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.
TABLE OF CONTENTS
PAGE
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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..............................................5
2.3 Supplementary Action..................................................7
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF COMPASS........................7
3.1 Organization, Standing and Power......................................7
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.................................................11
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..................................................14
3.14 Employee Plans......................................................14
3.15 Major Contracts.....................................................15
3.16 Taxes...............................................................17
3.17 Intellectual Property...............................................19
3.18 Employee Agreements.................................................20
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...............................................22
3.23 Insurance...........................................................25
3.24 Labor Matters.......................................................25
3.25 Personnel...........................................................26
3.26 Questionable Payments...............................................26
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3.27 Third-Party Consents...............................................26
3.28 Related Party Transactions.........................................27
3.29 Customers..........................................................27
3.30 Bank Accounts and Powers of Attorney...............................27
3.31 Products...........................................................27
3.32 Brokers or Finders; Professional Fees..............................27
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF AVANT! AND SUB................28
4.1 Organization; Standing and Power....................................28
4.2 Authority...........................................................28
4.3 Valid Issuance of Shares of Common Stock of Avant!..................29
4.4 Avant!. Financial Statements........................................29
4.5 Litigation..........................................................29
4.6 Reports.............................................................29
4.7 Restrictions on Business Activities.................................30
4.8 Brokers or Finders; Professional Fees...............................30
4.9 Conduct in the Ordinary Course......................................30
4.10 Third-Party Consents...............................................30
4.11 Due Diligence Investigation........................................30
ARTICLE V: CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL
AGREEMENTS...............................................................30
5.1 Conduct of Business of Compass......................................30
5.2 Access to Information; Provision of Interim Financial Statements....33
5.3 Compass Stockholders' Consent.......................................34
5.4 Exclusivity; Acquisition Proposals..................................34
5.5 Breach of Representations, Warranties, Agreements and Covenants.....34
5.6 Consents............................................................35
5.7 Best Efforts........................................................35
5.8 Legal Conditions to the Merger......................................35
5.9 Public Announcements................................................36
5.10 Affiliates Agreement...............................................36
5.11 Expenses...........................................................36
5.12 Information to be Supplied.........................................36
5.13 Form S-3 Registration Statement....................................36
5.14 Schedules..........................................................37
5.15 Certain Benefit Plans..............................................37
5.16 HSR Act Filing.....................................................38
5.17 Listing of Shares..................................................39
5.18 Voting Agreement...................................................39
ARTICLE VI: CONDITIONS PRECEDENT............................................39
6.1 Conditions to Each Party's Obligation to Effect the Merger..........39
6.2 Conditions of Obligations of Avant! and Sub.........................40
6.3 Conditions of Obligation of Compass.................................41
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ARTICLE VII: INDEMNITY......................................................41
7.1 Survival of Representations, Warranties, Covenants and Agreements...41
7.2 Indemnification.....................................................42
7.3 Termination of Indemnity and Representations and Warranties.........43
ARTICLE VIII: TERMINATION...................................................44
8.1 Termination.........................................................44
ARTICLE IX: GENERAL PROVISIONS..............................................45
9.1 Amendment...........................................................45
9.2 Extension; Waiver...................................................45
9.3 Notices.............................................................45
9.4 Interpretation......................................................46
9.5 Counterparts........................................................46
9.6 Entire Agreement....................................................46
9.7 No Transfer.........................................................47
9.8 Severability........................................................47
9.9 Other Remedies......................................................47
9.10 Further Assurances.................................................47
9.11 Absence of Third-Party Beneficiary Rights..........................47
9.12 Governing Law......................................................47
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
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 Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000,
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
of the Surviving Corporation shall be Xxxxxx X. Xxx and Xxxx X. Xxxxxx, (e) the
officers of the Surviving Corporation shall be Xxxxxx X. Xxx, President and
Chief Executive Officer and Xxxx X. Xxxxxx, 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
2
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
3
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
4
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 Xxxxxx 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
6
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.
7
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
8
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
9
"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 Xxxx-Xxxxx-Xxxxxx 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
10
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
11
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;
13
(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.
14
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.
15
(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;
(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;
16
(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
17
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
18
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, or (iii) challenging the ownership, validity or
effectiveness of any of the Compass Intellectual Property Rights.
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(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 xxxx,
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
24
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
25
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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2.25 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
27
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 Xxxxxx
Xxxxxxxx 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
29
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;
33
(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.
35
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
36
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
37
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 xxxxxxx xxxxxxx
policy. Avant! shall not impose a suspension on the sale of Avant! Common Stock
by the holders of Avant! Common Stock unless Avant!'s xxxxxxx xxxxxxx 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 Xxxxxxx Act, as amended,
the Xxxxxxx 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
39
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.
40
(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 Xxxxx X. Xxxxx, 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.
41
(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.
42
(d) OPINION OF AVANT!'S COUNSEL. Compass shall have
received an opinion dated the Closing Date of Xxxxxxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, 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.
43
(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
44
(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
45
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
46
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with copy to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to Compass:
Compass Design Automation, Inc.
0000 Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx XxXxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to VLSI:
VLSI Technology, Inc.
0000 XxXxx Xxxxx, XX-00
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxx Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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
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
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
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and Plan of Reorganization as of the date first above written.
AVANT! CORPORATION
By: /s/ Xxxxxx X. Xxx
------------------------------------
Xxxxxx X. Xxx
Chairman of the Board, Chief
Executive Officer and President
COMPASS DESIGN AUTOMATION, INC.
By: /s/ Xxxx XxXxxxxx
------------------------------------
Xxxx XxXxxxxx
President
GB ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxx
------------------------------------
Xxxxxx X. Xxx
President
VLSI TECHNOLOGY, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Xxxxx X. Xxxxx
Vice President, General Counsel and
Secretary
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), 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) VLSI agrees, at the request of Avant!, to join in an election
under Section 338(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
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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 0000 Xxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000
(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.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
AVANT! CORPORATION
By: /s/ Xxxxxx X. Xxx
--------------------------------------
Xxxxxx X. Xxx
Chairman of the Board, Chief Executive
Officer and President
COMPASS DESIGN AUTOMATION, INC.
By: /s/ Xxxx XxXxxxxx
--------------------------------------
Xxxx XxXxxxxx
President
GB ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxx
--------------------------------------
Xxxxxx X. Xxx
President
VLSI TECHNOLOGY, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------
Xxxxx X. Xxxxx
Vice President, General Counsel and
Secretary
