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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): July 31, 1997
AVANT! CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-25864 94-3133226
-------- ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
46871 Bayside Parkway, Fremont, California 94538
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (510) 413-8000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 12, 1997, Avant! Corporation, a Delaware corporation
("Avant!"), GB Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Avant! ("Merger Sub"), VLSI Technology, Inc., a
Delaware corporation ("VLSI") and Compass Design Automation, Inc., a Delaware
corporation and a subsidiary of VLSI ("Compass") announced the completion of
the previously announced merger of Merger Sub with and into Compass (the
"Merger"), with Compass surviving the Merger and becoming a wholly-owned
subsidiary of Avant!.
Upon the effective time of the Merger, (i) each share of Compass
preferred stock owned by VLSI was converted into the right to receive
$1.22689 and 0.04479 shares of Avant!'s common stock, or an aggregate
of $2,699,173.44 and approximately 98,552 shares of Avant!'s common
stock, (ii) each share of Compass common stock owned by VLSI was converted
into the right to receive $0.64460 and 0.02353 shares of Avant!'s
common stock, or an aggregate of $11,602,831.26 and approximately 423,640
shares of Avant!'s common stock, (iii) each share of Compass common stock
not owned by VLSI was converted into the right to receive $1.43333, or an
aggregate of $2,447,725.23, and (iv) each unexpired and unexercised option to
purchase shares of Compass common stock was converted into the right to
receive $1.43333, or an aggregate of $750,270.06.
ITEM 7. EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
2.1 Agreement and Plan of Reorganization dated July 31, 1997, as
amended on August 27, 1997
99.1 Press release dated September 12, 1997, announcing the
effectiveness of the Merger
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Avant! Corporation
Date: September 26, 1997 /s/ John P. Huyett
------------------------------------
John P. Huyett
Vice President of Finance, Treasurer
and Principal Accounting Officer
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 31, 1997,
AMONG
AVANT! CORPORATION,
GB ACQUISITION CORPORATION,
COMPASS DESIGN AUTOMATION, INC.,
AND
VLSI TECHNOLOGY, INC.
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TABLE OF CONTENTS
Page
----
ARTICLE I: THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Merger; Effective Time of the Merger . . . . . . . . . . . . . .1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . .1
1.4 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II: EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES; SUPPLEMENTARY ACTION . . . . .2
2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . .2
2.2 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . .6
2.3 Supplementary Action. . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF COMPASS . . . . . . . . . . .7
3.1 Organization, Standing and Power. . . . . . . . . . . . . . . . .8
3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . .8
3.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . 10
3.6 Payables; Receivables . . . . . . . . . . . . . . . . . . . . . 11
3.7 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 12
3.8 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Conduct in the Ordinary Course . . . . . . . . . . . . . . . . 12
3.11 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 14
3.12 Documents and Information Supplied . . . . . . . . . . . . . . 14
3.13 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . 15
3.14 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . 15
3.15 Major Contracts . . . . . . . . . . . . . . . . . . . . . . . . 16
3.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . 19
3.18 Employee Agreements . . . . . . . . . . . . . . . . . . . . . . 21
3.19 Restrictions on Business Activities . . . . . . . . . . . . . . 21
3.20 Title to Properties; Absence of Liens and Encumbrances:
Condition of Equipment . . . . . . . . . . . . . . . . . . . . 21
3.21 Governmental Authorizations and Licenses . . . . . . . . . . . 22
3.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 23
3.23 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.24 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.25 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.26 Questionable Payments . . . . . . . . . . . . . . . . . . . . . 27
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3.27 Third-Party Consents . . . . . . . . . . . . . . . . . . . . . 27
3.28 Related Party Transactions . . . . . . . . . . . . . . . . . . 27
3.29 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.30 Bank Accounts and Powers of Attorney . . . . . . . . . . . . . 28
3.31 Products . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.32 Brokers or Finders; Professional Fees. . . . . . . . . . . . . 28
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF AVANT! AND SUB. . . . . . . 28
4.1 Organization; Standing and Power . . . . . . . . . . . . . . . 28
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 Valid Issuance of Shares of Common Stock of Avant! . . . . . . 29
4.4 Avant!. Financial Statements . . . . . . . . . . . . . . . . . 30
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.6 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.7 Restrictions on Business Activities. . . . . . . . . . . . . . 30
4.8 Brokers or Finders; Professional Fees. . . . . . . . . . . . . 30
4.9 Conduct in the Ordinary Course . . . . . . . . . . . . . . . . 31
4.10 Third-Party Consents . . . . . . . . . . . . . . . . . . . . . 31
4.11 Due Diligence Investigation. . . . . . . . . . . . . . . . . . 31
ARTICLE V: CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL
AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.1 Conduct of Business of Compass . . . . . . . . . . . . . . . . 31
5.2 Access to Information; Provision of Interim Financial
Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Compass Stockholders' Consent. . . . . . . . . . . . . . . . . 34
5.4 Exclusivity; Acquisition Proposals . . . . . . . . . . . . . . 35
5.5 Breach of Representations, Warranties, Agreements
and Covenants . . . . . . . . . . . . . . . . . . . . . . . . 35
5.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.7 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.8 Legal Conditions to the Merger . . . . . . . . . . . . . . . . 36
5.9 Public Announcements . . . . . . . . . . . . . . . . . . . . . 37
5.10 Affiliates Agreement . . . . . . . . . . . . . . . . . . . . . 37
5.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.12 Information to be Supplied . . . . . . . . . . . . . . . . . . 37
5.13 Form S-3 Registration Statement. . . . . . . . . . . . . . . . 37
5.14 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.15 Certain Benefit Plans. . . . . . . . . . . . . . . . . . . . . 39
5.16 HSR Act Filing . . . . . . . . . . . . . . . . . . . . . . . . 39
5.17 Listing of Shares. . . . . . . . . . . . . . . . . . . . . . . 40
5.18 Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI: CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 40
6.1 Conditions to Each Party's Obligation to Effect the Merger . . 40
6.2 Conditions of Obligations of Avant! and Sub. . . . . . . . . . 41
6.3 Conditions of Obligation of Compass. . . . . . . . . . . . . . 42
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ARTICLE VII: INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1 Survival of Representations, Warranties, Covenants
and Agreements. . . . . . . . . . . . . . . . . . . . . . . . 43
7.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 43
7.3 Termination of Indemnity and Representations and Warranties. . 45
ARTICLE VIII: TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX: GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 46
9.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.2 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . 46
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 47
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 48
9.7 No Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.9 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 48
9.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 49
9.11 Absence of Third-Party Beneficiary Rights. . . . . . . . . . . 49
9.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 49
EXHIBITS
1.1 Certificate of Merger
1.3(a) Certificate of Incorporation
1.3(b) Bylaws
1.4 Escrow Agreement
2.1(c) Allocation of Merger Consideration Among Company Stockholders
3.2 Voting Agreement
5.10(a) Affiliates Agreement
SCHEDULES
2.1(d) Holders of Compass Options Exercisable for Common Stock
2.1(e) Stock Options Exercised
3.2(a) Capital Structure
3.2(b) Compliance with Securities Laws
3.2(e) Stockholders Party to the Voting Agreement
3.3(a) Subsidiaries
3.3(b) Jurisdictions Qualified to do Business
3.5 Financial Statements
3.6 Receivables
3.7 Exceptions to Compliance with Laws
3.8 List of Defaults
3.9 Pending Litigation
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3.10 Exceptions to Conduct in the Ordinary Course
3.11 Undisclosed Liabilities
3.13 Certain Agreements
3.14 Compass Compensation Plans
3.15 Major Contracts
3.16 Taxes
3.17 Compass Intellectual Property Rights
3.18 Proprietary Information Agreements
3.19 Restrictions on Business Activities
3.20 Real Property Leased; Physical Assets
3.21 Governmental Authorizations and Licenses
3.22 Environmental Matters
3.23 Insurance
3.25 Personnel
3.27 Third-Party Consents
3.28 Related Party Transactions
3.29 Customers
3.30 Bank Accounts and Powers of Attorney
5.10 List of Affiliates
iv
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is dated as of July 31, 1997,
by and among Avant! Corporation, a Delaware corporation ("Avant!"), GB
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary
of Avant! ("Sub"), Compass Design Automation, Inc., a Delaware corporation
("Compass"), and VLSI Technology, Inc., a Delaware corporation ("VLSI").
INTENDING TO BE LEGALLY BOUND, and in consideration of the promises and
mutual covenants and agreements contained herein, Avant!, Sub, Compass and
VLSI hereby agree as follows:
ARTICLE I:
THE MERGER
1.1 MERGER; EFFECTIVE TIME OF THE MERGER. Subject to the terms and
conditions of this Agreement and Plan of Reorganization (this "Agreement")
and as contemplated by the Certificate of Merger attached hereto as EXHIBIT
1.1 (the "Certificate of Merger"), Sub will be merged with and into Compass
(the "Merger") in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL"). The Certificate of
Merger provides, among other things, the mode of effecting the Merger and the
manner and basis of converting each issued and outstanding share of capital
stock of Compass into shares of Common Stock, par value $.0001 per share, of
Avant! ("Avant! Common Stock"). The Certificate of Merger shall be executed
by Compass, Avant! and Sub prior to the Effective Date of the Merger (as
defined in this Section 1.1).
Subject to the provisions of this Agreement, the Certificate of Merger
shall be filed in accordance with the DGCL on the Closing Date (as defined in
Section 1.2). The Merger shall become effective upon such filing of the
Certificate of Merger (the date of such filing being hereinafter referred to
as the "Effective Date of the Merger" and the time of confirmation of such
filing being hereinafter referred to as the "Effective Time of the Merger")
in the State of Delaware.
1.2 CLOSING. The closing of the Merger (the "Closing") will take place
as soon as practicable on the first business day after satisfaction or waiver
of the conditions precedent set forth in Article VI of this Agreement (the
"Closing Date"), at the offices of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, 155 Constitution Drive, Menlo Park, California
94025, unless a different date or place is agreed to in writing by Avant!,
Sub and Compass.
1.3 EFFECTS OF THE MERGER. At the Effective Time of the Merger, (a)
the separate existence of Sub shall cease and Sub shall be merged with and
into Compass (Sub and Compass are sometimes referred to herein as the
"Constituent Corporations" and Compass after the Merger is sometimes referred
to herein as the "Surviving Corporation"), (b) the Certificate of
Incorporation of the Surviving Corporation shall be set forth in EXHIBIT
1.3(a) hereto, (c) the Bylaws of the Surviving Corporation shall be set forth
in EXHIBIT 1.3(b) hereto, (d) the directors
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of the Surviving Corporation shall be Gerald C. Hsu and John P. Huyett, (e)
the officers of the Surviving Corporation shall be Gerald C. Hsu, President
and Chief Executive Officer and John P. Huyett, Vice President, Chief
Financial Officer and Secretary and (f) the Merger shall, from and after the
Effective Time of the Merger, have all the effects provided by applicable
law.
1.4 ESCROW. An amount of (a) the aggregate cash payment to be made to
VLSI Technology, Inc. ("VLSI") and (b) the aggregate number of shares of
Avant! Common Stock issuable to VLSI in connection with the Merger equal to
ten percent (10%) of the total consideration paid by Avant! in the Merger
(the "Escrow Proceeds") shall be held in escrow as collateral for the
indemnification obligations of Compass pursuant to Article VII of this
Agreement and the provisions of an escrow agreement ("Escrow Agreement") in
the form attached hereto as EXHIBIT 1.4. The Escrow Proceeds shall be
withheld pro rata from proceeds to be received by VLSI upon exchange of
Compass shares for the right to receive cash and/or shares of Avant! Common
Stock.
ARTICLE II:
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES; SUPPLEMENTARY ACTION
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the holder of
any shares of capital stock of Compass:
(a) CAPITAL STOCK OF SUB. All issued and outstanding shares of
capital stock of Sub shall continue to be issued and outstanding and shall be
converted into 1,000 shares of Common Stock of the Surviving Corporation.
Each stock certificate of Sub evidencing ownership of any such shares shall
thereafter evidence ownership of such shares of capital stock of the
Surviving Corporation into which such shares of stock of Sub have converted.
(b) CANCELLATION OF CAPITAL STOCK OF COMPASS.
(i) All shares of capital stock of Compass that are owned
directly or indirectly by Compass or by any entity controlled by Compass
shall be canceled and no stock of Avant! or other consideration shall be
delivered in exchange therefor. For this purpose, a controlled entity shall
mean a corporation or other entity whose voting securities are owned or are
otherwise controlled directly or indirectly by a parent corporation or other
intermediary entity in an amount sufficient to elect at least a majority of
the board of directors or other managers of such corporation or other entity.
(ii) Each holder of a certificate representing any shares of
Compass capital stock after the Effective Time of the Merger shall cease to
have any rights with respect to such shares, except the right either to
receive cash and/or shares of Avant! Common Stock upon surrender of such
certificate, or to exercise such holder's dissenters' rights, if applicable,
as provided in Section 2.1(f) hereof and pursuant to the DGCL, or
alternatively, the
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California General Corporation Law (the "CGCL"), to the extent Compass is
determined to be a foreign corporation contemplated by Section 2115 of the
CGCL.
(c) CONVERSION OF CAPITAL STOCK OF COMPASS. Subject to Section
2.2, at the Effective Time of the Merger, by virtue of the Merger and without
any action on the part of the holders thereof:
(i) CONVERSION OF COMPASS PREFERRED STOCK. Each share of the
Series A Preferred Stock of Compass (the "Compass Preferred Stock") issued
and outstanding at the Effective Time of the Merger (other than any shares of
Compass Preferred Stock to be canceled pursuant to Section 2.1(b)(i) and any
Dissenting Shares (as defined and to the extent provided in Section 2.1(f))
shall be canceled and extinguished and be converted automatically into the
right to receive that portion of the aggregate amount of $43,800,000 (the
"Merger Consideration") to which such share of Compass Preferred Stock is
entitled under, and in accordance with, Article Four, Section 2(a) of the
Restated Certificate of Incorporation of Compass (the "Liquidation
Preference"). Such Liquidation Preference equals the sum of $1.00 per share
plus all accrued but unpaid dividends. Additionally, the holders of Compass
Preferred Stock shall share ratably in the difference between the Merger
Consideration and the Liquidation Preference (the "Net Merger Consideration")
with the holders of the Common Stock of Compass and the holders of vested
options to purchase Common Stock of Compass (assuming that all such options
have been exercised). The Liquidation Preference plus the portion of the Net
Merger Consideration payable to the holders of Compass Preferred Stock
pursuant to this Section 2.1(c)(i) (the "Compass Preferred Stock
Consideration") shall be payable in a combination of cash and shares of
Avant! Common Stock. For the purpose of determining the number of shares of
Avant! Common Stock issuable to the holders of the Compass Preferred Stock,
the price of the Avant! Common Stock shall be closing sales price of Avant!
Common Stock as quoted on the Nasdaq National Market for the five (5)
consecutive trading days ending three (3) business days prior to the Closing
Date of the Merger (the "Average Nasdaq Per Share Price"). The total dollar
and share amounts of the Compass Preferred Stock Consideration allocated to
the holders of Compass Preferred Stock is set forth in EXHIBIT 2.1(c),
subject to appropriate adjustments at the Closing to reflect the total of
accrued but unpaid dividends as of such date and the Average Nasdaq Per Share
Price.
(ii) CONVERSION OF COMPASS COMMON STOCK OWNED BY VLSI. Each
share of the Common Stock of Compass issued and outstanding and owned by VLSI
Technology, Inc. ("VLSI") immediately prior to the Effective Time of the
Merger (other than any shares of Compass Common Stock to be canceled pursuant
to Section 2.1(b)(i) and any Dissenting Shares (as defined and to the extent
provided in Section 2.1(f)) (the "VLSI-Owned Common Stock") shall be canceled
and extinguished and be converted automatically into the right to share
ratably in the Net Merger Consideration with the holders of the Compass
Preferred Stock, the holders of the Common Stock of Compass (excluding
VLSI-Owned Common Stock) and the holders of vested options to purchase Common
Stock of Compass (assuming that all such options have been exercised). Such
portion of the Net Merger Consideration payable to VLSI pursuant to this
Section 2.1(c)(ii) shall be payable in a combination of cash and shares of
Avant! Common Stock. For the purpose of determining the number of shares of
Avant! Common Stock
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issuable to VLSI pursuant to this Section 2.1(c)(ii), the price of the Avant!
Common Stock shall be the Average Nasdaq Per Share Price. The total dollar
and share amounts of such portion of the Net Merger Consideration allocated
to VLSI pursuant to this Section 2.1(c)(ii) is set forth in EXHIBIT 2.1(C),
subject to appropriate adjustments at the Closing to reflect the total of
accrued but unpaid dividends as of such date and the Average Nasdaq Per Share
Price.
(iii) CONVERSION OF COMPASS COMMON STOCK NOT OWNED BY VLSI.
Each share of the Common Stock of Compass issued and outstanding immediately
prior to the Effective Time of the Merger (other than any shares of the
VLSI-Owned Common Stock, any shares of Compass Common Stock to be canceled
pursuant to Section 2.1(b)(i) and any Dissenting Shares (as defined and to
the extent provided in Section 2.1(f)) shall be canceled and extinguished and
be converted automatically into the right to share ratably in the Net Merger
Consideration with the holders of the Compass Preferred Stock, the holders of
the VLSI-Owned Common Stock of Compass and the holders of vested options to
purchase Common Stock of Compass (assuming that all such options have been
exercised). Such portion of the Net Merger Consideration allocated to the
holders of the Common Stock of Compass pursuant to this Section 2.1(c)(iii)
shall be payable in cash. The total dollar amount of such portion of the Net
Merger Consideration allocated to the holders of the Common Stock of Compass
pursuant to this Section 2.1(c)(iii) is set forth in EXHIBIT 2.1(C), subject
to appropriate adjustments at the Closing to reflect the total of accrued but
unpaid dividends as of such date and the Average Nasdaq Per Share Price.
(d) CONVERSION OF COMPASS OPTIONS. At the Effective Time of the
Merger, each unexpired and unexercised option to purchase shares of Compass
Common Stock (a "Compass Option") granted under the stock option plans and
agreements or other agreements of Compass outstanding immediately prior to
the Effective Time of the Merger shall terminate and be converted into a
right to receive a cash payment to the extent exercisable for vested shares
(the "Option Payment") from Avant!. SCHEDULE 2.1(D) hereto sets forth a true
and complete list as of the date hereof of all holders of Compass Options to
purchase shares of Compass Common Stock, including the number of shares of
Compass Common Stock subject to such options, a breakdown as between vested
and unvested options, the exercise price per share and the term of such
options and the residence address of each such holder. Three (3) days prior
to the Closing Date, Compass shall deliver to Avant! an updated SCHEDULE
2.1(D) hereto current as of the Closing Date. With respect to each Compass
Option, the amount of the Option Payment shall be equal to the product of (a)
the pro rata share of the Net Merger Consideration minus the exercise price
per share of such Option multiplied by (b) the number of shares for which
such Option is exercisable or vested at the Effective Time of the Merger.
The Option Payment shall be made to the holder of the Option (or his or her
successors) upon the Effective Time of the Merger. The provisions of the 1992
Stock Option Plan and the applicable stock option agreement shall control in
determining when an Option becomes exercisable or vested and to what extent
an Option is forfeited in the event that the holder's service with the
Company terminates. Each Compass Option shall terminate at the Effective
Time of the Merger to the extent not exercisable for vested shares on such
date. The parties intend that the conversion of the Compass Options
hereunder will not meet the requirements of Section 424(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and this Section 2.1(d) shall
be interpreted consistent with such
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intention. Consistent with the terms of the Compass Options and the
documents governing such Compass Options, the Merger will not accelerate any
Compass Option or any right of exercise, vesting or repurchase relating
thereto. Holders of Compass Options will not be entitled to acquire Compass
Common Stock following the Merger. Holders of vested Compass Options may
elect to exercise such options prior to the Effective Time of the Merger and
receive the consideration per share delineated in Section 2.1(c)(iii) by
providing notice of such exercise and payment of the exercise price thereof
to Compass at any time prior to the Effective Time of the Merger. In the
event that any holder of vested Compass Options does not exercise such
Compass Options prior to the Effective Time of the Merger, such Compass
Options shall terminate and be converted into a right to receive the Option
Payment. The right to receive the Option Payment may not be assigned or
transferred. Any attempted assignment contrary to this Section 2.1(d) shall
be null and void.
(e) COMPASS CAPITAL STOCK SUBJECT TO REPURCHASE. All cash and
shares of Avant! Common Stock received in the Merger in exchange for shares
of Compass Preferred Stock or Compass Common Stock (collectively, the
"Compass Capital Stock") that, under applicable stock purchase, stock
restriction or similar agreements with Compass, are unvested or subject to a
repurchase option or other condition of forfeiture that by its terms does not
terminate due to the Merger ("Compass Restricted Stock") will also be
unvested or subject to the same repurchase option and escrow conditions or
other condition, as the case may be, and the certificates evidencing any such
shares will be marked with appropriate legends. SCHEDULE 2.1(e) hereto sets
forth a true and complete list of all holders of Compass Restricted Stock,
including the number of shares of Compass Restricted Stock held and a
breakdown as between vested and unvested shares. On the Closing Date,
Compass shall deliver to Avant! an updated SCHEDULE 2.1(e) hereto current as
of the Closing Date.
(f) DISSENTERS' RIGHTS. If, as of the Effective Time of the
Merger, holders of the issued and outstanding Compass Capital Stock are
entitled to dissenters' rights under the DGCL, or alternatively, the CGCL to
the extent Compass is determined to be a foreign corporation contemplated by
Section 2115 of the CGCL and have properly exercised and not lost such
dissenters' rights ("Dissenting Shares") in connection with the Merger,
shares of Compass Capital Stock shall not be converted into or represent a
right to receive the cash consideration and/or Avant! Common Stock pursuant
to Section 2.1(c) but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares.
(g) FRACTIONAL SHARES. No fractional shares of Avant! Common
Stock shall be issued by virtue of the Merger, but in lieu thereof each
holder of shares of Compass Capital Stock who would otherwise be entitled to
receive a fraction of a share of Avant! Common Stock shall receive from
Avant! the Average Nasdaq Per Share Price multiplied by the fraction of a
share of Avant! Common Stock to which such holder would otherwise be
entitled. The fractional share interests of each Compass stockholder shall
be aggregated, so that no Compass stockholder shall receive cash in an amount
greater than the value of one (1) full share of Avant! Common Stock.
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2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Closing Date, Avant! shall
appoint Harris Trust Company to act as exchange agent (the "Exchange Agent")
in the Merger.
(b) AVANT! TO PROVIDE CASH AND COMMON STOCK. Promptly after the
Effective Time of the Merger (but in no event later than ten (10) business
days thereafter), Avant! shall deposit, or shall cause to be deposited, with
the Exchange Agent for exchange in accordance with this Article II, the cash
and the aggregate number of shares of Avant! Common Stock issuable pursuant
to Section 2.1 in exchange for outstanding shares of Compass Capital Stock.
(c) EXCHANGE PROCEDURES. Within ten (10) business days after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates that immediately prior to the
Effective Time of the Merger represented outstanding shares of Compass
Capital Stock (the "Certificates") and which shares were converted into the
right to receive cash and/or shares of Avant! Common Stock pursuant to
Section 2.1 hereof (i) a letter of transmittal (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 be in such form and have such other provisions as Avant! may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for cash and/or certificates representing shares of
Avant! Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by
Avant!, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor the cash
payment and/or a certificate representing the number of whole shares of
Avant! Common Stock, plus cash in lieu of fractional shares in accordance
with Section 2.1(g), to which such holder of Compass Capital Stock is
entitled pursuant to Section 2.1 hereof. The Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of
Compass Capital Stock that is not registered on the transfer records of
Compass, the appropriate cash payment and/or a certificate representing the
number of shares of Avant! Common Stock, plus cash in lieu of fractional
shares in accordance with Section 2.1(g), may be delivered to a transferee if
the Certificate representing such Compass Capital Stock is presented to the
Exchange Agent and accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at all times after the Effective Time of the
Merger to represent the right to receive upon such surrender the cash payment
and/or a certificate representing the number of whole shares of Avant! Common
Stock, plus cash in lieu of fractional shares in accordance with Section
2.1(g), as provided by this Article II and the provisions of the DGCL but
shall have no other right; provided, however, that customary and appropriate
certifications, indemnities and bonds allowing exchange against lost or
destroyed certificates shall be provided; and provided further that nothing
in this Section 2.2(c) shall require Avant! to make a cash payment and/or
exchange its Common Stock to any holder of Compass Capital Stock who shall
fail to surrender a Certificate representing such shares or the
certification, indemnities and bonds relating to a lost
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certificate. Notwithstanding the foregoing, neither the Exchange Agent nor
any party hereto shall be liable to a holder of shares of Compass Capital
Stock for any cash payment and/or share of Avant! Common Stock and any other
cash, dividends or distributions delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws. Promptly following
the date that is six (6) months after the Effective Date of the Merger, the
Exchange Agent shall return to the Surviving Corporation the remaining
portion of the cash and shares of Avant! Common Stock deposited with the
Exchange Agent pursuant to Section 2.2(b) in its possession relating to the
transactions described in this Agreement, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the cash
payment and/or a certificate representing the shares of Avant! Common Stock
to which such holder is entitled pursuant hereto.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPASS CAPITAL STOCK. The
cash consideration and all shares of Avant! Common Stock delivered upon the
surrender for exchange of shares of Compass Capital Stock in accordance with
the terms hereof (including any cash paid for fractional shares in respect
therefor) shall be deemed to have been delivered in full satisfaction of all
rights pertaining to such shares of Compass Capital Stock. There shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Compass Capital Stock that were
outstanding immediately prior to the Effective Time of the Merger. If, after
the Effective Time of the Merger, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in this Article II.
2.3 SUPPLEMENTARY ACTION. If, at any time after the Effective Time of
the Merger, any further assignments or assurances in law or any other things
are necessary or desirable to vest or to perfect or confirm of record in the
Surviving Corporation the title to any property or rights of either Compass
or Sub or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered, in the name of and on behalf of Compass and Sub, to execute and
deliver any and all things necessary or proper to vest or to perfect or
confirm title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and provisions of this Agreement.
ARTICLE III:
REPRESENTATIONS AND WARRANTIES OF COMPASS
Compass represents and warrants to Avant! and Sub that the
representations and warranties set forth below shall be true and correct as
of the date hereof, except as disclosed in a document delivered by Compass to
Avant! prior to the execution of this Agreement (the "Compass Disclosure
Schedules"). As used in this Agreement, "Business Condition" with respect to
Compass shall refer to Compass' financial condition, business (including
products currently under development), property, results of operations and
assets.
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3.1 ORGANIZATION, STANDING AND POWER. Compass is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as now being
conducted. Compass is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material and adverse effect on Compass' Business Condition. Compass has
delivered or made available to Avant! complete and correct copies of its
current charter and Bylaws, and has delivered minutes of all directors' and
stockholders' meetings, complete and accurate as of the date hereof, and
stock certificate books of Compass, that correctly set forth the record
ownership of all outstanding shares of Compass Capital Stock and the
addresses of each of its security holders.
3.2 CAPITAL STRUCTURE.
(a) The authorized Capital Stock of Compass consists of 40,000,000
shares of Common Stock and 2,200,000 shares of Preferred Stock. As of the
date of this Agreement, there were issued and outstanding 19,628,560 shares
of Compass Common Stock, and there were issued and outstanding 2,200,000
shares of Compass Series A Preferred Stock. As of the date of this
Agreement, there were an aggregate of 1,880,774 shares of Common Stock
reserved for issuance upon the exercise of outstanding Compass Options.
SCHEDULE 3.2(A) sets forth a listing of each stockholder of Compass and the
respective number of shares of each class of Compass Capital Stock owned by
each such stockholder. Except as set forth on SCHEDULE 3.2(A), there are no
outstanding shares of Compass Capital Stock or any other equity securities or
rights to purchase equity securities of Compass, other than shares of Compass
Capital Stock and Compass Options as described in this paragraph.
(b) All outstanding shares of Compass Capital Stock are, and any
shares of Compass Capital Stock issued upon exercise of any Compass Option
will be, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights created by statute, Compass' charter or
Bylaws or any agreement to which Compass is a party or by which Compass may
be bound. Except as set forth on SCHEDULE 3.2(B), all outstanding Compass
Capital Stock or other Compass securities have been issued in compliance with
applicable securities laws. Except for the Compass Options, there are no
options, warrants, calls, conversion rights, commitments or agreements of any
character to which Compass is a party or by which Compass may be bound that
do or may obligate Compass to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of Compass Capital Stock or that do or
may obligate Compass to grant, extend or enter into any such option, warrant,
call, conversion right, commitment or agreement.
(c) Except for the Compass Preferred Stock and as set forth on
SCHEDULE 2.1(e), none of the issued and outstanding shares of Compass Capital
Stock is subject to repurchase or redemption. All Compass Options have been
issued in accordance with Compass' stock option plans and all applicable
securities laws, including pursuant to valid permits or exemptions therefrom.
The Compass stock option plans and all amendments thereto have been approved
by all requisite Compass stockholder action. Compass does not have in effect
any stock appreciation rights plan and no stock appreciation rights are
currently
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outstanding. The consummation of the Merger shall not cause an acceleration
in the vesting of any of Compass' Capital Stock.
(d) Except for any restrictions imposed by applicable securities
laws, the Compass Bylaws, the Compass stock option plan and agreements, and
the agreements related to Compass Restricted Stock listed in SCHEDULE 2.1(E),
there is no right of first refusal, co-sale right, right of participation,
right of first offer, option or other restriction on transfer applicable to
any shares of Compass Capital Stock.
(e) Except for the Voting Agreement entered into as of the date
hereof in substantially the form attached hereto as EXHIBIT 3.2(E) (the
"Voting Agreement") with the parties listed on SCHEDULE 3.2(E) hereto,
Compass is not a party or subject to any agreement or understanding, and
there is no agreement or understanding between or among any persons that
affects or relates to the voting or giving of written consent with respect to
any outstanding security of Compass.
3.3 SUBSIDIARIES.
(a) SCHEDULE 3.3(A) hereto sets forth each subsidiary of Compass
(each a "Subsidiary"), together with the jurisdiction of incorporation or
organization of each such Subsidiary, the outstanding capital stock of each
such Subsidiary, and the record owner of all such shares of capital stock.
All the outstanding shares of capital stock of each such Subsidiary have been
validly issued and are fully paid and nonassessable and are owned by Compass
free and clear of all adverse claims, restrictions on voting or transfer,
pledges, claims, liens, charges, encumbrances and security interests or other
restrictions of any kind or nature whatsoever (collectively, "Liens"). There
are no securities convertible into or exchangeable for, or any options,
warrants, calls, subscriptions or other rights (preemptive or otherwise) to
acquire, any shares of capital stock of such Subsidiaries or any agreements
or contractual commitments other than this Agreement obligating Compass, or
restricting Compass' rights, to transfer, sell or vote, the capital stock of
any of such Subsidiaries owned by it, directly or indirectly. Except as set
forth in SCHEDULE 3.3(A) hereto, neither Compass nor any of its Subsidiaries
owns, directly or indirectly, any capital stock or other ownership interest
in any corporation, partnership, joint venture or other entity or has any
agreement, understanding, contract or commitment relating to an interest in
any corporation, partnership, joint venture or other entity or Compass' or
such Subsidiary's investment therein. Each Subsidiary identified on SCHEDULE
3.3(A) hereto is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation.
(b) SCHEDULE 3.3(B) hereto sets forth a true and complete list of all
jurisdictions in which Compass and its Subsidiaries are qualified to do
business or own or lease property or have employees.
3.4 AUTHORITY.
(a) Compass has all requisite corporate power and authority to
enter into this Agreement and the Certificate of Merger and the Escrow
Agreement (collectively, the
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"Related Agreements") and, subject to approval of this Agreement and the
Certificate of Merger by the stockholders of Compass, to execute, deliver and
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Related Agreements, the performance by Compass of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of Compass, including approval by its
Board of Directors, other than approval of the Compass stockholders. Each of
this Agreement and the Related Agreements is a legal, valid and binding
obligation of Compass enforceable against Compass in accordance with its
respective terms, except (i) as enforcement may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors'
rights generally, (ii) that the availability of equitable remedies is subject
to the discretion of the court before which any proceeding therefor may be
brought, and (iii) that indemnification for securities law violations may not
be enforceable as a matter of public policy.
(b) Subject to satisfaction of the conditions set forth in Article
VI hereto, the execution and delivery of this Agreement and the Related
Agreements do not and the performance and consummation of the transactions
contemplated hereby and thereby will not, conflict with or result in any
conflict with, breach or violation of any statute, law, rule, regulation,
judgment, order, decree, or ordinance known to Compass and applicable to
Compass or its properties or assets, or conflict with or result in any
conflict with, breach or violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation, forfeiture or acceleration of any obligation or the loss of a
benefit under, or result in the creation of a lien or encumbrance on any of
the properties or assets of Compass pursuant to (i) any provision of the
current charter or Bylaws of Compass, or (ii) any agreement, contract, note,
mortgage, indenture, lease, instrument, permit, concession, franchise or
license to which Compass is a party or by which Compass or any of its
property or assets may be bound or affected, other than any such conflict,
breach, violation or default which would not have a material and adverse
effect on the Business Condition of Compass.
(c) No consent, approval, order or authorization of, or
registration, declaration of, or qualification or filing with, any court,
administrative agency, commission, regulatory authority or other governmental
or administrative body or instrumentality, whether domestic or foreign (a
"Governmental Entity"), is required by or with respect to Compass in
connection with the execution and delivery of this Agreement and the Related
Agreements by Compass or the consummation by Compass of the transactions
contemplated hereby or thereby, except for (i) the filing of the Certificate
of Merger as required under the DGCL and appropriate documents with the
relevant authorities of other jurisdictions in which Compass is qualified to
do business, (ii) compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") as described in Section
5.16 and (iii) such other consents, approvals, authorizations, registrations
or qualifications as may be required under applicable securities or Blue Sky
laws in connection with the Merger.
3.5 FINANCIAL STATEMENTS. Compass has delivered to Avant! a complete
and accurate copy of its unaudited balance sheet at December 27, 1996, and
its unaudited balance
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sheet at June 27, 1997, and its statement of operations, statement of cash
flows and statement of stockholders' equity, including notes thereto for the
year ended December 27, 1996, and the six months ended June 27, 1997, which
are unaudited (collectively, "the Compass Financial Statements"). The Compass
Financial Statements have been prepared internally in good faith by Compass'
management and applied on a consistent basis throughout the periods indicated
and with each other. Except for the absence of footnotes and customary
year-end adjustments in the financial statements the Compass Financial
Statements fairly present the financial position and operating results of
Compass as of the dates, and for the periods, indicated therein. The Compass
Financial Statements have been prepared with the understanding that: (i)
materiality thresholds reflect management judgments based on consolidated
VLSI financial results; (ii) no attempt has been made to apply carve out
accounting principles; and (iii) income tax provisions are based on the
VLSI/Compass tax sharing agreement and do not take into account FAS 109 on a
separate company basis.
3.6 PAYABLES; RECEIVABLES.
(a) All accounts payable and notes payable by Compass to third
parties as of the date hereof arose, and as of the Closing, will have arisen,
in the ordinary course of business.
(b) All of the accounts receivable and notes receivable, net of
allowances, owing to Compass as of June 27, 1997 and as of the Closing are,
or will be, set forth in SCHEDULE 3.6 or an updated SCHEDULE 3.6 delivered at
the Closing, respectively, and constitute, and as of the Effective Time of
the Merger will constitute, valid and enforceable claims arising from bona
fide transactions in the ordinary course of business collectible in the
recorded amounts thereof, to the extent not previously collected (provided
further that this representation regarding collectibility of accounts shall
be breached only to the extent the sum of all uncollectible accounts exceeds
the allowances in the balance sheet as of June 27, 1997 in the Compass
Financial Statements or allowances made in the updated SCHEDULE 3.6 delivered
at the Closing, which allowances have been and shall be calculated in a
manner consistent with the methodologies and practices used by Compass in
preparing its balance sheet as of December 27, 1996), and, there are no
known, contingent or asserted claims, refusals to pay, rights of return, or
other rights of set-off against any thereof. As of the date hereof, and as
of the Closing, there is and will be no account receivable or note receivable
that is pledged to any third party by Compass.
(c) As of June 27, 1997, there are no debts, liabilities,
obligations or claims against Compass of any nature, whether accrued,
absolute, contingent or otherwise (collectively "Liabilities"), and whether
due or to become due, that would be required to be reflected in a balance
sheet, or in the notes thereto, that are not disclosed or provided for in the
Compass Financial Statements or the notes thereto. As of the date hereof,
Compass has no Liabilities other than those specifically set forth in the
Compass Financial Statements or that have arisen in the ordinary course of
business since June 27, 1997. All of Compass' general ledgers, books and
records have been made available to Avant!. Compass does not have any of its
records, systems, controls, data or information recorded, stored, maintained,
operated or
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otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
that (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of Compass or its parent, VLSI.
Compass' financial reserves in the Compass Financial Statements are adequate
to cover claims already incurred. The provision for taxes of Compass as set
forth in the Compass Financial Statements is adequate and accurate for taxes
due or accrued as of such date.
3.7 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 3.7, Compass
is in compliance and has conducted its business and operations so as to
comply with all laws, ordinances, rules and regulations, judgments, decrees
or orders of any Governmental Entity known to Compass. There are no
judgments or orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against
Compass or against any of its properties or businesses, and none are pending
or, to Compass' knowledge, threatened in writing. Compass has not during the
past three (3) years received any governmental notice from any Governmental
Entity for any violation of applicable laws or regulations. Compass has all
valid and current permits, licenses, orders, authorizations, registrations,
approvals and other instruments (each of which is in full force and effect),
and Compass has made all filings and registrations and the like necessary or
required by law to conduct its business.
3.8 NO DEFAULTS. Except as set forth in SCHEDULE 3.8, Compass is not,
and it has not received notice that it is or would be with the passage of
time, in violation of any provision of its current charter or Bylaws or in
default or violation of any term, condition or provision of (a) any judgment,
decree, order, injunction or stipulation applicable to Compass, or (b) any
agreement, note, mortgage, indenture, law, statute, rule, regulation,
contract, lease, instrument, permit, concession, franchise or license to
which Compass is a party or by which Compass or its properties or assets may
be bound other than a default or violation that would not have a material and
adverse effect on Compass' Business Condition.
3.9 LITIGATION. Except as set forth in SCHEDULE 3.9, there is no
action, suit, proceeding, claim, arbitration or investigation pending or, to
the best of Compass' knowledge, threatened against Compass or, to the best of
Compass' knowledge, any of its officers or directors (in their capacities as
such), nor is there any reasonable basis therefor known to Compass. There is
no action, suit, proceeding or investigation by Compass currently pending or
which it intends to initiate. Compass is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
Governmental Entity. Compass has delivered to Avant! correct and complete
copies of all correspondence prepared by its counsel for Compass' independent
public accountants in connection with the last three (3) completed annual
Compass Financial Statements and any such correspondence since the date of
the last Compass Financial Statement.
3.10 CONDUCT IN THE ORDINARY COURSE. Except as set forth in SCHEDULE
3.10, since June 27, 1997, Compass has conducted its business in the ordinary
course and there has not occurred:
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(a) Any change in the assets, liabilities, Business Condition or
operating results from that reflected in the Compass Financial Statements at,
and for the six months ended, June 27, 1997 and that might reasonably be
expected to have a material and adverse affect on the Business Condition of
Compass;
(b) Any amendments or changes in the charter or Bylaws of Compass;
(c) Any damage, destruction or loss, whether covered by insurance
or not, materially and adversely affecting the Business Condition of Compass;
(d) Any issuance, redemption, repurchase or other acquisition of
shares of Compass Capital Stock (other than issuances pursuant to exercise of
Compass Options or repurchases of Common Stock at cost in the ordinary course
under the terms of agreements relating to Compass Restricted Stock), or any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to Compass Capital Stock;
(e) Any increase in or modification of the compensation or
benefits payable or to become payable by Compass to any of its service
providers or changes pursuant to employment agreements currently in effect or
changes in position;
(f) Any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement (including,
without limitation, the granting of stock options, restricted stock awards or
stock appreciation rights) made to, for or with any of its service providers;
(g) Any (i) sale of the property or assets of Compass individually
in excess of $10,000 or in the aggregate in excess of $25,000 other than
inventory sales or nonexclusive end user license grants in the ordinary
course of business consistent with past practice or (ii) any mortgage,
pledge, transfer of a security interest in, or lien created by it, with
respect to any of its properties or assets, except liens for taxes not yet
due or payable (other than liens arising under existing lease financing
arrangements, liens arising in the ordinary course of Compass' business that
in the aggregate are not material and liens for Taxes not yet due and
payable);
(h) Any alteration in any term of any outstanding security of
Compass;
(i) Any (i) incurrence, assumption or guarantee by Compass of any
debt for borrowed money other than trade indebtedness incurred in the
ordinary course of business consistent with past practice; (ii) any waiver or
compromise by it of a valuable right or of a debt owed to it; (iii) any
satisfaction or discharge of any lien, claim, or encumbrance or payment of
any obligation by it, except that which is not material to its Business
Condition; (iv) issuance or sale of any securities convertible into or
exchangeable for debt securities of Compass; or (v) issuance or sale of
options or other rights to acquire from Compass, directly or indirectly, debt
securities of Compass or any securities convertible into or exchangeable for
any such debt securities;
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(j) Any creation or assumption by Compass of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising under existing lease financing arrangements, liens arising in the
ordinary course of Compass' business that in the aggregate are not material
and liens for Taxes not yet due and payable);
(k) Any making of any loan, advance or capital contribution to, or
investment in, any person other than advances made in the ordinary course of
business of Compass consistent with Compass' past practices;
(l) Any entry into, amendment of, relinquishment, termination or
nonrenewal by Compass of any contract, lease, commitment or other right or
obligation other than in the ordinary course of business consistent with past
practice;
(m) Any transfer or grant of a right under the Compass
Intellectual Property Rights (as defined in Section 3.17) other than those
transferred or granted in the ordinary course of business consistent with
past practice;
(n) Any labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representative thereof to
organize any employees of Compass;
(o) Any resignation or termination of employment of any of its key
employees (and Compass does not know of the impending resignation or
termination of employment of any such employee); or
(p) Any agreement or arrangement made by Compass to take any
action that, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Section 3.10 untrue or incorrect
as of the date when made.
3.11 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
SCHEDULE 3.11 and in the Compass Financial Statements, Compass has no
liabilities or obligations (whether absolute, accrued or contingent, and
whether or not determined or determinable) of a character that should be
accrued, shown, disclosed, reserved or indicated in a balance sheet of
Compass (including the footnotes thereto).
3.12 DOCUMENTS AND INFORMATION SUPPLIED. The copies of all instruments,
agreements, and documents delivered by Compass, its stockholders and
professional advisors to Avant! and Sub or their counsel and accountants are
and will be true and correct copies of such documents. No representations or
warranties made by Compass in this Agreement, nor any document, information,
statement, financial statement, communication, letter, certificate or exhibit
prepared and furnished or to be prepared and furnished by Compass or its
representatives to Avant! or Sub pursuant hereto or in connection with the
transactions contemplated hereby contain or will contain any untrue statement
of a material fact, or omit or will omit to state a material fact necessary
to make the statements or facts contained herein or therein, in light of the
circumstances under which made, not misleading.
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3.13 CERTAIN AGREEMENTS. Except as set forth in SCHEDULE 3.13, neither
the execution and delivery of this Agreement or any of the Related Agreements
nor the consummation of the transactions contemplated hereby or thereby will
(a) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due
to any service provider of Compass under any Plan (as defined in Section 3.14
below) or otherwise, (b) materially increase any benefits otherwise payable
under any Plan, or (c) result in the acceleration of the time of payment or
vesting of any such benefits.
3.14 EMPLOYEE PLANS.
(a) Compass has not failed to comply in any material respect with
Title VII of the Civil Rights Act of 1964, as amended, the Fair Labor
Standards Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, all applicable federal, state, and local laws, rules, and
regulations relating to employment, and all applicable laws, rules, and
regulations governing payment of minimum wages and overtime rates, and the
withholding and payment of compensation of employees, except where the
failure to so comply will not have a material and adverse effect on Compass'
Business Condition.
(b) Compass is not a party to, nor has Compass made any
contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
(c) All plans, programs, policies, commitments or other
arrangements (whether or not set forth in a written document) maintained by
or on behalf of Compass that provide deferred or incentive compensation,
stock options or other stock purchase rights, severance or termination pay,
medical, dental, death, disability or accident benefits (whether or not
insured), collective bargaining agreements, or pension, profit sharing,
savings or retirement benefits to, or for the benefit of, any active, former
or retired service providers of Compass or their spouses or dependents are
set forth in SCHEDULE 3.14 (collectively, the "Plans").
(d) Compass has made available to Avant! or their counsel complete
and accurate copies of each Plan. Compass has prepared in good faith and
timely filed all requisite governmental reports and has properly and timely
posted, or distributed all notices and reports to employees required to be
filed, posted, or distributed with respect to each Plan, except where the
failure to so comply will not have a material and adverse affect on Compass'
Business Condition. Each Plan has at all times been operated and
administered in all material respects in accordance with its terms and all
applicable laws currently in effect, including ERISA and the Code, and
including but not limited to, amendments to Section 401(a) of the Code
enacted by the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act
of 1986, the Omnibus Budget Reconciliation Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, and the Omnibus Budget Reconciliation Act
of 1989.
(e) Compass has not violated in any material respect any of the
health care continuation coverage requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA") applicable to its employees prior
to the Time of Closing.
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(f) There are no "reportable events" under Section 4043 of ERISA
with respect to any pension benefit plan within the meaning of Section 3(2)
of ERISA, subject to Title IV of ERISA, and Compass has not incurred any
liability under Title IV of ERISA in connection with the termination of any
pension benefit plan or the complete or partial withdrawal from any
multiemployer plan within the meaning of Section 3(37) of ERISA.
3.15 MAJOR CONTRACTS. Except as set forth in SCHEDULE 3.15, Compass is
not a party to or subject to:
(a) Any union contract or any employment or consulting contract or
arrangement other than stock option or stock purchase agreements or
proprietary information agreements, written or oral with any director,
officer or affiliate;
(b) Any original equipment manufacturer agreement, distribution
agreement, volume or quantity purchase agreement or other similar agreement
(each a "Distribution Agreement"), or joint marketing, joint development or
joint venture contract or arrangement or any other agreement that has
involved or is expected to involve a sharing of profits with other persons or
provides for payments of more than $75,000 per annum;
(c) Any lease for real or personal property involving payments of
more than $75,000 per annum;
(d) Any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of companies or other entities or
indebtedness for borrowed money by way of direct loan, sale of debt
securities, purchase money obligation, conditional sale, guarantee, leasehold
obligations or otherwise;
(e) Any license agreement over $100,000, either as licensor or
licensee other than standard end-user licensing agreements entered into in
the ordinary course of business;
(f) Any contract containing covenants purporting to limit the
freedom of Compass directly or indirectly to distribute or otherwise compete
in any line of business in any geographic area or with any third party;
(g) Any agreement of indemnification, except indemnification
provided in the ordinary course of business for officers and directors
pursuant to applicable corporate law;
(h) Any agreement, contract or commitment relating to capital
expenditures involving payments of more than $75,000 per annum;
(i) Any agreement, contract or commitment relating to the
disposition or acquisition by Compass of any assets (other than Inventory) or
any Compass Intellectual Property Rights (as defined in Section 3.17 below),
other than nonexclusive object code end-user license grants in the ordinary
course of business;
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(j) Any agreement providing for minimum payment or resale
obligations, ongoing support or research and development obligations, or
warranty obligations on the part of Compass, except arrangements entered into
in the ordinary course of business;
(k) Any agreement for the provision of products or securities to
any Governmental Entity, except customer agreements entered into in the
ordinary course of business;
(l) Any agreement requiring a commitment of Compass resources or
personnel to market, distribute or license products or technology, whether on
a best-efforts basis or otherwise;
(m) Any other agreement, contract, letter of intent, memorandum of
understanding or commitment that is material to Compass and that provides for
payments of more than $75,000 per year;
(n) Service contracts in excess of $100,000 for products and
contracts relating to material amounts of deferred revenues; or
(o) Any sole or limited source supplier agreements (written or oral).
Except as set forth on SCHEDULE 3.15, each agreement, contract,
mortgage, indenture, plan, lease, instrument, permit, concession, franchise,
arrangement, license and commitment to which Compass is a party or by which
it is bound as set forth in SCHEDULE 3.15 (or required to be set forth in
SCHEDULE 3.15) (i) is valid and binding on Compass, (ii) is in full force and
effect and (iii) has not been breached by Compass or, to the best of Compass'
knowledge, any other party thereto in a manner that is material and adverse
to the Business Condition of Compass. To the best of Compass' knowledge, no
party to any such contract, agreement or instrument intends to cancel,
withdraw, modify or amend such contract, agreement or arrangement. Compass
is not aware of any facts from which it should reasonably conclude that it
will not be able to perform in all material respects the obligations required
to be performed by it subsequent to the date hereof under each such
agreement, which non-performance would reasonably be expected to result in a
material and adverse change to the Business Condition of Compass.
3.16 TAXES. Federal income tax returns and certain other Tax returns
have been filed on a combined or consolidated basis by VLSI. All Tax
returns, statements, reports, declarations and other forms and documents
(including without limitation estimated Tax returns and reports and material
information returns and reports) required to be filed with any Tax authority
with respect to any Taxable period ending on or before the Closing (or, in
the case of a Tax Return that is not filed with respect to a period) that is
due on or before the Closing, by or on behalf of Compass (collectively, "Tax
Returns" and individually a "Tax Return"), have been or will be completed and
filed when due (including any extensions of such due date), all such Tax
Returns were or will be complete and accurate as filed, and all amounts shown
due on such Tax Returns on or before the Effective Time of the Merger have
been or will be paid on or before such date. The Compass Financial
Statements (i) fully accrue all actual and contingent liabilities
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for Taxes (whether or not shown as due on the Tax Returns) with respect to
all periods or portions thereof through June 27, 1997 and Compass has not
incurred and will not incur any Tax liability in excess of the amount
reflected on its June 27, 1997 balance sheet included in the Compass
Financial Statements with respect to such periods or portions thereof, and
(ii) fully accrues all material liabilities for Taxes payable after June 30,
1997 with respect to all transactions and events occurring on or prior to
such date. All information set forth in the notes to the Compass Financial
Statements relating to Tax matters is true, complete and accurate in all
material respects. No Tax liability since June 27, 1997 has been incurred by
Compass in excess of the amount of Tax liability that would have been
incurred in the ordinary course of business of Compass during such period had
Compass not been a member of an affiliated, consolidated, combined or unitary
group for Tax purposes during any part of such period and adequate provision
has been made by Compass for all Taxes since that date on at least a
quarterly basis. Compass has withheld and paid to the applicable financial
institution or Tax authority all amounts required to be withheld. Except as
set forth on SCHEDULE 3.16, to the best knowledge of Compass, no Tax Returns
filed with respect to Taxable years of Compass through the Taxable year ended
December 31, 1996 in the case of the United States, have been examined and
closed. Compass (or any member of any affiliated or combined group of which
Compass has been a member) has not granted any extension or waiver of the
limitation period applicable to any Tax Returns that is still in effect.
Except as set forth on SCHEDULE 3.16, there is no material claim, audit,
action, suit, proceeding, or (to the best knowledge of Compass) investigation
now pending or (to the best knowledge of Compass) threatened against or with
respect to Compass in respect of any Tax or assessment. Except as set forth
on SCHEDULE 3.16, no notice of deficiency or similar document of any Tax
authority has been received by Compass, and there are no liabilities for
Taxes (including liabilities for interest, additions to Tax and penalties
thereon and related expenses) with respect to the issues that have been
raised (and are currently pending) by any Tax authority that could, if
determined adversely to Compass, materially and adversely affect the
liability of Compass for Taxes. There are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of Compass. Compass
is in full compliance with all the terms and conditions of any Tax exemptions
or other Tax-sharing agreement or order of a foreign government and the
consummation of the Merger will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption or other Tax-sharing
agreement or order. Neither Compass nor any person on behalf of Compass has
entered into or will enter into any agreement or consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income tax law) or agreed
to have Section 341(f)(2) of the Code (or any corresponding provision of
state, local or foreign income tax law) apply to any disposition of any asset
owned by Compass. None of the assets of Compass is property that Compass is
required to treat as being owned by any other person pursuant to the
so-called "safe harbor lease" provisions of former Section 168(f)(8) of the
Code. None of the assets of Compass directly or indirectly secures any debt
the interest on which is tax exempt under Section 103(a) of the Code. None
of the assets of Compass is "tax-exempt use property" within the meaning of
Section 168(h) of the Code. Compass has not made and will not make a deemed
dividend election under Treas. Reg. Section 1.1502-32(f)(2) or a consent
dividend election under Section 565 of the Code. Compass has not participated
in (and will not participate in) an international boycott within the meaning
of Section 999 of the Code. Except as set forth on SCHEDULE 3.16 hereto,
Compass does not have and has not had a permanent
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establishment in any foreign country, as defined in any applicable tax treaty
or convention between the United States of America and such foreign country.
All material elections with respect to Compass' Taxes made during the fiscal
years ending December 27, 1994, 1995 and 1996 are reflected on the Compass
Tax Returns for such periods, copies of which have been provided to Avant!.
There is no agreement, contract or arrangement to which Compass is a party
that could, individually or collectively, result in the payment of any amount
that would not be deductible by reason of Sections 280G (as determined
without regard to Section 280G(b)(4)), 162 (other than 162(a)) or 404 of the
Code. Compass is not a party to or bound by any Tax indemnity, Tax sharing
or Tax allocation agreement (whether written or unwritten or arising under
operation of federal law as a result of being a member of a group filing
consolidated Tax returns, under operation of certain state laws as a result
of being a member of a unitary group, or under comparable laws of other
states or foreign jurisdictions) which includes a party other than Compass
nor does Compass owe any amount under any such Agreement. Compass has
previously provided or made available to Avant! true and correct copies of
all Tax Returns, and, as reasonably requested by Avant!, prior to or
following the date hereof, presently existing information statements and
reports. Compass is not, and has not been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Other
than by reason of the Merger, Compass has not been and will not be required
to include any material adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger. For
purposes of this Agreement, the following terms have the following meanings:
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any and
all taxes including, without limitation, (i) any net income, alternative or
add-on minimum tax, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, value added, net worth, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount imposed by
any Governmental Entity (a "Tax authority") responsible for the imposition of
any such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period or
as the result of being a transferee or successor thereof and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii)
as a result of any express or implied obligation to indemnify any other
person. As used in this Section 3.16, the term "Compass" means Compass and
any entity included in, or required to be included in, or required under
generally accepted accounting principles ("GAAP") to be included in any of
the Compass Financial Statements.
3.17 INTELLECTUAL PROPERTY.
(a) Except as otherwise set forth in SCHEDULE 3.17, Compass owns,
or is licensed or otherwise entitled to exercise, without material
restriction, all rights to all patents, trademarks, trade names, service
marks, copyrights, mask work rights, trade secret rights and other
intellectual property rights, and any applications or registrations therefor,
and all mask
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works, net lists, schematics, technology, source code, know-how, computer
software programs and all other tangible and intangible information or
material used in the business of Compass as currently conducted or in
connection with products currently under development without any conflict or
infringement of the rights of others (collectively, the "Compass Intellectual
Property Rights"). All of the trademarks, trade names, service marks and
registered copyrights included in such Compass Intellectual Property Rights
are set forth in SCHEDULE 3.17. Except as set forth on SCHEDULE 3.17,
Compass has no patents, patent applications or copyright registrations. In
addition, Compass has taken all reasonable and practicable steps (including,
without limitation, entering into confidentiality and non-disclosure
agreements with all officers and employees of and consultants to Compass with
access to or knowledge of Compass' Intellectual Property Rights that Compass
wishes to maintain as confidential) to maintain the secrecy and
confidentiality of and its proprietary rights in, all Compass Intellectual
Property Rights that Compass wishes to maintain as confidential.
(b) SCHEDULE 3.17 also lists (i) all patents and patent
applications and all registered copyrights, trade names, trademarks, service
marks and other company, product or service identifiers included in the
Compass Intellectual Property Rights, and specifies the jurisdictions in
which each such Compass Intellectual Property Right has been registered,
including the respective registration numbers; (ii) other than nonexclusive
end-user licenses entered into in the ordinary course of business, all
licenses, sublicenses and other agreements as to which Compass is a party and
pursuant to which Compass or any other person is authorized to use any
Compass Intellectual Property Right; and (iii) all licenses under which
Compass is or may be obligated to make royalty or other payments. Copies of
all licenses, sublicenses, and other agreements identified pursuant to clause
(ii) above have been delivered by Compass to Avant!.
(c) Compass is not in violation in any material respect of any
license, sublicense or agreement described in SCHEDULE 3.17. As a result of
the execution and delivery of this Agreement or the performance of Compass'
obligations hereunder, Compass will not be in violation in any material
respect of any license, sublicense or agreement described in SCHEDULE 3.17,
or lose or in any way impair any rights pursuant thereto.
(d) Compass is the absolute owner or exclusive licensee of, with
all necessary right, title and interest in and to (free and clear of any
liens, encumbrances or security interests), the Compass Intellectual Property
Rights and has rights to the use, sale, license or disposal thereof in
connection with the services or products in respect of which the Compass
Intellectual Property Rights are being used or proposed to be used in
connection with products currently under development.
(e) No claims with respect to the Compass Intellectual Property
Rights have been asserted to Compass, or to Compass' knowledge, are
threatened by any person, (i) to the effect that Compass infringes any
copyright, patent, trade secret, or other intellectual property right of any
third party or violates any license or agreement with any third party, (ii)
contesting the right of Compass to use, sell, license or dispose of any
Compass Intellectual Property Rights,
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or (iii) challenging the ownership, validity or effectiveness of any of the
Compass Intellectual Property Rights.
(f) To Compass' knowledge, all trademarks, service marks, and
other company, product or service identifiers held by Compass are valid and
subsisting.
(g) To the best of Compass' knowledge, there has not been and
there is not now any unauthorized use, infringement or misappropriation of
any of the Compass Intellectual Property Rights by any third party,
including, without limitation, any service provider of Compass; Compass has
not been sued or charged as a defendant in any claim, suit, action or
proceeding that involves a claim of infringement of any patents, trademarks,
service marks, copyrights or other intellectual property rights. To Compass'
knowledge, it does not have any infringement liability with respect to any
patent, trademark, service mark, copyright or other intellectual property
right of another.
(h) No Compass Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting in
any manner the licensing thereof by Compass. Compass has not entered into
any agreement to indemnify any other person against any charge of
infringement of any Compass Intellectual Property Right, except in the
ordinary course of business. Compass has not entered into any agreement
granting any third party the right to bring infringement actions with respect
to, or otherwise to enforce rights with respect to, any Compass Intellectual
Property Right. Compass has the exclusive right to file, prosecute and
maintain all applications and registrations with respect to the Compass
Intellectual Property Rights developed or owned by Compass, except patents
and patent applications previously assigned to VLSI.
3.18 EMPLOYEE AGREEMENTS. To the best of Compass' knowledge, no service
provider of Compass is in violation of any term of any judgment, decree or
order, or any term of an employment contract (whether written or verbal),
patent or trademark disclosure agreement or any other contract or agreement
relating to the relationship of any such service provider with Compass or any
other party (including prior employers), because of the nature of the
business now conducted by Compass. Each current and former service provider
of Compass has executed a proprietary information and inventions agreement
(or similar agreement) with Compass in the form then being used by Compass,
all of which forms have been attached to SCHEDULE 3.18.
3.19 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in
SCHEDULE 3.19, there is no agreement, judgment, injunction, order or decree
binding upon Compass or which has or could reasonably be expected to have the
effect of prohibiting or significantly impairing any material business
practice of Compass, any material acquisition of property by Compass, or the
continuation of the business of Compass as currently conducted.
3.20 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES: CONDITION
OF EQUIPMENT.
(a) Compass does not own any real property.
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(b) All of the existing Compass real property leases have been
previously delivered to Avant!. SCHEDULE 3.20 sets forth a complete and
accurate list of all real property leased by Compass.
(c) Compass owns or has valid leasehold interests in all of its
tangible properties and assets, real, personal and mixed, used in its
business, free and clear of any liens (other than liens for Taxes that are
not yet delinquent), charges, pledges, security interests or other
encumbrances, except as reflected in the Compass Financial Statements and
except for such imperfections of title and encumbrances, if any, that are not
substantial in character, amount or extent, and that do not and are not
reasonably likely to materially detract from the value, or interfere with the
use, as presently conducted, of the property subject thereto or affected
thereby. Compass has delivered to Avant! correct and complete copies of each
lease identified in SCHEDULE 3.20 and such lease(s) are valid and enforceable
by Compass in accordance with their terms, except (i) as enforcement may be
limited by bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights generally, and (ii) that the availability of
equitable remedies is subject to the discretion of the court before which any
proceeding therefor may be brought. Compass has received no notice that,
and, to the best of Compass' knowledge, no circumstance exists which, with
the passage of time or the giving of notice could constitute a default under,
any such lease(s). Except as set forth in SCHEDULE 3.20, no consent of any
party is required to any lease of which Compass is a party as a consequence
of the Merger.
(d) Each item of machinery and equipment (the "Equipment") owned
or leased by Compass is listed in SCHEDULE 3.20, except such Equipment which
individually has a net book value of less than $50,000. The Equipment is (i)
adequate for the conduct of the business of Compass consistent with its past
practice, (ii) suitable for the uses to which it is currently employed, (iii)
in good operating condition, (iv) regularly and properly maintained, and (v)
not obsolete, dangerous or in need of renewal or replacement, except for
renewal or replacement in the ordinary course of business.
(e) Since June 27, 1997, there has not occurred any transfer of
title other than in the ordinary course of business, any material
abandonment, or any material pilferage or any other material loss with
respect to, any of its property, plant or equipment.
(f) SCHEDULE 3.20 also contains a true and correct list of all of
the physical assets (including fixed assets) having a net book value in
excess of $50,000 owned or leased by Compass or on consignment, provided that
leased property may be summarized on such schedule by lessor, lease number,
amount financed and type of equipment. All improvements on leased property
used in the business of Compass and the present use thereof are performed in
all material respects in accordance with all applicable laws. The net book
value of any fixed assets used in Compass' business has not been written up
or down, other than pursuant to depreciation or amortization expense in
accordance with its historical practice.
3.21 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. SCHEDULE 3.21 sets forth
all of Compass' licenses, authorizations, permits, concessions, certificates
and other franchises of any Governmental Entity required to operate its
business as currently conducted (collectively, the
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Government Licenses). Compass is in compliance in all material respects with
the terms, conditions, limitations, restrictions, standards, prohibitions,
requirements and obligations of such Government Licenses. The Government
Licenses are in full force and effect. There is not now pending, nor, to the
best of Compass' knowledge, is there threatened, any action, suit,
investigation or proceeding against Compass before any Governmental Entity
with respect to the Government Licenses, nor is there any issued or
outstanding notice, order or complaint with respect to the violation by
Compass of the terms of any Government License or any rule or regulation
applicable thereto.
3.22 ENVIRONMENTAL MATTERS.
(a) For purposes of this Section 3.22, the following terms shall
have the following meanings:
(i) "Court Order" shall mean any judgment, order, award or
decree of any foreign, federal, provincial, state, local or other court or
tribunal, or any Governmental Entity, and any award in any arbitration
proceeding.
(ii) "Disposal Site" shall mean landfill, disposal agent,
waste hauler or recycler of Hazardous Materials.
(iii) "Environmental Encumbrance" shall mean any lien, claim,
charge, security interest, mortgage, pledge, easement, conditional sale or
other title retention agreement, defect in title, covenant or other
restrictions of any kind in favor of any Governmental Entity for (i) any
liability under any Environmental Law or (ii) damages arising from, or costs
incurred by such Governmental Entity in response to, a Release or threatened
Release of Hazardous Material into the environment.
(iv) "Environmental Laws" shall mean all Requirements of
Laws that relate to any Hazardous Material, any Hazardous Materials
Activities or the use, handling, transportation, production, spin, lead
pumping, injection, deposit, disposal discharge, Release, threatened Release,
migration, emission, sale or storage of, or the exposure of any person to,
Hazardous Material
(v) "Governmental Permits" shall mean all licenses,
franchises, permits, privileges, immunities, approvals and other
authorizations from a Governmental Entity.
(vi) "Hazardous Material" shall mean any material or
substance that is prohibited or regulated by any Requirement of Law or that
is designated by any Governmental Entity to be radioactive, toxic, hazardous
or otherwise a danger to health, reproduction or the environment.
(vii) "Hazardous Materials Activities" shall mean the
generation, release, storage, use, handling, transportation, distribution,
sale, Release or threatened Release of, or Remedial Action concerning any
Hazardous Material, performed in connection with Compass' business or the
Real Property.
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(viii) "Real Property" shall mean real property now or at any
time in the past owned or leased by Compass or any predecessors.
(ix) "Release" shall mean release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration of Hazardous Material in, on, under or through the Real Property or
the air, soil, surface water, ground water or improvements thereof.
(x) "Remedial Action" shall mean any reporting,
investigation, characterization, feasibility study, health assessment, risk
assessment, remediation, treatment, recycling, removal, transport,
monitoring, maintenance or any other activity incident to the Release,
threatened Release, investigation, remediation or removal of Hazardous
Material existing on the Real Property or in, on, under or through the air,
soil, ground water, surface water or improvements thereof.
(xi) "Requirements of Laws" shall mean any laws, statutes,
regulations, rules, guidelines, codes, ordinances, judgments, injunctions'
decrees, orders, permits, approvals, treaties or protocols enacted, adopted,
issued or promulgated by any Governmental Entity (including, without
limitation, those pertaining to electrical building, zoning, environmental
and occupational safety and health requirements) or common law in effect on
the date hereof.
(b) Except to the extent described in reasonable detail in
SCHEDULE 3.22 hereto:
(i) Compass complies in all respects with any applicable
existing federal, state or local law, statute or regulation, or any existing
decree, order, arbitration award, or any license or permit issued by any
federal, state or local governmental authority relating to the Environmental
Laws, including, without limitation, Environmental Laws relating to: (i)
Hazardous Materials; (ii) air, water and noise pollution; (iii) ground water
contamination; (iv) the release or threatened release into the environment of
Hazardous Materials; (v) the protection of wildlife, marine sanctuaries and
wetlands; (vi) the protection of natural resources; (vii) storage tanks,
vessels and related equipment; (viii) abandoned or discarded barrels,
containers and other closed receptacles; (ix) health and safety of employees
and other persons; and (x) otherwise relating to the manufacture, processing,
use, distribution, treatment, storage, disposal, transportation or handling
of Hazardous Materials;
(ii) Compass has obtained all environmental health and
safety Governmental Permits necessary for its operation or required by any
Environmental Laws, all such Governmental Permits are in good standing, and
Compass is in compliance in all material respects with all terms and
conditions of such permits;
(iii) to Compass' knowledge, none of Compass nor any of the
Real Property or present or past Compass operations is subject to any pending
or ongoing investigation by notice or order from or agreement with any person
with respect to (A) any claim
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of Environmental Law, (B) any Remedial Action or (C) any claim of losses and
expenses arising from the Release or threatened Release of Hazardous
Material;
(iv) Compass is not subject to any pending or existing
judicial or administrative proceeding, Court Order or settlement alleging or
addressing a violation of or liability under any Environmental Law;
(v) Compass has not filed, and Compass does not intend to
file any notice or report under any Environmental Law reporting a violation
of any Environmental Law;
(vi) to Compass' knowledge, there is not now, and there has
never been, on or under any Real Property; (A) any underground storage tank
or surface impoundment; or (B) any landfill or waste pile that either is or
was used to dispose or store any Hazardous Material or contains or contained
Hazardous Material;
(vii) Compass has not received any notice of claim to the
effect that it is or may be liable to any person as a result of the Release
or threatened Release of Hazardous Material into the environment or any
Hazardous Materials Activities from or on any Real Property;
(viii) There are no written notices or written complaints
which Compass has received in violation of the Environmental Laws;
(ix) Compass is not aware of any Environmental Encumbrance
on any Real Property;
(x) to Compass' knowledge, any asbestos-containing material
that is on or part of any Real Property is in good repair according to the
current standards and practices governing such material, and its presence or
condition does not violate any currently applicable Environmental Law;
(xi) none of the products Compass manufactures, distributes
or sells or has manufactured, distributed or sold in the past, contains
substantial amounts of asbestos containing material;
(xii) to Compass' knowledge, no Hazardous Material is present
on Real Property;
(xiii) Hazardous Materials Activities (A) have been conducted
in compliance with applicable Environmental Laws, and (B) have not resulted
in the exposure of any person to Hazardous Material in a manner that has or
will cause an adverse health effect to such person;
(xiv) no Court Order, action, proceeding, liability or claim
exists or, to Compass' knowledge, is threatened, against any Disposal Site
used by Compass or against
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Compass with respect to any transfer or release of Hazardous Materials by
Compass to a Disposal Site used by Compass, and there is no valid basis for
such claim based on any conduct of Compass;
(xv) Compass is not aware of any fact or circumstance that
is reasonably expected to involve Compass in any environmental litigation or
impose upon Compass any environmental liability that would have a material
and adverse effect on the Business Condition of Compass; and
(xvi) Compass has no records pertaining to environmental
audits or environmental assessments of any Real Property.
(c) Except to the extent described in reasonable detail on
SCHEDULE 3.22 attached hereto, there have been no events, conditions,
circumstances, activities, practices, incidents, actions or plans (i) which
may prevent continued compliance by Compass with the Environmental Laws or
which may give rise to any criminal or civil liability on the part of Compass
or Avant! under the Environmental Laws, and (ii) which could have a material
adverse effect on the Compass' Business Condition.
3.23 INSURANCE. Excluding any policies held by VLSI that included
coverage for Compass as a majority-owned subsidiary, SCHEDULE 3.23 lists all
insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of
Compass, and the amounts of coverage under each such policy and bond of
Compass. Compass has not been refused any requested coverage and no material
claim made by Compass has been denied by the underwriters of such policies or
bonds. All premiums payable under all such policies and bonds have been
paid, and Compass is otherwise in full compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). Compass is in compliance in all material
respects with each of such policies. Compass does not know of any threatened
termination of, the invalidation of any coverage of or premium increase with
respect to, any of such policies.
3.24 LABOR MATTERS. Compass is in compliance in all material respects
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment and wages
and hours and occupational safety and health and employment practices, and
Compass is not engaged in any unfair labor practice. Compass has not
received any notice from any Governmental Entity; and, to the best of
Compass' knowledge, there has not been asserted before any Governmental
Entity, any claim action or proceeding to which Compass is a party or
involving Compass, and there is neither pending nor, to the best of Compass'
knowledge, threatened any investigation or hearing concerning Compass arising
out of or based upon any such laws, regulations or practices. There are no
strikes or labor disputes pending or threatened by or any attempts at union
organization of any Compass employees. No employee or group of employees
whose continued services are material to Compass business as presently
conducted and as intended to be conducted with regard to products currently
under development has terminated employment and, to the best of Compass'
knowledge, there is none that intends to do so.
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3.25 PERSONNEL. Set forth on SCHEDULE 3.25 is a true and complete list
identifying all current directors, officers, regular and temporary employees,
independent contractors and consultants of Compass, as of the date hereof,
setting forth the job title of, salary (including bonuses and commissions)
payable to each such person and the location at which each employee is based.
None of such service providers whose annual base compensation exceeds
$100,000 has indicated to Compass a present intention to resign or retire.
Except as may be modified by law for employees outside the State of
California, the employment of each of Compass' employees is at-will
employment. Except as set forth on SCHEDULE 3.25, Compass does not have any
obligation (i) to provide any particular form or period of notice prior to
termination or (ii) to pay any of such employees any severance benefits in
connection with their termination of employment or service. In addition, no
severance pay will become due to any Compass employees or other service
providers in connection with the Merger as a result of any Compass agreement,
plan or program. Except as set forth on SCHEDULE 3.25, Compass has not
entered into any consulting agreements with any service provider who owes
services to or are owed compensation by Compass for services provided.
3.26 QUESTIONABLE PAYMENTS. Neither Compass nor any director, officer
or other employee, agent or representative of Compass has (a) made any
illegal payments or provided services or other favors that are illegal in the
United States of America or in any foreign country in order to obtain
preferential treatment or consideration by any Governmental Entity with
respect to any aspect of the business of Compass; or (b) made any political
contributions that would not be lawful under the laws of the United States or
the foreign country in which such payments were made. To Compass' knowledge,
neither Compass nor any director, officer or other employee, agent or
representative of Compass has been the subject of any inquiry or
investigation by any Governmental Entity in connection with payments or
benefits or other favors to or for the benefit of any governmental or armed
services official, agent, representative or employee with respect to any
aspect of the business of Compass or with respect to any political
contribution.
3.27 THIRD-PARTY CONSENTS. Except as set forth in SCHEDULE 3.27 and
except as required by the HSR Act and except for approval of the Merger by
Compass' stockholders, no consent or approval is needed from any third party in
order to effect the Merger or any of the transactions contemplated hereby, or
those that a third party has, to Compass' knowledge, decided are necessary to
avoid the loss of rights to use Compass Intellectual Property Rights. The
Compass stockholders that are party to the Voting Agreement represent a
sufficient majority of Compass stockholders to approve the Merger and related
transactions.
3.28 RELATED PARTY TRANSACTIONS. Except as set forth in SCHEDULE 3.28,
no employee, officer or director of Compass or member of his or her immediate
family is indebted to Compass, nor is Compass indebted (or committed to make
loans or extend or guarantee credit) to or subject to a guarantee from any of
them. None of such persons has any direct or indirect ownership interest in
any firm or corporation with which Compass is affiliated or with which
Compass has a business relationship, or any firm or corporation that competes
with Compass, except that the employees, officers or directors of Compass and
members of their immediate families may own stock in publicly traded
companies that may compete with Compass. No
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member of the immediate family of any officer or director of Compass is
directly interested in any contract with Compass.
3.29 CUSTOMERS. SCHEDULE 3.29 sets forth a list of the names of the ten
(10) largest customers of Compass during the past twelve (12) months
(determined on the basis of revenues and expenses, respectively, during such
period). Compass has not been informed by any of such customers that such
customer has terminated, or intends to reduce or terminate the use of Compass
products.
3.30 BANK ACCOUNTS AND POWERS OF ATTORNEY. Set forth in SCHEDULE 3.30
is an accurate and complete list showing (a) the name and address of each
bank in which Compass has an account or safe deposit box, the number of any
such account or any such box and the names of all persons authorized to draw
thereon or to have access thereto and (b) the names of all persons, if any,
holding powers of attorney from Compass and a summary statement of the terms
thereof.
3.31 PRODUCTS. Compass has delivered to Avant! copies of its warranty
policies and all outstanding warranties or guarantees relating to any of
Compass' products other than warranties or guarantees implied by law.
Compass is not aware of any claim asserting (a) any material damage, loss or
injury caused by any product, or (b) any breach of any express or implied
product warranty or any other similar claim with respect to any product other
than standard warranty obligations (to replace, repair or refund) made by
Compass in the ordinary course of business.
3.32 BROKERS OR FINDERS; PROFESSIONAL FEES. No third party shall be
entitled to receive any brokerage commissions, finder's fees, fees for
financial advisory services or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Compass or any stockholder of Compass
except Deutsche Morgan Grenfell Inc. for whom VLSI shall be solely
responsible.
ARTICLE IV:
REPRESENTATIONS AND WARRANTIES OF AVANT! AND SUB
Avant! and Sub represents and warrants to Compass that the
representations and warranties set forth below shall be true and correct as
of the date hereof. As used in this Agreement, Business Condition with
respect to Avant! shall refer to Avant! and all of its subsidiaries taken as
a whole and shall mean the financial condition, business (including products
currently under development), results of operations and assets of Avant! and
all of its subsidiaries taken as a whole.
4.1 ORGANIZATION; STANDING AND POWER. Each of Avant! and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as now being
conducted. Avant! is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on Avant!'s Business Condition.
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4.2 AUTHORITY.
(a) Avant! and Sub have all requisite corporate power and
authority to enter into this Agreement and the Related Agreements (to the
extent each is a party), to execute, deliver and perform their respective
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Related Agreements, the performance by Avant! and Sub of
their respective obligations hereunder and thereunder and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Avant! and Sub,
including approval by their respective Boards of Directors and by Avant! as
the sole stockholder of Sub. Each of this Agreement and the Related
Agreements is a legal, valid and binding obligation of Avant! and Sub
enforceable against Avant! and Sub in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought.
(b) Subject to satisfaction of the conditions set forth in Article
VI hereto, the execution and delivery of this Agreement and the Related
Agreements do not and the performance and consummation of the transactions
contemplated hereby and thereby will not conflict with or result in any
violation of any statute, law, rule, regulation, judgment, order, decree, or
ordinance applicable to Avant! or Sub or their respective properties or
assets, or conflict with or result in any conflict with, breach or violation
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation, forfeiture or acceleration of
any obligation or the loss of a benefit under, or result in the creation of a
lien or encumbrance on any of the properties or assets of Avant! or Sub
pursuant to (i) any provision of their respective Certificate of
Incorporation or Bylaws, or (ii) any agreement, contract, note, mortgage,
indenture, lease, instrument, permit, concession, franchise or license to
which Avant! or Sub is a party or by which Avant! or Sub or any of their
respective property or assets may be bound or affected.
(c) No consent, approval, order or authorization of, or
registration, declaration, qualification, or filing of or with, any
Governmental Entity is required by or with respect to Avant! or Sub in
connection with the execution and delivery of this Agreement or the Related
Agreements or the consummation by Avant! and Sub of the transactions
contemplated hereby, except for (i) the filing of documents with, and the
obtaining of orders from, the various securities or "blue sky" authorities,
(ii) the making of such reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as are required in connection with the
transactions contemplated by this Agreement, (iii) the filing of the
Certificate of Merger with the appropriate documents with the relevant
governmental authorities, and (iv) compliance with the HSR Act as described
in Section 5.16.
4.3 VALID ISSUANCE OF SHARES OF COMMON STOCK OF AVANT!. The Shares of
Avant! Common Stock, when issued, sold and delivered to the stockholders and
optionholders of Compass in accordance with the terms hereof for the
consideration described herein, will be duly
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authorized, validly issued, fully paid and non-assessable and will be issued
in compliance with all applicable securities laws and will be free and clear
of any liens, claims, encumbrances or restrictions other than liens or
encumbrances created by or imposed upon the holders hereof.
4.4 AVANT! FINANCIAL STATEMENTS. The financial statements of Avant!
included in the Registration Statement on Form S-1, as amended, and the
annual, quarterly or other reports filed on or prior to the Closing Date by
Avant! with the Securities and Exchange Commission (the "SEC") (the "Avant!
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP consistently applied (except as may be indicated in the notes
thereto or, in the case of unaudited statements as permitted by published
rules and regulations of the SEC) and fairly present the consolidated
financial position of Avant! and its consolidated subsidiaries at the dates
thereof and the consolidated results of their operations and changes in
financial position for the periods then ended (subject, in the case of
unaudited statements, to normal recurring audit adjustments). There has been
no change in Avant!'s accounting policies or estimates, except as described
in the notes to the Avant! Financial Statements. There has been no material
and adverse change in Avant!'s Business Condition subsequent to June 30,
1997.
4.5 LITIGATION. There is no action, suit, proceeding, arbitration or
investigation pending against Avant! or Sub that in any manner challenges or
seeks to prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby.
4.6 REPORTS. Avant! has furnished or made available to Compass
complete and accurate copies, as amended or supplemented, of (i) its
Registration Statement on Form S-1, as amended, filed with the SEC, (ii) its
Quarterly Reports on Form 10-Q filed with the SEC since Avant! became
obligated to file such reports, and (iii) all other reports and filings made
with the SEC, including current reports on Form 8-K since Avant! became
obligated to file such reports (such reports and other filings, together with
any amendments or supplements thereto, are collectively referred to herein as
the "Avant! Reports"). As of their respective filing dates, the Avant!
Reports complied in all material respects with the rules and regulations
promulgated by the SEC, and none of the Avant! Reports contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Avant! has
made all filings required under the rules and regulations promulgated by the
SEC.
4.7 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon Avant! or Sub that has or
could reasonably have the effect of prohibiting or significantly impairing
any business practice of Avant!, any acquisition of property by Avant!, or
the continuation of the business of Avant! as currently conducted or as
currently proposed to be conducted.
4.8 BROKERS OR FINDERS; PROFESSIONAL FEES. No third party shall be
entitled to receive any brokerage commissions, finder's fees, or similar
compensation in connection with
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the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Avant! or Sub.
4.9 CONDUCT IN THE ORDINARY COURSE. Since June 30, 1997, there has not
occurred any amendments or changes in the charter or Bylaws of Avant! or any
agreement or arrangement made by Avant! to do the same.
4.10 THIRD-PARTY CONSENTS. No consent or approval is needed from any
third party in order to enable Avant! and Sub to effect the Merger or any of the
transactions contemplated hereby.
4.11 DUE DILIGENCE INVESTIGATION. In each case, without affecting the
right of Avant! and Sub to rely on the representations, covenants and
warranties made herein by Compass:
(a) Each of Avant! and Sub acknowledges that: (i) it has had the
opportunity to visit with Compass and meet with its officers and other
representatives to discuss the business and the assets, liabilities,
financial condition, cash flow and operations of Compass, and (ii) all
materials and information requested by Avant! have, to Avant!'s knowledge,
been provided to Avant! to Avant!'s reasonable satisfaction.
(b) Each of Avant! and Sub acknowledges that it has made its own
independent examination, investigation, analysis and evaluation of Compass,
including its own estimate of the value of Compass' business.
(c) Each of Avant! and Sub acknowledges that it has undertaken
such due diligence (including, without limitation, a review of the assets,
liabilities, books, records and contracts of Compass) as it deems adequate.
ARTICLE V:
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS
5.1 CONDUCT OF BUSINESS OF COMPASS. During the period from the date
hereof and continuing until the earlier of the termination of this Agreement
or the Effective Time of the Merger, Compass shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
conducted prior to the date of this Agreement and, to the extent consistent
with such business, use its best efforts to preserve intact its present
business organizations, keep available the services of its present service
providers and preserve its relationships with customers, suppliers,
distributors, licensers, licensees, and others with whom it has business
dealings, to the end that its goodwill and ongoing businesses shall be
unimpaired at the Effective Time of the Merger. Compass shall promptly
notify Avant! of any material event or occurrence not in the ordinary course
of business of Compass, and any event that would reasonably be expected to
have a material and adverse effect on the Business Condition of Compass.
Except as expressly contemplated by this Agreement, Compass, without the
prior written consent of Avant! or Sub shall not:
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(a) Accelerate, amend or change the period of exercisability of
options, warrants, stock or purchase rights or authorize cash payments in
exchange therefor;
(b) Enter into any commitment or transaction not in the ordinary
course of business to be performed over a period longer than six (6) months
in duration, or, except as in accordance with its existing capital budget
previously disclosed to Avant!, to purchase fixed assets with an aggregate
purchase price exceeding $10,000;
(c) Grant any severance or termination pay to any service
provider, except mandatory payments made pursuant to standard written
agreements outstanding on the date hereof (with any such agreement or
arrangement to be disclosed in SCHEDULE 3.18);
(d) Transfer to any person or entity any rights to the Compass
Intellectual Property Rights, except licenses of Intellectual Property Rights
in connection with the sale of Compass products in the ordinary course of
business consistent with past practice;
(e) Enter into or amend any agreements pursuant to which any other
party is granted marketing or other similar rights of any type or scope with
respect to any products of Compass;
(f) Violate, amend or otherwise modify, in any material respect,
the terms of any contract listed in SCHEDULE 3.15;
(g) Commence a lawsuit other than for the routine collection of
bills;
(h) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Compass
Capital Stock, or split, combine or reclassify any of its Common Stock or
issue or authorize the issuance of other securities in respect of, in lieu
of, or in substitution for shares of Compass Capital Stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of Compass Capital
Stock except as set forth in the Compass Disclosure Schedules, pursuant to
the exercise of outstanding Compass Options or pursuant to repurchases of
Common Stock at cost from former service providers in accordance with the
terms of agreements providing for the repurchase of shares in connection with
any termination of service to Compass or repurchase of Compass options
pursuant to a rescission offer.
(i) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of or authorization of, the purchase of any shares of
Compass Capital Stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities, other than the issuance of shares of Compass Common Stock upon
the exercise of Compass Options;
(j) Cause or permit any amendments to Compass' charter or Bylaws,
or take any action or make any filings with any federal or state regulatory
agency or department that would modify or alter Compass' corporate, legal or
regulatory status in any material respect;
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(k) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to
the Business Condition of Compass, except as in accordance with its existing
capital budget previously disclosed to Avant!;
(l) Sell, lease, license or otherwise dispose of any of its
properties or assets except in the ordinary course of business;
(m) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(n) Adopt or amend any plan, or enter into any employment
contract, pay any special bonus or special remuneration to any service
provider, or increase the salaries or wage rates of its employees other than
pursuant to scheduled employee reviews under normal employee review cycles or
pursuant to Compass' existing bonus plans, as the case may be, or in
connection with the hiring of employees other than officers in the ordinary
course of business, in all cases consistent with past practice, or otherwise
increase or modify the compensation or benefits payable or to become payable
by Compass to any of its service providers, except for employees other than
officers in the ordinary course of business, consistent with past practice,
or for changes pursuant to employment agreements in effect as of the date
hereof;
(o) Re-value in any material respect any of its assets, including,
without limitation, writing down the value of inventory or accounts
receivable;
(p) Pay, discharge or satisfy in an amount in excess of $10,000 in
any one case any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past practice
of liabilities reflected or reserved against in the Compass Financial
Statements;
(q) Make any material Tax election, change any material Tax
election, adopt any Tax accounting method other than in the ordinary course
of business and consistent with past practice, change any Tax accounting
method, file any Tax Return (other than any estimated Tax Returns, immaterial
information returns, payroll Tax Returns or sales Tax Returns) or any
amendment to a Tax Return, enter into any closing agreement, settle any Tax
claim or assessment or consent to any Tax claim or assessment;
(r) Engage in any activities or transactions that are outside the
ordinary course of its business consistent with past practice, including the
forming, financing or contributing any property to any business entity;
(s) Fail to pay or otherwise satisfy its monetary obligations as
they become due or consistent with past practice, except such as are being
contested in good faith;
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(t) Waive or commit to waive any rights of substantial value;
(u) Cancel, amend or, other than in the ordinary course upon
expiration of a policy term, renew any insurance policy;
(v) Alter, or enter into any commitment to alter, in any material
respect its interest in any corporation, association, joint venture,
partnership or business entity in which Compass directly or indirectly holds
any interest on the date hereof;
(w) Pay its employees bonuses, other than in the ordinary course
of business, or any other extraordinary payments to its employees or
stockholders, including, without limitation, dividends or other distributions
with respect to its outstanding capital stock;
(x) Issue any new options, warrants or any instruments to purchase
Compass' Capital Stock; or
(y) Take, or agree (in writing or otherwise) to take, any of the
actions described in this Section 5.1 or any action that would make any of
the representations or warranties or covenants of Compass contained in this
Agreement untrue or incorrect.
5.2 ACCESS TO INFORMATION; PROVISION OF INTERIM FINANCIAL STATEMENTS.
(a) Compass shall afford Avant! and its accountants, counsel and
other representatives, reasonable access during normal business hours in such
manner as not to disrupt business during the period from the date of this
Agreement until the earlier of the Effective Time of the Merger or the
termination of this Agreement to (i) all properties, books, contracts,
commitments and records, and (ii) all other information concerning the
business, properties and personnel as may reasonably be requested, provided
that any information provided pursuant hereto or any investigation by each
party hereto shall not affect such party's right to rely on the
representations, warranties, agreements and covenants made by the other party
herein. Compass shall cause Compass' accountants to cooperate with Avant! in
reviewing the financial statements of Compass' business.
(b) Compass shall provide Avant! with an unaudited monthly balance
sheet, income statement and statement of cash flows within fifteen (15) days
of each month-end prior to the Effective Time of the Merger as well as copies
of such other internal financial statements as may be reasonably requested by
Avant!.
(c) Compass shall provide Avant! with all information regarding
Compass necessary for the preparation of any documents or filings prepared by
Avant! to be filed with the SEC and any applicable securities or blue sky
commissions.
5.3 COMPASS STOCKHOLDERS' CONSENT. Compass shall solicit the consent
of its stockholders as promptly as practicable after the date hereof for the
purpose of obtaining the stockholder approval required in connection with the
transactions contemplated hereby, and shall use its best efforts to obtain
such approval.
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5.4 EXCLUSIVITY; ACQUISITION PROPOSALS. Until the earlier of (i) the
Closing or (ii) the termination of this Agreement:
(a) Compass shall not knowingly, and shall not knowingly cause or
permit, directly or indirectly, through any officer, director, agent or
representative (including, without limitation, investment bankers, attorneys,
accountants and consultants), or otherwise:
(i) Solicit, initiate or further the submission of
proposals or offers from, or enter into any agreement with, any firm,
corporation, partnership, association, group (as defined in Section 13(d)(3)
of the Exchange Act) or other person or entity, individually or collectively
(including, without limitation, any managers or other employees of Compass or
any affiliates), other than Avant! and Sub (a "Third Party"), relating to any
acquisition or purchase of all or any substantial portion of the assets of,
or any equity interest in, Compass or any merger, consolidation or business
combination with Compass;
(ii) Participate in any discussions or negotiations
regarding, or furnish to any Third Party any confidential information with
respect to Compass in connection with any acquisition or purchase of all or
any substantial portion of the assets of, or any equity interest in, Compass
or any merger, consolidation or business combination with Compass; or
(iii) Otherwise knowingly cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt by
any Third Party to undertake or seek to undertake any acquisition or purchase
of all or any portion of the assets of, or any equity interest in, Compass,
or any merger, consolidation or business combination with Compass.
(b) In the event Compass receives prior to termination of this
Agreement any offer or indication of interest from any Third Party relating
to any acquisition or purchase of all or any portion of the assets of, or any
equity interest in, Compass or any merger, consolidation or business
combination with Compass, Compass shall promptly notify Avant! and Sub in
writing, and shall in any such notice, set forth in reasonable detail the
identity of the Third Party, the terms and conditions of any proposal and any
other information requested of it by the Third Party or in connection
therewith.
(c) Compass shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Third Party
conducted prior to the date of this Agreement with respect to any of the
foregoing.
5.5 BREACH OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS.
Each of Avant!, Sub and Compass shall use its respective best efforts to
refrain from taking any action that from the date hereof through the Closing
or earlier termination of this Agreement would cause or constitute a breach
of any of its respective representations, warranties, agreements and
covenants set forth in this Agreement. In the event of, and promptly after
becoming aware of, the actual, pending or threatened occurrence of any event
that would cause or constitute such a breach or inaccuracy, each party shall
give detailed notice thereof to the other parties and shall use its best
efforts to prevent or promptly remedy such breach or inaccuracy.
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5.6 CONSENTS. Each of Avant!, Sub and Compass shall promptly apply for
or otherwise seek and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger,
and Compass shall use its best efforts to obtain all necessary consents,
waivers and approvals under any of Compass' agreements, contracts, licenses
or leases in connection with the Merger, except such consents and approvals
which are not material to the Business Condition of Compass (the existence of
which Compass shall have notified Avant! of) or which Avant! and Compass
agree Compass shall not seek to obtain.
5.7 BEST EFFORTS. If applicable, each of Avant!, Sub and Compass shall
use best efforts to effectuate the transactions contemplated hereby and to
fulfill and cause to be fulfilled the conditions to closing under this
Agreement.
5.8 LEGAL CONDITIONS TO THE MERGER.
(a) Compass shall take all reasonable actions necessary to comply
promptly with all legal requirements that may be imposed on Compass with
respect to the Merger and will promptly cooperate with and furnish
information to Avant! in connection with any such requirements imposed upon
Avant! or Sub in connection with the Merger. Compass shall take all
reasonable actions to obtain (and to cooperate with Avant! and Sub in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity required to be obtained or made by Compass (or by
Avant! or Sub) in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement, and to defend such lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby as Compass deems advisable in good faith, to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby as Compass deems advisable in good faith, and to effect
all necessary registrations and filings and submissions of information as
Compass deems advisable in good faith required by any Governmental Entity,
and to fulfill all conditions to this Agreement.
(b) Each of Avant! and Sub shall take all reasonable actions
necessary to comply promptly with all legal requirements that may be imposed
on them with respect to the Merger and will promptly cooperate with and
furnish information to Compass in connection with any such requirement
imposed upon Compass or any subsidiary of Compass in connection with the
Merger. Avant! and Sub shall take all reasonable actions to obtain (and to
cooperate with Compass in obtaining) any consent, authorization order or
approval of, or exemption by, any Governmental Entity required to be obtained
or made by Avant! or Sub (or by Compass or any of its subsidiaries) in
connection with the Merger or the taking of any action contemplated thereby
or by this Agreement, and to defend such lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions
contemplated hereby as Avant! and Sub deem advisable in good faith, to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby as Avant! and Sub deem advisable in good faith, and to
effect all necessary registrations and
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filings and submissions of information as Avant! and Sub deem advisable in
good faith, required by any Governmental Entity, and to fulfill all
conditions to this Agreement.
5.9 PUBLIC ANNOUNCEMENTS. Avant! and Compass will make joint
announcements to employees and the public after the execution of this
Agreement. Each party will consult in advance with the other concerning the
timing and content of any announcements, press releases or public statements
concerning the Merger and will not make any such announcement, release or
statement to any party who is not entitled to have knowledge of the Merger
without the other's prior written consent (which consent shall not be
unreasonably withheld); provided, however, that either Avant! or Compass, or
its parent, VLSI may make any public statement concerning the Merger without
the other's consent, after it has used reasonable efforts to obtain consent,
and in the opinion of counsel for the disclosing party, such statement or
announcement is required or advisable to comply with applicable law.
5.10 AFFILIATES AGREEMENT. The stockholders of Compass listed on
SCHEDULE 5.10 are, in Compass' reasonable judgment, the only persons and
entities that are stockholders of Compass who may be deemed to be
"affiliates" of Compass within the meaning of Rule 145 (each such person an
"Affiliate") promulgated under the Securities Act of 1933, as amended (the
"Securities Act") ("Rule 145"). Compass shall deliver or cause to be
delivered to Avant!, concurrently with the execution of this Agreement, from
each of the Affiliates of Compass who are directors or officers of Compass,
and concurrently with or promptly following execution of this Agreement from
each other Affiliate, an Affiliates Agreement in the form attached hereto as
EXHIBIT 5.10(A). Avant! and Sub shall be entitled to place appropriate
legends on the certificates evidencing any Avant! Common Stock to be received
by such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Avant!
Common Stock, consistent with the terms of such Affiliates Agreement. Such
Affiliates Agreements shall not impose any greater restrictions on Affiliates
than are required by law.
5.11 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the Related Agreements and the transactions contemplated hereby
and thereby, including fees of any finders or brokers or investment bankers,
attorneys and accountants retained by such party, shall be paid by the party
incurring such expense.
5.12 INFORMATION TO BE SUPPLIED. All information supplied by Compass,
Avant! and Sub for inclusion in the Compass stockholder solicitation
materials as described in Section 5.3 above and any other solicitation
materials relating to the Merger or relating to any offering of securities by
Avant! shall not contain any untrue statement of material fact and shall not
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
are made, not misleading.
5.13 FORM S-3 REGISTRATION STATEMENT. Within thirty (30) days of the
Effective Time of the Merger, Avant! shall file with the SEC a registration
statement on Form S-3 to register the Avant! Common Stock issued pursuant to
the Merger for resale. Avant! will, at its expense (excluding any broker
fees and commissions), use its best efforts to cause such
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registration statement to become effective, and, subject to the provisions
below, use best efforts to, keep such registration statement effective for
the lesser of one (1) year or until all such shares of Avant! Common Stock
have been sold. If at any time after such registration statement becomes
effective, Avant! advises the holders of such Avant! Common Stock in writing
that due to the existence of material information that has not been disclosed
to the public and included in the registration statement it is thus necessary
to amend the registration statement (including by reporting such information
under the Exchange Act), the holders of such Avant! Common Stock shall
suspend any further sale of Avant! Common Stock pursuant to the registration
statement until the registration statement has been amended. In such event,
Avant! shall use best efforts to amend the registration statement as soon as
reasonably practicable and in no event later than the earlier of (i) ten (10)
days after Avant! has advised the holders of such Avant! Common Stock to
suspend sales (which ten (10) day period may be extended, one time only, an
additional ten (10) days (the "Additional Suspension") if the Board of
Directors of Avant! in its good faith judgment determines that such
disclosure would be substantially detrimental to Avant!; provided, however,
that Avant! shall only have the right to effect an Additional Suspension
twice in any twelve (12) month period) or (ii) the commencement of any period
in which directors and officers of Avant! are allowed to buy or sell Common
Stock of Avant! pursuant to Avant!'s insider trading policy. Avant! shall
not impose a suspension on the sale of Avant! Common Stock by the holders of
Avant! Common Stock unless Avant!'s insider trading window is closed. In
addition, Avant! shall use its best efforts to (i) register and qualify the
Avant! Common Stock covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the holders of a majority of such Avant! Common Stock; provided
that Avant! 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, unless Avant! is already subject
to service in such jurisdiction and except as may be required by the
Securities Act; and (ii) file with the SEC in a timely manner all reports and
other documents required of Avant! under the Exchange Act.
5.14 SCHEDULES. From time to time prior to the Closing Date, each of
Avant! and Compass will promptly supplement or amend the Compass or Avant!
Disclosure Schedules, as the case may be, with respect to any matter
hereafter arising that, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described in the
Compass or Avant! Disclosure Schedules, as the case may be, or that is
necessary to correct any information in the Compass or Avant! Disclosure
Schedules, as the case may be, or in any representation and warranty of each
of Avant! and Compass that has been rendered inaccurate thereby. For
purposes of determining the accuracy of the respective representations and
warranties contained in Articles III and IV, and in order to determine the
fulfillment of the conditions set forth in Sections 6.2(a) and 6.3(a), the
Compass or Avant! Disclosure Schedules, as the case may be, shall be deemed
to include only that information contained therein on the date of this
Agreement and shall be deemed to exclude any information contained in any
subsequent supplement or amendment thereto; provided, however that for the
purpose of determining the availability of rights to indemnification under
Article VII below or otherwise, such revised Compass or Avant! Disclosure
Schedules, as the case may be, shall be deemed to include all information
contained in such revised Compass or Avant! Disclosure Schedules as of the
Closing, as the case may be.
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5.15 CERTAIN BENEFIT PLANS. Avant! shall take such reasonable actions as
are necessary to allow eligible employees of Compass to participate in the
benefit programs of Avant!, or alternative benefits programs in the aggregate
substantially comparable to those applicable to employees of Avant! on
similar terms, as soon as practicable after the Effective Time of the Merger.
For purposes of satisfying the terms and conditions of such programs, to the
extent permitted by Avant!'s benefit programs, Avant! shall use reasonable
efforts to give full credit for eligibility, vesting or benefit accrual for
each participant's period of service with Compass or VLSI.
5.16 HSR ACT FILING.
(a) Each of Avant! and Compass shall (i) promptly make or cause to
be made the filings required of such party or any of its affiliates or
subsidiaries under the HSR Act with respect to the Merger and the other
transactions provided for in this Agreement, (ii) comply at the earliest
practicable date with any request under the HSR Act for additional
information, documents, or other material received by such party or any of
its affiliates or subsidiaries from the Federal Trade Commission or the
Department of Justice or other Governmental Entity in respect of such
filings, the Merger, or such other transactions, and (iii) cooperate with the
other party in connection with any such filing and in connection with
resolving any investigation or other inquiry of any such agency or other
Governmental Entity under any Antitrust Laws (as defined in Section 5.16(b))
with respect to any such filing, the Merger, or any such other transaction.
Each party shall promptly inform the other party of any material
communication with, and any proposed understanding, undertaking, or agreement
with, any Governmental Entity regarding any such filings, the Merger, or any
such other transactions. Neither party shall participate in any meeting with
any Governmental Entity in respect of any such filings, investigation, or
other inquiry without giving the other party notice of the meeting and, to
the extent permitted by such Governmental Entity, the opportunity to attend
and participate.
(b) Each of Avant! and Compass shall use its commercially
reasonable efforts to resolve such objections, if any, as may be asserted by
any Governmental Entity with respect to the Merger or any other transactions
provided for in this Agreement under the HSR Act, the Sherman Act, as
amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other federal, state or foreign statutes, rules,
regulations, orders, or decrees that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint
of trade (collectively, "Antitrust Laws"). In connection therewith, if any
administrative or judicial action or proceeding is instituted (or threatened
to be instituted) challenging the Merger as violative of any Antitrust Law,
and, if by mutual agreement, Compass and Avant! decide that litigation is in
their best interests, each of Compass and Avant! shall cooperate and use its
reasonable efforts vigorously to contest and resist any such action or
proceeding and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction, or other order, whether temporary, preliminary, or
permanent, that is in effect and that prohibits, prevents, or restricts
consummation of the Merger. Each of Compass and Avant! shall use
commercially reasonable efforts to take such action as may be required to
cause the expiration of the notice periods under the HSR Act or other
Antitrust Laws with respect to the Merger and
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such other transactions as promptly as possible after the execution of this
Agreement. Notwithstanding anything to the contrary in this Section 5.16,
neither Compass or any of its affiliates, nor Avant! or any of its
affiliates, shall be required to divest any of their respective businesses,
product lines, or assets, or to take or agree to take any other action or
agree to any limitation that would have a material adverse effect on their
respective businesses, product lines or assets.
5.17 LISTING OF SHARES. Upon Closing, Avant! will amend its listing
application with the Nasdaq National Market to include the Avant! Common
Stock issued under this Agreement.
5.18 VOTING AGREEMENT. Compass and the parties listed on SCHEDULE
3.2(E) hereto shall enter into the Voting Agreement attached hereto as
EXHIBIT 3.21(E) concurrent with the execution of this Agreement.
ARTICLE VI:
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction (or, to the extent legally permissible, waiver) prior to the
Closing of the following conditions:
(a) APPROVALS. All authorizations, consents, orders or approvals
of, or declarations or filings with or expiration of waiting periods imposed
by, any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred
or been obtained.
(b) LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation
of the Merger shall have been issued by any Governmental Entity of competent
jurisdiction and remain in effect, and no litigation not pending on the date
hereof shall be pending the ultimate resolution of which may in the opinion
of Avant! or Compass (i) result in the issuance of such an order or
injunction, or the imposition against Compass or Avant! of substantial
damages if the Merger is consummated, or (ii) render Avant!, Sub or Compass
unable to consummate the Merger. In the event any such order or injunction
shall have been issued, each party agrees to use its best efforts to have any
such injunction lifted as promptly as practicable.
(c) STATUTES. No action shall have been taken, and no statute,
rule, regulation or order shall have been enacted, promulgated or issued or
deemed applicable to the Merger by any Governmental Entity of competent
jurisdiction that would (i) make the consummation of the Merger illegal or
(ii) render Avant!, Sub or Compass unable to consummate the Merger, except
for any waiting period provisions.
(d) HSR. The applicable waiting period under the HSR Act relating
to the Merger shall have expired or been terminated.
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(e) STOCKHOLDER APPROVAL. This Agreement and the Merger shall
have been approved and adopted by (i) the holders of Compass Capital Stock
representing a majority of the total votes entitled to be cast on such
matters, (ii) the holders of a majority of the shares of Compass Preferred
Stock outstanding and voting together as a single class, and (iii) the
holders of a majority of the shares of Compass Common Stock outstanding and
voting together as a single class.
6.2 CONDITIONS OF OBLIGATIONS OF AVANT! AND SUB. The obligations of
Avant! and Sub to effect the Merger are also subject to the satisfaction of
the following conditions, unless waived by Avant!:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Compass set forth in this Agreement that are qualified as to
materiality shall be true and correct as so qualified, and the
representations and warranties of Compass set forth in this Agreement that
are not so qualified shall be true and correct in all material respects as of
the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except to the extent any such representation or
warranty expressly speaks as of an earlier date), and Avant! shall have
received a certificate signed on behalf of Compass by the chief executive
officer and chief financial officer of Compass to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF COMPASS. Compass shall have
performed in all material respects all obligations and covenants required to
be performed by it under this Agreement prior to the Closing Date, and Avant!
shall have received a certificate signed on behalf of Compass by the chief
executive officer and the chief financial officer of Compass to such effect.
(c) AFFILIATES AGREEMENT. Avant! shall have received from each
stockholder of Compass listed on SCHEDULE 5.10, a duly executed Affiliates
Agreement substantially in the form attached hereto and approved by Avant!'s
and Compass' respective counsel.
(d) TECHNOLOGY TRANSFER AGREEMENT. Compass and VLSI shall have
amended that certain Intercompany Agreement, dated July 1, 1991, by and
between Compass and VLSI in a manner satisfactory to Avant!.
(e) ESCROW AGREEMENT. The Escrow Agreement shall be executed by
all appropriate parties.
(f) OPINION OF COMPASS' COUNSEL. Avant! shall have received an
opinion dated the Closing Date of Larry L. Grant, counsel to Compass, in form
and substance reasonably satisfactory to Avant!.
(g) DISSENTING SHARES. Dissenting Shares shall consist of no more
than ten percent (10%) of the then outstanding shares of Compass Capital
Stock.
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(h) CONSENTS. Avant! shall have received duly executed copies of
all third-party consents and approvals contemplated by this Agreement or the
Compass Schedules in form and substance reasonably satisfactory to Avant!.
(i) FIRPTA. Compass shall, prior to the Closing Date, provide
Avant! with a properly executed Foreign Investment and Real Property Tax Act
of 1980 ("FIRPTA") Notification Letter, in form and substance satisfactory to
Avant!, which states that shares of Compass Capital Stock do not constitute
"United States real property interests" under Section 897(c) of the Code, for
purposes of satisfying Avant!'s obligations under Treasury Regulation Section
1.1445-2(c)(3). In addition, simultaneously with delivery of such
Notification Letter, Compass shall have provided to Avant!, as agent for
Compass, a form of notice to the Internal Revenue Service in accordance with
the requirements of Treasury Regulation Section 1.897-2(h)(2) along with
written authorization for Avant! to deliver such notice form to the Internal
Revenue Service on behalf of Compass upon the Closing of the Merger.
(j) TERMINATION OF RIGHTS AND CERTAIN SECURITIES. Any
registration rights or rights of first refusal and/or negotiation relating to
any outstanding Compass Capital Stock shall by their terms terminate upon the
Closing or have been terminated or permanently waived as of the Closing,
which termination or waiver may be strictly contingent upon the occurrence of
the Closing. Except as contemplated by Section 3.2, with such changes as may
be permitted under Section 5.1, there shall be no warrants, options,
convertible securities or other rights to purchase or acquire any securities
of Compass outstanding.
6.3 CONDITIONS OF OBLIGATION OF COMPASS. The obligation of Compass to
effect the Merger is also subject to the satisfaction of the following
conditions unless waived by Compass:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Avant! set forth in this Agreement that are qualified as to
materiality shall be true and correct as so qualified, and the
representations and warranties of Avant! set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date), and
Compass shall have received a certificate signed on behalf of Avant! by the
chief executive officer and chief financial officer of Avant! to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF AVANT! AND SUB. Avant! and Sub
shall have performed in all material respects all obligations and covenants
required to be performed by them under this Agreement and the Certificate of
Merger prior to the Closing Date, and Compass shall have received a
certificate signed on behalf of Avant! by the chief executive officer and the
chief financial officer of Avant! to such effect.
(c) NO STOP ORDER. The SEC shall not have issued any stop order
preventing the sale of any Common Stock of Avant! pursuant to a registration
statement.
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(d) OPINION OF AVANT!'S COUNSEL. Compass shall have received an
opinion dated the Closing Date of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, counsel to Avant!, in form and substance
reasonably satisfactory to Compass.
ARTICLE VII:
INDEMNITY
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
(a) Notwithstanding any investigation conducted at any time with
regard thereto by or on behalf of any party to this Agreement, all
representations, warranties, covenants and agreements of the parties hereto
shall survive the execution, delivery, and performance of this Agreement in
accordance with section 7.3 of this Agreement. No investigation made by or
on behalf of a party hereto with respect to another party shall be deemed to
affect the party's reliance on the representations, warranties, covenants and
agreements made by the other party contained in this Agreement, when read
together with the disclosure schedules of such party, and shall not be a
waiver of Avant!'s or Sub's rights to indemnity as herein provided for the
breach or inaccuracy of or failure to perform or comply with any of Compass'
representations, warranties, covenants or agreements under this Agreement or
the Escrow Agreement. All representations and warranties of each party set
forth in this Agreement shall be deemed to have been made again by such party
at and as of the Closing Date.
(b) As used in this Article VII, any reference to a
representation, warranty, agreement or covenant contained in any section of
this Agreement shall include the Schedules attached hereto (in the form
delivered at the time of Closing).
(c) Nothing in this Agreement shall be construed as limiting in
any way: (i) the remedies that may be available to a party in the event of
fraud relating to the representations, warranties, agreements or covenants
made by any other party in this Agreement; (II) Avant!'s right to seek
indemnification from VLSI for the applicable statute of limitations for
breaches of section 3.16 of this Agreement.
(d) VLSI shall have liabilities and obligations for Damages (as
defined below) under this Agreement only with respect to claims submitted or
notice of claims provided during the time period of survivability of the
specific representation, warranty, covenant or agreement as set forth in
section 7.3. Notwithstanding the expiration date of the representations,
warranties, covenants and agreements set forth herein, if Avant! or Compass
shall notify VLSI with respect to the submission of a claim during the time
period of survivability of such representation, warranty, covenant or agreement,
VLSI's liability or obligation for Damages shall continue in full force and
effect until settled with respect to those claims timely made.
(e) Avant! shall be entitled to use the Escrow Proceeds as the
sole remedy for the obligations of VLSI pursuant to this Article VII of this
Agreement.
7.2 INDEMNIFICATION.
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(a) Subject to the limitations set forth in this Article VII,
VLSI hereby agrees to indemnify, reimburse, defend and hold harmless Avant!,
Compass and Sub and each of their respective officers, directors, agents and
affiliates against any and all losses, liabilities, damages, demands, claims,
suits, actions, judgments, and causes of action, assessments, costs, and
expenses, including, without limitation, interest, penalties, attorneys' fees,
any and all expenses incurred in investigating, preparing, and defending against
any litigation, commenced or threatened, and any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation (collectively,
"Damages"), asserted against, resulting from, imposed upon, or incurred or
suffered, directly or indirectly, by Avant!, Compass or Sub and each of their
respective officers, directors, agents and affiliates, directly or indirectly,
as a result of or arising from or in connection with: (i) any inaccuracy in or
breach, or any claim (including claims by parties other than Avant!) that if
true, would constitute a breach, nonfulfillment of or noncompliance with any of
the representations, warranties, covenants, or agreements made by Compass in
this Agreement (including any exhibit, letter, schedule, certificate or document
delivered pursuant hereto or other instrument referred to herein) or the Escrow
Agreement or any facts or circumstances constituting such an inaccuracy, breach,
nonfulfillment or noncompliance; (ii) expenditures in excess of $100,000 in the
aggregate in connection with the lawsuits listed on SCHEDULE 3.9; and (iii) any
Damages resulting from the failure of the Compass Financial Statements to fairly
present the financial position and operating results of Compass in accordance
with GAAP on a separate company basis (all of which shall also be referred to as
"Indemnifiable Claims"). Avant! and Sub shall be entitled to make claims under
the foregoing provisions of this Article VII only in the event that Damages
exceed $100,000 in the aggregate.
(b) VLSI hereby agrees to indemnify, reimburse, defend and hold
harmless Avant!, Compass and Sub and each of their respective officers,
directors, agents and affiliates against any and all Damages asserted
against, resulting from, imposed upon, or incurred or suffered, directly or
indirectly, by Avant!, Compass or Sub and each of their respective officers,
directors, agents and affiliates, directly or indirectly, as a result of or
arising from or in connection with any inaccuracy in or breach, or any claim
(including claims by parties other than Avant!) that if true, would
constitute a breach, nonfulfillment of or noncompliance with any of the
representations, warranties, covenants, or agreements made by Compass in this
Agreement relating to Taxes (including any exhibit, letter, schedule,
certificate or document delivered pursuant hereto or other instrument
referred to herein) or any facts or circumstances constituting such an
inaccuracy, breach, nonfulfillment or noncompliance including, without
limitation, any Taxes of Compass and its subsidiaries with respect to any Tax
year or portion thereof ending on or before the Closing Date (or for any Tax
year beginning before and ending after the Closing Date to the extent
allocable to the portion of such period beginning before and ending on the
Closing Date), to the extent that such Taxes exceed the sum of (i) the amount
of Taxes reflected in the reserve for Tax liability (other than any reserve
established to reflect timing differences between book and Tax income)
reflected on the June 27, 1997 balance sheet that is part of the Compass
Financial Statements and (ii) the amount of Taxes that would have been
incurred by Compass in the ordinary course of business between June 27, 1997
and the Closing Date had Compass not been a member of an affiliated,
consolidated, combined or unitary group for Tax purposes during any part of
such period. Notwithstanding any other provision of this Agreement
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(including Section 7.3), the obligations of VLSI pursuant to this Section
7.2(b) shall be unlimited and shall survive until expiration of the
applicable statute of limitations with respect to any Tax.
7.3 TERMINATION OF INDEMNITY AND REPRESENTATIONS AND WARRANTIES. Except
as otherwise stated in Article VII of this Agreement the indemnity
obligations of VLSI pursuant to this Article VII for a breach or inaccuracy
of or a failure to perform or comply with any or all of Compass'
representations, warranties, covenants and agreements, and the
representations and warranties of Avant! and Compass shall terminate one (1)
year after the Effective Time of the Merger. The covenants of Article V
listed in Section 9.11 are unaffected by the termination provisions of this
Section 7.3. For purposes of the indemnification set forth herein, the fair
market value of one share of Avant! Common Stock shall be the Average Nasdaq
Per Share Price.
ARTICLE VIII:
TERMINATION
8.1 TERMINATION.
(a) This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger
by the stockholders of Compass:
(i) by mutual agreement of the Boards of Directors of
Avant! and Compass;
(ii) by Avant!, if there has been a material breach by
Compass or Compass stockholder of any representation, warranty, covenant or
Agreement set forth in this agreement and, to the extent such breach shall be
curable, such breach shall not have been cured within thirty (30) days
following receipt by Compass of written notice of such breach;
(iii) by Compass, if there has been a material breach by
Avant! or Sub of any representation, warranty, covenant or Agreement set
forth in this agreement and, to the extent such breach shall be curable, such
breach shall not have been cured within thirty (30) days following receipt by
Avant! of written notice of such breach;;
(iv) by Compass or Avant!, if any permanent injunction or
other order of a court preventing the Merger shall have become final and
nonappealable or shall render unlikely within a reasonable period of time the
consummation of the Merger on the terms contemplated hereby; or
(v) by Compass or Avant!, if any Governmental Entity of
competent jurisdiction shall have issued a temporary restraining order,
preliminary injunction or permanent injunction or other order preventing the
consummation of the Merger or any litigation not pending on the date hereof
shall be pending, the ultimate resolution of which is likely in such party's
opinion to (i) result in the issuance of such an order or injunction, or the
imposition
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against the Surviving Corporation or Avant! of substantial damages if the
Merger is consummated, or (ii) render Avant!, Sub or Compass unable to
consummate the Merger.
(b) Where action is taken to terminate this Agreement pursuant to
this Section 8.1, it shall be sufficient authorization for such action to be
authorized by the Board of Directors of the party taking such action and for
such party to notify the other parties in writing of the termination.
(c) If the Effective Date shall not have occurred on or before
October 31, 1997, this Agreement may be terminated by Avant! or Compass with
prior written notice to the other party provided that the right to terminate
this Agreement pursuant to this paragraph (c) shall not be available to any
party whose failure to fulfill any material, uncured breach of any obligation
under this Agreement that has been a significant cause of, or resulted in,
the failure of the Effective Date to occur on or before such date and
provided further that, except as otherwise provided herein, no such
termination shall relieve any party hereto of any liability or damages
resulting from any breach of this Agreement.
ARTICLE IX:
GENERAL PROVISIONS
9.1 AMENDMENT. This Agreement may be amended by the parties hereto at
any time before or after approval of the Merger by the stockholders of
Compass; provided, however, that following approval of the Merger by the
stockholders of Compass, no amendment shall be made that by law requires the
further approval of such stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.2 EXTENSION; WAIVER. At any time prior to the Effective Time of the
Merger, each of Compass and Avant!, to the extent legally allowed, (a) may
extend the time for the performance of any of the obligations or other acts
of the other, (b) may waive any inaccuracies in the representations and
warranties made to it contained herein or in any document delivered pursuant
hereto, and (c) may waive compliance with any of the agreements or conditions
for the benefit of it 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.
9.3 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given (a) on the same day if delivered
personally, (b) three (3) business days after being mailed by registered or
certified mail (return receipt requested), or (c) on the same day if sent by
facsimile, confirmation received, to the parties at the following addresses
and facsimile numbers (or at such other address or number for a party as
shall be specified by like notice):
If to Avant! or Sub, to:
Avant! Corporation
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46871 Bayside Parkway
Fremont, California 94538
Attention: John P. Huyett
Telephone No.: (510) 413-8000
Facsimile No.: (510) 413-8080
with copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, California 94025
Attention: Steven M. Spurlock, Esq.
Telephone No.: (415) 321-2400
Facsimile No.: (415) 321-2800
If to Compass:
Compass Design Automation, Inc.
1865 Lundy Avenue
San Jose, California 95131
Attention: Paul McLellan
Telephone No.: (408) 434-7990
Facsimile No.: (408) 434-7820
If to VLSI:
VLSI Technology, Inc.
1109 McKay Drive, MS-45
San Jose, California 95131
Attention: Larry L. Grant, Esq.
Telephone No.: (408) 434-3063
Facsimile No.: (408) 434-7744
with copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Ann Yvonne Walker, Esq.
Telephone No.: (415) 493-9300
Facsimile No.: (415) 493-6811
9.4 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such references shall be to a Section,
Exhibit or Schedule to this
47
<PAGE>
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."
9.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party.
9.6 ENTIRE AGREEMENT. Except for the mutual nondisclosure agreement
previously signed by the parties hereto, which shall survive in its entirety,
this Agreement and the documents and instruments and other agreements among
the parties delivered pursuant hereto constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements, understandings, representations and warranties, both written and
oral, among the parties with respect to the subject matter hereof and are not
intended to confer upon any other person any rights or remedies hereunder
except as otherwise expressly provided herein. EACH PARTY HERETO AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
AGREEMENT, NEITHER AVANT! AND SUB NOR COMPASS MAKES ANY OTHER REPRESENTATIONS
OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR
WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT
TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER
OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH
RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.7 NO TRANSFER. This Agreement and the rights and obligations set
forth herein may not be transferred or assigned by operation of law or
otherwise without the consent of each party hereto. This Agreement is
binding upon and will inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
9.8 SEVERABILITY. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and 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 the void or unenforceable
provision.
9.9 OTHER REMEDIES. Unless otherwise expressly specified herein, any
and all remedies set forth in this Agreement and in the Related Agreements
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby or by law or equity on such
party; and the exercise of any one remedy will not preclude the exercise of
any other.
48
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9.10 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
9.11 ABSENCE OF THIRD-PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, or will be interpreted, to provide to or create for
any third-party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, stockholder, employee, partner or any party
hereto or any other person or entity, and all provisions hereof will be
personal solely between the parties to this Agreement, except that the
provisions of Section 5.15 shall be for the benefit of the employees of
Compass, and Article IV and Sections 5.13 and 5.17 shall be for the benefit
of the stockholders of Compass and shall be enforceable by such individuals
against Avant! subject to the terms and conditions of this Agreement.
9.12 GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to its choice of law principles). Provided,
however, that the law governing the fiduciary duties of each party hereto and
their respective boards of directors and the law governing any other matters
of internal corporate governance of any of Avant! or Compass shall be the law
of their respective jurisdictions of incorporation.
49
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Reorganization as of the date first above written.
AVANT! CORPORATION
By:
--------------------------------------
Gerald C. Hsu
Chairman of the Board, Chief Executive
Officer and President
COMPASS DESIGN AUTOMATION, INC.
By:
--------------------------------------
Paul McLellan
President
GB ACQUISITION CORPORATION
By:
--------------------------------------
Gerald C. Hsu
President
VLSI TECHNOLOGY, INC.
By:
--------------------------------------
Larry L. Grant
Vice President, General Counsel and
Secretary
<PAGE>
AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (this
"Amendment") is made as of August 27, 1997, by and among Avant! Corporation,
a Delaware corporation ("Avant!"), GB Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Avant! ("Sub"), Compass Design
Automation, Inc., a Delaware corporation ("Compass"), and VLSI Technology,
Inc., a Delaware corporation ("VLSI").
R E C I T A L S
WHEREAS, Avant!, Sub, Compass and VLSI entered into that certain
Agreement and Plan of Reorganization, dated July 31, 1997 (the "Merger
Agreement"); and
WHEREAS, Avant!, Sub, Compass and VLSI desire to amend the Merger
Agreement as provided below.
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Section 2.1(c)(i) of the Merger Agreement be, and it hereby is,
amended and restated to read in full as follows:
"(i) CONVERSION OF COMPASS PREFERRED STOCK. Each share of the
Series A Preferred Stock of Compass (the "Compass Preferred Stock") issued
and outstanding at the Effective Time of the Merger (other than any shares of
Compass Preferred Stock to be canceled pursuant to Section 2.1(b)(i) and any
Dissenting Shares (as defined and to the extent provided in Section 2.1(f))
shall be canceled and extinguished and be converted automatically into the
right to receive that portion of the aggregate amount of $35,000,000 (the
"Merger Consideration") to which such share of Compass Preferred Stock is
entitled under, and in accordance with, Article Four, Section 2(a) of the
Restated Certificate of Incorporation of Compass (the "Liquidation
Preference"). Such Liquidation Preference equals the sum of $1.00 per share
plus all accrued but unpaid dividends. Additionally, the holders of Compass
Preferred Stock shall share ratably in the difference between the Merger
Consideration and the aggregate Liquidation Preference (the "Net Merger
Consideration") with the holders of the Common Stock of Compass and the
holders of vested options to purchase Common Stock of Compass (assuming that
all such options have been exercised). The aggregate Liquidation Preference
plus the portion of the Net Merger Consideration payable to the holders of
Compass Preferred Stock pursuant to this Section 2.1(c)(i) (the "Compass
Preferred Stock Consideration") shall be payable in a combination of cash and
shares of Avant! Common Stock. For the purpose of determining the number of
shares of Avant! Common Stock issuable to the holders of the Compass
Preferred Stock, the price of the Avant! Common Stock shall be the average
closing sales price of Avant! Common Stock as quoted on the Nasdaq National
Market for the five (5) consecutive trading days ending three (3) business
days prior to the Closing Date of the Merger (the "Average Nasdaq Per Share
Price"). The total dollar and share amounts of the Compass Preferred Stock
Consideration allocated to the holders of Compass Preferred Stock are set
forth in EXHIBIT 2.1(c),
<PAGE>
subject to appropriate adjustments at the Closing to reflect the total of
accrued but unpaid dividends as of such date and the Average Nasdaq Per Share
Price."
2. The following provision shall be inserted into the Merger Agreement
as Section 5.19:
"5.19 ELECTION PURSUANT TO INTERNAL REVENUE CODE SECTION 338(h)(10).
(a) VSLI agrees, at the request of Avant!, to join in an election
under Section 388(h)(10) of the Code (hereinafter referred to as the
"Election") and, at the request of Avant!, to join in an election under any
comparable provisions of state or local law under which such an Election is
permissible and to take all actions reasonably necessary to effect same,
including those actions set forth below.
(b) Avant! shall be responsible for the preparation and filing of
all forms and documents required in connection with the Election. VLSI shall
pay all Taxes resulting from the Election; provided, however, that if prior
to making such Election VLSI shall inform Avant! of the amount (the
"Additional Tax Amount") of the difference, if any, between the Taxes VLSI is
required to pay as a result of the Election and the Taxes that VLSI would
otherwise have incurred by reason of the Merger if the Election were not made
but the Merger were consummated, then Avant! shall indemnify VLSI for the
payment of the Additional Tax Amount. VLSI shall execute and deliver to
Avant! such documents or forms as are reasonably requested and are required
by any tax laws to complete properly the Election at least twenty (20) days
prior to the date such Election is required to be filed. For the purpose of
executing the Election, VLSI and Avant! shall, as soon as practicable after
the Effective Date of the Merger but in no event sooner than 90 days
thereafter, execute Internal Revenue Service Form 8023-A and all attachments
required to be filed therewith pursuant to applicable Treasury Regulations.
Avant! shall not file such Form 8023-A or the attachments thereto as
corrected, amended or supplemented unless it shall have obtained VLSI's
consent thereto, which consent shall not be unreasonably withheld. On or
prior to the tenth (10th) day after VLSI's receipt of such corrections,
amendments or supplements from Avant!, VLSI shall deliver to Avant! either
(i) its consent to such filing or (ii) a written notice specifying in
reasonable detail all disputed items and the basis therefore. If, within ten
(10) days after Avant!'s receipt of the written notice described in clause
(ii) above, VLSI and Avant! have been unable to resolve their differences,
any remaining disputed issues shall be submitted to Deloitte & Touche LLP to
resolve in a final and binding manner after hearing the views of both
parties. In that event, VLSI and Avant! shall execute and consent to the
filing of such corrected, amended or supplemented Form 8023-A in the manner
determined by Deloitte & Touche LLP.
(c) Avant!, not less than thirty (30) days prior to the date the
forms required under Section 338(h)(10) are required to be filed, shall
provide VLSI with a valuation statement reflecting, as of the Effective Date
of the Merger, the fair market values of all of the assets and the
liabilities of Compass. VLSI shall review said values and to the extent VLSI
disagrees therewith, will notify Avant!. Should the parties fail to agree, the
dispute shall be resolved by Deloitte & Touche LLP as set forth above. VLSI
and Avant! shall file all returns with respect to taxes and statements, forms
and schedules in connection therewith (including, without limitation,
Internal Revenue Service Form 8594 and any required exhibits thereto) in a
2
<PAGE>
manner consistent with such valuations, and shall take no position contrary
thereto unless required to do so by applicable tax laws.
(d) To the extent permitted by state and local laws, the principles
and procedures of this Section 5.20 shall also apply with respect to a
Section 338(h)(10) election or equivalent or comparable provision under state
or local law, including without limitation, an election under Section 338(g)
of the Code."
3. The following provision shall be inserted into the Merger Agreement
as Section 5.20:
"5.20 USE OF VLSI DATA CENTER. As of the date of the Merger
Agreement, VLSI occupied approximately 3,800 square feet of office space at
Compass' building located at 1865 Lundy Avenue, San Jose, California 95131
(the "Compass Space"). From the Effective Date of the Merger until December
31, 1997, VLSI shall have the right to continue to occupy and use the Compass
Space rent free as a data center upon the same terms and conditions that VLSI
occupied and used the Compass Space prior to the Effective Date of the
Merger."
4. The following provision shall be inserted into the Merger Agreement
as Section 5.21:
"5.21 INTERCOMPANY DEBT. The parties acknowledge that VLSI has
loaned money to Compass to cover operating and other expenses on an ongoing
basis, which such monies have been reflected in the Financial Statements as
intercompany debt payable to VLSI. Avant! hereby agrees to cause the
intercompany debt outstanding on the Effective Date of the Merger to be paid
in full to VLSI on or before September 26, 1997, or if the Effective Date of
the Merger has not occurred prior to that date, on the Effective Date of the
Merger; provided, however, the parties agree that, immediately prior to the
Effective Time of the Merger, VLSI shall contribute to the capital of Compass
the amount by which the intercompany debt owed to VLSI exceeds the sum of
$16,000,000 plus the amount of any intercompany receivable then due Compass
from VLSI. Such contribution shall not be made in cash but shall instead be
made by VLSI contributing a portion of such intercompany debt. It is further
understood that the intercompany debt may include amounts paid by Compass for
retention bonuses previously agreed to be paid by Compass which have been
disclosed to Avant! in SCHEDULE 3.13."
5. MISCELLANEOUS.
(a) NO OTHER MODIFICATION. Except as expressly provided herein,
this Agreement does not in any way change, modify or delete any of the
provisions of the Merger Agreement, and all such provisions shall remain in
full force and effect.
(b) GOVERNING LAW. This Amendment shall be governed by and
construed under the laws of the State of Delaware.
(c) COUNTERPARTS. This Amendment 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.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
AVANT! CORPORATION
By:_______________________________________
Gerald C. Hsu
Chairman of the Board, Chief Executive Officer
and President
COMPASS DESIGN AUTOMATION, INC.
By:_______________________________________
Paul McLellan
President
GB ACQUISITION CORPORATION
By:_______________________________________
Gerald C. Hsu
President
VLSI TECHNOLOGY, INC.
By:_______________________________________
Larry L. Grant
Vice President, General Counsel and Secretary
<PAGE>
AVANT! COMPLETES COMPASS ACQUISITION
SEPTEMBER 12, 1997 8:02 AM EDT
INTEGRATION PLAN COMPLETED; COMPASS OPERATIONS STREAMLINED
FREMONT, Calif., Sept. 12/PRNewswire/ -- Avant! Corporation (Nasdaq: AVNT),
the indisputable industry leader in deep-submicron IC design automation
(ICDA) tools, today announced the completion of its acquisition of COMPASS
Design Automation, formerly a subsidiary of VLSI Technology, Inc. (Nasdaq:
VLSI).
Avant! exchanged $17,500,000 and 522,192 shares of its common stock for all
outstanding COMPASS common and preferred stock. The transaction will be
accounted for as a purchase. Avant! expects to take a significant charge for
in-process research and development in the third quarter of 1997. Third
quarter financial results are expected to be announced on October 14, 1997.
"We are pleased that since the signing of the definitive agreement at the end
of July, we have been able to prepare the integration process so that we may
swiftly streamline the COMPASS operations. The majority of the merger
logistics are already behind us," said Gerald C. Hsu, chairman, president and
CEO of Avant! Corporation. "COMPASS' customers worldwide have welcomed this
transaction, and we look forward to working with them closely with minimal
disruptions. We will continue to sell and support all existing COMPASS
products and libraries while providing a migration path for their place and
route tool, PathFinder(TM), to Avant!'s Aquarius(TM) family of products.
After trimming nearly 50% of COMPASS personnel, we believe that the COMPASS
line will achieve profitability for our shareholders. As in all our previous
mergers, Avant! intends to maintain a balance between high employee
productivity and a high degree of customer satisfaction."
"COMPASS' expertise in the area of silicon calibration and Passport(TM)
libraries will be a foundation for growing our newly-formed Galax!
(pronounced GA-lox-ee) business, whose mission is to deliver silicon
intellectual property (SIP) and design services to customers," continued Hsu.
About Avant!
Avant! (pronounced Ah VANH tee) Corporation develops, markets, and supports
integrated circuit design automation (ICDA) software for the simulation,
layout, verification and analysis of deep submicron ICs including
microprocessors, microcontrollers, application-specific standard products
(ASSPs) and complex application-specific integrated circuits (ASICs). The
Company's new headquarters is located in Fremont, California. Telephone:
510-413-8000, Fax: 510-413-8080. World Wide Web: http://www.avanticorp.com.
NOTE: Aquarius, PathFinder, Passport and Galax! are trademarks of Avant!
Corporation. All other company and product names are trademarks or registered
trademarks of their respective owners and should be treated as such.
Except for any historical information presented herein, matters presented in
this press release are forward-looking statements that involve risks and
uncertainties. The Company's future results could differ materially from the
results presented herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed from time to
time in the Company's public reports filed with the Securities and Exchange
Commission, including those discussed in the Company's report on Form 10-K
for the year ended December 31, 1996, and including the risks discussed in
the "Risk Factors" section included in the Company's Registration Statement
on Form S-3 as declared effective by the Securities and Exchange Commission
on January 31, 1997.
SOURCE Avant! Corporation
