EXHIBIT 99.1
CONSULTING, ASSIGNMENT AND
TECHNOLOGY USE RESTRICTION AGREEMENT
This Consulting, Assignment and Technology Use Restriction Agreement (the
"Agreement") is entered into by and between IKOS Systems, Inc., a Delaware
corporation with a principal place of business at 00000 Xxxxxxxxxx Xxxxxx,
Xxxxxxxxx, XX 00000 ("IKOS") and Xxxx Xxxx and Xxxxx Xxxx (collectively, the
"Principals") as of May 12, 1998 (the "Effective Date").
RECITALS
A. Pursuant to that certain Technology Purchase Agreement (the "Purchase
Agreement") dated as of an even date between Interra, Inc., a Delaware
corporation ("Interra") and IKOS, Interra will sell and transfer to IKOS certain
proprietary software technologies as further described in Exhibit A of the
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Purchase Agreement and the related technology, including know-how, design rules,
trade secrets, inventions (whether or not patentable), algorithms, routines,
files, databases, works of authorship, processes, devices and documentation
thereto (the "Technology") and IKOS will grant Interra rights as to such
Technology.
B. The Principals serve as President and Vice-President, respectively, of
Interra and have substantial knowledge and expertise in the areas of electronic
design automation, video and audio compression and other software and electronic
design businesses, as well as knowledge and expertise in acquiring and
establishing operations in these businesses in India;
C. IKOS and the Principals acknowledge that it would be detrimental to
IKOS if the Principals compete with IKOS following the Closing Date of the
Purchase Agreement.
D. The Principals have certain rights to acquire Delsoft India Private
Ltd., and Indian corporation ("Delsoft") under an agreement dated as of March 5,
1997 (the "Delsoft Agreement") between the Principals and Delsoft; and
E. IKOS desires to acquire the Delsoft Business and to compensate the
Principals for their services as consultants and to obtain their continued
cooperation in the further development of the business organization in India.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
Definitions
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Unless defined herein, defined terms shall have the meaning given to them in
the Purchase
Agreement.
1.1 "Business" shall mean the development and manufacture of hardware and
software systems for the verification of integrated circuits.
1.2 "Delsoft Business" shall mean the assets related to the EDA business
owned by Delsoft and acquired by IKOS as set forth in that certain Xxxx of Sale
and Work Force Transfer Agreement between Delsoft and IKOS India Private
Limited.
1.3 "Reserved Field" shall mean applications for digital logic
simulation, emulation, and hardware acceleration for the verification of
integrated circuits.
1.4 "IKOS' Competitors" shall mean direct competitors of IKOS in the
Reserved Field as of the Effective Date of this Agreement as listed on Schedule
1.6 to the Purchase Agreement.
1.5 "Restricted Software" shall mean the "RTL Compiler-Verilog" software
currently in production and the "RTL Compiler-VHDL" software currently under
development by Interra and marked as such on Exhibit A to the Purchase
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Agreement.
ARTICLE II
Obligations and Services of the Principals
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2.1 Acquiring and Establishing India Operations. The Principals have
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provided advice and assistance to IKOS in connection with the acquisition and
establishment of business operations in India. Their services have included (i)
advice on how to establish and operate a strategic research and development
business unit in India, (ii) the identification and introduction of a suitable
acquisition target (Delsoft), (iii) the negotiation of an acquisition agreement
between IKOS and Delsoft, (iv) assistance in obtaining regulatory approval in
India for the acquisition, and (v) assistance in attracting and retaining the
approximately 50 highly skilled engineers who work for Delsoft and in
structuring programs to attract and retain future engineers.
2.2 Transfer of Rights. The Principals hereby assign and transfer to IKOS
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pursuant to that certain Delsoft Agreement the rights, obligations and interest
necessary to acquire the Delsoft Business.
2.3 Technology Use Restriction.
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(a) The parties understand and agree that this Agreement is entered
into in connection with the Purchase Agreement. The parties further understand
and agree that the Principals are key and significant members of Interra, own a
significant number of shares of Interra and that the consummation of the
Purchase Agreement is contingent upon the parties
entering into this Agreement, including this technology use restriction
provision. IKOS and the Principals further acknowledge that IKOS and Interra
following the Closing Date of the Purchase Agreement will continue to conduct
their respective businesses. The parties expressly acknowledge and agree that
the technology use restrictions contained in this Agreement are permissible and
enforceable pursuant to the provisions of applicable law.
(b) During the period commencing on the Effective Date of this
Agreement and ending three (3) years thereafter, the Principals may not (i)
incorporate the Technology in Stand Alone Products in the Reserved Field; (ii)
incorporate the Restricted Software in Service Products for license and
distribution to or for IKOS's Competitors for use in the Reserved Field; (iii)
sublicense the Restricted Software to Distributors or End Users who are IKOS'
Competitors for use in the Reserved Field; or (iv) provide services that
exclusively rely on IKOS' products in the Reserved Field to IKOS' customers.
(c) The Principals' obligations under this Section 2.3 shall
terminate if IKOS, or any entity deriving title to its goodwill or shares or
pursuant to a change of control, ceases to carry on a like Business therein.
ARTICLE III
Representations and Warranties and Covenant. The Principals, severally and
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not jointly, hereby represent and warrant to IKOS:
3.1 Power. The Principals have complete and unrestricted power and the
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unqualified legal right, capacity and authority to execute, deliver and perform
this Agreement, and to sell, convey, assign and transfer the rights to acquire
the Delsoft Business pursuant to the Delsoft Agreement attached hereto as
Exhibit A.
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3.2 Authority. All authorizations necessary on the part of the Principals
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to effect the (i) provision of consulting services, (ii) transfer and assignment
of the rights to acquire the Delsoft Business and (iii) covenant regarding the
technology use restrictions has been or shall have been taken on or before the
Effective Date. The Agreement is a valid and binding obligation of the
Principals, enforceable against the Principals in accordance with its terms
except as limited by applicable bankruptcy, insolvency, moratorium or other
laws of general application relating to or affecting enforcement of creditors'
rights and rules or laws concerning equitable remedies.
3.3. No Conflict. Neither the execution and delivery of this Agreement
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nor compliance by the Principals with any provision hereof will conflict with,
result in a breach or violation or constitute a default under any agreement that
the Principals have with Interra or any other third party. The Principals are
not required to obtain any authorization, consent, approval or waiver from any
governmental authority, Interra, or any other third party.
3.4 Accuracy of Documents and Information. The copies of all instruments,
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agreements, other documents and written information set forth as, or referenced
in this Agreement or specifically required to be furnished pursuant to the
Agreeement to IKOS by the Principals are complete and correct in all material
respects. No representations or warranties made by the Principals in this
Agreement, nor any document, written information, or statement furnished
directly to IKOS pursuant to Agreement contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements or facts contained therein not misleading.
3.5 Retention. The average number of Delsoft engineers employed by IKOS
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India Private Limited during any six month period shall not be less than forty
(40) (the "Threshold Number"); provided, however (i) that IKOS shall continue an
active and competitive compensation program and (ii) that there not be a
substantial change in the operations of IKOS India Private Limited or in the
nature or quality of work assignments of such engineers. This Section 3.5 shall
terminate in the event of a change in control of IKOS or IKOS India Private
Limited where the successor company does not continue the operations of IKOS
India Private Limited in a manner substantially similar in practice prior to the
change in control.
ARTICLE IV
Payment
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4.1 Payment. Subject to Section 4.2, IKOS will pay to the Principals an
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aggregate amount of Two Million Five Hundred Thousand dollars ($2,500,000) as
consideration for: (i) a success fee to the acquisition of Delsoft operations
and the establishment of IKOS's Indian research and development operations, (ii)
the transfer to IKOS of the Principals' rights to acquire the Delsoft Business,
and (iii) the acceptance of the restrictions set forth in Section 2.3. Payment
of the Purchase Price, minus the Holdback (as hereinafter defined), will be made
in cash on the Effective Date and will be allocated between the Principals as
follows: Xxxx Xxxx shall receive One Million Five Hundred Ten Thousand
($1,510,000) and Xxxxx Xxxx shall receive Four Hundred Eighty Thousand
($480,000.00).
4.2 Holdback. Of the Purchase Price, Five Hundred Ten Thousand
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($510,000.00) will be held as a holdback (the "Holdback") as security for the
technology use restriction covenant in Section 2.3 of Article II and the
representations and warranties and covenant made by the Principals in Article
III, subject to the limitation set forth in Section 4.4, for a period of
eighteen (18) months after the Effective Date. The Holdback shall be payable to
the Principals in cash or IKOS Common Stock at IKOS's sole election, and shall
be released as follows: (i) One Hundred Seventy Thousand ($170,000.00) on the
six (6) month anniversary of the Effective Date; (ii) One Hundred Seventy
Thousand ($170,000.00) on the twelve (12) month anniversary of the Effective
Date; and (iii) One Hundred Seventy Thousand ($170,000.00) on the eighteen (18)
month anniversary of the Effective Date (each, a "Release Date"); provided,
however, that should IKOS elect to pay any portion of the Holdback in IKOS
Common Stock, (i) the Principals
shall confirm in writing its suitability to receive such shares by means of an
Investor Representation Letter in the form attached hereto as Exhibit B; (ii)
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the IKOS Common Stock shall be listed and traded on a national stock exchange;
(iii) the average daily trading volume of the IKOS Common Stock for the 30 days
prior to the Release Date shall not be less than 7,000 shares per day; (iv) the
average closing price of the IKOS Common Stock for the five days prior to, but
not including, the Release Date shall not be less than $5.00 per share; (v) IKOS
shall have complied with all of its filing requirements with the Securities and
Exchange Commission for the year prior to the Release Date; and (vi) the IKOS
Common Stock shall be valued at the average closing price of the IKOS Common
Stock for the five (5) business days prior to, but not including, the Release
Date. The amounts paid upon each Release Date shall be allocated between the
Principals as follows: Xxxx Xxxx shall receive One Hundred Thirty Thousand
($130,000.00) and Xxxxx Xxxx shall receive Forty Thousand ($40,000.00).
4.3 Required Registration. Should IKOS elect to pay the Holdback, or any
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portion thereof, in IKOS Common Stock, IKOS shall file on or before each such
Release Date a registration statement in the form attached hereto as Exhibit C
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relating to such shares of IKOS Common Stock issuable on such Release Date. If
a valid registration statement is not effective on or before such Release Date,
then IKOS shall pay interest on the portion of the Holdback scheduled to be
released at the rate of 6% APR from such Release Date up to a maximum of 30
days. If a valid registration statement is not effective within 30 days after
such Release Date (the "Payment Date"), then the Principals will have the right
to demand and IKOS will be required to pay the payment plus interest then due in
cash on the Payment Date. With respect to IKOS' obligation to file registration
statements hereunder, the Principals' sole and exclusive remedy shall be the
demand of and receipt of payment of the amount(s) due in cash.
4.4 Limitation to the Holdback. The parties agree that in the event that
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the average number of engineers fall below the Threshold Number, IKOS shall not
withhold the full amount of the Holdback subject to the Release Date upon such
occurrence. IKOS shall make a good faith assessment as to the direct damages to
IKOS for each engineer that falls below the Threshold Number and deduct such
amount from the Holdback (the "Damages"). The Holdback, minus the Damages,
shall be delivered to the Principals on the Release Date. Should the Principals
dispute the Damages, the parties shall agree to select an arbitrator to make a
final and binding determination of the Damages in accordance with Section 6.5
herein.
ARTICLE V
Survival of Representations, Warranties and Covenants; Indemnification.
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5.1 Survival of Representations, Warranties and Covenants. The
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representations, warranties, agreements and covenants of the Principals
contained in this Agreement shall survive the Effective Date for a period ending
at midnight, PST, on the eighteen (18) month anniversary of the Effective Date
and shall in no manner be limited by any investigation of the subject matter
thereof made by or on behalf of either party or by the satisfaction of any
condition to the
Closing. At the end of such period, all such agreements, covenants,
representations or warranties by the Principals shall expire and be of no
further force and effect; provided, however, that the Principals will remain
liable thereafter to the extent one or more Claims (as defined in Section 19.2)
shall have been asserted in writing by IKOS on or before the expiration of such
period.
5.2 Indemnification by the Principals. The Principals will defend,
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indemnify and hold harmless IKOS from and against any and all demands, claims,
debts, damages, losses and liabilities (individually a "Claim" or collectively
"Claims") which are asserted against, incurred by or imposed upon IKOS and which
constitute, directly result from, or relate to (i) any failure of the Principals
to perform or comply with the covenant in Section 2.3 of Article II set forth
herein or (ii) the inaccuracy of any representation or the breach of any
warranty made in Article III of this Agreement. The indemnification obligations
set forth herein shall terminate as to any Claim (or any potential Claim by an
appropriate party) not asserted by IKOS in writing prior to midnight, PST, on
the eighteen (18) month anniversary of the Effective Date. The term "Claim"
shall include, but not be limited to, any claim or action by any claimant,
creditor, interest holder or other party in interest.
5.3 The amounts for which IKOS may seek indemnification under this Article
V shall extend to, and as used herein the term "Claim" shall include, reasonable
attorneys' fees, reasonable accountants' fees, costs of litigation and other
expenses reasonably incurred by IKOS in the investigation or defense of any
claim asserted against IKOS and any amounts paid in settlement or compromise of
any claim asserted against it, but only to the extent that the claim asserted is
or would have been subject to the provisions of this Section 5.2.
5.4 IKOS shall not have the right to be indemnified pursuant to this
Section 5.2 unless and until Claims made hereunder, individually or in
aggregate, exceed $15,000. The Principals' obligations to indemnify IKOS
hereunder shall be limited to the amount remaining under the Holdback.
5.5 Any payment due to IKOS (or payable to IKOS) pursuant to a Claim shall
be calculated net of any insurance recovery and tax benefits and then paid in
the following order: (i) first by offset against the Holdback, and thereafter
(ii) by bank cashier's check or wire transfer but in no event in excess of the
Holdback. Without limiting the other rights it may have, IKOS may, at its sole
option, by notice to the Principals satisfy any amount due to IKOS pursuant to a
Claim by withholding such amount from the Holdback.
5.6 IKOS agrees to give the Principals prompt written notice of any event
or assertion of which it has knowledge concerning any Claim as to which it may
request indemnification hereunder. Any delay in giving a notice hereunder which
does not materially prejudice the Principals shall not affect IKOS' right to
indemnification hereunder. A notice shall state that IKOS has paid or accrued a
Claim, identifying in reasonable detail the nature of the Claim, the date the
Claim was paid or accrued and the nature of the inaccuracy, breach or other
basis for indemnification. Each party will cooperate with the other in
determining the validity of any such
Claim. The Principals shall make available to IKOS and its attorneys and
accountants all records relating to the Claim and the parties agree to render to
each other such assistance as they may reasonably require of each other in order
to ensure the proper and adequate defense of such Claim if the Claim relates to
a claim asserted by a third party. If the Claim relates to a claim asserted by a
third party, IKOS shall control the defense or settlement of such Claim,
including selection of counsel, and the Principals shall have the right at its
expense the participate in the defense of any such Claim. In no event shall IKOS
settle a Claim asserted by a third party without the prior written approval of
the Principals, which approval shall not be unreasonably withheld or delayed
(provided the IKOS shall not need the consent of the Principals if they shall
fail to acknowledge responsibility for such Claim or shall fail to cooperate in
the defense of any Claim asserted by a third party.)
5.7 The indemnification obligations of the Principals under this Article
V shall continue in full force and effect as to any Claim as to which notice has
been given pursuant to Section 6.9 until such Claim has been settled either by
mutual agreement of the parties concerned, by arbitration in accordance with the
provisions of this agreement or in the event of a Claim resulting from legal
action by a third party, by the final arbitration award or final order, decree
or judgment of a court of competent jurisdiction in the United States of America
(the time for appeal having expired with no appeal having been take,). The right
of IKOS to be indemnified under this Article V shall not limit, reduce or
otherwise affect any other rights and remedies it may have with respect to the
maters indemnified under this Agreement.
5.8 IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES, INCLUDING ANY LOST
PROFITS OR LOST SAVINGS REGARDLESS OF THE LEGAL THEORY ON WHICH A CLAIM MAY BE
BASED, EVEN IF A PARTY OR ITS REPRESENTATIVE HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
ARTICLE VI
Miscellaneous
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6.1 Savings Clause. If any restrictions set forth in Article II above is
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held to be unreasonable or unenforceable, then the Principals agree, and hereby
submit, to the reduction and limitation of such prohibition to such field of
business or period as shall be deemed reasonable.
6.2 Successors, Assigns. This Agreement shall be binding upon and shall
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inure to the benefit of IKOS and its successors and assigns.
6.3 Entire Agreement. This Agreement constitutes the entire agreement
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between IKOS and the Principals relating to the transactions contemplated
herein. This Agreement supersedes and replaces any prior verbal or written
agreements between the parties. This
Agreement may be amended or altered only in a writing signed by the President of
IKOS and the Prinicpals.
6.4 Applicable Law; Severability. This Agreement shall be construed and
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interpreted in accordance with the laws of the State of California without
regard to conflicts of laws and principles. Each provision of this Agreement is
severable from the others, and if any provision hereof shall be to any extent
unenforceable it and the other provisions hereof shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this Agreement.
6.5 Arbitration. Any claim, dispute, or controversy arising out of or in
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connection with or relating to this Agreement or the breach or alleged breach
thereof will be submitted by the parties to arbitration in Santa Xxxxx County,
California conducted by one arbitrator. The Principals and IKOS shall agree on
the arbitrator, provided that if such parties cannot agree on such arbitrator,
either the Principals or IKOS can request that Judicial Arbitration and
Mediation Services ("JAMS") select the arbitrator. The arbitrator shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery while allowing the parties an opportunity, adequate in the
sole judgment of the arbitrator, to discover relevant information from the
opposing parties about the subject matter of the dispute. The decision of the
arbitrator shall be written, shall be in accordance with JAMS rules, applicable
law and with this Agreement, and shall be supported by written findings of fact
and conclusion of law which shall set forth the basis for the decision of the
arbitrator. The decision of the arbitrator as to the validity and amount of any
Claim shall be binding and conclusive upon the parties to this Agreement. The
award rendered by the arbitrators will include costs of arbitration, reasonable
attorneys' fees, and reasonable costs for expert and other witnesses, and
judgment on such award may be entered in any court having jurisdiction thereof.
Nothing in this Agreement will be deemed as preventing either party from seeking
injunctive relief (or any other provisional remedy) from any court having
jurisdiction over the parties and the subject matter of the dispute.
6.6 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
6.7 Facsimile Signatures. Any signature page delivered by fax machine or
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telecopy machine shall be binding to the same extent as an original signature
page. Any party who delivers such a signature page agrees to later deliver an
original counterpart to any party which requests it.
6.8 Waivers and Amendments. No amendment, modification or waiver of the
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terms of this Agreement shall be binding unless reduced to writing and signed by
the IKOS and the Principals.
6.9 Notice. In order to be effective, an notice or other communication
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required or
permitted hereunder must be in writing and may be transmitted by messenger,
delivery service, mail, telex, telegram, telecopy or cable:
If to the Principals: Xxxx Xxxx
00000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxxx Xxxx
00000 Xxxxxxx Xxx
Xxxxxxxx, XX 00000
With a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
If to IKOS: IKOS Systems, Inc.
00000 Xxxxxxxxxx Xxx.
Xxxxxxxxx, XX 00000
With a copy to: Xxxx Xxxx Xxxx & Freidenrich, LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
[Signature pages follow]
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first written above.
IKOS SYSTEMS, INC. PRINCIPALS
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxx Xxxx
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Xxxx Xxxx
Title: CFO
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/s/ Xxxxx Xxxx
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Xxxxx Xxxx
