AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AVANT! CORPORATION,
CARDINAL MERGER CORPORATION
AND
TECHNOLOGY MODELING ASSOCIATES, INC.
SEPTEMBER 7, 1997
TABLE OF CONTENTS
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ARTICLE I THE MERGER........................................................................................ 1
1.1 The Merger........................................................................................ 1
1.2 Closing, Effective Time........................................................................... 1
1.3 Effect of the Merger.............................................................................. 2
1.4 Articles of Incorporation; Bylaws................................................................. 2
1.5 Directors and Officers............................................................................ 2
1.6 Effect on Capital Stock........................................................................... 2
1.7 Dissenters' Rights................................................................................ 3
1.8 Surrender of Certificates......................................................................... 3
1.9 No Further Ownership Rights in TMAI Common Stock.................................................. 4
1.10 Lost, Stolen or Destroyed Certificates............................................................ 5
1.11 Tax and Accounting Consequences................................................................... 5
1.12 Taking of Necessary Action; Further Action........................................................ 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TMAI........................................................... 5
2.1 Organization, Standing and Power.................................................................. 6
2.2 Capital Structure................................................................................. 6
2.3 Authority......................................................................................... 7
2.4 SEC Documents, Financial Statements............................................................... 8
2.5 Absence of Certain Changes........................................................................ 8
2.6 Absence of Undisclosed Liabilities................................................................ 9
2.7 Permits and Licenses.............................................................................. 9
2.8 Properties and Contracts.......................................................................... 9
2.9 Litigation........................................................................................ 10
2.10 Intellectual Property............................................................................. 10
2.11 Environmental Matters............................................................................. 11
2.12 Taxes............................................................................................. 11
2.13 Employee Benefit Plans............................................................................ 12
2.14 Certain Agreements Affected by the Merger......................................................... 14
2.15 Brokers' and Finders' Fees........................................................................ 14
2.16 Opinion of TMAI Financial Advisor................................................................. 14
2.17 Registration Statement; Proxy Statement/Prospectus................................................ 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AVANT! AND MERGER SUB.........................................
14
3.1 Organization, Standing and Power.................................................................. 15
3.2 Capital Structure................................................................................. 15
3.3 Authority......................................................................................... 16
3.4 SEC Documents; Financial Statements............................................................... 16
3.5 Absence of Certain Changes........................................................................ 17
3.6 Litigation........................................................................................ 17
3.7 Absence of Undisclosed Liabilities................................................................ 17
3.8 Taxes............................................................................................. 18
3.9 Registration Statement; Proxy Statement/Prospectus................................................ 18
3.10 Intellectual Property............................................................................. 19
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ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.............................................................. 19
4.1 Conduct of Business of TMAI....................................................................... 19
4.2 Covenants of TMAI................................................................................. 19
4.3 Notices........................................................................................... 21
4.4 Other Offers...................................................................................... 21
4.5 Avant! Offers..................................................................................... 22
ARTICLE V ADDITIONAL AGREEMENTS............................................................................. 23
5.1 Proxy Statement/Prospectus; Registration Statement................................................ 23
5.2 Meeting of Shareholders........................................................................... 23
5.3 Access to Information............................................................................. 23
5.4 Confidentiality................................................................................... 24
5.5 Public Disclosure................................................................................. 24
5.6 Consents; Cooperation............................................................................. 24
5.7 Pooling Accounting................................................................................ 25
5.8 Affiliates Agreements............................................................................. 25
5.9 FIRPTA............................................................................................ 25
5.10 Continuity of Interest Certificates............................................................... 25
5.11 Legal Requirements................................................................................ 25
5.12 Blue Sky Laws..................................................................................... 26
5.13 Employee Benefit Plans............................................................................ 26
5.14 Form S-8.......................................................................................... 27
5.15 Indemnification................................................................................... 27
5.16 Listing of Additional Shares...................................................................... 28
5.17 Pooling Letters................................................................................... 28
5.18 Best Efforts and Further Assurances............................................................... 28
5.19 Notification of Certain Matters................................................................... 28
5.20 Shareholder Agreement............................................................................. 29
5.21 HSR Act Filings................................................................................... 29
5.22 Schedules......................................................................................... 29
5.23 Management of TCAD Division....................................................................... 29
ARTICLE VI CONDITIONS TO THE MERGER......................................................................... 29
6.1 Conditions to Obligations of Each Party to Effect the Merger...................................... 29
6.2 Additional Conditions to Obligations of TMAI...................................................... 30
6.3 Additional Conditions to the Obligations of Avant! and Merger Sub................................. 31
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................................................... 32
7.1 Termination....................................................................................... 32
7.2 Effect of Termination............................................................................. 33
7.3 Expenses and Termination Fees..................................................................... 33
7.4 Amendment......................................................................................... 34
7.5 Extension; Waiver................................................................................. 34
ARTICLE VIII GENERAL PROVISIONS............................................................................. 34
8.1 Survival.......................................................................................... 34
8.2 Notices........................................................................................... 35
8.3 Interpretation.................................................................................... 35
8.4 Counterparts...................................................................................... 36
8.5 Entire Agreement; Nonassignability; Parties in Interest........................................... 36
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8.6 Severability...................................................................................... 36
8.7 Remedies Cumulative............................................................................... 36
8.8 Governing Law..................................................................................... 36
8.9 Rules of Construction............................................................................. 36
EXHIBITS
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EXHIBIT A-1 TMAI Affiliates Agreement
EXHIBIT A-2 Avant! Affiliates Agreement
EXHIBIT B Shareholder Agreement
EXHIBIT C Continuity of Interest Certificate
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of September 7, 1997, by and among Avant! Corporation, a
Delaware corporation ("Avant!"), Cardinal Merger Corporation, a California
corporation ("Merger Sub") and wholly owned subsidiary of Avant! and Technology
Modeling Associates, Inc., a California corporation ("TMAI").
RECITALS
A. The Boards of Directors of TMAI, Avant! and Merger Sub believe it is in
the best interests of their respective corporations and the stockholders of
their respective corporations that TMAI and Merger Sub combine into a single
company through the statutory merger of Merger Sub with and into TMAI (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. In the Merger, among other things, the outstanding shares of TMAI Common
Stock, no par value ("TMAI Common Stock"), shall be converted into shares of
Avant! Common Stock, $.0001 par value ("Avant! Common Stock"), at the rate set
forth herein.
C. TMAI, Avant! and Merger Sub desire to make certain representations and
warranties and other agreements in connection with the Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
E. The parties intend for the Merger to be accounted for as a pooling of
interests.
F. Concurrent with the execution of this Agreement and as an inducement to
Avant! and Merger Sub to enter into this Agreement, ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, Lung ▇▇▇, ▇▇▇-▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Shareholders") who are
officers and directors of TMAI, have on the date hereof entered into an
agreement to vote the shares of TMAI's Common Stock owned by such persons to
approve the Merger.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law ("California
Law"), Merger Sub shall be merged with and into TMAI, the separate corporate
existence of Merger Sub shall cease and TMAI shall continue as the surviving
corporation. TMAI as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 CLOSING; EFFECTIVE TIME. The closing of the transactions contemplated
hereby (the "Closing") shall take place as soon as practicable after the
satisfaction or waiver of each of the conditions set forth in Article VI hereof
or at such other time as the parties hereto agree (the date on which the Closing
shall occur, the "Closing Date" or the "Effective Date"). The Closing shall take
place at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other
location as the parties hereto agree. In connection with the Closing, the
parties hereto shall cause the Merger to be consummated by filing an Agreement
of Merger, in form reasonably satisfactory to Avant! and TMAI (the "Agreement of
Merger"), with the Secretary of State of the State of
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California, in accordance with the relevant provisions of California Law (the
time of such filing being the "Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Agreement of Merger and the
applicable provisions of California Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of TMAI and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of TMAI and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Articles of Incorporation of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended; provided,
however, that Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the corporation is
TMAI."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors of Merger
Sub shall be the initial directors of the Surviving Corporation and the officers
of Merger Sub shall be the initial officers of the Surviving Corporation, until
their respective successors are duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without any
action on the part of Merger Sub, Avant!, TMAI or the holders of any of the
following securities:
(a) CONVERSION OF TMAI COMMON STOCK. At the Effective Time, each share
of TMAI Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of TMAI Common Stock to be canceled
pursuant to Section 1.6(b) and any Dissenting Shares (as defined in Section
1.7 below)) will be canceled and extinguished and will be converted
automatically into the right to receive a fraction of a share of Avant!
Common Stock (the "Exchange Ratio"), the numerator of which is equal to (i)
$17.00, and the denominator of which is equal to (ii) the average of the per
share closing prices of Avant! Common Stock as quoted on the Nasdaq National
Market for the ten (10) consecutive trading days ending three (3) business
days prior to the Effective Date of the Merger (the "Average Nasdaq Per
Share Price"). Notwithstanding anything to the contrary set forth herein, in
the event that the Average Nasdaq Per Share Price is greater than $35.678
(the "Maximum Price"), then the Exchange Ratio shall be 0.476484, and in the
event that the Average Nasdaq Per Share Price is less than $25.678 (the
"Minimum Price"), then the Exchange Ratio shall be 0.662045.
(b) CANCELLATION OF TMAI COMMON STOCK OWNED BY AVANT! OR TMAI. At the
Effective Time, all shares of TMAI Common Stock that are owned by TMAI and
each share of TMAI Common Stock owned by Avant! or any direct or indirect
wholly owned subsidiary of Avant! or of TMAI immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) TMAI STOCK PLANS. At the Effective Time, the 1996 Equity Incentive
Plan, the 1995 Stock Option Plan and the 1989 Stock Option Plan of TMAI, and
all options to purchase TMAI Common Stock then outstanding under such plans,
shall be assumed by Avant! in accordance with Section 5.13. The TMAI 1989
Stock Option Plan, 1995 Stock Option Plan and 1996 Equity Incentive Plan are
sometimes collectively referred to herein as the "TMAI Stock Plans."
(d) TMAI EMPLOYEE STOCK PURCHASE PLAN. At the Effective Time, the TMAI
1996 Employee Stock Purchase Plan (the "TMAI ESPP") and all of the existing
rights and obligations of TMAI pursuant to the outstanding subscription
rights thereunder shall be assumed by Avant! in accordance with Section
5.13.
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(e) CAPITAL STOCK OF MERGER SUB. At the Effective Time, each share of
Common Stock, no par value, of Merger Sub ("Merger Sub Common Stock"),
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one (1) validly issued, fully paid and
nonassessable share of Common Stock, no par value, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of
any such shares shall continue to evidence ownership of such shares of
capital stock of the Surviving Corporation.
(f) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted
to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible
into Avant! Common Stock or TMAI Common Stock), reorganization,
recapitalization or other like change with respect to Avant! Common Stock or
TMAI Common Stock occurring after the date hereof and prior to the Effective
Time.
(g) FRACTIONAL SHARES. No fraction of a share of Avant! Common Stock
will be issued, but in lieu thereof each holder of shares of TMAI Common
Stock who would otherwise be entitled to a fraction of a share of Avant!
Common Stock (after aggregating all fractional shares of Avant! Common Stock
to be received by such holder) shall receive from Avant! an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Average Nasdaq Per Share Price.
1.7 DISSENTERS' RIGHTS. If, as of the Effective Time, holders of TMAI
Common Stock have complied with all requirements for perfecting and not
forfeited dissenters' rights ("Dissenting Shares") in connection with the Merger
under California Law, such Dissenting Shares shall not be converted into Avant!
Common Stock but instead shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the California Law. TMAI shall give Avant! prompt notice of
any demand received by TMAI to require TMAI to pay the value of any Dissenting
Shares of TMAI Common Stock, and Avant! shall have the right to participate in
all negotiations and proceedings with respect to such demand. TMAI agrees that,
except with the prior written consent of Avant!, it will not make any payment
with respect to, or settle or offer to settle, any such purchase demand. Each
holder of Dissenting Shares (a "Dissenting Shareholder") who, pursuant to the
provisions of California Law, becomes entitled to payment of the value of shares
of TMAI Common Stock shall receive payment therefor (but only after the value
therefor shall have been agreed upon or finally determined pursuant to such
provisions). In the event of a legal obligation, after the Effective Time, to
deliver shares of Avant! Common Stock to any holder of shares of TMAI Common
Stock who shall have failed to make an effective payment demand or shall have
lost his or her status as a Dissenting Shareholder, Avant! shall issue and
deliver, upon surrender by such Dissenting Shareholder of his or her certificate
or certificates representing shares of TMAI Common Stock, the shares of Avant!
Common Stock to which such Dissenting Shareholder is then entitled under Section
1.6(a) and cash in lieu of fractional shares pursuant to Section 1.6(g).
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. ▇▇▇▇▇▇ Trust Company of California shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) AVANT! TO PROVIDE COMMON STOCK AND CASH. As soon as practicable after
the Effective Time, but no later than two (2) business days thereafter, Avant!
shall make available to the Exchange Agent for exchange in accordance with this
Article I, through such reasonable procedures as Avant! may adopt, (i) the
shares of Avant! Common Stock issuable pursuant to Section 1.6(a) in exchange
for shares of TMAI Common Stock outstanding immediately prior to the Effective
Time and (ii) cash in an amount sufficient to permit payment of cash in lieu of
fractional shares pursuant to Section 1.6(g).
(c) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time,
but no later than five (5) business days thereafter, the Surviving Corporation
shall cause to be mailed to each holder of record of
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a certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of TMAI Common Stock, whose
shares were converted into the right to receive shares of Avant! Common Stock
(and cash in lieu of fractional shares) pursuant to Section 1.6, (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 receipt of the
Certificates by 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 certificates
representing shares of Avant! Common Stock (and cash in lieu of fractional
shares). 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 record of such Certificate shall be
entitled to receive in exchange therefor a certificate representing the number
of whole shares of Avant! Common Stock and payment in lieu of fractional shares
which such holder of record has the right to receive pursuant to Section 1.6,
and the Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of TMAI Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than as provided in subsection
(d) below, to evidence only the ownership of the number of full shares of Avant!
Common Stock into which such shares of TMAI Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions with respect to Avant! Common Stock with a record date after the
Effective Time will be paid to the holder of record of any unsurrendered
Certificate with respect to the shares of Avant! Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Avant! Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
theretofore payable (but for the provisions of this Section 1.8(d)) with respect
to such shares of Avant! Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of Avant! Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Avant! or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Avant! Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Avant! or any
agent designated by it that such tax has been paid or is not payable.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this Section
1.8, none of the Exchange Agent, the Surviving Corporation or any party hereto
shall be liable to any person for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN TMAI COMMON STOCK. All shares of Avant!
Common Stock issued upon the surrender for exchange of shares of TMAI Common
Stock in accordance with the terms hereof (including any cash paid in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of TMAI Common Stock, and following the
Effective Time there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of TMAI Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
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1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Avant! Common Stock
(and cash in lieu of fractional shares) as may be required pursuant to Section
1.6; provided, however, that the Exchange Agent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Avant!, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties hereto
that the Merger shall (i) constitute a reorganization within the meaning of
Section 368 of the Code and (ii) qualify for accounting treatment as a pooling
of interests. No party shall take any action which, to such party's knowledge,
would cause the Merger to fail to qualify as a reorganization within the meaning
of Section 368 of the Code or to fail to qualify for accounting treatment as a
pooling of interest.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of TMAI and Merger Sub, the officers and directors of TMAI and
Merger Sub are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action, so long
as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TMAI
In this Agreement, any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a "Material Adverse Effect" with
respect to any entity or group of entities means any event, change or effect
that is materially adverse to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such entity and its subsidiaries, taken
as a whole; PROVIDED, HOWEVER, that (i) any adverse change, event or effect that
is demonstrated to be primarily caused by conditions affecting the United States
economy generally or the economy of any nation or region in which such entity or
any of its subsidiaries conducts business that is material to the business of
such entity and its subsidiaries, taken as a whole, shall not be taken into
account in determining whether there has been or would be a "Material Adverse
Effect" on or with respect to such entity, (ii) any adverse change, event or
effect that is demonstrated to be primarily caused by conditions generally
affecting the integrated circuit design automation software industry shall not
be taken into account in determining whether there has been or would be a
"Material Adverse Effect" on or with respect to such entity, (iii) any adverse
change, event or effect that is demonstrated to be primarily caused by the
announcement or pendency of the Merger shall not be taken into account in
determining whether there has been or would be a "Material Adverse Effect" on or
with respect to such entity, and (iv) any adverse change in the stock price of
an entity as quoted on the Nasdaq National Market shall not be taken into
account in determining whether there has been or would be a "Material Adverse
Effect" on or with respect to such entity.
In this Agreement, any reference to a party's "knowledge" means such party's
actual knowledge after due and diligent inquiry of officers, directors and other
employees of such party and its subsidiaries reasonably believed to have
knowledge of such matters.
Except as disclosed in a document of even date herewith and delivered by
TMAI to Avant! prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this
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Agreement (the "TMAI Disclosure Schedule"), TMAI represents and warrants to
Avant! and Merger Sub as follows:
2.1 ORGANIZATION, STANDING AND POWER. Each of TMAI and its subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of TMAI and its subsidiaries has
the corporate power to own its properties and to carry on its business as now
being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on TMAI.
TMAI has delivered a true and correct copy of the Articles of Incorporation
(referred to herein as TMAI's "Articles of Incorporation") and Bylaws or other
charter documents, as applicable, of TMAI and each of its subsidiaries, each as
amended to date, to Avant!. Neither TMAI nor any of its subsidiaries is in
violation of any of the provisions of its Articles of Incorporation or Bylaws or
equivalent organizational documents. TMAI is the owner of all outstanding shares
of capital stock of each of its subsidiaries and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of each such subsidiary are owned by TMAI free and clear
of all liens, charges, claims or encumbrances or rights of others. There are no
outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable
or convertible securities or other commitments or agreements of any character
relating to the issued or unissued capital stock or other securities of any such
subsidiary, or otherwise obligating TMAI or any such subsidiary to issue,
transfer, sell, purchase, redeem or otherwise acquire any such securities.
Except as disclosed in the TMAI SEC Documents (as defined in Section 2.4), TMAI
does not directly or indirectly own any equity or similar interest in, or any
interest convertible or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
2.2 CAPITAL STRUCTURE. The authorized capital stock of TMAI consists of
25,000,000 shares of Common Stock, no par value, and 4,000,000 shares of
Preferred Stock, no par value, of which there were issued and outstanding as of
the close of business on August 31, 1997, 8,089,027 shares of TMAI Common Stock
and no shares of Preferred Stock. There are no other outstanding shares of
capital stock or voting securities of TMAI and no outstanding commitments to
issue any shares of capital stock or voting securities of TMAI after August 31,
1997 other than pursuant to (i) the exercise of options under the TMAI Stock
Plans and the 1996 Directors Stock Option Plan of TMAI (the "Directors Plan") or
(ii) the exercise of subscription rights outstanding as of such date under the
TMAI ESPP. All outstanding shares of TMAI Common Stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any liens or
encumbrances, other than any liens or encumbrances created by or imposed upon
the holders thereof, and are not subject to preemptive rights or rights of first
refusal created by statute, the Articles of Incorporation or Bylaws of TMAI or
any agreement to which TMAI is a party or by which it is bound. As of the close
of business on August 31, 1997, TMAI had reserved (i) 1,500,000 shares of TMAI
Common Stock for issuance to employees pursuant to the 1996 TMAI Equity
Incentive Plan, of which no shares have been issued pursuant to option exercises
and 800,200 shares are subject to outstanding, unexercised options, (ii) 200,000
shares of TMAI Common Stock for issuance to employees pursuant to the TMAI ESPP,
of which 56,799 shares have been issued and no shares remain purchasable under
outstanding, unexercised subscription rights and no more than 143,201 shares are
subject to outstanding subscriptions, (iii) 229,925 shares of TMAI Common Stock
for issuance to employees pursuant to the TMAI 1989 Stock Option Plan, of which
no shares have been issued pursuant to option exercises and no shares are
subject to outstanding, unexercised options, (iv) 525,525 shares of TMAI Common
Stock for issuance to employees pursuant to the TMAI 1995 Stock Option Plan, of
which no shares have been issued pursuant to option exercises and no shares are
subject to outstanding, unexercised options, and (v) 150,000 shares of TMAI
Common Stock for issuance to board members pursuant to the Directors Plan, of
which no shares have been issued pursuant to option exercises and 15, 000 shares
are subject to outstanding, unexercised options. No Stock Bonuses, Restricted
Stock Awards or other stock-based awards (as all of such terms are defined in
the 1996 TMAI Equity Incentive Plan) have been issued prior to the date hereof
under the 1996 TMAI Equity Incentive Plan. Since August 31, 1997, TMAI has not
(i) issued or granted additional options
6
under any of the TMAI Stock Plans or the Directors Plan or (ii) accepted any
additional Common Stock subscriptions or otherwise granted any additional
purchase rights under the TMAI ESPP, except as set forth in the TMAI Disclosure
Schedule. Except for the rights created pursuant to this Agreement and as
disclosed in this Section 2.2, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which TMAI is a party or
by which it is bound obligating TMAI to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of TMAI or obligating TMAI to grant, extend, accelerate
the vesting of, change the price of, or otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement. There are no contracts,
commitments or agreements relating to voting, registration, purchase or sale of
TMAI's capital stock (i) between or among TMAI and any of its shareholders or
(ii) to TMAI's knowledge, between or among any of TMAI's shareholders other than
the Shareholder Agreements entered into pursuant hereto. The terms of the TMAI
Stock Plans permit the assumption or substitution of options to purchase Avant!
Common Stock as provided in this Agreement, without the consent or approval of
the holders of such securities, the TMAI shareholders, or otherwise and without
any acceleration of the exercise schedule or vesting provisions in effect for
those options. No benefits under any of such TMAI Stock Plans will accelerate in
connection with the Merger. No other outstanding options, whether under the TMAI
Stock Plans or otherwise, will be accelerated in connection with the Merger,
except options outstanding under the Directors Plan. The most recent two-year
offering period (as contemplated by the TMAI ESPP) commenced under the TMAI ESPP
on August 1, 1997, and except for the subscriptions to acquire no more than
143,201 shares of TMAI Common Stock under the TMAI ESPP, there are no other
subscriptions or purchase rights or options outstanding under the TMAI ESPP.
True and complete copies of all agreements and instruments relating to or issued
under the TMAI Stock Plans, the Directors Plan and the TMAI ESPP have been made
available to Avant! and such agreements and instruments have not been amended,
modified or supplemented, and there are no agreements to amend, modify or
supplement such agreements or instruments in any case from the form made
available to Avant!. TMAI will update the TMAI Disclosure Schedule to reflect
outstanding shares and options as of the Effective Time.
2.3 AUTHORITY. TMAI has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of TMAI, subject only to the approval of the Merger
by TMAI's shareholders as contemplated by Section 6.1(a). This Agreement has
been duly executed and delivered by TMAI and, subject to receipt of such
shareholder approval, constitutes the valid and binding obligation of TMAI
enforceable against TMAI in accordance with its terms. The Board of Directors of
TMAI has unanimously approved this Agreement and the transactions contemplated
hereby. The execution and delivery of this Agreement by TMAI does not, and,
subject to receipt of shareholder approval and the consents contemplated by
Section 2.3 of the TMAI Disclosure Schedule, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit under (i) any provision of the
Articles of Incorporation or Bylaws of TMAI or any of its subsidiaries, or (ii)
any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to TMAI or any of its
subsidiaries or any of their properties or assets, except where such conflict,
violation, default, termination, cancellation or acceleration with respect to
the foregoing provisions of (ii) would not have had and would not reasonably be
expected to have a Material Adverse Effect on TMAI. Except as set forth in the
TMAI Disclosure Schedule, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to TMAI or any of its subsidiaries in
connection with the execution and delivery of this Agreement, or the
consummation of the transactions contemplated hereby and thereby, except for (i)
the filing of the Agreement of Merger as provided in Section 1.2; (ii) the
filing with the
7
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers, Inc. (the "NASD") of the Proxy Statement (as defined in
Section 2.17) relating to the TMAI Shareholders' Meeting (as defined in Section
2.17) and any clearance thereof by the SEC (iii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state securities laws and the securities laws of any
foreign country; (iv) filings required to be made by each of TMAI and Avant!
under the HSR Act (as defined in Section 5.21 below); and (v) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on TMAI and would not
prevent, or materially alter or delay any of the transactions contemplated by
this Agreement.
2.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. TMAI has furnished to Avant! a
true and complete copy of each statement, report, registration statement
(together with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act of 1933, as amended (the "Securities Act"), if any), definitive
proxy statement and other filings filed with the SEC by TMAI on or after
September 20, 1996, and, prior to the Effective Time, TMAI will have furnished
Avant! with true and complete copies of any additional documents filed with the
SEC by TMAI prior to the Effective Time (collectively, the "TMAI SEC
Documents"). In addition, TMAI has made available to Avant! all exhibits to the
TMAI SEC Documents filed prior to the date hereof, and will promptly make
available to Avant! all exhibits to any additional TMAI SEC Documents filed
prior to the Effective Time. All documents required to be filed as exhibits to
the TMAI SEC Documents have been so filed. As of their respective filing dates,
or, with respect to registration statements as of their effective dates, the
TMAI SEC Documents complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act, and none of the TMAI SEC Documents 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 in which they were made, not misleading, except to the extent
corrected, modified or superseded by a subsequently filed TMAI SEC Document. The
financial statements of TMAI, including the notes thereto, included in the TMAI
SEC Documents (the "TMAI Financial Statements"), complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto).
The TMAI Financial Statements fairly present in all material respects the
consolidated financial condition and operating results of TMAI and its
subsidiaries at the dates and during the periods indicated therein (subject, in
the case of unaudited statements, to normal, recurring year-end adjustments).
There has been no change in TMAI accounting policies except as described in the
notes to the TMAI Financial Statements.
2.5 ABSENCE OF CERTAIN CHANGES. Except as set forth in the TMAI Disclosure
Schedule or in the TMAI SEC Documents, since June 30, 1997 (the "TMAI Balance
Sheet Date"), TMAI has conducted its business in the ordinary course consistent
with past practice and there has not occurred: (i) any change, event or
condition (whether or not covered by insurance) that has resulted in a Material
Adverse Effect on TMAI; (ii) any acquisition, sale or transfer of any material
asset of TMAI or any of its subsidiaries other than in the ordinary course of
business and consistent with past practice; (iii) any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by TMAI or any revaluation by TMAI of any of its or any of
its subsidiaries' assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of TMAI, or any direct
or indirect redemption, purchase or other acquisition by TMAI of any of its
shares of capital stock except for the repurchase at cost of unvested shares
held by TMAI employees on the termination of employment; (v) any material
contract entered into by TMAI or any of its subsidiaries, other than in the
ordinary course of business and as provided to Avant!, or any material amendment
or termination of, or default under, any material contract to which TMAI or any
of its subsidiaries is a party or by which it is bound; (vi) any action by TMAI
or, to TMAI's knowledge, any affiliate of TMAI which might reasonably be
expected to preclude
8
the ability of Avant! to account for the business combination to be effected by
the Merger as a "pooling of interests" under generally accepted accounting
principles; (vii) any increase in the compensation payable or to become payable
by TMAI to any of its officers, directors, consultants or employees (except for
salary or rate increases granted to such persons in the ordinary course of
business and consistent with prior practice); (viii) any (A) grant of any
severance or termination pay to any director, officer or employee of TMAI or any
of its subsidiaries except in the ordinary course of business and consistent
with past practice, (B) entering into of any employment, deferred compensation
or other similar agreement (or any amendment to any such existing agreement)
with any director, officer or employee of TMAI or any such subsidiary except in
the ordinary course of business and consistent with past practice, (C) any
increase in benefits payable under any existing severance or termination pay
policies or employment agreements, or (D) any increase in compensation, bonus or
other benefits payable to directors, officers or employees of TMAI or any such
subsidiary, in each case other than in the ordinary course of business
consistent with past practice; or (ix) any negotiation or agreement by TMAI or
any of its subsidiaries to do any of the things described in the preceding
clauses (i) through (viii) (other than negotiations with Avant! and its
representatives regarding the transactions contemplated by this Agreement). Any
agreement or obligation to provide severance or termination payments and any
employment, deferred compensation or other similar agreements and the material
terms thereof are set forth on Section 2.5 of the TMAI Disclosure Schedule.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. TMAI has no material obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the Balance Sheet
included in TMAI's Quarterly Report on Form 10-Q for the period ended June 30,
1997 (the "TMAI Balance Sheet"); (ii) those incurred in the ordinary course of
business and not required to be set forth in the TMAI Balance Sheet under
generally accepted accounting principles; (iii) those incurred in the ordinary
course of business since the TMAI Balance Sheet Date and consistent with past
practice; and (iv) those incurred in connection with the execution and delivery
of this Agreement and the transactions contemplated hereby.
2.7 PERMITS AND LICENSES. TMAI is now the holder of all licenses,
franchises, ordinances, authorizations, permits, and certificates, domestic or
foreign (collectively, the "TMAI Licenses"), necessary to enable it to continue
to conduct its business in all material respects, as presently conducted, except
where the failure to have such TMAI Licenses, individually or in the aggregate,
would not have a Material Adverse Effect on TMAI. All of the TMAI Licenses are
in full force and effect. TMAI has no reason to believe that any Federal, state,
or local government or agency having jurisdiction will revoke, cancel, rescind,
refuse to renew in the ordinary course, or modify any of the TMAI Licenses.
There is not now pending, or, to the knowledge of TMAI, threatened any
investigation before any such Federal, state, or local governments or agencies
which, either individually or in the aggregate, would have a Material Adverse
Effect on TMAI. TMAI has conducted its business so as to comply with all
applicable laws, regulations, ordinances, and codes, domestic and foreign,
including, without limitation, laws, regulations, ordinances, and codes relating
to the protection of the environment, the failure to comply with which could
reasonably be expected to have a Material Adverse Effect on TMAI.
2.8 PROPERTIES AND CONTRACTS.
(a) TMAI owns, or is licensed to use, or leases, all property and assets,
real and personal, tangible and intangible, used in or necessary for the conduct
of its business as currently conducted, except in those cases where the failure
so to own, license or lease would not have a Material Adverse Effect on TMAI and
except as this subsection (a) may relate to TMAI Intellectual Property which is
addressed exclusively by Section 2.10 below.
(b) To the knowledge of TMAI, (i) all of the material contracts of TMAI are
presently valid and existing and in full force and effect, and (ii) there is no
violation or default or claim of violation or default by any party thereto and
no condition or event has occurred which with notice or lapse of time or both
9
would constitute a violation or default thereunder, except for any such failure
or any such violation, default, or claim, which would not have a Material
Adverse Effect on TMAI.
2.9 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of TMAI, threatened
against TMAI or any of its subsidiaries or any of their respective properties or
any of their respective officers or directors (in their capacities as such)
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on TMAI or that arise out of or in any way relate to
this Agreement, the Merger or any of the transactions contemplated hereby. From
the date of this Agreement until the Effective Time, TMAI shall promptly advise
Avant! of any such action, suit, proceeding, claim, arbitration or investigation
that is commenced, or, to the knowledge of TMAI, threatened against TMAI or any
of its subsidiaries. There is no judgment, decree or order against TMAI or any
of its subsidiaries, or, to the knowledge of TMAI, any of their respective
directors or officers (in their capacities as such), that could prevent, enjoin,
alter or materially delay any of the transactions contemplated by this Agreement
or that could reasonably be expected to have a Material Adverse Effect on TMAI.
2.10 INTELLECTUAL PROPERTY.
(a) TMAI and/or its subsidiaries own, or otherwise possess legally
enforceable rights to use all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in source code and/or object code
form), and tangible or intangible proprietary information or material ("TMAI
Intellectual Property") that are used in the business of TMAI and its
subsidiaries as currently conducted (including with respect to products
currently under development), except to the extent that the failure to have such
rights has not had and would not reasonably be expected to have a Material
Adverse Effect on TMAI.
(b) Section 2.10 of the TMAI Disclosure Schedule lists (i) all patents and
patent applications and all material registered and unregistered trademarks,
trade names and service marks, registered copyrights, and maskworks that are
included in the TMAI Intellectual Property, in each case where such applications
have been filed by or registered in the name of TMAI or assigned to TMAI,
including the jurisdictions in which each such TMAI Intellectual Property right
has been issued or registered or in which any application for such issuance and
registration has been filed, (ii) all material licenses, sublicenses and other
agreements as to which TMAI is a party and pursuant to which any person is
authorized to use any TMAI Intellectual Property other than end user licenses
entered into with customers of TMAI in the ordinary course of business, and
(iii) all licenses, sublicenses and other agreements as to which TMAI is a party
and pursuant to which TMAI is authorized to use any third party patents,
trademarks or copyrights, including software ("TMAI Third Party Intellectual
Property Rights") which are incorporated in, are, or form a part of any TMAI
product that is material to its business or any TMAI product under development
that is expected to be material to its business, other than end user licenses of
commercially available products of third parties entered into in the ordinary
course of business.
(c) To the knowledge of TMAI, there is no material unauthorized use,
disclosure, infringement or misappropriation of any TMAI Intellectual Property
rights of TMAI or any of its subsidiaries, any trade secret material to TMAI or
any of its subsidiaries, or any TMAI Intellectual Property right of any third
party to the extent licensed by or through TMAI or any of its subsidiaries, by
any third party, including any employee or former employee of TMAI or any of its
subsidiaries. Neither TMAI nor any of its subsidiaries has entered into any
agreement to indemnify any other person against any charge of infringement by
any TMAI Intellectual Property, other than indemnification provisions contained
in end user licenses, distribution agreements or sales representative agreements
entered into with customers of TMAI arising in the ordinary course of business.
10
(d) Neither TMAI nor any of its subsidiaries is, nor will they be as a
result of the execution and delivery of this Agreement or the performance of
their respective obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the TMAI Intellectual Property or TMAI
Third Party Intellectual Property Rights, which breach would have a Material
Adverse Effect on TMAI.
(e) To TMAI's knowledge, all patents, registered trademarks, service marks
and copyrights held by TMAI or any of its subsidiaries are valid and subsisting.
TMAI (i) has not been sued in any suit, action or proceeding which involves a
claim of infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party;
(ii) has no knowledge that the manufacturing, marketing, licensing or sale of
its products infringes any patent, trademark, service ▇▇▇▇, copyright, trade
secret or other proprietary right of any third party, which such infringement
would have a Material Adverse Effect on TMAI; and (iii) has not brought any
action, suit or proceeding for infringement of TMAI Intellectual Property or
breach of any license or agreement involving TMAI Intellectual Property against
any third party.
(f) TMAI has secured from all consultants and employees who contributed to
the creation or development of TMAI Intellectual Property valid written
assignments of the rights to such contributions that TMAI does not already own
by operation of law, the absence of which would have a Material Adverse Effect
on TMAI.
(g) TMAI has taken reasonable and practical steps to protect and preserve
the confidentiality of all TMAI Intellectual Property not otherwise protected by
patents, patent applications or copyright ("TMAI Confidential Information"). It
is TMAI's policy that all use, disclosure or appropriation of TMAI Confidential
Information owned by TMAI by or to a third party be pursuant to the terms of a
written agreement between TMAI and such third party. All use, disclosure or
appropriation of TMAI Confidential Information not owned by TMAI has been
pursuant to the terms of a written agreement between TMAI and the owner of such
TMAI Confidential Information, or is otherwise lawful.
2.11 ENVIRONMENTAL MATTERS. To the knowledge of TMAI, each of TMAI and its
subsidiaries is and at all times has been in compliance with all foreign,
federal, state and local laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or waste, except to the extent noncompliance with such laws has not had and
could not reasonably be expected to have a Material Adverse Effect on TMAI.
2.12 TAXES. TMAI and each of its subsidiaries, and each member of any
consolidated, combined or unitary group for Tax purposes of which TMAI or any of
its subsidiaries is or has been a member have timely filed all Tax Returns
required to be filed by them (other than those that are not, individually or in
the aggregate, material) and have paid all Taxes shown thereon to be due. The
TMAI Financial Statements (i) fully accrue all actual and contingent liabilities
for Taxes with respect to all periods through June 30, 1997 and TMAI and each of
its subsidiaries have not and will not incur any Tax liability in excess of the
amount reflected on the TMAI Financial Statements with respect to such periods,
and (ii) properly accrue in accordance with generally accepted accounting
principles all liabilities for Taxes payable after June 30, 1997 with respect to
all transactions and events occurring on or prior to such date. No material Tax
liability since June 30, 1997 has been incurred by TMAI or its subsidiaries
other than in the ordinary course of business and adequate provision has been
made in the TMAI Financial Statements for all Taxes since that date in
accordance with generally accepted accounting principles on at least a quarterly
basis. TMAI and each of its subsidiaries have withheld and paid or will timely
pay to the applicable financial institution or Tax Authority all amounts
required to be withheld. No notice of deficiency or similar document of any Tax
Authority has been received by either TMAI or any of its subsidiaries, and there
are no liabilities for Taxes with respect to the issues that have been raised
(and are currently pending) by any Tax Authority that could, if determined
adversely to TMAI and its subsidiaries, materially and adversely affect the
liability of TMAI and its subsidiaries for Taxes. Except as disclosed in the
TMAI Disclosure Schedule, there (i) is no material claim for Taxes that is a
lien against the property of TMAI or any of its subsidiaries other than
11
liens for Taxes not yet due and payable, (ii) has been no notification received
by TMAI of any audit of any Tax Return of TMAI or any of its subsidiaries being
conducted, pending or threatened by a Tax Authority, and (iii) is no extension
or waiver of the statute of limitations on the assessment of any Taxes granted
by TMAI or any of its subsidiaries that is currently in effect, and (iv) is no
agreement, contract or arrangement to which TMAI or any of its subsidiaries is a
party that may result in the payment of any material amount that would not be
deductible by reason of Sections 280G or 404 of the Code. TMAI 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. Neither
TMAI nor any of its subsidiaries is a party to any Tax sharing or Tax allocation
agreement nor does TMAI or any of its subsidiaries owe any amount under any such
agreement. TMAI and each of its subsidiaries are in material compliance with all
terms and conditions of any Tax exemptions or other Tax sharing agreement or
order of a foreign government applicable to them and the consummation of the
Merger shall not have any adverse effect on the continued validity and
effectiveness of any such Tax exemptions or other Tax sharing agreement or
order. For purposes of this Agreement, the following terms have the following
meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i)
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, 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 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 herein, "Tax Return" shall mean any return, statement, report or
form including, without limitation, estimated Tax returns and reports,
withholding Tax returns and reports and information reports and returns required
to be filed with respect to Taxes.
2.13 EMPLOYEE BENEFIT PLANS.
(a) Section 2.13 of the TMAI Disclosure Schedule lists, with respect to
TMAI, any subsidiary of TMAI and any trade or business (whether or not
incorporated) which is treated as a single employer with TMAI (an "ERISA
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to
a non-officer employee in excess of $10,000, loans to officers and directors and
any stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code Section 125) or
dependent care (Code Section 129), life insurance or accident insurance plans,
programs or arrangements, (iii) all bonus, pension, profit sharing, savings,
deferred compensation or incentive plans, programs or arrangements, (iv) other
fringe or employee benefit plans, programs or arrangements that apply to senior
management of TMAI and that do not generally apply to all employees, and (v) any
current or former employment or executive compensation or severance agreements,
written or otherwise, as to which unsatisfied obligations of TMAI of greater
than $10,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of TMAI (together, the "TMAI Employee Plans").
(b) TMAI has furnished to Avant! a copy of each of the TMAI Employee Plans
and related plan documents (including trust documents, insurance policies or
contracts, employee booklets and the most recent summary plan descriptions) and
has, with respect to each TMAI Employee Plan which is subject to ERISA reporting
requirements, provided copies of the most recent Form 5500 report. Any TMAI
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the
12
Internal Revenue Service a favorable determination as to its qualified status
under the Code, including the provisions of the Tax Reform Act of 1986, or has
applied to the Internal Revenue Service for such a determination prior to the
expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such determination
and to make any amendments necessary to obtain a favorable determination. TMAI
has also furnished Avant! with the most recent Internal Revenue Service
determination or opinion letter issued with respect to each such TMAI Employee
Plan, and nothing has occurred since the issuance of each such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
any TMAI Employee Plan subject to Code Section 401(a).
(c) (i) None of the TMAI Employee Plans promises or provides retiree medical
or other retiree welfare benefits to any person; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any TMAI Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect on
TMAI; (iii) each TMAI Employee Plan has been administered in accordance with its
terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), except as would
not have, in the aggregate, a Material Adverse Effect on TMAI or as otherwise
disclosed in the TMAI Disclosure Schedule; (iv) neither TMAI nor any subsidiary
or ERISA Affiliate is subject to any liability or penalty under Sections 4976
through 4980 of the Code or Title I of ERISA with respect to any of the TMAI
Employee Plans; (v) all material contributions required to be made by TMAI or
any subsidiary or ERISA Affiliate to any TMAI Employee Plan have been made on or
before their due dates and a reasonable amount has been accrued for such
required contributions to each TMAI Employee Plan for the current plan years;
and (vi) no TMAI Employee Plan is covered by, and neither TMAI nor any
subsidiary or ERISA Affiliate has incurred or expects to incur any material
liability under, Title IV of ERISA or Section 412 of the Code. With respect to
each TMAI Employee Plan subject to ERISA as either an employee pension plan
within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, TMAI has prepared in good faith and
timely filed all requisite governmental reports (which were true and correct as
of the date filed) and has properly and timely filed and distributed or posted
all notices and reports to employees required to be filed, distributed or posted
with respect to each such TMAI Employee Plan. No suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
TMAI is threatened, against or with respect to any such TMAI Employee Plan,
including any audit or inquiry by the IRS or United States Department of Labor.
Neither TMAI nor any TMAI subsidiary or other ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each TMAI Employee Plan, TMAI and each of its United
States subsidiaries have complied with (i) the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), and the proposed regulations thereunder,
and (ii) the applicable requirements of the Family Leave Act of 1993 and the
regulations thereunder, except, in each case, to the extent that such failure to
comply would not, in the aggregate, have a Material Adverse Effect on TMAI.
(e) Except as otherwise disclosed in the TMAI Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or other service provider of TMAI, any
TMAI subsidiary or any other ERISA Affiliate to severance benefits or any other
payment (including, without limitation, unemployment compensation, golden
parachute or bonus), except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting of any such benefits, or increase the
amount of compensation due any such employee or service provider.
(f) There has been no amendment to, written interpretation or announcement
(whether or not written) by TMAI, any TMAI subsidiary or other ERISA Affiliate
relating to, or change in participation or coverage under, any TMAI Employee
Plan which would materially increase the expense of maintaining
13
such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in TMAI's financial statements.
2.14 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the execution and
delivery of this Agreement nor the consummation of the transaction contemplated
hereby will (i) result in any material payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director or employee of TMAI or any of its subsidiaries,
(ii) materially increase any benefits otherwise payable by TMAI or (iii) result
in the acceleration of the time of payment or vesting of any such benefits.
2.15 BROKERS' AND FINDERS' FEES. TMAI has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby, other than fees and
expenses payable to ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.C. and ▇▇▇▇▇ and Company as
set forth on Section 2.15 of the TMAI Disclosure Schedule.
2.16 OPINION OF TMAI FINANCIAL ADVISOR. TMAI has received the opinion of
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.C. and ▇▇▇▇▇ and Company, to the effect that,
as of the date hereof, the consideration to be received by TMAI's shareholders
in the Merger is fair, from a financial point of view, to the shareholders of
TMAI.
2.17 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The written
information supplied by TMAI expressly for the purpose of inclusion in the
registration statement on Form S-4 (or such other or successor form as shall be
appropriate) pursuant to which the issuance of the shares of Avant! Common Stock
to be issued in the Merger will be registered with the SEC (the "Registration
Statement") shall not at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The written information supplied by TMAI
expressly for the purpose of inclusion in the combined proxy
statement/prospectus to be sent to the shareholders of TMAI in connection with
the meetings of TMAI's shareholders (the "TMAI Shareholders Meeting") and
Avant!'s stockholders (the "Avant! Stockholders Meeting") to be held in
connection with the Merger (such proxy statement/ prospectus as amended or
supplemented is referred to herein as the "Proxy Statement") shall not, on the
date the Proxy Statement is first mailed to TMAI's shareholders, at the time of
the TMAI Shareholders Meeting and at the Effective Time, contain any material
statement which, at such time, is false or misleading or omits to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not false or misleading or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the TMAI's
Shareholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event or information should be discovered by TMAI
which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, TMAI shall promptly inform Avant!.
Notwithstanding the foregoing, TMAI makes no representation, warranty or
covenant with respect to any information supplied by Avant! or Merger Sub that
is contained in any of the foregoing documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AVANT! AND MERGER SUB
Except as disclosed in a document of even date herewith and delivered by
Avant! to TMAI prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this
14
Agreement (the "Avant! Disclosure Schedule"), Avant! and Merger Sub jointly and
severally represent and warrant to TMAI as follows:
3.1 ORGANIZATION, STANDING AND POWER. Each of Avant! and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of Avant! and Merger Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on Avant!.
Avant! has delivered a true and correct copy of the Certificate of Incorporation
and Bylaws or other charter documents, as applicable, of Avant! and each of its
subsidiaries, each as amended to date, to TMAI. Neither Avant! nor Merger Sub is
in violation of any of the provisions of its Certificate or Articles of
Incorporation or Bylaws or equivalent organizational documents. Avant! is the
owner of all outstanding shares of capital stock of Merger Sub and all such
shares are duly authorized, validly issued, fully paid and nonassessable. All of
the outstanding shares of capital stock of Merger Sub are owned by Avant! free
and clear of all liens, charges, claims or encumbrances or rights of others.
Merger Sub was formed on September 5, 1997 for the purpose of consummating this
Merger and has no material assets or liabilities and will conduct no business
except as is necessary for such purpose.
3.2 CAPITAL STRUCTURE. The authorized capital stock of Avant! consists of
75,000,000 shares of Common Stock, $.0001 par value, and 5,000,000 shares of
Preferred ▇▇▇▇▇, ▇.▇▇▇▇ par value, of which there were issued and outstanding as
of the close of business on August 31, 1997, 25,926,728 shares of Avant! Common
Stock and no shares of Preferred Stock. There are no other outstanding shares of
capital stock or voting securities of Avant! and no outstanding commitments to
issue any shares of capital stock or voting securities of Avant! after August
31, 1997, other than shares of Avant! Common Stock issued after August 31, 1997
upon the exercise of options under the Avant! 1995 Stock Option/Stock Issuance
Plan, the Integrated Silicon Systems, Inc. stock option plans, the
Meta-Software, Inc. stock option plans, the NexSyn, Inc. stock option plans, the
FrontLine Design Automation, Inc. stock option plans and the Anagram, Inc. stock
option plans (the "Avant! Stock Option Plans"). The authorized capital stock of
Merger Sub consists of 1,000 shares of Common Stock, no par value, all of which
are issued and outstanding and are held by Avant!. All outstanding shares of
Avant! and Merger Sub have been duly authorized, validly issued, fully paid and
are nonassessable and free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof and are not subject
to preemptive rights or rights of first refusal created by statute, the
Certificate of Incorporation or Bylaws of Avant! or any agreement to which
Avant! is a party or by which it is bound. As of August 31, 1997, Avant! had
reserved 4,537,209 shares of Avant! Common Stock for issuance to employees,
directors and independent contractors pursuant to the Avant! Stock Option Plans,
of which approximately 21,861 shares have been issued pursuant to option
exercises, and approximately 1,697,089 shares are subject to outstanding,
unexercised options. Other than this Agreement and the Agreement and Plan of
Reorganization dated as of July 31, 1997 and as amended on August 27, 1997 among
Avant!, GB Acquisition Corporation, Compass Design Automation, Inc., and VLSI
Technology, Inc. (the "Compass Agreement"), there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Avant! or Merger Sub is a party or by which either of them is bound obligating
Avant! or Merger Sub to issue, deliver, sell, repurchase or redeem, or cause to
be issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of Avant! or Merger Sub or obligating Avant! or Merger Sub to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. The shares of Avant! Common Stock to be issued pursuant to the Merger
will be duly authorized, validly issued, fully paid, and non-assessable, will
not be subject to any preemptive or other statutory right of stockholder, will
be issued in compliance with applicable U.S. Federal and State securities laws
and will be free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. Except for the
Registration Rights Agreement dated November 27, 1996, by and among Avant! and
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, on behalf of the shareholders and the holders of warrants of
FrontLine Design Automation, Inc., there are no contracts, commitments or
agreements relating to voting, registration,
15
purchase or sale of Avant!'s capital stock (i) between or among Avant! and any
of its stockholders or (ii) to the best of Avant!'s knowledge, between or among
any of Avant!'s stockholders.
3.3 AUTHORITY. Each of Avant! and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of Avant! and
Merger Sub, subject only to the approval of the issuance of shares of Avant!
Common Stock in the Merger by the stockholders of Avant!. This Agreement has
been duly executed and delivered by each of Avant! and Merger Sub and
constitutes the valid and binding obligations of each of Avant! and Merger Sub,
enforceable against each in accordance with its terms. The Boards of Directors
of Avant! and Merger Sub have unanimously approved this Agreement and the
transactions contemplated hereby. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under (i) any provision of the Certificate of Incorporation or Bylaws of Avant!
or any of its subsidiaries, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Avant! or any of its subsidiaries or their properties or assets,
except where such conflict, violation, default, termination, cancellation or
acceleration with respect to the foregoing provisions of (ii) would not have had
and would not reasonably be expected to have a Material Adverse Effect on
Avant!. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to Avant! or any of its subsidiaries in connection with the execution
and delivery of this Agreement by Avant! and Merger Sub or the consummation by
each of Avant! and Merger Sub of the transactions contemplated hereby, except
for (i) the filing of the Agreement of Merger as provided in Section 1.2, (ii)
the filing with the SEC and NASD of the Registration Statement, (iii) the filing
of a Form 8-K with the SEC and NASD within fifteen (15) days after the Closing
Date, (iv) any filings as may be required under applicable state securities laws
and the securities laws of any foreign country, (v) the filing with the Nasdaq
National Market of a Notification Form for Listing of Additional Shares, in each
case with respect to the shares of Avant! Common Stock issuable upon conversion
of the TMAI Common Stock in the Merger and upon exercise of the options,
subscriptions or other awards, as the case may be, under the TMAI Stock Plans
and the TMAI ESPP to be assumed by Avant!, (vi) filings required to be made by
each of Avant! and TMAI under the HSR Act (as defined in Section 5.21 below);
(vii) the filing of a registration statement on Form S-8 covering the Avant!
Common Stock issuable pursuant to outstanding options under the TMAI Stock Plans
and TMAI ESPP; and (viii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Avant! or would not prevent or materially alter or
delay any of the transactions contemplated by this Agreement.
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. Avant! has furnished to TMAI a
true and complete copy of each statement, report, registration statement (with
the prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement, and other filings filed with the SEC by Avant! since
June 6, 1995, and, prior to the Effective Time, Avant! will have furnished TMAI
with true and complete copies of any additional documents filed with the SEC by
Avant! prior to the Effective Time (collectively, the "Avant! SEC Documents").
In addition, Avant! has made available to TMAI all exhibits to the Avant! SEC
Documents filed prior to the date hereof, and will promptly make available to
TMAI all exhibits to any additional Avant! SEC Documents filed prior to the
Effective Time. All documents required to be filed as exhibits to the TMAI SEC
Documents have been so filed, and all material contracts so filed as exhibits
are in full force and effect, except those which have expired or have been
terminated in accordance with their terms, and neither Avant! nor any of its
subsidiaries is in material default thereunder. As of their respective filing
dates, or, with respect to registration statements as of their effective dates,
the Avant! SEC Documents complied in all material respects with the requirements
of the
16
Exchange Act and the Securities Act, and none of the Avant! SEC Documents
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 in which they were made, not misleading,
except to the extent corrected, superseded or modified by a subsequently filed
Avant! SEC Document. The financial statements of Avant!, including the notes
thereto, included in the Avant! SEC Documents (the "Avant! Financial
Statements") complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q
of the SEC). The Avant! Financial Statements fairly present the consolidated
financial condition and operating results of Avant! and its subsidiaries at the
dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). There has been
no change in Avant! accounting policies except as described in the notes to the
Avant! Financial Statements.
3.5 ABSENCE OF CERTAIN CHANGES. Except as set forth in the Avant! SEC
Documents, since June 30, 1997 (the "Avant! Balance Sheet Date"), Avant! has
conducted its business in the ordinary course consistent with past practice and
there has not occurred: (i) any change, event or condition (whether or not
covered by insurance) that has resulted in a Material Adverse Effect on Avant!;
(ii) any acquisition, sale or transfer of any material asset of Avant! or any of
its subsidiaries other than in the ordinary course of business and consistent
with past practice; (iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Avant! or any revaluation by Avant! of any of its assets; (iv) any declaration,
setting aside, or payment of a dividend or other distribution with respect to
the shares of Avant!, or any direct or indirect redemption, purchase or other
acquisition by Avant! of any of its shares of capital stock; (v) any material
contract entered into by Avant!, other than the Compass Agreement or in the
ordinary course of business and as provided to TMAI, or any material amendment
or termination of, or default under, any material contract to which Avant! is a
party or by which it is bound; (vi) any action by Avant! or, to Avant!'s
knowledge, any affiliate of Avant! which might reasonably be expected to
preclude the ability of Avant! to account for the business combination to be
effected by the Merger as a "pooling of interests" under generally accepted
accounting principles; or (vii) any negotiation or agreement by Avant! or any of
its subsidiaries to do any of the things described in the preceding clauses (i)
through (viii) (other than negotiations with TMAI and its representatives
regarding the transactions contemplated by this Agreement).
3.6 LITIGATION. There is no action, suit, proceeding, arbitration or
investigation pending or, to the knowledge of Avant!, threatened in writing
against Avant! that in any manner challenges or seeks to prevent, enjoin, alter
or delay any of the transactions contemplated hereby. Except as set forth in the
Avant! SEC Documents, Avant! is not aware of any other pending or threatened
action, suit, proceeding, investigation or claim, or any reasonable basis
therefor, that individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on Avant!. From the date of this Agreement until
the Effective Time, Avant! shall promptly advise TMAI of any such action, suit,
proceeding, claim, arbitration or investigation that is commenced, or, to the
knowledge of Avant!, threatened in writing against Avant! or any of its
subsidiaries. As of the date hereof, there is no judgment, decree or order
against Avant! or any of its subsidiaries, or, to the knowledge of Avant!, any
of their respective directors or officers (in their capacities as such), that
could prevent, enjoin, alter or materially delay any of the transactions by this
Agreement or that could reasonably be expected to have a Material Adverse Effect
on Avant!.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Avant! has no material obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the Balance Sheet
included in Avant!'s Quarterly Report on Form 10-Q for the period ended June 30,
1997
17
(the "Avant! Balance Sheet"); (ii) those incurred in the ordinary course of
business and not required to be set forth in the Avant! Balance Sheet under
generally accepted accounting principles; (iii) those incurred in the ordinary
course of business since the Avant! Balance Sheet Date and consistent with past
practice; and (iv) those incurred in connection with the execution of this
Agreement and the Compass Agreement and the transactions contemplated hereby or
thereby.
3.8 TAXES. Avant! and each of its subsidiaries, and each member of any
consolidated, combined or unitary group for Tax purposes of which Avant! or any
of its subsidiaries is or has been a member have timely filed all Tax Returns
required to be filed by them and have paid all Taxes shown thereon to be due.
The Avant! Financial Statements (i) fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through June 30, 1997 and
Avant! and each of its subsidiaries have not and will not incur any Tax
liability in excess of the amount reflected on the Avant! Financial Statements
with respect to such periods, and (ii) properly accrue in accordance with
generally accepted accounting principles all liabilities for Taxes payable after
June 30, 1997 with respect to all transactions and events occurring on or prior
to such date. No material Tax liability since June 30, 1997 has been incurred by
Avant! or its subsidiaries other than in the ordinary course of business and
adequate provision has been made in the Avant! Financial Statements for all
Taxes since that date in accordance with generally accepted accounting
principles on at least a quarterly basis. Avant! and each of its subsidiaries
have withheld and paid or will timely pay to the applicable financial
institution or Tax Authority all amounts required to be withheld. No notice of
deficiency or similar document of any Tax Authority has been received by either
Avant! or any of its subsidiaries, and there are no liabilities for Taxes with
respect to the issues that have been raised (and are currently pending) by any
Tax Authority that could, if determined adversely to Avant! and its
subsidiaries, materially and adversely affect the liability of Avant! and its
subsidiaries for Taxes. There (i) is no material claim for Taxes that is a lien
against the property of Avant! or any of its subsidiaries other than liens for
Taxes not yet due and payable, (ii) has been no notification received by Avant!
of any audit of any Tax Return of Avant! or any of its subsidiaries being
conducted, pending or threatened by a Tax Authority, (iii) is no extension or
waiver of the statute of limitations on the assessment of any Taxes granted by
Avant! or any of its subsidiaries that is currently in effect, and (iv) is no
agreement, contract or arrangement to which Avant! or any of its subsidiaries is
a party that may result in the payment of any material amount that would not be
deductible by reason of Sections 280G or 404 of the Code. Avant! 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. Neither
Avant! nor any of its subsidiaries is a party to any Tax sharing or Tax
allocation agreement nor does Avant! or any of its subsidiaries owe any amount
under any such agreement. Avant! and each of its subsidiaries are in full
compliance with all terms and conditions of any Tax exemptions or other
Tax-sharing agreement or order of a foreign government applicable to them and
the consummation of the Merger shall not have any adverse effect on the
continued validity and effectiveness of any such Tax exemptions or other
Tax-sharing agreement or order.
3.9 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The written
information supplied by Avant! and Merger Sub expressly for the purpose of
inclusion in the Registration Statement shall not, at the time the Registration
Statement (including any amendments or supplements thereto) is declared
effective by the SEC, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
written information supplied by Avant! expressly for the purpose of inclusion in
the Proxy Statement shall not, on the date the Proxy Statement is first mailed
to TMAI's shareholders, at the time of TMAI's Shareholders Meeting and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which it is made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for TMAI's Shareholders Meeting which has
become false or
18
misleading. If at any time prior to the Effective Time any event or information
should be discovered by Avant! or Merger Sub which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
Avant! or Merger Sub will promptly inform TMAI. Notwithstanding the foregoing,
Avant! and Merger Sub make no representation, warranty or covenant with respect
to any information supplied by TMAI which is contained in any of the foregoing
documents.
3.10 INTELLECTUAL PROPERTY. Avant! and/or its subsidiaries own, or
otherwise possess legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in source code and/or object code form), and tangible or
intangible proprietary information or material that are used in the business of
Avant! and its subsidiaries as currently conducted (including with respect to
products currently under development), except to the extent that the failure to
have such rights has not had a Material Adverse Effect on Avant! excluding the
results and expense as of the date of this Agreement of any litigation or other
court proceedings.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF TMAI. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, TMAI agrees (except to the extent expressly contemplated
by this Agreement or the Disclosure Schedules or as consented to in writing by
Avant!) to carry on its and its subsidiaries' business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted; to pay
and to cause its subsidiaries to pay debts and Taxes when due subject (i) to
good faith disputes over such debts or Taxes and (ii) in the case of Taxes of
TMAI or any of its subsidiaries, to Avant!'s consent to the filing of material
Tax Returns, if applicable; to pay or perform other obligations when due; to use
all reasonable efforts consistent with past practice and policies to preserve
intact its and its subsidiaries' present business organizations; to use its
reasonable best efforts consistent with past practice to keep available the
services of its and its subsidiaries' present officers and key employees; and to
use its commercially reasonable efforts consistent with past practice to
preserve its and its subsidiaries' relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it
or its subsidiaries, to the end that its and its subsidiaries' goodwill and
ongoing businesses shall be unimpaired at the Effective Time. TMAI agrees to
promptly notify Avant! of any event or occurrence not in the ordinary course of
its or its subsidiaries' business, and of any event which could have a Material
Adverse Effect. Without limiting the foregoing, except as expressly contemplated
by this Agreement, TMAI shall not take, or agree in writing or otherwise to
take, any action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect in any material respect or
prevent it from performing or cause it not to perform its covenants hereunder in
any material respect.
4.2 COVENANTS OF TMAI. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, except as expressly contemplated by this Agreement or the TMAI
Disclosure Schedule, TMAI shall not do, cause or permit any of the following, or
allow, cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of Avant!, which shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, Avant!'s
consent shall be deemed given if the matter is discussed in advance with ▇▇▇▇ ▇.
▇▇▇▇▇▇, and he has received any additional information requested and, after such
discussion and receipt of any additional requested information, he shall not
have objected to the taking of the proposed action.
19
(a) MATERIAL CONTRACTS. Enter into any material contract or commitment, or
violate, amend or otherwise modify or waive any of the material terms of any of
its material contracts, other than in the ordinary course of business consistent
with past practice;
(b) INTELLECTUAL PROPERTY. Transfer to any person or entity any rights to
its Intellectual Property other than in the ordinary course of business
consistent with past practice;
(c) EXCLUSIVE RIGHTS. Enter into or amend any agreements pursuant to which
any other party is granted exclusive marketing or other exclusive rights of any
type or scope with respect to any of its products or technology;
(d) INDEBTEDNESS. 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, other than in the ordinary course of business and
consistent with past practice, which in the aggregate do not exceed $100,000;
(e) LEASES. Enter into any operating lease in excess of an aggregate of
$100,000;
(f) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an amount in
excess of $100,000 in any one case or $250,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the TMAI Financial Statements;
(g) CAPITAL EXPENDITURES. Make any capital expenditures, capital additions
or capital improvements over $100,000 except in the ordinary course of business
and consistent with past practice;
(h) INSURANCE. Materially reduce the amount of any material insurance
coverage provided by existing insurance policies;
(i) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Adopt or amend any
employee benefit or stock purchase or option plan, accept any new or additional
subscriptions under the TMAI ESPP, or hire any officer level employee without
prior consultation with Avant!, pay any special bonus or special remuneration to
any employee or director, or increase the salaries or wage rates of its
employees, except in the ordinary course of business and consistent with past
practices or as previously disclosed to Avant!;
(j) SEVERANCE ARRANGEMENTS. Grant any severance or termination pay (i) to
any director or officer or (ii) to any other employee except (A) payments made
pursuant to standard written agreements outstanding on the date hereof or (B)
grants which are made in the ordinary course of business in accordance with its
standard past practice;
(k) CHARTER DOCUMENTS. Cause or permit any amendments to its Articles of
Incorporation or Bylaws or other similar organizational document;
(l) ISSUANCE OF SECURITIES. Issue, deliver or sell or authorize or propose
the issuance, delivery or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into, or subscriptions
(including subscription rights under the TMAI ESPP), 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 its Common Stock pursuant to the exercise of stock options,
warrants or other rights therefor permitted under this Agreement; provided,
however, that TMAI may, in the ordinary course of business consistent with past
practice, grant (A) options for the purchase of up to an aggregate of 40,000
shares of common stock under the TMAI Stock Plans to existing employees and (B)
options for the purchase of common stock under the TMAI Stock Plans to new
employees; provided, however, that TMAI may not grant an individual options to
purchase an aggregate of more than 10,000 shares of common stock pursuant to
this subsection (l) of Section 4.2.
(m) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any dividends on
or make any other distributions (whether in cash, stock or property) in respect
of any of its capital stock, or split, combine or
20
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its subsidiaries;
(n) STOCK OPTION PLANS, ETC. Accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under its stock
option agreements or stock plans or authorize cash payments in exchange for any
options or other rights granted under any of such agreements or plans, except as
disclosed in the TMAI Disclosure Schedule;
(o) POOLING. To the knowledge of TMAI, take any action, that would
interfere with Avant!'s ability to account for the Merger as a pooling of
interests;
(p) DISPOSITIONS. Sell, lease, license or otherwise dispose of or encumber
any of its properties or assets which are material, individually or in the
aggregate, to its and its subsidiaries' business, taken as a whole, except in
the ordinary course of business consistent with past practice;
(q) LAWSUITS. Commence a lawsuit other than (i) for the routine collection
of bills, (ii) in such cases where it in good faith determines that failure to
commence suit would result in the material impairment of a valuable aspect of
its business, provided that it consults with Avant! prior to the filing of such
a suit, or (iii) for a breach of this Agreement;
(r) ACQUISITIONS. 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 which are material, individually or in the aggregate, to its
and its subsidiaries' business, taken as a whole;
(s) TAXES. Other than as set forth in the TMAI Disclosure Schedule, or in
the ordinary course of business, make or change any material election in respect
of Taxes, except where such change or election would not have a Material Adverse
Effect on TMAI and its subsidiaries, taken as a whole, adopt or change any
accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any extension or waiver
of the limitation period applicable to any claim or assessment in respect of
Taxes;
(t) REVALUATION. Revalue in any material respect any of its assets,
including without limitation writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business; or
(u) OTHER. Take or agree in writing or otherwise to take, any of the
actions described in Sections 4.2(a) through (t) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
4.3 NOTICES. TMAI, with the assistance and advice of Avant!, shall give
all notices and other information required to be given to the employees of TMAI,
any collective bargaining unit representing any group of employees of TMAI, and
any applicable government authority under the WARN Act, the National Labor
Relations Act, the Code, COBRA, and other applicable law in connection with the
transactions provided for in this Agreement.
4.4 OTHER OFFERS. (a) TMAI and its subsidiaries and the officers,
directors, employees or other agents of TMAI and its subsidiaries will not,
directly or indirectly, (i) take any action to solicit, initiate or encourage
any Takeover Proposal (defined below) or (ii) engage in negotiations with, or
disclose any nonpublic information relating to TMAI or any of it subsidiaries
to, or afford access to the properties,
21
books or records of TMAI or any of its subsidiaries to, any person that has
advised TMAI that it may be considering making, or that has made, a Takeover
Proposal; provided, however, that nothing herein shall prohibit TMAI's Board of
Directors from taking and disclosing to TMAI's shareholders a position with
respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under
the Exchange Act. TMAI will promptly notify Avant! after receipt of any Takeover
Proposal or any notice that any person is considering making a Takeover Proposal
or any request for nonpublic information relating to TMAI or any of its
subsidiaries or for access to the properties, books or records of TMAI or any of
its subsidiaries by any person that has advised TMAI that it may be considering
making, or that has made, a Takeover Proposal and will keep Avant! fully
informed of the status and details of any such Takeover Proposal notice or
request. For purposes of this Agreement, "Takeover Proposal" means any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving TMAI or any of its subsidiaries or the acquisition of any
significant equity interest in, or a significant portion of the assets of, TMAI
or any of its subsidiaries, other than the transactions contemplated by this
Agreement.
(b) Notwithstanding the provisions of paragraph (a) above, prior to the
Effective Time, TMAI may, to the extent the Board of Directors of TMAI
determines, in good faith, based upon and consistent with advice received in
consultation with outside legal counsel, that the Board's fiduciary duties under
applicable law require it to do so, participate in discussions or negotiations
with, and, subject to the requirements of paragraph (c), below, furnish
information to any person, entity or group after such person, entity or group
has delivered to TMAI in writing, an unsolicited bona fide Acquisition Proposal
which the Board of Directors of TMAI in its good faith reasonable judgment
determines, based upon and consistent with advice received in consultation with
its independent legal and financial advisors, would result in a transaction more
favorable than the Merger to the shareholders of TMAI from a financial point of
view (a "TMAI Alternative Proposal"). In addition, notwithstanding the
provisions of paragraph (a) above, in connection with a possible Acquisition
Proposal, TMAI may refer any third party to this Section 4.4 or make a copy of
this Section 4.4 available to a third party. In the event TMAI receives a TMAI
Alternative Proposal, nothing contained in this Agreement (but subject to the
terms hereof) will prevent the Board of Directors of TMAI from recommending such
TMAI Alternative Proposal to its Shareholders, if the Board determines, in good
faith, based upon and consistent with advice received in consultation with
outside legal counsel, that such action is required by its fiduciary duties
under applicable law. In such case, the Board of Directors of TMAI may withdraw,
modify or refrain from making its recommendation set forth in Section 5.1, and,
to the extent it does so, TMAI may refrain from soliciting proxies to secure the
vote of its shareholders as may be required by Section 5.2(a); PROVIDED,
HOWEVER, that TMAI shall (i) provide at least 48 hours prior notice to Avant! of
any TMAI Board meeting at which it is reasonably expected to contemplate an
Alternative Proposal, and (ii) not recommend to its shareholders a TMAI
Alternative Proposal for a period of not less than five (5) business days after
Avant!'s receipt of a copy of such TMAI Alternative Proposal (or a description
of the significant terms and conditions thereof, if not in writing); and
PROVIDED, FURTHER, that nothing contained in this Section 4.4 shall limit TMAI's
obligation to hold and convene the TMAI Shareholders' Meeting (regardless of
whether the recommendation of the Board of Directors of TMAI shall have been
withdrawn, modified or not yet made) or to provide the TMAI shareholders with
material information relating to such a meeting.
(c) Notwithstanding anything to the contrary in this Section 4.4, TMAI will
not provide any non-public information to a third party unless: (i) TMAI
provides such non-public information pursuant to a nondisclosure agreement with
terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreement; (ii) such non-public
information has been previously delivered to Avant!; and (iii) TMAI advises
Avant! in writing of such disclosure, including the party to whom disclosed.
4.5 AVANT! OFFERS Avant! will not acquire or agree to acquire any direct
competitor of TMAI if such acquisition would have reasonable likelihood of
preventing or delaying the Merger.
22
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, TMAI and Avant! shall prepare
and file with the SEC preliminary proxy materials relating to the approval of
the Merger and the transactions contemplated hereby by the shareholders of TMAI
and Avant! and, as promptly as practicable following receipt of SEC comments
thereon, Avant! shall file with the SEC a Registration Statement on Form S-4 (or
such other or successor form as shall be appropriate), which complies in form
with applicable SEC requirements and shall use all reasonable efforts to cause
the Registration Statement to become effective as soon thereafter as
practicable; provided, however, that Avant! shall have no obligation to agree to
account for the Merger as a "purchase" in order to cause the Registration
Statement to become effective. Subject to the provisions of Section 4.4, the
Proxy Statement shall include the recommendation of the Board of Directors of
TMAI in favor of the Merger.
5.2 MEETING OF SHAREHOLDERS.
(a) TMAI shall promptly after the date hereof take all action necessary in
accordance with California Law and its Articles of Incorporation and Bylaws to
convene the TMAI Shareholders Meeting on or prior to November 30, 1997 or as
soon thereafter as is practicable and in any event on the date within forty (40)
days of the date on which the Registration Statement shall be declared effective
by the SEC, unless otherwise mutually agreed by the parties hereto. TMAI shall
consult with Avant! and use all reasonable efforts to hold the TMAI Shareholders
Meeting and shall not postpone or adjourn (other than for the absence of a
quorum) the TMAI Shareholders Meeting without the consent of Avant!. Subject to
the provisions of Section 5.1 above, TMAI shall use its reasonable best efforts
to solicit from shareholders of TMAI proxies in favor of the Merger and shall
take all other action necessary or advisable to secure the vote or consent of
shareholders required to effect the Merger.
(b) Avant! shall promptly after the date hereof take all action necessary in
accordance with Delaware Law and its Certificate of Incorporation and Bylaws to
convene the Avant! Stockholders Meeting on or prior to November 30, 1997 or as
soon thereafter as is practicable and in any event on the date within forty (40)
days of the date on which the Registration Statement shall be declared effective
by the SEC, unless otherwise mutually agreed by the parties hereto. Avant! shall
consult with TMAI and use all reasonable best efforts to hold the Avant!
Stockholders Meeting on the same day as the TMAI Shareholders Meeting and shall
not postpone or adjourn (other than for the absence of a quorum) the Avant!
Stockholders meeting without the consent of TMAI. Avant! shall use its best
efforts to solicit from stockholders of Avant! proxies in favor of the Merger
and shall take all other action necessary or advisable to secure the vote or
consent of stockholders to effect the Merger.
5.3 ACCESS TO INFORMATION.
(a) TMAI shall afford Avant! and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of TMAI's and its subsidiaries'
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of TMAI and its
subsidiaries as Avant! may reasonably request. TMAI agrees to provide to Avant!
and its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. Avant! shall afford TMAI and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (i) all of
Avant!'s and its subsidiaries' properties, books, contracts, commitments and
records, and (ii) all other information concerning the business, properties and
personnel of Avant! and its subsidiaries as TMAI may reasonably request. Avant!
agrees to provide to TMAI and its accountants, counsel and other representatives
copies of internal financial statements promptly upon request.
23
(b) Subject to compliance with applicable law governing the exchange of
information, from the date hereof until the Effective Time, each of Avant! and
TMAI shall confer on a regular and frequent basis with one or more
representatives of the other party to report material operational matters and
the general status of ongoing operations.
(c) No information or knowledge obtained in any investigation pursuant to
this Section 5.3 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
5.4 CONFIDENTIALITY. The parties acknowledge that Avant! and TMAI have
previously executed a non-disclosure agreement dated September 4, 1997 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms.
5.5 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement,
Avant! and TMAI shall consult with each other before issuing any press release
or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.6 CONSENTS; COOPERATION.
(a) Each of Avant! and TMAI shall promptly apply for or otherwise seek, and
use its reasonable best efforts to obtain, all consents and approvals required
to be obtained by it for the consummation of the Merger, and shall use its
reasonable best efforts to obtain all necessary consents, waivers and approvals
under any of its material contracts in connection with the Merger for the
assignment thereof or otherwise. Subject to compliance with applicable law
governing the exchange of information, the parties hereto will consult and
cooperate with one another, and consider in good faith the views of one another,
in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to any federal or state
antitrust or fair trade law.
(b) Each of Avant! and TMAI shall use all reasonable efforts to resolve such
objections, if any, as may be asserted by any Governmental Entity with respect
to the transactions contemplated by this Agreement under the ▇▇▇▇▇▇▇ Act, as
amended, the ▇▇▇▇▇▇▇ 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 any transaction contemplated by this Agreement as violative of any
Antitrust Law, each of Avant! and TMAI shall cooperate and use all 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 (each an "Order"),
that is in effect and that prohibits, prevents, or restricts consummation of the
Merger or any such other transactions, unless by mutual agreement Avant! and
TMAI decide that litigation is not in their respective best interests.
Notwithstanding the provisions of the immediately preceding sentence, it is
expressly understood and agreed that neither TMAI nor Avant! shall have any
obligation to litigate or contest any administrative or judicial action or
proceeding or any Order beyond January 31, 1998.
(c) Notwithstanding anything to the contrary in subsection (a) or (b) above,
(i) neither Avant! nor any of it subsidiaries 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 could reasonably be
expected to
24
have a Material Adverse Effect on Avant! or of Avant! combined with the
Surviving Corporation after the Effective Time or (ii) neither TMAI nor its
subsidiaries 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 could reasonably be expected to have a Material Adverse
Effect on TMAI.
5.7 POOLING ACCOUNTING. Avant! and TMAI shall each use its best efforts to
cause the business combination to be effected by the Merger to be accounted for
as a pooling of interests and to take such action as may be reasonably necessary
to permit such treatment. Each of Avant! and TMAI shall use its best efforts to
cause its "Affiliates" (as defined in Section 5.8) not to take any action that
would adversely affect the ability of Avant! to account for the business
combination to be effected by the Merger as a pooling of interest.
5.8 AFFILIATES AGREEMENTS.
(a) Section 5.8(a) of the TMAI Disclosure Schedule sets forth those persons
who may be deemed "Affiliates" of TMAI within the meaning of paragraphs (c) and
(d) of Rule 145 promulgated under the Securities Act ("Rule 145"). TMAI shall
provide Avant! such information and documents as Avant! shall reasonably request
for purposes of reviewing such list. TMAI shall use its best efforts to deliver
or cause to be delivered to Avant!, as soon as practicable following the
execution of this Agreement (and in each case prior to the Effective Time) from
each of the Affiliates of TMAI, an executed Affiliates Agreement in
substantially the form attached hereto as EXHIBIT A-1. Avant! shall be entitled
to place appropriate legends on the certificates evidencing any Avant! Common
Stock to be received by such Affiliates of TMAI 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
Agreements.
(b) Section 5.8(b) of the Avant! Disclosure Schedule sets forth each person
Avant! believes to be an "Affiliate" of Avant! within the meaning of paragraphs
(c) and (d) of Rule 145. Avant! will use its reasonable best efforts to deliver
or cause to be delivered to TMAI, as soon as practicable following the execution
of this Agreement (and in each case prior to the Effective Time) from each of
the Affiliates of Avant!, an executed Affiliates Agreement in substantially the
form attached hereto as EXHIBIT A-2.
5.9 FIRPTA. TMAI 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 reasonably satisfactory to
Avant!, which states that shares of capital stock of TMAI 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, TMAI shall provide to Avant!, as agent for TMAI, a form of notice to the
Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2), which shall be in form and substance
reasonably satisfactory to Avant!, along with written authorization for Avant!
to deliver such notice form to the Internal Revenue Service on behalf of TMAI
upon the Closing of the Merger.
5.10 CONTINUITY OF INTEREST CERTIFICATES. TMAI shall use its best efforts
to deliver or cause to be delivered to Avant!, as of the Effective Time, from
holders of the outstanding capital stock of TMAI specified on Section 5.10 of
the TMAI Disclosure Schedule executed Continuity of Interest Certificates in the
form attached hereto as EXHIBIT C.
5.11 LEGAL REQUIREMENTS. Each of Avant!, Merger Sub and TMAI will, and
will cause their respective subsidiaries to, take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval,
25
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.12 BLUE SKY LAWS. Avant! shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Avant! Common Stock in connection with the
Merger. TMAI shall use its reasonable best efforts to assist Avant! as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Avant! Common Stock in
connection with the Merger.
5.13 EMPLOYEE BENEFIT PLANS.
(a) On or before the Effective Time, TMAI shall cause all options
outstanding under the Directors Plan to terminate as provided in the Directors
Plan. At the Effective Time, the TMAI Stock Plans and each outstanding option to
purchase shares of TMAI Common Stock under the TMAI Stock Plans, whether vested
or unvested, will be assumed by Avant!. Section 5.13(a) of the TMAI Disclosure
Schedule sets forth a true and complete list as of the date hereof of all
holders of outstanding options under the TMAI Stock Plans, including the number
of shares of TMAI capital stock subject to each such option, the exercise or
vesting schedule, the exercise price per share and the grant and expiration
dates of each such option. On the Closing Date, TMAI shall deliver to Avant! an
updated Section 5.13(a) of the TMAI Disclosure Schedule current as of such date.
Each such option so assumed by Avant! under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in each of the
TMAI Stock Plans immediately prior to the Effective Time, except that (i) such
option will be exercisable for that number of whole shares of Avant! Common
Stock equal to the product of the number of shares of TMAI Common Stock that
were issuable upon exercise of such option immediately prior to the Effective
Time multiplied by the Exchange Ratio and rounded down to the nearest whole
number of shares of Avant! Common Stock, and (ii) the per share exercise price
for the shares of Avant! Common Stock issuable upon exercise of such assumed
option will be equal to the quotient determined by dividing the exercise price
per share of TMAI Common Stock at which such option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent. Consistent with the terms of the TMAI Stock Plans and the documents
governing the outstanding options under those plans and except as set forth in
the TMAI Disclosure Schedule, the Merger will not terminate or otherwise result
in the cash-out of any of the outstanding options under such plans or accelerate
the exercisability or vesting of such options or the shares of Avant! Common
Stock which will be subject to those options solely as a result of the
consummation of the Merger and Avant!'s assumption of the options in connection
therewith. Avant! shall take all necessary steps to ensure that the options so
assumed by Avant! qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent such options
qualified as incentive stock options prior to the Effective Time. Within ten
(10) business days after the Effective Time, Avant! will issue to each person
who, immediately prior to the Effective Time was a holder of an outstanding
option under any of the TMAI Stock Plans, a document in form and substance
reasonably satisfactory to TMAI evidencing the foregoing assumption of such
option by Avant!. Avant! will take all corporate and other action necessary to
reserve a sufficient number of shares of Avant! Common Stock for issuance upon
the exercise of the options assumed by Avant! pursuant to this subsection (a)
and upon the exercise of TMAI Purchase Rights pursuant to subsection (b) below.
(b) The TMAI ESPP and each outstanding subscription to purchase shares of
TMAI Common Stock thereunder (a "TMAI Purchase Right") shall be assumed by
Avant! at the Effective Time of the Merger. Section 5.13(b) of the TMAI
Disclosure Schedule sets forth a true and complete list as of the date hereof of
all holders of outstanding TMAI Purchase Rights, including the maximum number of
shares of TMAI Common Stock purchasable under each such right, the outstanding
balance in each TMAI ESPP participant's subscription account thereunder, the
fair market value per share of TMAI Common Stock on the date the TMAI Purchase
Right was granted, and the expiration date of such right. On the Closing Date,
TMAI shall deliver to Avant! an updated Section 5.13(b) of the TMAI Disclosure
Schedule current
26
as of such date. The TMAI Purchase Rights so assumed by Avant! shall continue to
be exercisable upon the same terms and conditions applicable to those rights
immediately prior to the Effective Time in accordance with the terms of the TMAI
ESPP, except that each such assumed TMAI Purchase Right will be exercisable for
shares of Avant! Common Stock and the purchase price payable per share of Avant!
Common Stock under the assumed right will be equal to eighty-five percent (85%)
of the lower of (i) the fair market value per share of the TMAI Common Stock on
the date the TMAI Purchase Right was granted, divided by the Exchange Ratio and
rounded up to the nearest whole cent, or (ii) the fair market value per share of
Avant! Common Stock on the date such right is exercised. Within ten (10)
business days after the Effective Time, Avant! will issue to each person who,
immediately prior to the Effective Time was a holder of an outstanding TMAI
Purchase Right, a document in form and substance reasonably satisfactory to TMAI
evidencing the foregoing assumption of such TMAI Purchase Right by Avant!. No
additional TMAI Purchase Rights shall be granted after the Effective Time, and
Avant! shall not be obligated to continue the TMAI ESPP after each TMAI Purchase
Right has been exercised.
(c) Avant! shall take such reasonable actions as are necessary to allow
eligible employees of TMAI 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 and vesting for each participant's period of service with TMAI. The
Surviving Corporation will not substitute any employee's health, life or
disability insurance coverage without first obtaining a waiver by the substitute
carrier of any preexisting condition that such employee may have.
(d) Avant! shall issue offer letters to ▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇-▇▇▇▇▇ ▇▇▇▇▇
substantially in the forms attached to the TMAI Disclosure Schedule as EXHIBIT
5.13(d).
(e) On or before the Effective Time, TMAI shall take all necessary actions
to terminate its 401(k) Plan.
5.14 FORM S-8. Avant! agrees to file, no later than ten (10) days after
the Closing, a registration statement on Form S-8 covering the shares of Avant!
Common Stock issuable pursuant to (i) outstanding options under the TMAI Stock
Plans assumed by Avant! and (ii) outstanding TMAI Purchase Rights under the TMAI
ESPP assumed by Avant!. TMAI shall cooperate with and assist Avant! in the
preparation of such registration statement.
5.15 INDEMNIFICATION.
(a) From and after the Effective Time and for a period ending six (6) years
after the Effective Time, Avant! and the Surviving Corporation jointly and
severally shall indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date of this Agreement or who becomes prior to
the Effective Time, an officer, director or employee of TMAI or any of its
subsidiaries (the "Indemnified Parties") in respect of acts or omissions
occurring on or prior to the Effective Time to the extent provided under TMAI's
Articles of Incorporation, Bylaws and indemnification agreements in effect on
the date hereof; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. Without limitation of
the foregoing, in the event any such Indemnified Party is or becomes involved in
any capacity in any action proceeding or investigation in connection with any
matter relating to this Agreement or the transactions contemplated hereby
occurring on or prior to the Effective Time, Avant! and the Surviving
Corporation shall jointly and severally pay as incurred such Indemnified Party's
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith by counsel reasonably acceptable
to such Indemnified Parties. The provisions of this Section 5.15 are intended to
be for the benefit of, and shall be enforceable by, each Indemnified Party, his
or her heirs and representatives.
27
(b) If Avant! or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving person of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any person or entity, then and in each such case, proper provision
shall be made so that such successors or assigns of Avant! or the Surviving
Corporation, as the case may be, shall assume the obligations set forth in this
Section 5.15.
(c) Avant! shall use good faith efforts to cause to be maintained in effect
for a period of not less than three (3) years subsequent to the Effective Time
the current policies of the directors' and officers' liability insurance
maintained by Avant! and shall use good faith efforts to cause coverage to be
provided to the former directors and officers of TMAI thereunder (provided that
Avant! may substitute therefor policies of at least the same coverage containing
terms and conditions that are not less advantageous to the former directors and
officers of TMAI) with respect to matters occurring prior to the Effective Time.
(d) All agreements in effect at the date hereof pursuant to which TMAI
covenants and agrees in any respect to indemnify or defend any director or
executive officer of TMAI from and against any liability, cost or expense
identified in Section 5.15 of the TMAI Disclosure Schedule are expressly assumed
by Avant! at the Effective Time.
(e) Promptly after the date hereof, Avant! shall enter into indemnification
agreements with directors and officers of TMAI who become directors or officers
of the Surviving Corporation, which agreements shall be substantially identical
to those which Avant! has entered into with its current directors and officers.
5.16 LISTING OF ADDITIONAL SHARES. Prior to the Effective Time, Avant!
shall file with the Nasdaq National Market a Notification Form for Listing of
Additional Shares with respect to the shares referred to in Section 6.1(f).
5.17 POOLING LETTERS.
(a) TMAI shall use all reasonable efforts to cause to be delivered to TMAI a
letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP dated the Effective Date to the effect that the
Merger will qualify for pooling of interests accounting treatment if consummated
in accordance with this Agreement. Such letter shall be in a form reasonably
satisfactory to Avant! and TMAI and shall be customary in scope and substance
for letters delivered by independent public accountants in connection with
transactions of this type.
(b) Avant! shall use all reasonable efforts to cause to be delivered to
Avant! a letter of KPMG Peat Marwick LLP ("KPMG") dated the Effective Date to
the effect that the Merger will qualify for pooling of interests accounting
treatment if consummated in accordance with this Agreement. Such letter shall be
in a form reasonably satisfactory to Avant! and TMAI and shall be customary in
scope and substance for letters delivered by independent public accountants in
connection with transactions of this type.
5.18 BEST EFFORTS AND FURTHER ASSURANCES. Subject to the respective rights
and obligations of TMAI and Avant! under this Agreement, each of the parties to
this Agreement shall use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Subject to the foregoing, each party hereto, at
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.19 NOTIFICATION OF CERTAIN MATTERS. TMAI shall give prompt notice to
Avant!, and Avant! shall give prompt notice to TMAI, of (i) the occurrence, or
non-occurrence, of any event, the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate at or prior to the Effective Time and (ii)
any failure of TMAI, Avant! or Merger Sub, as the case may be, to comply with or
satisfy any covenant, condition or agreement
28
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.19 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.20 SHAREHOLDER AGREEMENT. TMAI and the Shareholders shall enter into the
Shareholder Agreement at EXHIBIT B concurrent with the execution of this
Agreement.
5.21 HSR ACT FILINGS. If applicable, each of Avant! and TMAI shall
promptly make its respective filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and thereafter shall make
any required submissions under the HSR Act with respect to the Merger, and shall
cooperate with each other with respect to the foregoing. TMAI and Avant! shall
give each other prior notice and consult with each other prior to any meeting
with the United States Federal Trade Commission or Department of Justice with
respect to their respective filings under the HSR Act or any review by either of
the foregoing agencies. Each of Avant! and TMAI shall take all reasonable
actions necessary to cause the expiration of the waiting periods under the HSR
Act as promptly as possible. Neither party shall be required to take any action
pursuant to Articles IV or V that would cause a violation of the HSR Act.
5.22 SCHEDULES. From time to time prior to the Closing Date, each of
Avant! and TMAI will promptly supplement or amend the TMAI 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 TMAI or Avant! Disclosure
Schedules, as the case may be, or that is necessary to correct any information
in the TMAI or Avant! Disclosure Schedules, as the case may be, or in any
representation and warranty of each of Avant! and TMAI 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 TMAI 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 unless such changes reflect actions
taken in compliance with the provisions of Articles IV and V hereof.
5.23 MANAGEMENT OF TCAD DIVISION. At the Effective Date of the Merger, ▇▇▇
▇▇▇▇▇▇ will be appointed the head of Avant!'s TCAD division. As such, ▇▇. ▇▇▇▇▇▇
will have full responsibility and authority to make all personnel decisions
related to Avant!'s TCAD division, including, without limitation, all
compensation decisions.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, subsection (e) of which may be waived, in writing, by agreement of
all the parties hereto:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by (i) the holders of TMAI Common Stock representing a
majority of the total votes entitled to be cast on such matters at the TMAI
Shareholders Meeting at which a quorum is present in person or by proxy and
(ii) the holders of shares of Avant! Common Stock representing a majority of
the total votes cast on such matters at the Avant! Stockholders Meeting at
which a quorum is present in person or by proxy.
(b) REGISTRATION STATEMENT EFFECTIVE. The SEC shall have declared the
Registration Statement effective. No stop order suspending the effectiveness
of the Registration Statement or any part thereof
29
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Proxy Statement, shall have been initiated or
threatened by the SEC; and all requests for additional information on the
part of the SEC shall have been complied with to the reasonable satisfaction
of the parties hereto.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect;
nor shall there be any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal; and no temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint
provision limiting or restricting Avant!'s conduct or operation of the
business of TMAI and its subsidiaries following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending. In the event an injunction or other order shall have
been issued, each party agrees to use its reasonable diligent efforts to
have such injunction or other order lifted.
(d) GOVERNMENTAL APPROVAL. Avant!, TMAI and Merger Sub and their
respective subsidiaries shall have timely obtained from each Governmental
Entity all approvals, waivers, authorizations and consents, if any,
necessary for consummation of or in connection with the Merger and the
several transactions contemplated hereby, including such approvals, waivers,
authorizations and consents as may be required under the HSR Act, Securities
Act and under state Blue Sky laws.
(e) TAX OPINIONS. Avant! and TMAI shall have received substantially
identical written opinions of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP and Fenwick & West LLP, respectively, in form and substance
reasonably satisfactory to them, and dated on or about the Effective Date to
the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, and such opinions shall not have been
withdrawn. In rendering such opinions, counsel shall be entitled to rely
upon, among other things, reasonable assumptions as well as representations
of Avant!, Merger Sub and TMAI and certain shareholders of TMAI.
(f) LISTING OF ADDITIONAL SHARES. The filing with the Nasdaq National
Market of a Notification Form for Listing of Additional Shares with respect
to the shares of Avant! Common Stock issuable upon conversion of the TMAI
Common Stock in the Merger and upon exercise of the options under the TMAI
Stock Plans, and upon the exercise of TMAI Purchase Rights under the TMAI
ESPP, assumed by Avant! shall have been made.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TMAI. The obligations of TMAI
to consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, by TMAI:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The representations
and warranties of Avant! and Merger Sub in this Agreement shall be true and
correct in all material respects (other than representations and warranties
regarding litigation or other proceedings connected with the Merger, which
shall be governed solely by the standard set forth in Section 6.1(c) and
except for such representations and warranties that are qualified by their
terms by a reference to materiality which representations and warranties as
so qualified shall be true in all respects) on and as of the Effective Time
as though such representations and warranties were made on and as of such
time except for changes contemplated by this Agreement (except to the extent
such representations and warranties speak as of an earlier date) except, in
all such cases, where such breaches of such representations and warranties,
individually or in the aggregate, have not resulted in, nor reasonably would
be expected to result in liabilities aggregating in excess of $10,000,000 or
have not substantially impaired nor
30
reasonably would be expected to substantially impair, Avant!'s ability after
the Closing to continue to develop, produce, sell and distribute the
products and services that are material to Avant!'s business in a manner
that has resulted in or would reasonably be expected to result in a Material
Adverse Effect on Avant!, and (ii) Avant! and Merger Sub shall have
performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Effective Time.
(b) CERTIFICATE OF AVANT!. TMAI shall have been provided with a
certificate dated, the Effective Date, executed on behalf of Avant! by its
President and its Chief Financial Officer to the effect that, as of the
Effective Time, the condition provided for in subsection (a) above has been
satisfied.
(c) LEGAL OPINION. TMAI shall have received a legal opinion, dated the
Effective Date, from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, counsel to Avant! and Merger Sub, in form and substance
reasonably satisfactory to TMAI.
(d) NO MATERIAL ADVERSE CHANGES. There shall have been no material
adverse change in the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, operations or results
of operations (either actual since the date of this Agreement or as such
condition has been represented pursuant to Article III hereof) of Avant!
taken as a whole from the date hereof through the Closing Date; provided,
however, that any developments, changes or results arising out of or related
to the litigation and other court proceedings described in the Avant! SEC
Documents that do not otherwise result in a Material Adverse Effect on
Avant! shall not be considered for purposes of this Section 6.2(d).
(e) THIRD PARTY CONSENTS. TMAI shall have been furnished with evidence
satisfactory to it of the consent or approval of those persons whose consent
or approval shall be required in connection with the Merger under any
material contract of Avant! or any of its subsidiaries or otherwise.
(f) AFFILIATES AGREEMENT. Each of the Affiliates of Avant! identified
on Section 5.8(b) of the Avant! Disclosure Schedule shall have executed an
Affiliates Agreement in substantially the form attached hereto as EXHIBIT
A-2.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF AVANT! AND MERGER SUB. The
obligations of Avant! and Merger Sub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Avant!:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The representations
and warranties of TMAI in this Agreement shall be true and correct in all
material respects (other than representations and warranties regarding
litigation or other proceedings connected with the Merger, which shall be
governed solely by the standard set forth in Section 6.1(c) and except for
such representations and warranties that are qualified by their terms by a
reference to materiality, which representations and warranties as so
qualified shall be true in all respects) on and as of the Effective Time as
though such representations and warranties were made on and as of such time
except for changes contemplated by this Agreement except, in all such cases,
where such breaches of such representations and warranties, individually or
in the aggregate, have not resulted in, nor reasonably would be expected to
result in liabilities aggregating in excess of $2,000,000 or, have not
substantially impaired nor reasonably would be expected to substantially
impair, TMAI's ability after the Closing to continue to develop, produce,
sell and distribute the products and services that are material to TMAI's
business in a manner that has resulted in or would reasonably be expected to
result in a Material Adverse Effect on TMAI, and (ii) TMAI shall have
performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time.
31
(b) CERTIFICATE OF TMAI. Avant! shall have been provided with a
certificate, dated the Effective Date, executed on behalf of TMAI by its
President and its Chief Financial Officer to the effect that, as of the
Effective Time, the condition provided for in subsection (a) above has been
satisfied.
(c) LEGAL OPINION. Avant! shall have received a legal opinion, dated
the Effective Date, from Fenwick & West LLP, legal counsel to TMAI, in form
and substance reasonably satisfactory to Avant!.
(d) THIRD PARTY CONSENTS. Avant! shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the Merger
under any material contract of TMAI or any of its subsidiaries or otherwise.
(e) No Material Adverse Changes. There shall not have occurred any
material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of TMAI and its subsidiaries,
taken as a whole from the date hereof through the Closing Date.
(f) LETTERS FROM ACCOUNTANTS. Avant! shall have received the letter
referred to in Section 5.17(b) from KPMG.
(g) AFFILIATE AGREEMENTS. Avant! shall have received from each of the
Affiliates of TMAI identified on Section 5.8(a) of the TMAI Disclosure
Schedule an executed Affiliate Agreement in substantially the form attached
hereto as EXHIBIT A-1.
(h) DISSENTING SHARES. Dissenting Shares shall consist of no more ten
(10) percent (10%) of the then outstanding shares of TMAI Capital Stock.
(i) CONTINUITY OF INTEREST CERTIFICATES. Avant! shall have received a
sufficient number of executed Continuity of Interest Certificates, in the
form attached hereto as EXHIBIT C, such that counsel to Avant! shall have
concluded that the Continuity of Interest requirement shall be satisfied for
purposes of issuing the tax opinion pursuant to Section 6.1(e) of this
Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. At any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
shareholders of TMAI, this Agreement may be terminated:
(a) by mutual consent of Avant! and TMAI;
(b) by either Avant! or TMAI, if the Effective Date shall not have
occurred on or before January 31, 1998; PROVIDED that the right to terminate
this Agreement pursuant to this paragraph (b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been
a significant cause of, or resulted in, the failure of the Effective Date to
occur on or before such date;
(c) by Avant!, if (i) TMAI shall breach any of its representations,
warranties or obligations hereunder, which breach would result in a material
adverse change in the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, operations or results
of operations of TMAI and its subsidiaries, taken as a whole, and such
breach shall not have been cured within ten (10) business days following
receipt by TMAI of written notice of such breach, (ii) (x) there shall have
occurred any material adverse change in the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations, results of operations or prospects of TMAI and its
subsidiaries, taken as a whole, and (y) TMAI shall not, within twenty (20)
business days of notice from Avant! to the effect that Avant! intends to
terminate this Agreement pursuant to
32
this clause (ii), have proposed to Avant! a plan to mitigate the effect of
such material adverse change which plan shall be reasonably acceptable to
Avant!, or (iii) the Board of Directors of TMAI shall have withdrawn or
modified its recommendation of this Agreement or the Merger in a manner
adverse to Avant! or shall have resolved to do any of the foregoing;
(d) by TMAI, if (i) Avant! shall breach any of its representations,
warranties or obligations hereunder, which breach would result in a material
adverse change in the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, operations or results
of operations of Avant! and its subsidiaries, taken as a whole, and such
breach shall not have been cured within ten (10) business days following
receipt by Avant! of written notice of such breach, (ii) (x) there shall
have occurred any material adverse change in the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations, results of operations or prospects of Avant! and its
subsidiaries, taken as a whole, and (y) Avant! shall not, within twenty (20)
business days of notice from TMAI to the effect that TMAI intends to
terminate this Agreement pursuant to this clause (ii), have proposed to TMAI
a plan to mitigate the effect of such material adverse change which plan
shall be reasonably acceptable to TMAI, or (iii) the Board of Directors of
Avant! shall have withdrawn or modified its recommendation of this Agreement
or the Merger in a manner adverse to TMAI or shall have resolved to do any
of the foregoing; or
(e) by either Avant! or TMAI, if (i) any permanent injunction or other
order of a court or other competent authority preventing the consummation of
the Merger shall have become final and nonappealable or (ii) at the TMAI
Shareholders Meeting (including any adjournment or postponement thereof) the
requisite vote of shareholders of TMAI shall not have been obtained, or
(iii) at the Avant! Stockholders Meeting (including any adjournment or
postponement thereof) the requisite vote of stockholders of Avant! shall not
have been obtained.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Avant!, Merger Sub or TMAI or
their respective officers, directors, stockholders or affiliates, except to the
extent that such termination results from the breach by a party hereto of any of
its representations, warranties or covenants set forth in this Agreement;
PROVIDED that the provisions of Section 5.4 (Confidentiality), Section 7.3
(Expenses and Termination Fees) and this Section 7.2 and the Confidentiality
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
7.3 EXPENSES AND TERMINATION FEES.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense, except that, in the event the Merger shall not be consummated for any
reason or if this Agreement shall be terminated for any reason other than
pursuant to Section 7.1(d), expenses incurred in connection with printing the
Proxy Materials and the Registration Statement, registration and filing fees
incurred in connection with the Registration Statement and the Proxy Materials
in connection with the Merger shall be shared equally by TMAI and Avant!.
(b) In the event that (i) either Avant! or TMAI shall terminate this
Agreement pursuant to Section 7.1(e)(ii) following a failure of the shareholders
of TMAI to approve this Agreement and, prior to the time of the meeting of
TMAI's shareholders, there shall have been (A) a Trigger Event with respect to
TMAI that TMAI's Board of Directors has not recommended that its shareholders
reject or (B) a Takeover Proposal with respect to TMAI which at the time of the
meeting of TMAI's shareholders shall not have been rejected by TMAI and
withdrawn by the third party, or (ii) Avant! shall terminate this Agreement
pursuant to Section 7.1(c), due in whole or in part to any failure by TMAI to
use its reasonable best efforts to perform and comply with all agreements and
conditions required by this Agreement to be performed or complied with by TMAI
prior to or on the Closing Date or any failure by TMAI's affiliates to take any
33
actions required to be taken hereby, (and if TMAI is not entitled to terminate
this Agreement by reason of Section 7.1(d)), and prior thereto there shall have
been (A) a Trigger Event with respect to TMAI or (B) a Takeover Proposal with
respect to TMAI which shall not have been rejected by TMAI and withdrawn by the
third party, then TMAI shall promptly pay to Avant! the sum of $5,250,000;
provided, however, that with respect to Section 7.3(b)(i)(A) and Section
7.3(b)(ii)(A), a Trigger Event shall not be deemed to include the acquisition by
any Person of securities representing 10% or more of TMAI if such Person has
acquired such securities not with the purpose nor with the effect of changing or
influencing the control of TMAI, nor in connection with or as a participant in
any transaction having such purpose or effect, including without limitation (i)
making any public announcement with respect to the voting of such shares at any
meeting to consider any merger, consolidation, sale of substantial assets or
other business combination or extraordinary transaction involving TMAI, (ii)
making, or in any way participating in, any "solicitation" of "proxies" (as such
terms are defined or used in Regulation 14A under the Exchange Act) to vote any
voting securities of TMAI (including, without limitation, any such solicitation
subject to Rule 14a-11 under the Exchange Act) or seeking to advise or influence
any Person with respect to the voting of any voting securities of TMAI, (iii)
forming, joining or in any way participating in any "group" within the meaning
of Section 13(d)(3) of the Exchange Act with respect to any voting securities of
TMAI or (iv) otherwise acting, alone or in concert with others, to seek control
of TMAI or to seek to control or influence the management or policies of TMAI.
As used herein, a "Trigger Event" shall occur if any Person commences a tender
or exchange offer following the successful consummation of which the offeror and
its affiliate would beneficially own securities representing 25% or more, of the
voting power of TMAI.
(c) If this Agreement is terminated by TMAI pursuant to any subsection of
Section 7.1(d) hereof, due in whole or in part to any failure by Avant! to use
its reasonable best efforts to perform and comply with all agreements and
conditions required by this Agreement to be performed or complied with by Avant!
prior to or on the Closing Date or any failure by Avant!'s affiliates to take
any actions required to be taken hereby (and Avant! is not entitled to terminate
this Agreement by reason of Section 7.1(c) hereof), then, Avant! shall promptly
pay to TMAI a termination fee of $5,250,000.
7.4 AMENDMENT. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of this Agreement by the stockholders of
TMAI, Avant! or Merger Sub shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the TMAI Common Stock, (ii) alter
or change any term of the Articles of Incorporation of the Surviving Corporation
to be effected by the Merger, or (iii) alter or change any of the terms and
conditions of this Agreement if such alteration or change would adversely affect
the holders of TMAI Common Stock or Avant! Common Stock.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL. The representations, warranties and agreements set forth in
this Agreement shall terminate at the Effective Time, except that the agreements
set forth in Article I, Section 5.4 (Confidentiality) 5.7 (Pooling Accounting),
5.8 (Affiliates Agreements), 5.13 (Employee Benefit Plans), 5.14 (Form
34
S-8), 5.15 (Indemnification), 5.16 (Listing of Additional Shares), 5.18 (Best
Efforts and Further Assurances), 7.3 (Expenses and Termination Fees), 7.4
(Amendment), and this Article VIII shall survive the Effective Time.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Avant! or Merger Sub, to:
Avant! Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to TMAI, to:
Technology Modeling Associates, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
8.3 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to September 7, 1997. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
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8.4 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 parties, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the TMAI Disclosure Schedule and the Avant! Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Sections
1.6(a)-(d) and (g), 1.7-1.9, 5.13, 5.14, 5.15 and 5.16; and (c) shall not be
assigned by operation of law or otherwise except as otherwise specifically
provided.
8.6 SEVERABILITY. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 REMEDIES CUMULATIVE. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California (without regard to its
principles of conflicts of law).
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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IN WITNESS WHEREOF, Avant!, TMAI and Merger Sub have caused this Agreement
to be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
AVANT! CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
CARDINAL MERGER CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇
PRESIDENT
TECHNOLOGY MODELING ASSOCIATES, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
Chairman of the Board, Chief Executive
Officer and President
37
