over the defense
or settlement thereof; and (iii) all available information, assistance
and authority to settle and/or defend any such claim or action.
11.2 LIMITED REMEDIES. If the Licensed Software becomes, or in the opinion
of Synopsys is likely to become, the subject of an infringement claim
or action, Synopsys may at its sole option: (i) procure, at no cost to
OEM Partner, the right to continue using the Licensed Software; (ii)
replace or modify the Licensed Software to render it noninfringing,
provided there is no material loss of functionality; or (iii) if, in
Synopsys' reasonable opinion, neither (i) nor (ii) above are
commercially feasible, terminate the license and refund the amounts OEM
Partner paid for such Licensed.
11.3 EXCEPTIONS. Synopsys will have no liability under this Section 11 for
any claim or action to the extent that: (i) such claim or action would
have been avoided but for modifications of the Licensed Software, or
portions thereof, made by Synopsys or any party authorized by Synopsys
to make such modification on behalf of Synopsys after delivery to OEM
Partner; (ii) such claim or action would have been avoided but for the
combination or use of the Licensed Software, or portions thereof, with
other products, processes or materials not specified by Synopsys in the
Documentation; (iii) OEM Partner continues allegedly infringing
activity after being notified thereof or after being informed of
modifications offered by Synopsys free of charge or under its support
program that would have avoided the alleged infringement; or (iv) OEM
Partner's use of the Licensed Software is not in accordance with the
material terms of this Agreement and such use is related to the
infringement or alleged infringement.
11.4 DISCLAIMER. THE FOREGOING PROVISIONS OF THIS SECTION 11 STATE THE
ENTIRE LIABILITY AND OBLIGATIONS OF SYNOPSYS AND ITS LICENSORS, AND THE
EXCLUSIVE REMEDY OF OEM PARTNER, WITH RESPECT TO ANY ACTUAL OR ALLEGED
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS BY THE LICENSED
SOFTWARE AND DOCUMENTATION.
12. GENERAL PROVISIONS
12.1 CHOICE OF LAW. The rights and obligations of the parties under this
Agreement shall not be governed by the 1980 U.N. Convention on
Contracts for the International Sale of Goods. This Agreement will in
all respects be interpreted and construed in accordance with, and
governed by, the laws of the Commonwealth of Massachusetts excepting
that body of Massachusetts law concerning conflicts of law provisions,
regardless of the place of execution or performance of this Agreement.
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12.2 ASSIGNMENT. This Agreement may not be assigned by OEM Partner without
the prior written consent of Synopsys, which consent shall not be
unreasonably withheld. In the event OEM Partner sells all or
substantially all of its assets, or implements or suffers any material
change in management or control (which such change is evidenced by a
substantial change in OEM Partner's board of directors) and such sale
or change in management or control is not to a direct competitor of
Synopsys, Synopsys agrees, in good faith, to meet with OEM Partner and
the third party buying all or substantially all of OEM Partner's assets
or assuming day-to-day management or control of OEM Partner to discuss
the possible continuation of this Agreement as between Synopsys and
such third party. OEM Partner may not delegate its duties hereunder
without the prior written consent of Synopsys, which consent shall not
be unreasonably withheld.
12.3 NOTICES. Any notice, report, approval or consent required or permitted
hereunder shall be in writing and will be deemed to have been duly
given if delivered personally, by facsimile, or mailed by first-class,
registered or certified mail, postage prepaid to the respective
addresses of the parties as set forth in this Agreement. If to
Synopsys, Attention: General Counsel.
12.4 NO WAIVE. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or
any other provision.
12.5 INDEPENDENT CONTRACTOR. The relationship of Synopsys and OEM Partner
established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed (i) to give
either party the power to direct or control the day-to-day activities
of the other or (ii) to constitute the parties as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking.
12.6 SEVERABILITY. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to the
maximum extent permissible so as to effect the intent of the parties,
and the remainder of this Agreement will continue in full force and
effect.
12.7 ATTORNEYS' FEES. The prevailing party in any action to enforce the
Agreement shall be entitled to recover costs and expenses including,
without limitation, reasonable attorneys' fees.
12.8 INJUNCTIVE RELIEF. The parties agree that a material breach of this
Agreement adversely affecting either party's Intellectual Property
Rights could cause irreparable injury for which monetary damages would
not be an adequate remedy and the non-breaching party may be entitled
to equitable relief in addition to any remedies it may have hereunder
or at law.
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12.9 FORCE MAJEURE. Notwithstanding anything else in this Agreement, no
default, delay, or failure to perform on the part of either party shall
be considered a breach of this Agreement if such default, delay or
failure to perform is shown to be due to causes beyond the reasonable
control of the party charged with a default, including, but not limited
to, causes such as strikes, lockouts, or other labor disputes, riots,
civil disturbances, actions or inactions of governmental authorities or
suppliers, epidemics, war, embargoes, sever weather, fire, earthquakes,
acts of God, or the public enemy, nuclear disasters, or default of a
common carrier.
12.10 EXPORT CONTROLS. OEM Partner agrees and certifies that neither the
Licensed Software, nor any other technical data received from Synopsys
will be exported or re-exported outside the United States except as
authorized and as permitted by the laws and regulations of the United
States.
12.11 ENTIRE AGREEMENT. This Agreement, including all Exhibits, constitutes
the entire agreement between the parties with respect to the subject
matter hereof, and supersedes all prior agreements or representations,
oral or written, regarding such subject matter. This Agreement may not
be modified or amended except in a writing signed by a duly authorized
representative of both parties.
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EXHIBIT A
LICENSED SOFTWARE DESCRIPTION AND SPECIFICATIONS
1. Licensed Software, as of the date of this agreement, shall consist of
the following products with the following components:
(a) FPGA EXPRESS (FOR UNIX AND WINDOWS PLATFORMS)
FPGA Express Graphical User Interface (HP supported when available)
FPGA Express Synthesis Engine
FPGA Express TimeTracker
FPGA Express VHDL Language Optimizer
FPGA Express Verilog Language Optimizer
FPGA Express Technology Optimizers
FPGA Express Graphical Analysis Tools
(b) FPGA EXPRESS LITE (FOR UNIX AND WINDOWS PLATFORMS)
FPGA Express Graphical User Interface (HP supported when available)
FPGA Express Synthesis Engine
FPGA Express VHDL Language Optimizer
FPGA Express Verilog Language Optimizer
FPGA Express Technology Optimizers for specific OEM End Users
2. Additional Products. Additional products may be added to this Agreement
upon mutual agreement of the parties. In the event additional products
are added to this Agreement by mutual written agreement of the parties
hereto, they shall be included in the definition of Licensed Software.
3. Operating System. The Licensed Software shall run on both Windows 95
and Windows NT operating systems. Synopsys has made OEM Partner aware
of an incompatibility with Windows 95 and Windows 98 for the Graphical
Analysis Tools which Synopsys is currently working to resolve,
estimated resolution December 31, 1998. All Microsoft current and
popularly-installed versions of Windows 95 and Windows NT will be
supported (e.g., NT 3.51 and 4.0). Synopsys will provide six (6) months
notice of its intention to discontinue support of any version. While
the Agreement is in effect, OEM Partner may continue selling the final
release for a period between six (6) months and one (1) year, (the
actual period to be mutually agreed upon), after discontinuation. No
backup technical support or bug fixes will be provided for discontinued
versions.
CONFIDENTIAL
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<PAGE>
A version of the Licensed Software which runs on the UNIX operating
system shall also be provided by Synopsys for sale with the OEM Partner
UNIX product line at the prices set forth in Exhibit B and subject to
the restrictions contained in Section 2.2 of this Agreement.
4. Node Locked Configuration. If possible, the Licensed Software shall be
offered in node-locked and floating network configurations and Synopsys
shall use its best commercial effort to provide the Licensed Software
engineered so as to work with and be protected by OEM Partner's
software licensing scheme.
5. FPGA EXPRESS LITE REGISTER LIMITS. OEM Partner may distribute the FPGA
Express Lite product through its Resellers Actel, Lattice, and Lucent
at the pricing set forth in Exhibit B, provided that OEM Partner
ensures that the FPGA Express Lite products distributed through such
Resellers are configured so that, during the following date ranges,
each FPGA Express Lite product shall have no more than the following
maximum numbers of registers available for use:
If distributed by Lattice:
<TABLE>
<S> <C> <C>
Effective Date to May 31, 1999 600
June 1, 1999 to May 31, 2000 900
June 1, 2000 to May 31, 2001 1350
June 1, 2001 to May 31, 2002 2025
After May 31, 2002 according to contract
between
OEM Partner and Lattice
If distributed by Actel:
Effective Date to December 31, 1998 400
After December 31, 1998 according to contract
between
OEM Partner and Actel
</TABLE>
If distributed by Lucent:
CONFIDENTIAL
16
<PAGE>
<TABLE>
<S> <C> <C>
Effective Date to May 31, 1999 800
June 1, 1999 to August 31, 1999 900
September 1, 1999 to May 31, 2000 1200
June 1, 2000 to August 31, 2000 1350
September 1, 2000 to May 31, 2001 1800
After May 31, 2001 according to contract
between
OEM Partner and Lucent
</TABLE>
OEM Partner may not expand the distribution of FPGA Express Lite beyond
the three Resellers named above.
6. NON-SOLICITATION OF RESELLERS. Synopsys agrees that, during the
term of this Agreement, it shall not initiate or invite any
discussions or negotiations with any of the OEM Partner Resellers
named in Paragraph 5 above or otherwise appointed by OEM Partner to
distribute the FPGA Express Lite product. In the event that any
such Reseller approaches or contacts Synopsys of its own accord
Synopsys shall notify OEM Partner no later than thirty (30) days
following such approach or contact but such notice shall in no way
preclude Synopsys from entering into a reseller relationship with
any such entity.
CONFIDENTIAL
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives:
VIEWLOGIC SYSTEMS, INC. SYNOPSYS, INC.
By: /s/ William J. Herman By: /s/ Steven K. Shevick
-------------------------------- -----------------------------------
Name: William J. Herman Name: Steven K. Shevick
------------------- ------------------
Title: President Title: Vice President General Counsel
----------- -------------------------------
Date: 10-2-98 Date: 10-2-98
------- -------
CONFIDENTIAL
18
<PAGE>
EXHIBIT B
LICENSED SOFTWARE AND MAINTENANCE FEES
1. OEM Partner agrees to the following Minimum Purchase Commitments. OEM
Partner will pay Synopsys thirty-two percent (32%) of the suggested
list price for all PC Platform sales of the Licensed Software and
thirty-seven percent (37%) of the suggested list price for all UNIX
Platform sales of the Licensed Software. In addition, OEM Partner shall
pay Synopsys, maintenance fees for the Licensed Software as set forth
in this Exhibit B, Section 1(B). The license and maintenance fees are
as set forth below.
A. MINIMUM PURCHASE COMMITMENT
OEM Partner agrees to the following revenue commitments for Licensed Software
and maintenance sales during Period 1:
Period 1: October 1, 1998 to September 30, 1999
Minimum Purchase Commitment: $750,000
In the event OEM Partner has not met the Minimum Purchase Commitment prior to
the end of the Period, OEM Partner must pay Synopsys the remainder of the
Minimum Purchase Commitment within thirty (30) days following the end of such
Period.
Minimum Purchase Commitments for subsequent Periods shall be the same as that
set forth above unless the parties mutually agree in writing to a different
amount within thirty (30) days of any renewal of this Agreement.
In the event Synopsys adds material additional distribution channels for the
Licensed Software or materially expands its direct sales force for the Licensed
Software, the parties agree that they shall discuss whether the additions are
such that there is likely to be a loss of market share by OEM Partner, and if
so, then to mutually agree on an appropriate reduction of the Minimum Purchase
Commitments.
B. PER UNIT LICENSE AND MAINTENANCE FEES
As reflected in the following table, for each copy of the FPGA Express Licensed
Software sold hereunder, OEM Partner agrees to pay Synopsys a per unit license
fee plus a maintenance fee of 15% of the applicable per unit license fee as
follows:
CONFIDENTIAL
19
<PAGE>
<TABLE>
<CAPTION>
PC PLATFORM PRICING
SYNOPSYS LICENSE FEE MAINTENANCE
DESCRIPTION US LIST PRICE TO SYNOPSYS TO SYNOPSYS
- ------------- -------------- ------------ -------------
<S> <C> <C> <C>
Base $5,000 $1,600 $ 240
1 vendor, 1 language,
node-locked)
All vendor option $4,000 $1,280 $ 190
Second Language $4,000 $1,280 $ 190
Floating License $4,000 $1,280 $ 910
Timing Option $3,000 $ 960 $ 144
Graphical Analysis Tools $4,000 $1,280 $ 190
UNIX PLATFORM PRICING
SYNOPSYS LICENSE FEE MAINTENANCE
DESCRIPTION US LIST PRICE TO SYNOPSYS TO SYNOPSYS
- ------------- --------------- ------------- ------------
<S> <C> <C> <C>
Base $29,000 $10,370 $1,610
(includes the all Vendor
option, Second
Language, Floating
License, Timing Option,
Graphical Analysis
Tools)
</TABLE>
The above specifically excludes any FPGA Compiler II specific features
Synopsys may revise the suggested list prices as set forth in Section 3 of this
Agreement.
OEM Partner may discount the suggested end-user list price license and/or
maintenance fees set forth above. However, notwithstanding any greater discount
provided by OEM Partner to its customers, OEM Partner shall pay Synopsys the
license and maintenance fees set forth above.
2. SALES BY OEM PARTNER'S DISTRIBUTORS
In addition, OEM Partner may allow the following three (3) Distributors to
re-sell the FPGA Express Lite product on the PC Platform only:
Actel
CONFIDENTIAL
20
<PAGE>
Lattice
Lucent
The above-listed Distributors may not advertise, issue press releases, or
distribute printed marketing materials using the product name "FPGA Express". In
addition, such Distributors may not resell the FPGA Express Licensed Software as
defined in Exhibit A, Section l(a).
The above-listed Distributors may resell the FPGA Express Lite Licensed Software
as defined in Exhibit A, Section 1(b) during the term of this agreement. These
Distributors may sell an unlimited number of FPGA Express Lite licenses with
size restrictions described in Exhibit A, Section 5, for a fee of $50,000 per
calendar quarter, in advance, to be paid to Synopsys by OEM Partner for each of
the three (3) OEM Partner Distributors identified above, commencing with the
calendar quarter beginning on April 1, 1999. Synopsys agrees that the payment
due on April 1, 1999 shall have terms of net 90 days such that the April 1, 1999
payment shall he paid on July 1, 1999 together with the July 1999 payment. These
above listed Distributors may sell the size unrestricted version of FPGA Express
Lite as an upgrade to the such restricted version, and OEM partner will pay
Synopsys a royalty of $640.00 (32% royalty of $2000 suggested list price) for
each such upgrade. The parties agree to negotiate in good faith an increase in
the above-listed Distributor fees which is proportional to any change in terms
as between OEM Partner and such Distributors.
In the event that an End User who purchased a copy of FPGA Express Lite from OEM
Partner or one of OEM Partner's Resellers purchases an "upgrade" to FPGA Express
from OEM Partner, then OEM Partner will owe Synopsys a royalty of fifty percent
(50%) of the standard royalty set forth in Item 1 of this Exhibit for the base
product and one hundred percent (100%) of the standard royalty set forth in Item
1 of this Exhibit for any additional products, subject also to said end User
certifying to its discontinued use of the FPGA Express Lite product.
3. OEM Partner shall prepare a report detailing all sales during each
fiscal quarter of this Agreement and shall provide such report to
Synopsys and make quarterly payments to Synopsys, in the amounts
described in Item 1 of this Exhibit, for all sales of the Licensed
Software and maintenance during the previous fiscal quarter, within
thirty (30) days of the end of each fiscal quarter.
4. From the Effective Date until March 31, 1999, OEM Partner will not owe
Synopsys royalties for Licensed Software provided to universities who
agree to use such Licensed Software for educational purposes only
("Educational Users"). Thereafter, OEM Partner will have the
opportunity to provide an unlimited number of copies of the Licensed
Software to Educational Users during the Term of this Agreement for a
fee of Ten Thousand Dollars ($10,000) per calendar quarter, payable
quarterly, in advance. OEM Partner will provide Synopsys with quarterly
reports identifying the universities
CONFIDENTIAL
21
<PAGE>
to which the Licensed Software is provided. OEM Partner will provide
Synopsys with 90 days prior notice of its intention not to renew this
option.
5. From the Effective Date through December 31, 1998, existing OEM Partner
customers who have previously purchased licenses for the OEM Partner's
Aurora or ViewSynthesis products will receive an upgrade to a
comparable configuration of FPGA Express at no charge. Thereafter, any
such upgrades are subject to the pricing set forth in Section 1 of this
Exhibit B.
6. REPORTS. On a quarterly basis, OEM Partner shall provide Synopsys with
reports identifying all Licensed Software and maintenance sold or
distributed, the purchase order number, the date of the transaction,
the OEM Partner catalog number, and the fee paid to Synopsys for each
such license or maintenance contract. In the case of Licensed Software
sold by Actel, Lattice, and Lucent, OEM Partner is only required to
report the total number of copies of the Licensed Software distributed
by each Distributor.
Upon reasonable notice, Synopsys may request reasonable access to OEM
Partner's facilities to review OEM Partner's license generation process
and data as it pertains to information about licenses generated for End
Users of Actel, Lattice and Lucent.
CONFIDENTIAL
22
<PAGE>
EXHIBIT C
VIEWLOGIC END USER LICENSE AGREEMENT
(SEE ATTACHED)
CONFIDENTIAL
23
<PAGE>
MASTER SOFTWARE LICENSE AGREEMENT
Licensee:________________________________________________
Address:________________________________________________
_______________________________________________
_______________________________________________
By: _______________________________________________
Name: _______________________________________________
Title: _______________________________________________
Date: _______________________________________________
Viewlogic Systems, Inc.
By: _______________________________________________
Name: _______________________________________________
Title: _______________________________________________
Date: _______________________________________________
This Master Software License Agreement ("Agreement") with an effective date of
_______________ is made by and between Viewlogic Systems, Inc., a Delaware
corporation and an Equal Opportunity and Affirmative Action Employer and its
subsidiaries (collectively "Viewlogic") and Licensee. This Agreement shall
govern all licensing of Software, Peripherals and Documentation as those items
are defined in this Agreement.
A complete description of the Licensed Products is contained in the Product
Description Addendum described below and incorporated herein.
A complete description of the software support services provided under this
Agreement is contained in the Software Maintenance Agreement Addendum described
below and incorporated herein.
1. DEFINITIONS.
1.1 "Designated Equipment" means the equipment as set forth in the Product
Description Addendum, or any temporary substitute as specified at
Section 3.6 below. Any transfer of the Designated Equipment shall be
subject to the provisions of Sections 3.4 & 3.5.
1.2 "Designated Location" means the specific address of the Designated
Equipment as set forth in the Product Description Addendum. Any change
in the Designated Location shall be subject to the provisions of
Sections 3.4 & 3.5.
1.3 "Documentation" means the documentation for the Software.
1.4 "Licensed Products" means two products licensed under this
Agreement described in to Product Description Addendum attached hereto.
Generally, the term shall include the Documentation, Peripherals and
Software.
1.5 "Peripherals" means the mouse, software code block and cable furnished
to Licensee under this Agreement for use with the Software.
1.6 "Product Description Addendum" or Addenda is one or more documents
attached hereto, and any additions after the effective date of this
Agreement, that specifies the Licensed Products for use on the
Designated Equipment at the Designated Location. This Addendum may be
the Viewlogic quotation or any other suitable document accepted by
Viewlogic which contains the required information.
1.7 "Proprietary Information" means: (a) manufacturing processes, (b)
marketing business or other strategies or plans; and (c) any other
trade secrets disclosed in writing and marked appropriately or
identified as proprietary or confidential. "Proprietary information"
includes the internal design and implementation techniques of the
Licensed Products, and the source code of the Software. Excluded is any
information that the receiving party can establish was: (d) in the
public domain; (e) already in its possession, or rightfully known prior
to receipt; (f) rightfully learned from a third party not in violation
of any others proprietary rights; or (g) developed independently.
1.8 "Software" means the computer program or programs in
machine readable form furnished to License under this
Agreement. Such software may include software provided
by Viewlogic's suppliers for sublicensing hereunder as well
as software that Viewlogic owns. In with the Software
Maintenance Agreement Addendum attached hereto,
"Software" shall also include any update or upgrade
programs furnished thereunder.
1.9 "Software Maintenance Agreement" means that agreement for software
support services if any, set forth in the Software Maintenance
Agreement Addendum attached hereto and
incorporated herein.
1.10 "Territory" means the country of the Designated Location.
1.11 "Updates" are now releases of a particular Software program.
1.12 "Upgrades" are programs with a higher Viewlogic series
number or greater capability than the program to be
upgraded.
1.13 "Use" includes copying all or any portion of the Software into a
computer or transmitting it to a computer for processing of its
instructions, and/or displaying any portion of the Software in
connection with the processing of such machine instructions.
2. PAYMENT, DELIVERY AND INSTALLATION.
2.1 Prices. Unless otherwise agreed in writing, prices will be as set forth
an Viewlogic's price list in effect for the Designated Equipment and
the Designated Location. Any subsequent change in the Designated
Equipment or Location may be
subject to new pricing per Section 3.4.
2.2 Payment. Unless otherwise agreed in writing, Licensee shall pay
Viewlogic in full for all Licensed Products within thirty (30) days of
the invoice date.
2.3 Installments. Licensee shall pay for each installment delivery of
Licensed Products as a separate transaction.
2.4 Delivery. Viewlogic and/or its suppliers will deliver the Licensed
Products FOB origin under a mutually agreed delivery schedule at
Licensee's expense.
2.5 Installation. licensee shall be solely responsible to install the
Licensed Products unless otherwise agreed upon in writing.
3. LICENSE GRANT.
3.1 Grant. Viewlogic hereby grants, and Licensee accepts, a
nontransferable, nonsublicensable, perpetual, nonexclusive,
fully
Version 1.0 24 1 December 1995
<PAGE>
paid, limited license to use the Licensed Products in machine readable
form on the Designated Equipment at the Designated Location for
Licensee's internal, normal business use only. The Licensed Products
are not for use in a computer service business, rental or commercial
timesharing arrangement.
3.2 Intellectual Property Rights. All intellectual property rights in and
to the Licensed Products, other than those granted under this
Agreement, shall remain the sole and exclusive property of Viewlogic
and/or its suppliers as appropriate.
3.3 Use on Designated Equipment. Use is restricted to the
Designated Equipment at the Designated Location, whether a
single computer or a network. Accessing the Licensed
Products from any location other than the Designated
Location via wide area networking technology or any other
means is prohibited unless authorized by the Product
Description Addendum. The addition of any networked
computer beyond that specified in the Product Description
Addendum or a change in the Designated Location unless
authorized in advance by Viewlogic as provided in Section
3.4 shall breach this Agreement.
3.4 Transfers. Viewlogic may, at its sole option, grant Licensee's request
for a change in the Designated Equipment or Designated Location within
the Territory. Licensee must pay Viewlogic an administrative fee for
any change granted by Viewlogic.
3.5 Licensee to Certify Equipment and Location. Licensee shall, upon
request from Viewlogic certify to Viewlogic in writing the current
Designated Equipment and Designated Location.
3.6 Substitute Designated Equipment. In the event that the Designated
Equipment becomes inoperative due to malfunction, repair, servicing or
other like cause, and the terms of the Software Maintenance Agreement
remain in effect, Viewlogic shall use it commercially reasonable
efforts to assist Licensee upon Licensee's request in the transfer to
and use of the Licensed Products on a substitute system at the
Designated Location. The substitute system shall be deemed the
Designated Equipment during its use. If the Software Maintenance
Agreement or its equivalent is not then in effect, Licensee shall pay
Viewlogic's list price transfer fee.
3.7 Automatic License; Payment. Licensee acknowledges and agrees that any
use of the Licensed Products on other than the Designated Equipment at
the Designated Location will materially breach this Agreement. However,
Viewlogic may elect not to terminate, but to give notice to Licensee
that Licensee is deemed to order and accept a license for each
breaching use. Licensee shall then become liable to pay Viewlogic the
applicable list price license and support fees under the payment terms
of Section 2 effective as of the date of such breach.
4. PROTECTION OF PROPRIETARY INFORMATION.
4.1 Confidentiality. The Propriety Information of Viewlogic shall remain
confidential and proprietary to Viewlogic.
4.2 Source Code. Licensee agrees not to attempt to reverse engineer,
decompile, or disassemble the Software or any portion thereof, or
otherwise derive its source code.
4.3 Copies. Licensee may make backup and archival copies of the Software
and Documentation solely for its internal use, retaining on all copies
Viewlogic's and/or its suppliers' copyright, trademark, or other
proprietary notices.
4.4 Destruction of Copies. Licensee shall erase the Software from the
storage media of any Designated Equipment prior to disposing of or
refiring such equipment from active use or in the event of termination
of this Agreement Licensee also must destroy all other copies upon such
termination.
4.5 Inclusion With Other Software. Licensee may use the Software within or
in conjunction with any other software, but must comply with Section
4.4 above upon any termination of this Agreement or change of the
Designated Equipment or Location, and any use shall always remain
subject to this Agreement. Licensee shall display Viewlogic's or its
suppliers' copyright trademark or other proprietary notices an any
portion of the Software used.
4.6 Protect Confidentiality. Licensee agrees not to disclose, provide or
otherwise make available the Proprietary Information of Viewlogic to
any person other than authorized employees without Viewilogic's prior
written consent. Licensee agrees to protect the Proprietary Information
through instructions to its employees, access limitations and the like,
no less securely than if it were the Licensee's own intellectual
property. No media containing the Software, or any Documentation shall
be transferred, reproduced or used in any way other than as provided by
this Agreement
4.7 Certify Protection. Viewlogic shall give Licensee written notice if
Viewlogic reasonably deems itself insecure with respect to Licensees
compliance with the protections of Sections 3 and 4. Licensee shall
then within ten (10) days of the notice, either certify in writing by a
duly authorized representative that it has complied with the terms of
those Sections or give Viewlogic access to its facilities in a manner
that is sufficient to enable Viewlogic to verify compliance.
5. SOFTWARE MAINTENANCE.
Viewlogic shall provide, and Licensee shall accept, software maintenance
services under the Software Maintenance Agreement Addendum at Viewlogic's then
current maintenance fee for an initial term of one year after expiration of the
Software warranty period, renewable year to year until termination occurs under
the said Software Maintenance Agreement. Termination will end any support
obligations of Viewlogic, and Licensee shall incur reinstatement charges in the
event of a lapse and subsequent renewal.
6. WARRANTY.
6.1 Software. Viewlogic warrants that the Software will conform
substantially to its Documentation for thirty (30) days from delivery.
If Viewlogic confirms a defect, reported by Licensee, in the unaltered
Software, Viewlogic shall use commercially reasonable efforts to remedy
to nonconformance. Viewlogic does not warrant that the
operation of any of the Licensed Products will be uninterrupted or
error free, nor does it guarantee that its remedial efforts will
correct any nonconformance.
6.2 Media and Peripherals. Viewlogic warrants that the media containing the
Software and the Peripherals will be free of defects in materials and
workmanship under normal use and service for (30) days from delivery.
Viewlogic's entire liability and Licensee's sole remedy for defective
media or Peripherals shall be for Viewlogic to replace any returns
within the warranty period. Viewlogic will not replace failures that
are not returned or that we caused by accident, abuse, or
misapplication. Any replacements will be warranted for the remainder of
the original warranty period.
6.3 DISCLAIMER. VIEWLOGIC MAKES NO WARRANTY OF ANY KIND, WHETHER EXPRESSED
OR IMPLIED, WRITTEN OR ORAL, EXCEPT AS EXPRESSLY STATED IN THIS SECTION
6. SPECIFICALLY, VIEWLOGIC MAKES NO IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR
Version 1.0 25 1 December 1995
<PAGE>
PURPOSE OR FREEDOM FROM INFRINGEMENT FOR THE LICENSED
PRODUCTS.
7. INFRINGEMENT.
7.1 Viewlogic to Defend. Viewlogic will defend, at its own expense, any
action against Licensee based upon the claim that the Licensed Products
infringe a United States patent or copyright or involve
misappropriation of a trade secret. Viewlogic will pay such damages or
costs as are finally awarded against Licensee for such infringement or
misappropriation provided that Licensee gives Viewlogic: (a) prompt
written notice of any such action and of an prior related claims; (b)
sole control of the defense and/or settlement of such action; and (c)
cooperates fully in any defense or settlement. Viewlogic shall not be
liable for any fees, costs or damages incurred without such prior
notice.
7.2 Obtain Permission or Modify. Should any Licensed Product become, or in
Viewlogic's opinion be likely to become, the subject of a claim of
infringement or trade secret misappropriation, Viewlogic shall, at its
option and expense: (a) obtain for Licensee the right to continue using
the Licensed Product; (b) replace or modify the Licensed Product so its
use becomes noninfringement or otherwise lawful; or (c) terminate the
licenses granted hereunder with respect to the infringing Licensed
Products and refund the amounts paid by Licensee for the infringing
Licensed Products, less a reasonable allowance for use.
7.3 Disclaimer. Notwithstanding the foregoing. Viewlogic shall have no
liability for any claim of patent or copyright infringement or trade
secret misappropriation based upon the operation or use of any Licensed
Products: (a) on a computer for which it was not designed; (b) with any
other software not supplied by Viewlogic; (c) in any manner or purpose
for which the Licensed Products were not designed or recommended by
Viewlogic; (d) if the infringement or misappropriation would have been
avoided by Licensee's use of the most current version of the Licensed
Product; or (e) which have been modified by anyone other than
Viewlogic.
8. LIMITATION OF REMEDIES.
8.1 No Other Liability. Except as otherwise stated in this Agreement,
Viewlogic's entire liability to Licensee and Licensee's sole remedy for
any cause whatsoever, regardless of the form of the action, whether in
contract tort or strict liability, shall be limited to the amounts paid
to Viewlogic by Licensee for the Licensed Products that: (a) caused the
damages; (b) are the subject matter of the action; or (c) are directly
related to the cause of action.
8.2 NO CONSEQUENTIAL, ETC. DAMAGES. IN NO EVENT SHALL VIEWLOGIC OR ANY OF
ITS SUPPLIERS BE LIABLE FOR DAMAGES RESULTING FROM LOSS OF DATA, LOSS
OF PROFITS IN CONNECTION WITH USE OF ANY LICENSED PRODUCTS OR OTHER
ITEMS PROVIDED UNDER THIS AGREEMENT, NOR FOR COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS, PROPERTY DAMAGE, PERSONAL INJURY, OR ANY OTHER
SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT WHETHER IN BREACH OF WARRANTY,
CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE EVEN IF VIEWLOGIC HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8.3 Limitations Period. Neither party may bring any action under this
Agreement for any cause whatsoever more than two (2) years after the
occurrence giving rise to such cause of action, provided however that
this Section 8.3 shall not apply to any action brought by Viewlogic for
violations of Section 3 or Section 4 of this Agreement and/or actions
brought by Viewlogic to protect its intellectual property rights.
9. DEFAULT AND TERMINATION.
9.1 Default. Viewlogic may, by written notice to Licensee, terminate this
Agreement including its license of the Licensed Products it any of the
following events occurs: (a) the failure or neglect of Licensee to pay
Viewlogic any sums or amounts due to Viewlogic if payment is not
rendered within thirty (30) days attar written demand; (b) any breach
of the material terms and obligations of this Agreement are not
remedied within thirty (30) days after written demand; (c) any material
breach of Section 3 (License Grant) or Section 4 (Protection of
Proprietary Information) effective immediately upon notice from
Viewlogic; or (d) in the event of insolvency.
9.2 Termination. Licensee's right to use the Licensed Products shall cease
upon termination without further action of the parties. Within seven
(7) days of termination, Licensee shall return to Viewlogic the
Licensed Products, including the original and all copies of the
Documentation, Peripherals, and the Software and any Updates or
Upgrades thereto, together with a certification by a duly authorized
representative of Licensee that any copies of the Software not returned
have been destroyed.
9.3 No Waiver. Termination shall be in addition to, rather than a
waiver of, any remedy at law or equity under this
Agreement.
9.4 Survival. Notwithstanding the foregoing, the provisions of Sections 4
("Protection of Proprietary Information"), 6.3 ("[Warranty]
Disclaimer"), 7 ("Infringement"), & 8 ("Limitation of Remedies"), shall
survive termination.
10. GENERAL
10.1 Prior Agreements Superseded. This Agreement along with the Software
Maintenance Agreement Addendum supersedes all prior agreements and
understandings between the parties related to the subject matter
herein, and is intended to be the complete and exclusive statement of
their agreement.
10.2 Headings. The headings in this Agreement are for convenience only, and
shall be disregarded when interpreting the terms hereof.
10.3 Export Controls. Licensee shall not attempt to export the Licensed
Products without the prior written consent of Viewlogic. Any attempt to
export the Licensed Products without Viewlogic's consent will be cause
for immediate termination of this Agreement.
10.4 No Assignment. Viewlogic may assign all or any part of its rights and
duties under this Agreement. This Agreement and the Licensee's rights
and duties under this Agreement may not be assigned by Licensee without
the prior written consent of Viewlogic. Licensee agrees that this
Agreement binds Licensee and each of its employees, agents, and persons
associated with it, including Licensee's affiliated and subsidiary
firms, corporations and other organizations.
10.5 Force Majeure. Viewlogic shall not be liable for any failure or delay
in performing services or any other obligation under this Agreement or
for any damages suffered by Licensee by reason of such failure or delay
which is, indirectly or directly, caused by
Version 1.0 26 1 December 1995
<PAGE>
strike, riot, natural catastrophe or other act of God, or any cause
beyond Viewlogic's reasonable control.
10.6 No Waiver. If either party fails to perform any of its obligations
hereunder and the other party fails to enforce the provisions relating
thereto, such party's failure to enforce this Agreement shall not
prevent its later enforcement.
10.7 Severability. If any provision of this Agreement is held invalid,
illegal or unenforceable, that provision shall be construed so as to
most closely reflect the original intent of the parties, but still be
enforceable, and the remaining provisions shall continue tin full force
and effect.
10.8 Notices. Any notice or report shall be considered given if delivered
personally or if sent by first class mail, postage prepaid, addressed
to the address specified below and specifically addressed to the person
to whom notices are to be sent as follows:
If to Licensee: Attn: __________________________________________
If to Viewlogic: Attn: Contracts Administration
The parties may change such addresses by providing notice to the
other.
10.9 Governing Law. This Agreement and all transactions hereunder shall be
governed by the laws of the Commonwealth of Massachusetts.
10.10 Attorney Fees and Costs. If any legal action is brought in connection
with this Agreement, the prevailing party shall be entitled to receive
its reasonable attorney fees and court costs in addition to any other
relief it may receive.
10.11 Modifications. No modifications of this Agreement shall be binding upon
either party unless made in writing executed by an authorized
representative of Viewlogic and Licensee.
10.12 Government Use. If the Software is being supplied to the
Department of Defense (DOD), the Software is classified as
"Commercial Computer Software" and the Government is
acquiring only "restricted rights" to the Software and
concerning the documentation the government is acquiring
only "restricted rights" (as defined in DFARS Clause
252.227-7013). If the Software is being supplied to an agency
or unit of the Government other than DOD, the Software is
classified as "Commercial Computer Software" and the
Government is acquiring only "restricted rights" to the
Software and Documentation (as defined in FAR Clause
52.227-19).
IN WITNESS WHEREOF the parties have executed this Agreement by their duly
authorized representatives as of the effective date.
Version 1.0 27 1 December 1995
<PAGE>
28
<PAGE>
EXHIBIT 10.43
SOFTWARE ASSIGNMENT AND LICENSE AGREEMENT
This Software Assignment and License Agreement ("Agreement") is entered into
effective as of this 2nd day of October, 1998 ("Effective Date"), by and between
Synopsys, Inc., a Delaware corporation having a principal place of business at
700 E. Middlefield Road, Mountain View, CA 94043 ("Synopsys "), and Viewlogic
Systems, Inc., a Delaware corporation having a principal place of business at
293 Boston Post Road West, Marlboro, MA 01752 ("Viewlogic").
WITNESSETH
WHEREAS, Synopsys is willing to assign its interests in certain of its software
to Viewlogic subject to the terms hereof;
WHEREAS, Synopsys is willing to grant patent licenses to Viewlogic to make, use
and sell the Assigned Software in Systems Level applications;
WHEREAS, Synopsys is willing to assign its interests in certain executory
software contracts relating to Assigned Software to Viewlogic;
WHEREAS, Viewlogic wishes to obtain such assignments and licenses for the
purpose of developing, marketing, licensing, supporting and maintaining software
products for Systems Level applications.
NOW THEREFORE
In view of the foregoing premises and the mutual covenants set forth herein, the
parties agree as follows:
1.0 DEFINITIONS
AFFILIATE: A corporation, company, or other legal entity now or
hereinafter controlling, controlled by or under common control with a
party hereto, for so long as such ownership or control exists. For the
purposes of this definition, control shall refer to a greater than 50%
interest in the right to make decisions for such entity, e.g., greater
than 50% ownership of the voting shares or securities of such entity.
ASIC: Application specific integrated circuit.
ASSIGNED SOFTWARE: That computer software listed on Exhibit A hereto, as
it exists on the Effective Date, in source code and object code forms,
including all files, manuals, flow charts, libraries, documentation and
comments that form a part of, describe the
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use of or are necessary for the use of such software. Assigned Software
shall not, however, include any code licensed from third parties, if any.
ENHANCEMENT: means an embodiment of an Assigned Software product that
delivers bug-fixes, minor improvements, incremental features or
improvements of existing features, and/or functionality to the Licensed
Software.
FPGA INTERNAL: The field-of-use, pertaining to the design, test,
verification, simulation, and emulation of a single field programmable
gate array, however, for the purposes of this Agreement, FPGA Internal
expressly excludes synthesis, timing, and verilog simulation
functionality. Furthermore, in no event shall FPGA Internal be construed
to include any functionality directed principally toward an ASIC.
IC: Integrated circuit.
PCB: Printed circuit board.
GRANT-BACK SOFTWARE: Those elements of the Assigned Software set forth in
Exhibit B1 and Exhibit B2.
SOFTWARE AGREEMENTS: All agreements, contracts, warranties and other
documents in Synopsys' name relating exclusively to the Assigned
Software, and all severable portions of all agreements, contracts,
warranties and other documents relating both to the Assigned Software and
other Synopsys software not being assigned to Viewlogic hereunder.
SUCCESSOR: a software product which replaces an Assigned Software product
and which encompasses a substantial portion of the functionality of such
replaced product.
SYNOPSYS PATENT RIGHTS: All claims of all United States and foreign
patents and patent applications owned, controlled or licensable by
Synopsys or its Affiliates on the Effective Date, or any divisional,
continuation, reissue, renewal or reexamination patent issuing therefrom
(including any foreign counterparts) that read upon an item of Assigned
Software or its use as contemplated in the applicable documentation.
SYSTEMS LEVEL: Refers to the field-of-use pertaining to the design, test
and timing analysis, verification, simulation, and emulation of systems
comprising discrete IC components and associated electrical
interconnections. However, the term "Systems Level" expressly excludes
the design, test and timing analysis, verification, simulation, and
emulation of individual IC components or circuit sub-elements contained
therein ("IC field-of-use"). Notwithstanding the foregoing nominal or
incidental capabilities or applicability of software in regard to the
design, test, verification, simulation, or emulation of individual ICs or
sub-elements thereof shall not be deemed to render
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otherwise Systems Level software within the IC field-of-use, provided
that such software is directed principally and substantially to Systems
Level applications or PCB applications and not directed substantially to
the IC field-of-use.
UPGRADE: means an embodiment of an Assigned Software product that
delivers substantial performance improvements, architectural changes or
new features and/or functionality to such product.
2.0 ASSIGNMENT OF ASSIGNED SOFTWARE AND ASSIGNED AGREEMENT
2.1 ASSIGNED SOFTWARE. Synopsys hereby unconditionally and irrevocably
sells, transfers, conveys, assigns and delivers its entire right, title, and
interest in and to the Assigned Software, including all copyright, trade secret,
know-how, and other intellectual property rights necessarily and inherently
embodied in the Assigned Software (but excluding the Synopsys Patent Rights) to
Viewlogic, and Synopsys hereby conveys to Viewlogic good and marketable title to
the Assigned Software, free and clear of all liens, mortgages, pledges, security
interests, prior assignments and encumbrances of any kind or nature whatsoever.
2.2 SOFTWARE AGREEMENT. Synopsys hereby unconditionally and irrevocably
sells, transfers, conveys, assigns and delivers the Software Agreements to
Viewlogic, including all rights and obligations of Synopsys thereunder, and
will take reasonable steps to convey Viewlogic good and marketable title to
the Software Agreements, free and clear of all liens, mortgages, pledges,
security interests, prior assignments, encumbrances. Synopsys will use its
best reasonable efforts to deliver to Viewlogic all Software Agreements no
later than thirty (30) days following the Effective Date. Until such
Software Agreements or portions thereof are duly assigned to Viewlogic,
Synopsys shall permit Viewlogic to enjoy the benefits of all such Software
Agreements, including all license, maintenance and other revenues associated
therewith to the extent that such revenues arise from billings issued after
September 4, 1998 (which Synopsys shall promptly forward to Viewlogic); and
Viewlogic hereby agrees to perform all obligations of Synopsys thereunder,
including obligations of support and maintenance.
2.3 FURTHER ASSURANCES. At any time and from time to time after the
Effective Date, at Viewlogic's request and sole expense, Synopsys promptly shall
execute and deliver, and shall cause its Affiliates to execute and deliver, such
instruments of sale, transfer, conveyance, assignment and confirmation, and take
such other action, as Viewlogic may reasonably request to more effectively
transfer, convey and assign to Viewlogic, and to confirm Viewlogic's title to,
all of the Assigned Software and Software Agreements, to put Viewlogic in actual
possession and operating control thereof, to assist Viewlogic in exercising all
rights with respect thereto and to carry out the purpose and intent of this
Agreement.
3.0 PATENT LICENSE
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3.1 LICENSE. Synopsys hereby grants to Viewlogic and its Affiliates under
the Synopsys Patent Rights a personal, nonexclusive, perpetual, irrevocable,
worldwide, royalty-free, fully-paid up, right and license to make, have made,
use, have used, sell and have sold the Assigned Software and any Enhancements,
Upgrades, and Successors thereto, in Systems Level and FPGA Internal
applications.
3.2 THIRD PARTY PATENT RIGHTS. In the event that Synopsys becomes aware that
the grant of any license described in Section 3.1 with respect to any Synopsys
Patent Right licensed by Synopsys from a non-Affiliate third party licensor
would require Synopsys to pay any royalty or other amount to such third party
licensor, then Synopsys shall notify Viewlogic of such required payment and,
unless Viewlogic agrees to pay such royalty or other amount in respect of its
license of such Synopsys Patent Right, such Synopsys Patent Right shall not be
included in the license granted above.
3.3 The Assigned Software, as used and understood on the Effective Date, is
within the Systems Level and FPGA Internal applications.
4.0 GRANT BACK
4.1 LICENSE. Viewlogic hereby grants to Synopsys and its Affiliates a
nonexclusive, worldwide, royalty-free, fully-paid up, perpetual license (a)
to use, modify and prepare derivative works of the Grant-Back Software in
Exhibit B1 in source code and object code form to develop products that are
outside the Systems Level field of use; (b) to distribute and display the
Grant-Back Software in Exhibit B1 in object code form only, and only as
incorporated into Synopsys products outside of Systems Level applications.
Synopsys shall have no right to grant sublicenses of the license granted in
clause 4.1(a) above. Viewlogic hereby grants to Synopsys and its Affiliates
a nonexclusive, worldwide, royalty-free, fully-paid up, perpetual license to
use the Grant-Back Software in Exhibit B2 consistent with the terms of the
license from Interra involving the Grant-Back Software in Exhibit B1.
4.2 OEM OF GALAXY SIMULATION GUI. For a period of six (6) months from the
Effective Date, Synopsys shall have the option to license and distribute from
Viewlogic as an original equipment manufacturer (OEM) the Galaxy Simulation GUI
on commercially reasonable terms and conditions. Any such OEM agreement shall
include royalty, maintenance, and support provisions. During such six (6) month
period, Viewlogic shall provide to Synopsys, at no charge, a limited number of
thirty (30) day evaluation licenses to binaries capable of demonstrating the
Galaxy Simulation GUI.
5.0 CONFIDENTIALITY
5.1 The source code to the Assigned Software shall be treated as
"Confidential Information" of Viewlogic by Synopsys. Information relating to
unissued patent applications of Synopsys, and other confidential technical
information of Synopsys
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SYNOPSIS CONFIDENTIAL
<PAGE>
provided to Viewlogic hereunder (other than information relating directly to the
Assigned Software) shall be treated by Viewlogic as Confidential Information of
Synopsys.
5.2 Each party agrees that it will not disclose, publish, or disseminate
Confidential Information of the other to anyone other than those of its
employees with a demonstrated need to know, and further agrees to take
reasonable precautions to prevent any unauthorized use, disclosure,
publication, or dissemination of Confidential Information. The parties agree
to use the Confidential Information solely for the purposes contemplated by
this Agreement and not otherwise for their own or any third party's benefit.
5.3 The obligations of confidentiality contained in this Section will not
apply to the extent that it can be established by the recipient of
"Confidential Information" hereunder that such Confidential Information: a)
was generally available to the public or otherwise part of the public domain
at the time of its disclosure to the recipient; b) became generally available
to the public or otherwise part of the public domain after its disclosure and
other than through any act or omission of the recipient in breach of this
Agreement; c) was rightfully disclosed to recipient by a third party without
restriction; or d) is documented to have been independently developed by a
party without reference to the other party's Confidential Information by
employees who have had no access to the relevant Confidential Information.
5.4 The provisions of this Section 5 will survive any termination or
expiration of this Agreement.
5.5 Notwithstanding anything to the contrary herein, Synopsys, shall have the
right, during the term of this Agreement and thereafter, to use any Residual
Information (as hereinafter defined) resulting from its prior exposure to the
Assigned Software, subject only to Viewlogic's valid copyright and patent
rights, however, the provisions of this paragraph shall not be deemed to
authorize Synopsys to publish Viewlogic Confidential Information. Residual
Information shall mean that information which is of general application in
nature and which is retained in the mind of an employee of Synopsys without
further or subsequent reference to the Assigned Software (provided that such
employee has not made any deliberate effort to memorize Viewlogic Confidential
Information).
6.0 CONSIDERATION
In consideration of the rights granted hereunder, Viewlogic shall pay to
Synopsys on the date hereof the sum of Fifteen Million Five Hundred Thousand
Dollars ($15,500,000).
7.0 WARRANTIES AND DISCLAIMERS
7.1 HARMFUL CODE. Synopsys represents and warrants that, to its knowledge,
the Assigned Software is free from all computer viruses, worms, time outs, back
doors, time bombs,
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SYNOPSIS CONFIDENTIAL
<PAGE>
disabling devices and other harmful or malicious code intended to damage,
disrupt, inconvenience or permit access to the user's or another's software,
hardware or networks.
7.2 INTELLECTUAL PROPERTY. Synopsys represents and warrants that, to its
knowledge, Assigned Software does not infringe upon the patent, copyright,
trademark, trade secret or other intellectual property rights of any third
party.
7.3 TREATMENT OF ASSIGNED SOFTWARE. Synopsys represents and warrants that
from December 4, 1997 through the Effective Date, inclusive:
a. Synopsys, to its knowledge, has not published, disclosed or
licensed the source code or system documentation of the Assigned Software to any
third party, and has not at any time made the Assigned Software or any portion
thereof available to third parties as freeware, shareware or on any other
unrestricted basis, other than portions of the Assigned Software that may have
been deposited into source code escrow under obligations of confidentiality and
subject to contingent license grants pursuant to the ordinary course of conduct
of Synopsys' business, of which Synopsys has made Viewlogic aware prior to the
Effective Date;
b. Synopsys has not granted any exclusive license to any portion of
the Assigned Software to any third party;
c. Synopsys has licensed the Assigned Software, in object code form,
to resellers and end users only pursuant to forms of reseller, distributor,
sales representative, OEM, VAR, and end user agreements which have been provided
to Viewlogic;
d. Except as expressly provided for herein or as may otherwise be
agreed to in writing by Viewlogic, Synopsys and its Affiliates shall use best
reasonable efforts to remove any manifestation, listing or embodiment of the
Assigned Software, except for the Jaguar VHDL Front End, on any storage device
or medium after thirty (30) days from the Effective Date. Viewlogic and
Synopsys will each be responsible for establishing their own maintenance
arrangements with Interra after the Effective Date.
7.4 SOFTWARE AGREEMENTS. Synopsys represents and warrants that:
a. each Software Agreement is a valid and binding agreement of
Synopsys enforceable against Synopsys in accordance with its terms and
Synopsys does not have any knowledge that any Software Agreement is not a
valid and binding agreement of the other parties thereto;
b. Synopsys has fulfilled all material obligations required pursuant
to the Software Agreements to have been performed by Synopsys on its part prior
to the Effective Date;
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<PAGE>
c. Synopsys is not in breach of or default under any Software
Agreement and no event has occurred which with the passage of time or giving of
notice or both would constitute such a default, result in a loss of rights, or
result in the creation of any lien, charge or encumbrance, thereunder or
pursuant thereto; and
d. to the best knowledge of Synopsys, there is no existing breach or
default by any other party to any Software Agreement, and no event has occurred
which with the passage of time or giving notice or both would constitute a
default by such other party, result in a loss of rights or result in the
creation of any lien, charge or encumbrance thereunder or pursuant thereto.
7.5 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ASSIGNED SOFTWARE
AND THE GRANT-BACK SOFTWARE, INCLUDING ANY DOCUMENTATION PERTAINING THERETO,
ARE ASSIGNED AND LICENSED "AS IS," AND NEITHER PARTY MAKES ANY WARRANTIES
WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE REGARDING THE ASSIGNED
SOFTWARE AND THE GRANT-BACK SOFTWARE. THE PARTIES SPECIFICALLY DISCLAIM ANY
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, OR ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE.
7.6 Neither party warrants or represents that the fights granted hereunder
will result in commercially acceptable product lines.
7.7 This Agreement does not confer by implication, estoppel, laches or by any
other means any license or any right other than those expressly granted herein.
7.8 The parties acknowledge and agree that, notwithstanding any other
provision herein, no trademark licenses are granted under this Agreement.
7.9 The warranties set forth in this Section 7 shall have a duration of three
(3) years from the Effective Date.
7.10 SYNOPSYS KNOWLEDGE. Synopsys representations and warranties in this
Agreement are limited only to Parent Knowledge as defined in the Stock Purchase
Agreement entered concurrently herewith.
8.0 LIMITATION OF LIABILITY
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES ARISING IN ANYWAY OUT OF THIS AGREEMENT OR THE USE OF
THE ASSIGNED SOFTWARE OR
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GRANT-BACK SOFTWARE, INCLUDING ANY DOCUMENTATION, HOWEVER CAUSED (WHETHER
ARISING UNDER A THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR
OTHERWISE), INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS, LOSS OF
DATA, OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES. THE
LIMITATIONS ON THE PARTIES' LIABILITY SET FORTH IN THIS PARAGRAPH SHALL APPLY
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY SET
FORTH HEREIN.
9.0 GENERAL PROVISIONS
9.1 CHOICE OF LAW. This Agreement will be governed by and construed in
accordance with the laws of the United States and the Commonwealth of
Massachusetts excepting that body of Massachusetts law governing conflicts of
law.
9.2 ASSIGNMENT. Neither this Agreement nor the licenses granted hereunder
may be assigned by either party without the prior written consent of the other
party, except that upon a merger, acquisition of all or substantially all of the
capital stock or assets of a party, such consent shall not be required.
9.3 NOTICES. Any notice, report, approval or consent required or permitted
hereunder shall be in writing and will be deemed to have been duly given if
delivered personally, by facsimile, or mailed by first-class, registered or
certified mail, postage prepaid to the respective addresses of the parties. If
to Synopsys, Attention: General Counsel. If to Viewlogic, Attention: President,
with a courtesy copy to John A. Burgess, Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts 02109. The address for notice may be changed by giving
written notice in accordance with this section.
9.4 NO WAIVER. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or any other
provision.
9.5 INDEPENDENT CONTRACTORS. The relationship of Synopsys and Viewlogic
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed (i) to give either party the
power to direct or control the day-to-day activities of the other or (ii) to
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking.
9.6 SECTION HEADINGS. The section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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<PAGE>
9.7 INTERPRETATION. The parties agree that this Agreement shall be fairly
interpreted in accordance with its terms without any strict construction in
favor of or against either party and that ambiguities shall not be interpreted
against the drafting party.
9.8 SEVERABILITY. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, to be unenforceable, that
provision of the Agreement will be enforced to the maximum extent permissible so
as to effect the intent of the parties, and the remainder of this Agreement will
continue in full force and effect.
9.9 ATTORNEYS' FEES. The prevailing party in any action to enforce the
Agreement shall be entitled to recover costs and expenses including, without
limitation, reasonable attorneys' fees.
9.10 INJUNCTIVE RELIEF. The parties agree that a material default of the
provisions of this Agreement by a party hereto could cause irreparable injury to
the other party for which monetary damages would not be an adequate remedy and
such other party shall be entitled to seek equitable relief, including
injunctive relief and specific performance, in addition to any remedies it may
have hereunder or at law.
9.11 FORCE MAJEURE. Nonperformance of either party shall be excused to the
extent that performance is rendered impossible by strike, fire, flood,
governmental action, failure of suppliers, earthquake, or any other reason where
failure to perform is beyond the reasonable control of the non-performing party.
9.12 ENTIRE AGREEMENT. This Agreement, including any Exhibits attached
hereto, which are hereby incorporated by reference, constitutes the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements or representations, oral or written, regarding
such subject matter. This Agreement may not be modified or amended except in a
writing signed by a duly authorized representative of both parties.
[SIGNATURE PAGE FOLLOWS IMMEDIATELY HEREAFTER.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives:
SYNOPSYS, INC. VIEWLOGIC SYSTEMS, INC.
By: /s/ Steven K. Shevick By: /s/ William J. Herman
--------------------- ---------------------
Name: Steven K. Shevick Name: William J. Herman
----------------- -----------------
Title: Vice President General Counsel Title: President
------------------------------ ---------
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<PAGE>
EXHIBIT A
ASSIGNED SOFTWARE
DX DATA MANAGER
DX DATABOOK
VIEWBASE FOR WINDOWS
VIEWDATABOOK II
VIEWDRAW (VO) PLUG-IN
VIEWLIBRARIAN
Library Studio
VIEWDRAW
VIEWDRAW FOR WINDOWS
ALLEGRO PCB INTERFACE
MENTOR:BOARDSTATION
PADS PCB INTERFACE
PCAD (TANGO) PCB INTERFACE
VERIBEST PCB INTERFACE
ZUKEN REDAC VISULA/CADSTAR I/F
CADvance I/F
VIEWPLD
VIEWPLD FOR WINDOWS
QUIET
QUIET EXPERT
QUIET EXTENSION FOR XTK
CONSTRAINT MANAGMENT SYSTEM
ISIS PREVUE
AC GRADE
TLC
XFX3D
XTK
XTK FOR WINDOWS
XTK 3D
PDQ
PERSONAL COMPUTER PCB CAD INTERFACE
PRECISE
ISIS Planner
WORKSTATION PCB CAD INTERFACES
ACTEL ACT 1
ACTEL ACT2
ALTERA MAX7000
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<PAGE>
Fusion GUI
FUSION/SPEEDWAVE
FUSION/VIEWSIM
LMC LM-SERIES FUSION & VCS MULTI
LMC LM-SERIES FUSION & VCS SINGLE
LMC MODEL SOURCE FUSION & VCS MULTI
LMC MODEL SOURCE FUSION & VCS SINGL
ZYCAD-XP INTERFACE-FUSION
HSPICE FUSION ENABLER
SABER FUSION ENABLER
SPICE INTEGRATION
SPICE INTEGRATION FOR WINDOWS
VIEWANALOG FUSION ENABLER
SPICELINK
ViewRF
Fusion IKOS Interface
Optium
Fusion / Eagle Interface
Fusion / Easy5 Interface
Viewsim XL
Speedwave MT
INTERFACE EDIF GRAPHICS
IntelliFlow
Javuar VHDL Front End
EXPT1076
PropheCE
PreVUE Interface to Mentor
PreVUE Interface to Viewlogic
TRACES
TRACES 3D
TRACES 3D w/o PDQ
Verilnet
VHDL2Sym
Sym2VHDL
Ordgen
EDIFNETO
EDIFNETI
WIRM
WIR2ABL
SCH2PRT
PRT2SCH
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STYX COMPILER INTERFACE W/ FUSION
CONCEPT SCHEMATICS INTERFACE
SAS VIEWSYMBOL
SCOUT
VASA SHERPA STORAGE MANAGER
POWERVIEW
WORKVIEW OFFICE POWERWORKS
SYSTEMPLANNER
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EXHIBIT B1
GRANT-BACK SOFTWARE
Synchronization Files:
- ------------------------------
stnsynch.h
stnsynch.c
vcssynch.h
vcssynch.c
Elaboration Files:
- ------------------------------
elabtop.c
elabtop.h
vcselab.c
Cosimulation Data Structures Files:
- ------------------------------
cosim.h
cosim.c
VCS Interface Files:
- ------------------------------
vcs.c vcs.h
vcsacc.c vcsacc.h
vcsnodlc.c vcssynch.h
vcssynch.c vcsuser.h
vcs_shell.c vcs_vdbapi.h
vcselab.c vcsfns.h
vcspli.c vcstf.h
vcstf.c
vcs_vdbapi.c
vcsfns.c
vcsstyxcreate.c
vcstop.c
EXHIBIT B2
VHDL Front End:
- ------------------------------
The modules and associated documentation comprising the Jaguar Front End.
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EXHIBIT 10.44
PATENT ASSIGNMENT AND CROSS-LICENSE AGREEMENT
This Patent Assignment and Cross-License Agreement ("Agreement") is
entered into effective as of this 2nd day of October, 1998 ("Effective Date"),
by and between Synopsys, Inc., a Delaware corporation having a principal place
of business at 700 E. Middlefield Road, Mountain View, CA 94043 ("Synopsys"),
and Viewlogic Systems, Inc., a Delaware corporation having a principal place of
business at 293 Boston Post Road West, Marlboro, MA 01752 ("Viewlogic").
WITNESSETH
WHEREAS, Synopsys is willing to assign certain of its patents and patent
applications to Viewlogic subject to the grant back of licenses thereunder;
WHEREAS, Synopsys is willing to grant licenses to Viewlogic under certain of its
patents; and
WHEREAS, Viewlogic wishes to obtain such assignments and licenses and is willing
to grant back licenses under the Assigned Patents to Synopsys.
NOW THEREFORE
In view of the foregoing premises and the mutual covenants set forth herein, the
parties agree as follows:
1. Definitions
AFFILIATE: A corporation, company, or other legal entity now or hereinafter
controlling, controlled by or under common control with a party hereto, for so
long as such ownership or control exists. For the purposes of this definition,
control shall refer to a greater than 50% interest in the right to make
decisions for such entity, e.g., greater than 50% ownership of the voting shares
or securities of such entity.
ASSIGNED PATENTS: The patent and patent applications, including any divisional,
continuation, continuation-in-part, reissue, extension or re-examination
application, renewals or patents issuing therefrom (and further including any
foreign counterpart patents and applications corresponding thereto), as more
particularly set forth in Exhibit A hereto.
LICENSED PATENTS: The patent and patent applications, including any divisional,
continuation, continuation-in-part, reissue, extension or re-examination
application, renewals or patents issuing therefrom (and further including any
foreign counterpart patents and applications corresponding thereto), as more
particularly set forth in Exhibit B hereto.
2. Assignment
2.1 ASSIGNMENT. Synopsys agrees to sell, transfer and assign and does hereby
assign the Assigned Patents to Viewlogic pursuant to the Patent Assignment
attached hereto as Exhibit A, free and clear of all liens, mortgages, pledges,
security interests, prior assignments and encumbrances of any kind or nature
whatsoever.
2.2 FURTHER ASSURANCES. At any time and from time to time after the date
hereof, at Viewlogic's request and expense, Synopsys promptly shall execute and
deliver, and shall cause its Affiliates and
<PAGE>
employees to execute and deliver, such instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as
Viewlogic may reasonably request to more effectively transfer, convey and
assign to Viewlogic, and to confirm Viewlogic's title to, all of the Assigned
Patents, to assist Viewlogic in exercising all rights with respect thereto
and to carry out the purpose and intent of this Agreement.
2.3 FURTHER ASSURANCES BY VIEWLOGIC. At any time and from time to time after
the date hereof, at Synopsys' request and expense, Viewlogic promptly shall
execute and deliver, and shall cause its Affiliates and employees to execute and
deliver, such instruments of sale, transfer, conveyance, assignment and
confirmation, and take such other action, as Synopsys may reasonably request to
more effectively transfer, convey and assign to Synopsys, and to confirm
Synopsys title to, all of the Licensed Patents, to assist Synopsys in exercising
all rights with respect thereto and to carry out the purpose and intent of this
Agreement.
3.0 License Grant
Synopsys hereby grants to Viewlogic and its Affiliates a non-exclusive,
irrevocable, perpetual, worldwide, royalty-free, fully-paid up, license to make,
have made, use, have used, sell, or have sold products and perform and have
performed processes under the Licensed Patents.
4.0 Grant Back
Viewlogic hereby grants to Synopsys and its Affiliates a non-exclusive,
irrevocable, perpetual, worldwide, royalty-free, fully-paid up, license to make,
have made, use, have used, sell, or have sold products and perform and have
performed processes under the Assigned Patents.
5.0 Consideration
In consideration of the rights granted hereunder, Viewlogic shall pay to
Synopsys on the date hereof the sum of One Million Two Hundred Thousand Dollars
($1,200,000).
6.0 Prosecution, Maintenance and Enforcement
Neither party hereto shall owe any obligation hereunder to the other party to
prosecute, maintain, or enforce, either domestically or abroad, any patent or
patent application corresponding to a Licensed Patent or an Assigned Patent.
7.0 Warranties and Disclaimers
7.1 LICENSES. Synopsys represents and warrants to Viewlogic that, except as
set forth in Exhibit B hereto, Synopsys has not granted any license, right or
authority under any Assigned Patent to any third party, nor has Synopsys
extended any covenant not to sue under the Assigned Patents to any third party.
Synopsys agrees and acknowledges that Viewlogic is not, and shall not be, bound
by the terms of any covenant not to sue extended by Synopsys.
-2-
<PAGE>
7.2 OWNERSHIP. Synopsys represents and warrants that it is the sole,
exclusive, true and lawful owner of the Assigned Patents, and that it has the
right to sell and transfer to Viewlogic good, clear record and marketable title
to the Assigned Patents as contemplated hereby.
7.3 FILES. Synopsys has used its best reasonable efforts to provide to
Viewlogic all existing files and records pertaining to the Assigned Patents,
including, but not limited to, all office actions, drafts, receipts, drawings,
correspondence, disclosures, models, copies, prototypes, diagnostic reports,
test results, opinions, prior art (including search results, publications and
copies of patents) and analyses (collectively, the "Patent Files"). To the
extent that any Patent Files have not been provided to Viewlogic as of the date
hereof, Synopsys shall, upon the first to occur of the request of Viewlogic or
discovery that such Patent Files have not been provided, provide such Patent
Files to Viewlogic, at no charge to Viewlogic.
7.4 Neither party warrants or represents that the rights granted hereunder
will result in commercially acceptable product lines.
7.5 This Agreement does not confer by implication, estoppel, laches or by any
other means any license or any right other than those expressly granted herein.
8.0 Confidentiality
8.1 The Patent Files for the Assigned Patents shall be treated as
"Confidential Information" of Viewlogic by Synopsys. The Patent Files for the
Licensed Patents shall be treated by Viewlogic as "Confidential Information" of
Synopsys.
8.2 Each party agrees that it will not disclose, publish, or disseminate
Confidential Information of the other to anyone other than those of its
employees with a demonstrated need to know, and further agrees to take
reasonable precautions to prevent any unauthorized use, disclosure, publication,
or dissemination of Confidential Information. The parties agree to use the
Confidential Information solely for the purposes contemplated by this Agreement
and not otherwise for their own or any third party's benefit.
8.3 The obligations of confidentiality contained in this Section will not
apply to the extent that it can be established by the recipient of "Confidential
Information" hereunder that such Confidential Information was: a) was generally
available to the public or otherwise part of the public domain at the time of
its disclosure to the recipient; b) became generally available to the public or
otherwise part of the public domain after its disclosure and other than through
any act or omission of the recipient in breach of this Agreement; or c) was
rightfully disclosed to recipient by a third party without restriction after the
date hereof.
8.4 The provisions of this Section 8 will survive any termination or
expiration of this Agreement.
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<PAGE>
9.0 General Provisions
CHOICE OF LAW. This Agreement will be governed by and construed in accordance
with the laws of the United States and the Commonwealth of Massachusetts
excepting that body of Massachusetts law governing conflicts of law.
ASSIGNMENT. Neither this Agreement nor the licenses granted hereunder may be
assigned by either party without the prior written consent of the other party,
except that upon a merger, or acquisition of all or substantially all of the
capital stock or assets of a party, such consent shall not be required.
NO WAIVER. Failure by either party to enforce any provision of this Agreement
will not be deemed a waiver of future enforcement of that or any other
provision.
INDEPENDENT CONTRACTORS. The relationship of Synopsys and Viewlogic established
by this Agreement is that of independent contractors, and nothing contained in
this Agreement shall be construed (i) to give either party the power to direct
or control the day-to-day activities of the other or (ii) to constitute the
parties as partners, joint venturers, co-owners or otherwise as participants in
a joint or common undertaking.
SECTION HEADINGS. The section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
INTERPRETATION. The parties agree that this Agreement shall be fairly
interpreted in accordance with its terms without any strict construction in
favor of or against either party and that ambiguities shall not be interpreted
against the drafting party.
SEVERABILITY. If for any reason a court of competent jurisdiction finds any
provision of this Agreement, or portion thereof, to be unenforceable, that
provision of the Agreement will be enforced to the maximum extent permissible so
as to effect the intent of the parties, and the remainder of this Agreement will
continue in full force and effect.
ATTORNEYS' FEES. The prevailing party in any action to enforce the Agreement
shall be entitled to recover costs and expenses including, without limitation,
reasonable attorneys' fees.
INJUNCTIVE RELIEF. The parties agree that a material default of the provisions
of this Agreement by a party hereto could cause irreparable injury to the other
party for which monetary damages would not be an adequate remedy and such other
party shall be entitled to seek equitable relief, including injunctive relief
and specific performance, in addition to any remedies it may have hereunder or
at law.
ENTIRE AGREEMENT. This Agreement, including any Exhibits attached hereto, which
are hereby incorporated by reference, constitutes the entire understanding of
the parties with respect to the subject matter hereof, and supersedes all prior
agreements or representations, oral or written, regarding such subject matter.
This Agreement may not be modified or amended except in a writing signed by a
duly authorized representative of both parties.
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[SIGNATURE BLOCK FOLLOWS IMMEDIATELY HEREAFTER.]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives:
SYNOPSYS, INC. VIEWLOGIC SYSTEMS, INC.
By: Steven K. Shevick By: William J. Herman
------------------------------------- -------------------------
Name: Steven K. Shevick Name: William J. Herman
------------------------------------ -----------------------
Title: Vice President and General Counsel Title: President
----------------------------------- -----------------------
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<PAGE>
EXHIBIT A
PATENT ASSIGNMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, Synopsys, Inc. ("ASSIGNOR"), hereby sells, assigns, transfers, and
sets over its entire right, title, and interest in and to the Assigned Patents
(as set forth below), any patent or reissues of any patent that may be granted
thereon, and any extensions and applications which are continuations,
continuations-in-part, substitutes, divisions, renewals or reissues of said
Assigned Patents to Viewlogic Systems, Inc. ("ASSIGNEE") and its successors and
assigns.
Assigned Patents:
U.S. Patent Application Serial No. 08/644,618 filed 5/1/96
U.S. Patent Application Serial No. 08/868,289 filed 6/3/97
U.S. Patent Application Serial No. 08/988,658 filed 12/11/97
U.S. Patent Application Serial No. 09/027950 filed 2/23/98
U.S. Patent Application Serial No. 09/050671 filed 3/20/98
ASSIGNOR hereby further sells, assigns, transfers, and sets over unto
ASSIGNEE ASSIGNOR's entire right, title, and interest in and to the aforesaid
inventions in the United States and each and every country foreign to the United
States; and ASSIGNOR further conveys to ASSIGNEE all priority rights resulting
from the Assigned Patents, and all causes of action for infringement arising
prior to and after the date of this Assignment.
At any time and from time to time after the date hereof, at ASSIGNEE's
request and expense, ASSIGNOR promptly shall execute and deliver, and shall
cause its Affiliates and employees to execute and deliver, such instruments of
sale, transfer, conveyance, assignment and confirmation, and take such other
action, as ASSIGNEE may reasonably request to more effectively transfer, convey
and assign to ASSIGNEE, and to confirm ASSIGNEE's title to, all of the Assigned
Patents.
IN WITNESS WHEREOF, ASSIGNOR has hereunto set its hand and seal on the date
below.
SYNOPSYS, INC.
By
-------------------------------------
Bryn Ekroot
Assistant Secretary
Date:
----------------------------------
State of California )
) ss
County of Santa Clara )
Subscribed and sworn to before me
this ___ day of _____________, 1998
- ---------------------------------
Notary Public
My commission expires:
---------
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<PAGE>
EXHIBIT B
LICENSED PATENTS
U.S. Patent No. 5,625,567 issued 4/29/97
U.S. Patent Application Serial No. 09/053,140 filed 3/31/98
U.S. Patent Application Serial No. 09/053,327 filed 3/31/98
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<PAGE>
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<PAGE>
EXHIBIT 10.45
BLAST SOFTWARE LICENSE AND ASSIGNMENT AGREEMENT
This BLAST Software License and Assignment Agreement ("Agreement") is
entered into effective as of this 2nd day of October, 1998 ("Effective Date"),
by and between Synopsys, Inc., a Delaware corporation having a principal place
of business at 700 E. Middlefield Road, Mountain View, CA 94043 ("Synopsys"),
and Viewlogic Systems, Inc., a Delaware corporation having a principal place of
business at 293 Boston Post Road West, Marlboro, MA 01752 ("Viewlogic").
WITNESSETH
WHEREAS, Synopsys is willing to grant a license to Viewlogic to develop, market,
and sell the BLAST timing analysis software only for use in PCB and Systems
Level applications;
WHEREAS, Synopsys is willing to assign the BLAST software to Viewlogic, subject
to a grant back of a license to certain code therein and further subject to the
terms and conditions herein; and
WHEREAS, Viewlogic wishes to obtain such a license and such an assignment for
the purpose of developing, marketing, and licensing the BLAST software product.
NOW THEREFORE
In view of the foregoing premises and the mutual covenants set forth herein, the
parties agree as follows:
1.0 DEFINITIONS
AFFILIATE: A corporation, company, or other legal entity now or
hereinafter controlling, controlled by or under common control with a
party hereto, for so long as such ownership or control exists. For the
purposes of this definition, control shall refer to a greater than 50%
interest in the right to make decisions for such entity, e.g., greater
than 50% ownership of the voting shares or securities of such entity.
ASIC: Application Specific Integrated Circuit as that term is understood
in the industry on the Effective Date.
BLAST: that timing analysis software for Systems Level applications known
by the name "BLAST"'or "BLAST FOR SYSTEMS", as it exists on the Effective
Date, in source code and object code forms, including all files, manuals,
flow charts, libraries, documentation and comments that form a part of,
describe the use of or are necessary for the use of such software. The
foregoing shall not, however, include any code licensed from third parties
other than Synopsys and its Affiliates, if any. BLAST does not include
SLAM.
BLAST AGREEMENTS: All agreements, including but not limited to end user
licenses and maintenance agreements, contracts, warranties and other
documents in Synopsys' name relating exclusively to BLAST and other
software assigned to Viewlogic, and all severable portions of all
agreements, contracts, warranties and other documents relating to BLAST,
other software assigned to Viewlogic and other Synopsys software not being
assigned to Viewlogic hereunder.
SYNOPSYS CONFIDENTIAL
<PAGE>
COMMON CODE: The code and documentation elements common to BLAST and
MOTIVE as of the Effective Date.
ENHANCEMENT: means an embodiment of BLAST that delivers bug-fixes, minor
improvements, incremental features or improvements of existing features,
and/or functionality to BLAST.
FPGA INTERNAL: The field-of-use pertaining to the designing,
configuration, programming, testing, verification, simulation, and
emulation of a single field programmable gate array, however, for the
purposes of this Agreement, FPGA Internal expressly excludes synthesis and
verilog simulation functionality. Furthermore, in no event shall FPGA
Internal be construed to include any functionality directed principally
toward an ASIC.
IC: Integrated circuit.
MOTIVE: that timing analysis software for IC applications known by the
name "MOTIVE", as it exists on the Effective Date, in source code and
object code forms, including all files, manuals, flow charts, libraries,
documentation and comments that form a part of, describe the use of or are
necessary for the use of such software. The foregoing shall not, however,
include any code licensed from third parties, if any.
PCB: Printed circuit board.
SUCCESSOR: a software product which replaces BLAST but which encompasses
a substantial portion of the functionality of BLAST.
SYNOPSYS BACKGROUND INFORMATION RIGHTS: All copyright, trade secret,
know-how, and other intellectual property rights (but excluding the
Synopsys Patent Rights) owned or controlled by Synopsys or its Affiliates
on the Effective Date that cover or are necessary to make, use, sell,
reproduce, modify, distribute, enhance, correct, maintain, market,
commercialize, sublicense and promote BLAST.
SYNOPSYS PATENT RIGHTS: All claims of all United States and foreign
patents and patent applications owned or controlled by Synopsys on the
Effective Date, or any divisional, continuation, reissue, renewal or
re-examination patent issuing therefrom (including any foreign
counterparts) that read upon BLAST or its use as contemplated in its
documentation.
SYSTEMS LEVEL: Refers to the field-of-use pertaining to the design, test,
verification, simulation, and emulation of systems comprising discrete IC
components and associated electrical interconnections. However, the term
"Systems Level" expressly excludes the design, test, verification,
simulation, and emulation of individual IC components or circuit
sub-elements contained therein ("IC field-of-use"). Notwithstanding the
foregoing, nominal or incidental capabilities or applicability of software
in regard to the design, test, verification, simulation, or emulation of
individual ICs or sub-elements thereof shall not be deemed to render BLAST
within the IC field-of-use, provided that BLAST is directed principally
and substantially to Systems Level applications or PCB applications and
not directed substantially to the IC field-of-use.
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SYNOPSYS CONFIDENTIAL
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UPGRADE: means an embodiment of BLAST that delivers substantial
performance improvements, architectural changes or new features and/or
functionality to BLAST.
2.0 LICENSE GRANT
2.1 BACKGROUND INFORMATION LICENSE. Synopsys hereby grants to Viewlogic and
its Affiliates, under the Synopsys Background Information Rights a personal,
worldwide, royalty-free, fully-paid up, right and license to make, have made,
use, have used, sell, have sold, reproduce, modify, distribute, enhance,
correct, maintain, market, commercialize, sublicense and promote BLAST and any
Enhancements, Upgrades, and Successors thereto, in Systems Level and FPGA
Internal applications. The foregoing license shall be exclusive for Systems
Level applications for those portions of BLAST which are not part of MOTIVE,
even as to Synopsys, and non-exclusive otherwise, and shall extend for a period
of three (3) years from the Effective Date.
2.2 PATENT LICENSE. Synopsys hereby grants to Viewlogic under the Synopsys
Patent Rights a personal, nonexclusive, worldwide, three (3) year, royalty-free,
fully-paid up, right and license to make, have made, use, have used, sell and
have sold BLAST and any Enhancements, Upgrades, and Successors thereto, in
Systems Level and FPGA Internal applications.
2.3 Nothing herein shall he construed to alter, affect, or further limit any
existing end user licenses to MOTIVE (or prior versions of such product) granted
by Synopsys prior to the Effective Date. Contrary provisions notwithstanding,
Synopsys may continue to support, maintain, and update MOTIVE for any such
pre-existing Synopsys end user licensees.
2.4 Synopsys agrees that Viewlogic (or its designee) shall own all
Enhancements, Upgrades and Successors of BLAST developed after the Effective
Date, and Viewlogic shall have no obligation to disclose, provide or license
such Enhancements, Upgrades and Successors to Synopsys.
2.5 BLAST and any Enhancements, Upgrades, and Successors thereto, will not
have internal ASIC timing analysis capability for five (5) years from the
Effective Date. Provided Viewlogic acts consistently within the provisions of
sections 2.1, 2.2 and 2.3, BLAST may have internal FPGA timing analysis
capability. After three (3) years from the Effective Date, Viewlogic may
request relief from this section 2.
2.6 BLAST and any Enhancements, Upgrades, and Successors thereto, will not
support ASIC libraries for three (3) years. Except as required to support the
STAMP format, for three (3) years, BLAST will not
(a) provide the features specified in Exhibit A1; and
(b) support the flows described in Exhibit A2.
3.0 OBLIGATIONS OF LICENSEE
3.1 Viewlogic agrees that its distribution of BLAST and any Enhancements,
Upgrades, and Successors thereto, to third parties under Section 2.0 shall be
made pursuant to the terms of a license agreement having restrictions on use and
obligations of confidentiality substantially similar to those set forth in the
end user software license agreement attached hereto as Exhibit B.
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SYNOPSYS CONFIDENTIAL
<PAGE>
3.2 Viewlogic will refrain from promoting or advertising BLAST as an FPGA
timing tool and any Enhancements, Upgrades, and Successors thereto, to its
customers for 45 days after the Effective Date of the Agreement. Synopsys and
Viewlogic will use reasonable commercial efforts to establish an OEM
relationship for a version of Primetime that can support FPGAs consistent with
Viewlogic's System Level business. Provided pricing, availability and
capability issues can be reasonably resolved, the terms of the proposed
relationship are generally to track the terms of the FPGA OEM Agreement and the
VCS OEM Agreement entered into concurrently with this Agreement.
3.3 Viewlogic will use best reasonable commercial efforts to develop BLAST and
any Enhancements, Upgrades, and Successors thereto, to support the STAMP format.
4.0 ASSIGNMENT OF BLAST
4.1 Upon the third anniversary of the Effective Date, and provided that this
Agreement has not been sooner terminated in accordance with the provisions of
Section 9.0, Synopsys shall irrevocably and unconditionally assign to Viewlogic
its entire right, title, and interest in and to BLAST and all intellectual
property therein, except for any Synopsys Patent Rights and Residual
Information, and Synopsys shall at that time convey to Viewlogic good and
marketable title to BLAST, free and clear of all liens, mortgages, pledges,
security interests, prior assignments and encumbrances of any kind or nature
whatsoever.
4.2 Upon the assignment of BLAST to Viewlogic, Viewlogic shall grant back to
Synopsys an irrevocable, perpetual, worldwide, royalty-free, fully-paid up,
license to use, execute, display, perform, modify, sell, distribute, prepare
derivative works of the Common Code, including the right to grant sublicenses
thereunder.
4.3 In connection with such assignment, if this Agreement has not been sooner
terminated in accordance with the provisions of Section 9.0, Viewlogic's license
under Section 2.2 shall thereafter become irrevocable and perpetual.
5.0 CONFIDENTIALITY
5.1 The source code to BLAST shall be treated as "Confidential Information" of
Viewlogic by Synopsys. The source code to MOTIVE shall be treated as
"Confidential Information" of Synopsys by Viewlogic.
5.2 Each party agrees that it will not disclose, publish, or disseminate
Confidential Information of the other to anyone other than those of its
employees with a demonstrated need to know, and further agrees to take
reasonable precautions to prevent any unauthorized use, disclosure, publication,
or dissemination of Confidential Information. The parties agree to use the
Confidential Information solely for the purposes contemplated by this Agreement
and not otherwise for their own or any third party's benefit.
5.3 The obligations of confidentiality contained in this Section will not
apply to the extent that it can be established by the recipient of "Confidential
Information" hereunder that such Confidential Information: a) was generally
available to the public or otherwise part of the public domain at the time of
its disclosure to the recipient; b) became generally available to the public or
otherwise part of the public domain after its disclosure and other than through
any act or omission of the recipient in breach of this
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SYNOPSYS CONFIDENTIAL
<PAGE>
Agreement; c) was rightfully disclosed to recipient by a third party without
restriction: or d) is documented to have been independently developed by a
party without reference to the other party's Confidential Information.
5.4 The provisions of this Section 5 will survive any termination or
expiration of this Agreement.
6.0 RESIDUALS
6.1 Notwithstanding anything to the contrary herein, either party shall have
the right, during the term of this Agreement and thereafter, to use any Residual
Information (as hereinafter defined) resulting from its prior exposure to the
other party's Confidential Information, subject only to such other party's valid
copyright and patent rights. Residual Information shall mean that information
which is of general application in nature and which is retained in the mind of
an employee, contractor, or agent of a party without further or subsequent
reference to the other party's Confidential Information.
7.0 WARRANTIES AND DISCLAIMERS
7.1 INTELLECTUAL PROPERTY. Synopsys represents and warrants that, to its
knowledge, BLAST does not infringe upon the patent, copyright, trademark, trade
secret or other intellectual property rights of any third party.
7.2 TREATMENT OF BLAST. Synopsys represents and warrants that from December
4, 1997 through the Effective Date, inclusive:
a. Synopsys, to its knowledge, has not published, disclosed or licensed
the source code or affiliated internal engineering documents of BLAST to any
third party, and has not at any time made BLAST or any portion thereof available
to third parties as freeware, shareware or on any other unrestricted basis,
other than portions of BLAST that may have been deposited into source code
escrow under obligations of confidentiality and subject to contingent license
grants pursuant to the ordinary course of conduct of Synopsys' business, of
which Synopsys has made Viewlogic aware prior to the Effective Date;
b. Synopsys has not granted any exclusive license to any portion of
BLAST to any third party; and
c. Synopsys has licensed BLAST, in object code form, to resellers and
end users only pursuant to forms of reseller, distributor, sales representative,
OEM, VAR, and end user agreements (including beta agreements) which are
consistent with industry practice.
7.3 BLAST AGREEMENTS. Synopsys will use its best reasonable efforts to assign
to Viewlogic all BLAST Agreements no later than thirty (30) days following the
Effective Date. Until such BLAST Agreements or portions thereof are duly
assigned to Viewlogic, Synopsys shall permit Viewlogic to enjoy the benefits of
all such BLAST Agreements, including all license, maintenance and other revenues
associated therewith to the extent that such revenues arise ftom billings issued
after September 4, 1998 (which Synopsys shall promptly forward to Viewlogic);
and Viewlogic hereby
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<PAGE>
agrees to perform all obligations of Synopsys thereunder, including
obligations of support and maintenance.
7.4 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BLAST, INCLUDING ANY
DOCUMENTATION PERTAINING THERETO, IS LICENSED OR ASSIGNED "AS IS," AND SYNOPSYS
MAKES NO WARRANTIES WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE REGARDING
BLAST AND ITS DOCUMENTATION. SYNOPSYS SPECIFICALLY DISCLAIMS ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, OR ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE.
7.5 Synopsys shall not be responsible for any claims or actions arising from
Viewlogic's distribution, use, or sale of BLAST or derivative works therefrom,
including object code versions thereof, and Viewlogic shall indemnify and hold
Synopsys harmless from and against any and all losses, damages, costs and fees
reasonably incurred (including reasonable attorneys' fees) that are attributable
to such claim or action, unless such claim or action is related to a breach of
one of Synopsys' warranties or obligations in this Agreement).
7.6 Neither party warrants or represents that the rights granted hereunder
will result in commercially acceptable product lines.
7.7 This Agreement does not confer by implication, estoppel, laches or by any
other means any license or any right other than those expressly granted herein.
7.8 Except as expressly provided for herein or as may otherwise be agreed to
in writing by Viewlogic, Synopsys and its Affiliates shall use best reasonable
efforts to remove (i) the source code and affiliated engineering documents for
portions of BLAST which are not part of MOTIVE and (ii) executable versions of
BLAST on any storage device or medium after thirty (30) days from the Effective
Date. Viewlogic acknowledges that certain software modules, (Allegro PCB
interface and PCAD (TANGO) PCB Interface) are incorporated as part of MOTIVE's
CD-ROM distribution. These modules will be removed from future distributions
beginning with the January, 1999 release of MOTIVE. Synopsys will not market or
promote the use of these modules for Systems Level applications.
7.9 SYNOPSYS KNOWLEDGE. Synopsys representations and warranties in this
Agreement are limited only to Parent Knowledge as defined in the Stock Purchase
Agreement entered concurrently herewith.
7.10 HARMFUL CODE. Synopsys represents and warrants that, to its knowledge,
the Assigned Software is free from all computer viruses, worms, time outs, back
doors, time bombs, disabling devices and other harmful or malicious code
intended to damage, disrupt, inconvenience or permit access to the user's or
another's software, hardware or networks.
8.0 LIMITATION OF LIABILITY
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SYNOPSYS CONFIDENTIAL
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UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT. HOWEVER
CAUSED (WHETHER ARISING UNDER A THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE),
OR OTHERWISE), INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS, LOSS OF
DATA, OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES. THE LIMITATIONS
ON THE PARTIES' LIABILITY SET FORTH IN THIS PARAGRAPH SHALL APPLY
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY SET FORTH
HEREIN.
9.0 TERMINATION
The term of this Agreement shall be five (5) years from the Effective Date. For
the purposes of this Section, "Material Default" shall mean the marketing,
distributing, or licensing of software by Viewlogic in violation of the scope of
the licenses granted in Sections 2.0 or the violation of Viewlogic's obligations
in Sections 3.0 or 5.0.
Termination pursuant to this Section shall not affect the existing rights or
licenses granted by Viewlogic in accordance with the terms and conditions of
this Agreement prior to the effective date of such termination. Termination
will not relieve either party from any liability arising from any breach of this
Agreement and the provisions set forth in Sections 5.0, 6.0, 7.0, 8.0, 9.0 and
11.0 shall survive any such termination of this Agreement. Neither party will
be liable to the other for damages of any sort solely as a result of terminating
this Agreement in accordance with its terms, and termination of this Agreement
will be without prejudice to any other right or remedy of either party.
If Viewlogic is in Material Default of the provisions of Sections 2.0, 3.0 or
5.0, then Synopsys shall give Viewlogic written notice of such Material Default.
No later than 30 days after receipt of such notice, Viewlogic shall either cure
such default or provide Synopsys with a reasonable corrective plan to cure such
default or, if such default is not reasonably susceptible of cure, to prevent a
similar default from occurring again. If Synopsys deems Viewlogic's corrective
plan is not adequate, Synopsys shall so notify Viewlogic in writing, and
executive officers of Synopsys and Viewlogic shall meet, no later than 10
business days following Viewlogic's receipt of such notice, to discuss in good
faith a mutually satisfactory resolution of the situation. In the event that,
despite the parties' good faith efforts to come to agreement, by five business
days after such meeting, the breach remains uncured or no corrective plan has
been agreed upon, then Synopsys shall have the right, upon written notice to
Viewlogic, to terminate this Agreement. Synopsys may terminate this Agreement
upon 10 days written notice of a breach of a corrective plan established
pursuant to this section 9.0.
10.0 CONSIDERATION
In consideration of the rights granted hereunder, Viewlogic shall pay to
Synopsys on the date hereof the sum of Three Million Three Hundred Thousand
Dollars ($3,300,000).
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11.0 GENERAL PROVISIONS
11.1 CHOICE OF LAW. This Agreement will be governed by and construed in
accordance with the laws of the United States and the Commonwealth of
Massachusetts excepting that body of Massachusetts law governing conflicts of
law.
11.2 ASSIGNMENT. Neither this Agreement nor the licenses granted hereunder may
be assigned by either party without the prior written consent of the other
party, except that upon a merger, acquisition of all or substantially all of the
capital stock or assets of a party, such consent shall not be unreasonably
conditioned, delayed or withheld.
11.3 NOTICES. Any notice, report, approval or consent required or permitted
hereunder shall be in writing and will be deemed to have been duly given if
delivered personally, by facsimile, or mailed by first-class, registered or
certified mail, postage prepaid to the respective addresses of the parties. If
to Synopsys, Attention: General Counsel. If to Viewlogic, Attention: President,
with a courtesy copy to John A. Burgess, Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts 02109. The address for notice may be changed by giving
written notice in accordance with this section.
11.4 NO WAIVER. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or any other
provision.
11.5 INDEPENDENT CONTRACTORS. The relationship of Synopsys and Viewlogic
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed (i) to give either party the
power to direct or control the day-to-day activities of the other or (ii) to
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking.
11.6 SECTION HEADINGS. The section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
11.7 INTERPRETATION. The parties agree that this Agreement shall be fairly
interpreted in accordance with its terms without any strict construction in
favor of or against either party and that ambiguities shall not be interpreted
against the drafting party.
11.8 SEVERABILITY. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, to be unenforceable, that
provision of the Agreement will be enforced to the maximum extent permissible so
as to effect the intent of the parties, and the remainder of this Agreement will
continue in full force and effect.
11.9 ATTORNEYS' FEES. The prevailing party in any action to enforce the
Agreement shall be entitled to recover costs and expenses including, without
limitation, reasonable attorneys' fees.
11.10 INJUNCTIVE RELIEF. The parties agree that a material default of the
provisions of this Agreement by a party hereto could cause irreparable injury to
the other party for which monetary damages would not be an adequate remedy and
such other party shall be entitled to seek equitable
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relief, including injunctive relief and specific performance, in addition to
any remedies it may have hereunder or at law.
11.11 FORCE MAJEURE. Nonperformance of either party shall be excused to the
extent that performance is rendered impossible by strike, fire, flood,
governmental action, failure of suppliers, earthquake, or any other reason where
failure to perform is beyond the reasonable control of the non-performing party.
11.12 ENTIRE AGREEMENT. This Agreement, including any Exhibits attached hereto,
which are hereby incorporated by reference, constitutes the entire understanding
of the parties with respect to the subject matter hereof, and supersedes all
prior agreements or representations, oral or written, regarding such subject
matter. This Agreement may not be modified or amended except in a writing
signed by a duly authorized representative of both parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives:
SYNOPSYS, INC. VIEWLOGIC SYSTEMS, INC.
By: /s/ Steven K. Shevick By: /s/ William J. Herman
--------------------- -------------------------
Name: Steven K. Shevick Name: William J. Herman
----------------- -----------------------
Title: Vice President Title: President
-------------- ----------------
General Counsel
---------------
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EXHIBIT A1
ASIC features
Delay calculator with capacitive information from placement
Delay calculator with capacitive information from fanout
Hierarchy Advisor
ASIC specific Modeling constructs
CCD support (SLAM feature)
RC Tree support
EXHIBIT A2
Removed Flows
ASIC-Using Verilog and SDF
ASIC-Using flat pin file and SDF
ASIC-Using hierarchical pin files and SDF
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EXHIBIT B
VIEWLOGIC STANDARD END USER SOFTWARE LICENSE
Licensee:
---------------------------------
Address:
---------------------------------
---------------------------------
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
Viewlogic Systems, Inc.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
This Master Software License Agreement ("Agreement") with an effective date of
_________________ is made by and between Viewlogic Systems, Inc., a Delaware
corporation and an Equal Opportunity and Affirmative Action Employer and its
subsidiaries (collectively "Viewlogic") and Licensee. This Agreement shall
govern all licensing of Software, Peripherals and Documentation as those items
are defined in this Agreement.
A complete description of the Licensed Products is contained in the Product
Description Addendum described below and incorporated herein.
A complete description of the software support services provided under this
Agreement is contained in the Software Maintenance Agreement Addendum described
below and incorporated herein.
1. DEFINITIONS.
1.1 "Designated Equipment" means the equipment as set forth in the Product
Description Addendum, or any temporary substitute as specified at Section 3.6
below. Any transfer of the Designated Equipment shall be subject to the
provisions of Sections 3.4 & 3.5.
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1.2 "Designated Location" means the specific address of the Designated
Equipment as set forth in the Product Description Addendum. Any change in the
Designated Location shall be subject to the provisions of Sections 3.4 & 3.5.
1.3 "Documentation" means the documentation for the Software.
1.4 "Licensed Products" means those products licensed under this Agreement and
described in the Product Description Addendum attached hereto. Generally, the
term shall include the Documentation, Peripherals, and Software.
1.5 "Peripherals" means the mouse, software code block, and cable furnished to
Licensee under this Agreement for use with the Software.
1.6 "Product Description Addendum" or Addenda is the one or more documents
attached hereto, and any additions after the effective date of this Agreement,
that specifies the Licensed Products, for use on the Designated Equipment at the
Designated Location. This Addendum may be the Viewlogic quotation or any other
suitable document accepted by Viewlogic which contains the required information.
1.7 "Proprietary Information" means: (a) manufacturing processes,
(b) marketing, business, or other strategies or plans; and (c) any other trade
secrets disclosed in writing and marked appropriately or identified as
proprietary or confidential. "Proprietary Information" includes the internal
design and implementation techniques of the Licensed Products, and the source
code of the Software. Excluded is any information that the receiving party can
establish was: (d) in the public domain; (e) already in its possession, or
rightfully known prior to receipt; (f) rightfully learned from a third party not
in violation of any other's proprietary rights; or (g) developed independently.
1.8 "Software" means the computer program or programs in machine readable form
furnished to Licensee under this Agreement. Such software may include software
provided by Viewlogic's suppliers for sublicensing hereunder, as well as
software that Viewlogic owns. In accordance with the Software Maintenance
Agreement Addendum attached hereto, "Software" shall also include any update or
upgrade programs furnished thereunder.
1.9 "Software Maintenance Agreement" means that agreement for software support
services, if any, set forth in the Software Maintenance Agreement Addendum
attached hereto and incorporated herein.
1.10 "Territory" means the country of the Designated Location.
1.11 "Updates" are new releases of a particular Software program.
1.12 "Upgrades" are programs with a higher Viewlogic series number or greater
capability than the program to be upgraded.
1.13 "Use" includes copying all or any portion of the Software into a computer
or transmitting it to a computer for processing of its instructions, and/or
displaying any portion of the Software in connection with the processing of such
machine instructions.
2. PAYMENT, DELIVERY AND INSTALLATION.
2.1 Prices. Unless otherwise agreed in writing, prices will be as set forth
on Viewlogic's price list in effect for the Designated Equipment and the
Designated Location. Any subsequent change in the Designated Equipment or
Location may be subject to new pricing per Section 3.4.
2.2 Payment. Unless otherwise agreed in writing, Licensee shall pay Viewlogic
in full for all Licensed Products within thirty (30) days of the invoice date.
2.3 Installments. Licensee shall pay for each installment delivery of
Licensed Products as a separate transaction.
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SYNOPSYS CONFIDENTIAL
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2.4 Delivery. Viewlogic and/or its suppliers will deliver the Licensed
Products FOB origin under a mutually agreed delivery schedule at Licensee's
expense.
2.5 Installation. Licensee shall be solely responsible to install the
Licensed Products unless otherwise agreed upon in writing.
3. LICENSE GRANT.
3.1 Grant. Viewlogic hereby grants, and Licensee accepts, a nontransferable,
nonsublicensable, perpetual, nonexclusive, fully paid, limited license to use
the Licensed Products in machine readable form on the Designated Equipment at
the Designated Location for Licensee's internal, normal business use only. The
Licensed Products are not for use in a computer service business, rental or
commercial timesharing arrangement.
3.2 Intellectual Property Rights. All intellectual property rights in and to
the Licensed Products, other than those granted under this Agreement, shall
remain the sole and exclusive property of Viewlogic and/or its suppliers as
appropriate.
3.3 Use on Designated Equipment. Use is restricted to the Designated
Equipment at the Designated Location, whether a single computer or a network.
Accessing the Licensed Products from any location other than the Designated
Location via wide area networking technology or any other means is prohibited
unless authorized by the Product Description Addendum. The addition of any
networked computer beyond that specified in the Product Description Addendum or
a change in the Designated Location unless authorized in advance by Viewlogic as
provided in Section 3.4, shall breach this Agreement.
3.4 Transfers. Viewlogic may, at its sole option, grant Licensee's request for
a change in the Designated Equipment or Designated Location within the
Territory. Licensee must pay Viewlogic an administrative fee for any change
granted by Viewlogic.
3.5 Licensee to Certify Equipment and Location. Licensee shall, upon request
from Viewlogic, certify to Viewlogic in writing the current Designated Equipment
and Designated Location.
3.6 Substitute Designated Equipment. In the event that the Designated
Equipment becomes inoperative due to malfunction, repair, servicing or other
like cause, and the terms of the Software Maintenance Agreement remain in
effect, Viewlogic shall use its commercially reasonable efforts to assist
Licensee upon Licensee's request in the transfer to and use of the Licensed
Products on a substitute system at the Designated Location. The substitute
system shall be deemed the Designated Equipment during its use. If the Software
Maintenance Agreement or its equivalent is not then in effect, Licensee shall
pay Viewlogic's list price transfer fee.
3.7 Automatic License; Payment. Licensee acknowledges and agrees that any use
of the Licensed Products on other than the Designated Equipment at the
Designated Location will materially breach this Agreement. However, Viewlogic
may elect not to terminate, but to give notice to Licensee that Licensee is
deemed to order and accept a license for each breaching use. Licensee shall
then become liable to pay Viewlogic the applicable list price license and
support fees under the payment terms of Section 2 effective as of the date of
such breach.
4. PROTECTION OF PROPRIETARY INFORMATION.
4.1 Confidentiality. The Proprietary Information of Viewlogic shall remain
confidential and proprietary to Viewlogic.
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SYNOPSYS CONFIDENTIAL
<PAGE>
4.2 Source Code. Licensee agrees not to attempt to reverse engineer,
decompile, or disassemble the Software or any portion thereof, or otherwise
derive its source code.
4.3 Copies. Licensee may make backup and archival copies of the Software and
Documentation solely for its internal use, retaining on all copies Viewlogic's
and/or its suppliers' copyright, trademark, or other proprietary notices.
4.4 Destruction of Copies. Licensee shall erase the Software from the storage
media of any Designated Equipment prior to disposing of or retiring such
equipment from active use or in the event of termination of this Agreement.
Licensee also must destroy all other copies upon such termination.
4.5 Inclusion With Other Software. Licensee may use the Software within or in
conjunction with any other software, but must comply with Section 4.4 above upon
any termination of this Agreement, or change of the Designated Equipment or
Location, and any use shall always remain subject to this Agreement. Licensee
shall display Viewlogic's and/or its suppliers' copyright, trademark or other
proprietary notices on any portion of the Software used.
4.6 Protect Confidentiality. Licensee agrees not to disclose, provide or
otherwise make available the Proprietary Information of Viewlogic to any person
other than authorized employees without Viewlogic's prior written consent.
Licensee agrees to protect the Proprietary Information through instructions to
its employees, access limitations, and the like, no less securely than if it
were the Licensee's own intellectual property. No media containing the
Software, or any Documentation shall be transferred, reproduced or used in any
way other than as provided by this Agreement.
4.7 Certify Protection. Viewlogic shall give Licensee written notice if
Viewlogic reasonably deems itself insecure with respect to Licensee's compliance
with the protections of Sections 3 and 4. Licensee shall then, within ten (10)
days of the notice, either certify in writing by a duly authorized
representative that it has complied with the terms of those Sections, or give
Viewlogic access to its facilities in a manner that is sufficient to enable
Viewlogic to verify compliance.
5. SOFTWARE MAINTENANCE.
Viewlogic shall provide, and Licensee shall accept, software maintenance
services under the Software Maintenance Agreement Addendum at Viewlogic's then
current maintenance fee for an initial term of one year after expiration of the
Software warranty period, renewable year to year until termination occurs under
the said Software Maintenance Agreement. Termination will end any support
obligations of Viewlogic, and Licensee shall incur reinstatement charges in the
event of a lapse and subsequent renewal.
6. WARRANTY.
6.1 Software. Viewlogic warrants that the Software will conform substantially
to its Documentation for thirty (30) days from delivery. If Viewlogic confirms
a defect, reported by Licensee, in the unaltered Software, Viewlogic shall use
commercially reasonable efforts to remedy the nonconformance. Viewlogic does
not warrant that the operation of any of the Licensed Products will be
uninterrupted or error free, nor does it guarantee that its remedial efforts
will correct any nonconformance.
6.2 Media and Peripherals. Viewlogic warrants that the media containing the
Software and the Peripherals will be free of defects in materials and
workmanship under normal use and service for
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SYNOPSYS CONFIDENTIAL
<PAGE>
thirty (30) days from delivery. Viewlogic's entire liability and Licensee's
sole remedy for defective media or Peripherals shall be for Viewlogic to
replace any returns within the warranty period. Viewlogic will not replace
failures that are not returned, or that are caused by accident, abuse, or
misapplication. Any replacements will be warranted for the remainder of the
original warranty period.
6.3 DISCLAIMER. VIEWLOGIC MAKES NO WARRANTY OF ANY KIND, WHETHER EXPRESSED OR
IMPLIED, WRITTEN OR ORAL, EXCEPT AS EXPRESSLY STATED IN THIS SECTION 6.
SPECIFICALLY, VIEWLOGIC MAKES NO IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR FREEDOM FROM INFRINGEMENT FOR THE LICENSED PRODUCTS.
7. INFRINGEMENT.
7.1 Viewlogic to Defend. Viewlogic will defend, at its own expense, any
action against Licensee based upon the claim that the Licensed Products infringe
a United States patent or copyright or involve misappropriation of a trade
secret. Viewlogic will pay such damages or costs as are finally awarded against
Licensee for such infringement or misappropriation provided that Licensee gives
Viewlogic: (a) prompt, written notice of any such action and of all prior
related claims; (b) sole control of the defense and/or settlement of such
action; and (c) cooperates fully in any defense or settlement. Viewlogic shall
not be liable for any fees, costs or damages incurred without such prior notice.
7.2 Obtain Permission or Modify. Should any Licensed Product become, or in
Viewlogic's opinion be likely to become, the subject of a claim of infringement
or trade secret misappropriation. Viewlogic shall, at its option and expense:
(a) obtain for Licensee the right to continue using the Licensed Product;
(b) replace or modify the Licensed Product so its use becomes noninfringing or
otherwise lawful; or (c) terminate the licenses granted hereunder with respect
to the infringing Licensed Products and refund the amounts paid by Licensee for
the infringing Licensed Products, less a reasonable allowance for use.
7.3 Disclaimer. Notwithstanding the foregoing, Viewlogic shall have no
liability for any claim of patent or copyright infringement or trade secret
misappropriation based upon the operation or use of any Licensed Products:
(a) on a computer for which it was not designed; (b) with any other software not
supplied by Viewlogic; (c) in any manner or purpose for which the Licensed
Products were not designed or recommended by Viewlogic; (d) if the infringement
or misappropriation would have been avoided by Licensee's use of the most
current version of the Licensed Product; or (e) which have been modified by
anyone other than Viewlogic.
8. LIMITATION OF REMEDIES.
8.1 No Other Liability. Except as otherwise stated in this Agreement,
Viewlogic's entire liability to Licensee and Licensee's sole remedy for any
cause whatsoever, regardless of the form of the action, whether in contract,
tort, or strict liability, shall be limited to the amounts paid to Viewlogic by
Licensee for the Licensed Products that: (a) caused the damages; (b) are the
subject matter of the action; or (c) are directly related to the cause of
action.
8.2 NO CONSEQUENTIAL, ETC. DAMAGES. IN NO EVENT SHALL VIEWLOGIC OR ANY OF ITS
SUPPLIERS BE LIABLE FOR DAMAGES RESULTING FROM LOSS OF DATA,
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SYNOPSYS CONFIDENTIAL
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LOSS OF PROFITS IN CONNECTION WITH USE OF ANY LICENSED PRODUCTS OR OTHER
ITEMS PROVIDED UNDER THIS AGREEMENT, NOR FOR COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS, PROPERTY DAMAGE, PERSONAL INJURY, OR ANY OTHER SPECIAL,
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT WHETHER IN BREACH OF WARRANTY, CONTRACT, TORT,
STRICT LIABILITY OR OTHERWISE EVEN IF VIEWLOGIC HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
8.3 Limitations Period. Neither party may bring any action under this
Agreement for any cause whatsoever more than two (2) years after the occurrence
giving rise to such cause of action, provided however that this Section 8.3
shall not apply to any action brought by Viewlogic for violations of Section 3
or Section 4 of this Agreement and/or actions brought by Viewlogic to protect
its intellectual property rights.
9. DEFAULT AND TERMINATION.
9.1 Default. Viewlogic may, by written notice to Licensee, terminate this
Agreement, including its license of the Licensed Products if any of the
following events occurs: (a) the failure or neglect of Licensee to pay Viewlogic
any sums or amounts due to Viewlogic if payment is not rendered within thirty
(30) days after written demand; (b) any breach of the material terms and
obligations of this Agreement if not remedied within thirty (30) days after
written demand; (c) any material breach of Section 3 (License Grant) or
Section 4 (Protection of Proprietary Information) effective immediately upon
notice from Viewlogic; or (d) in the event of insolvency.
9.2 Termination. Licensee's right to use the Licensed Products shall cease
upon termination without further action of the parties. Within seven (7) days
of termination, Licensee shall return to Viewlogic the Licensed Products,
including the original and all copies of the Documentation, Peripherals, and
Software and any Updates or Upgrades thereto, together with a certification by a
duly authorized representative of Licensee that any copies of the Software not
returned have been destroyed,
9.3 No Waiver. Termination shall be in addition to, rather than a waiver of,
any remedy at law or equity under this Agreement.
9.4 Survival. Notwithstanding the foregoing. the provisions of Sections 4
("Protection of Proprietary Information"), 6.3 ("[Warranty] Disclaimer"), 7
("Infringement"), & 8 ("Limitation of Remedies"), shall survive termination.
10. GENERAL
10.1 Prior Agreements Superseded. This Agreement along with the Software
Maintenance Agreement Addendum supersedes all prior agreements and
understandings between the parties related to the subject matter herein, and is
intended to be the complete and exclusive statement of their agreement.
10.2 Headings. The headings in this Agreement are for convenience only, and
shall be disregarded when interpreting the terms hereof.
10.3 Export Controls. Licensee shall not attempt to export the Licensed
Products without the prior written consent of Viewlogic. Any attempt to export
the Licensed Products without Viewlogic's consent will be cause for immediate
termination of this Agreement
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10.4 No Assignment. Viewlogic may assign all or any part of its rights and
duties under this Agreement. This Agreement and the Licensee's rights and
duties under this Agreement may not be assigned by Licensee without the prior
written consent of Viewlogic. Licensee agrees that this Agreement binds
Licensee and each of its employees, agents, and persons associated with it,
including Licensee's affiliated and subsidiary firms, corporations or other
organizations.
10.5 Force Majeure. Viewlogic shall not be liable for any failure or delay in
performing services or any other obligation under this Agreement or for any
damages suffered by Licensee by reason of such failure or delay which is,
indirectly or directly, caused by strike, riot, natural catastrophe or other act
of God, or any cause beyond Viewlogic's reasonable control.
10.6 No Waiver. If either party fails to perform any of its obligations
hereunder and the other party fails to enforce the provisions relating thereto,
such party's failure to enforce this Agreement shall not prevent its later
enforcement.
10.7 Severability. If any provision of this Agreement is held invalid, illegal
or unenforceable, that provision shall be construed so as to most closely
reflect the original intent of the parties, but still be enforceable, and the
remaining provisions shall continue in full force and effect.
10.8 Notices. Any notice or report shall be considered given if delivered
personally or if sent by first class mail, postage prepaid, addressed to the
address specified below and specifically addressed to the person to whom notices
are to be sent as follows:
If to Licensee: Attn:__________________________
If to Viewlogic: Attn: Contracts Administration
The parties may change such addresses by providing notice to the other.
10.9 Governing Law. This Agreement and all transactions hereunder shall be
governed by the laws of the Commonwealth of Massachusetts.
10.10 Attorney Fees and Costs. If any legal action is brought in connection
with this Agreement, the prevailing party shall be entitled to receive its
reasonable attorney fees and court costs in addition to any other relief it may
receive.
10.11 Modifications. No modifications of this Agreement shall be binding upon
either party unless made in writing executed by an authorized representative of
Viewlogic and Licensee.
10.12 Government Use. If the Software is being supplied to the Department of
Defense (DOD), the Software is classified as "Commercial Computer Software" and
the Government is acquiring only "restricted rights" to the Software, and
concerning the Documentation the Government is acquiring only "limited rights"
(as defined in DFARS Clause 252.227-7013). If the Software is being supplied to
an agency or unit of the Government other than DOD, the Software is classified
as "Commercial Computer Software" and the Government is acquiring only
"restricted rights" to the Software and Documentation (as defined in FAR Clause
52.227-19).
IN WITNESS WHEREOF the parties have executed this Agreement by their duly
authorized representatives as of the effective date.
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EXHIBIT 10.46
LOAN AGREEMENT
BY AND AMONG
VIEWLOGIC SYSTEMS, INC.
AND
FLEET NATIONAL BANK, AS AGENT AND A LENDER
AND
THE OTHER FINANCIAL INSTITUTIONS NOW OR
HEREAFTER PARTIES HERETO
$18,000,000 SECURED TERM LOAN
AND
$6,000,000 SECURED REVOLVING CREDIT LOAN
OCTOBER 2, 1998
<PAGE>
INDEX TO
LOAN AGREEMENT
<TABLE>
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PAGE
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<S> <C>
ARTICLE 1. DEFINITIONS AND ACCOUNTING AND OTHER TERMS. . . . . . . . . . . . . 1
SECTION 1.1. CERTAIN DEFINED TERMS . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. ACCOUNTING TERMS. . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.3. OTHER TERMS . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2. AMOUNT AND TERMS OF THE LOANS . . . . . . . . . . . . . . . . . . . 17
SECTION 2.1. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.1.0. The Revolving Credit Loans . . . . . . . . . . . . . . . . 17
Section 2.1.1. Term Loans . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.2. INTEREST AND FEES ON THE LOANS. . . . . . . . . . . . . . . . 19
Section 2.2.1. Default Rate of Interest; Suspension of Libor Loans; Etc . 19
Section 2.2.2. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.2.3. Increased Costs - Capital . . . . . . . . . . . . . . . . 20
SECTION 2.3. NOTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.4. COMPUTATION OF INTEREST . . . . . . . . . . . . . . . . . . . 21
SECTION 2.5. TIME OF PAYMENTS AND PREPAYMENTS IN IMMEDIATELY
AVAILABLE FUNDS . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.5.1. Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.5.2. Setoff, etc. . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.5.3. Unconditional Obligations and No Deductions . . . . . . . 23
SECTION 2.6. PREPAYMENT AND CERTAIN PAYMENTS . . . . . . . . . . . . . . . 25
Section 2.6.1. Mandatory Payments . . . . . . . . . . . . . . . . . . . . 25
Section 2.6.2. Voluntary Prepayments . . . . . . . . . . . . . . . . . . 27
Section 2.6.3. Prepayment of Libor Loans . . . . . . . . . . . . . . . . 27
Section 2.6.4. Permanent Reduction of Commitment . . . . . . . . . . . . 27
SECTION 2.7. PAYMENT ON NON-BUSINESS DAYS. . . . . . . . . . . . . . . . . 28
SECTION 2.8. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.9. SPECIAL LIBOR LOAN PROVISIONS . . . . . . . . . . . . . . . . 28
Section 2.9.1. Requests . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.9.2. Libor Loans Unavailable . . . . . . . . . . . . . . . . . 28
Section 2.9.3. Libor Lending Unlawful . . . . . . . . . . . . . . . . . . 29
Section 2.9.4. Additional Costs on Libor Loans . . . . . . . . . . . . . 30
Section 2.9.5. Libor Funding Losses . . . . . . . . . . . . . . . . . . . 31
Section 2.9.6. Banking Practices . . . . . . . . . . . . . . . . . . . . 32
Section 2.9.7. Borrower's Options on Unavailability or Increased Cost
of Libor Loans. . . . . . . . . . . . . . . . . . . . . . 32
Section 2.9.8. Assumptions Concerning Funding of Libor Loans . . . . . . 33
SECTION 2.10. INTEREST RATE PROTECTION. . . . . . . . . . . . . . . . . . . 33
ARTICLE 3. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.1. CONDITIONS PRECEDENT TO THE COMMITMENT AND TO ALL LOANS . . . 34
Section 3.1.1. The Commitment and Initial Loans . . . . . . . . . . . . . 34
Section 3.1.2. The Commitment and the Loans . . . . . . . . . . . . . . . 37
ARTICLE 4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 38
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. . . . . . . . 38
Section 4.1.1. Organization and Existence . . . . . . . . . . . . . . . . 38
Section 4.1.2. Authorization and Absence of Defaults. . . . . . . . . . . 38
Section 4.1.3. Acquisition of Consents. . . . . . . . . . . . . . . . . . 39
Section 4.1.4. Validity and Enforceability. . . . . . . . . . . . . . . . 39
Section 4.1.5. Financial Information. . . . . . . . . . . . . . . . . . . 39
Section 4.1.6. No Litigation. . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.1.7. Regulation U . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.1.8. Absence of Adverse Agreements. . . . . . . . . . . . . . . 40
Section 4.1.9. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.1.10. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.1.11. Ownership of Properties. . . . . . . . . . . . . . . . . . 42
Section 4.1.12. Accuracy of Representations and Warranties . . . . . . . . 42
Section 4.1.13. No Investment Company. . . . . . . . . . . . . . . . . . . 42
Section 4.1.14. Solvency, etc. . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.1.16. Ownership Interests. . . . . . . . . . . . . . . . . . . . 43
Section 4.1.16. Licenses, Registrations, Compliance with Laws, etc. . . . 43
Section 4.1.18. Principal Place of Business; Books and Records . . . . . . 43
Section 4.1.19. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.1.20. Copyright. . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.1.21. Environmental Compliance . . . . . . . . . . . . . . . . . 44
Section 4.1.22. Material Agreements, etc. . . . . . . . . . . . . . . . . 44
Section 4.1.22. Patents, Trademarks and Other Property Rights. . . . . . . 45
Section 4.1.24. Related Transaction Documents. . . . . . . . . . . . . . . 45
Section 4.1.25. Material Adverse Effect. . . . . . . . . . . . . . . . . . 45
Section 4.1.26. Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 5. COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.1. AFFIRMATIVE COVENANTS OF THE BORROWER OTHER THAN
REPORTING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . 45
Section 5.1.1. Payment of Taxes, etc. . . . . . . . . . . . . . . . . . . 46
Section 5.1.2. Maintenance of Insurance . . . . . . . . . . . . . . . . . 46
Section 5.1.3. Preservation of Existence, etc. . . . . . . . . . . . . . 47
Section 5.1.4. Compliance with Laws, etc. . . . . . . . . . . . . . . . . 47
Section 5.1.5. Visitation Rights. . . . . . . . . . . . . . . . . . . . . 47
Section 5.1.6. Keeping of Records and Books of Account. . . . . . . . . . 47
Section 5.1.7. Maintenance of Properties, etc. . . . . . . . . . . . . . 47
Section 5.1.8. Post-Closing Items . . . . . . . . . . . . . . . . . . . . 48
Section 5.1.9. Other Documents, etc. . . . . . . . . . . . . . . . . . . 48
Section 5.1.10. Minimum Debt Service Coverage Ratio. . . . . . . . . . . . 48
Section 5.1.10.(A). Minimum Interest Coverage. . . . . . . . . . . . . . . 48
Section 5.1.11. Maximum Leverage Ratio . . . . . . . . . . . . . . . . . . 48
Section 5.1.13. Officer's Certificates and Requests. . . . . . . . . . . . 48
Section 5.1.14. Depository . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.1.15. Chief Executive Officer. . . . . . . . . . . . . . . . . . 48
Section 5.1.16. Notice of Purchase of Real Estate and Leases . . . . . . . 49
Section 5.1.17. Additional Assurances. . . . . . . . . . . . . . . . . . . 49
Section 5.1.18. Appraisals . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.1.19. Environmental Compliance . . . . . . . . . . . . . . . . . 49
Section 5.1.20. Remediation. . . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.1.21. Site Assessments . . . . . . . . . . . . . . . . . . . . . 49
Section 5.1.22. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.1.23. Trademarks, Copyrights, etc. . . . . . . . . . . . . . . . 50
Section 5.1.24. Maintenance of Escrow. . . . . . . . . . . . . . . . . . . 50
SECTION 5.2. NEGATIVE COVENANTS OF THE BORROWER. . . . . . . . . . . . . . 50
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 5.2.1. Liens, etc. . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.2.2. Assumptions, Guaranties, etc. of Indebtedness of Other
Persons. . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.2.3. Dissolution, Merger, etc. . . . . . . . . . . . . . . . . 52
Section 5.2.4. Change in Nature of Business . . . . . . . . . . . . . . . 52
Section 5.2.5. Ownership. . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.2.6. Sale and Leaseback . . . . . . . . . . . . . . . . . . . . 52
Section 5.2.7. Sale of Accounts, etc. . . . . . . . . . . . . . . . . . . 52
Section 5.2.8. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.2.9. Other Agreements . . . . . . . . . . . . . . . . . . . . . 53
Section 5.2.10. Payment or Prepayment of Equity or Subordinated Debt . . . 53
Section 5.2.11. Dividends, Payments and Distributions. . . . . . . . . . . 53
Section 5.2.12. Investments in or to Other Persons . . . . . . . . . . . . 54
Section 5.2.13. Transactions with Affiliates . . . . . . . . . . . . . . . 55
Section 5.2.14. Change of Fiscal Year. . . . . . . . . . . . . . . . . . . 55
Section 5.2.15. Subordination of Claims. . . . . . . . . . . . . . . . . . 55
Section 5.2.16. Compliance with ERISA. . . . . . . . . . . . . . . . . . . 55
Section 5.2.17. Capital Expenditures . . . . . . . . . . . . . . . . . . . 55
Section 5.2.18. Hazardous Waste. . . . . . . . . . . . . . . . . . . . . . 56
Section 5.2.19 Other Restrictions on Liens or Dividends . . . . . . . . . 56
Section 5.2.20 Limitation on Creation of Subsidiaries, etc. . . . . . . . 56
Section 5.2.21. Subsidiary Merger, etc. . . . . . . . . . . . . . . . . . 56
SECTION 5.3. REPORTING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . 56
ARTICLE 6. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.1. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 7. REMEDIES OF LENDERS . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 8. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.1. APPOINTMENT . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.2. POWERS; GENERAL IMMUNITY. . . . . . . . . . . . . . . . . . . 61
Section 8.2.1. Duties Specified . . . . . . . . . . . . . . . . . . . . . 61
Section 8.2.2. No Responsibility for Certain Matters. . . . . . . . . . . 62
Section 8.2.3. Exculpatory Provisions . . . . . . . . . . . . . . . . . . 62
Section 8.2.4. Agent Entitled to Act as Lender. . . . . . . . . . . . . . 62
SECTION 8.3. REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR
APPRAISAL OF CREDITWORTHINESS . . . . . . . . . . . . . . . . 63
SECTION 8.4. RIGHT TO INDEMNITY. . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.5. PAYEE OF NOTE TREATED AS OWNER. . . . . . . . . . . . . . . . 63
SECTION 8.6. RESIGNATION BY AGENT. . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.7. SUCCESSOR AGENT . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.1. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. . . . . . . . 64
SECTION 9.2. RIGHTS AND REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . 65
SECTION 9.3. DELAY OR OMISSION NOT WAIVER. . . . . . . . . . . . . . . . . 65
SECTION 9.5. AMENDMENTS, ETC. . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.6. ADDRESSES FOR NOTICES, ETC. . . . . . . . . . . . . . . . . . 66
SECTION 9.7. COSTS, EXPENSES AND TAXES . . . . . . . . . . . . . . . . . . 68
SECTION 9.8. PARTICIPATIONS. . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.9. BINDING EFFECT; ASSIGNMENT. . . . . . . . . . . . . . . . . . 68
SECTION 9.10. ACTUAL KNOWLEDGE. . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.11. SUBSTITUTIONS AND ASSIGNMENTS . . . . . . . . . . . . . . . . 69
SECTION 9.12. PAYMENTS PRO RATA . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 9.13. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.14. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.15. SEVERABILITY OF PROVISIONS. . . . . . . . . . . . . . . . . . 73
SECTION 9.16. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.17. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
SCHEDULE OF EXHIBITS
<TABLE>
<S> <C>
EXHIBIT 1.1 EQUITY INVESTMENTS, OWNERSHIP INTERESTS AND SUBSIDIARIES
EXHIBIT 1.2 RELATED TRANSACTION DOCUMENTS
EXHIBIT 1.4 FORM OF INTEREST RATE ELECTION
EXHIBIT 1.5 FORM OF REVOLVING CREDIT NOTE
EXHIBIT 1.6 FORM OF TERM NOTE
EXHIBIT 1.8 PERMITTED ENCUMBRANCES
EXHIBIT 1.9 PRO RATA SHARES - AGENT'S AND LENDERS' NOTICE ADDRESSES AND
WIRE TRANSFER INSTRUCTIONS
EXHIBIT 1.10 FORM OF REQUEST
EXHIBIT 1.12 PROJECTIONS
EXHIBIT 3.1.1.8 PERMITTED INDEBTEDNESS AND CAPITALIZED LEASES
EXHIBIT 3.1.1.10 FORM OF COMPLIANCE CERTIFICATE
EXHIBIT 4.1.1 ORGANIZATION AND EXISTENCE
EXHIBIT 4.1.2 AUTHORIZATIONS AND ABSENCE OF DEFAULTS
EXHIBIT 4.1.3 CONSENTS
EXHIBIT 4.1.6 LITIGATION
EXHIBIT 4.1.8 ADVERSE AGREEMENTS
EXHIBIT 4.1.9 TAXES
EXHIBIT 4.1.11 REAL PROPERTY
EXHIBIT 4.1.16 LICENSES, REGISTRATIONS, COMPLIANCE WITH LAWS, ETC.
EXHIBIT 4.1.19 COPYRIGHTS
EXHIBIT 4.1.20 HAZARDOUS WASTE
EXHIBIT 4.1.21 MATERIAL AGREEMENTS
EXHIBIT 4.1.22 PATENTS, TRADEMARKS AND OTHER PROPERTY RIGHTS
EXHIBIT 5.2.2.4 GUARANTIES
EXHIBIT 5.2.13 TRANSACTIONS WITH AFFILIATES
EXHIBIT 9.11.1 FORM OF SUBSTITUTION AGREEMENT
</TABLE>
iv
<PAGE>
LOAN AGREEMENT
October 2, 1998
VIEWLOGIC SYSTEMS, INC., a Delaware corporation with a principal place
of business at 293 Boston Post Road West, Marlboro, Massachusetts 01752-4615
(hereinafter the "Borrower"), FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States and having a head
office at One Federal Street, Boston, Massachusetts 02110, as agent,
(hereinafter sometimes the "Agent," as Agent for itself and each of the other
Lenders who now and/or hereafter become parties to this Agreement pursuant to
the terms of SECTION 9.11 hereof, sometimes "Fleet," and sometimes in its
capacity as a Lender "Lender"), and such Lenders, hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING AND OTHER TERMS
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"ADJUSTED LIBOR RATE" means, with respect to any Libor Loan to be made
by the Lenders for the Interest Period applicable to such Libor Loan, the
rate per annum (rounded upward, if necessary, to the nearest 1/32 of one
percent) as determined on the basis of the offered rates for deposits in
Dollars, for a period of time and for an amount comparable to such Libor
Loan which appears on the Telerate page 3750 as of 11:00 a.m. London time on
the day that is two Business Days preceding the first day of such Libor Loan;
provided, however, if the rate described above does not appear on the
Telerate System on any applicable Interest Adjustment Date, the Adjusted
Libor Rate shall be the rate (rounded upwards as described above, if
necessary) for deposits in Dollars for a period and for an amount comparable
to such Libor Loan on the Reuters Page "LIBO" (or such other page as may
replace the LIBO Page on that service for the purpose of displaying such
rates), as of 11:00 a.m. (London Time), on the day that is two Business Days
prior to the beginning of such Interest Period.
If both the Telerate and Reuters system are unavailable, then the rate
for that date will be determined on the basis of the offered rates for
deposits in Dollars for a period of time and for an amount comparable to such
Libor Loan which are offered to each Reference Lender by four first-class
banks in the London interbank market at approximately 11:00 a.m. London time,
on the day that is two Business Days preceding the first day of such Libor
Loan as selected by the Lender. The principal London office of each of the
four first-class London banks will be requested to provide a quotation of its
Dollar deposit offered rate. If at least two such quotations are provided,
the rate for that date will be the arithmetic mean of the quotations. If
fewer than two quotations are provided as requested, the rate for that date
will be determined on the basis of the rates quoted for loans in Dollars to
leading European banks for a period of time comparable to such Libor Loan
offered by major banks in New York City at approximately 11:00 a.m. New York
City time, on the day that its two Business Days preceding the first day of
such Libor Loan. In the event that the Reference Lenders are unable to
obtain any such quotation as provided
<PAGE>
above, it will be deemed that the Adjusted Libor Rate pursuant to a Libor
Loan cannot be determined.
In the event that the Board of Governors of the Federal Reserve System
shall impose a "Reserve Percentage" with respect to Libor deposits of any
Reference Lender then, to the extent that the rate determined in the
foregoing paragraph does not include a provision for such Reserve Percentage,
for any period during which such Reserve Percentage shall apply, the Adjusted
Libor Rate shall be equal to the amount determined above divided by an amount
equal to 1 minus the Reserve Percentage. If any Reference Lender fails to
provide its offered quotation to the Agent, the Adjusted Libor Rate shall be
determined on the basis of the offered quotation of the other Reference
Lender. The Adjusted Libor Rate shall be adjusted automatically on and as of
the effective date of any change in the Libor Rate Reserve Percentage.
"ADVANCE" and "ADVANCES" means the funding by any Lender of all or a
portion of the Loans in accordance with this Agreement.
"AFFILIATE" means singly and collectively, any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, the Borrower. For purposes of this
definition, a Person shall be deemed to be "controlled by" the Borrower if
the Borrower possesses, directly or indirectly, power either to (i) vote 10%
or more of the securities having ordinary voting power for the election of
directors of such Person or (ii) direct or cause the direction of the
management and policies of such Person whether by contract or otherwise, and
the legal representative, successor or assign of any such Person.
"AGENT" means Fleet or any other Person which is at the time in question
serving as the agent under the terms of Article 8 hereof and the other
Financing Documents.
"AGREEMENT" means this loan agreement, as the same may from time to time
be amended.
"A.M." means a time from and including 12 o'clock midnight to and
excluding 12 o'clock noon on any Business Day using Eastern Standard
(Daylight Savings) time.
2
<PAGE>
APPLICABLE MARGIN means as of any date, for the period commencing on
the Closing Date and ending on the fifth Business Day after the Borrower
delivers its financial statements to the Agent for the fiscal quarter ending
April 3, 1999 (the "INITIAL PERIOD"), (i) with respect to Libor Loans, two
percent (2%), (ii) with respect to Prime Rate Loans one-half of one percent
(1/2%), and thereafter, the applicable per annum percentage set forth below:
<TABLE>
<CAPTION>
LEVEL LEVERAGE RATIO PRIME RATE LOANS LIBOR LOANS
<S> <C> <C> <C>
I Greater than 2:1 1% 2.75%
II Greater than 1:1 and less .50% 2%
than or equal to 2:1
III 1:1 or less .00% 1%
</TABLE>
Any change in the Applicable Margin required pursuant to the foregoing shall
become effective on the fifth Business Day after the Agent receives the
Borrower's financial statements for the Borrower's fiscal quarter or
year-end, as the case may be. In the event that the financial statements
required to be delivered pursuant to SECTION 5.3.2 or 5.3.3 are not delivered
when due, are delivered thereafter and an interest rate adjustment is
required, such adjustment shall be retroactively effective to the date on
which the financial statements in question should have been delivered to the
Agent in accordance with SECTION 5.3.2 or 5.3.3, as the case may be, and (i)
the Borrower shall pay any amount owing by the Borrower as a result thereof
upon written demand from the Agent or (ii) if any amount is owing to the
Borrower as a result of such adjustment, such amount shall be credited
against interest accruing on the Loans then outstanding ratably among the
Lenders. In the event that the Applicable Margin which is calculated based
on the Borrower's unaudited financial statements for the any fiscal quarter
of any fiscal year of the Borrower delivered pursuant to Section 5.3.3 is
different from the Applicable Margin which is calculated based on the
Borrower's audited financial statements delivered pursuant to Section 5.3.2
for such year, then the Applicable Margin shall be adjusted retroactively,
and (i) if any amount is owing to the Lenders as a result of such adjustment,
the Borrower shall pay such amount upon demand by the Agent to the Agent for
the ratable benefit of the Lenders, or (ii) if any amount is owing to the
Borrower as a result of such adjustment, such amount shall be credited
against interest accruing on the Loans then outstanding ratably among the
Lenders, PROVIDED THAT in the event of a dispute as to the appropriate fiscal
quarter as to which any adjustment should be allocated, the decision of the
independent accountants of the Borrower shall be made in accordance with GAAP
and shall
3
<PAGE>
be binding upon the Agent, the Lenders and the Borrower absent manifest
error. If the amount of any credit due to Borrower as a result of such
adjustment exceeds the aggregate amount of interest accruing on the Loans in
all remaining periods during which Loans are outstanding, the Lenders shall
reimburse Borrower for the amount of such credit which remains unapplied to
pay interest within ten (10) Business Days after all Loans have been paid in
full and the Commitments are terminated. The Agent shall send the Borrower
written notification (each a "Notice of Interest Rate Change") of each change
in the Applicable Margin in accordance with the Agent's customary procedures
as in effect from time to time, but the failure to send such notice shall
have no effect on the effectiveness or applicability of the foregoing
provisions of this definition or Borrower's obligations with respect to
payment and calculation of interest on the Loans.
Each Notice of Interest Rate Change shall be deemed correct and accepted
by the Borrower unless within thirty (30) days after the date of any such
Notice of Interest Rate Change, written notice to the contrary is received by
the Agent from the Borrower. In the event that no interest rate adjustment
is made by the Agent in accordance with the foregoing, or no Notice of
Interest Rate Change is received by the Borrower, any claim for an interest
rate adjustment under this provision must be made by the Borrower by written
statement of the Borrower's claim providing in reasonable detail the
Borrower's calculations of the interest rate adjustments being requested
delivered to the Agent no later than the earlier of (i) with respect to
adjustments based on the Borrower's unaudited financial statements, the
earlier of (A) thirty (30) days after the date such statements are delivered
to the Agent, and (B) seventy-five (75) days after the last day of each
Borrower fiscal quarter, and (ii) with respect to adjustments based on the
Borrower's audited financial statements, (A) thirty (30) days after the date
such statements are delivered and (B) one hundred and twenty (120) days after
the last day of each Borrower fiscal year end.
"AUTHORIZED REPRESENTATIVE" means such senior personnel of the Borrower
as shall be duly authorized and designated in writing by the Borrower to
execute documents, instruments and agreements on its behalf and to perform
the functions of Authorized Representative under any of the Financing
Documents.
"BORROWED MONEY" means any obligation to repay Indebtedness for money
borrowed, any Indebtedness evidenced by notes, bonds, debentures, guaranties
or similar obligations including without limitation the Loans and any
obligation to pay money under a conditional sale or other title retention
agreement, the net aggregate rentals payable under any Capitalized Lease
Obligation, any reimbursement obligation for any letter of credit and any
obligations in respect of banker's and other acceptances or similar
obligations.
"BORROWER" has the meaning assigned in the first paragraph of this
Agreement.
"BUDGET" has the meaning assigned to such term in SECTION 5.3.6.
"BUSINESS CONDITION" means the financial condition, business, assets,
liabilities and operations of a Person.
4
<PAGE>
"BUSINESS DAY" means (i) for all purposes other than as covered by
clause (ii) below, any day on which banks in Boston, Massachusetts or New
York, New York are not authorized or required by applicable law to close;
and (ii) with respect to all notices and determinations in connection with,
and payments of principal and interest on, Libor Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by
and between banks in Dollar deposits in the London interbank market.
"CAPITAL EXPENDITURES" means all expenditures paid or incurred by the
Borrower or any Subsidiary in respect of (i) the acquisition, construction,
improvement or replacement of land, buildings, machinery, equipment, any
other fixed assets or leaseholds and (ii) to the extent related to and not
included in (i) above, materials, contract labor and direct labor, which
expenditures have been or should be, in accordance with GAAP, capitalized on
the books of the Borrower or such Subsidiary. Where a fixed asset is
acquired by a lease which is required to be capitalized pursuant to Statement
of Financial Accounting Standards number 13 or any successor thereto, the
amount required to be capitalized in accordance therewith shall be considered
to be an expenditure in the year such asset is first leased.
"CAPITALIZED LEASE OBLIGATIONS" means all lease obligations which have
been or should be, in accordance with GAAP, capitalized on the books of the
lessee.
"CAPITALIZED SOFTWARE DEVELOPMENT COSTS" means the Borrower's and any
Subsidiaries' costs of software development which are capitalized on the
financial statements and books and records of the Person incurring such costs.
"CASH EQUIVALENT INVESTMENTS" means any Investment in (i) direct
obligations of the United States or any agency, authority or instrumentality
thereof, or obligations guaranteed by the United States or any agency,
authority or instrumentality thereof, whether or not supported by the full
faith and credit of, a right to borrow from or the ability to be purchased by
the United States; (ii) commercial paper rated in the highest grade by a
nationally recognized statistical rating agency or which, if not rated, is
issued or guaranteed by any issuer with outstanding long-term debt rated A or
better by any nationally recognized statistical rating agency; (iii) demand
and time deposits with, and certificates of deposit and bankers acceptances
issued by, any office of the Agent, any Lender or any other bank or trust
company which is organized under the laws of the United States or any state
thereof and has capital, surplus and undivided profits aggregating at least
$500,000,000, the outstanding long-term debt of which or of the holding
company of which it is a subsidiary is rated A or better by any nationally
recognized statistical rating agency; (iv) any short-term note which has a
rating of MIG-2 or better by Moody's Investors Service Inc. or a comparable
rating from any other nationally recognized statistical rating agency; (v)
any municipal bond or other governmental obligation (including without
limitation any industrial revenue bond or project note) which is rated A or
better by any nationally recognized statistical rating agency; (vi) any other
obligation of any issuer, the outstanding long-term debt of which is rated A
or better by any nationally recognized statistical rating agency; (vii) any
repurchase agreement with any financial institution described in clause (iii)
above, relating to any of the foregoing instruments and fully collateralized
by such instruments; (viii) shares of any open-end diversified investment
company that has its assets invested only in investments of the types
described in clause (i) through (vii) above at the time of
5
<PAGE>
purchase and which maintains a constant net asset value per share; and (ix)
shares of any open-end diversified investment company registered under the
Investment Company Act of 1940, as amended, which maintains a constant net
asset value per share in accordance with regulations of the Securities &
Exchange Commission, has aggregate net assets of not less than $50,000,000 on
the date of purchase and either derives at least 95% of its gross income from
interest on or gains from the sale of investments of the type described in
clauses (i) through (vii), above or has at least 85% of the weighted average
value of its assets invested in investments of such types; provided that the
purchase of any shares in any particular investment company shall be limited
to an aggregate amount owned at any one time of $500,000. Each Cash
Equivalent Investment shall have a maturity of less than one year at the time
of purchase; provided that the maturity of any repurchase agreement shall be
deemed to be the repurchase date and not the maturity of the subject security
and that the maturity of any variable or floating rate note subject to
prepayment at the option of the holder shall be the period remaining
(including any notce period remaining) before the holder is entitled to
prepayment.
"CHANGE OF CONTROL" means, (x) at any time prior to the completion of an
Initial Public Offering, any change in the ownership of the Borrower such
that the Sprout Group, ceases to own and control, in the aggregate, at least
51.0% of the voting securities of Borrower. For purposes of this
calculation, Class A-1 Preferred Stock shall be treated as voting securities
and (y) at any time after the completion of an Initial Public Offering, any
one of the following events:
(i) any "person" or "group" (each as used in Sections 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended from time to
time), other than the Sprout Group, either (A) becomes the "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of voting capital stock of the Borrower (or securities
convertible into or exchangeable for such voting capital stock)
representing 32% or more of the combined voting power of all voting
capital stock of the Borrower (on a fully diluted basis) or (B)
otherwise has the ability, directly or indirectly, to elect a majority
of the board of directors of the Borrower; or
(ii) during any period of up to 24 consecutive months, commencing on the
Closing Date, individuals who at the beginning of such 24-month period
were directors of the Borrower, or who were nominated for election as
directors by the board of directors of Borrower (or the nominating
committee thereof), shall cease for any reason (other than (A) the
death, disability or retirement of a director or (B) the death,
disability or retirement of an officer of the Borrower that is serving
as a director at such time so long as another officer of the Borrower
replaces such Person as a director) to constitute a majority of the
board of directors of the Borrower.
"CLOSING DATE" means the date on which all of the conditions precedent
set forth in SECTION 3.1 of this Agreement have been satisfied and the Term
Loan is funded in accordance with this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
6
<PAGE>
"COMMITMENT" means the Lenders' several commitments to make or maintain
the Loans as set forth in SECTION 2.1 hereof in the maximum outstanding
amount of each Lender's Pro Rata Share of $24,000,000 less the reductions set
forth in SECTION 2.1 and less any reductions and prepayments or repayments of
the Term Loan as set forth in SECTION 2.6.
"COMMONLY CONTROLLED ENTITY" means a Person, whether or not
incorporated, which is under common control with the Borrower within the
meaning of section 414(b) or (c) of the Code.
"DEBT SERVICE COVERAGE RATIO" means as at the date of any determination
thereof, the ratio of (i) EBITDA MINUS the sum of Capital Expenditures and
taxes paid and currently payable for the rolling four Borrower fiscal quarter
period consisting of the Borrower fiscal quarter then ending and the three
immediately preceding Borrower fiscal quarters,to (ii) Total Debt Service
measured as follows: (i) for the first Borrower fiscal quarter ending after
the Closing Date, Total Debt Service for the immediately preceding fiscal
quarter TIMES FOUR (4); (ii) for the second Borrower fiscal quarter ending
after the Closing Date, Total Debt Service for the immediately preceding two
fiscal quarters TIMES TWO (2); (iii) for the third Borrower fiscal quarter
ending after the Closing Date, Total Debt Service for the immediately
preceding three fiscal quarters DIVIDED BY .75; AND FOR EACH BORROWER FISCAL
QUARTER ENDING THEREAFTER, for the rolling four Borrower fiscal quarter
period consisting of the Borrower fiscal quarter then ending and the three
immediately preceding Borrower fiscal quarters.
"DEFAULT" means an event or condition which with the giving of notice or
lapse of time or both would become an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.2.1 hereof.
"DISCHARGED RIGHTS AND OBLIGATIONS" shall have the meaning assigned to
such term in SECTION 9.11.4.
"DOLLARS" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means, for any fiscal period, Net Income PLUS, to the extent
accounted for in Net Income, Interest Expense, taxes, depreciation,
amortization and any other noncash charges or any non-recurring extraordinary
costs incurred by the Borrower and any Subsidiaries prior to January 2, 1999
in connection with closing the Loans and the Related Transactions, for such
period determined on an accrual and consolidated basis in accordance with
GAAP, PLUS, without duplication, any non-cash foreign exchange adjustment
included in the Borrower's profit and loss statement for the fiscal quarter
ending October 3, 1998, PROVIDED THAT such adjustment does not reduce the
Borrower's total equity as reflected on its balance sheet, LESS, Capitalized
Software Development Costs.
"EFFECTIVE PRIME" means the Prime Rate plus the Applicable Margin.
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"EQUITY" means the Investments in Dollars by the New Stockholders in the
Borrower, made on or prior to the date of this Agreement in the aggregate
amount of not less than $32,000,000 as set forth in EXHIBIT 1.1.
"EQUITY DOCUMENTS" means, collectively, all documents entered into by
the Borrower, the Old Stockholder and/or any of the New Stockholders in
connection with the investment of the Equity.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended from time to time.
"EVENTS OF DEFAULT" has the meaning assigned to that term in SECTION 6.1
of this Agreement.
"EXCESS CASH FLOW" means, for any fiscal year of the Borrower, EBITDA
for such fiscal year, MINUS the sum of (i) the amount equal to the payments
included in Total Debt Service paid during such fiscal year, (ii) to the
extent not included in Total Debt Service, all Capital Expenditures permitted
under Section 5.2.17 and paid during such fiscal year, (iii) voluntary
principal prepayments of the Term Loans made during such fiscal year, (iv)
taxes payable during such fiscal year and (v) plus or minus changes in
working capital during such fiscal year.
"EXHIBIT" means, when followed by a letter, the exhibit attached to this
Agreement bearing that letter and by such reference fully incorporated in
this Agreement.
"FACILITY FEE" means, the fee payable by the Borrower in accordance with
SECTION 2.2.2 and the Fee Letter.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/16th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York, PROVIDED that (i) if such
day is not a Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next succeeding Business Day as so
published, and (ii) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Agent on such day on such transactions as determined by the
Agent in its discretion exercised in good faith.
"FEE LETTER" means that certain side letter of even date with this
Agreement between the Borrower and the Agent regarding certain fees payable
by the Borrower.
"FINANCING DOCUMENTS" means, collectively, this Agreement, each Note,
the Security Documents, the Fee Letter, the Post-Closing Letter, any Letter
of Credit, any Letter of Credit Agreement, any agreement with any Lender
providing any interest rate protection arrangement and each other agreement,
instrument or document now or hereafter executed in connection herewith or
therewith.
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"GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America.
"HAZARDOUS MATERIAL" shall mean any substance or material defined or
designated as a hazardous or toxic waste, hazardous or toxic material,
hazardous or toxic substance, or other similar term, by any United States
federal, state or local environmental statute, regulation or ordinance.
"INDEBTEDNESS" means, without duplication for any Person, (i) all
indebtedness or other obligations of said Person for Borrowed Money or for
the deferred purchase price of property or services, including, without
limitation, all reimbursement obligations of said Person with respect to
standby and/or documentary letters of credit (ii) the indebtedness or other
obligations of any other Person ("Other Person") for Borrowed Money or for
the deferred purchase price of property or services, the payment or
collection of which said Person has guaranteed (except by reason of
endorsement for deposit or collection in the ordinary course of business) or
in respect of which said Person is liable, contingently or otherwise, whether
by way of agreement to purchase or lease, to provide funds for payment, to
supply funds to purchase, sell or lease property or services primarily to
assure a creditor of such Other Person against loss or otherwise to invest in
or make a loan to the Other Person, or otherwise to assure a creditor of such
Other Person against loss, (iii) all indebtedness or other obligations of any
Person for Borrowed Money or for the deferred purchase price of property or
services secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or
in any property owned by said Person, whether or not said Person has assumed
or become liable for the payment of such indebtedness or obligations, (iv)
Capitalized Lease Obligations of said Person and (v) obligations of such
Person, in the notional amount, under contracts pursuant to which such Person
has agreed to purchase interest rate protection or swap interest rate
obligations.
"INELIGIBLE SECURITIES" means Securities which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.
"INITIAL PUBLIC OFFERING" means the filing by the Borrower of a Form S-1
or any other form of registration statement then available for registration
with the Securities and Exchange Commission or otherwise conducting an
initial public offering of any class of the Borrower's or any Subsidiary's
securities.
"INTELLECTUAL PROPERTY ACQUISITION" means the purchase by Borrower,
funded in part with the initial proceeds of $18,000,000 from the Loans
provided by Lenders at the Closing, of certain intellectual property assets
from Synopsis.
"INTEREST ADJUSTMENT DATE" means (i) as to any Prime Rate Loan to be
converted to a Libor Loan the Business Day elected by the Borrower in its
applicable Interest Rate Election, but being not less than three (3) Business
Days after the receipt by the Agent before 12:00 o'clock P.M. on a Business
Day of an Interest Rate Election electing the Libor Rate as the interest rate
on
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such Loan; and (ii) as to any Libor Loan, the last Business Day of the
Interest Period pertaining to such Libor Loan.
"INTEREST EXPENSE" means, with respect to any fiscal quarter, the
aggregate amount required to be accrued by the Borrower and any Subsidiaries
in such fiscal quarter for interest, fees (excluding, however, the Facility
Fee being paid to the Agent on the Closing Date), charges and expenses,
however characterized, on its Indebtedness, including, without limitation,
all such interest, fees, charges and expenses required to be accrued with
respect to Indebtedness under the Financing Documents, all determined in
accordance with GAAP.
"INTEREST PERIOD" means:
With respect to each Libor Loan:
(i) initially, the period commencing on the date of such Libor
Loan and ending one, two, three or six or such greater number of months
thereafter as may be acceptable to all of the Lenders and as the
Borrower may elect in the applicable Interest Rate Election and subject
to SECTION 2.9; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Libor Loan and
ending one, two, three or six or such greater number of months
thereafter as may be acceptable to all of the Lenders and as the
Borrower may elect in the applicable Interest Rate Election and subject
to SECTION 2.9;
PROVIDED THAT clauses (i) and (ii) of this definition are subject to the
following:
(A) any Interest Period (other than an Interest Period determined
pursuant to clause (C) below) which would otherwise end on a day which is not
a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in another calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day;
(B) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject
to clause (C) below, end on the last Business Day of a calendar month; and
(C) for the Term Loan, no Interest Period shall end after the Term Loan
Repayment Date and for the Revolving Credit Loan, no Interest Period shall
end after the Revolving Credit Repayment Date; and
(D) with respect to all Libor Loans, no more than three Interest
Periods may be in effect at any time.
"INTEREST RATE ELECTION" means the Borrower's irrevocable telecopied or
telephonic notice of election, which shall be promptly confirmed by a written
notice of election that Effective
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Prime or the Libor Rate shall apply to all or any portion of the Loans, which
shall, subject to this Agreement, be effective on the next Interest
Adjustment Date, such telecopied or telephonic notice and written
confirmation thereof to be in the form of EXHIBIT 1.4 and to be received by
the Agent prior to 12:00 o'clock P.M. on a Business Day and at least three
(3) Business Days prior to an Interest Adjustment Date in the case of a Libor
Loan, and by 12:00 p.m. on an Interest Adjustment Date in the case of a Prime
Rate Loan or four (4) Business Days in the case of an Interest Rate Election
as to which the consent of the Lenders is required), each such Interest Rate
Election, subject to the terms of this Agreement to apply to the Advance or
the Loan referred to in such Interest Rate Election or to effect a change in
the interest rate on the applicable portion of the Loans then outstanding, as
applicable, with respect to which such Interest Rate Election was made, such
change to occur on the Interest Adjustment Date next succeeding receipt of
such Interest Rate Election by the Agent. Any Interest Rate Election
received by the Agent after 12 o'clock P.M. on a Business Day shall be
deemed, for all purposes of this Agreement to have been received prior to 12
o'clock P.M. on the next succeeding Business Day.
"INVESTMENT" means any investment in any Person whether by means of a
purchase of capital stock, notes, bonds, debentures or other evidences of
Indebtedness and/or by means of a capital or partnership contribution, loan,
deposit, advance or other means, excluding amounts due from customers for
services or products delivered or sold in the ordinary course of business.
"LENDER" means Fleet, or any financial institution which hereafter
becomes a party hereto pursuant to the terms of SECTION 9.10, each in their
individual capacity, and "Lenders" means Fleet and each of such financial
institutions.
"LEVERAGE RATIO" means the ratio of (i) total Indebtedness for Borrowed
Money of the Borrower and its Subsidiaries on a consolidated basis as of the
last day of such fiscal quarter to (ii) EBITDA for the rolling four Borrower
fiscal quarter period consisting of such fiscal quarter and the three
immediately preceding Borrower fiscal quarters.
"LETTER OF CREDIT" means an irrevocable stand-by or commercial letter of
credit issued by the Agent for the account of the Borrower pursuant to a
Letter of Credit Agreement subject to and in accordance with this Agreement.
"LETTER OF CREDIT AGREEMENT" means an application and agreement for
stand-by or commercial letter of credit in such form as may at any time be
customarily required by the Agent for its issuance of stand-by or commercial
letters of credit.
"LIBOR LOAN" means any portion of any Loan bearing interest at the Libor
Rate.
"LIBOR RATE" means, for any Interest Period, the Adjusted Libor Rate in
effect on the first day of such Interest Period (subject to adjustment as
provided in the definition of Adjusted Libor Rate) plus the Applicable Margin
for Libor Loans from time to time in effect.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including without limitation any conditional sale or other title
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retention agreement and any Capitalized Lease Obligation) having
substantially the same economic effect as any of the foregoing and the filing
of any financing statement under the applicable Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing.
"LOANS" and "LOAN" means at any time the outstanding principal amount of
Indebtedness owed to the Lenders or to any Lender, as the context may require
pursuant to this Agreement.
"MAJORITY LENDERS" means Lenders holding an aggregate Pro Rata Share of
the outstanding principal balance of the Loans in an amount equal to or in
excess of 51.0% of the total outstanding principal balance of the Loans and
if there is no outstanding principal balance of the Loans, Lenders having at
least 51.0% of the Commitment.
"MANAGEMENT" means the individuals who are "executive officers" (as
defined in Rule 16a-1 under the Securities Exchange Act of 1934, as amended)
of Borrower including, but not limited to, William Herman and Richard Lucier.
"MATERIAL ADVERSE EFFECT" means material adverse effect on (i) the
ability of the Borrower, or the Borrower and any Subsidiaries taken as a
whole, to fulfill any of their respective obligations under any of the
Financing Documents, or (ii) the Business Condition of the Borrower, or the
Borrower and any Subsidiaries taken as a whole.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NET INCOME" means, for any fiscal period, the net after tax income
(loss) of the Borrower and any Subsidiaries for such period determined on an
accrual and consolidated basis in accordance with GAAP.
"NEW STOCKHOLDERS" means the Sprout Group and the individual members of
Management.
"NOTE" means any promissory note of the Borrower payable to the order of
a Lender and substantially in the form of EXHIBIT 1.5 or EXHIBIT 1.6 and
evidencing all or a portion of the Loan and "Notes" means all of the Notes,
collectively.
"OBLIGATIONS" mean any and all Indebtedness, obligations and liabilities
of Borrower and/or any Subsidiaries under any of the Financing Documents to
any one or more of the Lenders and/or the Agent of every kind and
description, absolute or contingent, due or to become due, whether for
payment or performance, now existing or hereafter arising, including,
without limitation, all Loans, interest, taxes, fees, charges, and expenses
under the Financing Documents and attorneys' fees chargeable to the Borrower
and/or any Subsidiaries or incurred by any of the Lenders and/or the Agent
under any of the Financing Documents.
"OFFICER'S CERTIFICATE" means a certificate signed by an Authorized
Representative and delivered to the Agent on behalf of the Lenders.
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"OLD STOCKHOLDER" means Synopsys.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to subtitle A of Title IV of ERISA.
"P.M." means a time from and including 12 o'clock noon on any Business
Day to the end of such Business Day using Eastern Standard (Daylight Savings)
time.
"PERMITTED ENCUMBRANCES" means each Lien granted pursuant to any of the
Security Documents, those Liens, security interests and defects in title
permitted under SECTION 5.2.1 and those Liens listed on EXHIBIT 1.8 hereto.
"PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, trust, or unincorporated organization, or a
government or any agency or political subdivision thereof.
"PLAN" means an employee benefit plan as defined in Section 3(3) of
ERISA maintained for employees of the Borrower or any Commonly Controlled
Entity.
"POST-CLOSING LETTER" means that certain letter agreement between the
Borrower and the Agent dated the Closing Date and listing certain
post-closing actions to be completed by the Borrower.
"PREMISES" has the meaning assigned to such term in SECTION 4.1.20.1.
"PRIME RATE" means the higher of (i) the floating rate of interest per
annum designated from time to time by the Agent as being its "prime rate" of
interest, such interest rate to be adjusted on the effective date of any
change thereof by the Agent, it being understood that such rate of interest
may not be the lowest rate of interest from time to time charged by the Agent
and (ii) the Federal Funds Rate plus one-half percent (.50%), such interest
rate to be adjusted on the effective date of any change thereof by the
Federal Reserve Bank of New York.
"PRIME RATE LOAN(S)" means any portion of the Loans bearing interest at
Effective Prime.
"PROJECTIONS" means the Borrower's written projections of Borrower's
ONE-year future performance on a consolidated basis delivered to the Agent
prior to the Closing and attached to this Agreement as EXHIBIT 1.12.
"PRO RATA SHARE" means (i) with respect to the Commitment, each Lender's
percentage share of the Commitment as set forth immediately opposite such
Lender's name on EXHIBIT 1.9, and (ii) with respect to the Loans, each
Lender's percentage share of the aggregate outstanding principal balance of
the Loans and "Pro Rata Shares" means such percentage shares of the Lenders.
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"REFERENCE LENDER(S)" means the Agent unless the Agent resigns said
responsibility, at which time and thereafter such term means one or two
Lenders selected by the Agent in its discretion from time to time as a
reference lender for purposes of determining the Adjusted Libor Rate.
"RELATED TRANSACTIONS" means the Borrower's receipt of the Equity, the
Borrower's purchase of certain technology and intellectual property from the
Old Stockholder, the Borrower's payment of a dividend to the Old Stockholder,
the Borrower's issuance of capital stock to the New Stockholders, the
completion of the conditions precedent to the Borrower's receipt of the
Equity as set forth in the Related Transaction Documents and any other
transactions described in the Related Transaction Documents, all on the
Closing Date but immediately subsequent to the initial funding of the Loans
under this Loan Agreement.
"RELATED TRANSACTION DOCUMENTS" means the documents listed on EXHIBIT
1.2.
"REPORTABLE EVENT" shall have the meaning assigned to that term in
Section 4043 of ERISA for which the requirement of 30 days' notice to the
PBGC has not been waived by the PBGC.
"REQUEST" means a written request for the Loans in the form of EXHIBIT
1.10, received by the Agent on behalf of the Lenders from the Borrower in
accordance with this Agreement, specifying the date on which the Borrower
desires such Loans and the disbursement instructions of the Borrower with
respect thereto.
"REVOLVING CREDIT LOAN" means the revolving credit loans to be made by
the Lenders to the Borrower from time to time in the maximum outstanding
principal amount of the Revolving Credit Loan Commitment, all subject and
pursuant to SECTION 2.1.0.
"REVOLVING CREDIT LOAN COMMITMENT" means the Lenders' several
commitments to make Revolving Credit Loans to the Borrower in accordance with
SECTION 2.1.0 and this Agreement and in the maximum outstanding amount of
each Lender's Pro Rata Share of $6,000,000, as such amount may be reduced
pursuant to SECTION 2.6.4.
"REVOLVING CREDIT NOTE" means each revolving credit note of the
Borrower, payable to the order of a Lender in the form of EXHIBIT 1.5 hereto
evidencing the Indebtedness of the Borrower to such Lender with respect to
the Revolving Credit Loan.
"REVOLVING CREDIT REPAYMENT DATE" means the earlier to occur of (i)
September 30, 2003 and (ii) earlier date on which the Revolving Credit Loan
becomes due and payable pursuant to the terms hereof.
"SECTION" means, when followed by a number, the section or subsection of
this Agreement bearing that number.
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"SECTION 20 SUBSIDIARY" means a subsidiary of the bank holding company
controlling any Lender, which subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
"SECURITY DOCUMENTS" means any and all documents, instruments and
agreements now or hereafter providing security for the Loans and any other
Indebtedness of the Borrower or any Subsidiary to any of the Lenders and/or
the Agent, including without limitation the following documents, instruments
and agreements between the Agent and the Borrower or any Subsidiary: any
mortgages on and collateral assignments of real property interests (fee,
leasehold and easement) of the Borrower and any Subsidiary granting Liens
thereon; landlord lien waivers and consents as may be reasonably requested by
the Agent; security agreements granting first Liens on all Borrower's and any
Subsidiary's fixtures and tangible and intangible personal property; pledge
of 14,000,000 shares of the Borrower's capital stock owned by the Sprout
Group; collateral assignments of Borrower's and any Subsidiary's contracts,
licenses, permits, easements and leases; collateral assignments of Borrower's
and any Subsidiary's copyrights; conditional assignments of Borrower's and
any Subsidiary's trademarks and patents; any Subordination Agreement; the
software escrow agreement referred to in SECTION 5.1.24; any guaranty by a
Subsidiary; any pledge of the capital stock of any Subsidiary; casualty and
liability insurance policies providing coverage to the Agent for the benefit
of the Lenders; UCC-1 financing statements or similar filings perfecting the
above-referenced security interests, pledges and assignments, all as
executed, delivered to and accepted by the Agent on or prior to the Closing
Date or subsequent to the Closing Date as may be required by this Agreement,
as any of the foregoing may be amended in writing by the Agent and any other
party or parties thereto.
"SELLING LENDER" shall have the meaning assigned to such term in SECTION
9.11.1.
"SINGLE EMPLOYER PLAN" means any Plan as defined in Section 4001(a)(15)
of ERISA.
"SOLVENT" as applied to any Person at any date shall mean that on and as
of such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation,
contingent liabilities of such Person, (b) the present fair salable value of
the assets of such Person is not less than the amount that will be required
to pay the probable liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability
to pay as such debts and liabilities mature and (d) such Person is not
engaged in business or a transaction, and is not about to engage in business
or a transaction, for which such Person's property would constitute an
unreasonably small capital. The amount of contingent liabilities on and as
of any date shall be computed as the amount that, in the light of all the
facts and circumstances existing on and as of such date, represents the
amount that can reasonably be expected to become an actual or matured
liability. For purposes of this definition, "PERSON" shall mean, where so
required by the context in which the term "Solvent" appears, such Person and
its Subsidiaries taken as a whole.
"SPROUT GROUP" means the group of equity investors in Borrower
identified on EXHIBIT 1.1 hereto.
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"STOCKHOLDER" means, collectively, the Old Stockholder and the New
Stockholders.
"SUBSIDIARY" means any corporation or entity other than the Borrower of
which more than 50% of the outstanding capital stock or voting interests or
rights having ordinary voting power to elect a majority of the board of
directors or other managers of such entity (irrespective of whether or not at
the time capital stock or voting interests or rights of any other class or
classes of such Person shall or might have voting power upon the occurrence
of any contingency) is at the time directly or indirectly owned by the
Borrower or by the Borrower and/or one or more Subsidiaries or the management
of which corporation or entity is under control of the Borrower and/or any
other Subsidiary, directly or indirectly through one or more Persons and any
other Person which, under GAAP, should at any time for financial reporting
purposes be consolidated or combined with the Borrower and/or any other
Subsidiary.
"SUBSTITUTED LENDER" has the meaning set forth in SECTION 9.11 hereof.
"SUBSTITUTION AGREEMENT" has the meaning assigned to such term in
SECTION 9.11.1.
"SYNOPSIS" means Synopsis, Inc.
"TERM LOAN" means the term loan in the aggregate principal amount of
$18,000,000 to be made or maintained by the Lenders pursuant to SECTION 2.1.1
hereof.
"TERM NOTE" means a term note of the Borrower payable to the order of a
Lender in the form of EXHIBIT 1.6 hereto evidencing the Indebtedness of the
Borrower to such Lender with respect to the Term Loan.
"TERM LOAN REPAYMENT DATE" means the earlier to occur of (i)
September 30, 2003 and (ii) such earlier date on which the Term Loan becomes
due and payable pursuant to the terms hereof.
"TOTAL DEBT SERVICE" means, at any date of determination, the sum of (i)
interest expense and (ii) scheduled and mandatory principal payments for the
fiscal period in question due on account of any Indebtedness of the Borrower,
but excluding any mandatory payments of principal required pursuant to
SECTIONS 2.6.1.2, 2.6.1.3, 2.6.1.4 and 2.6.1.5.
"UNUSED FEES" has the meaning assigned to such term in SECTION 2.2.2.
SECTION 1.2. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, calculations of
amounts for the purposes of calculating any financial covenants or ratios
hereunder shall be made in accordance with GAAP applied on a basis consistent
with those used in the Borrower's financial statements referred to in SECTION
4.1.5 (other than departures therefrom not material in their impact), and all
financial data submitted pursuant to this Agreement shall be prepared in
accordance with GAAP (except, in the case of unaudited financial statements,
the absence of footnotes and that such statements are subject to changes
resulting from year-end adjustments made in accordance with GAAP).
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SECTION 1.3. OTHER TERMS. References to "Articles", "Sections",
"subsections" and "Exhibits" shall be to Sections, subsections and Exhibits
and of this Agreement unless otherwise specifically provided. In this
Agreement, "hereof," "herein," "hereto," "hereunder" and the like mean and
refer to this Agreement as a whole and not merely to the specific section,
paragraph or clause in which the respective word appears; words importing any
gender include the other genders; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible
visible form; the words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation"; references to agreements
and other contractual instruments shall be deemed to include subsequent
amendments, assignments, and other modifications thereto, but only to the
extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Financing Document;
references to Persons include their respective permitted successors and
assigns or, in the case of governmental Persons, Persons succeeding to the
relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of same and any successor
statutes and regulations.
ARTICLE 2.
AMOUNT AND TERMS OF THE LOANS
SECTION 2.1. THE LOANS.
SECTION 2.1.0. THE REVOLVING CREDIT LOANS. Each of the Lenders
severally agrees, subject to the terms and conditions of this Agreement, to
make Advances of Revolving Credit Loans to the Borrower from time to time
after receipt by the Agent from time to time before the Revolving Credit
Repayment Date of, and at the times provided for in, a Request and an
Interest Rate Election from the Borrower in accordance with this Agreement,
during the period commencing on the Closing Date and ending on the Business
Day immediately preceding the Revolving Credit Repayment Date, in an
aggregate principal amount at any one time outstanding not to exceed such
Lender's Pro Rata Share of the Revolving Credit Loan Commitment less such
Lender's Pro Rata Share of the aggregate outstanding stated amount of any
Letters of Credit or Letter of Credit Agreements and any unreimbursed amounts
drawn thereunder. The outstanding principal balance of the Revolving Credit
Loans shall be repaid on the Revolving Credit Repayment Date.
Promptly after receipt of a Request and Interest Rate Election, Agent
shall notify each Lender by telephone, telex or telecopy of the proposed
borrowing. Subject to the immediately preceding paragraph, each Lender agrees
that after its receipt of notification from Agent of Agent's receipt of a
Request and Interest Rate Election, such Lender shall send its Pro Rata Share
(or such portion thereof as may be necessary to provide Agent with such Pro
Rata Share in Dollars and in immediately available funds, without
consideration or use of any contra accounts of any Lender) of the requested
Loan by wire transfer to Agent so that Agent receives such Pro Rata Share in
Dollars and in immediately available funds not later than 12:00 P.M. (Boston,
Massachusetts time) on the first day of the Interest Period for any such
requested Libor Loan and on the Business Day for such Advance set forth in
Borrower's Request for any such requested
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Prime Rate Loan, and Agent shall advance funds to the Borrower by depositing
such funds in Borrower's account with the Agent upon Agent's receipt of such
Pro Rata Shares in the amount of the Pro Rata Shares of such Loan in Agent's
possession. Unless Agent shall have been notified by any Lender (which
notice may be telephonic if confirmed promptly in writing) prior to the
first day of the Interest Period in respect of any Loan which such Lender is
obligated to make under this Agreement, that such Lender does not intend to
make available to Agent such Lender's Pro Rata Share of such Loan on such
date, Agent may assume that such Lender has made such amount available to
Agent on such date and Agent in its sole discretion may, but shall not be
obligated to, make available to the Borrower a corresponding amount on such
date. If such corresponding amount is not in fact made available to Agent by
such Lender, Agent shall be entitled to recover such corresponding amount
from such Lender promptly upon demand by Agent together with interest
thereon, for each day from such date until the date such amount is paid to
Agent, at the Federal Funds Rate for three (3) Business Days and thereafter
at the interest rate on the Loan in question. If such Lender does not pay
such corresponding amount forthwith upon Agent's demand therefor, Agent shall
promptly notify the Borrower and the Borrower shall promptly pay such
corresponding amount to Agent. Nothing contained in this Section shall be
deemed to relieve any Lender from its obligation to fulfill its obligations
hereunder or to prejudice any rights which the Borrower may have against any
Lender as a result of any default by such Lender hereunder.
Throughout the term of the Revolving Credit Loans, the Revolving Credit
Loan Commitment may, in Fleet's discretion, be made available to the Borrower
prior to the Revolving Credit Repayment Date by issuance of Letters of Credit
having an expiration date prior to the earlier to occur of (a) the first
anniversary date of the date of issuance of any such Letter of Credit or (b)
three (3) Business Days prior to the Revolving Credit Repayment Date,
reasonably promptly after submission by the Borrower to the Agent of a Letter
of Credit Agreement, duly completed and executed by the Borrower and
otherwise in form and substance satisfactory to Fleet. The Borrower shall
pay upon demand by the Agent such usual and customary fees and costs as Fleet
may from time to time establish for issuance, transfer, amendment and
negotiation of each Letter of Credit and shall pay to the Agent for Fleet's
account upon issuance of any Letter of Credit an annual Letter of Credit fee
in an amount equal to an amount determined by Fleet based on Fleet's usual
and customary fees charged for Letters of Credit similar to such Letter of
Credit. In the event that the Borrower shall fail to reimburse Fleet under
any Letter of Credit or Letter of Credit Agreement, and any outstanding
Indebtedness of the Borrower relating thereto, Fleet shall promptly notify
the Agent, and the Agent shall, in turn, promptly notify each Lender of the
unreimbursed amount together with accrued interest thereon, and each Lender
agrees to purchase, and it shall be deemed to have purchased, a participation
in such Letter of Credit or Letter of Credit Agreement and such indebtedness
in an amount equal to its Pro Rata Share of the unpaid amount together with
unpaid interest thereon. Upon one (1) Business Day's notice from the Agent,
each Lender shall deliver to the Agent an amount equal to its respective
participation in same day funds, at the place and on the date and by the time
notified by the Agent. The obligation of each Lender to deliver to the Agent
an amount equal to its respective participation pursuant to the foregoing
sentence shall be absolute and unconditional and such remittance shall be
made notwithstanding the occurrence or continuation of an Event of Default or
the failure to satisfy any condition set forth in Article III of this
Agreement.
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SECTION 2.1.1. TERM LOANS. Each of the Lenders severally agrees,
subject to the terms and conditions of this Agreement, to make a Term Loan to
the Borrower in the amount of its respective Pro Rata Share of $18,000,000.
Borrower shall pay on the last day of each fiscal quarter commencing January
2, 1999 the amount set forth below as the quarterly payment amount for the
fiscal year in question:
<TABLE>
<CAPTION>
Fiscal Year Quarterly Payment Amount
<S> <C>
1999 $500,000
2000 $750,000
2001 $875,000
2002 $1,000,000
2003 $1,375,000
</TABLE>
SECTION 2.2. INTEREST AND FEES ON THE LOANS.
SECTION 2.2.1. INTEREST; DEFAULT RATE OF INTEREST; SUSPENSION OF
LIBOR LOANS; ETC. Interest shall accrue on the Loans at Effective Prime or
the Libor Rate for each of the Loans' Interest Periods in accordance with the
Borrower's Interest Rate Elections for the Loans subject to and in accordance
with the terms and conditions of this Agreement and the Note(s); provided
that if a Default or an Event of Default exists and is continuing, no
Interest Rate Election electing the Libor Rate shall be effective and all
Loans shall bear interest, payable on demand, at Effective Prime PLUS, so
long as an Event of Default exists and is continuing, two percent (2%) above
the Applicable Margin (the "DEFAULT RATE"); all of the foregoing being
applicable until such Default or Event of Default is cured or waived and, as
to availability of Libor Loans, an Interest Rate Election electing the Libor
Rate for such Loan or portion thereof which is effective in accordance with
this Agreement is submitted to the Agent; and provided further that the
Borrower shall submit Interest Rate Elections so that on any date on which
under SECTION 2.1.1 a regularly scheduled payment of principal of the Term
Loans is to be made, at least the amount of the Term Loans to be so repaid is
bearing interest at Effective Prime and/or such payment date is an Interest
Adjustment Date for outstanding Libor Loans in such amount of the Term Loans.
The Borrower shall pay such interest to the Agent for the pro rata account
of each Lender in arrears on the Loans (including without limitation Libor
Loans) outstanding from time to time after the Closing Date, such payments to
be made, with respect to Libor Loans with Interest Periods of three months or
less on each Interest Adjustment Date for such Loans, and with respect to
Libor Loans with Interest Periods of more than three months and with respect
to Prime Rate Loans, quarterly on the last Business Day of each calendar
quarter of each year. In the event no Interest Rate Election has been made
by the Borrower with respect to any Loan or Advance (or an Interest Rate
Election shall have expired without an effective substitute Interest Rate
Election), Effective Prime shall be the rate applicable to such Loan or
Advance. All provisions of each Note and any other agreements between the
Borrower and the Lenders are expressly subject to the condition that in no
event, whether by reason of acceleration of maturity of the Indebtedness
evidenced by any Note or otherwise, shall the amount paid or agreed to be
paid to the Lenders which is deemed interest under applicable law exceed the
maximum permitted rate of interest under applicable law (the "MAXIMUM
PERMITTED RATE"), which shall mean the law in effect on the date of this
Agreement, except that if there is a change in such law which results in a
higher Maximum Permitted Rate, then each Note shall be governed by such
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amended law from and after its effective date. In the event that fulfillment
of any provision of any Note, or this Agreement or any document, instrument
or agreement providing security for any Note results in the rate of interest
charged under any Note being in excess of the Maximum Permitted Rate, the
obligation to be fulfilled shall automatically be reduced to eliminate such
excess. If, notwithstanding the foregoing, any Lender receives an amount
which under applicable law would cause the interest rate under any Note to
exceed the Maximum Permitted Rate, the portion thereof which would be
excessive shall automatically be deemed a prepayment of and be applied to the
unpaid principal balance of such Note to the extent of then outstanding Prime
Rate Loans and not a payment of interest and to the extent said excessive
portion exceeds the outstanding principal amount of Prime Rate Loans, said
excessive portion shall be repaid to the Borrower.
SECTION 2.2.2. FEES. On the Closing Date the Borrower shall pay
the Facility Fee to the Agent for the account of Fleet. In addition, on the
last Business Day of each March, June, September and December commencing
December 31, 1998 and continuing through the earlier of (i) the Revolving
Credit Repayment Date and (ii) the date that all amounts owed hereunder have
been paid and all Commitments to make Revolving Credit Loans have terminated,
the Borrower shall pay to the Agent for the pro rata account of each Lender,
a fee (the "Unused Fee") in an amount equal to .50% per annum of the amount,
if any, by which the average actual daily amount of the Revolving Credit Loan
Commitment for the quarterly period just ended (or in the case of the first
such payment, the period from the Closing Date to the date such payment is
due) exceeds the sum of the average of the actual daily outstanding principal
balances of the Revolving Credit Loans PLUS the average of the actual daily
aggregate amount of the outstanding stated amount of any Letter of Credit or
Letter of Credit Agreement, and any unreimbursed amounts thereunder.
SECTION 2.2.3. INCREASED COSTS - CAPITAL. If, after the date
hereof, any Lender shall have reasonably determined that the adoption after
the date hereof of any applicable law, governmental rule, regulation or order
regarding capital adequacy of banks or bank holding companies, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender or
such Lender's holding company with any policy, guideline, directive or
request regarding capital adequacy (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the capital of such Lender or such Lender's
holding company as a consequence of the obligations hereunder of such Lender
to a level below that which such Lender could have achieved but for such
adoption, change or compliance (taking into consideration the policies of
such Lender or such Lender's holding company with respect to capital adequacy
immediately before such adoption, change or compliance and assuming that the
capital of such Lender or such Lender's holding company was fully utilized
prior to such adoption, change or compliance) by an amount reasonably deemed
by such Lender to be material, then such Lender shall notify the Agent and
the Borrower thereof and the Borrower shall pay to the Agent for the account
of such Lender from time to time as specified by such Lender such additional
amounts as shall be sufficient to compensate such Lender for such reduced
return, each such payment to be made by the Borrower within ten (10) Business
Days after each demand by such Lender;
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provided that the Borrower shall have no liability to pay such costs accruing
from and after the 60th day prior to the date of each such demand. A
certificate in reasonable detail of one of the officers of such Lender
describing the event giving rise to such reduction and setting forth the
amount to be paid to such Lender hereunder and a computation of such amount
shall accompany any such demand and shall, in the absence of manifest error,
be presumptively correct. In determining such amount, such Lender shall act
reasonably and will use any reasonable averaging and attribution methods. If
the Borrower shall, as a result of the requirements of this SECTION 2.2.3
above, be required to pay any Lender the additional costs referred to above
and the Borrower, in its sole discretion, shall deem such additional amounts
to be material, the Borrower shall have the right to substitute another bank
satisfactory to the Agent for such Lender which has certified the additional
costs to the Borrower, and the Agent shall use reasonable efforts at no cost
to the Agent to assist the Borrower to locate such substitute bank. Any such
substitution shall take place in accordance with SECTION 9.11 and shall
otherwise be on terms and conditions reasonably satisfactory to the Agent,
and until such time as such substitution shall be consummated, the Borrower
shall continue to pay such additional costs. Upon any such substitution, the
Borrower shall pay or cause to be paid to the Lender that is being replaced,
all principal, interest (to the date of such substitution) and other amounts
owing hereunder to such Lender and such Lender will be released from
liability hereunder.
SECTION 2.3. NOTATIONS. At the time of (i) the making of each
Advance evidenced by any Note, (ii) each change in the interest rate under
any Note effected as a result of an Interest Rate Election; and (iii) each
payment or prepayment of any Note, each Lender may enter upon its records an
appropriate notation evidencing (a) such Lender's Pro Rata Share of the Loans
and (b) the interest rate and Interest Adjustment Date applicable thereto or
(c) such payment or prepayment (voluntary or involuntary) of principal and
(d) in the case of payments or prepayments (voluntary or involuntary) of
principal, the portion of the applicable Loan which was paid or prepaid. No
failure to make any such notation shall affect the Borrower's unconditional
obligations to repay the Loans and all interest, fees and other sums due in
connection with this Agreement and/or any Note in full, nor shall any such
failure, standing alone, constitute grounds for disproving a payment of
principal by the Borrower. However, in the absence of manifest error, such
notations and each Lender's records containing such notations shall
constitute presumptive evidence of the facts stated therein, including,
without limitation, the outstanding amount of such Lender's Pro Rata Share of
the Loans and all amounts due and owing to such Lender at any time. Any such
notations and such Lender's records containing such notations may be
introduced in evidence in any judicial or administrative proceeding relating
to this Agreement, the Loans or any Note.
SECTION 2.4. COMPUTATION OF INTEREST. Interest due under this
Agreement and any Note shall be computed on the basis of a year of 360 days
for the actual number of days elapsed.
SECTION 2.5. TIME OF PAYMENTS AND PREPAYMENTS IN IMMEDIATELY
AVAILABLE FUNDS.
SECTION 2.5.1. TIME. All payments and prepayments of principal,
fees, interest and any other amounts owed from time to time under this
Agreement and/or under each Note shall be made to the Agent for the pro rata
account of each Lender at the address referred to in SECTION 9.6 in Dollars
and in immediately available funds prior to 12:00 o'clock P.M. on the
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<PAGE>
Business Day that such payment is due, provided that the Borrower hereby
authorizes and instructs the Agent to charge against the Borrower's accounts
with the Agent on each date on which a payment is due hereunder and/or under
any Note and on any subsequent date if and to the extent any such payment is
not made when due an amount up to the principal, interest and fees due and
payable to the Lenders, the Agent or any Lender hereunder and/or under any
Note and such charge shall be deemed payment hereunder and under the Note(s)
in question to the extent that immediately available funds are then in such
accounts. The Agent shall use reasonable efforts in accordance with the
Agent's customary procedures to give subsequent notice of any such charge to
the Borrower, but the failure to give such notice shall not affect the
validity of any such charge. To the extent that immediately available funds
are then in such accounts, the failure of the Agent to charge any such
account or the failure of the Agent to charge any such account prior to 12
o'clock P.M. shall not be basis for an Event of Default under SECTION 6.1.1
and any amount due on the Loans on such date shall be deemed paid; provided
that the Agent shall have the right to charge any such account on any
subsequent date for such unpaid payment and an Event of Default shall exist
if sufficient immediately available funds are not in such accounts on the
date the Agent so charges such account after the expiration of any applicable
cure period. In the event of any charge against the Borrower's accounts by
the Agent pursuant to the immediately preceding sentence, the Agent shall use
reasonable efforts to provide notice to the Borrower of such charge in
accordance with the Agent's customary procedures, but the failure to provide
such notice shall not in any way be a basis for any liability of the Agent
nor shall such failure adversely affect the validity and effectiveness of any
such action by the Agent. Any such payment or prepayment which is received by
the Agent in Dollars and in immediately available funds after 12 o'clock P.M.
on a Business Day shall be deemed received for all purposes of this Agreement
on the next succeeding Business Day unless the failure by Agent to receive
such funds prior to 12 o'clock P.M. is due to Agent's failure to charge the
account of Borrower prior to 12 o'clock P.M., except that solely for the
purpose of determining whether a Default or Event of Default has occurred
under SECTION 6.1.1, any such payment or prepayment, if received by the Agent
prior to the close of the Agent's business on a Business Day, shall be
deemed received on such Business Day. All payments of principal, interest,
fees and any other amounts which are owing to any or all of the Lenders or
the Agent hereunder and/or under any of the Notes that are received by the
Agent in immediately available Dollars prior to 12:00 o'clock P.M. on any
Business Day shall, to the extent owing to the Lenders other than the Agent,
be sent by wire transfer by the Agent to any such other Lenders (in each
case, without deduction for any claim, defense or offset of any type) before
3:00 o'clock P.M. on the same Business Day. Each such wire transfer shall be
addressed to each Lender in accordance with the wire instructions set forth
in EXHIBIT 1.9 hereto. The amount of each payment wired by the Agent to each
such Lender shall be such amount as shall be necessary to provide such Lender
with its Pro Rata Share of such payment (without consideration or use of any
contra accounts of any Lender), or with such other amount as may be owing to
such Lender in accordance with this Agreement (in each case, without
deduction for any claim, defense or offset of any type). Each such wire
transfer shall be sent by the Agent only after the Agent has received
immediately available Dollars from or on behalf of the Borrower and each such
wire transfer shall provide each Lender receiving same with immediately
available Dollars on receipt by such Lender. Any such payments of
immediately available Dollars received by the Agent after 12:00 o'clock P.M.
and before 3:00 o'clock P.M. on any Business Day shall be forwarded in the
same manner by the Agent to such Lender(s) as soon as practicable on said
Business Day, and if any such payments of immediately
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<PAGE>
available Dollars are received by the Agent after 3:00 o'clock P.M. on a
Business Day, the Agent shall so forward same to such Lender(s) before 10:00
o'clock A.M. on the immediately succeeding Business Day.
SECTION 2.5.2. SETOFF, ETC. Regardless of the adequacy of any
collateral for any of the Obligations, upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized at any
time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any
time held and any other Indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower against any and all of the
Obligations due and owing by the Borrower. Each such Lender agrees to
promptly notify the Borrower and the Agent after any such setoff and
application; provided that the failure to give such notice shall not affect
the validity of such setoff and application. Promptly following any notice
of setoff received by the Agent from a Lender pursuant to the foregoing, the
Agent shall notify each other Lender thereof. The rights of each Lender
under this SECTION 2.5.2 are in addition to all other rights and remedies
(including, without limitation, other rights of setoff) which such Lender may
have and are subject to SECTION 9.12.
SECTION 2.5.3. UNCONDITIONAL OBLIGATIONS AND NO DEDUCTIONS. The
Borrower's obligation to make all payments provided for in this Agreement and
the other Financing Documents when due shall be unconditional. Each such
payment shall be made when due without deduction for any claim, defense or
offset of any type, including without limitation any withholdings and other
deductions on account of income or other taxes and regardless of whether any
claims, defenses or offsets of any type exist.
SECTION 2.5.3.2. (a) Any and all payments by the Borrower to
or for the account of any Lender or the Agent hereunder or under any other
Financing Document shall be made free and clear of and without deduction for
any and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding,
in the case of each Lender and the Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which
such Lender (or its applicable lending office) or the Agent (as the case may
be) is organized or any political subdivision thereof, (all such non-excluded
taxes, duties, levies, imposts, deductions, charges, withholdings, and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
under this Agreement or any other Financing Document to any Lender or the
Agent,(i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this SECTION 2.5.3.2) such Lender or the Agent receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law, and (iv) the Borrower shall
furnish to the Agent, at its address referred to in SECTION 9.6 hereof, the
original or a certified copy of a receipt evidencing payment thereof.
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<PAGE>
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this
Agreement or any other Financing Document or from the execution or delivery
of, or otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent for the
full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts
payable under this SECTION 2.5.3.2) paid by such Lender or the Agent (as the
case may be) and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and
on or prior to the date on which it becomes a Lender in the case of each
other Lender, and from time to time thereafter if requested in writing by the
Borrower or the Agent (but only so long as such Lender remains lawfully able
to do so), shall provide the Borrower and the Agent with (i) a properly
completed Internal Revenue Service Form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that
such Lender is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on
payments of interest or certifying that the income receivable pursuant to
this Agreement is effectively connected with the conduct of a trade or
business in the United States, (ii) a properly completed Internal Revenue
Service Form W-8 or W-9, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is exempt from
United States backup withholding, and (iii) any other form or certificate
required by any taxing authority (including any certificate required by
Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that
such Lender is entitled to an exemption from or a reduced rate of tax on
payments pursuant to this Agreement or any of the other Financing Documents.
(e) For any period with respect to which a Lender has failed to provide
the Borrower and the Agent with the appropriate form pursuant to Section
2.5.3.2(d) hereof (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to
indemnification under SECTION 2.5.3.2(a) OR 2.5.3.2(b) hereof with respect to
Taxes imposed by the United States; provided, however, that should a Lender,
which is otherwise exempt from or subject to a reduced rate of withholding
tax, become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as such Lender shall
reasonably request and at such Lender's cost to assist such Lender to recover
such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 2.5.3.2, then such Lender will
agree to use reasonable efforts to change the jurisdiction of its applicable
lending office so as to eliminate or reduce any such additional payment which
may thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender. Alternatively, in the event of
such an additional cost, the Borrower shall have the right to substitute
another bank satisfactory to the
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Agent, and the Agent and such Lender shall use reasonable efforts at no cost
to the Agent and such Lender to assist the Borrower to locate and effect the
substitution in favor of such substitute bank. Any such substitution shall
take place in accordance with SECTION 9.11 and shall otherwise be on terms
and conditions reasonably satisfactory to the Agent, and until such time as
such substitution shall be consummated, the Borrower shall continue to pay
such additional costs. Upon any such substitution, the Borrower shall pay or
cause to be paid to the Lender that is being replaced, all principal,
interest (to the date of such substitution) and other amounts owing hereunder
to such Lender and such Lender will be released from liability hereunder.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent the original or a certified copy of a
receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained
in this SECTION 2.5.3.2 shall survive until the first anniversary of the
Repayment Date.
(i) If the Borrower makes any additional payment to any Lender pursuant
to this SECTION 2.5.3.2 in respect of any Taxes, and such Lender determines
that it has received (i) a refund of such Taxes, or (ii) a credit against,
relief or remission for, or a reduction in the amount of, any tax or other
governmental charge as a result of any deduction or credit for any Taxes with
respect to which it has received payments under this SECTION 2.5.3.2, such
Lender shall, to the extent that it can do so without prejudice to the
retention of such refund, credit, relief, remission or reduction, pay to the
Borrower such amount as shall be reasonably determined by such Lender to be
solely attributable to the deduction or withholding of such Taxes. If such
Lender later determines that it was not entitled to such refund, credit,
relief, remission or reduction to the full extent of any payment made
pursuant to the first sentence of this SECTION 2.5.3.2(i), the Borrower shall
upon demand of such Lender promptly repay the amount of such overpayment.
Nothing in this SECTION 2.5.3.2(i) shall be construed as requiring such
Lender to conduct its business or to arrange or alter in any respect its tax
or financial affairs so that it is entitled to receive such a refund, credit
or reduction or as allowing any Person to inspect any records, including tax
returns, of such Lender.
SECTION 2.6. PREPAYMENT AND CERTAIN PAYMENTS.
SECTION 2.6.1. MANDATORY PAYMENTS.
SECTION 2.6.1.1. In addition to each other principal payment
required hereunder, the outstanding principal balances of the Term Loans
shall be repaid on the Term Loan Repayment Date and the outstanding principal
balances of the Revolving Credit Loans shall be repaid on the Revolving
Credit Repayment Date.
SECTION 2.6.1.2. On or before the 90th day after the end of
each fiscal year of the Borrower commencing with the fiscal year ending
September 30, 1999 if at the end of any such fiscal year the Leverage Ratio
is at any time greater than 2.0:1, the Borrower shall prepay to
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the Agent for the accounts of the Lenders in accordance with their Pro Rata
Shares an amount of the outstanding principal balances of the Term Loans
equal to (i) fifty percent (50%) of the amount, if any, of Excess Cash Flow
for such fiscal year. Such prepayments shall be in addition to any and all
other mandatory and voluntary prepayments required or permitted hereunder and
shall be applied to the principal installments of the Term Loans in the
inverse order of their maturities.
SECTION 2.6.1.3. In the event that the Borrower or any
Subsidiary is entitled to receive, collectively, proceeds from any casualty
insurance policies maintained by any of them on account of any interest of
the Borrower and/or any Subsidiary in any property, which proceeds are in an
amount in excess of $250,000 with respect to any occurrence or related
series of occurrences in any 12-month period, such proceeds shall be received
by the Agent and, to the extent that such proceeds result from a casualty to
property of the Borrower and/or any Subsidiary, so long as no Default or
Event of Default exists and is continuing and the Borrower elects to repair,
replace or restore such property, such proceeds shall be released to the
Borrower subject to reasonable procedures and conditions established by the
Agent to the extent necessary to so repair, replace or restore such property
within 3 months (or as soon as reasonably practicable if such restoration,
replacement or repair is not susceptible to being completed within 3 months)
from the date of receipt of such proceeds by the Agent and to the extent such
proceeds are not so used or do not result from such a casualty, the Borrower
shall make a prepayment of the Term Loans for the accounts of the Lenders in
accordance with their Pro Rata Shares upon written notice from the Agent
given within ten (10) Business Days following the determination that a
prepayment is due hereunder. All such payments shall be applied to the
principal installments of the Term Loans in the inverse order of their
maturities.
SECTION 2.6.1.4. In the event that the Borrower and/or any
Subsidiary sells, assigns or otherwise transfers title to any assets
(tangible or intangible) other than in the ordinary course of its business
for aggregate net cash proceeds in excess of $100,000 in any fiscal year or
in excess of $500,000 in the aggregate since the Closing Date, the Borrower
and/or such Subsidiary shall remit 100% of the net cash proceeds of any sale,
assignment or other transfer which are in excess of such amounts to the Agent
for the accounts of the Lenders in accordance with their Pro Rata Shares to
be applied to the principal installments of the Term Loans in the inverse
order of their maturities within 90 days of the date of Borrower's or any
Subsidiary's receipt of such net cash proceeds; provided, however, that
Borrower may sell any asset (tangible or intangible) which is obsolete,
worn-out or no longer used or useful, or to be used, in Borrower's business
and Borrower may use the proceeds of such sale to purchase other assets
(tangible or intangible) which are, or will be, useful or necessary in the
operation of Borrower's business and if, and to the extent, so used, the
Borrower will not be required to make a prepayment hereunder.
SECTION 2.6.1.5. In the event that the Borrower and/or any
Subsidiary files a Form S-1 or any other form of registration statement then
available for registration with the Securities and Exchange Commission (other
than an offering on Form S-8 in respect of employee stock options) or
otherwise conducts an Initial Public Offering of any class of the Borrower's
or any Subsidiary's securities, the Borrower and/or such Subsidiary upon
receipt of the net aggregate cash consideration from the sale of any such
registered securities shall prepay to the Agent for the accounts of the
Lenders in accordance with their Pro Rata Shares the lesser of (i)
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the net proceeds of such offering and (ii) the amount necessary to reduce the
total of the outstanding principal balance of the Term Loans, PLUS the
outstanding principal balance of the Revolving Credit Loan, PLUS the unused
portion of the Revolving Credit Loan Commitment to an amount that is equal to
or less than the product of (A) EBITDA for the rolling four Borrower fiscal
quarter period consisting of the most recent Borrower fiscal quarter then
ended and the Borrower's three immediately preceding fiscal quarters TIMES
(B) two (2). Any such prepayment shall be applied to the installments of the
Term Loans in the inverse order of their maturities.
SECTION 2.6.1.6. If at any time the aggregate principal
amount of the Revolving Credit Loans plus the aggregate stated amount of any
outstanding Letters of Credit and unreimbursed amounts thereunder shall
exceed the Revolving Credit Loan Commitment, the Borrower shall immediately
pay to the Agent in immediately available Dollars the amount of such excess.
SECTION 2.6.1.7. In the event that any payment or prepayment
of a Libor Loan under this SECTION 2.6.1 is received on a date other than
the last day of an Interest Period, and after applying such payment or
prepayment to any portion of the Term Loans consisting of a Prime Rate Loan,
such payment or prepayment shall be held by the Agent in a separate account
and be pledged to the Agent as collateral for the Obligations of the
Borrower arising in connection with the Financing Documents until the last
day of the then current Interest Period, at which time the Agent shall apply
such payment or prepayment, for the account of the Lenders in accordance
with their Pro Rata Shares, to the outstanding Libor Loans, for which such
day is an Interest Adjustment Date.
SECTION 2.6.2. VOLUNTARY PREPAYMENTS. All or any portion of the
unpaid principal balance of the Loans (other than portions of any Loans
constituting Libor Loans) may be prepaid at any time, without premium or
penalty (other than amounts due under Section 2.9.5,) by giving the Agent at
least 3 days' prior written notice of such prepayment and by a payment to
the Agent for the accounts of the Lenders in accordance with their Pro Rata
Shares of such prepayment in immediately available Dollars by the Borrower;
provided that each such partial payment or prepayment of principal of the
Loans shall be in a principal amount of at least $400,000 or an integral
multiple of $100,000 in excess thereof and provided further that each such
prepayment of the Term Loans shall be applied to the principal installments
of the Term Loans in the inverse order of their maturities.
SECTION 2.6.3. PREPAYMENT OF LIBOR LOANS. Notwithstanding
anything to the contrary contained in any Note or in any other agreement
executed in connection herewith or therewith, the Borrower shall be permitted
to prepay any portion of the Loans constituting Libor Loans only in
accordance with SECTION 2.9 hereof.
SECTION 2.6.4. PERMANENT REDUCTION OF COMMITMENT. At the
Borrower's option the Commitment and the Revolving Credit Loan Commitment may
be permanently and irrevocably reduced in whole or in part by an amount of at
least $400,000 and to the extent in excess thereof in integral multiples of
$100,000 at any time; provided that (i) the Borrower gives the Agent written
notice of the exercise of such option at least three (3) Business Days prior
to the effective date thereof, (ii) the aggregate outstanding balance of the
Loans, if any, does not
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exceed the Commitment and the aggregate outstanding balance of the Revolving
Credit Loans, plus the aggregate outstanding amount of any Letters of Credit
or Letter of Credit Agreement and any unreimbursed drawn amounts thereunder,
if any, does not exceed the Revolving Credit Loan Commitment, both as so
reduced in any such case on the effective date of such reduction and (iii)
the Borrower is not, and after giving effect to such reduction, would not be
in violation of SECTION 2.6.3. Any such reduction shall concurrently reduce
the Dollar amount of each Lender's Pro Rata Share of the Commitment and the
Revolving Credit Loan Commitment.
SECTION 2.7. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to
be made hereunder or under any Note shall be stated to be due on a day other
than a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of fees, if any, and interest under this Agreement and
under such Note.
SECTION 2.8. USE OF PROCEEDS. (a) The Borrower shall use the
proceeds of the Term Loans to fund all or a portion of the Intellectual
Property Acquisition and to pay costs incurred by the Borrower in connection
with the closing of the Loans, including without limitation, the Facility Fee
and costs incurred in connection with the Related Transactions and shall use
the proceeds of the Revolving Credit Loans for Borrower's working capital
needs and for Investments permitted by SECTION 5.2.12. The Borrower shall
obtain any Letters of Credit solely for working capital and general corporate
purposes.
(b) No portion of the proceeds of any Loans is to be used,
and no portion of any Letter of Credit is to be obtained, for the purpose of
(a) knowingly purchasing, or providing credit support for the purchase of,
Ineligible Securities from a Section 20 Subsidiary during any period in which
such Section 20 Subsidiary makes a market in such Ineligible Securities, (b)
knowingly purchasing, or providing credit support for the purchase of, during
the underwriting or placement period, any Ineligible Securities being
underwritten or privately placed by a Section 20 Subsidiary, or (c) making,
or providing credit support for the making of, payments of principal or
interest on Ineligible Securities underwritten or privately placed by a
Section 20 Subsidiary and issued by or for the benefit of the Borrower or any
Subsidiary or other Affiliate of the Borrower.
SECTION 2.9. SPECIAL LIBOR LOAN PROVISIONS. The Libor Loans shall be
subject to and governed by the following terms and conditions:
SECTION 2.9.1. REQUESTS. Each Request accompanied by an Interest
Rate Election selecting the Libor Rate must be received by the Agent in
accordance with the definition of Interest Rate Election.
SECTION 2.9.2. LIBOR LOANS UNAVAILABLE. Notwithstanding any other
provision of this Agreement, if, prior to or on the date on which all or any
portion of the Loans is to be made as or converted into a Libor Loan, any of
the Lenders (or the Agent with respect to (ii) below) shall reasonably
determine (which determination shall be conclusive and binding on the
Borrower), that
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(i) Dollar deposits in the relevant amounts and for the relevant
Interest Period are not offered to such Lender in the London interbank
market,
(ii) by reason of circumstances affecting the London interbank
market, adequate and reasonable means do not exist for ascertaining the
Adjusted Libor Rate, or
(iii) the Adjusted Libor Rate shall no longer represent the
effective cost to such Lender for Dollar deposits in the London
interbank market for reasons other than the fact, standing alone, that
the Adjusted Libor Rate is based on an averaging of rates determined by
the Agent and that such Lender's rate may exceed such average,
such Lender may elect not to accept any Interest Rate Election electing a
Libor Loan and such Lender shall notify the Agent by telephone or telex
thereof, stating the reasons therefor, not later than the close of business
on the second Business Day prior to the date on which such Libor Loan is to
be made. The Agent shall promptly give notice of such determination and the
reason therefor to the Borrower, and all or such portion of the Loans, as the
case may be, which are subject to any of SECTION 2.9.2 (i), (ii) through
(iii) as a result of such Lender's determination shall be made as or
converted into, as the case may be, Prime Rate Loans and such Lender shall
have no further obligation to make Libor Loans, until further written notice
to the contrary is given by the Agent to the Borrower. If such circumstances
subsequently change so that such Lender shall no longer be so affected, such
Lender's obligation to make or maintain its Pro Rata Share of all or any
portion of the Loans as Libor Loans shall be reinstated when such Lender
obtains actual knowledge of such change of circumstances and promptly after
obtaining such actual knowledge such Lender shall forward written notice
thereof to the Agent. After receipt of such notice, the Agent shall promptly
forward written notice thereof to the Borrower. Upon or after receipt by the
Borrower of such written notice, the Borrower may submit an Interest Rate
Election in accordance with this Agreement electing an Interest Period ending
no later than the Interest Adjustment Date for the then current Interest
Period for the other Lenders' Pro Rata Shares of Libor Loans and electing the
Libor Rate for such Lenders' or Lender's Pro Rata Share(s) of the Loans as to
which such Lender's or Lenders' obligation(s) to make or maintain its or
their Pro Rata Share(s) of the Loans as Libor Loans was suspended and such
Pro Rata Share(s) shall be converted to Libor Loans in accordance with this
Agreement. During any period throughout which any of the Lenders has or have
no obligation to make or maintain its or their Pro Rata Share(s) of the Loans
as Libor Loans, no Interest Rate Elections electing the Libor Rate shall be
effective with regard to the Loans to the extent of the Pro Rata Share(s) of
such Lender(s), but shall be effective as to the other Lenders.
SECTION 2.9.3. LIBOR LENDING UNLAWFUL. In the event that any
change in applicable laws or regulations (including the introduction of any
new applicable law or regulation) or in the interpretation thereof (whether
or not having the force of law) by any governmental or other regulatory
authority charged with the administration thereof, shall make it unlawful for
any of the Lenders to make or continue to maintain its Pro Rata Share of all
or any portion of the Loans as Libor Loans, each such Lender shall promptly
notify the Agent by telephone or telex thereof, and of the reasons therefor,
and the obligation of such Lender to make or maintain its Pro Rata Share of
the Loans or such portion thereof as Libor Loans shall, upon the happening of
such event, terminate and the Agent shall, by telephonic notice to the
Borrower,
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declare that such obligation has so terminated with respect to such Lender,
and such Pro Rata Share of the Loans or any portion thereof to the extent
then maintained as Libor Loans, shall, on the last day on which such Lender
can lawfully continue to maintain such Pro Rata Share of the Loans or any
portion thereof as Libor Loans, automatically convert into Prime Rate Loans
without additional cost to the Borrower. If circumstances subsequently
change so that such Lender shall no longer be so affected, such Lender's
obligation to make or maintain its Pro Rata Share of all or any portion of
the Loans as Libor Loans shall be reinstated when such Lender obtains actual
knowledge of such change of circumstances, and promptly after obtaining such
actual knowledge such Lender shall forward written notice thereof to the
Agent. After receipt of such notice, the Agent shall promptly forward
written notice thereof the Borrower. Upon or after receipt by the Borrower
of such written notice, the Borrower may submit an Interest Rate Election in
accordance with this Agreement electing an Interest Period ending no later
than the Interest Adjustment Date for the then current Interest Period for
the other Lenders' Pro Rata Shares of Libor Loans and electing the Libor Rate
for such Lenders' or Lender's Pro Rata Share(s) of the Loans as to which such
Lender's or Lenders' obligation(s) to make or maintain its or their Pro Rata
Share(s) of the Loans as Libor Loans was suspended and such Pro Rata Share(s)
shall be converted to Libor Loans in accordance with this Agreement. During
any period throughout which any of the Lenders has or have no obligation to
make or maintain its or their Pro Rata Share(s) of the Loans as Libor Loans,
no Interest Rate Elections electing the Libor Rate shall be effective with
regard to the Loans to the extent of the Pro Rata Share(s) of such Lender(s),
but shall be effective as to the other Lenders.
SECTION 2.9.4. ADDITIONAL COSTS ON LIBOR LOANS. The Borrower
further agrees to pay to the Agent for the account of the applicable Lender
or Lenders such amounts as will compensate any of the Lenders for any
increase in the cost to such Lender of making or maintaining (or of its
obligation to make or maintain) all or any portion of its Pro Rata Share of
the Loans as Libor Loans and for any reduction in the amount of any sum
receivable by such Lender under this Agreement in respect of making or
maintaining all or any portion of such Lender's Pro Rata Share of the Loans
as Libor Loans, in either case, from time to time by reason of:
(i) any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
such Lender, under or pursuant to any law, treaty, rule, regulation
(including, without limitation, any Regulations of the Board of
Governors of the Federal Reserve System) or requirement in effect on or
after the date hereof, any interpretation thereof by any governmental
authority charged with administration thereof or by any central bank or
other fiscal or monetary authority or other authority, or any
requirement imposed by any central bank or such other authority whether
or not having the force of law but excluding any amount included in any
Reserve Percentage (as defined in the definition of Adjusted Libor
Rate); or
(ii) any change in (including the introduction of any new)
applicable law, treaty, rule, regulation or requirement or in the
interpretation thereof by any official authority, or the imposition of
any requirement of any central bank, whether or not having the force of
law, which shall subject such Lender to any tax (other than taxes on net
income imposed on such Lender), levy, impost, charge, fee, duty,
deduction or withholding of any kind
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whatsoever or change the taxation of such Lender with respect to making
or maintaining all or any portion of its Pro Rata Share of the Loans as
Libor Loans and the interest thereon (other than any change which
affects, and to the extent that it affects, the taxation of net income
of such Lender); provided, that with respect to any withholding the
foregoing shall not apply to any withholding tax described in sections
1441, 1442 or 3406 of the Code, or any succeeding provision of any
legislation that amends, supplements or replaces any such section, or to
any tax, levy, impost, duty, charge, fee, deduction or withholding that
results from any noncompliance by a Lender with any federal, state or
foreign law or from any failure by a Lender to file or furnish any
report, return, statement or form the filing or furnishing of which
would not have an adverse effect on such Lender and would eliminate such
tax, impost, duty, deduction or withholding;
In any such event, such Lender shall promptly notify the Agent thereof, and
of the reasons therefor, and the Agent shall promptly notify the Borrower
thereof in writing stating the reasons provided to the Agent by such Lender
therefor and the additional amounts required to fully compensate such Lender
for such increased or new cost or reduced amount as reasonably determined by
such Lender. Such additional amounts shall be payable on each date on which
interest is to be paid hereunder or, if there is no outstanding principal
amount under any of the Notes, within ten (10) Business Days after the
Borrower's receipt of said notice. Such Lender's certificate as to any such
increased or new cost or reduced amount (including calculations, in
reasonable detail, showing how such Lender computed such cost or reduction)
shall be submitted by the Agent to the Borrower and shall, in the absence of
manifest error, be presumptively correct. In determining any such amount, the
Lender(s) may use any reasonable averaging and attribution methods.
Notwithstanding anything to the contrary set forth above, the Borrower shall
not be obligated to pay any amounts pursuant to this SECTION 2.9.4 as a
result of any requirement or change referenced above with respect to any
period prior to the one hundred and eightieth (180th) day prior to the date
on which the Borrower is first notified thereof (other than any amounts which
relate to any such requirement or change which is adopted with retroactive
effect in which case the Borrower shall be obligated to pay all such amounts
accrued from the date as of which such requirement or change is retroactively
effective).
SECTION 2.9.5. LIBOR FUNDING LOSSES. In the event that any payment
or prepayment of a Libor Loan is received on a date other than the last day
of an Interest Period, such payment or prepayment shall, at the request of
the Borrower, be held by the Agent in a separate interest bearing account and
be pledged to the Agent as collateral for the obligations of the Borrower
arising in connection with this Agreement, the Notes and the other Financing
Documents until the end of the then current Interest Period, at which time
the Agent shall apply such payment or prepayment, for the accounts of the
Lenders in accordance with their Pro Rata Shares, to the outstanding Libor
Loans. Notwithstanding the foregoing, in the event Borrower does not request
the Agent to hold prepayment funds as described in the preceding sentence,
and any of the Lenders shall incur any loss or expense (including, without
limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain all or any portion of the Loans as Libor Loans) as a result of:
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(i) payment or prepayment by the Borrower of all or any portion of
any Libor Loan on a date other than the Interest Adjustment Date for such
Libor Loan, for any reason; provided, however that this clause shall not be
deemed to grant the Borrower any right to convert a Libor Loan to a Prime
Rate Loan prior to the end of any Interest Period or to imply such right;
(ii) conversion of all or any portion of any Libor Loan on a day
other than the last day of an Interest Period applicable to such Loan to a
Prime Rate Loan for any reason including, without limitation, acceleration
of the Loans upon or after an Event of Default, any Interest Rate Election
or any other cause whether voluntary or involuntary and whether or not
referred to or described in this Agreement, other than any such conversion
resulting solely from application of SECTIONS 2.9.2 or 2.9.3 by any Lender;
or
(iii) any failure by the Borrower to borrow the Loans as Libor Loans
on the date specified in any Interest Rate Election selecting the Libor
Rate, other than any such failure resulting solely from application of
SECTIONS 2.9.2 or 2.9.3 by any Lender;
such Lender shall promptly notify the Agent thereof, and of the reasons
therefor. Upon the request of the Agent, the Borrower shall pay directly to the
Agent for the account of such Lender such amount as will (in the reasonable
determination of such Lender, which shall be conclusive in the absence of
manifest error) reimburse such Lender for such loss or expense. Each Lender
shall furnish to the Borrower, upon written request from the Borrower received
by the Agent, a written statement setting forth the computation of any such
amounts payable to such Lender under this SECTION 2.9.5.
SECTION 2.9.6. BANKING PRACTICES. Each Lender agrees that upon the
occurrence of any of the events described in SECTIONS 2.2.3 and/or 2.9.2, 2.9.4
or 2.9.5, such Lender will exercise all reasonable efforts to take such
reasonable actions at no expense to such Lender (other than reasonable expenses
which are covered by the Borrower's advance deposit of funds with such Lender
for such purpose, or if such Lender agrees, which the Borrower has agreed to pay
or reimburse to such Lender in full upon demand), in accordance with such
Lender's usual banking practices in such situations and subject to any statutory
or regulatory requirements applicable to such Lender, as such Lender may take
without the consent or participation of any other Person to, in the case of an
event described in SECTIONS 2.2.3 and/or 2.9.4 or 2.9.5, mitigate the cost of
such events to the Borrower and, in the case of an event described in SECTIONS
2.9.2(i), (ii) or (iii), to seek Dollar deposits in any other interbank Libor
market in which such Lender regularly participates and in which the applicable
determination(s) described in SECTIONS 2.9.2(i), (ii) or (iii), as the case may
be, does not apply.
SECTION 2.9.7. BORROWER'S OPTIONS ON UNAVAILABILITY OR INCREASED COST
OF LIBOR LOANS. In the event of any conversion of all or any portion of any
Lender's Pro Rata Share of any Libor Loans to a Prime Rate Loan for reasons
beyond the Borrower's control or in the event that any Lender's Pro Rata Share
of all or any portion of the Libor Loans becomes subject, under SECTIONS 2.9.4
or 2.9.5, to additional costs, the Borrower shall have the option, subject to
the other terms and conditions of this Agreement, to convert such Lender's Pro
Rata Share to a Prime Rate Loan by making Interest Rate Elections for Interest
Periods which (i) end on the Interest
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Adjustment Date for such Libor Loan or (ii) end on Business Days occurring
prior to such Interest Adjustment Date, in which case, at the end of the last
of such Interest Periods any such Libor Rate Loan shall automatically convert
to a Prime Rate Loan and the Borrower shall have no further right to make an
Interest Rate Election with respect to such Prime Rate Loan other than an
Interest Rate Election which is effective on the Interest Adjustment Date for
such Libor Loan. The Borrower's options set forth in this SECTION 2.9.7 may
be exercised, if and only if the Borrower pays, concurrently with delivery to
the Agent of each such Interest Rate Election and thereafter in accordance
with SECTIONS 2.9.4, 2.9.5 and 2.9.6 all amounts provided for therein to the
Agent in accordance with this Agreement.
If the Borrower shall, as a result of the requirements of SECTION
2.9.4 above, be required to pay any Lender the additional costs referred to
therein, but not be required to pay such additional costs to the other Lender or
Lenders and the Borrower, in its sole discretion, shall deem such additional
amounts to be material or in the event that Libor Loans from a Lender are
unavailable to the Borrower as a result solely of the provisions of SECTIONS
2.9.2, 2.9.3 or 2.9.4, but are available from the other Lender or Lenders, the
Borrower shall have the right to substitute another bank satisfactory to the
Agent for such Lender which is entitled to such additional costs or which is
relieved from making Libor Loans and the Agent shall use reasonable efforts
(with all reasonable costs of such efforts by the Agent to be borne by the
Borrower) to assist the Borrower to locate such substitute bank. Any such
substitution shall take place in accordance with SECTION 9.11 and otherwise be
on terms and conditions reasonably satisfactory to the Agent, and until such
time as such substitution shall be consummated, the Borrower shall continue to
pay such additional costs and comply with the above-referenced Sections. Upon
any such substitution, the Borrower shall pay or cause to be paid to the Lender
that is being replaced, all principal, interest (to the date of such
substitution) and other amounts owing hereunder to such Lender and such Lender
will be released from liability hereunder.
SECTION 2.9.8. ASSUMPTIONS CONCERNING FUNDING OF LIBOR LOANS. The
calculation of all amounts payable to the Lenders under this SECTION 2.9 shall
be made as though each Lender actually funded its relevant Libor Loans through
the purchase of a deposit in the London interbank market bearing interest at the
Libor Rate in an amount equal to that Libor Loan and having a maturity
comparable to the relevant Interest Period and through the transfer of such
deposit from an offshore office of such Lender to a domestic office of such
Lender in the United States of America; provided, however, that each Lender may
fund each of its Libor Loans in any manner it sees fit and the foregoing
assumption shall be utilized solely for the calculation of amounts payable under
this SECTION 2.9.
SECTION 2.10. INTEREST RATE PROTECTION. On or before the Closing Date,
the Borrower shall enter into an interest rate protection arrangement covering
not less than $9,000,000 of the Term Loan. Such interest rate protection
arrangement may consist of any one or a combination of the following: (i) the
purchase of an interest rate swap arrangement from a financial institution
reasonably acceptable to the Majority Lenders covering such Loans effectively
converting the Borrower's interest payment obligations with respect to such
portion of the Term Loans to a fixed rate per annum satisfactory to the Majority
Lenders for a term expiring not earlier than the second anniversary of the
Closing Date or (ii) the purchase of an interest rate cap from a financial
institution reasonably acceptable to the Majority Lenders covering such Loans at
a cap rate per
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annum satisfactory to the Majority Lenders for a term expiring not earlier
than the second anniversary of the Closing Date. The other terms and
conditions of any such interest rate swap or interest rate cap shall be
reasonably satisfactory to the Majority Lenders.
ARTICLE 3.
CONDITIONS OF LENDING
SECTION 3.1. CONDITIONS PRECEDENT TO THE COMMITMENT AND TO ALL LOANS.
SECTION 3.1.1. THE COMMITMENT AND INITIAL LOANS. The Commitment and
the obligation of the Lenders to make the initial Advances of the Loans and/or
to issue any Letter of Credit or Letter of Credit Agreement are subject to
performance by the Borrower of all of its obligations under this Agreement and
to the satisfaction of the conditions precedent that all legal matters incident
to the transactions contemplated hereby or incidental to the Loans shall be
reasonably satisfactory to counsel for the Agent and that the Lenders shall have
received on or before the Closing Date all of the following, each dated the
Closing Date or another date acceptable to the Lenders and each to be in form
and substance reasonably satisfactory to the Agent or if any of the following is
not a deliverable, the satisfaction of such condition in form and substance
reasonably satisfactory to the Agent:
SECTION 3.1.1.1. The Financing Documents, including, without
limitation, those hereinafter set forth and the Borrower's and any Subsidiary's
certificate of incorporation or other organizational documents, by-laws and each
agreement or instrument relating thereto.
SECTION 3.1.1.2. Certificate of the secretary, clerk or similar
officer of the Borrower and each Subsidiary certifying as to the resolutions of
the shareholders or board of directors of the Borrower and each Subsidiary
authorizing and approving each of the Financing Documents to which the Borrower
and each Subsidiary is a party and other matters contemplated hereby and
certifying as to the names and signatures of the Authorized Representative(s) of
the Borrower and each Subsidiary authorized to sign each Financing Document to
be executed and delivered by or on behalf of the Borrower and each Subsidiary.
The Agent and the Lenders may conclusively rely on each such certificate until
the Agent shall receive a further certificate canceling or amending the prior
certificate and submitting the signatures of the Authorized Representative(s)
named in such further certificate.
SECTION 3.1.1.3. Favorable opinions of (i) Hale and Dorr LLP,
counsel for the Borrower, and (ii) the Assistant General Counsel of Donaldson,
Lufkin & Jenrette, Securities Corporation, counsel to the Sprout Group, each in
form and substance reasonably satisfactory to the Agent.
SECTION 3.1.1.4. An Officer's Certificate stating that:
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SECTION 3.1.1.4.1. The representations and warranties
contained in SECTION 4.1 and/or contained in any of the other Financing
Documents are correct on and as of the Closing Date as though made on and as of
such date; and
SECTION 3.1.1.4.2. No Default or Event of Default has
occurred and is continuing, or would result from the making of the Loans.
SECTION 3.1.1.5. Certificates of good standing or legal
existence of the secretaries of state (or equivalent officials) of the states
(or jurisdictions) of organization and qualification of and covering the
Borrower and any domestic Subsidiaries dated reasonably near the Closing Date.
SECTION 3.1.1.6. Evidence that (i) the ownership interests in
the Borrower are as set forth in EXHIBIT 1.1, (ii) documentation required for
the New Stockholders to invest the Equity in the Borrower on the Closing Date,
as set forth on EXHIBIT 1.1, has been finalized, and (iii) that except for the
completion of the Intellectual Property Acquisition, [the funding of the Equity
transaction by Borrower and the New Stockholders], the distribution of a special
dividend by Borrower to Old Stockholder in an amount not to exceed $32,000,000,
and receipt and application of certain proceeds of the Loans, all pre-funding
actions required for the Related Transactions have been completed in accordance
with the Related Transaction Documents without any waiver or amendment of any
term or condition contained therein without the prior written approval of the
Lenders, and in compliance with any applicable laws and necessary governmental
authority approvals.
SECTION 3.1.1.7. A Request and an Interest Rate Election.
SECTION 3.1.1.8. All documents, instruments and agreements
necessary to terminate, cancel and discharge the documents, instruments and
agreements evidencing or securing any and all existing Indebtedness of the
Borrower and any Subsidiary and Liens securing such Indebtedness other than
Permitted Encumbrances.
SECTION 3.1.1.9. Payment to the Agent and the Lenders of the
fees specified in this Agreement or the Fee Letter as being payable on the
Closing Date and all reasonable out-of-pocket costs and expenses incurred by the
Agent and Fleet in connection with the transactions contemplated hereby,
including, but not limited to, reasonable outside legal expenses and any
accounting fees, auditing fees, appraisal fees, and other fees associated with
any independent analyses of the Borrower and any Subsidiary and evidence that
all other reasonable fees and costs payable by the Borrower in connection with
the transactions contemplated by the Financing Documents and completed on the
Closing Date have been paid in full.
SECTION 3.1.1.10. An Officer's Certificate in the form of
EXHIBIT 3.1.1.10, duly completed and reflecting, INTER ALIA, compliance by the
Borrower as of the opening of business on the first Business Day after the
Closing Date but based on the Borrower's financial information as of the last
day of the Borrower's most recent fiscal quarter, adjusted to give effect to the
Loans made on the Closing Date and completion of all documentation and other
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pre-funding preparations for the Related Transactions on or prior to the
Closing Date, with the financial covenants provided for herein.
SECTION 3.1.1.11. Such other information about the Borrower, any
Subsidiaries and/or their Business Condition as the Lenders may reasonably
request.
SECTION 3.1.1.12. True copies of, and/or true copies of any
revisions to, the financial statements, the Projections, the pro forma Closing
Date financial statements giving effect to the Loans, the Equity to be received
on or prior to the Closing Date and completion of all documentation and other
pre-funding preparations for the other Related Transactions on or prior to the
Closing Date, and other information provided pursuant to SECTION 4.1.5 and
certification by the Borrower of the Projections.
SECTION 3.1.1.13. Certificates of fire, business interruption,
liability and extended coverage insurance policies, each such policy to name the
Agent as mortgagee and loss payee and, on all liability policies, as additional
insured.
SECTION 3.1.1.14. True descriptions of any pending or threatened
litigation against or by Borrower or any Subsidiary.
SECTION 3.1.1.15. Evidence that all necessary material third
party consents to the Related Transactions and the Loans have been obtained and
remain in effect without the imposition of any terms or condition not reasonably
acceptable to the Lenders and all required filings with any governmental
authority have been duly completed.
SECTION 3.1.1.16. Evidence that all necessary material third
party consents to the Related Transactions and the Loans have been obtained and
remain in effect without the imposition of any conditions or terms not
reasonably acceptable to the Lenders, and all required filings with any
governmental authority have been duly completed and any applicable waiting
periods shall have expired.
SECTION 3.1.1.17. The financial statements described in SECTION
4.1.5 together with the Borrower's pro forma Closing Date balance sheet. Such
financial statements shall be accompanied by an Officer's Certificate of the
chief financial officer of the Borrower to the effect that (i) the
representations of the Borrower set forth in SECTION 4.1.14 are accurate as of
the Closing Date and (ii) that no Material Adverse Effect has occurred since the
date of the Borrower's most recent financial statements delivered to the Lenders
except as set forth or reflected in the financial statements described in
SECTION 4.1.5 or otherwise disclosed in writing and acceptable to the Agent.
SECTION 3.1.1.18. True copies of (i) the Equity Documents, (ii)
all other documents, instruments and agreements relating to the Borrower's
capital structure and (iii) the Related Transaction Documents.
SECTION 3.1.1.19. The fact that the representations and
warranties of the Borrower contained in Article 4, INFRA, and in each of the
other Financing Documents are true
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and correct in all material respects on and as of the Closing Date except as
altered hereafter by actions not prohibited hereunder. The Borrower's
delivery of each Note and Letter of Credit Agreement to the Lenders and of
each Request to the Agent shall be deemed to be a representation and warranty
by the Borrower as of the date thereof to such effect.
SECTION 3.1.1.20. That there has been no enactment of any law or
regulation by any governmental authority which would make it (i) unlawful, (ii)
prevent, (iii) restrain or (iv) impose conditions which the Lenders determine to
be materially adverse, in any respect as to the foregoing, to the making of the
Loans and/or the completion of the Related Transactions.
SECTION 3.1.1.21. The Security Documents, after the completion
of any required filings or recordations, will grant to the Agent perfected,
first priority security interests or mortgages, as the case may be, with respect
to the collateral identified therein and the Agent shall received the favorable
opinions of counsel referred to in SECTION 3.1.1.3 above with respect to such
perfection. The Agent shall also have received such searches, landlord
consents, access agreements and/or title insurance commitments as reasonably
requested by the Agent, all in form and substance reasonably satisfactory to the
Agent and/or its counsel. Without limiting the generality of the foregoing, the
Agent shall be reasonably satisfied with the terms and conditions of all real
property leases in which the Borrower and any Subsidiary has a leasehold
interest, including the terms of such leaseholds and the assumability of the
lessee's obligations thereunder upon the transfer of or foreclosure upon of the
Borrower's or any Subsidiary's leasehold interest.
SECTION 3.1.1.22. There shall exist no action, suit,
investigation, litigation or proceeding pending or threatened in any court or
before any arbitrator or governmental or regulatory agency or authority which if
adversely determined would reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.1.1.23. All information and materials supplied to the
Agent prior to the date hereof shall be true and correct in all material
aspects; and no additional information shall have come to the attention of the
Agent or the Lenders that is inconsistent in any material respect with the
information and materials supplied to the Agent prior to the date hereof or that
would reasonably be expected to have a Material Adverse Effect.
SECTION 3.1.1.24. The Agent shall be satisfied with the results
of its and the New Stockholders' due diligence examination of the Borrower,
including without limitation, discussions with Borrower's management and certain
customers selected by the Agent and visits to Borrower's facilities and review
of other business and financial information about the Borrower as may be
requested from time to time by the Agent.
SECTION 3.1.2. THE COMMITMENT AND THE LOANS. The Commitment and the
obligation of each Lender to make or maintain its Pro Rata Share of any Advance
or Loan and/or to issue any Letter of Credit or Letter of Credit Agreement are
subject to performance by the Borrower of all its obligations under this
Agreement and to the satisfaction of the following further conditions precedent:
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(a) The fact that, immediately prior to and upon the making of each
Loan, no Event of Default or Default shall have occurred and be continuing;
(b) The fact that the representations and warranties of the Borrower
contained in Article 4, INFRA and in each of the other Financing Documents, are
true and correct in all material respects on and as of the date of each Advance
or Loan except as altered hereafter by actions consented to or not prohibited
hereunder and except for those which state that they are made as of a specified
date. The Borrower's delivery of each Request to the Agent shall be deemed to
be a representation and warranty by the Borrower as of the date of such Advance
or Loan as to the facts specified in SECTIONS 3.1.2(a) and (b);
(c) Receipt by Agent on or prior to the Business Day specified in the
definition of Interest Rate Election of a written Request stating the amount
requested for the Loan or Advance in question and an Interest Rate Election for
such Loan or Advance, all signed by a duly authorized officer of the Borrower on
behalf of the Borrower;
(d) That there exists no law or regulation by any governmental
authority having jurisdiction over the Agent or any of the Lenders which would
make it unlawful in any respect for such Lender to make its Pro Rata Share of
the Loan or Advance, including, without limitation, Regulations U, T, and X of
the Board of Governors of the Federal Reserve System; and
(e) No Material Adverse Effect has occurred.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants to the Agent and the Lenders that, after giving
effect to the Loans and the application of the proceeds thereof (which
representations and warranties shall survive the making of the Loans) as
follows:
SECTION 4.1.1. ORGANIZATION AND EXISTENCE. The Borrower and any
Subsidiary is a corporation, duly organized, validly existing and in good
standing under the laws of the state (or applicable jurisdiction) of its
incorporation or organization and is duly qualified to do business in all
jurisdictions in which such qualification is required, all as noted on EXHIBIT
4.1.1, except where failure to so qualify would not have a Material Adverse
Effect, and has all requisite power and authority to conduct its business, to
own its properties and to execute and deliver, and to perform all of its
obligations under the Financing Documents.
SECTION 4.1.2. AUTHORIZATION AND ABSENCE OF DEFAULTS. Except as
described on EXHIBIT 4.1.2, the execution, delivery to the Agent and/or the
Lenders and performance by the Borrower and any Subsidiary of the Financing
Documents and Related Transaction Documents to which it is a party have been
duly authorized by all necessary corporate and governmental
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action and do not and will not (i) require any consent or approval of the
shareholders or board of directors of the Borrower or any Subsidiary which
has not been obtained, (ii) violate any provision of any law, rule,
regulation (including, without limitation, Regulations U and X of the board
of governors of the federal reserve system), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower and/or any Subsidiary and/or the articles of
organization or by-laws, as applicable, of the Borrower and/or any
Subsidiary, (iii) result in a material breach of or constitute a material
default under any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which the Borrower and/or any Subsidiary is
or are a party or parties or by which it or they or its or their properties
may be bound or affected; or (iv) result in, or require, the creation or
imposition of any Lien on any of the Borrower's and/or any Subsidiary's
respective properties or revenues other than Liens granted to the Agent by
any of the Financing Documents securing the Obligations. The Borrower and
any Subsidiary are in compliance with all such applicable laws, rules,
regulations, orders, writs, judgments, injunctions, decrees, determinations
or awards or any such indentures, other agreements, leases or instruments,
except where the failure to be in compliance does not have a Material Adverse
Effect.
SECTION 4.1.3. ACQUISITION OF CONSENTS. Except as noted on EXHIBIT
4.1.3, no authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, other than those which
have been obtained, is or will be necessary to the valid execution and delivery
to the Agent and/or the Lenders or performance by the Borrower or any Subsidiary
of any Financing Documents and each of the foregoing which has been obtained is
in full force and effect except where the failure to obtain such authorizations,
consents, approvals, licenses, exemptions or filings would not have a Material
Adverse Effect.
SECTION 4.1.4. VALIDITY AND ENFORCEABILITY. Each of the Financing
Documents to which the Borrower or any Subsidiary is a party when delivered
hereunder will constitute the legal, valid and binding obligations of each of
the Borrower and any Subsidiary which is or are a party thereto enforceable
against the Borrower, and any Subsidiary which is or are a party thereto in
accordance with their respective terms except as the enforceability thereof may
be limited by the effect of general principles of equity and bankruptcy and
similar laws affecting the rights and remedies of creditors generally.
SECTION 4.1.5. FINANCIAL INFORMATION. The following information with
respect to the Borrower has heretofore been furnished to the Agent:
SECTION 4.1.5.1. Audited annual financial statements of
Viewlogic Systems, Inc. prior to its acquisition by Synopsis ("Old Viewlogic")
for the period ended December 31, 1996 and unaudited financial statements for
the period ended September 30, 1997;
SECTION 4.1.5.2. Interim, consolidated balance sheets of the
Borrower and any Subsidiaries as of the end of the most recent fiscal quarter
prior to the Closing for which such statements are available and the related
statements of income, such balance sheets and statements have been prepared and
certified by an Authorized Representative in an Officer's
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Certificate as having been prepared in accordance with GAAP except for
footnotes and year-end adjustments;
SECTION 4.1.5.3. The Projections.
SECTION 4.1.5.4. The pro forma balance sheet of the Borrower as
of the Closing Date provided pursuant to SECTION 3.1.1.12.
Each of the financial statements referred to above in
SECTION 4.1.5.1 and 4.1.5.2 was prepared in accordance with GAAP (subject, in
the case of interim statements, to the absence of footnotes and normal year-end
adjustments) applied on a consistent basis, except as stated therein. To the
best of the Borrower's knowledge, each of the financial statements referred to
above in SECTIONS 4.1.5.1, 4.1.5.2 and 4.1.5.4 fairly presents the financial
condition or pro forma financial condition, as the case may be, of the Person
being reported on at such dates and is complete and correct in all material
respects and no Material Adverse Effect has occurred since the date thereof.
The Projections were prepared by the Borrower in good faith.
SECTION 4.1.6. NO LITIGATION. There are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower and/or any Subsidiary or any of their properties before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which if determined adversely to the
Borrower and/or any Subsidiary would draw into question the legal existence of
the Borrower and/or any such Subsidiary and/or the validity, authorization
and/or enforceability of any of the Financing Documents and/or any provision
thereof and/or would reasonably be expected to have a Material Adverse Effect
except those matters, if any, described on EXHIBIT 4.1.6 none of which, in
Borrower's good faith opinion, will (i) have such Material Adverse Effect or
(ii) draw into question (a) the legal existence of the Borrower and/or any such
Subsidiary or (b) the validity, authorization and/or enforceability of any of
the Financing Documents and/or any provision thereof.
SECTION 4.1.7. REGULATION U. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR Part 221) ("Regulation U"), and does not own and
has no present intention of acquiring any such margin stock or a "margin
security" within the meaning of Regulation U. None of the proceeds of the Loans
will be used directly or indirectly by the Borrower for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry, any such margin
security or margin stock or for any other purpose which might constitute the
transaction contemplated hereby a "purpose credit" within the meaning of
Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities and Exchange
Act of 1934, as amended, or any rules or regulations promulgated under either
said statute.
SECTION 4.1.8. ABSENCE OF ADVERSE AGREEMENTS. Neither the Borrower
nor any Subsidiary is a party to any indenture, loan or credit agreement or any
lease or other agreement
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or instrument or subject to any corporate or partnership restriction which
would have a Material Adverse Effect.
SECTION 4.1.9. TAXES. The Borrower and each Subsidiary has filed all
tax returns (federal, state and local) required to be filed and paid all taxes
shown thereon to be due, including interest and penalties, except for those
taxes, if any, which are being contested in good faith and by appropriate
proceedings, and for which proper reserve or other provision has been made in
accordance with GAAP and except where any failure to file or pay would not have
a Material Adverse Effect on the Borrower or any Subsidiary and except as
described in EXHIBIT 4.1.9.
SECTION 4.1.10. ERISA. Borrower and any Commonly Controlled
Entity do not maintain or contribute to any Plan which is not in substantial
compliance with ERISA, or any Single Employer Plan which has incurred any
accumulated funding deficiency within the meaning of sections 412 and 418 of
the Code or which has applied for or obtained a waiver from the Internal
Revenue Service of any minimum funding requirement under section 412 of the
Code. Borrower and any Commonly Controlled Entity have not incurred any
liability to the PBGC in connection with any Plan covering any employees of
Borrower or any Commonly Controlled Entity in amount exceeding Fifty Thousand
Dollars ($50,000) in the aggregate or ceased operations at any facility or
withdrawn from any Plan in a manner which could subject any of them to
liability under sections 4062(e), 4063 or 4064 of ERISA in amount exceeding
Fifty Thousand Dollars ($50,000) in the aggregate, and know of no facts or
circumstance which might give rise to any liability of Borrower or any
Commonly Controlled Entity to the PBGC under Title IV of ERISA in amount
exceeding Fifty Thousand Dollars ($50,000) in the aggregate. Borrower and
any Commonly Controlled Entity have not incurred any withdrawal liability in
amount exceeding Fifty Thousand Dollars ($50,000) in the aggregate (including
but not limited to any contingent or secondary withdrawal liability) within
the meaning of sections 4201 and 4202 of ERISA, to any Multiemployer Plan,
and no event has occurred, and there exists no condition or set of
circumstances known to the Borrower, which presents a risk of the occurrence
of any withdrawal from or the partition, termination, reorganization or
insolvency of any Multiemployer Plan which could result in any liability to a
Multiemployer Plan in amount exceeding Fifty Thousand Dollars ($50,000) in
the aggregate.
Except for payments for which the minimum funding requirement has
been waived under section 412 of the Code, full payment has been made of all
amounts which Borrower and any Commonly Controlled Entity are required to have
paid as contributions to any Plan under applicable law or under any plan or any
agreement relating to any Plan to which Borrower or any Commonly Controlled
Entity is a party. Borrower and each Commonly Controlled Entity have made
adequate provision for reserves to meet contributions that have not been made
because they are not yet due under the terms of any Plan or related agreements.
Neither Borrower nor any Commonly Controlled Entity has any knowledge,
nor do any of them have any reason to believe, that any Reportable Event which
could result in a liability or liabilities of Fifty Thousand Dollars ($50,000)
or more in the aggregate has occurred with respect to any Plan.
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Neither Borrower nor any Commonly Controlled Entity maintain,
contributes to, or is required to make or accrue a contribution or has within
any of the six preceding years maintained, contributed to or been required to
make or accrue a contribution to any Plan subject to regulation under Title IV
of ERISA, any Plan that is subject to the minimum funding requirements of
Section 412 of the Code or Section 302 of ERISA, or any Multiemployer Plan.
SECTION 4.1.11. OWNERSHIP OF PROPERTIES.
SECTION 4.1.11.1. Except for Permitted Encumbrances, Borrower
and any Subsidiary has good title to all of its properties and assets free and
clear of all restrictions and Liens of any kind other than those which could
not reasonably be expected to have a Material Adverse Effect or a material
adverse effect on the validity, authorization and/or enforceability of the
Financing Documents and/or any provision thereof.
SECTION 4.1.11.2. EXHIBIT 4.1.11 accurately and completely lists
the location of all real property owned or leased by Borrower or any Subsidiary
organized under to the laws of any state in the United States. Borrower and
each such Subsidiary enjoys quiet possession under all material leases of real
property to which it is a party as a lessee, and all of such leases are valid,
subsisting and, to Borrower's knowledge, in full force and effect.
SECTION 4.1.11.3. Except as set forth in EXHIBIT 4.1.11, all of
the material properties used in the conduct of the Borrower's and each
Subsidiary's business (i) are in good repair, working order and condition
(reasonable wear and tear excepted) and reasonably suitable for use in the
operation of Borrower's, and each Subsidiary's business; and (ii) to Borrower's
knowledge are currently operated and maintained, in all material respects, in
accordance with the requirements of applicable governmental authorities.
SECTION 4.1.12. ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of
Borrower's representations or warranties set forth in this Agreement or in any
document or certificate furnished pursuant to this Agreement or in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary to make any statement
of fact contained herein or therein, in light of the circumstances under which
it was made, not misleading; except that unless provided otherwise any such
document or certificate which is dated speaks as of the date stated and not the
present.
SECTION 4.1.13. NO INVESTMENT COMPANY. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended, which is required to register thereunder.
SECTION 4.1.14. SOLVENCY, ETC. After giving effect to the
consummation of each Loan outstanding and to be made under this Agreement as of
the time this representation and warranty is given, the Borrower (a) will be
able to pay its debts as they become due, (b) will have funds and capital
sufficient to carry on its business and all businesses in which it is about to
engage, and (c) will own property in the aggregate having a value both at fair
valuation and at
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fair saleable value in the ordinary course of the Borrower's business greater
than the amount required to pay its Indebtedness, including for this purpose
its probable liabilities associated with unliquidated and disputed claims.
The Borrower will not be rendered insolvent by the execution and delivery of
this Agreement and the consummation of any transactions contemplated herein.
SECTION 4.1.15. OWNERSHIP INTERESTS. The schedule of ownership
interests in the Borrower and any Subsidiaries set forth in EXHIBIT 1.1 will be
true, accurate and complete as of the closing of the Related Transactions, and
the Investments to be made for all ownership interests disclosed therein will,
in fact, have been fully paid in immediately available Dollars after giving
effect to the closing of the Related Transactions. After giving effect to the
closing of the Related Transactions, the certificate of incorporation, bylaws
and any other charter or similar governing documents of Borrower will provide
that, prior to an Initial Public Offering, a simple majority of the shares of
capital stock entitled to vote will have the power to approve any merger or sale
of all or substantially all of the assets of Borrower.
SECTION 4.1.16. LICENSES, REGISTRATIONS, COMPLIANCE WITH LAWS, ETC.
EXHIBIT 4.1.16 accurately and completely describes all permits, governmental
licenses, registrations and approvals, material to carrying out of Borrower's
and each of the Subsidiaries' businesses as presently conducted and as required
by law or the rules and regulations of any federal, foreign governmental, state,
county or local association, corporation or governmental agency, body,
instrumentality or commission having jurisdiction over the Borrower or any of
the Subsidiaries, including but not limited to the United States Environmental
Protection Agency, the United States Department of Labor, the United States
Occupational Safety and Health Administration, the United States Equal
Employment Opportunity Commission, the Federal Trade Commission and the United
States Department of Justice and analogous and related state and foreign
agencies. All existing authorizations, licenses and permits material to the
conduct of Borrower's business are in full force and effect, are duly issued in
the name of, or validly assigned to the Borrower or a Subsidiary and the
Borrower or a Subsidiary has full power and authority to operate thereunder.
There is no material violation or material failure of compliance or, to
Borrower's knowledge, allegation of such violation or failure of compliance on
the part of the Borrower or any Subsidiary with any of the foregoing permits,
licenses, registrations, approvals, rules or regulations and there is no action,
proceeding or investigation pending or to the knowledge of the Borrower
threatened nor has the Borrower or any Subsidiary received any notice of such
which could reasonably be expected to result in the termination or suspension of
any such permit, license, registration or approval which in any case could have
a Material Adverse Effect.
SECTION 4.1.17. PRINCIPAL PLACE OF BUSINESS; BOOKS AND RECORDS. The
Borrower's chief executive offices are located at Borrower's addresses set forth
in SECTION 9.6. All of the Borrower's books and records are kept at one or more
of its addresses set forth in SECTION 9.6 or in EXHIBIT A to the Security
Agreement of even date herewith executed by the Borrower in favor of the Agent.
SECTION 4.1.18. SUBSIDIARIES. The Borrower has only the Subsidiaries
identified on EXHIBIT 1.1.
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SECTION 4.1.19. COPYRIGHT. Except as set forth in EXHIBIT 4.1.19 the
Borrower has not violated in any material respect any of the provisions of the
Copyright Revision Act of 1976, 17 U.S.C. 101, ET SEQ. The Borrower has filed
all registration statements, notices and statements of account and all necessary
supplements and adjustment schedules thereto with the United States Copyright
Office and has made all payments to the United States Copyright Office to obtain
and maintain those copyrights which it has registered with the United States
Copyright Office. EXHIBIT 4.1.19 accurately and completely sets forth all
registered copyrights held by the Borrower or any of the Subsidiaries and
contains exceptions to the representations contained in this SECTION 4.1.19. To
the knowledge of Borrower, no inquiries regarding any such filings have been
received by the Copyright Office.
SECTION 4.1.20. ENVIRONMENTAL COMPLIANCE. Neither the Borrower nor,
to the knowledge of the Borrower, any other Person:
SECTION 4.1.20.1. has caused, permitted, or suffered to exist
any Hazardous Material to be spilled, placed, held, located or disposed of on,
under, or about, any of the facilities owned, leased or used by the Borrower
(the "Premises"), or from the Premises into the atmosphere, any body of water,
any wetlands, or on any other real property which would reasonably be expected
to result in a material liability of Borrower, nor to Borrower's knowledge does
any Hazardous Material exist on, under or about the Premises other than as
disclosed on EXHIBIT 4.1.20, or in respect of Hazardous Material used or
disposed of in compliance with law;
SECTION 4.1.20.2. has any knowledge that any of the Premises has
ever been used (whether by the Borrower or, to the knowledge of the Borrower, by
any other Person) as a treatment, storage or disposal (whether permanent or
temporary) site for any Hazardous Waste as defined in 42 U.S.C.A. 6901, ET SEQ.
(the Resource Recovery and Conservation Act); and
SECTION 4.1.20.3. except as disclosed to the Agent, has any
knowledge of any notice of violation, Lien or other notice issued by any
governmental agency with respect to the environmental condition of the Premises
or any other property owned, leased or operated by the Borrower, or any other
property which was included in the property description of the Premises or such
other real property within the preceding three years which could reasonably be
expected to result in a material liability of Borrower.
SECTION 4.1.21. MATERIAL AGREEMENTS, ETC. EXHIBIT 4.1.21 attached
hereto accurately and completely lists all material agreements to which the
Borrower or any of the Subsidiaries are a party including without limitation all
material software licenses, and all material construction, engineering,
consulting, employment, management, operating and related agreements, if any,
which are presently in effect for which the termination prior to the stated term
thereof would reasonably be expected to have a Material Adverse Effect. All of
the material agreements to which Borrower or any Subsidiary is a party, are
legally valid and binding with respect to the Borrower and its Subsidiaries,
and, to Borrower's knowledge, in full force and effect and neither the Borrower,
any of the Subsidiaries nor, to Borrower's knowledge, any other
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parties thereto are in material default thereunder except for any defaults
which could not individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
SECTION 4.1.22. PATENTS, TRADEMARKS AND OTHER PROPERTY RIGHTS.
EXHIBIT 4.1.22 attached hereto contains a complete and accurate schedule of all
registered trademarks, registered copyrights and patents of the Borrower and/or
any of the Subsidiaries, and pending applications therefor, and all other
intellectual property in which the Borrower and/or any of the Subsidiaries has
any rights and which is material to the conduct of Borrower's business, other
than "off-the shelf" software which is generally available to the general public
at retail. Except as set forth in EXHIBIT 4.1.22, the Borrower and any
Subsidiaries own, possess, or have licenses to use all the patents, trademarks,
service marks, trade names, copyrights and non-governmental licenses, and all
rights with respect to the foregoing, reasonably necessary for the conduct of
their respective businesses as now conducted, without, to the Borrower's
knowledge any conflict with the rights of others with respect thereto.
SECTION 4.1.23. RELATED TRANSACTIONS . The Borrower has, on or prior
to the date hereof, delivered to the Lenders true copies of the Related
Transaction Documents, and each and every amendment or modification thereto and,
except for receipt and application of certain proceeds of the Loans, all
document preparation and other activities required to complete the Related
Transactions (other than the funding of the investment in the Equity by the New
Stockholders, the Intellectual Property Acquisition, and the payment of the
dividend to Synopsis in an amount not to exceed $32,000,000) have been completed
in accordance with the Related Transaction Documents, without any waiver or
amendment of any term or condition contained therein without the prior written
approval of the Lenders, and in compliance with any applicable laws and
necessary governmental authority approvals.
.
SECTION 4.1.24. MATERIAL ADVERSE EFFECT. No Material Adverse Effect
has occurred and there exists no action, suit, investigation, litigation or
proceeding pending or threatened in writing in any court or before any
arbitrator or governmental or regulatory agency or authority that could
reasonably be expected to result in a Material Adverse Effect.
SECTION 4.1.25. YEAR 2000. Based on the Borrower's familiarity with
its and its Subsidiaries computer applications, , and based on the Borrower's
familiarity with its and its Subsidiaries' material suppliers, vendors and
customers, the Borrower is not aware of any "Year 2000 Problem" (that is, the
risk that computer applications used by any Person may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to,
on and after December 31, 1999) that will result in a Material Adverse Effect.
ARTICLE 5.
COVENANTS OF THE BORROWER
SECTION 5.1. AFFIRMATIVE COVENANTS OF THE BORROWER OTHER THAN REPORTING
REQUIREMENTS. From the date hereof and thereafter for so long as there is
Indebtedness of the Borrower to any Lender and/or the Agent under any of the
Financing Documents or any part of
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the Commitment is in effect, the Borrower will, with respect to itself and,
unless noted otherwise below, with respect to each of its Subsidiaries,
ensure that each Subsidiary will, unless the Majority Lenders shall otherwise
consent in writing:
SECTION 5.1.1. PAYMENT OF TAXES, ETC. Pay and discharge all taxes
and assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims for the same which, if
unpaid, might become a Lien upon any of its properties, provided that (unless
and until foreclosure, restraint, sale or any similar proceeding is pending and
is not stayed, discharged or bonded within 30 days after commencement) the
Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by proper proceedings and for
which proper reserve or other provision has been made in accordance with GAAP,
unless failure to pay could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.1.2. MAINTENANCE OF INSURANCE. Maintain insurance in
accordance with the Security Documents including, without limitation, casualty,
liability and business interruption insurance reasonably acceptable to the
Majority Lenders and, to the extent not covered by any of the Security
Documents, with responsible and reputable insurance companies or associations
in such amounts and covering such risks as is usually carried by companies
engaged in similar businesses and owning similar properties and in accordance
with the requirements of any governmental agency having jurisdiction over the
Borrower and/or any Subsidiary. The Borrower shall provide the Lenders with
such evidence as the Agent may reasonably request from time to time as to the
maintenance of all such insurance. Maintain on the tangible insurable
collateral under any of the Security Documents insurance against loss by fire,
hazards included within the term "extended coverage", and such other hazards,
casualties and contingencies as the Agent may from time to time require, in an
amount equal to the greater of (i) $8,000,000 OR (ii) one hundred percent (100%)
of the replacement cost of the collateral under any of the Security Documents
and business interruption insurance in the amount of at least $8,000,000 All
policies of such insurance and all renewals thereof shall be in form and
substance reasonably acceptable to Agent, shall be made payable in case of loss
to the Agent as loss payee and mortgagee and shall contain an endorsement
requiring thirty (30) days prior written notice to the Agent prior to
cancellation or change in the coverage, scope or amount of any such policies.
Borrower shall also keep in full force and effect a policy of public liability
insurance against claims of bodily injury, death or property damage occurring in
any building providing combined single limit coverage of $1,000,000 for bodily
injury and property damage per occurrence and $2,000,000 in the aggregate.
Borrower shall increase the limits of such liability insurance to such higher
amounts as the Agent may from time to time reasonably require. Certificates of
all such insurance shall be delivered to the Agent concurrently with the
execution and delivery of this Agreement, and thereafter all renewal or
replacement certificates shall be delivered to the Agent not less than thirty
(30) days prior to the expiration date of the policy to be renewed or replaced,
accompanied by evidence satisfactory to the Agent that all premiums payable with
respect to such policies have been paid by Borrower. Borrower shall have the
right of free choice in the selection of the agent or the insurer through or by
which the insurance required hereunder is to be placed; provided, however, said
insurer has at all times a general policyholders' rating of A or A+ in Best's
latest rating guide. Furthermore, upon the
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occurrence of an Event of Default, the Agent shall have the right and, is
hereby constituted and appointed the true and lawful attorney irrevocable of
Borrower, in the name and stead of Borrower, but in the uncontrolled
discretion of said attorney, (i) to adjust, sue for, compromise and collect
any amounts due under such insurance policies in the event of loss and (ii)
to give releases for any and all amounts received in settlement of losses
under such policies; and the same shall, subject to SECTION 2.6.1.3 of this
Agreement, at the option of the Agent, be applied, after first deducting the
costs of collection, on account of any Indebtedness the payment of which is
secured by any of the Financing Documents, whether or not then due, or,
notwithstanding the claims of any subsequent lien or, be used or paid over to
Borrower in accordance with reasonable procedures established by the Agent
for use in repairing or replacing any damaged or destroyed collateral under
any of the Security Documents.
SECTION 5.1.3. PRESERVATION OF EXISTENCE, ETC. Preserve and maintain
in full force and effect its legal existence, and all material rights,
franchises and privileges in the jurisdiction of its organization, preserve and
maintain (except for sales of licenses or other scopes of use granted in the
ordinary course of Borrower's business consistent with past practice and
transactions permitted under Section 5.2.3) all material licenses, governmental
approvals, trademarks, patents, trade secrets, copyrights and trade names owned
or possessed by it and which are necessary or, in the reasonable business
judgment of the Borrower, desirable in view of its business and operations or
the ownership of its properties and qualify or remain qualified as a foreign
corporation in each jurisdiction in which such qualification is necessary or, in
its reasonable business judgment, desirable in view of its business and
operations and ownership of its properties except where the failure to so
qualify will not have a Material Adverse Effect.
SECTION 5.1.4. COMPLIANCE WITH LAWS, ETC. Comply in all material
respects with the requirements of all present and future applicable laws, rules,
regulations and orders of any governmental authority having jurisdiction over it
and/or its business including, without limitation, regulations of the United
States Copyright Office and the Copyright Royalty Tribunal, except where the
failure to comply would not have a Material Adverse Effect.
SECTION 5.1.5. VISITATION RIGHTS. Permit, at reasonable intervals
during normal business hours and upon the giving of reasonable notice, the
Agent, the Lenders and any agents or representatives thereof, to examine and
make copies of (at Borrower's cost and expense) and abstracts from the records
and books of account of, and visit the properties of the Borrower and any
Subsidiary to discuss the affairs, finances and accounts of the Borrower or any
Subsidiary with any of its officers or management level employees and/or any
independent certified public accountant of the Borrower and/or any Subsidiary.
SECTION 5.1.6. KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep
adequate records and books of account, in which complete entries will be made in
accordance with GAAP and with applicable requirements of any governmental
authority having jurisdiction over the Borrower and/or any Subsidiary in
question, reflecting all financial transactions.
SECTION 5.1.7. MAINTENANCE OF PROPERTIES, ETC. Except as explicitly
permitted by this Agreement, maintain and preserve all of its properties
necessary or useful in the proper
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conduct of its business, in good working order and condition, ordinary wear
and tear excepted, and in accordance with each of the Security Documents.
SECTION 5.1.8. POST-CLOSING ITEMS. Complete in a timely fashion all
actions required in the Post-Closing Letter.
SECTION 5.1.9. OTHER DOCUMENTS, ETC. Except as otherwise required by
this Agreement, pay, perform and fulfill all of its obligations and covenants
under each material document, instrument or agreement to which it is a party
including, without limitation, the Related Transaction Documents; provided that
so long as the Borrower or any Subsidiary is contesting any claimed default by
it or them under any of the foregoing by proper proceedings conducted in good
faith and for which any proper reserve or other provision in accordance with and
to the extent required by GAAP has been made, such default shall not be deemed a
violation of this covenant, provided further that it shall not be a default of
this covenant if such default under another document, instrument or agreement
would not reasonably be expected to create a Material Adverse Effect.
SECTION 5.1.10. MINIMUM DEBT SERVICE COVERAGE RATIO. Maintain at the
end of each fiscal quarter of the Borrower a Debt Service Coverage Ratio of not
less than 1.25:1.0.
SECTION 5.1.11. MINIMUM INTEREST COVERAGE. Maintain a ratio of
EBITDA to Interest Expense of not less than 3:1, such ratio to be measured at
each Borrower fiscal quarter end after the Closing for the rolling four Borrower
fiscal quarter period consisting of the Borrower fiscal quarter then ending and
the three immediately preceding Borrower fiscal quarters.
SECTION 5.1.12. MAXIMUM LEVERAGE RATIO . Maintain at the end of each
fiscal quarter of the Borrower in each period set forth below a Leverage Ratio
of not greater than the ratio set forth below opposite such period:
Fiscal Quarters Ending Maximum Ratio
01/02/99 through 10/2/99 2.50:1
1/1/00through 9/30/00 2.25:1
12/31/00 and thereafter 2.00:1
SECTION 5.1.13. OFFICER'S CERTIFICATES AND REQUESTS. Provide each
Officer's Certificate required under this Agreement and each Request so that the
statements contained therein are accurate and complete in all material respects.
SECTION 5.1.14. DEPOSITORY. Use the Agent as a principal depository
of Borrower's funds.
SECTION 5.1.15. CHIEF EXECUTIVE OFFICER. Maintain William Herman as
chief executive officer of the Borrower and as the Person with principal
executive, operating and management responsibility for the Borrower's business
and maintain Richard Lucier as a senior
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executive officer with technology oversight and research and development
responsibility for Borrower's business.
SECTION 5.1.16. [INTENTIONALLY OMITTED.].
SECTION 5.1.17. ADDITIONAL ASSURANCES. From time to time hereafter,
execute and deliver or cause to be executed and delivered, such additional
instruments, certificates and documents, and take all such actions, as the Agent
shall reasonably request for the purpose of implementing or effectuating the
provisions of the Financing Documents, and upon the exercise by the Agent of any
power, right, privilege or remedy pursuant to the Financing Documents which
requires any consent, approval, registration, qualification or authorization of
any governmental authority or instrumentality, exercise and deliver all
applications, certifications, instruments and other documents and papers that
the Agent may be so required to obtain.
SECTION 5.1.18. APPRAISALS. Permit the Agent and its agents, at any
time and in the sole discretion of the Agent or at the request of the Majority
Lenders, to conduct appraisals of the Borrower's business, the cost of which
shall be borne by the Borrower.
SECTION 5.1.19. ENVIRONMENTAL COMPLIANCE. Comply in all material
respects with the requirements of all federal, state, and local environmental
laws, except where the failure to so comply could not be reasonably expected to
have a Material Adverse Effect; notify the Lenders promptly in the event of any
spill of Hazardous Material materially affecting the Premises occupied by the
Borrower from time to time; forward to the Lenders promptly any written notices
relating to such matters received from any governmental agency; and pay promptly
when due any uncontested fine or assessment against the Premises.
SECTION 5.1.20. REMEDIATION. Promptly contain and remove any
Hazardous Material found on the Premises in compliance with applicable laws and
at the Borrower's expense, subject, however, to the right of the Agent, at the
Agent's option but at the Borrower's expense, to have an environmental engineer
or other representative review the work being done.
SECTION 5.1.21. SITE ASSESSMENTS. Promptly upon the request of the
Agent, based upon the Agent's reasonable belief that a material Hazardous Waste
or other environmental problem exists with respect to any Premises, provide the
Agent with a Phase I environmental site assessment report and, if Agent finds a
reasonable basis for further assessment in such Phase I assessment, a Phase II
environmental site assessment report, or an update of any existing report, all
in scope, form and content and performed by such company as may be reasonably
satisfactory to the Agent.
SECTION 5.1.22. INDEMNITY. Indemnify, defend, and hold the Agent and
the Lenders harmless from and against any claim, cost, damage (including without
limitation consequential damages), expense (including without limitation
reasonable attorneys' fees and expenses), loss, liability, or judgment now or
hereafter arising as a result of any claim for environmental cleanup costs, any
resulting damage to the environment and any other environmental claims against
the Borrower, any Subsidiary, the Lenders and/or the Agent arising out of the
transactions contemplated by this Agreement, or any of the Premises. The
provisions
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of this Section shall continue in effect and shall survive (among other
events), until the applicable statute of limitations has expired, any
termination of this Agreement, foreclosure, a deed in lieu transaction,
payment and satisfaction of the Obligations of Borrower, and release of any
collateral for the Loans.
SECTION 5.1.23. TRADEMARKS, COPYRIGHTS, ETC. Concurrently with the
acquisition of any registered trademark, registered tradename, registered
copyright, patent or service mark collaterally assign and grant a first
priority perfected Lien thereon to the Agent pursuant to documents in form and
substance reasonably satisfactory to the Agent.
SECTION 5.1.24. MAINTENANCE OF ESCROW. Comply with all of the terms
and conditions of a software escrow agreement to be entered into among Borrower,
Agent and the escrow agent thereunder, which will, at the election of Agent, be
based on the existing software escrow arrangements of Borrower (if any) or on a
form of software escrow agreement and with a software escrow agent reasonably
acceptable to Agent, providing copies of Borrower's source code to Agent for the
benefit of the Lenders upon the occurrence of an Event of Default. Borrower's
compliance with such software escrow agreement will, include, without
limitation, the payment of all amounts due thereunder and the requirement to
deposit modifications, updates, new releases or documentation related to
previously deposited materials.
SECTION 5.2. NEGATIVE COVENANTS OF THE BORROWER. From the date hereof and
thereafter for so long as there is Indebtedness of the Borrower to any Lender
and/or the Agent under any of the Financing Documents or any part of the
Commitment is in effect, the Borrower will not, with respect to itself and,
unless noted otherwise below, with respect to each of the Subsidiaries, will
ensure that each such Subsidiary will not, without the prior written consent of
the Majority Lenders:
SECTION 5.2.1. LIENS, ETC. Create, incur, assume or suffer to exist
any Lien of any nature, upon or with respect to any of its properties, now owned
or hereafter acquired, or assign as collateral or otherwise convey as
collateral, any right to receive income, except that the foregoing restrictions
shall not apply to any Liens:
SECTION 5.2.1.1. For taxes, assessments or governmental charges
or levies on property if the same shall not at the time be delinquent or
thereafter can be paid without penalty or interest, or (if foreclosure,
distraint, sale or other similar proceedings shall not have been commenced or if
commenced not stayed, bonded or discharged within 30 days after commencement)
are being contested in good faith and by appropriate proceedings diligently
conducted and for which proper reserve or other provision has been made in
accordance with and to the extent required by GAAP;
SECTION 5.2.1.2. Imposed by law, such as landlords', carriers',
warehousemen's and mechanics' liens, bankers' set off rights and other similar
Liens arising in the ordinary course of business for sums not yet due or being
contested in good faith and by appropriate proceedings diligently conducted and
for which proper reserve or other provision has been made in accordance with and
to the extent required by GAAP;
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SECTION 5.2.1.3. Arising in the ordinary course of business out
of pledges or deposits under worker's compensation laws, unemployment insurance,
old age pensions, or other social security or retirement benefits, or similar
legislation;
SECTION 5.2.1.4. Arising from or upon any judgment or award,
provided that such judgment or award is being contested in good faith by proper
appeal proceedings and only so long as execution thereon shall be stayed;
SECTION 5.2.1.5. Those set forth on EXHIBIT 1.8 provided that
any lien claimed by Sanwa Business Credit Corporation on account of an existing
UCC-1 financing statement shall not secure Indebtedness in excess of $335,000
and Borrower shall not incur any Indebtedness to, or enter into any agreement
with Sanwa Business Credit Corporation after the Closing Date;
SECTION 5.2.1.6. Those now or hereafter granted pursuant to the
Security Documents or otherwise now or hereafter granted to the Agent for the
benefit of the Lenders as collateral for the Loans and/or Borrower's other
Obligations arising in connection with or under any of the Financing Documents;
SECTION 5.2.1.7. Deposits to secure the performance of bids,
trade contracts (other than for Borrowed Money), leases, statutory obligations,
surety bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of the Borrower's or any Subsidiary's business;
SECTION 5.2.1.8. Easements, rights of way, restrictions and
other similar encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of business by any Borrower or any
Subsidiary;
SECTION 5.2.1.9. Liens securing Indebtedness permitted to exist
under SECTION 5.2.8.3; provided that the Lien securing any such Indebtedness is
limited to the item of property purchased or leased in each case;
SECTION 5.2.1.10. UCC-1 financing statements filed solely for
notice or precautionary purposes by lessors under operating leases which do not
secure Indebtedness and which are limited to the items of equipment leased
pursuant to the lease in question; and
SECTION 5.2.1.11. UCC-1 financing statements in connection with
sales of revenue streams from product leases without recourse to the Borrower.
SECTION 5.2.2. ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. Assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligation or Indebtedness of any
other Person, except:
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SECTION 5.2.2.1. Guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business;
SECTION 5.2.2.2. Guaranties, not to exceed $500,000in the
aggregate, of real and personal property leases of Subsidiaries.
SECTION 5.2.2.3. Assumptions, guaranties, endorsements and
contingent liabilities within the definition of Indebtedness and permitted by
SECTION 5.2.8; and
SECTION 5.2.2.4. Those set forth on EXHIBIT 5.2.2.4.
SECTION 5.2.3., DISSOLUTION, MERGER, ETC. Dissolve, liquidate, wind
up, merge or consolidate or combine with another Person, except as permitted
under Section 5.2.21, or sell, assign, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) any material assets (tangible or
intangible), whether now owned or hereafter acquired, other than (a) in the
ordinary course of business, (b) assets which, in the rolling four fiscal
quarters most recently ended, generated less than fifteen percent (15%) of
Borrower's Net Income and (c) rights to receive payment from customers.
SECTION 5.2.4. CHANGE IN NATURE OF BUSINESS. Make any material
change in the nature of its business.
SECTION 5.2.5. OWNERSHIP. Cause or permit the occurrence of any
Change of Control.
SECTION 5.2.6. SALE AND LEASEBACK. Enter into any sale and leaseback
arrangement with any lender or investor, or enter into any leases except in the
normal course of business at reasonable rents comparable to those paid for
similar leasehold interests in the area.
SECTION 5.2.7. SALE OF ACCOUNTS, ETC. Sell, assign, discount or
dispose in any way of any accounts receivable, promissory notes or trade
acceptances held by the Borrower or any Subsidiary, with or without recourse,
except in the ordinary course of the Borrower's or any Subsidiary's business.
SECTION 5.2.8. INDEBTEDNESS. Incur, create, become or be liable
directly or indirectly in any manner with respect to or permit to exist any
Indebtedness except:
SECTION 5.2.8.1. Indebtedness under the Financing Documents;
SECTION 5.2.8.2. Indebtedness with respect to trade payable
obligations and other normal accruals and customer deposits in the ordinary
course of business not yet due and payable in accordance with customary trade
terms or with respect to which the Borrower or any Subsidiary is contesting in
good faith the amount or validity thereof by appropriate proceedings and then
only to the extent such person has set aside on its books adequate reserves
therefor in accordance with and to the extent required by GAAP;
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SECTION 5.2.8.3. Indebtedness with respect to Capitalized Lease
Obligations and purchase money Indebtedness with respect to real or personal
property in an aggregate amount outstanding at any time not to exceed
$3,500,000; provided that the amount of any purchase money Indebtedness does not
exceed 90% of the lesser of the cost or fair market value of the asset purchased
with the proceeds of such Indebtedness;
SECTION 5.2.8.4. Unsecured Indebtedness in an aggregate amount
outstanding at any time not to exceed $250,000, provided that Borrower may incur
an additional $750,000 (for a total of $1,000,000) only if such additional
amount is expressly subordinated to the Loans;
SECTION 5.2.8.5. Indebtedness listed on EXHIBIT 3.1.1.8;
SECTION 5.2.8.6. Indebtedness owing by the Borrower to any
Subsidiary or by any Subsidiary to the Borrower or any other Subsidiary;
provided, however, that any Indebtedness owing by the Borrower or any Subsidiary
to an Affiliate be subordinated to the Obligations on terms and conditions
satisfactory to the Majority Lenders.
SECTION 5.2.8.7. Indebtedness permitted by SECTION 5.2.2.
SECTION 5.2.8.8. Indebtedness outstanding as a refinancing of
Indebtedness permitted under another clause of this SECTION 5.2.8 other than
SECTION 5.2.8.2; provided that such Indebtedness as refinanced continues to
qualify as permitted Indebtedness under the clause of this SECTION 5.2.8 under
which the refinanced Indebtedness was permitted under this SECTION 5.2.8.
SECTION 5.2.8.9. Indebtedness permitted to be secured by a Lien
under Section 5.2.1.
SECTION 5.2.9. OTHER AGREEMENTS. Amend any of the terms or
conditions of any of the Related Transaction Documents,its certificate of
incorporation, bylaws (or comparable applicable charter or governance document),
to require stockholder approval to authorize a merger or sale of all or
substantially all the assets of the Borrower by more than a simple majority of
the shares of capital stock entitled to vote or amend any subordination
agreement or any indenture, agreement, document, note or other instrument
evidencing, securing or relating to any other Indebtedness permitted under
SECTION 5.2.8 in a manner materially adverse to the Agent or any of the
Lenders,.
SECTION 5.2.10. PAYMENT OR PREPAYMENT OF EQUITY OR SUBORDINATED
DEBT. Make any payment or prepayment of any principal of or interest on or
any payment, prepayment, redemption, defeasance, sinking fund payment, other
repayment of principal or capital or deposit for the purpose of any of the
foregoing on or in connection with the Subordinated Debt, the Equity or any
other equity or ownership interests in the Borrower.
SECTION 5.2.11. DIVIDENDS, PAYMENTS AND DISTRIBUTIONS. Declare or
pay any dividends, management fees or like fees or make any other distribution
of cash or property or
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both to any of the Stockholders other than compensation for services
rendered to the Borrower and/or any Subsidiary or use any of its assets for
payment, purchase, conversion, redemption, retention, acquisition or
retirement of any beneficial interest in the Borrower or set aside or reserve
assets for sinking or like funds for any of the foregoing purposes, make any
other distribution by reduction of capital or otherwise in respect of any
beneficial interest in the Borrower or permit any Subsidiary which is not a
wholly-owned Subsidiary so to do; provided, however, that (i) in any fiscal
year after the Closing which has been immediately preceded by two full fiscal
years in which Borrower had at least $10,000,000 of Net Income, Borrower may
declare and pay a dividend in an aggregate amount not to exceed fifty percent
(50%) of the Net Income for the immediately preceding year, if and only to
the extent that both before and after such declaration and payment, no Event
of Default shall exist and be continuing and no circumstances shall exist
which, with notice or the passage of time, would constitute an Event of
Default; ; (ii) Borrower may repurchase from any employee of Borrower or
Subsidiary whose employment with Borrower or such Subsidiary ceases any
shares of the capital stock of Borrower which were issued to such employee by
Borrower as restricted stock or pursuant to the exercise of a stock option,
and (iii) Borrower may declare and pay a one time dividend of up to
$32,000,000 to Synopsis in connection with the Related Transactions; provided
further however, that in the event of a Initial Public Offering, and subject
at all times to the Borrower's compliance with the provisions of SECTION
2.6.1.5, the Borrower shall be permitted to redeem or convert shares of the
Borrower's preferred stock and/or declare and pay dividends thereon in
accordance with the Equity Documents. Notwithstanding anything to the
contrary set forth in this Agreement, the New Stockholders may at any time
convert their shares of the Borrower's Series A Voting and Series A-1
Non-Voting preferred stock in accordance with the provisions of the
Certificate of Designations therefor.
SECTION 5.2.12. INVESTMENTS IN OR TO OTHER PERSONS. Make or commit
to make any Investment in or to any other Person (including, without limitation,
any Subsidiary) other than (i) advances to employees for business expenses not
to exceed $10,000 in the aggregate outstanding for any one employee and not to
exceed $100,000 in the aggregate outstanding at any one time to all such
employees, (ii) other employee loans not to exceed $100,000 in the aggregate
outstanding at any one time to all such employees, (iii) Cash Equivalent
Investments, (iv) Indebtedness permitted under Section 5.2.8.6 (v) Investments
in accounts, contract rights and chattel paper (as defined in the Uniform
Commercial Code) and notes receivable, arising or acquired in the ordinary
course of business, (vi) full recourse promissory notes of officers and key
employees of Borrower made by such individuals to Borrower in consideration for
the issuance by Borrower of shares of restricted stock, which stock has been or
will be pledged to Borrower to secure such notes, and (vii) Investments (A) in
acquisitions of all or any part of the assets of or ownership interests in
another Person (other than a Subsidiary), provided that the cash consideration
paid by Borrower for such acquisition(s) does not exceed $250,000 in the
aggregate in any fiscal year and the minimum percentage ownership interests set
forth in the definition of "Change of Control" are maintained or (B) in
Subsidiaries, in the form of capital contribution or otherwise, provided that
the cash consideration paid for or contributed to such Subsidiaries does not
exceed $1,000,000 in the aggregate over the period from the Closing Date to the
Revolving Credit Repayment Date and the Borrower and such Subsidiaries shall
have executed and delivered to the Agent such guaranties, security agreements,
pledges and other instruments or documents reasonably requested by Agent to add
the assets of such Subsidiary or
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Borrower's ownership interest in it, or both to the collateral provided to
the Lenders for the Loans hereunder, and, in the case of (A) and (B),
provided that before and after making such Investment no Event of Default
shall have occurred and be continuing and there shall be no circumstances
which, with notice or the passage of time, would constitute an Event of
Default; and (viii) $97,000 investment in Transcendent Design, Inc.
SECTION 5.2.13. TRANSACTIONS WITH AffiliateS. Except as contemplated
by the Equity Documents and Related Transaction Documents or as set forth on
EXHIBIT 5.2.13, engage in any transaction or enter into any agreement with an
Affiliate, or in the case of Affiliates or Subsidiaries, with the Borrower or
another Affiliate or Subsidiary, except in the ordinary course of business, as
permitted by any other provision of this Agreement and then only on terms no
less favorable to Borrower than those that would be obtainable an arm's length
basis.
SECTION 5.2.14. CHANGE OF FISCAL YEAR. Change its accounting
policies, reporting practices or its fiscal year from those in effect on the
Closing Date.
SECTION 5.2.15. SUBORDINATION OF CLAIMS. Subordinate any present or
future claim against or obligation of another Person, except as ordered in a
bankruptcy or similar creditors' remedy proceeding of such other Person.
SECTION 5.2.16. COMPLIANCE WITH ERISA. With respect to Borrower and
any Commonly Controlled Entity (a) withdraw from or cease to have an obligation
to contribute to, any Multiemployer Plan so as to result in any material
liability of the Borrower or any Commonly Controlled Entity to PBGC or to any
Multiemployer Plan, (b) engage in any "prohibited transaction" (as defined in
Section 4975 of the Code) involving any Plan which would result in a material
liability of the Borrower or any Commonly Controlled Entity for an excise tax or
civil penalty in connection therewith, (c) except for any deficiency caused by a
waiver of the minimum funding requirement under sections 412 and/or 418 of the
Code, as described above, incur or suffer to exist any material "accumulated
funding deficiency" (as defined in section 302 of ERISA and section 412 of the
Code) of the Borrower or any Commonly Controlled Entity, whether or not waived,
involving any Single Employer Plan, (d) incur or suffer to exist any Reportable
Event or the appointment of a trustee or institution of proceedings for
appointment of a trustee for any Single Employer Plan if, in the case of a
Reportable Event, such event continues unremedied for ten (10) days after notice
of such Reportable Event pursuant to sections 4043(a), (c) or (d) of ERISA is
given, if in the reasonable opinion of the Majority Lenders any of the foregoing
is likely to result in a material liability of the Borrower or any Commonly
Controlled Entity, (e) permit the assets held under any Plan to be insufficient
to protect all accrued benefits, (f) allow or suffer to exist any event or
condition, which presents a material risk of incurring a material liability of
the Borrower or any Commonly Controlled Entity to PBGC by reason of termination
of any such Plan or (g) cause or permit any Plan maintained by Borrower and/or
any Commonly Controlled Entity to be out of compliance with ERISA. For purposes
of this SECTION 5.2.16 "material liability" shall be deemed to mean any
liability of Fifty Thousand Dollars ($50,000) or more in the aggregate.
SECTION 5.2.17. CAPITAL EXPENDITURES. Incur Capital Expenditures in
excess of $2,500,000 during the fiscal year ending on October 2, 1999 or in
excess of $3,000,000 in any
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fiscal year thereafter. Subject to the foregoing, the Borrower shall make
its Capital Expenditures substantially in accordance with and for the
purposes outlined in the Budget for the Borrower fiscal year in question.
SECTION 5.2.18. HAZARDOUS WASTE. Become involved, or permit, to the
extent reasonably possible after the exercise by the Borrower of reasonable due
diligence and preventive efforts, any tenant of its real property to become
involved, in any operations at such real property generating, storing,
disposing, or handling Hazardous Material or any other activity that could lead
to the imposition on the Borrower or the Agent or any Lender, or any such real
property of any material liability or Lien under any environmental laws.
SECTION 5.2.19. OTHER RESTRICTIONS ON LIENS OR DIVIDENDS. Enter into
any agreement or otherwise agree to or grant any restriction substantially
similar to the provisions of SECTION 5.2.1 hereof or which would otherwise have
the effect of prohibiting, restricting, impeding or interfering with the
creation subsequent to the Closing Date of Liens to secure the Obligations.
SECTION 5.2.20. LIMITATION ON CREATION OF SUBSIDIARIES, ETC.. Except
as permitted under Section 5.2.12, establish, create or acquire any Subsidiary
or become the general partner in any general partnership.
SECTION 5.2.21. SUBSIDIARY MERGER, ETC. Borrower will not permit any
Subsidiary to consummate any merger or consolidation with any other Person,
provided that any wholly-owned Subsidiary may be merged into Borrower or into
another wholly-owned Subsidiary if (i) Borrower or such other wholly-owned
Subsidiary is the surviving Person of such merger and is Solvent (both at the
time of and immediately after giving effect thereto), (ii) Borrower or such
other wholly-owned Subsidiary shall deliver to the Agent such opinions,
confirmations and other agreements and instruments as the majority of the
Lenders shall have reasonably requested, and (iii) both at the time of and
immediately after giving effect to such transaction, no Event of Default shall
have occurred and be continuing and no circumstances shall exist which, with
notice or the passage of time, would constitute an Event of Default. The
transactions permitted by this SECTION 5.2.21 shall not have the effect of
releasing Borrower or any other party to any of the Financing Documents from any
Obligation.
SECTION 5.3. REPORTING REQUIREMENTS. From the date hereof and thereafter
for so long as the Borrower is indebted to any Lender and/or the Agent under any
of the Financing Documents, the Borrower will, unless the Majority Lenders shall
otherwise consent in writing, furnish or cause to be furnished to the Agent for
distribution to the Lenders:
SECTION 5.3.1. As soon as possible and in any event upon acquiring
knowledge of an Event of Default or Default, continuing on the date of such
statement, the written statement of an Authorized Representative setting forth
details of such Event of Default or Default and the actions which the Borrower
has taken and proposes to take with respect thereto;
SECTION 5.3.2. As soon as practicable after the end of each Borrower
fiscal year and in any event within 90 days after the end of each such fiscal
year, consolidated balance
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sheets of the Borrower and any Subsidiaries as at the end of such year, and
the related consolidated statements of income and cash flows or shareholders'
equity of the Borrower and any Subsidiaries setting forth in each case the
corresponding figures for the preceding fiscal year, such statements to be
certified by a firm of independent certified public accountants selected by
Borrower and reasonably acceptable to the Majority Lenders, to be accompanied
by a true copy of said auditors' management letter, if one was provided to
the Borrower, and to contain a statement to the effect that such accountants
have examined SECTIONS 5.1.10 through 5.1.12 and 5.2.17 and that as of the
date of such financial statements no Default or Event of Default exists on
account of Borrower's failure to have been in compliance therewith on the
date of such statement;
SECTION 5.3.3. As soon as is practicable after the end of each fiscal
month of each Borrower fiscal year and in any event within 21 days thereafter,
consolidated balance sheets of the Borrower and any Subsidiaries as of the end
of such period and the related consolidated statements of income and cash flows
and shareholders' equity of the Borrower and any Subsidiaries, subject to
changes resulting from year-end adjustments, together, subject to SECTION 5.3.7,
with a comparison to the Budget for the applicable period, such balance sheets
and statements to be prepared and certified by an Authorized Representative in
an Officer's Certificate as having been prepared in accordance with GAAP except
for footnotes and year-end adjustments, and to be in form reasonably
satisfactory to the Agent;
SECTION 5.3.4. Simultaneously with the furnishing of each of the
year-end consolidated financial statements of the Borrower and any Subsidiaries
to be delivered pursuant to SECTION 5.3.2 and each of the consolidated quarterly
statements of the Borrower and the Subsidiaries to be delivered pursuant to
SECTION 5.3.3 an Officer's Certificate of an Authorized Representative which
shall contain a statement in the form of EXHIBIT 3.1.1.10 to the effect that no
Event of Default or Default has occurred, without having been waived in writing,
or if there shall have been an Event of Default not previously waived in writing
pursuant to the provisions hereof, or a Default, such Officer's Certificate
shall disclose the nature thereof and the actions the Borrower has taken and
prepare to take with respect thereto. Each such Officer's Certificate shall
also contain a calculation of and certify to the accuracy of the amounts
required to be calculated in the financial covenants of the Borrower contained
in this Agreement and described in EXHIBIT 3.1.1.10;
SECTION 5.3.5. Promptly after the commencement thereof, notice of all
material actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower and/or any Subsidiary;
SECTION 5.3.6. On or before October 31 of each fiscal year of the
Borrower, an updated proposed budget, prepared on a quarterly basis, and updated
financial projections for the Borrower and any Subsidiaries on a consolidated
basis (together, the "Budget") for such fiscal year, setting forth in reasonable
detail the projected results of operations of the Borrower and any Subsidiaries
on a consolidated quarterly basis, detailed Capital Expenditures plan and
stating underlying assumptions and accompanied by a written statement of an
Authorized Representative certifying as to the approval of such Budget by
Borrower's board of directors.
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SECTION 5.3.7. Such other information respecting the Business
Condition of the Borrower or any Subsidiaries as the Agent or any Lender may
from time to time reasonably request including, but not limited to,
consolidating financial statements;
SECTION 5.3.8. Written notice of the fact and of the details of any
sale or transfer of any ownership interest in the Borrower or any Subsidiary
given promptly after the Borrower acquires knowledge thereof; provided, however,
that this clause shall not be deemed to constitute or imply any consent to any
such sale or transfer;
SECTION 5.3.9. Prompt written notice of loss of any key personnel or
any Material Adverse Effect and an explanation thereof and of the actions the
Borrower and/or such Subsidiary propose to take with respect thereto; and
SECTION 5.3.10. Written notice of the following events, as soon as
possible and in any event within 15 days after the Borrower knows or has reason
to know thereof: (i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan, or (ii) the institution of proceedings or the
taking or expected taking of any other action by PBGC or the Borrower or any
Commonly Controlled Entity to terminate, withdraw or partially withdraw from
any Plan and, with respect to any Multiemployer Plan, the Reorganization (as
defined in Section 4241 of ERISA) or Insolvency (as defined in Section 4245 of
ERISA) of such Multiemployer Plan and in addition to such notice, deliver to the
Agent whichever of the following may be applicable: (a) an Officer's
Certificate setting forth details as to such Reportable Event and the action
that the Borrower or Commonly Controlled Entity proposes to take with respect
thereto, together with a copy of any notice of such Reportable Event that may be
required to be filed with PBGC, or b) any notice delivered by PBGC evidencing
its intent to institute such proceedings or any notice to PBGC that such Plan is
to be terminated, as the case may be.
ARTICLE 6.
EVENTS OF DEFAULT
SECTION 6.1. EVENTS OF DEFAULT. The Borrower shall be in default under
each of the Financing Documents, upon the occurrence of any one or more of the
following events ("Events of Default"):
SECTION 6.1.1. If the Borrower shall fail to make due and punctual
payment of any principal, fees, interest and/or other amounts payable under this
Agreement as provided in any Note and/or in this Agreement when the same is due
and payable except that it shall not be an Event of Default if any interest,
fees and/or other amounts (excluding principal) is paid within 5 Business Days
after it is due and payable, whether at the due date thereof or at a date fixed
for prepayment or if the Borrower shall fail to make any such payment of fees,
interest, principal and/or any other amount under this Agreement and/or under
any Note on the date when such payment becomes due and payable by acceleration;
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SECTION 6.1.2. If the Borrower or any Subsidiary shall make an
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall admit in writing its inability to pay its
debts as they become due or shall file a voluntary petition in bankruptcy, or
shall file any petition or answer seeking any reorganization, arrangement,
composition, adjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy laws or other applicable federal, state
or other statute, law or regulation, or shall seek or consent to or acquiesce in
the appointment of any trustee, receiver or liquidator of it or of all or any
substantial part of its properties, or if partnership or corporate action shall
be taken for the purpose of effecting any of the foregoing; or
SECTION 6.1.3. To the extent not described in SECTION 6.1.2, (i) if
the Borrower or any Subsidiary shall be the subject of a bankruptcy proceeding,
or (ii) if any proceeding against any of them seeking any reorganization,
arrangement, composition, adjustment, liquidation, dissolution, or similar
relief under the present or any future federal bankruptcy law or other
applicable federal, foreign, state or other statute, law or regulation shall be
commenced, or (iii) if any trustee, receiver or liquidator of any of them or of
all or any substantial part of any or all of their properties shall be appointed
without their consent or acquiescence; provided that in any of the cases
described above in this SECTION 6.1.3, such proceeding or appointment shall not
be an Event of Default if the Borrower or the Subsidiary in question shall cause
such proceeding or appointment to be discharged, vacated, dismissed or stayed
within sixty (60) days after commencement thereof; or
SECTION 6.1.4. If final judgment or judgments aggregating more than
$500,000 shall be rendered against the Borrower or any Subsidiary and shall
remain undischarged, unstayed or unpaid for an aggregate of thirty (30) days
(whether or not consecutive) after entry thereof; or
SECTION 6.1.5. If the Borrower or any Subsidiary shall default (after
giving effect to any applicable grace period) in the due and punctual payment of
the principal of or interest on any Indebtedness exceeding in the aggregate
$1,000,000 (other than the Loans), or if any default shall have occurred and be
continuing after any applicable grace period under any mortgage, note or other
agreement evidencing, securing or providing for the creation of such
Indebtedness, which results in the acceleration of such Indebtedness or which
permits, or with the giving of notice would permit, any holder or holders of any
such Indebtedness to accelerate the stated maturity thereof; or
SECTION 6.1.6. If there shall be a default in the performance of the
Borrower's obligations under SECTION 5.1.3 (insofar as such Section requires the
preservation of the corporate existence of the Borrower), any of SECTIONS 5.1.10
through 5.1.13 or SECTIONS 5.2.1, 5.2.3, 5.2.8 OR 5.2.11 of this Agreement; or
SECTION 6.1.7. If there shall be any Default in the performance of
any covenant or condition contained in this Agreement or in any of the other
Financing Documents to be observed or performed pursuant to the terms hereof or
any Financing Document, as the case may be, or to the extent such Default would
have a Material Adverse Effect, by the Borrower under
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any of the Related Transaction Documents, other than a covenant or condition
referred to in any other subsection of this SECTION 6.1 and such Default
shall continue unremedied or unwaived, (i) in the case of any covenant or
condition contained in SECTIONS 5.2 OR 5.3, for fifteen (15) Business Days,
or (ii) in the case of any other covenant or condition for which no other
grace period is provided, for thirty (30) days, or (iii) in the case of any
other covenant or condition for which another grace period is provided, for
such grace period, or (iv) if any of the representations and warranties made
or deemed made by the Borrower to the Agent and/or any Lender pursuant to any
of the Financing Documents proves to have been false or misleading in any
material respect when made and such falseness or misleading representation
or warranty would be reasonably likely to have a material adverse effect on
the Agent or any Lender or their rights and remedies or a Material Adverse
Effect; or
SECTION 6.1.8. If there shall be any attachment of any deposits or
other property of the Borrower and/or any Subsidiary in the possession of any
Lender or any attachment of any other property of the Borrower and/or any
Subsidiary in an amount exceeding $1,000,000, which shall not be discharged,
vacated or stayed within thirty (30) days of the date of such attachment; or
SECTION 6.1.9. Any certification of the financial statements,
furnished to the Agent pursuant to SECTION 5.3.2, shall contain any
qualification; provided, however, that such qualifications will not be deemed an
Event of Default if in each case (i) such certification shall state that the
examination of the financial statements covered thereby was conducted in
accordance with generally accepted auditing standards, including but not limited
to all such tests of the accounting records as are considered necessary in the
circumstances by the independent certified public accountants preparing such
statements, (ii) such financial statements were prepared in accordance with GAAP
and (iii) such qualification does not involve the "going concern" status of the
entity being reported upon.
ARTICLE 7.
REMEDIES OF LENDERS
Upon the occurrence and during the continuance of any one or more of the
Events of Default, the Agent, at the request of the Majority Lenders, shall, by
written notice to the Borrower, declare the obligation of the Lenders to make or
maintain the Loans to be terminated, whereupon the same and the Commitment shall
forthwith terminate, and the Agent, at the request of the Majority Lenders,
shall, by notice to the Borrower, declare the entire unpaid principal amount of
each Note and all fees and interest accrued and unpaid thereon and/or under this
Agreement, and/or any of the other Financing Documents and any and all other
Indebtedness under this Agreement, each Note and/or any of the other Financing
Documents to the Agent and/or any of the Lenders and/or to any holder of all or
any portion of each Note to be forthwith due and payable, whereupon each Note,
and all such accrued fees and interest and other such Indebtedness shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that upon the occurrence of an Event of Default
under SECTIONS 6.1.2 or 6.1.3,
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all of the unpaid principal amount of each Note, all fees and interest
accrued and unpaid thereon and/or under this Agreement and/or under any of
the other Financing Documents and any and all other such Indebtedness of the
Borrower to any of the Lenders and/or to any such holder shall thereupon be
due and payable in full without any need for the Agent and/or any Lender to
make any such declaration or take any action and the Lenders' obligations to
make the Loans shall simultaneously terminate. The Agent shall, in
accordance with the votes of the Majority Lenders, exercise all remedies on
behalf of and for the account of each Lender and on behalf of its respective
Pro Rata Share of the Loans, its Note and Indebtedness of the Borrower owing
to it or any of the foregoing, including, without limitation, all remedies
available under or as a result of this Agreement, the Notes or any of the
other Financing Documents or any other document, instrument or agreement now
or hereafter securing any Note without any such exercise being deemed to
modify in any way the fact that each Lender shall be deemed a separate
creditor of the Borrower to the extent of its Note and Pro Rata Share of the
Loans and any other amounts payable to such Lender under this Agreement
and/or any of the other Financing Documents and the Agent shall be deemed a
separate creditor of the Borrower to the extent of any amounts owed by the
Borrower to the Agent.
ARTICLE 8.
AGENT
SECTION 8.1. APPOINTMENT. The Agent is hereby appointed as administrative
and collateral agent, hereunder and each Lender hereby authorizes the Agent to
act under the Financing Documents as its Agent hereunder and thereunder,
respectively. The Agent agrees to act as such upon the express conditions
contained in this Article 8. The provisions of this Article 8 are solely for
the benefit of the Agent, and, except as expressly provided in SECTION 8.6,
neither the Borrower nor any third party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement and the other Financing Documents to which the Agent
is a party, the Agent shall act solely as Agent of the Lenders and does not
assume nor shall the Agent be deemed to have assumed any obligation towards or
relationship of agency or trust with or for the Borrower, any of the
Stockholders, any Affiliate or any Subsidiary.
SECTION 8.2. POWERS; GENERAL IMMUNITY.
SECTION 8.2.1. DUTIES SPECIFIED. Each Lender irrevocably authorizes
the Agent to take such action on such Lender's behalf, including, without
limitation, to execute and deliver the Financing Documents to which the Agent is
a party and to exercise such powers hereunder and under the Financing Documents
and other instruments and agreements referred to herein as are specifically
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. The Agent shall have only those
duties and responsibilities
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which are expressly specified in this Agreement or in any of the Financing
Documents and may perform such duties by or through its agents or employees.
The duties of the Agent shall be mechanical and administrative in nature; and
the Agent shall not have by reason of this Agreement or any of the Financing
Documents a fiduciary relationship in respect of any Lender; and nothing in
this Agreement or any of the Security Documents, expressed or implied, is
intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement or any of the Financing Documents or
the other instruments and agreements referred to herein except as expressly
set forth herein or therein.
SECTION 8.2.2. NO RESPONSIBILITY FOR CERTAIN MATTERS. The Agent
shall not be responsible to any Lender for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of any of
the Financing Documents or any other document, instrument or agreement now or
hereafter executed in connection herewith or therewith, or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith by or on behalf of the Borrower, any of the Affiliates, and/or any
Subsidiary to the Agent or any Lender, or be required to ascertain or inquire as
to the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any Default
or Event of Default.
SECTION 8.2.3. EXCULPATORY PROVISIONS. Neither the Agent nor any of
its officers, directors, employees or agents shall be liable to any Lender for
any action taken or omitted hereunder or under any of the Financing Documents,
or in connection herewith or therewith unless caused by its or their gross
negligence or willful misconduct. If the Agent shall request instructions from
Lenders with respect to any action (including the failure to take an action) in
connection with any of the Financing Documents, the Agent shall be entitled to
refrain from taking such action unless and until the Agent, shall have received
instructions from the Majority Lenders (or all of the Lenders if the action
requires their consent). Without prejudice to the generality of the foregoing,
(i) the Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for the Borrower, any
of the Affiliates, and/or any Subsidiary), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or (where so
instructed) refraining from acting under any of the Financing Documents or the
other instruments and agreements referred to herein in accordance with the
instructions of the Majority Lenders (or all of the Lenders if the action
requires their consent). The Agent shall be entitled to refrain from exercising
any power, discretion or authority vested in it under any of the Financing
Documents or the other instruments and agreements referred to herein unless and
until it has obtained the instructions of the Majority Lenders (or all of the
Lenders if the action requires their consent).
SECTION 8.2.4. AGENT ENTITLED TO ACT AS LENDER. The agency hereby
created shall in no way impair or affect any of the rights and powers of, or
impose any duties or obligations upon, Fleet in its individual capacity as a
Lender hereunder. With respect to its participation in
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the Loans and the Commitment, Fleet shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
performing the duties and functions delegated to it hereunder, and the term
"Lender" or "Lenders" or any similar term shall, unless the context clearly
otherwise indicates, include Fleet in its individual capacity. The Agent and
its affiliates may accept deposits from, lend money to and generally engage
in any kind of banking, trust, financial advisory or other business with the
Borrower, any of the Stockholder, or any Affiliate or Subsidiary as if it
were not performing the duties specified herein, and may accept fees and
other consideration from the Borrower and/or any of such other Persons for
services in connection with this Agreement and otherwise without having to
account for the same to Lenders.
SECTION 8.3. REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR
APPRAISAL OF CREDITWORTHINESS. Each Lender represents and warrants that it has
made its own independent investigation of the financial condition and affairs of
the Borrower, the Stockholder and any Subsidiaries of any of them in connection
with the making of the Loans hereunder and has made and shall continue to make
its own appraisal of the creditworthiness of the Borrower, the Stockholder and
the Subsidiaries. The Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to make any such investigation or any such
appraisal on behalf of Lenders or to provide any Lender with any credit or other
information with respect thereto whether coming into its possession before the
making of any Loan or any time or times thereafter (except for information
received by the Agent under SECTION 5.3 hereof which the Agent will promptly
forward to the Lenders), and the Agent shall further not have any responsibility
with respect to the accuracy of or the completeness of the information provided
to any of the Lenders.
SECTION 8.4. RIGHT TO INDEMNITY. Each Lender severally agrees to
indemnify the Agent proportionately to its Pro Rata Share of the Loans, to
the extent the Agent shall not have been reimbursed by or on behalf of the
Borrower, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including,
without limitation, counsel fees and disbursements) or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder or in any way relating
to or arising out of this Agreement and/or any of the other Financing
Documents; PROVIDED that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. If any indemnity furnished to the Agent for
any purpose shall, in the opinion of the Agent, be insufficient or become
impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity
is furnished.
SECTION 8.5. PAYEE OF NOTE TREATED AS OWNER. The Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any person or entity
who, at the time of making such request or giving such authority or consent, is
the holder of any Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Note or of any Note or Notes issued in exchange
for such Note.
SECTION 8.6. RESIGNATION BY AGENT.
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SECTION 8.6.1. The Agent may resign from the performance of all
its functions and duties under the Financing Documents at any time by giving
30 days' prior written notice to the Borrower and each of the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent, of
appointment pursuant to SECTIONS 8.6.2 and 8.6.3 below or as otherwise
provided below.
SECTION 8.6.2. Upon any such notice of resignation, the Majority
Lenders shall appoint a successor Agent, who shall be a Lender and, so long
as no Default or Event of Default exists and is continuing, who shall be
reasonably satisfactory to the Borrower and in any event shall be an
incorporated bank or trust company with a combined surplus and undivided
capital of at least Five Hundred Million Dollars ($500,000,000).
SECTION 8.6.3. If a successor Agent shall not have been so
appointed within said 30 day period, the resigning Agent, with the consent of
the Borrower, which shall not be unreasonably withheld or delayed, shall then
appoint a successor Agent, who shall be a Lender and who shall serve as the
Agent, until such time, if any, as the Majority Lenders, and so long as no
Default or Event of Default exists and is continuing, with the consent of the
Borrower, which shall not be unreasonably withheld or delayed, appoint a
successor Agent as provided above.
SECTION 8.6.4. If no successor Agent has been appointed pursuant
to SECTIONS 8.6.2 or 8.6.3 by the 40th day after the date such notice of
resignation was given by the resigning Agent, the Majority Lenders shall
promptly thereafter appoint a successor Agent (without regard to the
requirements of SECTIONS 8.6.2 or 8.6.3). The resigning Agent's resignation
shall become effective upon such successor Agent's acceptance of its
appointment, and such successor Agent shall thereafter perform all the duties
of the Agent under the Financing Documents.
SECTION 8.7. SUCCESSOR AGENT. Upon the acceptance of any appointment
as the Agent hereunder by a successor Agent, that successor Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent, shall be
discharged from its duties and obligations as the Agent under the Financing
Documents. After any retiring Agent's resignation hereunder as the Agent the
provisions of this Article 8 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under the Financing
Documents.
ARTICLE 9.
MISCELLANEOUS
SECTION 9.1. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
SECTION 9.1.1. Except to the extent prohibited by applicable law,
the Borrower irrevocably:
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SECTION 9.1.1.1. agrees that any suit, action, or other legal
proceeding arising out of any of the Financing Documents or any of the Loans
may be brought in the courts of record of The Commonwealth of Massachusetts
or any other state(s) in which a portion of the Borrower's or any Subsidiary's
assets sufficient for personal jurisdiction are located or the courts of the
United States located in The Commonwealth of Massachusetts or any other
state(s) in which a portion of the Borrower's or any Subsidiary's assets
sufficient for personal jurisdiction are located;
SECTION 9.1.1.2. consents to the jurisdiction of each such
court in any such suit, action or proceeding; and
SECTION 9.1.1.3. waives any objection which it may have to
the laying of venue of such suit, action or proceeding in any of such courts.
For such time as any of the Indebtedness of the Borrower to any Lender
and/or the Agent shall be unpaid in whole or in part and/or the Commitment is
in effect, the Borrower irrevocably designates the registered agent or agent
for service of process of the Borrower as reflected in the records of the
Secretary of State of The Commonwealth of Massachusetts as its registered
agent, and, in the absence thereof, the Secretary of State of The
Commonwealth of Massachusetts as its agent to accept and acknowledge on its
behalf service of any and all process in any such suit, action or proceeding
brought in any such court and agrees and consents that any such service of
process upon such agent and written notice of such service to the Borrower by
registered or certified mail shall be taken and held to be valid personal
service upon the Borrower regardless of where the Borrower shall then be
doing business and that any such service of process shall be of the same
force and validity as if service were made upon it according to the laws
governing the validity and requirements of such service in each such state
and waives any claim of lack of personal service or other error by reason of
any such service. Any notice, process, pleadings or other papers served
upon the aforesaid designated agent shall, within three (3) Business Days
after such service, be sent by the method provided therefor under SECTION 9.6
to the Borrower at its address set forth in this Agreement. EACH OF THE
PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY
DISPUTE BETWEEN THE BORROWER AND THE AGENT AND/OR THE LENDERS WITH RESPECT TO
THE FINANCING DOCUMENTS AND/OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY.
SECTION 9.2. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
conferred upon or reserved to the Agent and/or the Lenders in any of the
Financing Documents is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given under any of
the Financing Documents or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy under any of
the Financing Documents, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 9.3. DELAY OR OMISSION NOT WAIVER. No delay in exercising or
failure to exercise by the Agent and/or the Lenders of any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event
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of Default or an acquiescence therein. Every right and remedy given by any
of the Financing Documents or by law to the Agent and/or any of the Lenders
may be exercised from time to time, and as often as may be deemed expedient,
by the Agent and/or any of the Lenders.
SECTION 9.4. WAIVER OF STAY OR EXTENSION LAWS. The Borrower covenants
(to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law wherever enacted, now or at any
time hereafter in force, which may affect the covenants or the performance of
any of the Financing Documents; and the Borrower (to the extent that it may
lawfully do so) hereby expressly waives all benefit and advantage of any such
law and covenants that it will not hinder; delay or impede the execution of
any power herein granted to the Agent and/or any of the Lenders, but will
suffer and permit the execution of every such power as though no such law had
been enacted, except to the extent the Agent or any Lender is guilty of
willful misconduct or gross negligence.
SECTION 9.5. AMENDMENTS, ETC. No amendment, modification, termination,
or waiver of any provision of any of the Financing Documents nor consent to
any departure by the Borrower therefrom shall in any event be effective
unless the same shall be in a written notice given to the Borrower by the
Agent and consented to in writing by the Majority Lenders (or by the Agent
acting alone if any specific provision of this Agreement provides that the
Agent, acting alone, may grant such amendment, modification, termination,
waiver or departure) and the Agent shall give any such notice if the Majority
Lenders so consent or direct the Agent to do so; provided, however, that any
such amendment, modification, termination, waiver or consent shall require a
written notice given to the Borrower by the Agent and consented to in writing
by all of the Lenders if the effect thereof is to (i) change any of the
provisions affecting the interest rate on the Loans, (ii) extend or modify
the Commitment, (iii) discharge or release the Borrower from its obligation
to repay all principal due under the Loans or release any collateral or
guaranty for the Loans, (iv) change any Lender's Pro Rata Share of the
Commitment or the Loans, (v) modify this SECTION 9.5, (vi) change the
definition of Majority Lenders, (vii) extend any scheduled due date for
payment of principal, interest or fees or (viii) permit the Borrower to
assign any of its rights under or interest in this Agreement, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. Any amendment or modification of this
Agreement must be signed by the Borrower, the Agent and at least all of the
Lenders consenting thereto who shall then hold the Pro Rata Shares of the
Loans required for such amendment or modification under this SECTION 9.5 and
the Agent shall sign any such amendment if such Lenders so consent or direct
the Agent to do so provided that any Lender dissenting therefrom shall be
given an opportunity to sign any such amendment or modification. Any
amendment of any of the Security Documents must be signed by each of the
parties thereto. No notice to or demand on the Borrower and no consent,
waiver or departure from the terms of this Agreement granted by the Agent
and/or the Lenders in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances.
SECTION 9.6. ADDRESSES FOR NOTICES, ETC. All notices, requests,
demands and other communications provided for hereunder (other than those
which, under the terms of this Agreement, may be given by telephone, which
shall be effective when received verbally) shall be in writing (including
telecopied communication) and mailed (provided that in the case of items
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referred to in the next-to-last sentence of SECTION 9.1 and the items set
forth below as requiring a copy to legal counsel for the Borrower, the Agent
or a Lender, such items shall be mailed by overnight courier for delivery the
next Business Day), telecopied or delivered to the applicable party at the
addresses indicated below:
If to the Borrower:
Viewlogic Systems, Inc.
293 Boston Post Road West
Marlboro, MA 01752-4615
Attention: William Herman, President
Telephone: (508) 480-0881
Telecopy: (508) 480-0888
With a copy to (if given pursuant to any of SECTIONS 5.3.1, 5.3.5,
5.3.9, 5.3.10 and 5.3.11):
Hale and Dorr LLP
60 State Street
Boston, MA 02109 Attention: Mark N. Polebaum, Esquire
Telephone (617) 526-6792
Telecopy: (617) 526-5000
If to Agent:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attention: Lucie Burke, Vice President
High Technology Group, MA OF DO7A
Telephone: (617) 346-0099
Telecopy: (617) 346-0151
With a copy to (if given pursuant to any of SECTIONS 5.3.1, 5.3.5,
5.3.9, 5.3.10 and 5.3.11)
Hinckley, Allen & Snyder
28 State Street
Boston, Massachusetts 02109
Attention: Malcolm Farmer III, Esquire
Telephone: (617) 345-9000
Telecopy: (617) 345-9020
If to any other Lender, to the address set forth on EXHIBIT 1.9.
or, as to each party, at such other address as shall be designated by such
party in a written notice to each other party complying as to the delivery
with the terms of this Section. All such notices, requests, demands and
other communications shall be effective when received. Requests,
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certificates, other items provided pursuant to SECTION 5.3 and other routine
mailings or notices need not be accompanied by a copy to legal counsel for
the Lenders or the Borrower.
SECTION 9.7. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on
demand the reasonable fees and out-of-pocket expenses of Messrs. Hinckley,
Allen & Snyder, counsel for the Agent and of any local counsel retained by
the Agent in connection with the preparation, execution, delivery,
syndication and administration of the Financing Documents and the Loans. The
Borrower agrees to pay on demand all reasonable costs and expenses (including
without limitation reasonable attorneys' fees) incurred by the Agent and/or
any Lender, upon or after the occurrence and during the continuance of any
Default or Event of Default, if any, in connection with the enforcement of
any of the Financing Documents and any amendments, waivers, or consents with
respect thereto. In addition, the Borrower shall pay on demand any and all
stamp and other taxes and fees payable or determined to be payable in
connection with the execution and delivery of the Financing Documents, and
agrees to save the Lenders and the Agent harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes or fees, except those resulting from the Lenders'
or Agent's gross negligence or willful misconduct.
SECTION 9.8. PARTICIPATIONS. Subject to compliance with the proviso in
the first sentence of SECTION 9.11, any Lender may sell participations in all
or part of the Loans made by it and/or its Pro Rata Share of the Commitment
or any other interest herein to a financial institution having at least
$500,000,000 of assets, in which event the participant shall not have any
rights under any of the Financing Documents (the participant's rights against
such Lender in respect of that participation to be those set forth in the
Agreement executed by such Lender in favor of the participant relating
thereto) and all amounts payable by the Borrower hereunder or thereunder
shall be determined as if such Lender had not sold such participation. Such
Lender may furnish any information concerning the Borrower and any Subsidiary
in the possession of such Lender from time to time to participants (including
prospective participants); provided that such Lender and any participant
comply with the proviso in SECTIONS 9.11.7 and 9.11.8 as if any such
participant was a Substituted Lender.
SECTION 9.9. BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Agent and the
Lenders and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Agent and the Lenders. This
Agreement and all covenants, representations and warranties made herein
and/or in any of the other Financing Documents shall survive the making of
the Loans, the execution and delivery of the Financing Documents and shall
continue in effect so long as any amounts payable under or in connection with
any of the Financing Documents or any other Indebtedness of the Borrower to
the Agent and/or any Lender remains unpaid or the Commitment remains
outstanding; provided, however, that SECTIONS 2.2.3 and 9.7 shall, except to
the extent agreed to in a pay-off letter by the Agent and the Lenders in
their complete discretion, survive and remain in full force and effect for 90
days following repayment in full of all amounts payable under or in
connection with all of the Financing Documents and any other such
Indebtedness.
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SECTION 9.10. ACTUAL KNOWLEDGE. For purposes of this Agreement,
neither the Agent nor any Lender shall be deemed to have actual knowledge of
any fact or state of facts unless the senior loan officer or any other
officer responsible for the Borrower's account established pursuant to this
Agreement at the Agent or such Lender, shall, in fact, have actual knowledge
of such fact or state of facts or unless written notice of such fact shall
have been received by the Agent or such Lender in accordance with SECTION 9.6.
SECTION 9.11. SUBSTITUTIONS AND ASSIGNMENTS. Upon the request of any
Lender, the Agent and such Lender may assign all or any portion of its Pro
Rata Share of the Commitment and the Loans to a Federal Reserve Bank and may,
subject to the terms and conditions hereinafter set forth, take the actions
set forth below to substitute one or more financial institutions having at
least $500,000,000 in assets (a "Substituted Lender") as a Lender or Lenders
hereunder having an amount of the Loans as specified in the relevant
Substitution Agreement executed in connection therewith; provided that no
Lender, Selling Lender or Substituted Lender shall have a Pro Rata Share of
the Commitment and the Loans in the aggregate of less than $5,000,000 and
Fleet and/or its affiliates shall retain for their own account at least 50%
of the Term Loan and 50% of the Revolving Credit Loan Commitment.
SECTION 9.11.1. In connection with any such substitution the
Substituted Lender and the Agent shall enter into a Substitution Agreement in
the form of EXHIBIT 9.11.1 hereto (a "Substitution Agreement") pursuant to
which such Substituted Lender shall be substituted for the Lender requesting
the substitution in question (any such Lender being hereinafter referred to
as a "Selling Lender") to the extent of the reduction in the Selling Lender's
portion of the Loans specified therein. In addition, such Substituted Lender
shall assume such of the obligations of each Selling Lender under the
Financing Documents as may be specified in such Substitution Agreement and
this Agreement shall be amended by execution and delivery of each
Substitution Agreement to include such Substituted Lender as a Lender for all
purposes under the Financing Documents and to substitute for the then
existing EXHIBIT 1.9 to this Agreement a new EXHIBIT 1.9 in the form of
Schedule A to such Substitution Agreement setting forth the portion of the
Loans belonging to each Lender following execution thereof. The Agent and
each Substituted Lender shall countersign and accept delivery of each
Substitution Agreement.
SECTION 9.11.2. Without prejudice to any other provision of this
Agreement, each Substituted Lender shall, by its execution of a Substitution
Agreement, agree that neither the Agent nor any Lender is any way responsible
for or makes any representation or warranty as to: (a) the accuracy and/or
completeness of any information supplied to such Substituted Lender in
connection therewith, (b) the financial condition, creditworthiness, affairs,
status or nature of the Borrower, any of the Affiliates and/or any of the
Subsidiaries or the observance by the Borrower, or any other party of any of
its obligations under this Agreement or any of the other Financing Documents
or (c) the legality, validity, effectiveness, adequacy or enforceability of
any of the Financing Documents.
SECTION 9.11.3. The Agent shall be entitled to rely on any
Substitution Agreement delivered to it pursuant to this SECTION 9.11 which is
complete and regular on its face as to its contents and appears to be signed
on behalf of the Substituted Lender which is a party thereto, and the Agent
shall have no liability or responsibility to any party as a consequence of
relying
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thereon and acting in accordance with and countersigning any such
Substitution Agreement. The effective date of each Substitution Agreement
shall be the date specified as such therein and each Lender prior to such
effective date shall, for all purposes hereunder, be deemed to have and
possess all of their respective rights and obligations hereunder up to 12:00
o'clock Noon on the effective date thereof.
SECTION 9.11.4. Upon delivery to the Agent of any Substitution
Agreement pursuant to and in accordance with this SECTION 9.11 and acceptance
thereof by the Agent (which delivery shall be evidenced and accepted
exclusively and conclusively by the Agent's countersignature thereon pursuant
to the terms hereof without which such Substitution Agreement shall be
ineffective): (i) except as provided hereunder and in SECTION 9.11.5, the
respective rights of each Selling Lender and the Borrower against each other
under the Financing Documents with respect to the portion of the Loans being
assigned or delegated shall be terminated and each Selling Lender and the
Borrower shall each be released from all further obligations to the other
hereunder with respect thereto (all such rights and obligations to be so
terminated or released being referred to in this SECTION 9.11 as "Discharged
Rights and Obligations"); and (ii) the Borrower and the Substituted Lender
shall each acquire rights against each other and assume obligations towards
each other which differ from the Discharged Rights and Obligations only in
so far as the Borrower and the Substituted Lender have assumed and/or
acquired the same in place of the Selling Lender in question; and (iii) the
Agent, the Substituted Lender and the other Lenders shall acquire the same
rights and assume the same obligations between themselves as they would have
acquired and assumed had such Substituted Lender been an original party to
this Agreement as a Lender possessing the Discharged Rights and Obligations
acquired and/or assumed by it in consequence of the delivery of such
Substitution Agreement to the Agent.
SECTION 9.11.5. Discharged Rights and Obligations shall not
include, and there shall be no termination or release pursuant to this
SECTION 9.11 of (i) any rights or obligations arising pursuant to any of the
Financing Documents in respect of the period or in respect of payments
hereunder made during the period prior to the effective date of the relevant
Substitution Agreement or, (ii) any rights or obligations relating to the
payment of any amount which has fallen due and not been paid hereunder prior
to such effective date or rights or obligations for the payment of interest,
damages or other amounts becoming due hereunder as a result of such
nonpayment.
SECTION 9.11.6. With respect to any substitution of a Substituted
Lender taking place after the Closing Date, the Borrower shall issue to such
Substituted Lender and to such Selling Lender, new Notes reflecting the
inclusion of such Substituted Lender as a Lender and the reduction in the
respective Loans of such Selling Lender, such new Notes to be issued against
receipt by the Borrower of the existing Notes of such Lender. The Selling
Lender or the Substituted Lender shall pay to the Agent for its own account
an assignment fee in the amount of $3,000 for each assignment hereunder,
which shall be payable at or before the effective date of the assignment.
SECTION 9.11.7. Each Lender may furnish to any financial
institution having at least $500,000,000 in assets which such Lender proposes
to make a Substituted Lender or to a
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Substituted Lender any information concerning such Lender, the Borrower,
Stockholders and any Subsidiary in the possession of that Lender from time to
time; provided that any Lender providing any confidential information about
the Borrower, any of the Stockholders and/or any Subsidiary to any such
financial institution shall first obtain such financial institution's
agreement to keep confidential any such confidential information.
SECTION 9.11.8. (a) Each of the Lenders agrees, subject to
SECTION 9.11.7., that it will use its best efforts not to disclose without
the prior consent of the Borrower any information with respect to the
Borrower or any of its Subsidiaries which is furnished pursuant to this
Agreement; PROVIDED, that any Lender may disclose any such information (a) as
has become generally available to the public or has become properly available
to such Lender on a non-confidential basis, (b) as may be required or
appropriate in any report, statement or testimony submitted to any municipal,
state or Federal regulatory body having or claiming to have jurisdiction over
such Lender or to the Federal Reserve Board, the Federal Deposit Insurance
Corporation, the NAIC or similar organizations (whether in the United States
or elsewhere) or their successors, (c) as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation, (d)
in order to comply with any law, order, regulation or ruling applicable to
such Lender, and (e) to any prospective transferee in connection with any
contemplated transfer of any of the Loans or any interest therein by such
Lender; PROVIDED, that such prospective transferee agrees to be bound by the
provisions in this SECTION 9.11.8 to the same extent as such Lender.
(b) The Borrower hereby acknowledges and agrees that
each Lender may share with its auditors, counsel, other professional advisors
and any of its Affiliates any information related to the Borrower or any of
its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its
Subsidiaries), provided that Lender shall have made such Persons aware of
Section 9.10.8 and such Persons shall have agreed to be subject to the
provisions of this SECTION 9.11.8 to the same extent as such Lender.
SECTION 9.12. PAYMENTS PRO RATA. The Agent agrees that promptly after
its receipt of each payment from or on behalf of the Borrower in respect of
any obligations of the Borrower hereunder it shall distribute such payment
to the Lenders pro rata based upon their respective Pro Rata Shares, if any,
of the obligations with respect to which such payment was received. Each of
the Lenders agrees that, if it should receive any amount hereunder (whether
by voluntary payment, by realization upon security, by the exercise of the
right of setoff under SECTION 2.5.2 or otherwise or banker's lien, by
counterclaim or cross action, by the enforcement of any right under the
Financing Documents, or otherwise), which is applicable to the payment of the
Obligations of a sum which with respect to the related sum or sums received
by other Lenders is in a greater proportion than the total amount of such
Obligation then owed and due to such Lender bears to the total amount of such
Obligation then owed and due to all of the Lenders immediately prior to such
receipt, except for any amounts received pursuant to SECTION 2.2.3, then such
Lender receiving such excess payment shall purchase for cash without recourse
or warranty from the other Lenders an interest in the Obligations of the
Borrower to such Lenders in such amount as shall result in a proportional
participation by all the Lenders in such amount; provided further, however,
that if all or any portion of such excess amount is thereafter recovered from
such
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Lender, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.
SECTION 9.13. INDEMNIFICATION. The Borrower irrevocably agrees to and
does hereby indemnify and hold harmless Agent and each of the Lenders, their
agents or employees and each Person, if any, who controls any of the Agent
and the Lenders within the meaning of Section 15 of the Securities Act of
1933, as amended, and each and all and any of them (the "Indemnified
Parties"), against any and all losses, claims, actions, causes of action,
damages or liabilities (including any amount paid in settlement of any
action, commenced or threatened and any amount described in SECTION 8.4)
(collectively, the "Damages"), joint or several, to which they, or any of
them, may become subject under statutory law or at common law, and to
reimburse the Indemnified Parties for any legal or other out-of-pocket
expenses reasonably incurred by it or them in connection with investigating,
preparing for or defending against any of the Indemnified Parties, insofar as
such losses, claims, damages, liabilities or actions arise out of or are
related to any act or omission of the Borrower and/or any Subsidiary with
respect to any of (i) the Related Transactions, (ii) any of the Financing
Documents, (iii) any of Loans, (iv) any use made or proposed to be made with
the proceeds of the Loans, (v) any acquisition or proposed acquisition or any
other similar business combination or proposed business combination by the
Borrower and/or any of its Subsidiaries and/or its Affiliates (other than the
Sprout Group not related to the Related Transactions) (whether by acquisition
or exchange of capital stock or other securities or by acquisition of all or
substantially all of the assets of any Person), (vi) any offering of
securities by the Borrower and/or any Subsidiary after the date hereof and/or
in connection with the Securities and Exchange Act of 1933 and/or (vii) any
failure to comply with any applicable federal, state or foreign governmental
law, rule, regulation, order or decree, including without limitation, any
Damages which arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact with respect to matters relative to any
of the foregoing contained in any document distributed in connection
therewith, or the omission or alleged omission to state in any of the
foregoing a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, but
excluding any Damages to the extent arising from or due to, as determined in
a final nonappealable judgment by a court of competent jurisdiction, the
gross negligence or willful misconduct of any of the Indemnified Parties;
provided, however, that notwithstanding the foregoing, no Indemnified Party
shall have any liability (whether direct or indirect, in contract or tort of
otherwise to the Borrower, any Affiliates or any Subsidiaries or to their
respective security holders or creditors except for direct (as opposed to
consequential damages) determined in a final nonappealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or proceeding to which the indemnity described in
this paragraph applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by the Borrower, any
Affiliates or any Subsidiary or to their respective security holders or
creditors or an Indemnified Party or an Indemnified Party is otherwise a
party thereto and whether or not the Related Transaction and the transactions
contemplated by the Financing Documents are consummated.
Promptly upon receipt of notice of the commencement of any action, or
information as to any threatened action against any of the Indemnified
Parties in respect of which indemnity or reimbursement may be sought from the
Borrower on account of the agreement contained in this
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SECTION 9.13, notice shall be given to the Borrower in writing of the
commencement or threatening thereof, together with a copy of all papers
served, but the omission so to notify the Borrower of any such action shall
not release the Borrower from any liability which it may have to such
Indemnified Parties unless, and only to the extent that, such omission
materially prejudiced Borrower's ability to defend against such action.
In case any such action shall be brought against any of the Indemnified
Parties, the Borrower shall be entitled to participate in (and, to the extent
that it shall wish, to select counsel and to direct) the defense thereof at
its own expense. Any of the Indemnified Parties shall have the right to
employ its or their own counsel in any case, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless the
employment of such counsel shall have been authorized in writing by the
Borrower in connection with the defense of such action or the Borrower shall
not have employed counsel to have charge of the defense of such action or
such Indemnified Party shall have received an opinion from an independent
counsel that there may be defenses available to it which are different from
or additional to those available to the Borrower (in which case the Borrower
shall not have the right to direct the defense of such action on behalf of
such Indemnified Party), in any of which events the same shall be borne by
the Borrower. If any Indemnified Party settles any claim or action with
respect to which the Borrower has agreed to indemnify such Indemnified Party
pursuant to the terms hereof, the Borrower shall have no liability pursuant
to this SECTION 9.13 to such Indemnified Party with respect to such claim or
action unless the Borrower shall have consented in writing to the terms of
such settlement.
The provisions of SECTION 9.13 shall be effective only to the fullest
extent permitted by law. The provisions of this SECTION 9.13 shall continue
in effect and shall survive (among other events), until the applicable
statute of limitations has expired, any termination of this Agreement,
foreclosure, a deed in lieu transaction, payment and satisfaction of the
Obligations of Borrower, and release of any collateral for the Loans.
SECTION 9.13. GOVERNING LAW. This Agreement and each Note shall be
governed by, and construed in accordance with, the laws of The Commonwealth
of Massachusetts without regard to such state's conflict of laws rules.
SECTION 9.15. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.16. HEADINGS. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
SECTION 9.17. COUNTERPARTS. This Agreement may be executed and
delivered in any number of counterparts each of which shall be deemed an
original, and this Agreement shall be effective when at least one counterpart
hereof has been executed by each of the parties hereto.
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[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument by their respective officers thereunto duly
authorized, as of the date first written above.
In the presence of: VIEWLOGIC SYSTEMS, INC.
/s/ Eligible By: /s/ KEVIN P. O'BRIEN
- ------------ -----------------------------
Kevin P. O'Brien
Vice President and
Chief Financial Officer
In the presence of: FLEET NATIONAL BANK, as Agent for the
Lenders and as a Lender
/s/ Eligible By: /s/ Lucie Burke
- ------------ -----------------------------
Lucie Burke
Vice President
75
<PAGE>
EXHIBIT 1.4 - FORM OF INTEREST RATE ELECTION
FLEET NATIONAL BANK Date:
ONE FEDERAL STREET
BOSTON, MA 02110
ATTN: SUSAN KOULOURIS
TELECOPY: (617) 346-0151
Re: Interest Rate Election
Gentlemen:
Reference is made to that certain Loan Agreement, dated as of October 2,
1998 by and among the undersigned, you, and the Lenders, (the "Loan
Agreement"). Capitalized terms used herein shall have the same meaning as in
the Loan Agreement.
The undersigned hereby elects, pursuant to the Loan Agreement, that the
[Libor Rate or Effective Prime] shall be the interest rate applicable to that
certain [outstanding] Loan [requested pursuant to the Request attached hereto
in the principal amount of _____________ and no/100 Dollars ($__________ ).
[The Interest Adjustment Date for said Loan is _______ __, 19__.]
The undersigned hereby elects an Interest Period for such Loan of _____
months. [Complete only if electing Adjusted Libor Rate].
The undersigned hereby certifies to the Lenders that as of the date
hereof:
A. No Event of Default and no Default has occurred and is continuing;
and
B. The representations and warranties of the Borrower contained in
Article 4 of the Loan Agreement and/or in any of the other Financing
Documents are true and correct in all material respects except as altered by
actions permitted under the Loan Agreement.
VIEWLOGIC SYSTEMS, INC.
By:________________________________
Name:___________________________
Title:__________________________
cc: FLEET NATIONAL BANK
MAIL STOP: MA OF DO7A
ONE FEDERAL STREET
<PAGE>
BOSTON, MA 02110
ATTN: LUCIE BURKE, VICE PRESIDENT
2
<PAGE>
EXHIBIT 1.5 - FORM OF REVOLVING CREDIT NOTE
REVOLVING CREDIT NOTE
[Insert Maximum Amount of _______ __, 19__
Lender's pro Rata Share of
revolving credit loan
Commitment]
FOR VALUE RECEIVED, VIEWLOGIC SYSTEMS, INC., a Delaware corporation with
a business address of 293 Boston Post Road West, Marlboro, MA 01752-4615
(hereinafter referred to as the "Borrower"), promises to pay to the order of
[insert name of Lender], [a national banking association organized and existing
under the laws of the United States of America] [a ________ banking corporation
____________] (the "Lender"), at the Lender's head office located at [insert
address] or to FLEET NATIONAL BANK or any successor agent under the Loan
Agreement (defined below) (the "Agent") in accordance with the Loan Agreement
(defined below), the lesser of (i) the principal sum of [insert Lender's Pro
Rata Share of the Revolving Credit Loan Commitment] ($__________.00), or (ii)
the aggregate unpaid principal amount of all advances of funds under the
Revolving Credit Loan made by the Lender to the Borrower or by the Lender
through the Agent to the Borrower pursuant to that certain Loan Agreement dated
as of the date hereof by and among the Borrower, the Agent, the other Lenders
party thereto and the Lender, as the same may be amended (the "Loan Agreement").
The Borrower shall pay in full all unpaid principal, interest, fees and
other amounts due under this Note on the Revolving Credit Repayment Date.
The Borrower promises to pay to the order of the Lender interest before
and after maturity on the principal amount of this Note outstanding from time
to time from the date hereof until payment in full of all principal,
interest, fees and other sums due under this Note in accordance with the Loan
Agreement.
Upon the occurrence and during the continuance of any Event of Default
each Prime Rate Loan evidenced by this Note, shall bear interest, payable on
demand, at a floating interest rate per annum equal to two percent (2.0%)
above Effective Prime and each Libor Loan evidenced by this Note shall bear
interest at the Libor Rate plus two percent (2.0%). In addition, in the
event that the Borrower fails to pay any amount of principal or interest
hereof within ten (10) days after such payment is due, the Borrower shall pay
to the Lender upon demand by the Agent or the Lender, a late charge in an
amount equal to five percent (5%) of such amount of principal or interest.
<PAGE>
Principal, interest, fees and other sums are payable in immediately
available Dollars to the Agent at its address set forth in the Loan Agreement
or as otherwise directed in writing from the Agent to the Borrower.
This Note is one of the Revolving Credit Notes referred to in, and is
entitled to the benefits of, the Loan Agreement. The applicable terms and
provisions of the Loan Agreement are incorporated herein by reference as if
fully set forth herein. In the event of any conflict between any provision
of this Note and any provision(s) of the Loan Agreement, such provision(s) of
the Loan Agreement shall control. Each capitalized term used in this Note
and not expressly defined in this Note shall have the meaning ascribed to
such term in the Loan Agreement. The Loan Agreement, among other things,
contains provisions for acceleration of the maturity of this Note upon the
happening of certain stated events and also for prepayments on account of
principal of this Note prior to the maturity of this Note upon the terms and
conditions specified in the Loan Agreement.
This Note is secured by the Security Documents.
If this Note shall not be paid when due and shall be placed by the
holder hereof in the hands of an attorney for collection, through legal
proceedings or otherwise, the Borrower will pay reasonable attorneys' fees to
the holder hereof together with reasonable costs and expenses of collection.
All provisions of this Note and any other agreements between the
Borrower and the Lender are expressly subject to the condition that in no
event, whether by reason of acceleration of maturity of the Indebtedness
evidenced by this Note or otherwise, shall the amount paid or agreed to be
paid to the Lender which is deemed interest under applicable law exceed the
maximum permitted rate of interest under applicable law (the "Maximum
Permitted Rate"), which shall mean the law in effect on the date of this
Note, except that if there is a change in such law which results in a higher
Maximum Permitted Rate, then this Note shall be governed by such amended law
from and after its effective date. In the event that fulfillment of any
provision of this Note, or the Loan Agreement or any document, instrument or
agreement providing security for this Note results in the rate of interest
charged hereunder being in excess of the Maximum Permitted Rate, the
obligation to be fulfilled shall automatically be reduced to eliminate such
excess. If, notwithstanding the foregoing, the Lender receives an amount
which under applicable law would cause the interest rate hereunder to exceed
the Maximum Permitted Rate, the portion thereof which would be excessive
shall automatically be deemed a prepayment of and be applied to the unpaid
principal balance of this Note to the extent of then outstanding Prime Rate
Loans and not a payment of interest and to the extent said excessive portion
exceeds the outstanding principal amount of Prime Rate Loans, said excessive
portion shall be repaid to the Borrower.
The Borrower expressly waives presentment, notice of acceleration and
intent to accelerate, demand for payment and protest and notice of protest
and nonpayment.
2
<PAGE>
This Note shall for all purposes be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard
to such state's conflict of laws rules.
Executed as a sealed instrument as of the date first above written.
In the presence of: VIEWLOGIC SYSTEMS, INC.
_________________________ By:________________________________
Name:___________________________
Title:__________________________
3
<PAGE>
EXHIBIT 1.6 - FORM OF TERM NOTE
TERM NOTE
[Insert Amount of _______ __, 19__
Lender's Pro rata Share of Term
Loan Commitment]
FOR VALUE RECEIVED, VIEWLOGIC SYSTEMS, INC., a Delaware corporation,
with a principal business address at 293 Boston Post Road West, Marlboro, MA
01752-4615 (hereinafter referred to as the "Borrower") promises to pay the
principal sum of [insert Lender's Pro Rata Share of the Term Loan]
($_________.00) to the order of [insert name of Lender], [a national banking
association organized and existing under the laws of the United States of
America] [a _________ corporation] (the "Lender"), at the Lender's head
office located at [insert address] or to FLEET NATIONAL BANK or any successor
Agent under the Loan Agreement (defined below), as Agent for the Lender (the
"Agent"), in accordance with that certain Loan Agreement dated as of the date
hereof by and among the Borrower, the Agent, the other Lenders party thereto
and the Lender, as amended from time to time (the "Loan Agreement").
The Borrower promises to pay to the order of the Lender interest before
and after maturity on the principal amount of this Note outstanding from time
to time from the date hereof until payment in full of all principal,
interest, fees and other sums due under this Note in accordance with the
terms of the Loan Agreement.
The Borrower shall make payments of principal, interest, fees and other
amounts in accordance with the Loan Agreement and shall pay in full all
unpaid principal, interest, fees and other amounts due under this Note on the
Term Loan Repayment Date.
This Note is secured by the Security Documents.
Upon the occurrence and during the continuance of any Event of Default
each Prime Rate Loan evidenced by this Note shall bear interest, payable on
demand, at a floating interest rate per annum equal to two percent (2.0%)
above Effective Prime and each Libor Loan evidenced by this Note shall bear
interest at the Libor Rate plus two percent (2.0%). In addition, in the
event that the Borrower fails to pay any amount of principal or interest
hereof within ten (10) days after such payment is due, the Borrower shall
pay to the Lender upon demand by the Agent or the Lender, a late charge in an
amount equal to five percent (5%) of such amount of principal or interest.
<PAGE>
Principal, interest, fees and other sums are payable in immediately
available Dollars to the Agent at its address set forth in the Loan Agreement
or as otherwise directed in writing from the Agent to the Borrower.
This Note is one of the Term Notes referred to in, and is entitled to
the benefits of, the Loan Agreement. The applicable terms and provisions of
the Loan Agreement are incorporated herein by reference as if fully set forth
herein. In the event of any conflict between any provisions of this Note and
any provision(s) of the Loan Agreement, such provision(s) of the Loan
Agreement shall control. Each capitalized term used in this Note and not
expressly defined in this Note shall have the meaning ascribed to such term
in the Loan Agreement. The Loan Agreement, among other things, contains
provisions for acceleration of the maturity of this Note upon the happening
of certain stated events and also for prepayments on account of principal of
this Note prior to the maturity of this Note upon the terms and conditions
specified in the Loan Agreement.
If this Note shall not be paid when due and shall be placed by the
holder hereof in the hands of an attorney for collection, through legal
proceedings or otherwise, the Borrower will pay reasonable attorneys' fees to
the holder hereof together with reasonable costs and expenses of collection.
All provisions of this Note and any other agreements between the
Borrower and the Lender are expressly subject to the condition that in no
event, whether by reason of acceleration of maturity of the Indebtedness
evidenced by this Note or otherwise, shall the amount paid or agreed to be
paid to the Lender which is deemed interest under applicable law exceed the
maximum permitted rate of interest under applicable law (the "Maximum
Permitted Rate"), which shall mean the law in effect on the date of this
Note, except that if there is a change in such law which results in a higher
Maximum Permitted Rate, then this Note shall be governed by such amended law
from and after its effective date. In the event that fulfillment of any
provision of this Note, or the Loan Agreement or any document, instrument or
agreement providing security for this Note results in the rate of interest
charged hereunder being in excess of the Maximum Permitted Rate, the
obligation to be fulfilled shall automatically be reduced to eliminate such
excess. If, notwithstanding the foregoing, the Lender receives an amount
which under applicable law would cause the interest rate under this Note to
exceed the Maximum Permitted Rate, the portion thereof which would be
excessive shall automatically be deemed a prepayment of and be applied to the
unpaid principal balance of this Note to the extent of then outstanding Prime
Rate Loans and not a payment of interest and to the extent said excessive
portion exceeds the outstanding principal amount of Prime Rate Loans, said
excessive portion shall be repaid to the Borrower.
The Borrower expressly waives presentment, notice of acceleration and
intent to accelerate, demand for payment and protest and notice of protest
and nonpayment.
This Note shall for all purposes be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard
to such state's conflict of laws rules.
2
<PAGE>
Executed as a sealed instrument as of the date first above written.
In the presence of: VIEWLOGIC SYSTEMS, INC.
_________________________ By:________________________________
Name:___________________________
Title:__________________________
3
<PAGE>
EXHIBIT 1.9 - PRO RATA SHARES
AGENT'S AND LENDERS'
NOTICE ADDRESSES AND WIRE TRANSFER INSTRUCTIONS
NAME OF AGENT, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS:
FLEET NATIONAL BANK
ATTN: LUCIE BURKE, VICE PRESIDENT
MAILSTOP MA OF DO7A
ONE FEDERAL STREET
BOSTON, MA 02110
WIRE TRANSFER INSTRUCTIONS:
FLEET NATIONAL BANK
ABA #: 011000138
Account: COMMERCIAL LOAN SERVICES
ATTN: AGENT BANK MA
Account #: 1510351 G/L
Re: Viewlogic Systems, Inc.
NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE
FLEET NATIONAL BANK 100%
ATTN: LUCIE BURKE, VICE PRESIDENT
MAILSTOP MA OF DO7A
ONE FEDERAL STREET
BOSTON, MA 02110
WIRE TRANSFER INSTRUCTIONS:
FLEET NATIONAL BANK
ABA #: 011000138
Account: COMMERCIAL LOAN SERVICES
ATTN: AGENT BANK MA
Account #: 1510351 G/L
Re: Viewlogic Systems, Inc.
2
<PAGE>
EXHIBIT 1.10 - FORM OF REQUEST
Date:
FLEET NATIONAL BANK
ONE FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
ATTN: SUSAN KOULOURIS
TELECOPY: (617) 346-0151
RE: Request for Loan
Gentlemen:
Reference is made to that certain Loan Agreement dated as of October 2,
1998 by and among the undersigned, you and the Lenders (the "Loan
Agreement"). Capitalized terms used herein shall have the same meaning as in
the Loan Agreement.
The undersigned hereby requests a [Term] [Revolving Credit] Loan from
the Lenders pursuant to the Loan Agreement in the amount of _____________ and
no/100 Dollars ($__________.00) at the interest rate set forth in the
Interest Rate Election pertaining to such Loan.
The undersigned requests that each Lender fund its Pro Rata Share of
such Loan on ________ __, 19__ and such date is in accordance with the terms
and conditions of the Loan Agreement.
The undersigned hereby certifies to the Lenders that as of the date
hereof:
(a) no Event of Default and no Default has occurred and is continuing;
and
(b) the representations and warranties of the Borrower contained in
Article 4 of the Loan Agreement and/or contained in any of the other
Financing Documents are true and correct in all material respects except as
altered by actions not prohibited under the Loan Agreement.
VIEWLOGIC SYSTEMS, INC.
By:________________________________
Name:___________________________
Title:__________________________
cc:
FLEET NATIONAL BANK
ATTN: LUCIE BURKE, VICE PRESIDENT
MAILSTOP MA OF DO7A
ONE FEDERAL STREET
BOSTON, MA 02110
<PAGE>
EXHIBIT 3.1.1.10 - FORM OF COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
FLEET NATIONAL BANK
ATTN: LUCIE BURKE, VICE PRESIDENT
MAILSTOP: MA OF DO7A
ONE FEDERAL STREET
BOSTON, MA 02110
Re: Compliance Certificate Required by SECTIONS 3.1.1.10 or 5.3.4 of the
Loan Agreement dated as of October 2, 1998 by and among you as Agent,
the undersigned and certain Lenders, as same may have been amended
(the "Loan Agreement")
Gentlemen:
This certificate is submitted by the undersigned (hereinafter the
"Borrower") pursuant to SECTIONS 3.1.1.10 or 5.3.4 of the Loan Agreement.
Capitalized terms used herein have the same meaning as in the Loan Agreement.
The Borrower hereby certifies to the Agent and the Lenders that the
following information is true, accurate and complete as of ,
19 .
<TABLE>
<S> <C> <C>
1. Minimum Debt Service Coverage Ratio (Section 5.1.10)
(i) Net Income (or Net Loss) . . . . . . . . . . . . . . . . . . .$__________
(ii) Interest Expense . . . . . . . . . . . . . . . . . . . . . . .$__________
(iii) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .$__________
(iv) Depreciation . . . . . . . . . . . . . . . . . . . . . . . . .$__________
(v) Amortization . . . . . . . . . . . . . . . . . . . . . . . . .$__________
(vi) Any other non cash charges . . . . . . . . . . . . . . . . . .$__________
(vii) Any other non-recurring extraordinary costs. . . . . . . . . .$__________
(viii) Any non-cash foreign exchange adjustment . . . . . . . . . . .$__________
(ix) Capitalized Software Development Costs . . . . . . . . . . . .$__________
(x) EBITDA [Line (i) plus the sum of Lines (ii) + (iii) . . . . .$__________
(iv) + (v) + (vi) + (vii) + (viii) minus Line (ix)] . . . . .$__________
(xi) EBITA for prior three quarters . . . . . . . . . . . . . . . .$__________
(xii) EBITA for last four rolling quarters [Line (x) plus Line
(xi)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . .$__________
(xii) Capital Expenditures . . . . . . . . . . . . . . . . . . . . .$__________
(xiv) Taxes paid and currently payable for last four quarters. . . .$__________
(xv) Total Debt Service time four . . . . . . . . . . . . . . . . .$__________
(xvi) Ratio: [Line (xii) minus the sum of (Lines (xiii) +
(xiv)) divided by Line (xv)] . . . . . . . . . . . . . . . . . :1.00
----------
(xvii) Minimum Permitted by Agreement . . . . . . . . . . . . . . . . :1.00
----------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
2. Minimum Interest Coverage Ratio (Section 5.1.11)
(i) EBIDA [Line 1.(xii)] . . . . . . . . . . . . . . . . . . . . .$__________
(ii) Interest Expense . . . . . . . . . . . . . . . . . . . . . . .$__________
(iii) Ratio: [Line (i) divided by Line (ii)] . . . . . . . . . . . . :1.00
-----------
(iv) Minimum Permitted by Agreement . . . . . . . . . . . . . . . . :1.00
-----------
3. Maximum Leverage Ratio (Section 5.1.12)
(i) Total Indebtedness for Borrowed Money. . . . . . . . . . . . .$__________
(ii) EBITDA [Line 1.(xii)]. . . . . . . . . . . . . . . . . . . . .$__________
(iii) Ratio: [Line (i) divided by Line (ii)] . . . . . . . . . . . . :1.00
-----------
(iv) Maximum Permitted by Agreement . . . . . . . . . . . . . . . . :1.00
-----------
</TABLE>
The Borrower further certifies to the Lenders that as of the date hereof
no Event of Default or Default has occurred without having been waived in
writing.
VIEWLOGIC SYSTEMS, INC.
By:________________________________
Name:___________________________
Title:__________________________
2
<PAGE>
EXHIBIT 4.1.11 - REAL PROPERTY
<PAGE>
EXHIBIT 9.11.1 - FORM OF SUBSTITUTION AGREEMENT
Form of Substitution Agreement
Agreement made and entered into as of _____ day of ___________, 19__ by and
between ______________________, a ___________ having a principal place of
business at _______________________ (the "Substituted Lender") and FLEET
NATIONAL BANK, acting as Agent for itself in its individual capacity and for the
Borrower, [INSERT NAME(S) OF SELLING LENDER(S)] and the other Lenders which are
parties to the Loan Agreement (defined below) (the "Agent").
1. This Agreement relates to a Loan Agreement (the "Loan Agreement")
dated October ___, 1998, as same may have been or be amended, made
between Viewlogic Systems, Inc., a Delaware corporation (the
"Borrower") and the Lenders which are parties thereto and FLEET
NATIONAL BANK acting as Agent for the Lenders thereunder, upon and
subject to the terms of which the Lenders have agreed to make
available to the Borrower the Loans in an aggregate principal amount
up to $24,000,000. Terms defined in the Loan Agreement shall, unless
otherwise defined herein, have the same meanings herein.
2. The Substituted Lender hereby agrees to become a Lender pursuant to
the terms of SECTION 9.11 of the Loan Agreement having a Pro Rata
Share of the Loans and the Commitment in the amount set forth opposite
the Substituted Lender's name on SCHEDULE A hereto and to fund its Pro
Rata Share of any outstanding Loans in which it is purchasing a Pro
Rata Share by wire transfer to the Selling Lender in accordance with
Schedule A hereto on [insert proposed effective date].
3. [INSERT NAME OF SELLING LENDER] hereby agrees that, effective as the
effective date of this Agreement, its Pro Rata Share of the Loans and
the Commitment shall be reduced to the Pro Rata Share set forth
opposite its name on SCHEDULE A hereto.
4. The Substituted Lender hereby agrees (i) that its address for notices
for the purposes of SECTION 9.6 of the Loan Agreement shall be the
address set forth opposite its name on SCHEDULE A hereto and (ii) that
the instructions for wire transfers of funds to the Agent and for wire
transfers of funds to the Substituted Lender are as set forth on
Schedule A hereto.
5. The Substituted Lender hereby requests the Agent to accept, on behalf
of the Borrower and the Lenders, this Agreement as a Substitution
Agreement delivered to the Agent pursuant to and for the purposes of
SECTION 9.11 of the Loan
<PAGE>
Agreement so as to take effect in accordance with the terms hereof
and thereof on [insert proposed effective date].
6. The Substituted Lender hereby acknowledges (a) receipt of a copy of
the Loan Agreement and the Security Documents together with such other
documents and information as it has required in connection herewith,
(b) the provisions of SECTION 9.11 of the Loan Agreement as they apply
in connection with its execution hereof and the transactions and
matters to occur in consequence hereof, and (c) the correctness of the
details specified in SCHEDULE A hereto.
7. The Substituted Lender hereby undertakes with each of the other
parties to the Loan Agreement that it will perform in accordance with
their respective terms all those obligations which by the terms of the
Loan Agreement will be assumed by it upon and after delivery of this
Substitution Agreement to the Agent, and agrees to be bound by the
provisions of the Loan Agreement as though it were an original
signatory thereto.
8. This Agreement and the rights and obligations of the parties hereunder
shall be governed by, and construed in accordance with the laws of []
without regard to such state's conflict of laws rules.
[ ]
By:_______________________________
Name:
Title:
FLEET NATIONAL BANK, as Agent for itself
in its individual capacity and as agent
for the Borrower, [INSERT NAME(S) OF
SELLING LENDER(S)] and any other
Lenders
By:_______________________________
2
<PAGE>
SCHEDULE A
NAME OF AGENT, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS:
FLEET NATIONAL BANK
ATTN: LUCIE BURKE, VICE PRESIDENT
MAILSTOP MA OF DO7A
ONE FEDERAL STREET
BOSTON, MA 02110
WIRE TRANSFER INSTRUCTIONS:
FLEET NATIONAL BANK
ABA #: 011000138
Account: COMMERCIAL LOAN SERVICES
ATTN: AGENT BANK MA
Account #: 1510351 G/L
Re: Viewlogic Systems, Inc.
NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE
FLEET NATIONAL BANK 100%
Attn: Lucie Burke, Vice President
MAILSTOP MA OF DO7A
ONE FEDERAL STREET
BOSTON, MA 02110
WIRE TRANSFER INSTRUCTIONS:
FLEET NATIONAL BANK
ABA #: 011000138
Account: COMMERCIAL LOAN SERVICES
ATTN: AGENT BANK MA
Account #: 1510351 G/L
Re: Viewlogic Systems, Inc.
<PAGE>
EXHIBIT 10.47
BRONX PARK BUILDING II
293 BOSTON POST ROAD WEST
MARLBORO, MASSACHUSETTS
OFFICE LEASE
STANDARD FORM
THIS LEASE ("Lease") made in Marlboro, Massachusetts, by and between
Rosewood III Associates Limited Partnership, a Massachusetts partnership
("Landlord") having a principal place of business at 33 Boston Post Road West
and Viewlogic Systems, Inc. ("Tenant") having principal place of business at
313 Boston Post Road West, Marlboro, Massachusetts 01752.
W I T N E S S E T H
ARTICLE 1
REFERENCE DATA AND DEFINITIONS
1.01 REFERENCE DATA
<TABLE>
<S> <C>
LANDLORD'S REPRESENTATIVE: David Depietri
Rosewood Development Corporation
LANDLORD'S ADDRESS (FOR PAYMENT OF RENT): Rosewood Development Corporation
33 Boston Post Road West
Marlboro, MA 01752
LANDLORD'S ADDRESS (FOR NOTICE AND BILLING): Same as Above
TENANT: Viewlogic Systems, Inc.
TENANT'S REPRESENTATIVE: Eugene Connolly
TENANT'S PHONE NUMBER: (508) 480-0881
PREMISES: Suites 400 & 500
</TABLE>
<PAGE>
<TABLE>
<S> <C>
RENTABLE AREA OF PREMISES: 64,647 Square Fee (53,657 Usable
Square Feet)
RENTAL AREA OF THE BUILDING: 172,300 Square Feet
RENT COMMENCEMENT DATE: 53,749 Rentable Square Feet (44,612 Usable Square Feet) May 1,
1990 or three months from date of occupancy, if later.
Additional 10,898 rentable Square Feet (9,045 usable Square
Feet) eighteen month: (18) from occupancy or occupancy if
earlier.
OCCUPANCY DATE: February 1, 1990 or date of occupancy if later.
TERM: Four (4) LEASE YEARS
BASIC RENT: SEE SCHEDULE BELOW:
MONTH ANNUAL RATE PER RENTABLE
SQ. FT.
1-12 $15.80
13-24 $16.55
25-36 $17.40
37-48 $17.50
ESTIMATED COST OF ELECTRICAL SERVICE: N/A, Tenant to be separately metered for electricity.
INITIAL MONTHLY PAYMENT (Basic Rent): $70,769.52
TAX BASE: $1.60 Per Square Foot of Rentable Area per year.
OPERATING EXPENSE BASE: $2.75 Per Square Foot of Rentable Area per year.
TENANT'S SHARE: 31.20% for 53,749 Square Feet
37.52% for 64,647 Square Feet
SECURITY DEPOSIT: $70,769.52 plus one (1) months rent for additional space when
occupied.
GUARANTOR: N/A
PERMITTED USES: General Office uses consistent with a first class office
building, including software manufacturing and distribution.
</TABLE>
1.02 GENERAL PROVISIONS.
2
<PAGE>
For all purposes of the Lease unless otherwise expressed
and provided herein or therein or unless the context otherwise requires:
(a) The words HEREIN, HEREOF, HEREUNDER and other
words of words of similar import refer to the
Lease as a whole and not to any particular
article, section or other subdivision of this
Lease.
(b) A pronoun in one gender includes and applies to
the other genders as well.
(c) Each definition stated in Section 1.01 or 1.03 of
this Lease applies equally to the singular and the
plural forms of the term or expression defined.
(d) Any reference to a document defined in Section
1.03 of this Lease is to such document as
originally executed, or, if modified, amended or
supplemented in accordance with the provisions of
this Lease, to such document as so modified,
amended or supplemented and in effect at the
relevant time of reference thereto.
(e) All accounting terms not otherwise defined herein
have the meanings assigned to them in accordance
with generally accepted accounting principles.
(f) All references in Section 1.01 hereof are subject
to the specified definitions thereof (if any) in
Section 1.03 hereof.
1.3 TERMS DEFINED.
Each term of expression set forth above in Section 1.01
hereof or below in this Section 1.03 has the meaning stated immediately after
it.
ADDITIONAL SERVICES. Services provided to Tenant or in
respect of the Premises which are not described in Exhibit F hereto.
ADJUSTED OPERATING EXPENSE BASE. The amount determined by
multiplying the Operating Expense Base by the Adjustment Factor.
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ADJUSTED TAX BASE. The amount determined by multiplying the
Tax Base by the Adjustment Factor.
ADJUSTMENT FACTOR. With respect to the First Calendar Year
and the Last Calendar Year, the percentage computed by dividing (i) the
number of days of each such period falling within the Lease term by (ii) 365.
AFFILIATE. With respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes of this
definition, the term control when used with respect to any specified person
means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise, and the terms controlling and controlled by having
meanings correlative to the foregoing.
AUTHORIZATIONS. All franchises, licenses, permits and other
governmental consents issued by Governmental Authorities pursuant to Legal
Requirements which are or may be required for the use and occupancy of the
Premises and the conduct or continuation of a Permitted use therein.
BASIC SERVICES. The services described in Exhibit F hereto.
BUILDING. The building currently under construction on the
Land.
BUILDING STANDARD TENANT FINISHES. The standards set by
Landlord for the quality of work done on the Premises described in Exhibit C.
BUSINESS DAY. A day which is not a Saturday, Sunday or
other day on which banks in Boston, Massachusetts, are authorized or required
by law or executive order to remain closed.
CALENDAR YEAR. The First Calendar Year, the Last Calendar
Year and full calendar year (January 1 through December 31) occurring during
the Lease Term.
COMMON AREAS. All areas devoted to the common use of
occupants of the Building or the provision of Services the Building,
including but not limited to the atrium, all corridors, elevator foyers, air
shafts, elevator shafts, and elevators, stairwells and stairs, restrooms,
mechanical rooms, janitor closets, vending areas and other similar facilities
for the provision of Services of the use of all occupants of multi-tenant
floors or all occupants of the Building.
CONTROL. As defined in the definition of Affiliate.
CORPORATION. A corporation, company, association, business
trust or similar organization wherever formed.
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DEFAULT. Any event or condition specified in Article 20
hereof so long as any applicable requirement for the giving of notice or
lapse of time or both have not been fulfilled.
EVENT OF DEFAULT. Any event or condition specified in (a)
Article 20 hereof (if all applicable periods for the giving of notice or
lapse of time or both have been fulfilled) or (b) in Article 21 hereof.
FAIR RENTAL VALUE. The amount per square foot per annum
which a Person not an Affiliate or either Landlord or Tenant would pay as
Basic Rent (using the Tax Base and Operating Expense Base) as of the time of
determination for the Premises for a term of four years plus options. All
Additional Rent such as Taxes and Operating Expenses shall be in addition to
the price per square foot so determined.
FIRST CALENDAR YEAR. The partial Calendar Year period
commencing on the Term Commencement Date and ending on the next succeeding
December 31.
FORCE MAJEURE. Acts of God, strikes, lock outs, labor
troubles, failure of power, riots and insurrection, acts of public enemy,
wars, earthquakes, hurricanes and other natural disasters, fires, explosions,
any act; provided, however, lack of money shall not be deemed such a cause.
GENERAL CONTRACTOR. Harvey Construction Company, Inc.
GOVERNMENTAL AUTHORITY. United States of America, the
Commonwealth of Massachusetts, the Town of Marlborough, County of Middlesex,
and any political subdivision thereof and any agency, department, commission,
board, bureau or instrumentality of any of them.
INSOLVENCY. The occurrence with respect to any Person of
one or more of the following events: the death, dissolution, termination of
existence (other than by merger or consolidation), insolvency, appointment of
a receiver for all or substantially all of the property of such person, the
making of a fraudulent conveyance or the execution of an assignment or trust
mortgage for the benefit of creditors by such Person, or the filing of a
petition of bankruptcy or the commencement of any proceedings by or against
such Person under a bankruptcy, insolvency or other law relating to the
relief or the adjustment of indebtedness, rehabilitation or reorganization of
debtors; provided that if such petition or commencement is involuntarily made
against such a Person and is dismissed within 120 days of the date of such
filing or commencement, such events shall not constitute an insolvency
hereunder.
INSURANCE REQUIREMENTS. All terms of any policy of
insurance maintained by Landlord or Tenant and applicable to (or affecting
any condition, operation, use or occupancy of) the Building or the Premises
or any part or parts of either and all requirements of the
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issuer of any such policy and all orders, rules, regulations and other
requirements of the National Board of Fire Underwriters (or any other body
exercising similar functions).
LAND. The land on 293 Boston Post Road West, Marlboro,
Massachusetts, County of Middlesex, Commonwealth of Massachusetts. Map 077,
Lot 011, Book 15969, Page 237.
LANDLORD'S CONTRIBUTION. All the cost of finishing the
Premises shown in Exhibit C.
LANDLORD'S WORK. The work to be done by Landlord with
respect to the Premises described in Exhibit C.
LAST CALENDAR YEAR. The partial Calendar Year commencing on
January 1 of the Calendar Year in which the Lease Termination Date occurs and
ending on the Lease Termination Date.
LEASE TERM. The period commencing on the Term Commencement
Date and ending on the Lease Termination Date.
LEASE TERMINATION DATE. The earlier to occur of (1) the
Stated Expiration Date, (2) the termination of this Lease by Landlord as the
result of an Event of Default, (3) the termination of this Lease pursuant to
Article 17 (Damage or Destruction) or 18 (Eminent Domain) hereof.
LEASE YEAR. A period commencing on the Term Commencement
Date (or an anniversary thereof) and ending on the Day before the next
succeeding anniversary thereof. For example, the first Lease Year is a period
commencing on the Term Commencement Date and ending on the day before the
first anniversary thereof. The last Lease Year shall end on the Lease
Termination Date.
LEGAL REQUIREMENTS. All statutes, codes, ordinances (and
all rules and regulations thereunder), all executive orders and other
administrative orders, judgments, decrees, injunctions and other judicial
orders of or by any Governmental Authority which may at any time be
applicable to parts or appurtenances of the Premises or Building or to any
condition or use thereof and the provisions of all Authorizations.
OCCUPANCY ARRANGEMENT. With respect to the Premises of any
portion thereof, and whether (a) written or unwritten or (b) for all or any
portion of the Lease Term, an assignment, a sublease, any tenancy at will, a
tenancy at sufferance, or any other arrangement (including but not limited to
a license or concession) pursuant to which a Person occupies the Premises for
any purpose.
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OPERATING EXPENSE BASE. With respect to each Calendar Year
the amount determined by multiplying the Rentable Area of the Premises by the
amount hereinbefore set forth as the Operating Expense Base per square foot
of Rentable Area per year, but with respect to the First Calendar Year and
the and the Last Calendar Year, the Adjusted Operating Expense Base.
OPERATING EXPENSES. All expenses, costs, and disbursements
of every kind and nature which Landlord shall pay or become obligated to pay
in connection with the ownership, operation and maintenance of the Building
(including all facilities in operation on the Term Commencement Date and such
additional facilities which are necessary or beneficial for the operation of
the Building) and the Land and the provision of Basic Services, including,
but not limited to ((a) reasonable wages, salaries, fees and costs to Landlord
of all non-management Persons directly engaged in connection therewith,
including taxes, insurance, and standard Landlord non-management personnel
benefits relating thereto; (b) the cost of (i) all supplies and material
electricity and lighting, for Common Areas, (ii) water heat, air
conditioning, and ventilating for the building, (iii) all maintenance,
janitorial, and service agreements, (iv) all insurance, including the cost of
casualty and liability insurance applicable to the Building and Landlord's
personal property used in connection therewith, (v) repairs and general
maintenance, (vi) capital items which are primarily for the purpose of
reducing Operating Expenses or which may be required by a Governmental
Authority, amortized over the reasonable life of the capital items with the
reasonable life and amortization schedule being determined by Landlord in
accordance with generally accepted accounting principles but not to exceed
the reduction in operating expenses, (vii) pursuing an application for an
abatement of taxes pursuant to Section 6.05 hereof to the extent not deducted
from the abatement, if any, received, (viii) independent auditors, (ix)
Deleted (x) providing office space for the manager of the Building; (c)
management fees; and (d) a share (equal to percentage computed by a fraction
the numerator of which is the Rentable Area of the Building and the
denominator of which is the aggregate Rentable Area of all constructed
buildings (including the Building at 293 Boston Post Road West), at the cost
to Landlord of operating, repairing and maintaining exterior common areas and
facilities of 293 Boston Post Road West (of which development the Building is
a part) which may not be located entirely on the Land but which are available
for landscaping, security and maintenance for common roadways and open areas.
Operating Expenses shall not include (i) capital items except as provided
above or (ii) specific costs billed and paid by specific tenants. Operating
Expenses shall be determined using the accrual of accounting.
PARTIAL TAKING. Any Taking which is not a Total Taking.
PERMITTED EXCEPTIONS. Any liens or encumbrances on the
Premises in the nature of (a) liens for taxes assessed but not yet due and
payable, (b) easements, reservation restrictions and rights of way
encumbering or affecting the Land on the date of this Lease, (c) the rights
of Landlord, Tenant and any other Person to whom Landlord has granted such
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rights to exercise in common with respect to the Land and the Common Areas
the rights granted to Tenant hereunder, (d) mortgages of record, and (e)
Title Conditions.
PERSON. An individual, a Corporation, a company, a
voluntary association, a partnership, a trust, an unincorporated organization
or a government or any agency, instrumentality or political subdivision
thereof.
PREMISES. The space in the Building shown outlined in _____
on Exhibit B hereto.
PROCEEDS. With respect to any Taking or occurrence
described in Article 17 hereof, with respect to which any Person is obligated
to pay any amount to or for the account of Landlord, the aggregate of (i) all
sums payable or receivable under or in respect of any insurance policy, and
(ii) all sums or awards payable in respect to a Taking.
PROHIBITED OCCUPANCY ARRANGEMENT. An Occupancy Arrangement
which provides for any rent or other payment based in whole or in part on the
net income or profits derived by any person from the Premises.
RENT. Basic Rent and all Additional Rent.
RENTABLE AREA OF THE PREMISES. The number of square feet
stated in Section 1.01, whether the same should be more or less as a result
of minor variations resulting from actual construction and completion of the
Building or Premises so long as such work is done in accordance with the
terms and provisions hereof. The calculation was made according to the
following formula:
(i) On single tenant floors, the usable area
measured from the inside surfaces of the outer
glass of the Building less elevators, stairways
and ventilation shafts, plus Tenant's Share of
Common Areas.
(ii) On multi-tenant floors, the usable area
measured from inside surface of the outer glass of
the Building to the midpoint of all demising walls
of the space being measured plus the area of each
corridor adjacent to and required as the result of
the layout of the space being measured, measured
from the midpoint of the adjacent demising walls,
plus Tenant's Share of Common Areas.
RULES AND REGULATIONS. Reasonable rules and regulations
promulgated by Landlord and uniformly applicable to persons occupying the
Building regulating the details of the operation and use of the Building. The
initial Rules and Regulations are attached hereto as Exhibit G.
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SERVICES. Basic Services and Additional Services.
SPECIAL WORK. Work done in or with respect to the Premises
which is not part of Landlord's Work or the cost of which exceeds Landlord's
Contribution.
STATED EXPIRATION DATE. The last day of the last Lease Year
of the Term stated in Section 1.01.
SUBSTANTIAL COMPLETION DATE. The date on which the Premises
together with the appurtenant areas of the Building necessary for access and
service thereto, have been completed in accordance with Article 7 hereof
except for items of work and adjustment of equipment and fixtures which are
not necessary to make the Premises reasonably tenantable for the Permitted
Uses and because of season or weather or nature of the item cannot
practicably be done at the time.
TAKING. The taking or condemnation of title to all or any
part of the Land or the possession or use of the Building or the Premises by
a person for any public use or purpose or any proceeding.
TAX BASE. With respect to each Calendar Year the amount
determined by multiplying the Rentable Area of the Premises by the amount
hereinbefore set forth as the Tax Base per square foot of Rentable Area per
year, but with respect to the First Calendar Year and the Last Calendar Year,
the Adjusted Tax Base.
TAXES. Subject to the last sentence of this paragraph, all
taxes, special or general assessments, water rents, rates and charges, sewer
rents and other impositions and charges imposed by Governmental Authorities
of every kind and nature whatsoever, extraordinary as well as ordinary and
each and every installment thereof which shall or may during the term of this
Lease be charged, levied, laid, assessed, imposed, become due and payable or
become liens upon or for with respect to the Land or any part thereof or the
Building or the Premises, appurtenances of equipment owned by Landlord
thereon or therein or any part thereof or on this Lease under or by virtue of
all present or future Legal Requirements and are tax based on a percentage,
fraction or capitalized value of the Rent (whether in lieu of or in addition
to the taxes hereinbefore described). Taxes shall not include inheritance,
estate, excise, succession, transfer, gift, franchise, income, gross receipt,
or profit taxes except to the extent such are in lieu of but not in addition
to or in substitution for Taxes as now imposed on the Building, the Land, the
Premises or this Lease.
TENANT. As defined in the preamble hereof.
TENANT'S COST. None of the cost of work done in connection
with the completion of the Premises as shown in Exhibits B & C.
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TENANT'S SHARE. Tenant's share of building is equal to T
divided by B x 100%, where "T" is equal to the number of rentable square feet
rented by the Tenant and "B" is equal to 100% of the total rentable square
feet of the building.
TERM COMMENCEMENT DATE. The earlier of (a) the later of (x)
the date specified by Landlord in the notice delivered pursuant to Section
7.03 or (y) the Substantial Completion Date, or (b) any other date for such
commencement determined in accordance with said Article 7, or (c) the date on
which Tenant first occupies the Premises for the Permitted Uses.
TITLE CONDITIONS. All covenants, agreements, restrictions,
easements and declarations of record on the date hereof so far as the same
may be from time to time in force and applicable.
TOTAL TAKING. (I) a Taking of: (a) the fee interest in all
or substantially all of the Building or (b) such title to, easement in, over,
under or such rights to occupy and use any part or parts of the Building to
the exclusion of Landlord as shall have the effect, in the good faith
judgment of the Landlord, of rendering the portion of the Building remaining
after such Taking (even if restoration were made) unsuitable for the
continued use and occupancy of the Building for the Permitted Use or (ii) a
Taking of all or substantially all of the Premises or such title to or
easement in, on or over the Premises to the exclusion of Tenant which in the
good faith judgment of the Landlord prohibits access to the Premises or the
exercise by Tenant of any rights under this Lease.
WORK LETTER. The agreement between Landlord and Tenant with
respect to the finishing of the Premises, which shall be substantially in the
form attached hereto as Exhibit C.
WORKING DRAWINGS. The Working Drawings for the finishing of
the Premises developed by Landlord and Tenant in accordance with the Work
Letter. The Work Drawings shall be prepared in compliance with all applicable
Legal Requirements and stamped by registered Massachusetts professionals, and
shall consist of all architectural and engineering plans which are required
to finish the Premises or to obtain any Authorization required therefor.
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1.04 TABLE OF CONTENTS BY ARTICLES AND SECTIONS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 - Reference Data and Definitions........................................................................1
1.01 Reference Data.......................................................................1
1.02 General Provisions...................................................................3
1.03 Terms Defined........................................................................3
1.04 Table of Contents by Articles and Sections..........................................12
ARTICLE 2 - Premises.............................................................................................15
2.01 Premises............................................................................15
2.02 Appurtenances.......................................................................15
ARTICLE 3 - Term.................................................................................................15
3.01 Term Commencement...................................................................15
3.02 Termination.........................................................................15
ARTICLE 4 - Rent.................................................................................................15
4.01 Basic Rent..........................................................................15
4.02 Computation of Basic Rent...........................................................16
4.03 (Deleted)...........................................................................16
4.04 Resolution of Disputes with Respect to Fair Rental Value Arbitration................16
ARTICLE 5 - Use of Premises......................................................................................17
5.01 Use Restricted......................................................................17
ARTICLE 6 - Taxes; Operating Expenses; Estimated Cost of Electrical Services.....................................17
6.01 Expenses and Taxes..................................................................17
6.02 Annual Statement of Additional Rent Due.............................................17
6.03 Monthly Payments of Additional Rent.................................................18
6.04 Accounting Periods..................................................................18
6.05 Abatement of Taxes..................................................................18
6.06 Electric Service; Payment as Additional Rent........................................18
6.07 Change in Rates or Usage............................................................19
6.08 Late Payment of Rent................................................................19
ARTICLE 7 - Improvements, Repairs, Additions, Replacements.......................................................20
7.01 Preparation of the Premises.........................................................20
7.02 Time for Completion.................................................................20
7.03 Notice to Commence..................................................................20
7.04 Delays..............................................................................20
7.05 Tenant's Access to the Premises.....................................................21
</TABLE>
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7.06 Alterations and Improvements........................................................21
7.07 Maintenance.........................................................................22
7.08 Redelivery..........................................................................22
ARTICLE 8 - Building Services....................................................................................22
8.01 Building Services...................................................................23
8.02 Other Janitors......................................................................23
8.03 Additional Services.................................................................23
8.04 Limitations on Landlord's Liability.................................................23
8.05 Electric Service....................................................................23
ARTICLE 9 - Tenant's Particular Covenants........................................................................24
9.01 Pay Rent............................................................................24
9.02 Occupancy of the Premises...........................................................24
9.03 Safety..............................................................................24
9.04 Equipment...........................................................................24
9.05 Electrical Equipment................................................................25
9.06 Pay Taxes...........................................................................25
ARTICLE 10 - Requirements of Public Authority....................................................................25
10.01 Legal Requirements..................................................................25
10.02 Contests............................................................................25
ARTICLE 11 - Covenant Against Liens..............................................................................25
11.01 Mechanics Liens.....................................................................26
11.02 Right to Discharge..................................................................26
ARTICLE 12 - Access to Premises..................................................................................26
12.01 Access..............................................................................26
ARTICLE 13 - Assignment and Subletting: Occupancy Arrangements...................................................26
13.01 Subletting and Assignment...........................................................26
ARTICLE 14 - Indemnity...........................................................................................27
14.01 Tenant's Indemnity..................................................................27
14.02 Landlord's Liability................................................................27
ARTICLE 15 - Insurance...........................................................................................28
15.01 Liability Insurance.................................................................28
15.02 Casualty Insurance..................................................................28
ARTICLE 16 - Waiver of Subrogation...............................................................................28
16.01 Waiver of Subrogation...............................................................29
</TABLE>
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16.02 Waiver of Rights....................................................................29
ARTICLE 17 - Damage of Destruction...............................................................................29
17.01 Substantial Damage..................................................................29
17.02 Restoration.........................................................................29
18.01 Total Taking........................................................................30
18.02 Partial Taking......................................................................30
18.03 Awards and Proceeds.................................................................30
ARTICLE 19 - Quiet Enjoyment.....................................................................................30
19.01 Landlord's Covenant.................................................................30
19.02 Subordination.......................................................................31
19.03 Notice to Mortgagee.................................................................31
19.04 Other Provisions Regarding Mortgagees...............................................31
ARTICLE 20 - Defaults; Events of Default.........................................................................32
20.01 Defaults............................................................................32
20.02 Tenant's Best Efforts...............................................................32
20.03 Elimination of Default..............................................................32
ARTICLE 21 - Insolvency..........................................................................................33
21.01 Insolvency..........................................................................33
ARTICLE 22 - Landlord's Remedies; Damages on Default.............................................................33
22.01 Landlord's Remedies.................................................................33
22.02 Surrender...........................................................................34
22.03 Right to Relet......................................................................34
22.04 Survival of Covenants...............................................................34
22.05 Right to Equitable Relief...........................................................35
22.06 Right to Self Help; Interest on Overdue Rent........................................35
22.07 Further Remedies....................................................................35
ARTICLE 23 - Waivers.............................................................................................35
23.01 No Waivers..........................................................................36
ARTICLE 24 - Security Deposit....................................................................................36
24.01 Security Deposit....................................................................36
ARTICLE 25 - General Provisions..................................................................................36
25.01 Force Majeure.......................................................................36
25.02 Notices and Communications..........................................................36
25.03 Certificates, Estoppel Letter.......................................................37
25.04 Renewal.............................................................................37
</TABLE>
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<TABLE>
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25.05 Governing Law.......................................................................38
25.06 Partial Invalidity..................................................................38
25.07 Notice of Lease.....................................................................38
25.08 Interpretation; Consents............................................................38
25.09 Entire Agreement....................................................................38
25.10 Parties.............................................................................39
ARTICLE 26 - Miscellaneous.......................................................................................39
26.01 Option at Lease Termination.........................................................39
26.02 Right of First Offer on Additional Space............................................39
26.03 Parking.............................................................................39
26.04 Extended Hours HVAC.................................................................39
26.05 Moving Expense......................................................................40
26.06 Signage.............................................................................40
26.07 Balconies...........................................................................40
26.08 Refurbish Facility..................................................................40
</TABLE>
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ARTICLE 2
PREMISES
2.01 PREMISES.
Landlord hereby leases and lets to Tenant, and Tenant
hereby takes and hires from Landlord, upon and subject to the terms,
conditions, covenants and provisions hereof, the Premises subject to the
Permitted Exceptions. Landlord reserves the right to relocate within or
without the Premises pipes, ducts, vents, flues, conduits, wires and
appurtenant fixtures which service other parts of the Building; PROVIDED that
such work is done in such a manner that it does not unreasonably or
materially interfere with Tenant's use of the Premises.
2.02 APPURTENANCES.
Tenant may use the Common Areas and the Land as
appurtenant to the Premises for the purposes for which they were designed.
ARTICLE 3
TERM
3.01 TERM COMMENCEMENT.
The Lease Term shall commence on the Term Commencement
Date.
3.02 TERMINATION.
The Lease Term shall end on the Lease Termination Date.
ARTICLE 4
RENT
4.01 BASIC RENT.
Tenant shall pay Landlord for the Premises, without offset
or deduction and without previous demand therefor, the Basic Rent as annual
rent for each Lease Year. Basic Rent shall be paid in equal monthly
installments in advance on the first day of each calendar month during the
Lease Term. The first installment of Base Rent should be paid on the Rent
Commencement Date. Subsequent installments of Basic Rent shall be paid on the
first day of every calendar month thereafter. Basic Rent for partial months
at the beginning or end of the Lease Term shall be PRO-RATED and paid on the
Term Commencement Date and the first day of the calendar month in which the
Lease Termination Date is to occur.
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4.02 COMPUTATION OF BASIC RENT.
The Basic Rent for each the first four (4) Lease Years
shall be stated in Article 1.01 hereof.
Basic Rent so determined shall be exclusive of (and in
addition to) amounts due hereunder for Taxes, Operating Expenses above the
operating base and tax base.
4.03 (Deleted)
4.04 RESOLUTION OF DISPUTES WITH RESPECT TO FAIR RENTAL VALUE
ARBITRATION.
At least One-Hundred Eighty (180) (but not earlier than two
hundred forty (240)) days prior to the fourth anniversary of the Term
Commencement Date Landlord will notify Tenant of Landlord's estimate of the
Fair Rental Value of the Premises. Landlord and Tenant will attempt to
negotiate and determine by agreement the Fair Rental Rate for the Premises.
Landlord shall provide Tenant with data regarding all basic Lease terms and
renewal rates such as contained in Section 1.01 for all other tenants in the
existing Building and all similar buildings owned or controlled by Landlord
in the Town of Marlborough. If a dispute shall arise between Landlord and
Tenant with respect to the determination of Fair Rental Value or if Landlord
and Tenant have not agreed on such amount by the date which is One Hundred
Twenty (120) days prior to the date which is fourth anniversary of the Term
Commencement Date, such dispute shall be determined exclusively by the
arbitrators appointed under this Section 4.04.
If Fair Rental Value is to be determined by the
arbitrators, either Landlord or Tenant may give the other party a written
notice setting forth the name of an arbitrator and demanding that the same be
arbitrated pursuant to this Section. The other party shall, within 14 days
after the receipt of a notice to arbitrate as provided above, appoint their
arbitrator and notify the other party in writing of the name and address of
their arbitrator so appointed. If within 21 days after the appointment of the
second arbitrator the arbitrators have not rendered their decision, or have
not come to an agreement a third arbitrator shall be appointed by the
arbitrators previously appointed (or in default of such appointment by the
President of the Greater Boston Real Estate Board, (or any organization
successor thereto) or in his absence, refusal, failure or inability to act,
by the then President of the Boston Bar Association (or any organization
successor thereto), or in his absence, refusal, failure or inability to act,
or in the event that bona fide question shall exist as to the person
authorized to appoint the additional arbitrator, by a Judge of the Superior
Court of the Commonwealth of Massachusetts in Middlesex County, or of any
other Court sitting in Middlesex County succeeding to the jurisdiction and
functions now exercised by the Superior Court of the Commonwealth of
Massachusetts). In the event that an arbitrator appointed pursuant to this
Section 4.04 shall thereafter die or become unable or unwilling to act, his
successor shall be
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appointed in the same manner provided herein for the appointment of the
arbitrator so dying or becoming unable or unwilling to act.
All of the arbitrators, however appointed, shall be fit and
impartial individuals having at least five (5) years experience in commercial
real estate office leasing and financing. Arbitration proceedings shall be
conducted in Boston in accordance with the rules of the American Arbitration
Association then in effect, but only so far as consistent with the provisions
of this Section. The arbitrators shall be sworn faithfully and fairly to
determine the questions at issue. They shall afford each party a hearing and
the right to submit evidence with the privilege of cross-examination, on the
questions at issue, and shall, with all possible speed, make their
determination in writing and give written notice of their determination. If
the first two arbitrators fail to decide, the decision of the third
arbitrator shall be final.
Landlord and Tenant shall each be solely responsible for
the payment of all fees and expenses of the arbitrator it appointed, and
shall share equally the payment of all fees and expenses of the American
Arbitration Association (if any) and of a third arbitrator (if any be
appointed hereunder).
ARTICLE 5
USE OF PREMISES
5.01 USE RESTRICTED.
The Premises may be used for the Permitted Uses and for no
other purpose. No improvements may be made in or to the Premises except as
otherwise provided in this Lease.
ARTICLE 6
TAXES; OPERATING EXPENSES; ESTIMATED COST OF ELECTRICAL SERVICES
6.01 EXPENSES AND TAXES.
If with respect to any Calendar Year, Tenant's Share of (a)
Operating Expenses exceeds the Operating Expense Base or (b) Taxes exceeds
the Tax Base (whether as the result of an increase in rate or assessment or
both), Tenant shall pay to Landlord the amount of each such excess. Any
amount due with respect to this Section 6.01 shall be due on the date which
is thirty (30) days after receipt by the Tenant of the statement described in
Section 6.02 hereof.
6.02 ANNUAL STATEMENT OF ADDITIONAL RENT DUE.
Landlord shall render to Tenant a statement, showing (i)
for the Calendar Year so indicated (a) Taxes and (b) Operating Expenses and
(ii) for the then current Calendar
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Year, and estimate for (a) Operating Expense, (b) Taxes and (c) Tenant's
obligation under Section 6.01.
6.03 MONTHLY PAYMENTS OF ADDITIONAL RENT.
Tenant shall pay to Landlord in advance for each calendar
month of the Lease Term falling between receipt by Tenant of the statement
described in Section 6.02 and receipt by Tenant of the next such statement,
as Additional Rent an amount equal to 1/12th of Tenant's estimated obligation
under Section 6.01 shown thereon. The amount due under this Section 6.03
shall be paid with Tenant's monthly payments of Basic Rent and shall be
credited by Landlord to Tenant's obligations under Section 6.01. If the total
amount paid hereunder exceeds the amount due under such Section, such excess
shall be credited by Landlord against the monthly installments of Additional
Rent next falling due or shall be refunded to Tenant upon the expiration or
termination of this Lease.
6.04 ACCOUNTING PERIODS.
Landlord shall have the right from time to time to change
the periods of accounting hereunder to any other annual period than a
Calendar Year, and upon any such change, all items referred to in this
Article 6 shall be appropriately apportioned. In all statements rendered
under Section 6.02, amounts for periods partially within and partially
without the accounting periods shall be appropriately apportioned, and any
items which are not determinable at the time of a statement shall be included
therein on the basis of Landlord's estimate and with respect thereof Landlord
shall render promptly after determination a supplemental statement and
appropriate adjustment shall be made according thereto. With proper notice,
Tenant shall have the right to examine the accounting records of the Building
at their own expense during normal business hours.
6.05 ABATEMENT OF TAXES.
Landlord may at any time and from time to time make
application to the appropriate Governmental Authority for an abatement of
Taxes. Landlord shall make such an application at any time tenants occupying
more than 60% if the Rentable Area of the Building under written Occupancy
Arrangements directly with the Landlord request that Landlord do so. If (i)
such an application is successful and (ii) Tenant has made any payment in
respect of Taxes pursuant to this Article 6 for the period with respect to
which the abatement was granted, Landlord shall (a) deduct from the amount of
the abatement all reasonable expenses incurred by it in connection with the
application (b) pay to Tenant Tenant's share (adjusted for any period for
which Tenant has made a partial payment) of abatement with interest, if any,
paid by the Governmental Authority on such abatement and (c) retain the
balance, if any.
6.06 ELECTRIC SERVICE; PAYMENT AS ADDITIONAL RENT.
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If Tenant is separately metered for their electricity this
paragraph does not apply. The Estimated Cost of Electrical Service if
applicable, is Landlord's estimate of the cost (on the date hereof) of
lighting the Premises and operating Tenant's office equipment. This estimate
is based on information supplied to Landlord by Tenant and shall be subject
to adjustment as hereinafter set forth. Tenant shall reimburse Landlord for
the cost of providing such electrical energy by paying to Landlord the
estimated Cost of Electrical Service. Tenant shall pay Landlord (without
previous demand therefor) such amount in monthly installments on the same day
on which Basic Rent is due. If Tenant (a) connects equipment (i) other than
normal office equipment or (ii) which operates in excess of 120 volts nominal
to the Building Distribution System, or (b) operates any such equipment
beyond normal operating hours, the Estimated Cost of Electrical Service shall
be increased by an amount which will reflect the cost to Landlord of the
additional electrical service to be furnished by Landlord. If Landlord and
Tenant cannot agree on the amount of such increase, such amount shall be
conclusively determined by a reputable independent electrical engineer or
consulting firm to be selected by Landlord and paid equally by both parties.
All additional risers or other equipment required for equipment other than
normal office equipment or equipment which operates on 120 volts nominal
shall be provided by Landlord, and the cost thereof shall be paid by Tenant.
6.07 CHANGE IN RATES OR USAGE.
The Estimated Cost of Electrical Service is based on
current rates for such service and Landlord's good faith estimate of the
usage of electricity by Tenant. If at any time after the date of this Lease,
(i) the rates at which Landlord purchases electrical energy from the public
utility supplying electrical service to the Building, or any charges incurred
or Taxes payable by Landlord in connection therewith shall be increased or
decreased or (ii) the usage by Tenant exceeds Landlord's estimate thereof,
the Estimated Cost of Electrical Service shall be increased or decreased, as
the case may be, by an amount equal to the estimated increase or decrease, as
the case may be, in Landlord's cost of furnishing the electricity referred to
above as a result of such increase or decrease in rates, charges, taxes or
usage.
6.08 LATE PAYMENT OF RENT.
If any installment of fixed rent or additional rent is not
received in full within five (5) days of its due date then, in addition to
any other rights or remedies of the Landlord, upon demand of Landlord, Tenant
shall pay for each month that rental payments are not timely made, a sum
equal to five percent (5%) of each unpaid portion of such monthly installment
as a liquidated damages charge arising out of and occurring as the result of
each such late payment.
In the event that Tenant makes three or more late payments
of rent during the Term, Landlord may deem such action to constitute an Event
of Default sufficient to
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terminate (i) the Lease, (ii) any provision for exercise by Tenant of any
option rights under the Lease or (iii) both.
ARTICLE 7
IMPROVEMENTS, REPAIRS, ADDITIONS, REPLACEMENTS
7.01 PREPARATION OF THE PREMISES.
Landlord shall perform Landlord's Work as set forth in
Exhibit C. All improvements to the Premises must be of a quality equal to or
better than the Building Standard Tenant Finishes. Landlord shall also do the
work described in the Working Drawings, subject to the provisions of the Work
Letter. If (i) the cost of such work exceeds Landlord's Contribution or (ii)
Landlord further agrees to do, at Tenant's request, any Special Work, Tenant
shall pay the amount of Tenant's Cost to Landlord in accordance with
Section 9 of the Work Letter.
7.02 TIME FOR COMPLETION.
Landlord shall use due diligence to have the Premises ready
for occupancy on or before the Scheduled Occupancy Date. Reference is made to
the Work Letter for details of the completion process.
7.03 NOTICE TO COMMENCE.
Approximately fifteen (15) days prior to the Substantial
Completion Date, at Tenant's written request, Landlord shall furnish Tenant a
notice stating the Term Commencement Date.
7.04 DELAYS.
If Landlord shall be delayed in substantially completing
the work in the Premises as the result of:
(a) delay in delivery to Landlord of any plans,
design work and detailed drawing beyond
December 1, 1989, or
(b) Tenant's requests for Special Work or change
to the Working Drawings.
(c) delays in performance by Tenant or any Person
employed by Tenant which shall cause delays
in the completion of any work to be done by
Landlord or which shall otherwise delay the
substantial completion of the Premises, or
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(d) any fault, negligence, omission, or failure
to and on the part of Tenant or its agents,
contractors, workmen, mechanics, suppliers or
invitees.
The Premises shall be deemed to be substantially completed on (and the Term
Commencement Date shall be) the Estimated term Commencement Date.
7.05 TENANT'S ACCESS TO THE PREMISES.
Tenant and Tenant's agents, at Tenant's sole risk, may,
with Landlord's prior consent, enter the Premises prior to the Term
Commencement Date in order to do such work as may be required to make the
Premises ready for Tenant's use and occupancy thereof. If Landlord permits
such entry prior to the Term Commencement Date, such permission shall be
conditioned upon Tenant and Tenant's agents, contractors, workmen, mechanics,
suppliers and invitees, working in harmony with Landlord and the General
Contractor and with other tenants and occupants of the Building. If at any
time such entry shall cause or threaten to cause disharmony or otherwise
interfere with the orderly completion of operation of the Building, Landlord
shall have the right to withdraw such permission upon twenty-four (24) hours
written notice to Tenant. Any such entry into and occupation of the Premises
shall be deemed to be under all of the terms, covenants, conditions and
provisions of this Lease except the covenant to pay Rent. Landlord shall not
be liable in any way for any injury, loss or damage which may occur to any of
Tenant's work and installations made in the Premises or to properties placed
therein prior to the Term Commencement Date, the same being at Tenant's sole
risk.
7.06 ALTERATIONS AND IMPROVEMENTS.
Tenant shall not make alterations or additions to the
Premises except in accordance with plans and specifications therefor first
approved by Landlord. Tenant shall not hang shades, curtains, signs, awnings
or other materials, attach any materials to or make any change in the
appearance of any glass visible from outside of the Premises, add any window
treatments of any kind or make improvements or install furniture visible from
outside of the Premises, without Landlord's prior written consent not to be
unreasonably withheld. Without limitation, Landlord shall not be deemed
unreasonable for withholding approval of any alterations or additions except
furniture and fixtures which would (a) delay completion of the Premises or
the Building, or (b) require unusual expense to readapt the Premises to
normal office use upon termination of this Lease or increase (i) the cost of
(a) construction or (b) insurance or (ii) Taxes. All alterations and
additions shall be part of the Premises unless and until Landlord shall
specify the same for removal in a notice delivered to Tenant on or before the
Lease Termination Date. All of Tenant's alterations and additions and
installation of
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furnishings shall be coordinated with any work being performed by Landlord
and such manner as to maintain harmonious labor relations and not to damage
the Building or the Premises or interfere with Building operation and, except
for installation of furnishings, shall be performed by contractors or workman
first approved by Landlord. Except for work done by or through Landlord,
Tenant before its work is started shall: secure all licenses and permits
necessary therefor deliver to Landlord a statement of the names of all its
contractors and subcontractors and the estimated cost of all labor and
material to be furnished by them; and cause each contractor to carry
workmen's compensation insurance in statutory amounts covering all the
contractor's and subcontractor's employees and comprehensive public liability
insurance with limits as Landlord may reasonably require, but in no event
less than $1,000,000.00 and property damage insurance with limits of not less
than $1,000,000.00 and have deductibles of no more than $5,000.00 (all such
insurance to be written in companies approved by Landlord and insuring
Landlord and Tenant as well as the contractors), and to deliver to Landlord
certificates of all such insurance. Tenant agrees to pay promptly when due
the entire cost of any work done in the Premises by Tenant, its agents,
employees or independent contractors, and not to cause or permit any liens
therewith to attach to the Premises and immediately to discharge any such
liens which may so attach. All construction work done by Tenant, its agents,
employees or independent contractors shall be done in a good and workmanlike
manner and in compliance with all Legal Requirements and Insurance
Requirements. Landlord shall promptly give notice to Tenant of any observed
defects.
7.07 MAINTENANCE.
Tenant shall, at all times during the Lease Term, and at
its own cost and expense, (i) keep and maintain (or cause to be kept and
maintained) the Premises in good repair and condition (ordinary wear and tear
and damage by fire or casualty only excepted) and (ii) use all reasonable
precaution to prevent waste, damage or injury thereto. Subject to Landlord's
provision for basic services.
7.08 REDELIVERY.
On the Lease Termination Date, Tenant shall quit and
surrender the Premises free and clear of all tenants, occupants, liens, and
encumbrances whatsoever except (i) Permitted Exceptions and (ii)
encumbrances, restrictions or reservations caused by or consented to by
Landlord. Tenant shall, subject to the provisions of Articles 17 and 18
hereof, surrender the Premises to Landlord broom clean and in good condition
and repair (ordinary wear and tear, damage by fire or casualty only excepted)
with all damages occasioned by Tenant's removal of Tenant's fixtures or
equipment repaired at Tenant's cost to Landlord's satisfaction.
ARTICLE 8
BUILDING SERVICES
8.01 BUILDING SERVICES.
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Landlord shall furnish, or cause to be furnished, during
the Lease Term the Basic Services.
8.02 OTHER JANITORS.
No persons shall be employed by Tenant to do janitorial
work in the Premises and no persons other than the janitors of the Building
shall clean the Premises unless Landlord shall give its written consent
thereto. Any person employed by Tenant with Landlord's consent to do
janitorial work shall, while in the Building, either inside or outside the
Premises, be subject to and under the control and direction of the
superintendent of the Building (but not as agent or servant of said
superintendent or of Landlord).
8.03 ADDITIONAL SERVICES.
Tenant will pay the Landlord a reasonable charge for any
extra cleaning of the Premises required because of the carelessness or
indifference of Tenant and for any Additional Services rendered at the
request of Tenant. If the cost of cleaning the Premises shall be increased
due to the installation in the Premises, at Tenant's request, of any unique
or special materials, finish or equipment, Tenant shall pay the Landlord an
amount equal to such increase in cost. All charges for Additional Services
shall be due and payable within ten (10) days of the date on which they are
billed.
8.04 LIMITATIONS ON LANDLORD'S LIABILITY.
Landlord shall not be liable in damages, not in default
hereunder, for any failure or delay in furnishing any Basic Service or
Additional Service when such failure or delay is occasioned by Force Majeure
or by the act or Default of Tenant. No such failure or delay shall be held or
pleaded as eviction or disturbance in any manner whatsoever of Tenant's
possession or give Tenant any right to terminate this Lease or give rise to
any claim for set-off of any abatement of Rent or of any of Tenant's
obligations under this Lease.
8.05 ELECTRIC SERVICE.
Subject to Section 6.06 Landlord shall furnish electrical
energy required for lighting the Premises and operating Tenant's office
equipment used in the Premises, provided, however, Landlord may, at any time,
elect to discontinue the furnishing of electrical energy. Landlord shall pay
for the cost of installation of any and all electrical service and additions
thereto required by Tenant to use their office equipment, computers and other
equipment. Such service and additions are included in Exhibit C and will be
provided as part of Landlord's work at Landlord agrees to provide, when
needed, at Landlord's expense additional electrical service to increase
amount of power (amperage) to Premises. In the event of any such election by
Landlord: (1) Landlord shall give reasonable advance notice of any such
discontinuance to Tenant; (2) Landlord shall permit Tenant to receive
electrical service
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directly from the public utility supplying service to the Building and to use
(in common with others) the existing feeders, risers, wiring and other
electrical facilities serving the Premises for such purpose to the extent
they are suitable and safely capable; (3) Landlord shall pay such charge and
costs, if any, as such public utility may impose in connection with the
installation of Tenant's meters and pay for such other installations as such
public utility may require, as a condition to providing comparable electrical
service to Tenant; (4) Tenant's obligations under Section 6.06 shall end; and
(5) Tenant shall thereafter pay, directly to the utility furnishing the same,
all charges for electrical services to the Premises promptly when due.
ARTICLE 9
TENANT'S PARTICULAR COVENANTS
9.01 PAY RENT.
Tenant shall pay when due all Rent and all charges for
utility services rendered to the Premises not included in Rent and, as
further Additional Rent, all charges of Landlord for Additional Services.
9.02 OCCUPANCY OF THE PREMISES.
Tenant shall occupy the Premises from the term Commencement
Date for the Permitted Uses only. Tenant shall not (i) injure or deface the
Premises or the Building, (ii) install any sign in or on any window, demising
wall or Common Area, (iii) permit in the Premises any flammable fluids or
chemicals not reasonably related to the Permitted Uses nor (iv) permit
nuisance or any use thereof which is improper, offensive, contrary to any
Legal Requirement or Insurance Requirement or liable to render necessary any
alteration or addition to the Building.
9.03 SAFETY.
Tenant shall keep the Premises equipped with all safety
appliances required by Legal Requirements or Insurance Requirements because
of any use made by Tenant. Tenant shall procure all Authorizations so
required because of such use and, if requested by Landlord, shall do any work
so required because of such use, it being understood that the foregoing
provision shall not be construed to broaden in any way the Permitted Uses.
9.04 EQUIPMENT.
Tenant shall not place a load upon the floor of the
Premises exceeding the live load for which the floor has been designed; and
shall not move any safe or other heavy equipment in, about or out of the
Premises except in such a manner and at such a time as Landlord shall in each
instance authorize. Tenant shall isolate and maintain all of Tenant's
business machines and mechanic equipment which cause or may cause air-borne
or structure-
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born vibration or noise, whether or not it may be transmitted to any other
Premises so as to eliminate such vibration or noise.
9.05 ELECTRICAL EQUIPMENT.
Tenant shall not, without prior written notice to Landlord
in each instance (i) connect to the Building electric distribution system
anything other than normal office equipment and computer equipment. Tenant's
use of electrical energy in the Premises shall not at any time exceed the
capacity of any of the electrical conductors or equipment in or otherwise
serving the Premises. Tenant shall not, without prior written notice to
Landlord in each instance, connect to the Building electric distribution
system any fixtures, appliances or equipment which operate on a voltage in
excess of 120 volts or 220 volts with a properly certified transformer
nominal or make any alteration or addition to the electric system of the
Premises.
9.06 PAY TAXES.
Tenant shall pay promptly when due all Taxes upon personal
property (including, without limitation, fixtures and equipment) in the
Premises to whomsoever assessed.
ARTICLE 10
REQUIREMENTS OF PUBLIC AUTHORITY
10.01 LEGAL REQUIREMENTS.
Tenant shall, at its own cost and expense, promptly
observe and comply with all Legal Requirements. Tenant shall pay all costs,
expenses, liabilities, losses, damages, fines, penalties, claims and demands,
that may in any manner arise out of or be imposed because of the failure of
Tenant to comply with the covenants of this Article 10.
10.02 CONTESTS.
Tenant shall have the right to contest by appropriate
legal proceedings diligently conducted in good faith, in the name of the
Tenant, or Landlord (if legally required), or both (if legally required),
without cost, expense, liability or damage to Landlord, the validity or
application of any Legal Requirement and, if compliance with any of the terms
of any such Legal Requirement may legally be delayed pending the prosecution
of any such proceeding, Tenant may delay such compliance therewith until the
final determination of such proceeding.
ARTICLE 11
COVENANT AGAINST LIENS
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11.01 MECHANICS LIENS.
Landlord's right, title and interest in the Premises or the
Land or the Building shall not be subject to or liable for liens of mechanics or
materialmen for work done on behalf of Tenant in connection with improvements to
the Premises. Notwithstanding such restriction, if because of any act or
omission of Tenant, any mechanic's lien or other lien, charge or order for
payment of money shall be filed against any portion of the Premises or the Land
or the Building, Tenant shall, at its own cost and expense, cause the same to be
discharged of record or bonded within thirty (30) days after the filing thereof.
11.02 RIGHT TO DISCHARGE.
Without otherwise limiting any other remedy of Landlord for
default hereunder, if Tenant shall fail to cause such liens to be discharged of
record or bonded within the aforesaid thirty (30) day period or to satisfy such
liens within (30) days after any judgement in favor of such lien holders from
which no further appeal might be taken then Landlord shall have the right to
cause the same to be discharged. All amounts paid by Landlord to cause such
liens to be discharged shall constitute Additional Rent.
ARTICLE 12
ACCESS TO PREMISES
12.01 ACCESS.
Landlord or Landlord's agents and designers shall have the
right, but not the obligation, to enter upon the Premises at all reasonable
times during ordinary business hours to examine same and to exhibit the Premises
to prospective purchasers and tenants, but in the latter case only during the
last six (6) months of the Lease Term.
ARTICLE 13
ASSIGNMENT AND SUBLETTING: OCCUPANCY ARRANGEMENTS
13.01 SUBLETTING AND ASSIGNMENT.
Tenant shall not (either voluntarily or by operation of law)
enter into a Prohibited Occupancy Arrangement, and any Prohibited Occupancy
Arrangement shall be absolutely void and ineffective for any purpose. Tenant
shall not enter into any other Occupancy Arrangement, either voluntarily or by
operation of law, (other than with a Person who is Affiliate of Tenant for a
period ending when, as and if such Person ceases to be Affiliate of Tenant
without the prior written consent of Landlord, not to be unreasonably withheld.
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If Tenant intends to enter into a Occupancy Arrangement which
requires Landlord's consent, Tenant shall so notify Landlord writing, stating
the name of (and a financial statement with respect to) the Person whom Tenant
intends to enter into such Arrangement, the exact terms of the Arrangement and a
precise description of the portion of the Premises intended to be subject
thereto. Within ten (10) business days of receipt of such writing, Landlord
shall either (i) consent to such Occupancy Arrangement or (ii) terminate this
Lease with respect to so much of the Premises as is intended to be subject
thereto.
If the Landlord consents to such Occupancy Arrangement, Tenant
shall (i) enter into such Arrangement on the exact terms described to Landlord
within fourteen (14) days of Landlord's consent or comply again with their terms
of this Section and (ii) remain liable for the payment and performance of the
terms and covenants of this Lease. If Tenant enters into such an Arrangement,
Tenant shall pay to Landlord when received the excess, if any, of amounts
received in respect of such Occupancy Arrangement over the Rent.
If Landlord terminate this Lease, all Rent due shall be
adjusted as of the day the Premises (or portion thereof) are redelivered to
Landlord. Any portion of the Premises so redelivered shall be in the condition
specified in Section 7.08 hereof.
ARTICLE 14
INDEMNITY
14.01 TENANT'S INDEMNITY.
To the fullest extent permitted by law, Tenant shall indemnify
and save harmless Landlord from and against any and all liability; damage,
penalties or judgements and from and against any claims, actions, proceedings
and expenses and costs in connection therewith, including reasonable counsel
fees arising from injury to person or property sustained by anyone in and about
or omission of Tenant, or Tenant's officers, agents, servants, employees,
contractors, subleases or invitees. Tenant shall, at its own cost and expense,
defend any and all suits or actions (just or unjust) in which Landlord may be
impleaded with others upon any such above mentioned matter, claim or claims,
except as may result from the act as set forth in Section 14.02. All
merchandise, furniture, fixtures and property of every kind, nature and
description of Tenant or Tenant's employees, agents, contractors, invitees,
visitors, or guests which may be in or upon the Premises, the Land or the
Building during the Lease Term shall be at the sole risk and hazard of Tenant
and that if the whole or any part thereof shall be damaged, destroyed, stolen or
removed by reason of any cause or reason whatsoever, other than the gross
negligence or willful default of Landlord, no part of said damage or loss shall
be charged to or borrowed by Landlord.
14.02 LANDLORD'S LIABILITY.
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Except for its intentional acts or gross negligence or the
intentional acts or gross negligence of its officers, agents, servants,
employees or contractors, Landlord shall not be responsible or liable for any
damage or injury to any property, fixtures, buildings or improvements, or to any
person or persons, at any time in the Premises, including any damage or injury
to Tenant or to any of Tenant's officers, agents, servants, employees,
contractors, invitees, customers or subleassee.
ARTICLE 15
INSURANCE
15.01 LIABILITY INSURANCE.
Tenant shall provide or cause to be provided at its expense;
and keep in force during the Lease Term, general comprehensive liability
insurance in a good and solvent insurance company or companies licensed to do
business in the Commonwealth of Massachusetts, selected by Tenant, and
reasonably satisfactory to Landlord, and in an amount reasonably required by
Landlord but in any event not less than One Million Dollars ($1,000,000.00) with
respect to injury or death to any one person and One Million Dollars
($1,000,000.00) with respect to injury or death to more than one person in any
one accident or other occurrence and One Million Dollars ($1,000,000.00) with
respect to damages to property. Such policy or policies shall include Landlord
as an additional insured and have deductibles of no more than $5,000.00. Tenant
agrees to deliver certificates of such insurance to Landlord as of the date
hereof and thereafter not less than ten (10) days prior to the expiration of
such policy. Such insurance shall not be cancellable without thirty (30) days'
written notice to Landlord.
15.02 CASUALTY INSURANCE.
Tenant shall cause its improvements to the Premises to be
insured for the benefit of Landlord and Tenant as their respective interests may
appear, against loss or damage by fire and customary extended coverage in an
amount equal to (i) the replacement value thereof, if insurance in such amount
is available, or (ii) the amount necessary to avoid the effect of co-insurance
provisions of the applicable policies. Certificate thereof shall be delivered to
Landlord, Landlord shall, at Tenant's cost and expense, cooperate fully with
Tenant and execute any and all consents and other instruments and take all other
actions necessary to obtain the largest possible recovery. Landlord shall not
carry any insurance concurrent in coverage and contributing in the event of loss
with a insurance required to be furnished by Tenant hereunder if the effect of
such separate insurance would be to reduce the protection or the payment to be
made under Tenant's insurance.
ARTICLE 16
WAIVER OF SUBROGATION
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16.01 WAIVER OF SUBROGATION.
All insurance policies carried by either party covering the
Premises, including but not limited to contents, fire and casualty insurance,
shall expressly waive any right on the part of the insurer to make any claim
against the other party. The parties hereto agree that their policies will
include such waiver clause or endorsement.
16.02 WAIVER OF RIGHTS.
Landlord and Tenant each hereby waive all claims, causes of
action and rights of recovery against the other and their respective partners,
agents, officers and employees, for any damage to or destruction of persons,
property or business which shall occur on or about the Premises and shall result
from any of the perils insured under any and all policies of insurance
maintained by Landlord and Tenant, regardless of cause, including the negligence
and intentional wrong doing of either party and their respective agents,
officers and employees but only to the extent of recovery, _____ any under such
policy or policies of insurance; provided however, that this waiver shall be
invalidated by reason of this waiver.
ARTICLE 17
DAMAGE OF DESTRUCTION
17.01 SUBSTANTIAL DAMAGE.
If the Building or any part thereof shall be damaged by free
or other casualty to the extent that substantial alteration or reconstruction of
25% of the Building shall, in Landlord's sole opinion, be required (whether or
not the Premises shall have been damaged) or if as payable be used to retire the
mortgage debt, Landlord may, at its option, terminate this Lease by notifying
Tenant in writing of such termination within sixty (60) days after the date of
such damage. If this Lease is so terminated, Rent shall be abated as of the date
of such damage.
17.02 RESTORATION.
If Landlord does not terminate this Lease pursuant to Section
17.01, Landlord shall, (i) abate Tenant's rent for the unusable portion of
premises until that portion becomes usable, (ii) within seventy-five (75) days
after receipt by Landlord of the Proceeds payable in respect of such fire or
other casualty, proceed with reasonable diligence to repair and restore the
Building (subject to Force Majeure) to substantially the same condition in which
it was immediately prior to the occurrence of the casualty to the extent of
Landlord's Work and the value of Landlord's Contribution. Landlord shall not be
required to rebuild, repair, or replace any part of Tenant's furniture,
furnishings or fixtures or equipment. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from such damage or the repair thereof, except that,
Landlord shall allow
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Tenant an Abatement of Rent during the time and to the extent the Premises
are unfit for occupancy.
ARTICLE 18
EMINENT DOMAIN
18.01 TOTAL TAKING.
If the Premisses or the Building should be the subject of a
Total Taking, then this Lease shall terminate as of the date when physical
possession of the Building or the Premises is taken by the condemning authority.
18.02 PARTIAL TAKING.
If there occurs a Partial Taking, Landlord (whether or not the
Premises are affected thereby) may terminate this Lease by giving written notice
thereof to Tenant within sixty (60) days after the right of election accrues, in
which event this Lease shall terminate as of the date the Building or Premises
is taken by the condemning authority. If upon such Partial Taking this Lease is
not terminated, Rent shall be abated by an amount representing that part of the
Rent properly be allocable to the portion of the Premises so taken and Landlord
shall, at Landlord's sole expense, restore and reconstruct the Building and the
Premises to substantially their former condition to the extent that the same, in
Landlord's judgement, may be feasible, but such work shall not exceed the scope
of Landlord's Work and the value of Landlord's Contribution. The Landlord shall
have no liability for interruption of tenant's business.
18.03 AWARDS AND PROCEEDS.
All Proceeds payable in respect of Taking shall be the
property of Landlord. Tenant hereby assigns to Landlord all rights of Tenant in
or to such Proceeds, provided that Tenant shall be entitled to separately
petition the condemning authority for a separate award for its moving expenses
and trade fixtures but only if such a separate award will not diminish the
amount of Proceeds payable to Landlord.
ARTICLE 19
QUIET ENJOYMENT
19.01 LANDLORD'S COVENANT.
Provided that an Even of Default has not occurred and if not
then continuing, Tenant shall, subject to the Permitted Exceptions, quietly have
and enjoy the Premises during the Lease Term, without hindrance or molestation
from any Person lawfully claiming by, through or under Landlord.
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19.02 SUBORDINATION.
This Lease is and shall be subject and subordinate to a
mortgage now or hereafter on the Building and to each advance made or hereafter
to be made under any mortgage, and to all renewals, modifications,
consolidations, replacements and extensions thereof and all substitutions
therefore. This Section 19.02 shall be required. In confirmation of such
subordination, Tenant shall execute and deliver promptly any certificate that
Landlord or any mortgagee may request. In the event that may mortgagee shall
succeed to the interest of Landlord then this Lease shall terminate, or, at the
option of such mortgagee, this Lease shall nevertheless continue in full force
and effect and Tenant shall nevertheless continue in full force and effect and
Tenant shall and does hereby agree to attorn to such mortgagee and to recognize
such mortgagee as its Landlord.
19.03 NOTICE TO MORTGAGEE.
No act or failure to act on the part of Landlord which would
entitle Tenant under the terms of this Lease, or by law, to be relieved of
Tenant's obligations hereunder or to terminate this Lease, shall result in a
release or termination or such obligations or a termination of this Lease unless
(i) Tenant shall have first given written notice of Landlord's at or failure to
act to Landlord's mortgagees of record, if any, specifying the act or failure to
act on the part of Landlord which could or would give basis to tenant's rights;
and (ii) such mortgagees, after receipt of such notice, have had the opportunity
to cure such default within a reasonable time thereafter; but nothing contained
in this Section 19.03 shall be deemed to impose any obligation on any such
mortgagee to correct or cure any such condition. "Reasonable time" as used above
shall mean a period of not less than thirty (30) Business Days and shall include
(but not be limited to) a reasonable time to obtain possession of the Building
if the mortgagee elects to do so and a reasonable time to correct or cure the
condition if such condition is determined to exist.
19.04 OTHER PROVISIONS REGARDING MORTGAGEES.
If this Lease or the Rent due hereunder is assigned to a
mortgagee as collateral security for a loan, no such mortgagee shall be deemed
to have assumed any of Landlord's obligations hereunder solely as a result of
said assignment. A mortgagee to whom this Lease has been so assigned shall be
deemed to have assumed such obligations only if (i) by the terms of the
instrument of assignment such mortgagee specifically elects to assume such
obligations of (i) such mortgagee has (a) foreclosed its mortgage, (b) accepted
a deed in lieu thereof, of (c) taken possession of the Premises by entry or
otherwise. Even if such mortgagee assumes the obligations of Landlord hereunder,
(i) any such obligation under Section 24.01 to return the Security Deposit to
the Tenant shall be limited to the amount actually received by the mortgagee
with respect thereto, and (ii) such mortgage will be liable for breaches of any
Landlord's obligations hereunder only to the extent such breaches occur during
the period of ownership by the mortgagee after foreclosure (or any conveyance by
a deed in lieu thereof), all as set forth in Section 25.10 hereof. Tenant may
from time to time, at mortgagees request, be
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required to provide mortgagee with certain financial information pertaining
to the Tenant as mortgagee may reasonably request.
ARTICLE 20
DEFAULTS; EVENTS OF DEFAULT
20.01 DEFAULTS.
The following shall, if any requirement of notice or lapse of
time or both has not been met, constitute Defaults, and, if such requirements
for notice or lapse of time have been met, constitute Events of Default
hereunder:
(1) Occurrence of any event set forth in Article
21 hereof;
(2) The failure of Tenant to pay Rent when the
same shall be due and payable and the
continuance of such failure for a period of
ten (10) days after receipt by Tenant of
notice in writing from Landlord specifying
such failure;
(3) The failure of Tenant to observe any
covenant made by it in Sections 13.01, 15.01
and 25.03 hereof and;
(4) The failure of Tenant to keep, observe or
perform any of the other covenants,
conditions and agreements herein contained
on Tenant's part to be kept, observed or
performed and the continuance of such
failure without the curing of same for a
period of twenty (20) days after receipt by
Tenant of notice in writing from Landlord
specifying in reasonable detail the nature
of such failure.
20.02 TENANT'S BEST EFFORTS.
In the event hat the Default of which Landlord gives notice is
of such a nature that it cannot be cured within such twenty (20) day period,
then such Default shall not be deemed to be an Event of Default so long as
Tenant, after receiving such notice, proceeds to cure the Default as soon as
reasonably possible and continues to take all steps necessary to complete the
same within a period of time which, under all prevailing circumstances, shall be
reasonable. No Default shall be deemed to be an Event of Default if and so long
as Tenant shall be so proceeding to cure the same in good faith or be delayed in
or prevented from curing the same by reason of Force Majeure.
20.03 ELIMINATION OF DEFAULT.
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Notwithstanding anything to the contrary contained in this
Article 20, in the event that hereinabove provided, such Default(s) shall be
deemed never to have occurred and Tenant's right hereunder shall continue
unaffected by such Defaults.
ARTICLE 21
INSOLVENCY
21.01 INSOLVENCY.
If (1) there occurs with respect to Tenant an Insolvency or
(2) any execution or attachment is issued against Tenant or any of its property
and as a result thereof the Premises are taken or occupied by some Person other
than the Tenant, except as may herein be permitted, then an Event of Default
hereunder shall be deemed to have occurred so that the provisions of Article 22
hereof shall become effective and Landlord shall have the rights and remedies
provided for therein.
ARTICLE 22
LANDLORD'S REMEDIES; DAMAGES ON DEFAULT
22.01 LANDLORD'S REMEDIES.
If an Event of Default shall occur and be continuing, Landlord
may, at its option, give to Tenant a notice terminating the Lease upon a date
specified in such notice, which date shall be not less than three (3) Business
Days after the date specified in said notice, the term and estate hereby vested
in tenant shall cease and any and all other right, title and interest of Tenant
hereunder shall likewise cease without further notice or lapse of time, as fully
an with like effect as if the entire Lease Term had elapsed, but Tenant shall
continue to be liable to Landlord as hereinafter provided.
If such Event of Default results from Tenant's failure pay
Tenant's Cost as required by Section 7.01 hereof and the Work Letter Landlord
may, at its option, in addition to or in lieu of the other remedies available to
Landlord, refuse Tenant access to the Premises. In such event the Term
Commencement date shall be the earlier of (i) the date determined in accordance
with Section 7.04 (ii) the Substantial Completion Date.
If such Event of Default results form tenant's failure pay a
charge for an Additional Service pursuant to Section 8.03 hereof, Landlord may,
without further notice to Tenant, discontinue any or all of such Additional
Services.
If an Event of Default shall occur and the continuing,
Landlord shall be relieved of its undertaking under Article 13 hereof.
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22.02 SURRENDER.
Upon any termination of this Lease as the result of an Event
of Default, Tenant shall quit and peacefully surrender the Premises to Landlord,
upon or at any time after any such termination, Landlord may without further
notice enter the Premises and possess itself thereof by summary proceedings or
otherwise, any may dispossess Tenant and remove Tenant and all other Persons and
property from the Premises and may have, hold and enjoy the Premises and the
right to receive all rental income of and from the same.
22.03 RIGHT TO RELET.
At any time from time to time after any such termination,
Landlord may relet the Premises or any part thereof, in the name of Landlord or
otherwise, for such terms or terms (which may be greater of less than the period
which would otherwise have constituted the balance of the Lease Term) and on
such conditions (which may include concessions or free rent) as Landlord, in its
reasonable discretion, may determine and may collect and receive the rents
therefor. These sublet payments shall be credited to Tenant's rental payments
due. Landlord shall in no way be responsible or liable for any failure to relet
the Premises or any part thereof, or for any failure to collect any rent due
upon any such reletting.
22.04 SURVIVAL OF COVENANTS.
No such termination of this Lease shall relieve Tenant of its
liability and obligations under this Lease an such liability and obligations
shall survive any such termination. Tenant shall indemnify and hold Landlord
harmless from all loss, cost, expenses damage of liability arising out or in
connection with such termination.
In the event of any such termination, Tenant shall pay to the
Landlord the Rent up to the date of such termination. Tenant shall also pay to
Landlord, on demand, as and for liquidated and agreed damages for Tenant's
Default, the difference between
(1) the aggregate Rent which would have been
payable under this Lease by Tenant form the
date of such termination until the Stated
Expiration Date, less
(2) the fair and reasonable rental value of the
Premises for the same period, excluding all
of Landlord's reasonable estimate of
expenses to be incurred in connection with
reletting the Premises, including, without
limitation, all repossess costs, brokerage
commission, legal expenses, reasonable
attorney's fees, alteration costs, and
expenses of preparation for such reletting.
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If the Premises or any part thereof are relet by the Landlord
before presentation of proof of such liquidated damages to any court, commission
or tribunal, the amount of rent reserved upon such reletting shall be, PRIMA
FACIE, the fair and reasonable rental value for the part or the whole of the
Premises so relet during the term of the reletting.
Nothing herein contained shall limit or prejudice the right of
the Landlord to prove and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by an statute of rule of law
in effect at the time when, and governing the proceedings in which, such damages
are to be proved, whether or not such amount be greater, equal to, or less than
the amount of the difference referred to above.
22.05 RIGHT TO EQUITABLE RELIEF.
If there shall occur a Default or threatened Default, Landlord
shall be entitled to enjoin such Default or threatened Default and shall have
the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though re-entry, summary proceedings, and other remedies
were not provided for in this Lease.
22.06 RIGHT TO SELF HELP; INTEREST ON OVERDUE RENT.
If an Event of Default shall occur and be continuing, Landlord
shall have the right, but shall not be obligated, to enter upon the Premises and
to perform such obligation notwithstanding the fact that no specific provision
for such substituted performance by Landlord is made in this Lease with respect
to such Default. In performing such obligation, Landlord may make any payment of
money or perform any other act. The aggregate of (i) all sums so paid by
Landlord, (ii) interest (at the rate of 1 1/2% per month or the highest rate
permitted by law, whichever is less) on such sum PLUS all Rent not paid when due
and (iii) all necessary incidental costs and expenses in connection with the
performance of any such act by Landlord, shall be deemed to be Rent under this
Lease and shall be payable to Landlord immediately upon demand. Landlord may
exercise the foregoing rights without waiving any other of its rights or
releasing Tenant from any of its obligations under this Lease.
22.07 FURTHER REMEDIES.
Upon any termination of this Lease pursuant to Section 22.01,
or at any time thereafter, Landlord may, in addition to and without prejudice to
any other rights and remedies Landlord shall have at law or in equity, re-enter
the Premises, and recover possession thereof and may dispossess any or all
occupants of the Premises in the manner prescribed by the statute relating to
summary proceedings, or similar statute(s); but Tenant in such case shall remain
liable to Landlord as hereinbefore provided.
ARTICLE 23
WAIVERS
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23.01 NO WAIVERS.
Failure of Landlord to complain of any act or omission on the
part of Tenant no matter how long the same may continue, shall not be deemed to
be a waiver by said Landlord of any of its rights hereunder. No waiver by any
provision of this Lease shall be deemed a waiver of a breach of the same or any
other provision. No acceptance by Landlord of any partial payment shall
constitute an accord or satisfaction but shall only be deemed a partial payment
on account.
ARTICLE 24
SECURITY DEPOSIT
24.01 SECURITY DEPOSIT.
Tenant has deposited the Security Deposit with Landlord.
Landlord shall hold the Security Deposit as security for the full and faithful
payment or performance by Tenant of its obligations under this Lease and not as
a prepayment of Rent. Landlord may commingle the Security Deposit with other
funds of Landlord but shall be liable to Tenant for the payment of interest at
the rate of 5% per annum thereon. Landlord may expend such amounts form the
Security Deposit as may be necessary to cure any Default and, in such case,
Tenant shall pay to Landlord the amount so expended, on demand. Landlord may
assign the Security Deposit to any subsequent owner of the Building and
thereafter Landlord shall have no further liability to Tenant with respect
thereto. As soon as reasonably practicable after the Lease Termination Date,
Landlord shall (i) inspect the Premises (ii) make such payments form the
Security Deposit as may be required to cure any outstanding Events of Default
hereunder and (iii) if no Event of Default is then continuing, pay the balance
of the Security Deposit to Tenant.
ARTICLE 25
GENERAL PROVISIONS
25.01 FORCE MAJEURE.
In the event that Landlord or Tenant shall be delayed,
hindered in or prevented from the performance of any act required hereunder by
reason of Force Majeure, then performance of such act shall be excused for the
period of the delay and the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay.
25.02 NOTICES AND COMMUNICATIONS.
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All notices, demands, requests and other communications
provided for or permitted under this Lease shall be in writing, either delivered
by hand or sent by first class mail, postage prepaid, to the following address:
(a) if to Landlord at the address stated in Section 1.01
hereof, or at such other address as the Landlord
shall have designated in writing to the Tenant, with
a copy to such Persons as Landlord shall have
designated in writing to Tenant, or
(b) if to Tenant at the address stated in Section 1.01
hereof, or at such other address as the Tenant shall
have designated in writing to the Landlord, with a
copy to such Persons as Tenant shall have designated
in writing to Landlord.
Any notice provided for herein shall become effective only
upon and at the time of receipt by the Person to whom it is given, unless such
notice is mailed by first-class registered or certified mail, in which case it
shall be deemed to be received on (i) the third Business Day following the
mailing thereof or (ii) the day of its receipt, if a Business Day, or the next
succeeding Business Day, whichever of (i) or (ii) shall be the earlier.
25.03 CERTIFICATES, ESTOPPEL LETTER.
Either party shall, without charge, at any time and form time
to time hereafter, within ten (10) days after written request of the other,
certify by written instrument duly executed and acknowledged to any mortgagee or
purchaser, or proposed mortgagee or proposed purchaser, or any Person specified
in such request; (a) as to whether this Lease has been supplemented or amended,
and if so, the substance and manner of such supplement or amendment, (b) as to
the validity and force constituted, (c) as to the existence of any Default or
Event of Default, (d) as the existence of any offsets counterclaims or defenses
thereto on the part of such other party, (e) as to the Term Commencement Date
and Stated Expiration Date, and (f) as to any other matters as may reasonably be
so requested. Any such certificate may be relied upon by the party requesting it
and any other Person to whom the same may be exhibited or delivered, and the
contents of such certificate shall be binding on the party executing same.
Tenant shall in addition, within 5 Business Days of the Term
Commencement Date, execute and deliver to Landlord a tenant estoppel letter
substantially in the form attached hereto as Exhibit I.
25.04 RENEWAL.
If this Lease is renewed or extended the provisions of
Sections 7.01, 7.02, 7.03, 7.04, and 7.05 of Article 7 hereof shall not apply.
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25.05 GOVERNING LAW.
This Lease and the performance thereof shall be governed,
interpreted, construed and regulated by the laws of the Commonwealth of
Massachusetts.
25.06 PARTIAL INVALIDITY.
If any term, covenant, condition or provision of this Lease or
the application thereof to any person or circumstance shall at any time or to
any extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term or provision to persons or circumstances other than
those as to which is held invalid or unenforceable, shall not be affected
thereby, and each term, covenant, condition and provision of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
25.07 NOTICE OF LEASE.
The parties will at any time, at the request of either one,
promptly execute duplicate originals of an instrument, in recordable form, which
will constitute a Notice of Lease, setting forth a description of the Premises,
the Lease Term and any other portions thereof, excepting the rental provisions,
as wither party may request. Cost of review and recording to be borne by Tenant.
25.08 INTERPRETATION; CONSENTS.
The section headings used herein are for reference and
convenience only, and shall not enter into the interpretation hereof. This Lease
may be executed in several counterparts, each of which shall be an original, but
all of which shall constitute one and the same instrument. The term "Landlord"
whenever used herein, shall mean only the owner at the time of Landlord's
interest herein, and shall upon any sale or assignment (other than as collateral
security for a loan) of the interest of Landlord herein, its respective
successors in interest and/or assigns shall, during the term of ownership of its
respective estates herein, be deemed to be Landlord and the liability of
Landlord, if any, hereunder shall in any even be limited to the Landlord's
interest in the Building.
Subject to the provisions of the third sentence of Section
7.06 and except for the consents of Landlord required pursuant to the second
sentence of Section 7.06 and Article 13 hereof, consents or approvals required
or requested of either Landlord or Tenant shall not be unreasonably withheld or
delayed.
25.09 ENTIRE AGREEMENT.
No oral statement or prior written matter shall have any force
or effect. This Agreement shall not be modified or cancelled except by writing
subscribed to all parties.
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25.10 PARTIES.
Except as herein otherwise expressly provided, the covenants,
conditions and agreements contained in this Lease shall be binding upon the
heirs, successors and assigns of the parties hereto.
ARTICLE 26
MISCELLANEOUS
26.01 OPTION AT LEASE TERMINATION.
Tenant has the right to renew this Lease for 3 two (2) year
options at then fair market value. Tenant must deliver to Landlord written
notice by certified mail of its intent to exercise each option a minimum of six
(6) Months prior to Lease expiration.
26.02 RIGHT OF FIRST OFFER ON ADDITIONAL SPACE.
Tenant shall have the right of first offer on any space not
under agreement on the 3rd Floor. Any expansion space leased pursuant tot his
paragraph must be leased, at Fair Market Value, a minimum of two (2) years under
the same terms and conditions as provided in this Lease.
Tenant shall have the right of first offer on any basement
storage space not under agreement on or after February 1, 1990. Tenant shall
have the right to utilize any unleased basement secured storage space at no cost
to Tenant.
26.03 PARKING.
Tenant shall be allotted twelve (12) assigned "Viewlogic
Parking" spaces. Landlord guarantees to allocate, if needed, one (1) parking
space for every 275 square feet of rentable space rented if by Tenant.
Allocation of parking spaces will be deemed to be needed Tenant's employees can
not consistently find parking spaces. Tenant will be solely responsible for
enforcing parking rules. Any and all costs incurred in enforcing parking rules
for any parking space allocated pursuant to this paragraph is the responsibly of
the Tenant.
26.04 EXTENDED HOURS HVAC.
Tenant shall have extended hours available for HVAC. Extended
hours shall be defined as 7:00 PM - 7:00 AM Monday through Friday and with 48
hours prior notice, Saturday (except the 4th floor which will be air conditioned
on Saturdays without prior notice) and any time on Sunday or holidays. The
billable rates for air-conditioning shall be:
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$25.00 per hour plus an additional $5.00 per hour for every
10,000 square feet of air conditioned space.
The billable rates for heat shall be:
$10.00 per hour plus an additional $5.00 per hour for every
10,000 square feet of heated space.
26.05 MOVING EXPENSE.
Landlord agrees to move Tenant to Bronx Park II at Landlord's
expense. Landlord to provide liability insurance reasonably sufficient to cover
the actual replacement cost of any Tenant property lost or damaged in connection
with such move and shall in any event, indemnify and hold Tenant harmless for
any loss to Tenant negligence, arising out of such move. Landlord has the option
to perform the move through a duly-licensed third party mover reasonably
satisfactory to Tenant.
26.06 SIGNAGE.
Landlord to provide, subject to the approval of all parties,
two back lighted signs; one on Boston Post Road and one at entrance to building
near flag poles.
26.07 BALCONIES.
Furniture is permitted on outside balconies subject to
Landlord's approval. Tenant acknowledges that it has liability insurance
reasonably sufficient to cover any property lost or damage from such furniture
and use of balconies. Tenant agrees to indemnity and hold Landlord harmless for
any loss form the use of balconies of furniture on balconies.
26.08 REFURBISH FACILITY.
Landlord agrees to refurbish facility, as needed, at the end
of 3-1/2 years from occupancy date, providing the Tenant exercises its renewal
option under the terms and conditions provide in Article 26.01. Refurbishing to
include painting and carpeting where necessary at no charge to Tenant.
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Executed as a sealed instrument as of the 16th day of November, 1989.
Rosewood III Associates, L.P.
(Landlord)
By: /s/ Eligible
----------------------------------
Rosewood Development Corporation
By: /s/ Marc R. Verreault
----------------------------------
Marc R. Verreault,
Vice President of Finance
Viewelogic Systems, Inc.
(Tenant)
By: /s/ Eligible
----------------------------------
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INDEX
LEASE
Exhibit B: PLAN SHOWING TENANT'S SPACE
Exhibit C: MEMORANDUM OF WORK AND
INSTALLATIONS TO BE INITIALLY PERFORMED
AND FURNISHED N THE PREMISES.
Exhibit D: LIST OF DRAWINGS AND SPECIFICATIONS FOR
BASIC BUILDING.
Exhibit F: SERVICES BY LANDLORD
Exhibit G: RULES AND REGULATIONS
Exhibit H: NON-DISTURBANCE AND ATTORNMENT AGREEMENT
Exhibit I: ESTOPPEL LETTER
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293 BOSTON POST ROAD
MARLBORO, MASSACHUSETTS
EXHIBIT B
(PLAN SHOWING TENANT'S SPACE)
Any discrepancy between this Exhibit B and Exhibit C shall be resolved
in favor of Exhibit B.
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293 BOSTON POST ROAD
MARLBORO, MASSACHUSETTS
EXHIBIT C
MEMORANDUM OF WORK AND INSTALLATIONS
TO BE INITIALLY PERFORMED AND FURNISHED IN THE PREMISES
Landlord, at its expense, shall furnish and install in accordance with
construction drawings and specifications prepared and approved pursuant to
Landlord's work, the following materials and work (all to be building standard
unless otherwise expressly stated) in the initial preparation of the Premises
for Tenant's occupancy.
1. DEMISING PARTITIONS
A. PARTY WALL PARTITIONS separating Tenant spaces shall be
constructed of 3 1/2" metal studs with one layer of 1/2"
gypsum wall board on each side, or equivalent, and shall
extend to the underside of structural deck above. Demising
walls shall contain 2 1/2" roll-type fiberglass sound
installation. Exposed wall surfaces will be taped and patched
in preparation for wall finishes.
B. CORRIDOR WALL PARTITIONS separating Tenant spaces from a
common hallway shall be 3 1/2" metal studs with one layer of
5/8" gypsum wall board on each side, or equal, and shall
extend to the underside of structural deck above. Corridor
wall partitions shall contain 2 1/2" roll-type fiberglass
sound insulation. Exposed wall surfaces will be taped and
patched in preparation for wall finishes.
2. INTERIOR PARTITIONS
Walls within the Tenant space shall be constructed of 2 1/2"
metal studs with one layer of 1/2" gypsum wall board on each
side, and extend to the finished ceiling or penetrate the
finished ceiling at the option of the Landlord. Exposed wall
surfaces will be taped and patched in preparation for wall
finishes. The allowance for interior partitions shall be 1
LINEAL FOOT PER 17 SQUARE FEET OF NET FLOOR AREA.
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3. CEILINGS
A. Mechanically suspended 2" x 4' exposed metal grid with
low-gloss color coordinated finish to match specified ceiling
panels.
B. 2' x 4' acoustical lay in panels. Ceiling height to be 8' x 0'
min.
4. DOORS
A. INTERIOR DOOR PACKAGE
One (1) Interior Door Package will be allowed for every 40
LINEAL FEET of allowed wall construction and shall consist of:
(1) 3' -0" x 8' x 1 3/4" solid core hardwood veneer door in a
pressed (16 gage) metal frame.
One and one-half pair of butts.
One standard passage set.
One standard door stop as required.
B. ENTRANCE DOORS TO LEASE AREAS
One (1) Entrance Door Package will be allowed for each Tenant
space, and shall consist of:
(1) 3' -0" x 8' -0" x 1 3/4" solid core veneer oak door in a
pressed (16 gage) metal frame.
One and one-half pair butts.
Chrome lever handle hardware.
One standard door stop as required.
5. FLOOR & WALL BASE
A. TENANT SPACES-Carpeting as provided by Landlord.
B. Common areas to receive carpet or other flooring as traffic
patterns indicate. Color and materials shall be designated by
the Landlord.
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6. PAINTING & WALL COVERINGS
A. Tenant wall surfaces will receive (2) coats of latex paint.
Color designated by Tenant.
B. Entrance doors will receive (1) coat of clear sealer and (2)
coats of clear semi-gloss finish.
C. Tenant's interior doors (to the extent of the Tenant's
allowance) shall receive same as above.
D. Pressed metal door frames to be finished in building standard
color as selected by Landlord.
E. Corridors, lobbies and toilet rooms shall be finished as
selected by the Landlord.
F. Painted Viewlogic lettering on Reception area glass.
7. LIGHTING
A. Recessed 2' x 4' fluorescent troffer fixtures with Parabolic
Lenses accommodating four (3/4) cool white 40-watt fluorescent
tubes. ONE (1) SUCH INSTALLED FIXTURE WILL BE ALLOWED FOR
EVERY 100 SQUARE FEET OF NET FLOOR AREA.
B. Wall switches shall be single pole silent type. ONE (1) SUCH
SWITCH SHALL BE ALLOWED FOR EVERY 350 SQUARE FEET OF NET FLOOR
AREA. Each private office shall have at least one (1) wall
switch which will be included as part of the above allowance.
C. Fixtures, as required, either fluorescent or incandescent,
shall be installed in all common areas and maintained by
Landlord.
8. ELECTRICAL SERVICE
A. ONE (1) DUPLEX WALL OUTLET WILL BE PROVIDED FOR EVERY (100)
SQUARE FEET OF NET FLOOR AREA.
9. TELEPHONE
Installation of wall outlets and wiring shall be provided by a
telephone company at the Tenant's expense, subject to the
approval by Landlord.
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10. HEATING, VENTILATION AND AIR CONDITIONING
The Landlord will provide a zoned heating, ventilating and air
conditioning system.
11. PARKING AREA
A passenger vehicle parking area will be provided and
maintained by the Landlord. Special areas will be designated
for the handicapped.
12. LANDSCAPING
The grounds and parking areas will be landscaped as specified
by the Landlord. All landscaped areas will be maintained by
the Landlord.
Landlord to provide one-half (1/2) length basketball court
with regulation height basket.
13. STAIRCASE
Landlord to install center staircase between floors 4 and 5.
14. TOILET ROOMS
A men's toilet and a women's toilet will be maintained on each
floor. Toilet rooms will be designed for the handicapped on
the ground floor for accessibility. Each toilet room will be
suitably ventilated and equipped with metal toilet stall
partitions.
15. MISCELLANEOUS PLUMBING CONNECTIONS
Cold water and plumbing drains are available at the Building
core for connection to Tenant facilities at the Tenant's
expense. Connection to be done only by licensed plumber and
with Landlord's approval.
16. FIRE PROTECTION SYSTEM
Hazardous use of the Tenant's space may require special fire
protection systems beyond those normally furnished in the
Building. Such additional systems shall be installed at the
Tenant's expense.
17. ELEVATOR
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The Landlord shall provide and maintain a fully automatic
passenger/service elevator to be located in the core area of
the Building.
18. FLOOR LOADING
The design floor live loading of tenant spaces is 50 pounds
per square foot, uniformly distributed. Use of the Tenant's
space which exceeds the Building design may require additional
structural support at the Tenant's expense.
19. OTHER
All build-out shown in Exhibit B including built-in cabinets
and reception area.
48
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293 BOSTON POST ROAD
MARLBORO, MASSACHUSETTS
EXHIBIT D
(LIST OF DRAWINGS AND SPECIFICATIONS FOR BASIC BUILDING)
Site Plan # by Greenman Pederson, Inc. Engineering.
A- through A- dated by Anderson Nichols, Inc., 150 Causeway Street, Boston,
Mass.
49
<PAGE>
293 BOSTON POST ROAD
MARLBORO, MASSACHUSETTS
EXHIBIT F
SERVICES TO BE FURNISHED BY LANDLORD
(AS COMMON AREA EXPENSES)
A. Replacement of fluorescent tubes and starters in overhead parabolic
light fixtures as needed.
B. Hot and cold water for lavatory and drinking purposes.
C. Toilet supplies including soap, paper or cloth towels, and toilet
tissue for lavatories.
D. Janitor services in accordance with the following schedule and to be
accomplished unless otherwise indicated, five nights per week after
Tenant's normal working hours:
ENTRANCE DOORS: Entrance glass will be cleaned nightly.
ENTRANCE FLOOR: Entrance floor will be polished nightly.
BROADLOOM: All carpeted areas will be vacuumed nightly.
Broadloom will be shampooed upon request, at
an additional cost to Tenant. Carpet will be
spot cleaned every six (6) months as a
common area expense.
WASTEPAPER CONTAINERS: Wastepaper containers will be emptied
nightly; plastic liner bags will be provided
for wastepaper containers; liners will be
changed once a week.
WATER FOUNTAINS: All water fountains will be sanitized and
polished nightly.
50
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WASHROOMS: Washrooms will be cleaned and serviced
nightly. This will include refilling all
paper towel, toilet tissue, and soap
dispensers, cleaning all towel and trash
containers, cleaning and polishing all
stainless steel fixtures, cleaning toilets,
washing and sanitizing all wash basins and
shelves, cleaning and polishing all mirrors,
removing all disfigurements such as ink
marks, drawings, etc. from all partitions
and walls, damp mopping of floors.
SCUFF MARKS: All scuff marks will be removed nightly from
all scuff plates on doors.
TILE FLOORS: All floors will be swept nightly. All
corridors and office floors will be polished
every night. Floors will be stripped
whenever necessary.
CAFETERIA: Table and counters will be cleaned daily.
E. Proper care of grounds surrounding the Building, including care of
lawns and shrubs and including removal of litter.
F. Maintaining and cleaning the sidewalks and parking areas in front of
and around the Building including snow removal.
G. Provision of adequate lighting for the parking areas servicing the
Building.
H. Exterior windows will be washed annually as a common area expense.
I. HVAC (Heating, Ventilation, and Air-Conditioning) during normal
business hours (i.e. non-extended hours).
J. All janitorial services will be provided as late as possible so as not
to interfere with Tenant's employees. Janitorial service will be
scheduled following that of all other tenants in the Building.
K. The 5th floor temperature whill be maintained within 60 degrees F and
80 degrees F during extended hours. If Tenant has a concentration of
computer equipment that generates heat sufficient to damage equipment,
Tenant then must provide air conditioning for that concentrated area.
293 BOSTON POST ROAD
51
<PAGE>
MARLBORO, MASSACHUSETTS
EXHIBIT G
RULES AND REGULATIONS
1. Heating, lighting and plumbing: The Landlord should be notified at once
of any trouble with heating, lighting or plumbing fixtures. Tenants
must not leave the doors of the Premises unlocked at night.
2. The sidewalks, entrances, halls and stairways shall not be obstructed
by any Tenant or used for any purposes other than ingress and egress to
and from their respective Premises, and no articles or rubbish shall be
left herein.
3. No toilet fixture shall be used for any purpose other than that for
which it is intended, and no sweepings, rubbish, rags, ashes or other
substances shall be thrown herein.
4. The weight and position of all safes and heavy equipment or machines
shall be subject to the approval of the Landlord.
5. Lettering on doors, tablets and building directory shall be subject to
the approval of the Landlord; no lettering shall be all allowed on
outside windows.
6. No wires for telephone service, electric lights, messenger service or
for any other purpose shall be put in the Premises without the consent
of the Landlord.
7. No glass in doors or elsewhere through which light is admitted in to
any part of the building shall be obstructed.
8. No animals or birds shall be kept in or about the Building.
9. All freight, furniture, etc. must be received and delivered through
entrances to the Building designated for such purpose unless otherwise
authorized by the Landlord.
10. Nothing shall be thrown from or taken in through the windows, nor shall
anything be left outside the Building on the window sills of the
Premises.
11. No person shall loiter in the halls, corridors, or lavatories.
12. The Landlord, its agents and employees shall have access at reasonable
times to perform their duties in the maintenance and operation of the
Premises.
52
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13. No Tenant shall use any method of heating other than that provided for
in the Tenant's Lease without the consent of the Landlord.
14. Any damage caused to the Building or the Premises or to any person or
property herein as a result of any breach of any of the rules and
regulations by the Tenant shall be borne by the Tenant.
15. The Landlord reserves the right to make any such other and further
rules and regulations as, in its judgement, may from time to time be
necessary for maintaining the safety and cleanliness of the Premises
and Building for the preservation of good order therein.
53
<PAGE>
EXHIBIT H
A G R E E M E N T
THIS AGREEMENT dated the 16th day of November, 1989, between Rosewood
III Associates Limited Partnership, having its principal place of business c/o
Rosewood Development Corporation, 33 Boston Post Road West, Marlboro,
Massachusetts (hereinafter referred to as Mortgagee), and Viewlogic Systems,
Inc. (hereinafter referred to as Tenant).
WITNESSETH:
WHEREAS, Tenant has entered into a lease dated November 16, 1989
(hereinafter referred to as the Lease with Rosewood III Associates Limited
Partnership (the "Landlord"), leasing certain premises on 292 Boston Post Road,
Marlboro, Massachusetts (the "Premises") which Premises are more particularly
described in the Lease; and
WHEREAS, the mortgagee is the holder of a promissory note from the
Landlord in the sum of $18,000,000.00 Eighteen Million Dollars secured by a
mortgage upon the property of which the Premises are a part (the "Mortgage"),
the lien of the Mortgage being prior to the Tenant's leasehold estate; and
WHEREAS, Tenant desires to be assured of the continued use and
occupancy of the Premises under the terms of the Lease; and
WHEREAS, Mortgagee agrees to such continued use and occupancy by Tenant
provided that Tenant hereby agrees to recognize and attorn to Mortgagee or
purchaser in the event of foreclosure or otherwise.
NOW, THEREIN, in consideration of the Premises and the mutual covenants
contained herein, parties hereto agree as follows:
1. In the event it should become necessary to foreclose the said
Mortgage or Mortgagee should otherwise come into possession of the Premises,
Mortgagee will not join Tenant in summary of foreclosure proceedings and will
not disturb the use and occupancy of Tenant under the Lease so long as Tenant is
not in default under any other terms, covenants or conditions of said Lease has
not prepaid the rent except as provided herein.
2. Tenant, in the event any proceedings are brought for the
foreclosure of any such Mortgage, will attorn to the Mortgagee or to any
purchaser at such foreclosure sale and recognize such purchaser as a Landlord
under said Lease. Mortgagee or such purchaser by virtue of such foreclosure
shall be deemed to have assumed and agreed to be bound, as substitute
Landlord, by the terms and conditions by the Lease until the resale or other
deposition of the
54
<PAGE>
Premises, except that such assumption shall not be deemed of itself an
acknowledgment of the validity of any then existing claims of Tenant against
the Landlord. Tenant agrees to execute and deliver to the Mortgagee or any
such purchaser such further assurances and other documents confirming the
foregoing as either may reasonably request including a new Lease upon the
same terms conditions as the Lease. Tenant waives the provisions of any
statute or rule of law now or hereafter in effect which may give or purport
to give it any right or election to terminate or otherwise adversely the
Lease and the obligations of Tenant thereunder by reason of any such
foreclosure proceeding.
The provisions of the Agreement shall be binding upon and inure to the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
an instrument under seal as of the day and year first above written.
By:
-----------------------------------
Mortgagee
By:
-----------------------------------
Tenant
The terms of the above Agreement are hereby consented and agreed to:
By:
-----------------------------------
Landlord
55
<PAGE>
EXHIBIT I
RE:
Gentlemen:
The undersigned, as Tenant under that certain Lease dated November 16,
1989 made with Rosewood III Associates, Limited Partnership as Landlord, hereby
certifies that:
1. The Premises at the above location have been completed in accordance
with the terms of the Lease; that it has accepted possession of said
Premises; and that it now occupies the same;
2. Tenant began paying rent on , 19 and that no rental has been paid
in advance except as required or permitted by the terms of the Lease.
3. There exists no defense or offset to enforcement of the Lease by the
Landlord and there is, as of the date hereof, no default or breach on
the part of the Landlord under the Lease known to the undersigned.
4. The Lease is now in full force and effect and has not been amended,
modified or assigned, except by agreements dated
(if none so state).
It is understood that you require this statement from the undersigned
as a condition to the making of a loan to the Landlord secured by a first
mortgage on property of which the Premises are a part and also by an assignment
of the Lease as collateral security.
Dated: , 19 .
Tenant
56
<PAGE>
FIRST LEASE AMENDMENT
Agreement made this 15th day of June 1990, by and between Rosewood III
Associates, with a mailing address c/o Rosewood Development Corporation, 33
Boston Post Road West, Marlborough, Massachusetts, 01752 (hereinafter referred
to as "Landlord") and Viewlogic Systems, Inc., with a principal place of
business at 293 Boston Post Road West, Marlborough, Massachusetts, 01752,
(hereinafter referred to as "Tenant").
WHEREAS, Landlord and Tenant have entered into a certain lease dated November
16, 1989, (hereinafter referred to as the "Lease"), relating to a certain space
at 293 Boston Post Road West, Marlborough, Massachusetts, 01752.
WHEREAS, Landlord and Tenant have agreed to modify and amend the Lease by
modifying the Annual Fixed Rent and to make such other modifications and
amendments to the Lease as may be necessary, all as more fully set forth
hereinbelow, which modifications and amendments shall be effective as of July 1,
1990 or when space is substantially complete, whichever is later.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom "Suites 400 & 500" set forth in the subsection thereof
entitled "Tenant's Space" and by substituting therefor "Suites 400, 500, 50, 60,
70 and 90".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figure "53,749 Rentable (44,612 Usable) Square Feet" set
forth in the subsection thereof entitled "Rentable Floor Area of Tenant's Space"
and by substituting therefor the figure "68,976 Rentable (47,250 Usable) Square
Feet".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the date "February 1, 1990" set forth in the subsection
thereof entitled "Occupancy Date" and by substituting therefor the dated
February 12, 1990".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the Rent Schedule set forth in the subsection thereof
entitled "Basic Rent" and by substituting therefor the "Schedules A and B" as
attached hereto.
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figures "31.20% & 37.52%" set forth in the subsection
thereof entitled "Tenant's Share" and by substituting therefor the figure "40%".
57
<PAGE>
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figure "$70,769.52" set forth in the subsection thereof
entitled "Security Deposit" and by substituting therefor the figure
"$86,922.30".
Landlord and Tenant hereby agree that the amendments and modifications set forth
hereinabove shall be effective July 1, 1990 or when space is substantially
complete, whichever is later.
Landlord and Tenant hereby agree that except as hereinabove specifically
modified and amended, the Lease is and shall remain in full force and effect in
accordance with the terms and provisions set forth in the Lease.
Landlord and Tenant hereby agree that all buildout will be completed at
Landlord's expense. Tenant agrees to pay the Landlord's construction company for
the buildout cost. Payments will be made in three equal installments at 30, 60
and 90 days from the date of occupancy. Tenant will reduce the monthly rental
payment applicable to the additional space only by the amount of buildout cost.
The reduction in rental payments applicable to the buildout of additional space
shall only be deducted from rent attributable to the additional space and not
the 53,749 feet currently occupied.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed the Lease Amendment
under seal as of the 15TH day of JUNE, 1990.
Rosewood III Associates, L.P.
/s/ Robert J. Depietri, Jr.
- --------------------------------------
Robert J. Depietri, Jr.
Rosewood Management Associates, Inc.
/s/ Marc. R. Verreault
- --------------------------------------
Marc R. Verreault
Vice President of Finance
Viewlogic Systems, Inc.
/s/ Eligible
- --------------------------------------
58
<PAGE>
SECOND LEASE AMENDMENT
Agreement made this 22nd day of August, 1991 by and between Rosewood III
Associates, with mailing address c/o Rosewood Development Corporation, 293
Boston Post Road West, Suite 320, Marlborough, Massachusetts, 01752 (hereafter
referred to as "Landlord") and Viewlogic Systems, Inc., with a principal place
of business at 293 Boston Post Road West, Marlborough, Massachusetts, 01752
(hereinafter referred to as "Tenant").
WHEREAS, Landlord and Tenant have entered into a certain lease dated November
16, 1989 (hereinafter referred to as the "Lease") relating to a certain space at
293 Boston post Road West, Marlborough, Massachusetts, 01752.
WHEREAS, Landlord and Tenant have agreed to modify and amend the Lease by
modifying the Annual Fixed Rent and to make such other modifications and
amendments to the Lease as may be necessary, all as more fully set forth
hereinbelow, which modifications and amendments shall be effective as of
September 1, 1991 or when space is substantially complete, whichever is later.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom "Suites 400, 500, 50, 70, 80 and 90" set forth in the
subsection thereof entitled "Tenant's Space" and by substituting therefor
"Suites 400, 500, 30, 50, 70, and 90".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figure "68,976 Rentable (57,250 Usable) Square Feet" set
forth in the subsection thereof entitled "Rentable Floor Area of Tenant's Space"
and by substituting therefor the figure "70,969 Rentable (58,904 Usable) Square
Feet".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the Rent Scheduled set forth in the subsection thereof
entitled "Basic Rent" and by substituting therefor the "Schedules A and B" as
attached hereto.
Section 1.01 of Article 1 is hereby further modified and amended by deleting
therefrom the figures "31.20% & 40%" set forth in the subsection thereof
entitled "Tenant's Share" and by substituting therefor the figure "41.2%".
Landlord and Tenant hereby agree that the amendments and modifications set forth
hereinabove shall be effective September 1, 1991 or when space is substantially
complete, whichever is later.
59
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Landlord and Tenant hereby agree that except as hereinabove specifically
modified and amended, the Lease is and shall remain in full force and effect in
accordance with the terms and provisions set forth in the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed the Lease Amendment
under seal as of the 22ND day of AUGUST, 1991.
LANDLORD: Rosewood III Associates
/s/ Eligible
--------------------------------------
/s/ Mark J. Mistretta
--------------------------------------
Mark J. Mistretta
Controller
TENANT: Viewlogic Systems, Inc.
/s/ Eligible
--------------------------------------
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<PAGE>
THIRD LEASE AMENDMENT
Agreement made this 30th day of October, 1991 by and between Rosewood III
Associates, with mailing address c/o Rosewood Development Corporation, 293
Boston Post Road West, Suite 320, Marlborough, Massachusetts, 01752 (hereafter
referred to as "Landlord") and Viewlogic Systems, Inc., with a principal place
of business at 293 Boston Post Road West, Marlborough, Massachusetts, 01752
(hereinafter referred to as "Tenant").
WHEREAS, Landlord and Tenant have entered into a certain lease dated November
16, 1989 (hereafter referred to as the "Lease") relating to a certain space at
293 Boston Post Road West, Marlborough, Massachusetts, 01752.
WHEREAS, Landlord and Tenant have agreed to modify and amend the Lease by
modifying the Annual Fixed Rent and to make such other modifications and
amendments to the Lease as may be necessary, all as more fully set forth
hereinbelow, which modifications and amendments shall be effective as of January
1, 1992 or when space is substantially complete, whichever is later.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom "Suites 400, 500, 30, 50, 70 and 90" set forth in the
subsection thereof entitled "Tenant's Space" and by substituting therefor
"Suites 300, 400, 500, 30, 50, 70, and 90".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figure "70,969 Rentable (58,904 Usable) Square Feet" set
forth in the subsection thereof entitled "Rentable Floor Area of Tenant's Space"
and by substituting therefor the figure "87,198 Rentable (72,374 Usable) Square
Feet".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the Rent Schedule set forth in the subsection thereof
entitled "Basic Rent" and by substituting therefor the "Schedules A and B" as
attached hereto.
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figures "41.2%" set forth in the subsection thereof
entitled "Tenant's Share" and by substituting therefor the figure "53.5%".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the dates "February 12, 1990 to February 11, 1994" set forth
in the subsection thereof entitled (Term) and by substituting therefor the dates
"February 12, 1990 to May 11, 1995".
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Landlord and Tenant hereby agree that Landlord shall use its best efforts to
guarantee Tenant space on the third floor for its future expansion needs. Tenant
shall have right of first offer on all adjacent space on the third floor when
any existing leases expire and Landlord is released from all legal obligation
from Tenants presently occupying said space.
Landlord and Tenant hereby agree that the amendments and modifications set forth
hereinabove shall be effective January 1, 1992 or when space is substantially
complete, whichever is later.
Landlord and Tenant hereby agree that except as hereinabove specifically
modified and amended, the Lease is and shall remain in full force and effect in
accordance with the terms and provisions set forth in the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed the Lease Amendment
under seal as of the 30TH day of OCTOBER, 1991.
LANDLORD: Rosewood III Associates
/s/ Eligible
--------------------------------------
Rosewood Management Associates
/s/ Lisa A. Depicto
--------------------------------------
TENANT: Viewlogic Systems, Inc.
/s/ Eligible
--------------------------------------
62
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FOURTH LEASE AMENDMENT
Agreement made this 17th day of September, 1993 by and between Rosewood III
Associates, with mailing address c/o Rosewood Development Corporation, 293
Boston Post Road West, Suite 320, Marlborough, Massachusetts, 01752 (hereafter
referred to as "Landlord") and Viewlogic Systems, Inc., with a principal place
of business at 293 Boston Post Road West, Marlborough, Massachusetts, 01752
(hereinafter referred to as "Tenant").
WHEREAS, Landlord and Tenant have entered into a certain lease dated November
16, 1989 (hereinafter referred to as the "Lease") relating to a certain space at
293 Boston Post Road West, Marlborough, Massachusetts, 01752.
WHEREAS, Landlord and Tenant have agreed to modify and amend this Lease by
modifying the Annual Fixed Rent and to make such other modifications and
amendments to the Lease as may be necessary, all as more fully set forth
hereinbelow, which modifications and amendments shall be effective as of
September 17, 1993 or when space is substantially complete, whichever is later.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figure "87,198 Rentable (72,374 Usable) Square Feet" set
forth in the subsection thereof entitled "Rentable Floor Area of Tenant's Space"
and by substituting therefor the figure "98,573 Rentable (81,816 Usable) Square
Feet.
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the Rent Schedule set forth in the subsection thereof
entitled "Basic Rent" and by substituting therefor the "Schedules A and B" as
attached hereto.
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figures "53.3%" set forth in the subsection thereof
entitled "Tenant's Share" and by substituting therefor the figure "60.22%".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the dates "February 12, 1990 to February 11, 1994" set forth
in the subsection thereof entitled (Term) and by substituting therefor the dates
"February 12, 1990 to February 28, 1999".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figure "$86,922.30" set forth in the subsection thereof
entitled "Security Deposit" and by substituting therefor the figure
"$109,304.80".
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Landlord and Tenant hereby agree that the amendments and modifications set forth
hereinabove shall be effective September 1, 1993 or when space is substantially
complete, whichever is later.
Landlord and Tenant hereby agree that except as hereinabove specifically
modified and amended, the Lease is and shall remain in full force and effect in
accordance with the terms and provisions set forth in the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed the Lease Amendment
under seal as of the ____ day of September, 1993.
LANDLORD: Rosewood III Associates, L.P.
/s/ Eligible
--------------------------------------
Rosewood Management Associates
/s/ Eligible
--------------------------------------
TENANT: Viewlogic Systems, Inc.
/s/ Eligible
--------------------------------------
64
<PAGE>
FIFTH LEASE AMENDMENT
Agreement made this 7th day of February, 1995 by and between Rosewood III
Associates, L.P. with mailing address at 293 Boston Post Road West, Suite 320,
Marlborough, Massachusetts, 01752 (hereinafter referred to as "Landlord") and
Viewlogic Systems, Inc. with a principal place of business at 293 Boston Post
Road West, Marlborough, Massachusetts, 01752 (hereinafter referred to as
"Tenant").
WHEREAS, Landlord and Tenant have entered into a certain lease dated November
16, 1989 (hereinafter referred to as the "Lease") relating to a certain space at
293 Boston Post Road West, Marlborough, Massachusetts, 01752.
WHEREAS, Landlord and Tenant have agreed to modify and amend the Lease by
modifying the Annual Fixed Rent and to make such other modifications and
amendments to the Lease as may be necessary, all as more fully set forth
hereinbelow, which modifications an amendments shall be effective as of March 1,
1995 or when space is substantially complete, whichever is later.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figure "98,573 Rentable (81,816 Usable) Square Feet" set
forth in the subsection thereof entitled "Rentable Floor Area of Tenant's Space"
and by substituting therefor the figure "98,754 Rentable (81,966 Usable) Square
Feet".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the Rent Schedule set forth in the subsection thereof
entitled "Basic Rent" and by substituting therefor the "Schedule A" as attached
hereto.
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figures "60.22%" set forth in the subsection thereof
entitled "Tenant's Share" and by substituting therefor the figure "60.33."
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the dates "February 12, 1990 to February 11, 1994" set forth
in the subsection thereof entitled (Term) and by substituting therefor the dates
"February 12, 1990 to February 28, 2000".
Landlord and Tenant hereby agree that the amendments and modifications set forth
hereinabove shall be effective March 1, 1995.
65
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Viewlogic Systems, Inc.
Fourth Lease Amendment
Page 2
Landlord and Tenant hereby agree that except as hereinabove specifically
modified and amended the Lease is and shall remain in full force and effect in
accordance with the terms and provisions set forth in the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed the Fourth Lease
Amendment under seal as of the ___ day of February, 1995.
LANDLORD: Rosewood III Associates, L.P.
/s/ Robert J. Depietri, Jr.
--------------------------------------
Robert J. DePietri, Jr.
TENANT: Viewlogic Systems, Inc.
/s/ Eligible
--------------------------------------
66
<PAGE>
SIXTH LEASE AMENDMENT
Agreement made this 12th day of February, 1996 by and between Rosewood III
Associates, L.P., with mailing address at 293 Boston Post Road West, Suite 320,
Marlborough, Massachusetts, 01752 (hereinafter referred to as "Landlord") and
Viewlogic Systems, Inc., with a principal place of business at 293 Boston Post
Road Wet, Marlborough, Massachusetts, 01752 (hereinafter referred to as
"Tenant").
WHEREAS, Landlord and Tenant have entered into a certain lease dated November
16, 1989 and subsequent Amendments dated June 15, 1990, August 22, 1991, October
30, 1991, September 17, 1993, February 7, 1995 (hereinafter referred to as the
"Lease") relating to a certain space at 293 Boston Post Road West, Marlborough,
Massachusetts, 01752.
WHEREAS, Landlord and Tenant have agreed to modify and amend the Lease by
modifying the Annual Fixed Rent and to make such other modifications and
amendments to the Lease as may be necessary, all as more fully set forth
hereinbelow, which modifications and amendments shall be effective as of May 1,
1996 or when space is substantially complete, whichever is later.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figure "98,754 Rentable (81,966 Usable) Square Feet" set
forth in the subsection thereof entitled "Rentable Floor Area of Tenant's Space"
and by substituting therefore the figure "101,585 Rentable (84,316 Usable)
Square Feet".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the Rent Schedule set forth in the subsection thereof
entitled "Basic Rent" and by substituting therefor the "Schedule A" as attached
hereto.
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the figures "60.33%" set forth in the subsection thereof
entitled "Tenant's Share" and by substituting therefor the figure "62.06%".
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the dates "February 12, 1990 to February 28, 2000" set forth
in the subsection thereof entitled (Term) and by substituting therefor the dates
"February 12, 1990 to May 1, 2002".
Landlord and Tenant hereby agree that the amendments and modifications set forth
hereinabove shall be effective upon completion of construction and shall run for
a period of six (6) years from its completion.
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Landlord and Tenant hereby agree that except as hereinabove specifically
modified and amended, the Lease is and shall remain in full force and effect in
accordance with the terms and provisions set forth in the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed the Fifth Lease
Amendment under seal as of the 13TH day of February, 1996.
LANDLORD: Rosewood III Associates, L.P.
/s/ Robert J. Depietri, Jr.
---------------------------------
Robert J. Depietri, Jr.
TENANT: Viewlogic Systems, Inc.
/s/ Eligible 2-13-96
---------------------------------
68
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SEVENTH LEASE AMENDMENT
-----------------
Agreement made this 28th day of October, 1996 by and between Rosewood III
Associates, L.P., with mailing address at 293 Boston Post Road West, Suite 320,
Marlborough, Massachusetts, 01752 (hereinafter referred to as "Landlord") and
Viewlogic Systems, Inc., with a principal place of business at 293 Boston Post
Road West, Marlborough, Massachusetts, 01752, (hereinafter referred to as
"Tenant").
WHEREAS, Landlord and Tenant have entered into a certain lease dated November
16, 1989 and subsequent Amendments dated June 15, 1990, August 22, 1991, October
30, 1991, September 17, 1993, February 7, 1995, February 12, 1996 (hereinafter
referred to as the "Lease") relating to a certain space at 293 Boston Post Road
West, Marlborough, Massachusetts, 01752.
WHEREAS, Landlord and Tenant have agreed to modify and amend the Lease by
modifying the Annual Fixed Rent and to make such other modifications and
amendments to the Lease as may be necessary, all as more fully set forth
hereinbelow, which modifications and amendments shall be effective as of
November 1, 1996.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
Section 1.01 of said Article 1 is hereby further modified and amended by
deleting therefrom the dates "February 12, 1990 to February 28, 2000" set forth
in the subsection thereof entitled (Term) and by substituting therefor the dates
"February 12, 1990 to October 31, 2002".
Landlord and Tenant hereby agree that except as hereinabove specifically
modified and amended, the Lease is and shall remain in full force and effect in
accordance with the terms and provisions set forth in the Lease.
IN WITNESS WHEREOF. Landlord and Tenant have duly executed the Seventh Lease
Amendment under seal as of the 30TH day of OCTOBER, 1996.
LANDLORD: TENANT:
Rosewood III Associates, L.P. Viewlogic Systems, Inc
/s/ Robert J. Depietri, Jr. /s/ David Adey
- ------------------------------ -----------------------------
Robert J. Depietri, Jr. David Adey
Its: General Partner Its: Vice President of Human Resources 19
69
<PAGE>
VIEWLOGIC
RENT SCHEDULE A
<TABLE>
<CAPTION>
OFFICE OFFICE STORAGE STORAGE
ANNUAL TOTAL ANNUAL TOTAL TOTAL
DATE FIXED MONTHLY FIXED MONTHLY MONTHLY
RENT OFFICE RENT FIXED STORAGE RENT FIXED FIXED
DUE SF P.S.F. RENT SF P.S.F. RENT RENT
- ----- ------ ------ ----------- ------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1/1/96 92,340 $16.00 $123,120.00 6,414 $5.00 $2,672.50 $125,792.50
2/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
3/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
4/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
5/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
6/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
7/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
8/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
9/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
10/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
- ---------------------------------------------------------------------------------
11/1/96 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
12/1/96 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
1/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
2/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
3/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
4/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
5/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
6/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
7/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
8/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
9/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
10/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
11/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
12/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
1/1/98 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
2/1/98 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
3/1/98 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
- ---------------------------------------------------------------------------------
4/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
5/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
6/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
7/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
8/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
9/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
10/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
11/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
12/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
1/1/99 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
2/1/99 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
3/1/99 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
- ---------------------------------------------------------------------------------
4/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
5/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
6/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
7/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
70
<PAGE>
8/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
9/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
10/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
11/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
12/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
1/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
2/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
3/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
4/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
71
<PAGE>
5/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
6/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
7/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
8/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
9/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
10/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
- ---------------------------------------------------------------------------------
11/1/2000 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
12/1/2000 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
1/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
2/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
3/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
4/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
5/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
6/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
7/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
8/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
9/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
10/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
11/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
12/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
1/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
2/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
3/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
4/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
5/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
6/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
7/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
8/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
9/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
10/1/202 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
</TABLE>
72
<PAGE>
EXHIBIT 10.48
SECURED PROMISSORY NOTE
August 11, 1999
$21,963.48 Marlboro, Massachusetts
FOR VALUE RECEIVED Paula J. Cassidy and John F. Cassidy III, who reside
at 4 Dana Circle, Milford, MA 01757 (collectively and individually the
"Maker"), promises to pay to Viewlogic Systems, Inc., or order, at the
offices of Viewlogic Systems, Inc. in Marlboro, Massachusetts, or at such
other place as the holder of this Note may designate in writing, the
principal sum of $21,963.48, without interest. The entire unpaid principal
amount of this Note shall be due and payable on the earliest of the following
dates:
a. The date which is the seventh anniversary of the date of this Note.
b. The date which is eighteen months after the first date, if any, on
which the common stock of Viewlogic Systems, Inc. (or any security
substituted therefor) is listed on a national securities exchange
or the NASDAQ stock market.
c. Immediately upon the occurrence of an Event of Default hereunder or
as defined in the Stock Pledge Agreement referenced below.
d. The date which is three months after the termination of the Maker's
employment with the Company for any reason or no reason.
e. The date which is one month before the Final Exercise Date, as
defined in the option agreement between the Maker and the Company
under which the Maker acquired the collateral securing this Note.
All payments by the Maker under this Note shall be in immediately available
funds.
Payment of this Note is secured by a security interest in certain shares
of common stock of Viewlogic Systems, Inc. owned by the Maker (the
"Collateral") pursuant to a stock pledge agreement of even date herewith
between the Maker and Viewlogic Systems, Inc. (the "Stock Pledge Agreement").
Upon the occurrence of an Event of Default hereunder or as defined in
the Stock Pledge Agreement, the holder shall have then, or at any time
thereafter, all of the rights and remedies afforded by the Uniform Commercial
Code as from time to time in effect in the Commonwealth of Massachusetts or
afforded by other applicable law, subject to the limitations set forth is
this Note or the Stock Pledge Agreement relating to the liability of the
Maker for payment of any deficiency due hereunder or under the Stock Pledge
Agreement.
Notwithstanding anything to the contrary in this Note, the Stock Pledge
Agreement or otherwise, Viewlogic Systems, Inc. and each other holder of this
Note acknowledge and agree
-1-
<PAGE>
that the entire liability and obligation of the Maker under, or in connection
with, this Note is limited to the surrender of the Collateral, plus, if the
value of the Collateral at the time of any surrender thereof is not
sufficient to satisfy Maker's then outstanding liabilities and obligations
under this Note, the payment, in cash or by bank or certified check, of an
amount equal to the lesser of (a) one half of the original principal amount
of this Note and (b) the entire amount remaining unpaid under this Note after
applying the value of the Collateral.
No reference in this Note to the Stock Pledge Agreement or any guaranty
shall impair the obligation of the Maker to pay all amounts due under this Note
strictly in accordance with the terms of this Note.
No delay or omission on the part of the holder in exercising any right
under this Note or the Stock Pledge Agreement shall operate as a waiver of such
right or of any other right of such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar to or waiver of the same or any other
right on any future occasion. The Maker and every endorser or guarantor of this
Note regardless of the time, order or place of signing waives presentment,
demand, protest and notices of every kind (except as expressly set forth in this
Note or the Stock Pledge Agreement) and assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of Collateral, and to the addition or release of any other party or
person primarily or secondarily liable.
This Note may be prepaid in whole or in part at any time or from time to
time. Any such prepayment shall be without premium or penalty. Immediately
upon the payment or prepayment in whole of this Note, the Collateral shall be
released to Maker, free and clear of all liens, encumbrances and security
interests created or held by holder.
None of the terms or provisions of this Note may be excluded, modified or
amended except by a written instrument duly executed on behalf of the Maker and
the holder, expressly referring to this Note and setting forth the provision so
excluded, modified or amended.
All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts, excluding its rules regarding conflict of laws,
and this Note is executed as an instrument under seal.
-2-
<PAGE>
ATTEST: MAKER
By: /s/ Donna Ziegler /s/ Paula J. Cassidy
------------------------------ --------------------------------
Title: Benefit Analyst Print Name: Paula J. Cassidy
--------------------------- ---------------------
ATTEST: MAKER
By: /s/ Peter T. Johnson /s/ John F. Cassidy III
------------------------------ --------------------------------
Title: V.P. Print Name: John F. Cassidy III
--------------------------- ---------------------
-3-
<PAGE>
EXHIBIT 10.49
SECURED PROMISSORY NOTE
August 11, 1999
$69,300.00 Marlboro, Massachusetts
FOR VALUE RECEIVED Peter T. Johnson and Andrea R. Johnson, who reside at
14 Brook Street, North Walpole, MA 02081 (collectively and individually the
"Maker"), jointly and severally promise to pay to Viewlogic Systems, Inc., or
order, at the offices of Viewlogic Systems, Inc. in Marlboro, Massachusetts,
or at such other place as the holder of this Note may designate in writing,
the principal sum of $69,300.00, without interest. The entire unpaid
principal amount of this Note shall be due and payable on the earliest of the
following dates:
a. The date which is the seventh anniversary of the date of this Note.
b. The date which is eighteen months after the first date, if any, on
which the common stock of Viewlogic Systems, Inc. (or any security
substituted therefor) is listed on a national securities exchange
or the NASDAQ stock market.
c. Immediately upon the occurrence of an Event of Default
hereunder or as defined in the Stock Pledge Agreement referenced
below.
d. The date which is three months after the termination of the Maker's
employment with the Company for any reason or no reason.
e. The date which is one month before the Final Exercise Date, as
defined in the option agreement between the Maker and the Company
under which the Maker acquired the collateral securing this Note.
All payments by the Maker under this Note shall be in immediately available
funds.
Payment of this Note is secured by a security interest in certain shares of
common stock of Viewlogic Systems, Inc. owned by the Maker (the "Collateral")
pursuant to a stock pledge agreement of even date herewith between the Maker and
Viewlogic Systems, Inc. (the "Stock Pledge Agreement").
Upon the occurrence of an Event of Default hereunder or as defined in the
Stock Pledge Agreement, the holder shall have then, or at any time thereafter,
all of the rights and remedies afforded by the Uniform Commercial Code as from
time to time in effect in the Commonwealth of Massachusetts or afforded by other
applicable law, subject to the limitations set forth is this Note or the Stock
Pledge Agreement relating to the liability of the Maker for payment of any
deficiency due hereunder or under the Stock Pledge Agreement.
Notwithstanding anything to the contrary in this Note, the Stock Pledge
Agreement or
-1-
<PAGE>
otherwise, Viewlogic Systems, Inc. and each other holder of this Note
acknowledge and agree that the entire liability and obligation of the Maker
under, or in connection with, this Note is limited to the surrender of the
Collateral, plus, if the value of the Collateral at the time of any surrender
thereof is not sufficient to satisfy Maker's then outstanding liabilities and
obligations under this Note, the payment, in cash or by bank or certified
check, of an amount equal to the lesser of (a) one half of the original
principal amount of this Note and (b) the entire amount remaining unpaid
under this Note after applying the value of the Collateral.
No reference in this Note to the Stock Pledge Agreement or any guaranty
shall impair the obligation of the Maker to pay all amounts due under this
Note strictly in accordance with the terms of this Note.
No delay or omission on the part of the holder in exercising any right
under this Note or the Stock Pledge Agreement shall operate as a waiver of
such right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of the
same or any other right on any future occasion. The Maker and every endorser
or guarantor of this Note regardless of the time, order or place of signing
waives presentment, demand, protest and notices of every kind (except as
expressly set forth in this Note or the Stock Pledge Agreement) and assents
to any extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of Collateral, and to
the addition or release of any other party or person primarily or secondarily
liable.
This Note may be prepaid in whole or in part at any time or from time to
time. Any such prepayment shall be without premium or penalty. Immediately
upon the payment or prepayment in whole of this Note, the Collateral shall be
released to Maker, free and clear of all liens, encumbrances and security
interests created or held by holder.
None of the terms or provisions of this Note may be excluded, modified
or amended except by a written instrument duly executed on behalf of the
Maker and the holder, expressly referring to this Note and setting forth the
provision so excluded, modified or amended.
All rights and obligations hereunder shall be governed by the laws of
the Commonwealth of Massachusetts, excluding its rules regarding conflict of
laws, and this Note is executed as an instrument under seal.
-2-
<PAGE>
ATTEST: MAKER
By: /s/ Diane E. Brewer /s/ Peter T. Johnson
------------------------- ------------------------------
Title: Print Name: Peter T. Johnson
---------------------- -------------------
ATTEST: MAKER
By: /s/ James A. Radley /s/ Andrea R. Johnson
------------------------- ------------------------------
Title: Print Name: Andrea Johnson
---------------------- ------------------
-3-
<PAGE>
EXHIBIT 10.50
SECURED PROMISSORY NOTE
8/11, 1999
$417,817.95 Marlboro, Massachusetts
FOR VALUE RECEIVED William Herman, who resides at 8 Cobblestone Place,
Sudbury, MA 01776 (the "Maker"), promises to pay to Viewlogic Systems, Inc.,
or order, at the offices of Viewlogic Systems, Inc. in Marlboro,
Massachusetts, or at such other place as the holder of this Note may
designate in writing, the principal sum of $417,817.95, without interest.
The entire unpaid principal amount of this Note shall be due and payable on
the earliest of the following dates:
a. The date which is the seventh anniversary of the date of this Note.
b. The date which is eighteen months after the first date, if any, on
which the common stock of Viewlogic Systems, Inc. (or any security
substituted therefor) is listed on a national securities exchange or
the NASDAQ stock market.
c. Immediately upon the occurrence of an Event of Default hereunder or
as defined in the Stock Pledge Agreement referenced below.
d. The date which is three months after the termination of the Maker's
employment with the Company for any reason or no reason.
e. The date which is one month before the Final Exercise Date, as
defined in the option agreement between the Maker and the Company
under which the Maker acquired the collateral securing this Note.
All payments by the Maker under this Note shall be in immediately available
funds.
Payment of this Note is secured by a security interest in certain shares of
common stock of Viewlogic Systems, Inc. owned by the Maker (the "Collateral")
pursuant to a stock pledge agreement of even date herewith between the Maker and
Viewlogic Systems, Inc. (the "Stock Pledge Agreement").
Upon the occurrence of an Event of Default hereunder or as defined in the
Stock Pledge Agreement, the holder shall have then, or at any time thereafter,
all of the rights and remedies afforded by the Uniform Commercial Code as from
time to time in effect in the Commonwealth of Massachusetts or afforded by other
applicable law, subject to the limitations set forth is this Note or the Stock
Pledge Agreement relating to the liability of the Maker for payment of any
deficiency due hereunder or under the Stock Pledge Agreement.
Notwithstanding anything to the contrary in this Note, the Stock Pledge
Agreement or
-1-
<PAGE>
otherwise, Viewlogic Systems, Inc. and each other holder of this Note
acknowledge and agree that the entire liability and obligation of the Maker
under, or in connection with, this Note is limited to the surrender of the
Collateral, plus, if the value of the Collateral at the time of any surrender
thereof is not sufficient to satisfy Maker's then outstanding liabilities and
obligations under this Note, the payment, in cash or by bank or certified
check, of an amount equal to the lesser of (a) one half of the original
principal amount of this Note and (b) the entire amount remaining unpaid
under this Note after applying the value of the Collateral.
No reference in this Note to the Stock Pledge Agreement or any guaranty
shall impair the obligation of the Maker to pay all amounts due under this Note
strictly in accordance with the terms of this Note.
No delay or omission on the part of the holder in exercising any right
under this Note or the Stock Pledge Agreement shall operate as a waiver of such
right or of any other right of such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar to or waiver of the same or any other
right on any future occasion. The Maker and every endorser or guarantor of this
Note regardless of the time, order or place of signing waives presentment,
demand, protest and notices of every kind (except as expressly set forth in this
Note or the Stock Pledge Agreement) and assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of Collateral, and to the addition or release of any other party or
person primarily or secondarily liable.
This Note may be prepaid in whole or in part at any time or from time to
time. Any such prepayment shall be without premium or penalty. Immediately
upon the payment or prepayment in whole of this Note, the Collateral shall be
released to Maker, free and clear of all liens, encumbrances and security
interests created or held by holder.
None of the terms or provisions of this Note may be excluded, modified or
amended except by a written instrument duly executed on behalf of the Maker and
the holder, expressly referring to this Note and setting forth the provision so
excluded, modified or amended.
All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts, excluding its rules regarding conflict of laws,
and this Note is executed as an instrument under seal.
ATTEST: MAKER
By: /s/ Paula J. Cassidy /s/ William Herman
---------------------------------- ----------------------------------
Title: Paula J. Cassidy Print Name: William Herman
------------------------------- -----------------------
Vice President of Human Resources
-2-
<PAGE>
EXHIBIT 10.51
SECURED PROMISSORY NOTE
Aug 12, 1999
$330,000 Marlboro, Massachusetts
FOR VALUE RECEIVED Richard G. Lucier, who resides at 10 Bertis Adams
Way, Westboro, MA 01581 (the "Maker"), promises to pay to Viewlogic Systems,
Inc., or order, at the offices of Viewlogic Systems, Inc. in Marlboro,
Massachusetts, or at such other place as the holder of this Note may
designate in writing, the principal sum of $330,000, without interest. The
entire unpaid principal amount of this Note shall be due and payable on the
earliest of the following dates:
a. The date which is the seventh anniversary of the date of this Note.
b. The date which is eighteen months after the first date, if any, on
which the common stock of Viewlogic Systems, Inc. (or any security
substituted therefor) is listed on a national securities exchange
or the NASDAQ stock market.
c. Immediately upon the occurrence of an Event of Default hereunder or
as defined in the Stock Pledge Agreement referenced below.
d. The date which is three months after the termination of the Maker's
employment with the Company for any reason or no reason.
e. The date which is one month before the Final Exercise Date, as
defined in the option agreement between the Maker and the Company
under which the Maker acquired the collateral securing this Note.
All payments by the Maker under this Note shall be in immediately available
funds.
Payment of this Note is secured by a security interest in certain shares of
common stock of Viewlogic Systems, Inc. owned by the Maker (the "Collateral")
pursuant to a stock pledge agreement of even date herewith between the Maker and
Viewlogic Systems, Inc. (the "Stock Pledge Agreement").
Upon the occurrence of an Event of Default hereunder or as defined in the
Stock Pledge Agreement, the holder shall have then, or at any time thereafter,
all of the rights and remedies afforded by the Uniform Commercial Code as from
time to time in effect in the Commonwealth of Massachusetts or afforded by other
applicable law, subject to the limitations set forth is this Note or the Stock
Pledge Agreement relating to the liability of the Maker for payment of any
deficiency due hereunder or under the Stock Pledge Agreement.
Notwithstanding anything to the contrary in this Note, the Stock Pledge
Agreement or
-1-
<PAGE>
otherwise, Viewlogic Systems, Inc. and each other holder of this Note
acknowledge and agree that the entire liability and obligation of the Maker
under, or in connection with, this Note is limited to the surrender of the
Collateral, plus, if the value of the Collateral at the time of any surrender
thereof is not sufficient to satisfy Maker's then outstanding liabilities and
obligations under this Note, the payment, in cash or by bank or certified
check, of an amount equal to the lesser of (a) one half of the original
principal amount of this Note and (b) the entire amount remaining unpaid
under this Note after applying the value of the Collateral.
No reference in this Note to the Stock Pledge Agreement or any guaranty
shall impair the obligation of the Maker to pay all amounts due under this Note
strictly in accordance with the terms of this Note.
No delay or omission on the part of the holder in exercising any right
under this Note or the Stock Pledge Agreement shall operate as a waiver of such
right or of any other right of such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar to or waiver of the same or any other
right on any future occasion. The Maker and every endorser or guarantor of this
Note regardless of the time, order or place of signing waives presentment,
demand, protest and notices of every kind (except as expressly set forth in this
Note or the Stock Pledge Agreement) and assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of Collateral, and to the addition or release of any other party or
person primarily or secondarily liable.
This Note may be prepaid in whole or in part at any time or from time to
time. Any such prepayment shall be without premium or penalty. Immediately
upon the payment or prepayment in whole of this Note, the Collateral shall be
released to Maker, free and clear of all liens, encumbrances and security
interests created or held by holder.
None of the terms or provisions of this Note may be excluded, modified or
amended except by a written instrument duly executed on behalf of the Maker and
the holder, expressly referring to this Note and setting forth the provision so
excluded, modified or amended.
All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts, excluding its rules regarding conflict of laws,
and this Note is executed as an instrument under seal.
ATTEST: MAKER
By: /s/ Paula J. Cassidy /s/ Richard G. Lucier
-------------------------------------- ----------------------------------
Title: Vice President of Human Resources Print Name: Richard G. Lucier
----------------------------------- -----------------------
-2-
<PAGE>
EXHIBIT 10.52
SECURED PROMISSORY NOTE
8/11/, 1999
$87,853.59 Marlboro, Massachusetts
FOR VALUE RECEIVED Kevin P. O'Brien, who resides at 149 Willow St.,
Acton, MA 01720 (the "Maker"), promises to pay to Viewlogic Systems, Inc., or
order, at the offices of Viewlogic Systems, Inc. in Marlboro, Massachusetts,
or at such other place as the holder of this Note may designate in writing,
the principal sum of $87,853.59, without interest. The entire unpaid
principal amount of this Note shall be due and payable on the earliest of the
following dates:
a. The date which is the seventh anniversary of the date of this Note.
b. The date which is eighteen months after the first date, if any, on
which the common stock of Viewlogic Systems, Inc. (or any security
substituted therefor) is listed on a national securities exchange or
the NASDAQ stock market.
c. Immediately upon the occurrence of an Event of Default hereunder or
as defined in the Stock Pledge Agreement referenced below.
d. The date which is three months after the termination of the Maker's
employment with the Company for any reason or no reason.
e. The date which is one month before the Final Exercise Date, as
defined in the option agreement between the Maker and the Company
under which the Maker acquired the collateral securing this Note.
All payments by the Maker under this Note shall be in immediately available
funds.
Payment of this Note is secured by a security interest in certain shares of
common stock of Viewlogic Systems, Inc. owned by the Maker (the "Collateral")
pursuant to a stock pledge agreement of even date herewith between the Maker and
Viewlogic Systems, Inc. (the "Stock Pledge Agreement").
Upon the occurrence of an Event of Default hereunder or as defined in the
Stock Pledge Agreement, the holder shall have then, or at any time thereafter,
all of the rights and remedies afforded by the Uniform Commercial Code as from
time to time in effect in the Commonwealth of Massachusetts or afforded by other
applicable law, subject to the limitations set forth is this Note or the Stock
Pledge Agreement relating to the liability of the Maker for payment of any
deficiency due hereunder or under the Stock Pledge Agreement.
Notwithstanding anything to the contrary in this Note, the Stock Pledge
Agreement or
-1-
<PAGE>
otherwise, Viewlogic Systems, Inc. and each other holder of this Note
acknowledge and agree that the entire liability and obligation of the Maker
under, or in connection with, this Note is limited to the surrender of the
Collateral, plus, if the value of the Collateral at the time of any surrender
thereof is not sufficient to satisfy Maker's then outstanding liabilities and
obligations under this Note, the payment, in cash or by bank or certified
check, of an amount equal to the lesser of (a) one half of the original
principal amount of this Note and (b) the entire amount remaining unpaid
under this Note after applying the value of the Collateral.
No reference in this Note to the Stock Pledge Agreement or any guaranty
shall impair the obligation of the Maker to pay all amounts due under this Note
strictly in accordance with the terms of this Note.
No delay or omission on the part of the holder in exercising any right
under this Note or the Stock Pledge Agreement shall operate as a waiver of such
right or of any other right of such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar to or waiver of the same or any other
right on any future occasion. The Maker and every endorser or guarantor of this
Note regardless of the time, order or place of signing waives presentment,
demand, protest and notices of every kind (except as expressly set forth in this
Note or the Stock Pledge Agreement) and assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of Collateral, and to the addition or release of any other party or
person primarily or secondarily liable.
This Note may be prepaid in whole or in part at any time or from time to
time. Any such prepayment shall be without premium or penalty. Immediately
upon the payment or prepayment in whole of this Note, the Collateral shall be
released to Maker, free and clear of all liens, encumbrances and security
interests created or held by holder.
None of the terms or provisions of this Note may be excluded, modified or
amended except by a written instrument duly executed on behalf of the Maker and
the holder, expressly referring to this Note and setting forth the provision so
excluded, modified or amended.
All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts, excluding its rules regarding conflict of laws,
and this Note is executed as an instrument under seal.
ATTEST: MAKER
By: /s/ Paula J. Cassidy /s/ Kevin P. O'Brien
------------------------------------- -------------------------------
Title: Vice President of Human Resources Print Name: Kevin O'Brien
---------------------------------- --------------------
-2-
<PAGE>
Exhibit 21.1
List of Subsidiaries, Summit Design, Inc.
1. Summit Design (EDA) Ltd., an Israeli corporation
2. Summit Verification, Inc., a Delaware corporation
3. ProSoft Oy, a Finnish corporation
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
Summit Design, Inc. of our report dated February 3, 1999, except as to Note 21,
which is as of September 16, 1999 relating to the consolidated financial
statements, and of our report dated February 3, 1999 relating to the financial
statement schedule of Summit Design, Inc., which appear in such Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Portland, Oregon
October 21, 1999
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Registration Statement of Summit Design, Inc. on Form
S-4 of our report dated October 15, 1999, appearing in the Joint Proxy
Statement/Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
October 21, 1999
<PAGE>
EXHIBIT 99.1
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF SUMMIT DESIGN, INC.
SPECIAL MEETING OF STOCKHOLDERS
----------, -----
The undersigned stockholder of Summit Design, Inc., a Delaware corporation
("Summit"), hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Joint Proxy Statement/Prospectus, each dated __________, 1999,
and hereby appoints William V. Botts and C. Albert Koob, and each of them,
proxies, with full power of substitution, to represent the undersigned and to
vote as designated on the reverse side, all shares of common stock of Summit
that the undersigned is entitled to vote at the Special Meeting of Stockholders
of Summit to be held on __________, _____ at ______ a.m., local time, at the
Embassy Suites, 9000 S.W. Washington Square Road, Tigard, Oregon 97223 and at
any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR (I) THE BUSINESS COMBINATION OF SUMMIT AND VIEWLOGIC SYSTEMS, INC. AND THE
ISSUANCE OF SHARES OF SUMMIT COMMON STOCK TO THE STOCKHOLDERS OF VIEWLOGIC, (II)
AN AMENDMENT TO THE CORPORATE CHARTER OF SUMMIT TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF SUMMIT COMMON STOCK FROM 30 MILLION SHARES TO 50 MILLION,
(III) AN AMENDMENT TO THE CORPORATE CHARTER OF SUMMIT TO CHANGE THE COMPANY NAME
TO "_______", AND (IV) AS THE PROXIES DEEM ADVISABLE ON ALL OTHER MATTERS THAT
PROPERLY COME BEFORE THE MEETING.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS
Please mark votes as in this example: [X]
<TABLE>
<CAPTION>
For Against Abstain
----- ------- -------
<S> <C>
[ ] [ ] [ ] - the issuance of shares of our common stock to the stockholders of Viewlogic
pursuant to the Agreement and Plan of Reorganization among Summit, Viewlogic
and Hood Acquisition Corp., a wholly owned subsidiary of Summit, dated as of
September 16, 1999;
[ ] [ ] [ ] - an amendment to our Amended and Restated Certificate of Incorporation
increasing the number of shares of our common stock authorized for
issuance by 30 million shares to 50 million shares, contingent upon
approval of the above stock issuance proposal;
[ ] [ ] [ ] - an amendment to our Amended and Restated Certificate of Incorporation
changing the company's name to " ," contingent and effective upon
completion of the business combination with Viewlogic; and
</TABLE>
In their discretion, the proxies are authorized to vote or otherwise represent
the shares on any and all other business that may properly come before the
meeting or any adjournment thereof.
[Stockholder name and address label]
Please sign exactly as your name appears on your stock certificate. If the stock
is held by joint tenants or as community property, both should sign. Executors,
administrators, trustees, guardians, attorneys and corporate officers should
insert their titles.
Signature: Date: Signature: Date:
------------- --------- -------------- ----------
New Address (if applicable)
--------------------------------------------------
<PAGE>
EXHIBIT 99.2
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF VIEWLOGIC SYSTEMS, INC.
SPECIAL MEETING OF STOCKHOLDERS
,
<TABLE>
<S> <C>
P The undersigned stockholder of Viewlogic Systems, Inc., a
R Delaware corporation ("Viewlogic"), hereby acknowledges
O receipt of the Notice of Special Meeting of Stockholders and
X Joint Proxy Statement/Prospectus, each dated ,
Y 1999, and hereby appoints William J. Herman and Peter T.
Johnson, and each of them, proxies, with full power of
substitution, to represent the undersigned and to vote as
designated on the reverse side, all shares of common stock
of Viewlogic that the undersigned is entitled to vote at the
Special Meeting of Stockholders of Viewlogic to be held on ,
at a.m., local time, at the offices of Viewlogic,
293 Boston Post Road West, Marlboro, Massachusetts 01752 and
at any postponement or adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR (I) THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER OF
SUMMIT AND VIEWLOGIC AND (II) AS THE PROXIES DEEM ADVISABLE
ON ALL OTHER MATTERS THAT PROPERLY COME BEFORE THE MEETING.
</TABLE>
A VOTE FOR THE FOLLOWING PROPOSAL IS RECOMMENDED BY THE BOARD OF DIRECTORS
PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE: /X/
/ / FOR / / AGAINST / / ABSTAIN
- the approval and adoption of the agreement and plan of reorganization by
and among Summit Design, Inc., Hood Acquisition Corp., a wholly owned
subsidiary of Summit, and Viewlogic, pursuant to which Hood will merge
into Viewlogic and each outstanding share of capital stock of Viewlogic
will be converted into the right to receive 0.67928 of a share of Summit
common stock, and the transactions contemplated by the merger agreement,
including the merger; and
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
In their discretion, the proxies are authorized to vote or otherwise
represent the shares on any and all other business that may properly come before
the meeting or any postponement adjournment thereof, including any motion to
adjourn to a later date to permit further solicitation of proxies, if necessary,
to establish a quorum or to obtain additional votes in favor of the approval and
adoption of the merger agreement and the transactions contemplated by the merger
agreement, or to postpone or adjourn the meeting.
Please sign exactly as your name appears on your stock certificate. If the
stock is held by joint tenants or as community property, both should sign.
Executors, administrators, trustees, guardians, attorneys and corporate officers
should insert their titles.
----------------------------
Signature
----------------------------
Date
----------------------------
Signature
----------------------------
Date
----------------------------
New Address (if applicable)
