Exhibit 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 30, 1998
AMONG
SUMMIT DESIGN INC.,
PROSOFT OY,
AND
SHAREHOLDERS OF PROSOFT OY
CONTENTS
SECTION 1. SALE AND PURCHASE OF SECURITIES . . . . . . . . . . . . 1
1.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Consideration . . . . . . . . . . . . . . . . . . . . . 1
1.3 Mechanics of Share Exchange . . . . . . . . . . . . . . 2
1.4 Restricted Stock. . . . . . . . . . . . . . . . . . . . 2
1.5 Release . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE COMPANY
SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . 3
2.1 Organization and Qualification. . . . . . . . . . . . . 3
2.2 Articles of Incorporation and Bylaws. . . . . . . . . . 4
2.3 Capitalization. . . . . . . . . . . . . . . . . . . . . 4
2.4 Authority Relative to this Agreement. . . . . . . . . . 5
2.5 No Conflict, Required Filings and Consents. . . . . . . 5
2.6 Compliance, Permits . . . . . . . . . . . . . . . . . . 7
2.7 Company Financial Statements. . . . . . . . . . . . . . 7
2.8 Absence of Certain Changes or Events. . . . . . . . . . 8
2.9 No Undisclosed Liabilities. . . . . . . . . . . . . . . 8
2.10 Absence of Litigation . . . . . . . . . . . . . . . . . 9
2.11 Employee Benefit Plans. . . . . . . . . . . . . . . . . 9
2.12 Labor Matters . . . . . . . . . . . . . . . . . . . . . 9
2.13 Restrictions on Business Activities . . . . . . . . . . 10
2.14 Title to Property . . . . . . . . . . . . . . . . . . . 10
PAGE i
2.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.16 Environmental Matters . . . . . . . . . . . . . . . . . 12
2.17 Brokers . . . . . . . . . . . . . . . . . . . . . . . . 12
2.18 Full Disclosure . . . . . . . . . . . . . . . . . . . . 12
2.19 Intellectual Property . . . . . . . . . . . . . . . . . 13
2.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . 14
2.21 Bank Accounts . . . . . . . . . . . . . . . . . . . . . 14
2.22 Pooling Representation. . . . . . . . . . . . . . . . . 14
SECTION 3. REPRESENTATIONS AND WARRANTIES OF
ACQUIROR. . . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Organization and Qualification. . . . . . . . . . . . . 15
3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . 15
3.3 Authority Relative to this Agreement. . . . . . . . . . 16
3.4 No Conflict, Required Filings and Consents. . . . . . . 16
3.5 SEC Filings; Financial Statements . . . . . . . . . . . 17
3.6 Representations, Warranties and Covenants Concerning
Rule 144. . . . . . . . . . . . . . . . . . . . . . . . 17
3.6.1 Selling Under Rule 144. . . . . . . . . . . . 17
3.6.2 Rule 144 Reporting and Other Covenants. . . . 18
3.7 Finnish Transfer Tax. . . . . . . . . . . . . . . . . . 18
3.8 Full Disclosure . . . . . . . . . . . . . . . . . . . . 19
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
COMPANY SHAREHOLDERS. . . . . . . . . . . . . . . . . . 19
4.1 Authority . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 No Conflict . . . . . . . . . . . . . . . . . . . . . . 19
PAGE ii
4.3 Brokers and Finders . . . . . . . . . . . . . . . . . . 19
4.4 Ownership . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Investor Suitability. . . . . . . . . . . . . . . . . . 20
4.6 Pooling Representation. . . . . . . . . . . . . . . . . 21
4.7 Ownership and Assignment of Intellectual Property . . . 21
SECTION 5. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . 21
5.1 Conditions to Obligation of Each Party to Effect the
Closing . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Additional Conditions to Obligations of Acquiror. . . . 22
SECTION 6. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 22
6.1 Survival of Representations, Warranties and Covenants . 22
6.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Damage Threshold . . . . . . . . . . . . . . . . . . . 23
6.4 Maximum Liability . . . . . . . . . . . . . . . . . . . 24
6.5 Payment of Damages. . . . . . . . . . . . . . . . . . . 24
6.6 Claims For Indemnification. . . . . . . . . . . . . . . 24
6.7 Objections to Claims. . . . . . . . . . . . . . . . . . 25
6.8 Resolution of Conflicts; Arbitration. . . . . . . . . . 25
6.9 Third-Party Claims. . . . . . . . . . . . . . . . . . . 26
SECTION 7. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . 26
7.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2 Interpretation. . . . . . . . . . . . . . . . . . . . . 28
7.3 Severability. . . . . . . . . . . . . . . . . . . . . . 29
7.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . 29
PAGE iii
7.5 Assignment. . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Parties in Interest . . . . . . . . . . . . . . . . . . 29
7.7 Governing Law . . . . . . . . . . . . . . . . . . . . . 30
7.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . 30
7.9 Fees and Expenses . . . . . . . . . . . . . . . . . . . 30
7.10 Amendment . . . . . . . . . . . . . . . . . . . . . . . 30
7.11 Further Assurances. . . . . . . . . . . . . . . . . . . 30
PAGE iv
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is made and entered
into as of June 30, 1998 among SUMMIT DESIGN INC., a Delaware corporation
("Acquiror"), PROSOFT OY, a corporation organized under the laws of Finland
(Prosoft Oy and its subsidiaries will be referred to collectively as the
"Company") and ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (individually
each a "Company Shareholder" and collectively the "Company Shareholders").
RECITALS:
A. The Company Shareholders hold 100% of the outstanding common stock
of the Company ("Company Common Stock").
B. Jukka-Pekka Ikaheimonen, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Janne-Petteri ▇▇▇▇▇▇▇▇, and Simo Piiroinen hold options to purchase Company
Common Stock, and are simultaneously entering into an option exchange
agreement (the "Option Exchange Agreement") pursuant to which Acquiror will
acquire their options in exchange for options to purchase common stock of
Acquiror ("Acquiror Common Stock").
C. Acquiror wishes to acquire all of the outstanding Company Common
Stock, upon the terms and subject to the conditions set forth in this
Agreement, through a transaction in which Company Common Stock will be
exchanged for Acquiror Common Stock.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Acquiror and the Company hereby agree as follows:
SECTION 1. SALE AND PURCHASE OF SECURITIES
1.1 CLOSING
The closing of the Stock Purchase (the "Closing") will take place at
10:00 a.m., P.D.T. on June 30, 1998 (the "Closing Date" or "Effective Time"),
at the offices of ▇▇▇▇▇▇▇ Coie LLP, ▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇.
1.2 CONSIDERATION
At the Closing, Acquiror will purchase all of the outstanding Company
Common Stock from the Company Shareholders in exchange for the number of shares
PAGE 1
of Acquiror Common Stock set forth next to each such Company Shareholder's
name in Exhibit A, hereto, which in the aggregate shall be 225,386 shares of
fully paid and nonassessable Acquiror Common Stock and will exchange options
to purchase 22,948 shares of Acquiror Common Stock for options to purchase
168 shares of Company Common Stock pursuant to the Option Exchange Agreement.
1.3 MECHANICS OF SHARE EXCHANGE
At the Closing, the Company shall deliver to Acquiror a copy, certified
by the President of the Company, of the stock ledger of the Company
evidencing the transfer of all of the Company Common Stock from the Company
Shareholders to the Acquiror. At Closing, Acquiror shall deliver to the
Company a copy of a letter to Acquiror's transfer agent containing
irrevocable instructions to deliver to each Company Shareholder a certificate
issued in the name of such Company Shareholder representing the number of
shares of Acquiror Common Stock set forth next to each such Company
Shareholder's name in Exhibit A, hereto.
1.4 RESTRICTED STOCK
Each Company Shareholder acknowledges that each certificate evidencing
the shares of Acquiror Common Stock delivered pursuant to Section 1.3 shall
be conspicuously stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE LAW, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED
OR HYPOTHECATED UNLESS AND UNTIL (1) SUCH OFFERING AND SALE OR OTHER TRANSFER
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, OR (2) THE HOLDER HEREOF
PROVIDES THE CORPORATION WITH (A) A WRITTEN OPINION OF LEGAL COUNSEL, WHICH
COUNSEL AND OPINION (IN FORM AND SUBSTANCE) SHALL BE REASONABLY SATISFACTORY
TO THE CORPORATION, TO THE EFFECT THAT THE PROPOSED TRANSFER OF SUCH SECURITY
MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT, OR (B) SUCH
OTHER EVIDENCE AS MAY BE REASONABLY SATISFACTORY TO THE CORPORATION THAT THE
PROPOSED TRANSFER OF THIS SECURITY MAY BE EFFECTED WITHOUT REGISTRATION UNDER
THE SECURITIES ACT.
PAGE 2
1.5 RELEASE
At the Effective Time, each Company Shareholder hereby releases the
Company and each of the other Company Shareholders, and the Company hereby
releases each Company Shareholder from all agreements, commitments,
indebtedness, obligations and claims then existing or which, to the extent
arising from or in connection with any act, omission or state of facts taken
or existing on or prior to the Closing, may exist after the Closing, except
to the extent such agreements, commitments, indebtedness, obligations and
claims arise under this Agreement, the Option Exchange Agreement, or the
Employment Agreements referenced in Section 5.2(b). Each of the Company
Shareholders and the Company shall not assert in any manner (including, but
not limited to, by way of defense, offset or counterclaim) any matter
purported to be released by the preceding sentence.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE COMPANY SHAREHOLDERS
The Company and each of the Company Shareholders hereby represents and
warrants to Acquiror that, except as set forth in the Disclosure Schedule
(the "Company Disclosure Schedule") that the statements contained in this
Section 2 are true and correct in all material respects. Each exception set
forth in the Company Disclosure Schedule shall be specific to the identified
section and paragraphs to which such exception relates.
2.1 ORGANIZATION AND QUALIFICATION
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Approvals") necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
Approvals would not, individually or in the aggregate, have a Material
Adverse Effect (as defined below). The Company is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated
by it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and
in good standing that would not, either individually or in the aggregate,
have a Material Adverse Effect. When used in connection with the Company, the
term "Material Adverse Effect" means any change or effect that is or is
reasonably likely to be materially adverse to the business, assets
PAGE 3
(including intangible assets), financial condition, results of operations, or
prospects of the Company. The Company has no subsidiaries and the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
2.2 ARTICLES OF INCORPORATION AND BYLAWS
The Company has heretofore furnished to Acquiror a complete and correct
copy of its Articles of Incorporation, Bylaws, or other equivalent
organizational documents, as amended to date. Such Articles of
Incorporation, Bylaws or equivalent organizational documents are in full
force and effect. The Company is not in violation of any of the provisions
of its Articles of Incorporation or Bylaws or equivalent organizational
documents.
2.3 CAPITALIZATION
The authorized capital stock of the Company consists of 4,000 shares of
Company Common Stock. As of the close of business on the date of this
Agreement, 1,650 shares of Company Common Stock were issued and outstanding,
and 168 shares of Company Common Stock were reserved for future issuance
pursuant to an option agreement among the Company and its employees, dated
December 18, 1997. Any issuance of shares or options in excess of the number
of shares or options authorized for issuance did not violate the rights of,
or create any claims or cause of action on the part of any person. A list of
all security holders of the Company setting forth the number of shares of
Company Common Stock held, as well as all options to purchase such shares, is
included in the Company Disclosure Schedule (with respect to options, the
disclosure includes the date of grant, the extent of vesting, the vesting
schedule, and the exercise price). All outstanding shares of the Company
Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights or rights of first
refusal created by statute, the Articles of Incorporation or Bylaws or
equivalent organizational documents of the Company, or any agreement to which
the Company is bound, except for a redemption clause in the Company's
Articles of Association, which the Company and the Company Shareholders
hereby waive. All outstanding shares of Company Common Stock were issued in
compliance with all applicable securities laws. Except as set forth in this
Section 2.3, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or
unissued capital stock of the Company or obligating the Company to issue or
sell any shares of capital stock of, or other equity interests in, the
Company. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
PAGE 4
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of the Company to repurchase, redeem or otherwise
acquire any shares of Company Common Stock or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other entity.
2.4 AUTHORITY RELATIVE TO THIS AGREEMENT
The Company has all necessary corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement when duly and validly executed
and delivered by the Company will constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as that enforceability may be limited by the effect of
bankruptcy or other similar laws relating to the rights of creditors
generally.
2.5 NO CONFLICT, REQUIRED FILINGS AND CONSENTS
(a) Section 2.5(a) of the Company Disclosure Schedule includes a list
of all written and oral supply, customer and distributor agreements and all
other agreements involving the payment or receipt of $25,000 (the "Material
Contracts") of the Company. All of the Material Contracts are valid,
binding, in full force and effect, and enforceable by the Company in
accordance with their respective terms. To the knowledge of the Company, no
party to any such Material Contract intends to cancel, withdraw, modify or
amend such contract, agreement or arrangement. Each Material Contract shall,
upon consummation of the transactions contemplated by this Agreement,
continue in full force and effect without penalty or other adverse
consequence. Other than the Material Contracts, the Company has no
contracts, agreements, or commitments, whether oral or in writing, to which
it is a party or by which it or any of its properties is subject to or bound
in the following categories:
(i) distributor, broker, dealer, independent sales
representative, manufacturer's representative, agency, sales promotion,
market research, marketing consulting, and advertising contracts or
agreements;
(ii) licenses and sublicenses, whether as licensor or licensee
(other than for non-customized, commercial computer software used in the
ordinary operation of its business);
PAGE 5
(iii) contracts or commitments with officers, employees, agents,
consultants, independent contractors, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable by the
Company upon 30 days or less notice without liability, penalty or premium;
(iv) currently effective collective bargaining or union
agreements, contracts or commitments;
(v) agreements or commitments that restrict the Company from
competing with any person or from carrying on its business anywhere in the
world;
(vi) agreements or commitments to guarantee any obligations of
other persons;
(vii) agreements or commitments to borrow or lend, including
without limitation loans, notes, advances, line of credit, standby financing,
revolving credit or other similar financing arrangement of any sort;
(viii) agreements or commitments for the purchase of inventory,
spare parts, or other personal property with any supplier or for the
furnishing of services to the Company that is reasonably likely to require
payments in excess of $50,000 during the calendar year ending December 31,
1998 and that cannot be canceled by the Company upon 30 days or less notice
without liability, penalty or premium;
(ix) contracts and agreements with any governmental authority;
(x) indemnification agreements or commitments; and
(xii) contracts, commitments or agreements for the sale,
transfer, or encumbrance of any Company assets.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company shall not, (i) conflict
with or violate the Articles of Incorporation or Bylaws or equivalent
organizational documents of the Company, (ii) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
by which any of its properties is bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair the Company's rights or
alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the material
properties or assets of the Company pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which
PAGE 6
the Company is a party or by which the Company or its properties is bound or
affected, except for any such breaches, defaults or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except
where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of this Agreement, or otherwise prevent the Company from
performing its obligations under this Agreement, and would not have a
Material Adverse Effect.
2.6 COMPLIANCE, PERMITS
(a) The Company is not in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or by which
its properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the
Company or its properties is bound or affected, except for any such
conflicts, defaults or violations which would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) The Company holds all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities which are material to the
operation of the business of the Company (collectively, the "Company
Permits"). The Company is in compliance with the terms of the Company
Permits, except where the failure to so comply would not have a Material
Adverse Effect.
2.7 COMPANY FINANCIAL STATEMENTS
The Company has delivered to Acquiror its audited financial statements
for each of the fiscal years ended December 31, 1996 and 1997, respectively
(the "Annual Financial Statements"), and, its unaudited interim financial
statements (including an income statement, balance sheet and statement of
cash flows), at and for the four months ended April 30, 1998 (the "April
Financial Statements" and, collectively with the Annual Financial Statements,
the "Company Financial Statements"). The Company Financial Statements have
been prepared in accordance with generally accepted accounting principles in
Finland, including without limitation, Finnish laws on accounting, the
Companies Act and the Act on Auditors ("Finland GAAP") applied on a
consistent basis throughout the periods indicated and with each other. The
Company Financial Statements present fairly, in all material respects, the
financial
PAGE 7
position of the Company as of the respective dates thereof and the results of
its operations and cash flows for the periods indicated, subject, in the case
of the April Financial Statements, to normal year-end audit adjustments.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS
Since December 31, 1997, the Company has conducted its business only in
the ordinary course and in a manner consistent with past practice and, since
such date, there has not been (i) any change in the financial condition,
results of operations or business of the Company having a Material Adverse
Effect or any development that could reasonably be expected to have a
Material Adverse Effect, other than as disclosed in the Company Financial
Statements, (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Company having a Material
Adverse Effect, (iii) any change by the Company in its accounting methods,
principles or practices, (iv) any revaluation by the Company of any of its
assets, including, without limitation, writing down the value of capitalized
software or inventory or writing off notes or accounts receivable other than
in the ordinary course of business; (v) any grant or agreement to grant any
increase in the compensation payable or to become payable by the Company to
its officers or employees; (vi) any declaration or payment of any dividend or
other distribution on or in respect of the Company Common Stock or any
declaration or any direct or indirect redemption, retirement, purchase or
other acquisition of the Company Common Stock; (vii) any issuance of any
shares of capital stock of the Company or any warrants, rights, options or
other commitments relating to the shares of the Company; (viii) any sale,
lease, abandonment or other disposal of any real property or other assets,
other than sales of inventory in the ordinary course of business; or (ix) any
sale, assignment, transfer, license or other disposal of any patent,
trademark, trade name, brand name, copyright (including pending applications
for any patent, trademark, or copyright), invention, work of authorship,
process, know-how, formula, or trade secret or interest thereunder of other
intangible asset, except for such standard licenses the Company ordinarily
grants in conjunction with the distribution of its products to its customers.
2.9 NO UNDISCLOSED LIABILITIES
The Company has no liabilities (absolute, accrued, contingent or
otherwise) which are, in the aggregate, material to the business, operations
or financial condition of the Company, except liabilities (a) adequately
provided for in the April 30, 1998 balance sheet, (b) incurred in the
ordinary course of business and not required under Finland GAAP to be
reflected on the April 30, 1998 balance sheet, or (c) incurred since April
30, 1998 in the ordinary course of business and consistent with past
practice, and liabilities incurred in connection with this Agreement.
PAGE 8
2.10 ABSENCE OF LITIGATION
There are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of the Company, threatened against the Company,
or any properties or rights of the Company before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
2.11 EMPLOYEE BENEFIT PLANS
(a) The Company has no "Employee Plans" defined as employee benefit
plans or bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance or other similar fringe or
employee benefit plans, programs or arrangements, or any current or former
employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of the Company
other than those provided by mandatory laws in Finland.
(b) (i) All Employee Plans, including for purposes of this Section
2.11(b) Employee Plans mandated by the laws of Finland, are in compliance in
all material respects with the requirements prescribed by any and all
statutes, orders, or governmental rules and regulations currently in effect
with respect thereto, and the Company has performed all material obligations
required to be performed by it under, is not in any material respect in
default under or violation of, and to the knowledge of the Company there is
no default or violation by any other party to, any of the Employee Plans,
(ii) all contributions, premiums or other payments required to be made to any
Employee Plan, the terms of the Employee Plan or any collective bargaining
agreement, have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Employee Plan for the
current plan years, all accounts have been made in accordance with Finland
GAAP consistently applied on a reasonable basis and no further contributions
will be due or will have accrued thereunder as of the Closing Date; and (iii)
to the knowledge of the Company, there are no pending, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of
or against any of the Employee Plans or any trusts related thereto.
2.12 LABOR MATTERS
(a) (i) There are no controversies pending or, to the knowledge of the
Company, threatened, between the Company and any of their respective
employees, which controversies have or may have a Material Adverse Effect;
(ii) the Company is not a party to any collective bargaining agreement or
other labor union contract
PAGE 9
applicable to persons employed by the Company nor does the Company know of
any activities or proceedings of any labor union to organize any such
employees; and (iii) to the knowledge of the Company there are no strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect
to any employees of the Company.
(b) The Company is in compliance in all material respects with all
currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wage and
hour laws and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice.
(c) The Company Disclosure Schedule lists all currently effective
written or oral consulting, independent contractor and/or employment
agreements and other material agreements with individual employees,
independent contractors or consultants to which the Company is a party (other
than standard offer letters to at-will employees). The Company Disclosure
Schedule lists all previously effective written or oral consulting,
independent contractor and/or employment agreements and other material
agreements with individual employees, independent contractors or consultants
who participated in the technical development of the Company's products and
to which the Company is a party (other than standard offer letters to at-will
employees).
2.13 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no material agreement, judgment, injunction, order or decree
binding upon the Company which has had or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice
of the Company, any acquisition of property by the Company, the prospects of
the Company or the conduct of business by the Company as currently conducted
or as proposed to be conducted by the Company.
2.14 TITLE TO PROPERTY
The Company owns no real property. Section 2.14 of the Company
Disclosure Statement sets forth a true and complete list of all real property
leased by the Company and the aggregate monthly rental or other fee payable
under such lease. The Company has good and marketable title to all of its
properties and assets, free and clear of all liens, charges and encumbrances,
except liens for taxes not yet due and payable as reflected in the Company
Financial Statements, liens for current taxes not yet delinquent, liens
imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers, materialmen and
the
PAGE 10
like, liens and respective pledges or deposits under worker's compensation
laws or similar legislation and such liens or other imperfections of title,
if any, as do not materially detract from the value of or interfere with the
present use of the property affected thereby or which, individually or in the
aggregate, would not have a Material Adverse Effect. All leases pursuant to
which the Company leases from others material amounts of real or personal
property, are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of default on the part of the Company (or event
which with notice or lapse of time, or both, would constitute a material
default and in respect of which the Company has not taken adequate steps to
prevent such a default from occurring) except where the lack of such good
standing, validity and effectiveness or the existence of such default or
event of default would not have a Material Adverse Effect. All the plants,
structures and equipment of the Company, except such as may be under
construction, are in good operating condition and repair, except where the
failure of such plants, structures and equipment to be in such good operating
condition and repair would not, individually or in the aggregate, have a
Material Adverse Effect.
2.15 TAXES
The Company has filed all income tax and all other material Tax Returns
(defined below) required to be filed by it, and the Company has paid and
discharged all Taxes (defined below) due in connection with or with respect
to the filing of all Tax Returns and has paid all other Taxes as are due,
except such as are being contested in good faith by appropriate proceedings
(to the extent any such proceedings are required) and with respect to which
the Company is maintaining reserves to the extent currently required in all
material respects adequate for their payment except to the extent the failure
to do so would not have a Material Adverse Effect. For purposes of this
agreement, "Tax" or "Taxes" shall mean taxes and governmental impositions of
any kind in the nature of (or similar to) taxes, payable to any governmental
taxing authority, including (without limitation) (i) income, franchise,
profits, gross receipts, ad valorem, value added, sales, use, service, real
or personal property, capital stock, license, payroll, withholding,
employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes and (ii) interest,
penalties and additions to tax imposed with respect thereto; and "Tax
Returns" shall mean returns, reports, and information statements with respect
to Taxes required to be filed with any taxing authority, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax
returns. No taxing authority or agency is now asserting or, to the knowledge
of the Company, threatening to assert against the Company any deficiency or
claim for additional Taxes other than additional Taxes
PAGE 11
with respect to which the Company is maintaining reserves in all material
respects adequate for their payment. There are no liens for Taxes on any of
the Company's assets, other than liens for Taxes not yet due. The accruals
and reserves for Taxes reflected in the April 30, 1998 balance sheet is in
all material respects adequate to cover all Taxes that should have been
accrued through the date thereof in accordance with Finland GAAP, and no
material tax liability has been incurred since the date thereof other than in
the ordinary course of business.
2.16 ENVIRONMENTAL MATTERS
Except in all cases as, in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect, the Company (i) has
obtained all applicable permits, licenses and other authorization which are
required under laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or
wastes into ambient air, surface water, ground water, or land or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes by the Company (or its agents); (ii)
is in compliance with all terms and conditions of such required permits,
licenses and authorization, and also is in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in such laws or contained in
any regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder; (iii) as of the date
hereof, is not aware of nor has received notice of any event, condition,
circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance or which
would give rise to any common law or statutory liability, or otherwise form
the basis of any claim, action, suit or proceeding, based on or resulting
from the Company's (or any of its agent's) manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or
the emission, discharge, or release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste; and (iv) has taken all
actions necessary under applicable requirements of laws, rules or regulations
to register any products or materials required to be registered by the
Company (or any of its respective agents) thereunder.
2.17 BROKERS
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Company.
PAGE 12
2.18 FULL DISCLOSURE
This Agreement, the exhibits, certificates and schedules delivered
hereunder and other documents expressly required to be delivered hereunder,
taken as a whole, do not contain any untrue statement of a material fact or
omit to state any material fact necessary, in light of the circumstances
under which it was made, to make such documents not misleading.
2.19 INTELLECTUAL PROPERTY
(a) The Company owns, or is licensed or otherwise has sufficient rights
to use rights to all patents, trademarks, trade names, internet domain names,
service marks, maskworks, copyrights, and any applications for any of the
foregoing, net lists, schematics, technology, know-how, microcode, computer
software programs or applications and tangible or intangible proprietary
information or material that in any material respect, are used or proposed to
be used in the business of the Company as currently conducted (the "Company
Intellectual Property").
(b) Section 2.19 of the Company Disclosure Schedule lists all patents,
trademarks, registered and material unregistered copyrights, maskworks, trade
names, internet domain names and service marks which are included in the
Company Intellectual Property and relate to products currently offered for
sale by the Company, and specifies the jurisdictions in which each such
Company Intellectual Property has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers. Section 2.5(a) of the
Company Disclosure Schedule also lists all material licenses, sublicenses and
other agreements, other than license agreements with customers in the
ordinary course of the Company's business, as to which the Company is a party
and pursuant to which the Company or any other person is authorized to use
any Company Intellectual Property or other trade secret material of the
Company. The Company is not in violation of, and the execution and delivery
of this Agreement and the performance by the Company of its obligations
hereunder will not impair in any material respect, the Company's rights or
alter the rights or obligations of any third party under or violate any
material license, sublicense.
(c) The Company is not contractually obligated to pay any compensation
to any third party in respect of any Company Intellectual Property or the
material covered thereby or in connection with the services or products in
respect of which the Company Intellectual Property is being used or proposed
to be used. No claims with respect to the Company Intellectual Property have
been asserted or, to the knowledge of the Company, are threatened by any
person, and to the knowledge of the Company there are no valid grounds for
any bona fide claims (i) to the effect that the
PAGE 13
manufacture, sale or use of any product, or any licensing of any Company
Intellectual Property, as now used or offered or proposed for sale, use or
licensing by the Company, infringes on any copyright, trademark, patent or
trade secret, (ii) against the use by the Company of any Company Intellectual
Property, or (iii) challenging the ownership, validity or effectiveness of
any of the Company Intellectual Property. All patents, registered trademarks
and registered copyrights held by the Company are valid.
(d) To the knowledge of the Company, there is no material unauthorized
use, infringement or misappropriation of any of the Company Intellectual
Property by any third party, including any employee or former employee of the
Company. The Company (i) has not been sued or charged in writing as a
defendant in any claim, suit, action or proceeding which involves a claim or
infringement of trade secrets, any patents, trademarks, service marks,
maskworks or copyrights and which has not been finally terminated prior to
the date hereof; and (ii) has no knowledge of any infringement liability with
respect to, or infringement by, the Company of any trade secret, patent,
trademark, service ▇▇▇▇, maskwork or copyright of another. To the knowledge
of the Company, none of its current or former officers, employees or
consultants is in violation of such agreements.
2.20 INSURANCE
Section 2.20 of the Company Disclosure Schedule lists all material
insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company. There is no claim by the Company pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums payable under all such
policies and bonds have been paid and the Company is otherwise in full
compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage). Such policies of
insurance and bonds are of the type and in amounts customarily carried by
persons conducting businesses similar to those of the Company. The Company
does not know of any threatened termination of or material premium increase
with respect to, any of such policies.
2.21 BANK ACCOUNTS
The Company Disclosure Schedule sets forth the names and locations of
all banks, trusts, companies, savings and loan associations, and other
financial institutions at which the Company maintains accounts of any nature
and the names of all persons authorized to draw thereon or make withdrawals
therefrom.
PAGE 14
2.22 POOLING REPRESENTATION
(a) The Company has never been a subsidiary or division of another
corporation.
(b) The Company has never held or acquired any investment in Acquiror.
(c) The Company has not had any transactions changing its equity
interests in contemplation of this transaction.
(d) The Company has not repurchased its own shares within the last two
years.
(e) The Company's consulting arrangement with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ was
arrived at prior to discussions of this transaction, and neither the
consulting arrangement nor any changes to the consulting arrangement were
made in contemplation of this transaction.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to the Company that the
statements contained in this Section 3 are true and correct in all material
respects.
3.1 ORGANIZATION AND QUALIFICATION
Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware and has the requisite
corporate power and authority and is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("Approvals") necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power, authority and Approvals
would not, individually or in the aggregate, have a Material Adverse Effect
(as defined below). Acquiror is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of its properties owned, leased or operated by it or the
nature of its activities makes such qualification or licensing necessary,
except for such failures to be so duly qualified or licensed and in good
standing that would not, either individually or in the aggregate, have a
Material Adverse Effect. When used in connection with Acquiror, the term
"Material Adverse Effect" means any change or effect that is or is reasonably
likely to be materially adverse to the business, assets (including intangible
assets), financial condition, results of operations, or prospects of Acquiror.
PAGE 15
3.2 CAPITALIZATION
The shares of Acquiror Common Stock to be issued pursuant to this
Agreement will be duly authorized, validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT
Acquiror has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Acquiror and the consummation by Acquiror of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Acquiror and no other corporate
proceedings on the part of Acquiror are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement when duly
and validly executed and delivered by Acquiror will constitute a legal, valid
and binding obligation of Acquiror, enforceable against it in accordance with
its terms, except as that enforceability may be limited by the effect of
bankruptcy or other similar laws relating to the rights of creditors
generally.
3.4 NO CONFLICT, REQUIRED FILINGS AND CONSENTS
(a) The execution and delivery of this Agreement by Acquiror do not,
and the performance of this Agreement by Acquiror shall not, (i) conflict
with or violate the Articles of Incorporation or Bylaws of Acquiror, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Acquiror or by which Acquiror's properties are bound or
affected, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or impair Acquiror's rights, or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Acquiror pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Acquiror is a party or by which Acquiror or its properties are bound or
affected, except for any such breaches, defaults or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Acquiror do not,
and the performance of this Agreement by Acquiror shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Securities Act of 1933, as
amended (the "Securities Act"),
PAGE 16
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
securities laws of states and foreign countries, and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make
such filings or notifications, would not prevent or delay consummation of
this Agreement, or otherwise prevent Acquiror from performing its obligations
under this Agreement, and would not have Material Adverse Effect.
3.5 SEC FILINGS; FINANCIAL STATEMENTS
(a) Acquiror has filed all forms, reports and documents required to be
filed with the SEC since October 17, 1996, and has heretofore delivered to
the Company, in the form filed with the SEC, (i) its Annual Reports on Form
10-K for the fiscal year ended 1997, (ii) its Quarterly Report on Form 10-Q
for the period ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) all proxy statements relating to
Acquiror's meetings of shareholders (whether annual or special) held since
December 31, 1997 (iv) all other reports or registration statements (other
than Reports on Form 10-Q not referred to in clause (ii) above) filed by
Acquiror with the SEC since December 31, 1997 and (v) all amendments and
supplements to all such reports and registration statements filed by Acquiror
with the SEC (collectively, the "Acquiror SEC Reports"). The Acquiror SEC
Reports (i) were prepared in accordance with the requirements of the
Securities Act or the Exchange Act as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Acquiror SEC Reports has
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and each fairly presents
the consolidated financial position of Acquiror and its subsidiaries as at
the respective dates thereof and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
PAGE 17
3.6 REPRESENTATIONS, WARRANTIES AND COVENANTS CONCERNING RULE 144
3.6.1 SELLING UNDER RULE 144
Acquiror represents and warrants that, except with respect to applicable
holding periods set forth in Rule 144, promulgated under the Securities Act,
the shares of Acquiror Common Stock held by Company Shareholders could be
sold under Rule 144 as of the date hereof. Without limiting the foregoing,
Acquiror represents and warrants that it has (i) previously registered shares
of its Common Stock under the Securities Act; and (ii) been subject to the
reporting requirements of Section 15(d) of the Exchange Act for a period of
at least 90 days immediately preceding the date hereof.
3.6.2 RULE 144 REPORTING AND OTHER COVENANTS
(a) With a view to making available to the Company Shareholders,
and each of them, the benefits of Rule 144, so long as any Company
Shareholder shall hold shares of Acquiror Common Stock (the "Rule 144
Period"), Acquiror shall take all steps necessary to ensure that the shares
of Acquiror Common Stock may be resold under Rule 144. Without limiting the
foregoing, Acquiror shall (i) make and keep public information available, as
these terms are understood and defined in Rule 144, (ii) file, within
applicable time periods, all reports required to be filed by Acquiror under
the Exchange Act, and (iii) promptly furnish to each Company Shareholder upon
request (x) a written statement by the Acquiror as to its compliance with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(y) a copy of the most recent annual or quarterly report of the Acquiror
filed with the Securities and Exchange Commission, and (z) such other
reports, documents and other information in the possession of or reasonably
obtainable by the Acquiror as a Company Shareholder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such
shareholder to sell any such securities without registration.
(b) In addition to the foregoing, Acquiror shall take all actions
reasonably requested by each Company Shareholder to facilitate the sale of
shares of Acquiror Common Stock under Rule 144. Without limiting the
foregoing, upon request by a Company Shareholder, Acquiror agrees in a timely
manner to take all actions reasonably necessary to facilitate the removal of
the restrictive legends contained on the certificates representing the shares
of Acquiror Common Stock, including, without limitation, removal of all such
legends when such shares become eligible for resale under Rule 144(k).
PAGE 18
Acquiror understands, acknowledges and agrees that the Company
Shareholders would not accept restricted shares of Acquiror Common Stock
absent the representations, warranties and covenants in this Section 3.6.
3.7 FINNISH TRANSFER TAX
Acquiror shall pay, within two months of the Closing, the 1.6% Finnish
Transfer Tax required as a result of this transaction.
3.8 FULL DISCLOSURE
This Agreement, the exhibits, certificates and schedules delivered
hereunder, including, without limitation, the Acquiror SEC Reports, and other
documents expressly required to be delivered hereunder by Acquiror, taken as
a whole, do not contain any untrue statement of a material fact or omit to
state any material fact necessary, in the light of the circumstances under
which it was made, to make such documents not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF COMPANY SHAREHOLDERS
Each of the Company Shareholders, severally represents and warrants to
Acquiror that with respect to himself, the statements contained in this
Section 4 are true and correct in all material respects.
4.1 AUTHORITY
Each Company Shareholder has the power, authority, and capacity to
execute and deliver this Agreement and to consummate the transaction
contemplated hereby. This Agreement constitutes the valid and binding
obligation of each Company Shareholder enforceable against him in accordance
with its terms, except as that enforceability may be limited by the effect of
bankruptcy or other similar laws relating to the rights of creditors
generally.
4.2 NO CONFLICT
Neither the execution and delivery by each Company Shareholder of this
Agreement nor the consummation by each Company Shareholder of the
transactions contemplated hereby will conflict with, violate, result in a
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of any benefit) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, contract or
other agreement, instrument or obligation to which each Company
PAGE 19
Shareholder is a party or by which each Company Shareholder or any of his or
her properties or assets may be bound, or conflict or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to each Company Shareholder or any
of his properties or assets.
4.3 BROKERS AND FINDERS
Each Company Shareholder has not employed any broker, finder or
investment banker, or incurred any liability for any brokerage or investment
banking fees, commissions, or finder's fees in connection with the
transactions contemplated by this Agreement.
4.4 OWNERSHIP
Each Company Shareholder is the sole, true and lawful owner of that
number of shares of Company Common Stock and Company options set forth
opposite his name on Exhibit A, free and clear of all liens, charges and
encumbrances of any nature whatsoever. Other than the shares and options set
forth on Exhibit A, each Company Shareholder owns no other capital stock of
the Company and owns no options, warrants, rights or other securities
exercisable for or convertible into capital stock of the Company.
4.5 INVESTOR SUITABILITY
(a) Each Company Shareholder is capable of evaluating the merits
and risks of its investment in the Acquiror Common Stock and has the capacity
to protect his own interests in connection with the acquisition of Acquiror
Common Stock hereunder. Each Company Shareholder is an "accredited investor"
as defined in Rule 501 of Regulation D promulgated pursuant to the Securities
Act and has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of the transactions
contemplated by this Agreement. Each Company Shareholder is taking the
Acquiror Common Stock for his own account and not with a view to or for sale
in connection with any distribution of such securities. Each Company
Shareholder has reviewed the Acquiror SEC Reports. Each Company Shareholder
is familiar with the business and financial condition, properties, operations
and prospects of Acquiror and has had an opportunity to discuss Acquiror's
business and financial condition, properties, operations and prospects with
Acquiror's management. Each Company Shareholder has also had an opportunity
to ask questions of officers of Acquiror, which questions, if any, were
answered to his satisfaction.
PAGE 20
(b) Each Company Shareholder understands that (i) the Acquiror
Common Stock will be "restricted securities" under the applicable United
States securities laws, (ii) that the Securities Act and the rules of the
Commission provide in substance that each Company Shareholder may dispose of
the Acquiror Common Stock only pursuant to an effective registration
statement under the Securities Act or in a transaction exempt from the
registration requirements of the Securities Act, and (iii) that, Acquiror has
no obligation or intention to register the sale of the Acquiror Common Stock
pursuant to the Securities Act, and that, accordingly, each Company
Shareholder may be required to bear the economic risk of the investment in
the Acquiror Common Stock for a substantial period of time.
4.6 POOLING REPRESENTATION
(a) Each Company Shareholder has had no investment in Acquiror at any
time prior to the Closing.
(b) Each Company Shareholder has not engaged in a sale of any shares of
Company Common Stock since January 1, 1995.
(c) Each Company Shareholder will not sell the Acquiror Common Stock
received pursuant to this Agreement, or in any way reduce his risk relative
to ownership of Acquiror Common Stock until Acquiror publishes financial
results covering at least 30 days of post-acquisition combined operations.
4.7 OWNERSHIP AND ASSIGNMENT OF INTELLECTUAL PROPERTY
All patents, trademarks, trade names, internet domain names, service
marks, maskworks, copyrights, and any applications for any of the foregoing,
inventions, net lists, schematics, technology, know-how, microcode, computer
software programs or applications and tangible or intangible proprietary
information or material that in any material respect, prepared by each
Company Shareholder during the course of such Company's Shareholder's
employment with or consulting services to the Company, or which were prepared
with the use of Company resources, or which are used or proposed to be used
in the business of the Company as currently conducted (together, the
foregoing, the "Company Technology"), are the sole and exclusive property of
the Company, and are hereby irrevocably assigned by each Company Shareholder
to the Company. To the extent such assignment is invalid under applicable
law, each Company Shareholder hereby grants the Company an exclusive,
worldwide, royalty-free, assignable, and sublicensable license to the Company
Technology. Each Company Shareholder agrees to assist Acquiror and/or the
Company in every proper way to obtain and enforce patents, mask work rights,
trade secret rights and other legal protections for the Company Technology in
any and all countries.
PAGE 21
SECTION 5. CONDITIONS OF CLOSING
5.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE CLOSING
The respective obligations of each party to effect the Closing shall be
subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement shall have been unanimously
approved and adopted by the shareholders of the Company;
(b) 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 restraint or prohibition (an
"Injunction") preventing the consummation of the Agreement shall be in
effect, nor shall any proceeding brought by any administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Agreement, which makes the consummation
of the Agreement illegal.
(c) Acquiror and the Company Shareholders shall have entered into a
Registration Rights Agreement in the form attached hereto as Exhibit E.
5.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR
The obligations of Acquiror to effect the Closing are also subject to
the following conditions:
(a) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders identified in the Company's Disclosure Schedule as
required to be obtained, and all filings required to be made, by the Company
for the authorization, execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated hereby shall
have been obtained and made by the Company;
(b) EMPLOYMENT AGREEMENTS. ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ shall have
entered into employment agreements in the form attached hereto as Exhibit B
and Exhibit C, respectively; and
(c) OPTION EXCHANGE AGREEMENT. Each holder of options to purchase
Company Common Stock shall have entered into an Option Exchange Agreement
with Acquiror in the form attached hereto as Exhibit D.
PAGE 22
SECTION 6. INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties, covenants and agreements of any party
contained in this Agreement shall survive the Closing for a period of one
year (the "Indemnification Period"), except if a claim for indemnification is
made pursuant to this Section 6 during the Indemnification Period, then the
representations, warranties, covenants and agreements applicable to such
claim shall survive beyond the Indemnification Period, but only for purposes
of the resolution of such claim.
6.2 INDEMNITY
From and after the Effective Time and subject to the limitations
contained in Section 6.3: (i) the Company Shareholders will jointly and
severally indemnify Acquiror against any actual liability, damage, loss,
obligation, demand, judgment, fine, penalty, cost or expense, including
reasonable attorneys' fees and expenses, and the costs of investigation
incurred in defending against or settling such liability, damage, loss, cost
or expense or claim therefor and any amounts paid in settlement thereof
(collectively, "Damages"), that Acquiror has incurred by reason of the breach
by the Company of any representation, warranty, covenant or agreement of the
Company contained in this Agreement that occurs or becomes known to Acquiror
during the Indemnification Period; (ii) the Company Shareholders will jointly
and severally indemnify Acquiror against any Damages that Acquiror has
incurred by reason of the breach of the representations, warranties,
covenants or agreements of any Company Shareholder contained in this
Agreement that occur or become known to Acquiror during the Indemnification
Period; and (iii) the Acquiror will indemnify the Company Shareholders
against any Damages that the Company Shareholders have incurred by reason of
the breach of the representations, warranties, covenants or agreements of the
Acquiror contained in this Agreement that occur or become known to the
Company Shareholders during the Indemnification Period.
6.3 DAMAGE THRESHOLD
Notwithstanding the foregoing, the Company Shareholders shall have no
liability under Section 6.2, unless and until claims identifying Damages the
aggregate amount of which exceeds $25,000 has been delivered to one or more
of the Company Shareholders and such amount is determined pursuant to this
Section 6 to be payable, in which case Acquiror shall receive the full amount
of Damages (including the $25,000 threshold); and Acquiror shall have no
liability under Section 6.2, unless and until claims identifying Damages the
aggregate amount of which exceeds $25,000 has been delivered to the Acquiror
and such amount is determined pursuant to this
PAGE 23
Section 6 to be payable, in which case the Company Shareholders shall receive
the full amount of Damages (including the $25,000 threshold).
6.4 MAXIMUM LIABILITY
The maximum amount of Damages for which any Company Shareholder shall be
liable to Acquiror or for which Acquiror shall be liable to such Company
Shareholder pursuant to this Section 6 shall be the product of the fair
market value of one share of Acquiror Common Stock at the Closing as
reflected by the bid price at the market close on the day preceding the
Closing, such price being $14.8125 (the "Stipulated Share Value") and the
number of shares of Acquiror Common Stock received by such Company
Shareholder pursuant to this Agreement or the Option Exchange Agreement. Any
claim for Damages against Acquiror that is settled between Acquiror and any
Company Shareholder shall extinguish the claims of all Company Shareholders
against Acquiror regarding the subject matter of such claim (but shall not
preclude a claim for contribution among the Company Shareholders).
Notwithstanding the foregoing, any and all Damages arising in connection with
representations and warranties in Sections 2.15 and 4.4, and claims based
upon intentional or fraudulent breaches of representations or warranties,
shall not be subject to the limits set forth in this Section 6.4.
6.5 PAYMENT OF DAMAGES
Payment of Damages by Company Shareholders to Acquiror in resolution of
a claim for indemnification pursuant to this Section 6 shall be made, in the
Company Shareholders' discretion, in cash (U.S. dollars) or by the return of
Acquiror Common Stock acquired by such Company Shareholders pursuant to this
Agreement, such Acquiror Common Stock to be valued at the Stipulated Share
Value for purposes of such payments. Payment of Damages by Acquiror to
Company Shareholders in resolution of a claim for indemnification pursuant to
this Section 6 shall be made in Acquiror Common Stock to be valued at the
Stipulated Share Value.
6.6 CLAIMS FOR INDEMNIFICATION
(a) A claim for indemnification shall be made by providing notice to
the party or parties from whom indemnification is sought, signed, in the case
where Acquiror is asserting the claim, by the general counsel, chief
financial or chief executive officer of Acquiror, or in the case where a
Company Shareholder is asserting the claim, by the Company Shareholder or an
authorized representative of the Company Shareholder (a "Damage Certificate"):
PAGE 24
(i) stating that the injured party ("Claimant") has paid or incurred,
or reasonably expects to pay or incur or is subject to a claim for, Damages
in an aggregate stated amount with respect to which Claimant is or may
reasonably be entitled to indemnification pursuant to this Agreement; and
(ii) specifying in reasonable detail the individual items of Damages
included in the amount so stated, and the specific nature of the breach to
which such item is related
6.7 OBJECTIONS TO CLAIMS
The party or parties from whom indemnification is sought ("Objecting
Party") shall have a period of thirty (30) days after the delivery of an
Officer's Certificate seeking indemnity to object in a written statement to
the claim made in the Damage Certificate, and such statement shall be
delivered to Claimant prior to the expiration of such thirty (30) day period.
Failure to object during such 30 day period shall be deemed a waiver of the
right of such Objecting Party to object to such claim for indemnity.
6.8 RESOLUTION OF CONFLICTS; ARBITRATION
(a) In case any Objecting Party shall so object in writing to any claim
or claims by Claimant made in any Damage Certificate, the Objecting Party and
Claimant shall attempt in good faith for sixty (60) days to agree upon the
rights of the respective parties with respect to each of such claims. If
agreement is reached, a memorandum setting forth such agreement shall be
prepared and signed by the parties.
(b) If no such agreement can be reached after good faith negotiation,
either Claimant or Objecting Party may demand arbitration of the matter
unless the amount of the damage or loss at issue is in pending litigation
with a third party, in which event arbitration shall not be commenced until
such amount is ascertained or both Claimant and Objecting Party agree to
arbitration; and in such event the matter shall be settled by arbitration
conducted by a single arbitrator. Claimant and the Objecting Party shall
jointly select an arbitrator. If they fail to agree upon an arbitrator
within thirty (30) days, an arbitrator shall be selected for them by the
Arbitration Service of Portland, Inc. ("ASP"). The decision of the
arbitrator so selected as to the validity and amount of any claim in such
Damage Certificate shall be binding and conclusive upon the parties to the
Agreement.
(c) Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. Any such arbitration shall be held in
Portland, Oregon under the commercial rules then in effect of ASP. For
purposes of this Section 6.8, in
PAGE 25
any arbitration hereunder in which any claim or the amount thereof stated in
the Damage Certificate is at issue, Claimant shall be deemed to be the
Non-Prevailing Party unless the arbitrator awards Claimant more than one-half
(1/2) of the amount in dispute, plus any amounts not in dispute; otherwise,
the Objecting Party shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees
of each arbitrator, the administrative fee of ASP, and the expenses,
including without limitation, attorneys' fees and costs, reasonably incurred
by the other party to the arbitration.
6.9 THIRD-PARTY CLAIMS
In the event Acquiror becomes aware of a third-party claim which
Acquiror believes may result in a demand for indemnification, Acquiror shall
promptly notify the Company Shareholders of such claim; provided, however,
that Acquiror's failure to promptly notify the Company Shareholders shall not
relieve the obligations of the Company Shareholders hereunder, except to the
extent they are prejudiced hereunder. Acquiror shall have the right to
settle any such claim with the written consent of the Company Shareholders,
which consent shall not be unreasonably withheld; provided, however, that the
Company Shareholders may, at their option, direct the settlement negotiations
other than for claims relating to disputes or disagreements with customers of
Acquiror or for claims in which any Company Shareholder is affiliated with
the disputing party. If any proceeding is commenced, or if any claim, demand
or assessment is asserted, in respect of which a claim for indemnification is
or might be made, the Company Shareholders may, at their option, contest or
defend any such action, proceeding, claim, demand or assessment, with counsel
selected by the Company Shareholders that is reasonably acceptable to
Acquiror; provided, however, that if Acquiror shall reasonably object to such
control, then the Company Shareholders and Acquiror shall cooperate in the
defense of such matter; provided further that the Company Shareholders shall
not admit any liability with respect thereto or settle, compromise, pay or
discharge the same without the prior written consent of Acquiror, which
consent shall not be unreasonably withheld. The Company Shareholders or
Acquiror, whichever is not controlling the defense of any matter, shall be
entitled to participate in such defense, at their own expense.
SECTION 7. GENERAL PROVISIONS
7.1 NOTICES
All notices and other communications given or made pursuant hereto shall
be in writing and shall be deemed to have been duly given or made as of the
date delivered or mailed if delivered personally, by fax or mailed by
registered or certified mail (postage prepaid, return receipt requested) to
the parties at the following
PAGE 26
addresses (or at such other address for a party as shall be specified by like
changes of address shall be effective upon receipt):
(a) If to Acquiror:
Summit Design Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Vice President and General Counsel
With a copy to:
▇▇▇▇▇▇▇ Coie LLP
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(b) If to the Company:
ProSoft Oy
Teknologiantie 1
▇▇▇-▇▇▇▇▇ ▇▇▇▇
Facsimile Number: (▇▇▇-▇) ▇▇▇-▇▇▇▇
Attention: President
With copies to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
Suite 2300
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Facsimile Number: 358 9 175 451
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇
PAGE 27
(c) If to a Company Shareholder:
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇ ▇ ▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
Facsimile Number: 358 8 551 4237
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
Facsimile Number: 358 8 551 4237
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
Suite 2300
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Facsimile Number: 358 9 175 451
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇
7.2 INTERPRETATION
When a reference is made in this Agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise indicated. 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. Whenever the words "include," "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation. The term "knowledge" means, with respect to a
corporation, all facts that at any time were actually known to
PAGE 28
any officer or director of the corporation, or any agents representing the
corporation with respect to the transactions contemplated herein, or which
could be ascertained by a reasonably prudent search of the files and records
of the corporation, or by making inquiry to the employees or agents of the
corporation likely to have knowledge concerning the facts or matter at issue;
and with respect to an individual, all facts that at any time were actually
known by the individual, or any agent representing the individual with
respect to the transactions contemplated herein, or which could be
ascertained by a reasonably prudent search of the files and records to which
the individual has access, or by making reasonable inquiries concerning the
facts or matter at issue.
7.3 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
7.4 ENTIRE AGREEMENT
This Agreement, together with the Disclosure Schedules, exhibits and
schedules hereto, constitutes the entire agreement and supersedes all prior
agreements and undertakings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person
any rights or remedies hereunder.
7.5 ASSIGNMENT
The Company Shareholders shall not assign this Agreement without the
prior written consent of Acquiror.
7.6 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
PAGE 29
7.7 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Oregon applicable to contracts between residents of
Oregon, made in Oregon, and executed exclusively in Oregon.
7.8 COUNTERPARTS
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
7.9 FEES AND EXPENSES
All fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, subject, however, to any claim for damages contemplated by Section 7.
7.10 AMENDMENT
This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
7.11 FURTHER ASSURANCES
Any further action necessary or desirable to carry out the purposes of
this Agreement shall be taken by the parties to this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
SUMMIT DESIGN INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and CEO
PAGE 30
PROSOFT OY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------
▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
PAGE 31
EXHIBIT A
COMPANY SHARES OF OPTION HELD NUMBER OF ACQUIROR
SHAREHOLDER COMPANY PRIOR TO SHARES TO BE RECEIVED
COMMON STOCK TRANSACTION AS CONSIDERATION FOR
HELD PRIOR TO COMPANY COMMON STOCK
TRANSACTION
▇▇▇▇▇ ▇▇▇▇▇▇ 750 56 102,448
▇▇▇▇ ▇▇▇▇▇ 750 56 102,448
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 150 0 20,490
PAGE 1
