EXHIBIT B
EXECUTION COPY
RECAPITALIZATION AGREEMENT
This RECAPITALIZATION AGREEMENT (this "Agreement") is made as of March
18, 1997, by and among Software AG, a German corporation with its principal
place of business in Darmstadt, Germany (the "Seller"), Software AG Systems,
Inc., a Delaware corporation (the "Company"), Xxxxxx Equity Investors III, L.P.,
a Delaware limited partnership ("Xxxxxx"), and the managers of the Company
listed on Exhibit A hereto (collectively, such managers are referred to herein
as the "Managers" and together with Xxxxxx are referred to herein as the
"Buyers").
W I T N E S S E T H:
WHEREAS, the Company has 200,000 shares of authorized common stock, par
value $.0l per share, (the "Common Stock") of which, at the date hereof, 100,000
shares have been issued and are outstanding and all of which issued and
outstanding shares are owned by the Seller;
WHEREAS, subject to the terms and the conditions specified herein, the
Buyers desire to purchase from the Company, and the Seller and the Company
desire that the Company issue to the Buyers, 78,000 shares of Common Stock (such
shares are referred to herein as the "Shares"); and
WHEREAS, simultaneously with such purchase and sale of the Shares, the
Company desires to repurchase 90,000 shares (the "Repurchase Shares") of the
Common Stock shares owned by Seller;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations, warranties and covenants contained herein and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS
1.1. "Claim" shall mean all actions, causes of action, suits,
Liabilities, amounts due, sums of money, accounts, reckonings, bonds, bills,
controversies, trespasses, damages, judgments, executions, claims, and demands
whatsoever, in law or equity.
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1.2. "Closing" shall mean the closing described in Article 7 hereof at
which the Parties shall consummate the transactions contemplated hereby.
1.3. "Closing Date" shall mean the date that the Closing occurs.
1.4. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5. "Cooperation Agreement" shall mean the Cooperation Agreement
between Seller and SAGA substantially in the form attached hereto as Exhibit B.
1.6. "Damages" shall mean any and all Liabilities, losses, damages,
fines, penalties, costs, fees and expenses of every kind, nature or description
(including without limitation interest which may be imposed in connection
therewith, court costs, costs resulting from any judgments, orders, awards,
decrees or equitable relief, and reasonable fees and disbursements of counsel,
consultants and expert witnesses).
1.7. "Encumbrance" shall mean any title defect, conflicting claim of
ownership, order, decree, judgment, stipulation, settlement, attachment,
restriction, lien, pledge, right of first refusal, option, charge, security
interest, mortgage, reservation, lease or any other encumbrance of any nature
whatsoever.
1.8. "Environmental Claims" shall mean any claim, action, suit,
proceeding, investigation, order, demand, obligation, duty or government
directive or like matter, based on any Environmental Law, which is pending or
asserted (or unasserted but considered probable of assertion) or threatened
against the Company or any Subsidiary or to which the Company or any Subsidiary
is subject, including, without limitation, claims for reimbursement,
contribution, fines, penalties and punitive damages.
1.9. "Environmental Laws" shall include all United States federal, state
and local laws, regulations, standards, rules, ordinances, binding governmental
requirements, binding judicial or administrative orders, regulatory permits, and
common law legal obligations pertaining to environmental concerns, or to
employee and occupational health and safety, or to public health, including
without limitation the federal Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq., the federal Resource
Conservation
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and Recovery Act, 42 U.S.C. (S) 6901 et seq., the federal Clean Water Act, 33
U.S.C. (S) 1251 et seq., the federal Clean Air Act, 42 U.S.C. (S) 7401 et seq.
and analogous state and local laws.
1.10. "Environmental Properties" shall mean all property currently or
formerly owned, leased or used by the Company or any Subsidiary, including
without limitation any property not owned by the Company or any Subsidiary but
used or affected by any of their off-site waste disposal and similar practices,
and including without limitation all surface water, ground water, subsurface
soils, and air associated with such properties.
1.11. "Equity Contribution" shall mean, with respect to each Buyer, the
dollar amount set forth opposite such Buyer's name on Exhibit A hereto.
1.12. "Financial Statements" shall mean (i) the audited consolidated
balance sheets of the Company as of December 31, 1994, and 1995 and the related
audited consolidated statements of income, cash flows and changes in
stockholders' equity (including related notes, if any) for the years ended
December 31, 1994, and 1995; and (ii) as Previously Disclosed, the consolidated
balance sheets of the Company as of December 31, 1996 and the related
consolidated statements of income, cash flows and changes in stockholders'
equity (including related notes, if any) for the year ended December 31, 1996.
1.13. "Governmental Entity" shall mean any federal, state, local or
foreign legislative authority, court, governmental agency or other regulatory,
judicial or administrative authority.
1.14. "Hazardous Substances" shall mean uncontained petroleum products
and wastes and those materials designated or defined as hazardous substances,
toxic pollutants, toxic substances, hazardous pollutants, hazardous wastes or
other similar terms in any Environmental Laws, or any other substance which by
law or regulation requires special handling in its collection, storage,
treatment, disposal or transportation.
1.15. "Intellectual Property" shall mean all of the following,
throughout the universe that is owned by, controlled by, used by, licensed by
third parties to or registered in the name of, the Company or any Subsidiary:
(i) patents and patent applications and all forms and equivalents thereof,
including divisions, continuations,
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continuations-in-part, utility patents or models, design patents, extensions,
reissued and reexamined patents, patents of addition, confirmation patents,
importation patents, registration patents, and inventor's certificates; (ii)
rights to file patent applications and other interests in inventions and
discoveries, whether reduced to practice or not, on which no patent application
has been filed; (iii) copyrights and all related and equivalent rights,
including copyright registrations, applications for copyright registration,
moral rights, and neighboring rights; (iv) common law and other trademarks,
trade names, trade dress, and service marks, and registrations and applications
for registration thereof; (v) rights in industrial designs, mask works, and the
like, and registrations and applications for registration thereof; (vi) trade
secrets; (vii) methods, processes, computer software, designs, drawings,
laboratory notebooks, technical data, research and development data, know--how,
market reports, consumer investigations, product surveys, distribution methods,
and customer lists, whether or not secret and whether or not reduced to writing;
(viii) other proprietary rights; (ix) licenses to or under and shop rights in
any of the foregoing; and (x) all other factual and proprietary information,
whether or not secret and whether or not reduced to writing.
1.16. "Liabilities" shall mean any liabilities, debts or obligations,
whether accrued, absolute, contingent or otherwise, known or unknown.
1.17. "Material Adverse Effect" shall mean, with respect to any Person,
a material adverse effect on (i) the consolidated business, results of
operations, financial condition or prospects of such Person or (ii) the ability
of such Person to consummate the transactions contemplated hereby.
1.18. "Materials of Environmental Concern" shall mean Hazardous
Substances and other chemicals, pollutants, contaminants, or wastes that present
an identifiable risk to human health or the environment.
1.19. "Parties" shall mean Seller, the Company, and each of the Buyers.
1.20. "Per Share Price" shall mean the dollar amount (rounded to two
decimal points) equal to the Purchase Price divided by 78,000.
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1.21. "Permits" shall mean permits, licenses, orders, authorizations,
certificates or approvals of any Governmental Entity
1.22. "Person" shall mean an individual, partnership, corporation,
trust, unincorporated organization, government or any department or agency
thereof and any other entity.
1.23. "Previously Disclosed" shall mean disclosed in a schedule attached
hereto.
1.24. "Purchase Price" shall mean the greater of (i) $29,035,000 or (ii)
the sum of the Equity Contributions of each Buyer as set forth on Exhibit A
hereto.
1.25. "Properties" shall mean all properties (real or personal) and
other assets (tangible or intangible) owned, leased or used by the Company or
any Subsidiary.
1.26. "Related Agreements" shall mean the Cooperation Agreement, Release
and Tax Matters Agreement.
1.27. "Release" shall mean the Release executed by Seller, substantially
in the form attached hereto as Exhibit C.
1.28. "Rights" shall mean warrants, options, rights, convertible
securities and other arrangements or commitments which obligate an entity to
issue or dispose of any of its capital stock, and stock appreciation rights,
performance units, repurchase rights and other similar stock-based rights
whether they obligate the issuer thereof to issue stock or other securities or
to pay cash.
1.29. "SAGA" shall mean Software AG Americas, Inc., a Virginia
corporation that is a wholly-owned subsidiary of the Company.
1.30. "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.31. "Tax Matters Agreement" shall mean the Tax Matters Agreement
between Seller, the Company and Xxxxxx substantially in the form attached hereto
as Exhibit D.
Other capitalized terms used herein are defined in the preamble and the
recitals to this Agreement and in the other Articles hereof.
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ARTICLE 2.
PURCHASE AND SALE; REPURCHASE
At the Closing, on the terms and subject to the conditions set forth
herein, the following actions shall occur simultaneously:
(i) The Company shall issue and sell to the Buyers, and each Buyer
shall purchase severally and not jointly, at a purchase price per
Share equal to the Per Share Price, the number of Shares equal to
(x) the Equity Contribution of such Buyer, divided by (y) the Per
Share Price, provided, however, that any fractional Share to which
any Buyer (other than Xxxxxx) would otherwise be entitled to
hereunder shall be purchased by Xxxxxx instead of such Buyer;
(ii) The Company shall deliver to each Buyer stock certificates
representing the Shares purchased by such Buyer and shall take and
cause to be taken all actions necessary to transfer to each Buyer
good and valid title to the Shares purchased by such Buyer and to
record the issuance of such Shares to such Buyer on the books and
records of the Company;
(iii) Each Buyer shall pay his, her or its Equity Contribution (adjusted
for each Buyer to account for Xxxxxx'x purchase of any fractional
Shares pursuant to clause (i) of this Article) to the Company in
immediately available funds by wire transfer to the account
designated by the Company in writing at least two business days
prior to the Closing; and
(iv) The Company shall repurchase from Seller the Repurchase Shares for
an aggregate price of Fifty--Seven Million (57,000,000) Deutsche
Marks. The Company shall pay the amount owed to Seller pursuant to
this clause (iv) in immediately available funds by wire transfer to
the account designated by Seller in writing at least two business
days prior to the Closing. Seller shall deliver to the Company
stock certificates representing the
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Repurchase Shares, and the Company shall take and cause to be taken
all actions necessary to cancel such shares.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as Previously Disclosed, Seller represents and warrants to the
Buyers as follows:
3.1. Capital Structure of the Company
The authorized capital stock of the Company (the "Capital Stock")
consists solely of (i) 200,000 shares of Common Stock, of which 100,000 shares
are issued and outstanding and no shares are held in treasury and (ii) 50,000
shares of preferred stock, $.0l par value per share (the "Preferred Stock"), of
which none are issued and outstanding. No shares of Capital Stock are reserved
for issuance. All outstanding shares of Common Stock have been duly authorized
and issued and are validly outstanding, fully paid and nonassessable. The
Company does not have and is not bound by any Rights which are authorized,
issued or outstanding with respect to the Capital Stock, and there are no
agreements, understandings or commitments relating to the right of Seller to
vote or to dispose of any of such Capital Stock. None of the shares of the
Company's Capital Stock has been issued in violation of the preemptive or other
rights of any Person. Seller owns all of the outstanding shares of Common Stock,
with good and marketable title thereto free and clear of all Encumbrances.
3.2. Organization, Standing and Authority
Each of Seller and the Company and each Subsidiary is a duly organized
corporation, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of Seller and the Company and each
Subsidiary (i) has full corporate power and authority to carry on its business
as now conducted and (ii) is duly licensed or qualified to do business in all
jurisdictions of the United States and foreign jurisdictions where its ownership
or leasing of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on the Company.
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3.3. Subsidiaries and Related Interests
The Company owns, directly or indirectly, all of the outstanding capital
stock or other voting securities or interests of the corporations listed on
Exhibit E hereto (collectively the "Subsidiaries" and individually a
"Subsidiary"). The Company does not own, directly or indirectly, any capital
stock or other voting securities or interests of any other corporation,
partnership, limited liability company or other organization or entity. The
outstanding shares of capital stock or other voting securities or interests of
each Subsidiary are duly authorized and issued and are validly outstanding,
fully paid and nonassessable; all such shares are directly or indirectly owned
by the Company with good and marketable title thereto free and clear of all
Encumbrances. No Subsidiary has or is bound by any Rights which are authorized,
issued or outstanding with respect to the capital stock of any Subsidiary and
there are no agreements, understandings or commitments relating to the right of
the Company to vote or to dispose of any such capital stock. None of the shares
of capital stock of any Subsidiary has been issued in violation of the
preemptive rights of any Person.
3.4. Authorized and Effective Agreement
(a) Each of Seller, the Company and SAGA has all requisite corporate
power and authority to enter into and perform all of its obligations under this
Agreement and the Related Agreements to which it is a party. The execution and
delivery of this Agreement and the Related Agreements to which Seller, the
Company or SAGA is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of Seller, the Company
and SAGA. This Agreement has been, and each of the Related Agreements to which
Seller, the Company or SAGA is a party when executed and delivered by Seller,
the Company or SAGA, as the case may be, shall be, executed and delivered by a
duly authorized agent of Seller, the Company or SAGA, as the case may be. The
Shares, when issued, sold and delivered in accordance with this Agreement, shall
be duly authorized, validly issued, fully paid and nonassessable and will not
have been issued in violation of any preemptive rights. Upon consummation of the
purchase of the Shares, Buyers will acquire from the Company good and marketable
title to the Shares, free and clear of all Encumbrances.
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(b) Assuming the accuracy of the representations contained in Sections
4.2(a) and 4.2(c) hereof, this Agreement and the Related Agreements to which
Seller, the Company or SAGA is a party, constitute legal, valid and binding
obligations of Seller, the Company and SAGA, as the case may be, enforceable
against it in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization, bulk sales, or similar laws from time to time in effect which
affect the enforcement of creditors' rights generally and by general equity
principles.
(c) Neither the execution and delivery of this Agreement or any of the
Related Agreements, nor consummation of the transactions contemplated hereby or
thereby, nor compliance by Seller, the Company or SAGA with any of the
provisions hereof or thereof shall (i) conflict with or result in a breach of
any provision of the certificate of incorporation or bylaws (or similar charter
documents) of Seller, the Company or any Subsidiary, (ii) constitute or result
in a breach of any term, condition or provision of, or constitute a default
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any Encumbrance upon any property
or asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage,
indenture, license, lease, contract, agreement or other instrument or
obligation, or (iii) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Seller, the Company or any Subsidiary, except (in
the case of clauses (ii) and (iii) above) for such violations, rights, breaches,
Encumbrances or defaults which, either individually or in the aggregate, will
not have a Material Adverse Effect on the Company or any Subsidiary.
(d) No consent, approval or authorization of, or declaration, notice,
filing or registration with, any Governmental Entity or any other Person, is
required to be made or obtained by Seller, the Company or any Subsidiary in
connection with the execution, delivery and performance of this Agreement or the
Related Agreements or the consummation of the transactions contemplated hereby
or thereby, other than (i) any applicable filings under federal or state
securities laws or state anti-takeover laws and (ii) filings required pursuant
to the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act").
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3.5. Constitutive Documents
Seller has delivered to Buyers complete and correct copies of the
Company's and each Subsidiary's certificate of incorporation and bylaws (or
similar charter documents), each as amended as of the date hereof, and all
resolutions of the boards of directors of the Company and any Subsidiary (or any
committees thereof) relating to this Agreement or any Related Agreement or any
of the transactions contemplated hereby or thereby. The minute book of the
Company, a copy of which has been delivered to Buyers, contains a complete,
correct and current record of all meetings and other corporate actions of the
stockholders and the board of directors (and any committee thereof) of the
Company since its incorporation.
3.6. Compliance with Laws; Regulatory Filings
The Company and each Subsidiary is in compliance in all material respects
with all statutes and regulations applicable to the conduct of its business. The
Company and each Subsidiary has filed all reports required by statute,
regulation or other requirement to be filed with any Governmental Entity, except
where the failure to so file would not have a Material Adverse Effect on the
Company, and such reports were prepared in all material respects in accordance
with the applicable statutes, regulations and instructions in existence as of
the date of filing of such reports. Neither the Company nor any Subsidiary has
received notification from any Governmental Entity (i) asserting a violation of
any, statute, regulation or other requirement or (ii) restricting or in any way
limiting its operations. Neither the Company nor any Subsidiary is subject to
any regulatory or supervisory order, agreement, directive, memorandum of
understanding, commitment or similar requirements and none of them has received
any communication requesting that it enter into any of the foregoing.
3.7. Financial Statements; Books and Records
(a) The Financial Statements fairly present the financial position of the
Company as of the dates indicated and the results of operations, changes in
stockholders' equity and cash flows of the Company for the periods presented,
all in conformity with U.S. generally accepted accounting principles applied on
a consistent basis except as disclosed therein. The books and records of the
Company fairly reflect in all material respects the transactions to which it is
a party or by which its Properties are subject or bound. All accounts receivable
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included in the Financial Statements dated as of December 31, 1996 (the "1996
Financial Statements") are valid and enforceable and, to the knowledge of
Seller, the Company and the Subsidiaries (collectively, the "Seller's
Knowledge"), collectible net of reserves. Such reserves have been established in
accordance with U.S. generally accepted accounting principles.
(b) Seller's Previously Disclosed consolidated balance sheet as of
December 31, 1996 and its related, Previously Disclosed consolidated statement
of income (including related notes, if any) for the year ended December 31,
1996, fairly present Seller's financial position as of the date indicated and
the results of operations of Seller for the period presented, all in conformity
with generally accepted accounting principles applied on a consistent basis
except as disclosed therein.
3.8. Material Adverse Change
The Company has not, on a consolidated basis, suffered any material
adverse change in its financial condition, results of operations, business or
prospects since December 31, 1996.
3.9. Absence of Undisclosed Liabilities
Except as disclosed in the 1996 Financial Statements, neither the
Company nor any Subsidiary has any Liability that is material to the Company on
a consolidated basis, or that, when combined with all similar Liabilities, would
be material to the Company on a consolidated basis; to the Seller's Knowledge,
no set of circumstances exist that are reasonably likely to give rise to any
such Liability.
3.10. Properties
The Company or a Subsidiary has good title, free and clear of all
Encumbrances, to all of the Properties which, individually or in the aggregate,
are material to the business of the Company and its Subsidiaries taken as a
whole, and which are reflected on the 1996 Financial Statements or acquired
after December 31, 1996, except (i) liens for taxes not yet due and payable for
which adequate reserves have been established on the books of the Company and
(ii) such imperfections of title as are not material in character, amount or
extent. All leases pursuant to which the Company or any Subsidiary, as lessee,
leases Properties which, individually or in the aggregate, are material to the
business of the Company and
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its Subsidiaries taken as a whole (x) have been Previously Disclosed and (y) are
valid, in full force and effect and enforceable in accordance with their
respective terms.
3.11. Permits
Seller has Previously Disclosed a list and description of all material
Permits which are issued to, held or used by the Company or any Subsidiary, or
for which the Company or any Subsidiary has applied. There are no other required
Permits which are material to (i) the operation of the Company's or any
Subsidiary's business as now conducted or (ii) the ownership or use of any of
the Properties. All Permits Previously Disclosed by Seller are in good standing
and are valid and effective in accordance with their respective terms; such
Permits will continue in effect after the Closing. The Company and its
Subsidiaries are in material compliance with all Permits Previously Disclosed by
Seller, and no governmental proceedings or investigations are pending or, to the
Seller's Knowledge, threatened against Seller, the Company or any Subsidiary
relating to noncompliance with such Permits.
3.12. Employment Benefit Plans
Seller has Previously Disclosed true and complete copies of all qualified
pension or profit-sharing plans, any deferred compensation, consulting, bonus or
group insurance contract or any other incentive, welfare or employee benefit
plan or agreement maintained for the benefit of employees or former employees of
the Company or any Subsidiary (collectively, the "Plans"). No liability under
Title IV of the Employment Retirement Income Security Act of 1974, as amended
("ERISA") has been incurred by the Company or any of its Subsidiaries that has
not been satisfied in full, and no condition exists that presents a material
risk of the Company or any Subsidiary incurring any such liability. With respect
to each Plan that is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared with respect to such Plan,
did not, as of the valuation date used in such report, exceed the current value
of such Plan's assets allocable to such accrued benefits, and no material
adverse change in the funded status of any such Plan has occurred since such
valuation date. Full payment has been made of all amounts that the Company or
any of its Subsidiaries is required to pay under section 412 of the
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Code or under the terms of the Plans. To the Seller's Knowledge, each Plan that
is intended to be "qualified" within the meaning of section 401(a) of the Code
is so qualified and each Plan that is intended to satisfy the requirements of
section 125 or 501(c) (9) of the Code satisfies such requirements. Each of the
Plans has been operated and administered in all material respects in accordance
with its terms and applicable laws. There are no actions, suits, claims, or
actions pending, or, to the Seller's Knowledge, threatened or anticipated (other
than routine claims for benefits) against any Plan or any related trust or
against the Company or any of its Subsidiaries. None of the Plans is the subject
of an audit, investigation, or examination by the IRS, Pension Benefit Guaranty
Corporation, Department of Labor or any other Governmental Entity. None of the
Plans is a multiemployer plan within the meaning of section 3(37) of
ERISA.
3.13. Certain Contracts
Neither the Company nor any Subsidiary is a party to, or is bound by, (i)
any material contract or any other contract pursuant to which any party thereto
has an obligation or commitment of greater than $3,000,000, (ii) any agreement
restricting the nature or geographic scope of its business activities in any
material respect, other than the Cooperation Agreement (iii) any agreement,
indenture or other instrument relating to the borrowing of more than $1,000,000
by the Company or any Subsidiary or the guarantee by the Company or any
Subsidiary of any such obligation, (iv) any agreement, arrangement or commitment
relating to the employment of a consultant who was formerly a director or
executive officer or the employment, election, retention in office or severance
of any present or former director or officer, or (v) any agreement, contract or
other instrument relating to or involving any swap, hedge or other similar off-
balance sheet transaction. Neither the Company nor any Subsidiary is in default
under any material agreement, commitment, arrangement, lease, insurance policy
or other instrument whether written or oral, and there has not occurred any
event (including the execution, delivery and performance of this Agreement or
any of the Related Agreements) that, with the lapse of time or giving of notice
or both, would constitute such a default, except for such defaults which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
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3.14. Legal Proceedings
There are no actions, suits or proceedings instituted, pending or, to the
Seller's Knowledge, threatened (or unasserted but considered probable of
assertion) against the Seller, Company or any Subsidiary or against any asset,
interest or right of Seller, the Company or any Subsidiary which could have a
Material Adverse Effect on the Company and, to the Seller's Knowledge, there are
no other such actions, suits or proceedings instituted, pending or threatened
(or unasserted but considered probable of assertion). To the Seller's
Knowledge, there are no instituted, pending or threatened actions, suits or
proceedings that present a claim to restrain or prohibit the transactions
contemplated in this Agreement or any of the Related Agreements or to impose any
material liability in connection therewith.
3.15. Labor and Related Matters
Neither the Company nor any Subsidiary is a party to, or is bound by, any
contract, agreement or understanding with any labor union, organization, group
or association, and none of them has engaged in any unfair labor practice. Since
January 1, 1995, neither the Company nor any Subsidiary has experienced any
attempt by organized labor or its representatives to make the Company or any
Subsidiary conform to demands of organized labor relating to employees of the
Company or any Subsidiary or enter into a binding agreement with organized labor
that would cover employees of the Company or any Subsidiary. There is no pending
or threatened charge of unfair labor practice or any other action, complaint or
investigation by or before any Governmental Entity brought by or on behalf of
any employee, prospective employee or former employee of the Company or any
Subsidiary. There is no labor strike or labor disturbance pending against the
Company or any Subsidiary; and neither the Company nor any Subsidiary has
experienced any organized work stoppage or other labor difficulty since January
1, 1995. Neither the Company nor any Subsidiary is a party to or affected by or
threatened with any dispute or controversy with any supplier, subcontractor, or
customer, the outcome of which could have a Material Adverse Effect on the
Company.
3.16. Brokers and Finders
None of Seller, the Company, the Subsidiaries or any of their respective
officers, directors or employees, has employed any broker, finder or financial
advisor or
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incurred any Liability for any brokerage or finders fees or commissions in
connection with the transactions contemplated in this Agreement or the Related
Agreements.
3.17. Environmental Matters
(a) Except as disclosed in the 1996 Financial Statements, and except for
liabilities incurred in the ordinary course of business subsequent to December
31, 1996, neither the Company nor any Subsidiary has any material Liability
arising under any Environmental Law, nor, to the Seller's Knowledge, is there
any basis for the assertion of any such Liabilities.
(b) There is no pending or threatened (or unasserted but considered
probable of assertion) Environmental Claim against or otherwise involving the
Company or any Subsidiary or any of their officers, directors, businesses or
assets nor, to the Seller's Knowledge, does any valid basis for such a claim or
controversy exist. There is no judgment, order, injunction, award or consent
decree outstanding against or affecting the Company or any Subsidiary which
arises from or relates to an Environmental Claim.
(c) The Environmental Properties are free from any and all contamination
by Materials of Environmental Concern for which material remedial action is
required under Environmental Laws.
(d) Neither the Company nor any Subsidiary has conducted, engaged in or
permitted others to conduct or engage in any business, operation or activity on
or at the Environmental Properties that involved the manufacture, treatment,
processing or on-site disposal of any Materials of Environmental Concern.
(e) The Company and the Subsidiaries are in compliance with all
Environmental Laws in all material respects.
(f) Seller has Previously Disclosed a true and complete list of all
environmental permits, authorizations and licenses required under all
Environmental Laws for the conduct of the business of the Company or the
Subsidiaries (collectively, the "Authorizations") and the expiration dates, if
any, of such Authorizations. All Authorizations necessary for the Company or
the Subsidiaries to continue to conduct their business in compliance with all
Environmental Laws are in full force and effect.
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(g) Neither the Company nor any Subsidiary has received or anticipates
receiving any notice, letter, citation, order, warning, complaint, inquiry,
claim or demand alleging or asserting that: (a) the Company or any Subsidiary
has violated, or is about to violate, any Environmental Laws; (b) there has been
a release or there is a threat of a release of any Material of Environmental
Concern at, from or onto any of the Environmental Properties; (c) the Company or
any Subsidiary may be or is liable, in whole or in part, for the costs of
cleaning up, remediating, removing or responding to a release or threat of a
release of any Material of Environmental Concern at, from or onto any of the
Environmental Properties or, as a result of its operation of such Environmental
Properties, at, from or onto any other property wherever located; or (d) any of
the Environmental Properties are subject to a lien in favor of any Governmental
Entity for any Damages, under Environmental Laws, arising from costs incurred by
such Governmental Entity.
3.18. Intellectual Property
(a) Seller has Previously Disclosed (i) all of the Intellectual Property
that has been registered in, filed in or issued by the United States Patent and
Trademark Office or the United States Copyright Office or any similar office in
any country and (ii) all Intellectual Property that is not so registered, filed
or issued, but the use of which is material to the ability of the Company to
operate the business of the Company and the Subsidiaries, taken as a whole. The
Company or a Subsidiary is the sole and exclusive owner of the entire right,
title and interest in and to the Intellectual Property; neither the Company nor
any Subsidiary has granted, nor does there exist by implication or operation of
law, any license or other right in respect thereof which does or which will,
subsequent to the Closing, permit or enable any Person other than the Company
and the Subsidiaries to use the Intellectual Property, except for software
licenses granted by the Company or a Subsidiary to a distributor or an end user
customer in the ordinary course of business. None of the Intellectual Property
is subject to any outstanding order, decree, judgment, stipulation, settlement,
lien, charge, encumbrance or attachment. There is no pending or, to the
Seller's Knowledge, threatened (or unasserted but considered probable of
assertion) Claim (A) asserting that any of the Intellectual Property, or that
the past, present or contemplated future conduct of the Company's or its
Subsidiaries' business, infringes or violates the intellectual property rights
of any third parties,
- 17 -
(B) asserting that any third parties have any rights to use any of the
Intellectual Property or (C) which could, if adversely determined against the
Company or any Subsidiary, adversely affect the Company's ability to use any of
the Intellectual Property upon consummation of the transactions contemplated
hereby or thereafter, and to the Seller's Knowledge, there is no basis for any
claim of the foregoing types. Neither Seller nor the Company nor any Subsidiary
has given any notice to any third parties asserting infringement by such third
parties of any of the Intellectual Property. Neither the Company nor any
Subsidiary is subject to any bars or other restrictions with respect to its
rights to utilize any of the Intellectual Property, and, to the Seller's
Knowledge, no bars or other restrictions on such rights will be created by the
consummation of the transactions contemplated herein.
(b) Seller has Previously Disclosed a list of all Intellectual Property
owned by third parties and licensed to the Company or any Subsidiary (the
"Licensed Intellectual Property"). All of the Licensed Intellectual Property is
licensed pursuant to valid written agreements (the "License Agreements"),
enforceable in accordance with their terms, except as may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and by general principles of
equity. There is no pending or, to the Seller's Knowledge, threatened claim
that the Company, any Subsidiary or any licensor is in breach of any of the
License Agreements and, to the Seller's Knowledge, no basis for any such claim
exists. There is no pending or, to the Seller's Knowledge, threatened claim
against the Company, any Subsidiary or the licensor of any Licensed Intellectual
Property asserting that any of the Licensed Intellectual Property infringes or
conflicts with the rights of third parties, or that the present, past or
contemplated future conduct of the business of the Company and its Subsidiaries
infringes or violates the rights of third parties, and to the Seller's
Knowledge, no basis for any such claim exists.
3.19. Insurance
The Company and each Subsidiary currently maintains insurance in amounts
reasonably necessary for its operations. Such policies (i) are valid and
enforceable in accordance with their terms with financially sound and reputable
insurance companies and are in full force and effect, (ii) are sufficient for
compliance with all requirements of law and all agreements to which the
- 18 -
Company or any Subsidiary is a party or is subject, and (iii) provide insurance
coverage of the Properties, operations and employees of the Company and its
Subsidiaries generally comparable in type and amount to that which is
customarily carried by other corporations engaged in similar businesses. Neither
the Company nor any Subsidiary has received any notice of a premium increase or
cancellation with respect to any of its insurance policies or bonds, and within
the last three years, neither the Company nor any Subsidiary has been refused
any insurance coverage sought or applied for. The Company and the Subsidiaries
have no reason to believe that existing insurance coverage cannot be renewed as
and when the same shall expire, upon terms and conditions as favorable as those
presently in effect, other than possible increases in premiums or unavailability
in coverage that have not resulted from any extraordinary loss experience of the
Company or any Subsidiary.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYERS
Except as Previously Disclosed, each Buyer hereby severally represents
and warrants (but only with respect to the representations and warranties in
this Article applicable to him, her or it) to Seller as follows:
4.1. Organization, Standing and Authority of Xxxxxx
Xxxxxx is duly organized, validly existing and in good standing under the
laws of Delaware. Xxxxxx (i) has all requisite partnership power and authority
to carry on its business as now conducted or proposed to be conducted and (ii)
is duly licensed or qualified to do business in all jurisdictions of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such licensing or qualification, except
where the failure to be so licensed or qualified would not have a Material
Adverse Effect on Xxxxxx.
4.2. Authorized and Effective Agreement
(a) Each of the Managers has the legal capacity to enter into and perform
all of his or her obligations under this Agreement and the Related Agreements to
which he or she is a party. Upon execution and delivery by each Manager of this
Agreement and each of the Related Agreements to which such Manager is a party,
assuming the accuracy of the representations contained in
- 19 -
Section 3.4(b) hereof, the Agreement and each such Related Agreement shall
constitute the legal, valid and binding obligations of such Manager, enforceable
against him or her in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization, bulk sales, or similar laws from time to time in effect which
affect the enforcement of creditors' rights generally and by general equity
principles.
(b) Xxxxxx has all requisite partnership power and authority to enter
into and perform all of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary partnership action
in respect thereof on the part of Xxxxxx. This Agreement, when executed and
delivered by Xxxxxx, shall be executed and delivered by a duly authorized agent
of Xxxxxx.
(c) Assuming the accuracy of the representations contained in Sections
3.4(b) hereof, this Agreement constitutes a legal, valid and binding obligation
of Xxxxxx, enforceable against it in accordance with the terms thereof, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization, bulk sales, or similar laws from time to time in
effect which affect the enforcement of creditors' rights generally and by
general equity principles.
(d) Neither the execution and delivery of this Agreement nor consummation
of the transactions contemplated hereby, nor compliance by Xxxxxx with any of
the provisions hereof, shall (i) conflict with or result in a breach of Xxxxxx'x
charter documents, (ii) constitute or result in a breach of any term, condition
or provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any Encumbrance upon any property or asset of Xxxxxx pursuant to,
any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Xxxxxx, except (in the
case of clauses (ii) and (iii) above) for such violations, rights, breaches,
Encumbrances or defaults which, either individually or in the aggregate, will
not have a Material Adverse Effect on Xxxxxx.
(e) No consent, approval or authorization of, or declaration, notice,
filing or registration with, any
- 20 -
Governmental Entity or any other Person, is required to be made or obtained by
Xxxxxx in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, other
than (i) any applicable filings under federal or state securities laws or state
anti-takeover laws and (ii) filings required pursuant to the HSR Act.
4.3. Brokers and Finders
Xxxxxx has not employed any broker, finder or financial advisor or
incurred any Liability for any brokerage or finders fees or commissions in
connection with the transactions contemplated in this Agreement or the Related
Agreements, other than payments made or to be made to MLC Group, Inc.
4.4. Access; Sophistication
Seller has provided to each Buyer copies of the Financial Statements and
each Buyer has reviewed such documents. Each Buyer acknowledges that all
documents, books and records requested by such Buyer pertaining to the Company
or the Shares have been made available for inspection by such Buyer and his, her
or its agents and representatives; that such Buyer and his, her or its agents
and representatives have had a reasonable opportunity to ask questions of and
receive answers from Seller, the Company or officers or employees acting on
behalf of the Company and Seller, concerning the terms and conditions of the
offering of the Shares and the business and prospects of the Company. Each
Buyer is an "accredited investor," as such term is defined in Rule 501 under the
Securities Act. Each Buyer and his, her or its respective agents and
representatives have such knowledge and experience in financial and business
matters as to enable them to utilize the information made available to them in
connection with the transactions contemplated hereby, to evaluate the merits and
risks of an investment in the Shares and to make an informed decision with
respect thereto, and such an evaluation and informed decision have been made.
The questionnaires Previously Disclosed to Seller relating to each of the
Managers are accurate and complete in all material respects.
4.5. Investment Representation
Each Buyer is acquiring the Shares to be received by such Buyer at the
Closing for such person's own account for investment only and not with a view to
- 21 -
making a distribution thereof within the meaning of the Securities Act. Each
Buyer agrees not to sell or transfer such Shares, except in accordance with the
terms of the legend set forth below. Each Buyer is aware that the Shares have
not been registered under the Securities Act or any state or other
jurisdiction's securities laws, and that the Shares must be held indefinitely
unless subsequently registered or an exemption from such registration is
available. Each Buyer acknowledges that investment in the Shares involves
substantial risks, including the risk of total loss of his, her or its
investment in the Shares. Each Buyer represents that he, she or it (i) is able
to hold the Shares for an indefinite period of time; (ii) has adequate means,
other than the Shares or funds invested therein, of providing for his, her or
its current and foreseeable needs; (iii) has no foreseeable need to sell or
otherwise dispose of any of the Shares; and (iv) has sufficient net worth to
sustain a loss of his, her or its entire investment in the Shares in the event
such loss should occur. Each Manager is a bona fide resident of Virginia,
Maryland, or the District of Columbia and has no present intention of changing
his or her residence. Each Buyer understands and agrees that the certificate or
certificates representing the Shares to be received by such Buyer will bear a
legend substantially to the effect set forth below and that a stop transfer
order may be placed with respect thereto.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE SECURITIES LAW OF ANY JURISDICTION AND MAY NOT BE TRANSFERRED
UNTIL (A) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO OR (B) IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
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ARTICLE 5.
COVENANTS
5.1. Conduct of the Company's Business
(a) Prior to the earlier of termination of this Agreement or the Closing
Date, and except as otherwise provided for by this Agreement or as consented to
or approved by Xxxxxx in writing, Seller and the Company shall cause the Company
and each Subsidiary to, use its best efforts to preserve its Properties,
business and relationships with customers, employees, suppliers, licensors,
licensees, advertisers, distributors and other Persons.
(b) Prior to the earlier of termination of this Agreement or the
Closing Date, Seller and the Company shall cause the Company and each Subsidiary
only to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted. Prior to the earlier of
termination of this Agreement or the Closing Date, Seller and the Company shall
not permit the Company Or any of the Subsidiaries to, except with the prior
written consent of Xxxxxx or except as expressly contemplated or permitted by
this Agreement:
(i) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock;
(ii) issue any shares of its capital stock or permit any treasury
shares to become outstanding;
(iii) enter into any swap, hedge or other similar off-balance
sheet transaction;
(iv) incur any additional debt obligation or other obligation for
borrowed money or guarantee any indebtedness of another Person;
(v) fail to comply with any of the representations, warranties,
covenants, conditions or other terms of any existing obligation for borrowed
money;
(vi) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to any of the Subsidiaries;
(vii) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock
- 23 -
dividend, stock split or like change in capitalization, or redeem, repurchase or
otherwise acquire any shares of its capital stock;
(viii) amend its certificate of incorporation or bylaws (or similar
charter documents); impose, or suffer the imposition, on any share of its
capital stock or stock held by it, of any Encumbrance, or permit any such
Encumbrance to exist;
(ix) merge with any other Person, permit any other Person to merge
into it, consolidate with any other Person, acquire control over any Person, or
create any subsidiary;
(x) waive, transfer or release any material right, modify or
change in any material respect any material agreement, or cancel, settle or
compromise any material debt, claim or litigation;
(xi) enter into any material contract, agreement or other
arrangement that is not terminable at will, with less than 30 days notice,
without payment or penalty, except in the ordinary course of business consistent
with past practice;
(xii) liquidate, sell, license, mortgage, lease or otherwise
encumber or dispose of any material assets, except sales of inventory in the
ordinary course of business; or acquire any material assets;
(xiii) increase the rate of compensation of, pay or agree to pay any
bonus to, or provide any other employee benefit or incentive to, any of its
directors, officers or employees, except as Previously Disclosed; enter into or
modify any employment or severance contract; or enter into or substantially
modify (except as may be required by applicable law) any pension, retirement,
stock option, stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto;
(xiv) change its methods of accounting in effect at December 31,
1996, except as required by changes in U.S. generally accepted accounting
principles concurred in by its independent certified public accountants, or
change any of its methods of reporting income and deductions for U.S. federal
income tax purposes from those employed in the preparation of its federal income
tax
- 24 -
returns for the year ended December 31, 1995, except as required by law; or
(xv) agree to do any of the matters specified in clauses (i)
through (xiv) of this Section 5.1(b).
5.2. Other Offers.
Neither Seller nor the Company shall solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, participate in
any negotiations or discussions concerning, or enter into any transaction
involving, (i) any acquisition or purchase of all or a substantial portion of
the assets of, or a substantial equity interest in, the Company or any
Subsidiary, or (ii) any business combination with the Company or any Subsidiary,
except as contemplated in this Agreement. Each of Seller and the Company will
instruct its officers, directors, agents, subsidiaries and other affiliates to
refrain from doing any of the above. Seller and the Company will notify Xxxxxx
if any such inquiries or proposals are received by, any such information is
received from, or any such negotiations or discussions are sought to be
initiated with Seller, the Company or any of the other persons or entities
referred to above. Seller and the Company will promptly inform Xxxxxx in
writing of all of the relevant details with respect to the foregoing. Each of
Seller and the Company acknowledges and agrees that any remedy at law for breach
of the foregoing covenant will be inadequate, and in addition to any other
relief which may be available, Buyers will be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damages and
without regard to the adequacy of any remedy at law.
5.3. Buyer's Access
Following the execution and delivery of this Agreement, and prior to the
Closing, Seller and the Company will (a) continue to provide to Buyers and their
authorized representatives reasonable access during normal business hours to the
Company's books, records and Properties, (b) make reasonably available to Buyers
and their authorized representatives, during normal business hours and at their
normal places of work, additional personnel of the Company having knowledge of
any matters to be investigated by Buyers and (c) furnish to Buyers promptly upon
request such generally available financial and operating data and other
information relating to the Company's business and Properties as Buyers or their
- 25 -
authorized representatives may reasonably request. Buyers shall conduct their
investigations in such a manner as to minimize any disruption of the Company's
normal business operations.
5.4. Compliance
The Parties covenant and agree that between the date hereof and the
Closing, none of them shall take any action that would cause their
representations and warranties made herein not to be true and correct, in all
material respects, as of such Closing. Seller and the Company shall promptly
inform Xxxxxx in writing of (i) any matter that has caused the representations
and warranties of Seller to become untrue or incorrect in any material respect
or (ii) any materially adverse change in the Company's financial condition,
results of operations, business or prospects since December 31, 1996. Each
Buyer shall promptly inform Seller and the Company in writing of any matter that
has caused the representations and warranties of such Buyer to become untrue or
incorrect in any material respect.
5.5. Best Efforts
Subject to the terms and conditions of this Agreement, each Party shall
use its reasonable best efforts and shall cooperate with the other Parties as
promptly as practicable to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations or otherwise to consummate, as soon as practicable, the
transactions contemplated hereby and by the Related Agreements. Seller and the
Company shall use all reasonable efforts to secure approvals and consents of any
Person necessary to the consummation of the transactions contemplated by this
Agreement and by the Related Agreements and to obtain any consent or approval
required for the continued effectiveness after the Closing of any contract,
agreement or customer relationship to which the Company or any Subsidiary is a
party.
5.6. Right of First Refusal
(a) Before any Common Stock shares (or securities convertible into or
exercisable or exchangeable for such shares) owned or controlled by Seller
("Seller Shares") may be sold or otherwise disposed or transferred
(collectively, "Transferred"), Xxxxxx and the Company shall be offered the
following rights with respect to such shares:
- 26 -
(i) Seller shall first deliver a written notice (a "Seller
Notice") to Xxxxxx and the Company stating (i) the number of Seller Shares that
Seller proposes to Transfer and (ii) the price and other material terms of the
proposed Transfer. The Seller Notice shall be accompanied by a certificate of
the Seller certifying that it has received from a third party (the "Third
Party") a bona fide offer to acquire such Seller Shares at such price and on
such terms as are set forth in the Seller Notice and shall identify such Third
Party.
(ii) Within thirty (30) days after receipt of a Seller Notice (the
"Company Period"), the Company may elect, by delivering to Seller and Xxxxxx a
written notice of its election, to purchase all or any part of the Seller Shares
to which the Seller Notice refers, on the same terms and conditions specified in
such notice. In the event that the Company does not elect to purchase any of
such shares, the Company shall send a notice to such effect to Seller and Xxxxxx
prior to the end of the Company Period.
(iii) In the event that the Company does not elect during the
Company Period to purchase all of the Seller Shares to which the Seller Notice
refers, then Xxxxxx may elect, by delivering to Seller a written notice (a
"Xxxxxx Notice") of its election, within forty-five (45) days after receipt of
the Seller Notice (the "Xxxxxx Period"), to acquire on the same terms and
conditions specified in the Seller Notice, any of the Seller Shares to which the
Seller Notice refers that are not acquired by the Company.
(iv) In the event that the Company and/or Xxxxxx elects to acquire
Seller Shares pursuant to this Section 5.7, the Company, Xxxxxx and Seller shall
consummate the sale and purchase of such shares within ninety (90) days after
the date that the Company and Xxxxxx have received the Seller Notice.
(v) To the extent the Company and Xxxxxx do not exercise their
respective rights under this Section 5.7 within the specified time periods,
Seller may Transfer the Seller Shares specified in the Seller Notice (and not
purchased by the Company or Xxxxxx) to the Third Party specified in such Seller
Notice at the price and on the terms specified in such notice, provided that (i)
such Transfer is consummated within one hundred twenty (120) days of the date of
delivery of such Seller Notice and (ii) prior to the Transfer, such Third Party
agrees in
- 27 -
writing, in a form satisfactory to the Company and Xxxxxx and as a condition of
the Transfer, that such Third Party shall receive and hold such shares subject
to the rights of first refusal of the Company and Xxxxxx set forth in this
section.
(b) Seller agrees that all certificates representing shares of Common
Stock owned or controlled by Seller will contain the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED
AS TO TRANSFER IN ACCORDANCE WITH AN AGREEMENT DATED AS OF
MARCH 18, 1997 AMONG SOFTWARE AG, SOFTWARE AG SYSTEMS, INC.
(THE "COMPANY"), XXXXXX EQUITY INVESTORS, III, L.P., AND
CERTAIN MANAGERS OF THE COMPANY, A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY.
(c) The rights and obligations set forth in this Section 5.7 shall
terminate upon consummation of an underwritten public offering of Common Stock
pursuant to an effective registration statement under the Securities Act that is
underwritten by one or more nationally-recognized investment banking firms.
ARTICLE 6.
INDEMNIFICATION
6.1. Indemnification by Seller
Subject to the limitations set forth in Sections 6.4 and 6.5 hereof,
Seller hereby indemnifies and holds harmless Buyers and their respective
affiliates, directors, officers, employees and agents from and against any and
all Damages (other than consequential and punitive damages that do not result
from third party Claims) arising out of, based upon or with respect to:
(i) any breach of any representation or warranty made by Seller in
this Agreement or the Related Agreements or any material misrepresentation
in or omission from any certificate, schedule, exhibit or other document
delivered to Buyers pursuant to this Agreement or the Related Agreements;
or
(ii) any failure, on the part of the Company prior to the Closing
and on the part of
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Seller at any time, to perform any material covenant, agreement or
undertaking contained in this Agreement or the Related Agreements.
6.2. Indemnification By Buyers
Subject to the limitations set forth in Sections 6.4 and 6.5 hereof,
Buyers hereby jointly and severally indemnify and hold harmless Seller and each
of its affiliates, directors, officers, employees and agents from and against
any and all Damages (other than consequential and punitive damages that do not
result from third party Claims) arising out of, based upon or with respect to:
(i) any breach of any representation or warranty made by Buyers in
this Agreement or the Related Agreements or any material misrepresentation
in or omission from any certificate, schedule, exhibit or other document
delivered to Seller pursuant to this Agreement or the Related Agreements;
or
(ii) any failure of Buyers to perform any material covenant,
agreement or undertaking of Buyers contained in this Agreement or the
Related Agreements.
6.3. Indemnification Procedures
(a) Promptly after the occurrence of any event or the discovery of any
facts which could give rise to a right to indemnification under this Article 6,
the person who may be entitled to indemnification (the "Indemnified Person")
shall promptly give notice to the Party required to indemnify the Indemnified
Person (the "Indemnitor"), in writing, describing in reasonable detail the facts
and circumstances giving rise to the claim for indemnification, the Damages
suffered or incurred, including the amount of such Damages, if known, or as
estimated, and the provisions of this Agreement relating to such claim for
indemnification. The failure of an Indemnified Person to give prompt notice in
the manner provided herein shall not relieve the Indemnitor of its obligations
under this Article 6, except to the extent that the Indemnitor is actually
prejudiced by such failure to give prompt notice. Upon receipt of a notice of a
claim for indemnification, the Indemnitor shall promptly pay to the Indemnified
Person the amount of such Damages in accordance with and subject to the
provisions of this Article 6; provided, however, that no such payment shall
- 29 -
be due during any period in which the Indemnitor is contesting in good faith
either its obligation to make such indemnification or the amount of Damages
payable.
(b) If any Claim is instituted by a third party with respect to which an
Indemnified Person intends to, or may be entitled to, claim a right to
indemnification under this Article 6, the Indemnified Person shall promptly
notify the Indemnitor of such Claim. The failure of an Indemnified Person to
give notice in the manner provided herein shall not relieve the Indemnitor of
its obligations under this Article 6, except to the extent that the Indemnitor
is actually prejudiced by such failure to give notice. The Indemnitor shall
have the right to control, at its expense and through counsel of its choosing,
the defense of any such third party Claim, but may compromise or settle the same
only with the consent of the Indemnified Person, which consent shall not be
unreasonably withheld. The Indemnified Person shall cooperate fully with the
Indemnitor and its counsel in the defense of any such third party Claim and
shall make available to the Indemnitor any books, records or other documents
within its control that are necessary or appropriate for such defense. After
providing notice of its intent to exercise its right to control such defense,
the Indemnitor shall not be responsible for any legal or other expenses
subsequently incurred by the Indemnified Person in connection therewith;
provided, however, that an Indemnified Person shall have the right to control
its defense of any such third party Claim and retain its own counsel, with the
reasonable fees and expenses to be paid by the Indemnitor, if such Indemnitor
shall have consented to such retention of counsel or the Indemnified Party shall
have reasonably concluded that representation of such Indemnified Person by the
counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnified Person and any other
party represented by such counsel in such proceeding.
(c) At no time may an Indemnitor assert as a defense to its obligation
to provide indemnification as set forth in this Article 6 that, prior to the
Closing, the Indemnified Person or any of its employees, agents or affiliates
had any knowledge of the matter to which the claim for indemnification relates,
or conducted any investigation relating thereto, and each Party hereby
irrevocably waives all such defenses.
- 30 -
6.4. Limitations on Recoveries
Notwithstanding anything to the contrary contained herein, no
indemnification claim under this Article 6 shall be (i) enforced against any
Indemnitor to the extent any insurance proceeds or other recoveries actually are
received by the Indemnified Person with respect to any Damages otherwise payable
by the Indemnitor or (ii) valid against an Indemnitor unless a written notice
pursuant to Section 6.3 of this Agreement (a "Claims Notice") has been delivered
to such Indemnitor with respect to such claim.
6.5. Remedies for Damages
The right to indemnification under this Article 6 constitutes an
Indemnified Person's sole remedy for damages with respect to the breach of any
representation or warranty contained in this Agreement. In circumstances where
Seller is the Indemnitor, an Indemnified Person shall have the right to seek
indemnification under this Article either (i) directly from Seller or (ii)
indirectly from Seller by causing the Company to (x) pay such indemnification
claim and (y) make a corresponding deduction in the amount payable or to be paid
by the Company to Seller pursuant to the Cooperation Agreement. In circumstances
where the Seller is the Indemnitor, the Indemnified Person shall specify in its
Claims Notice the indemnification source from which the Indemnified Person
intends to recover.
ARTICLE 7.
CLOSING; CONDITIONS
7.1. Closing
The transactions contemplated by this Agreement shall be consummated at a
Closing to be held at the offices of Xxxxxx & Xxxxxx, 000 Xxxxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000 or at such other place as Seller and Xxxxxx shall agree,
at the close of business on the first business day following satisfaction of the
conditions set forth in Sections 7.2 and 7.3 hereof or such later date within 14
days thereafter as shall be specified by Xxxxxx. All actions taken at the
Closing shall be deemed to occur simultaneously, and no document shall be deemed
to be delivered until all documents are delivered. Unless otherwise indicated,
each document delivered at the Closing shall be dated as of the date of the
Closing.
- 31 -
7.2. Conditions to the Obligations of Buyers
The obligations of Buyers under this Agreement are subject to the
satisfaction at or prior to Closing of the following conditions, but compliance
with any such conditions may be waived by Xxxxxx:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct, in all material respects, at and as of the
Closing, and Seller and the Company shall have performed and complied with all
the covenants and agreements and satisfied all the conditions, in all material
respects, required by this Agreement to be performed or complied with or
satisfied by Seller and the Company at or prior to the Closing. Xxxxxx shall
have received a certificate signed by Xx. Xxxxx Xxxxxxx and Xxxxxx Xxxxxx
stating that, to the best of their knowledge, the conditions specified in this
Section 7.2(a) have been satisfied.
(b) No order, judgment or decree shall have been issued restraining or
prohibiting the consummation of the transactions contemplated by this Agreement
or any of the Related Agreements. No inquiry, action or proceeding which, in
the opinion of Xxxxxx, is material shall have been instituted to restrain or
prohibit the consummation of the transactions contemplated by this Agreement or
any of the Related Agreements, or to challenge the validity of such transactions
or any part thereof, or seeking damages on account or as a result thereof.
(c) There shall have been no material adverse change in the financial
condition, results of operations, business or prospects of the Company since
December 31, 1996.
(d) All required consents and approvals shall have been obtained, all
other requirements prescribed by law which are necessary to the consummation of
the transactions contemplated hereby or by any Related Agreement shall have been
satisfied, and all statutory waiting periods in respect thereof shall have
expired or been terminated.
(e) Buyers shall have received one or more opinions from counsel to
Seller and the Company, in form and substance reasonably satisfactory to Xxxxxx
addressing the matters set forth in Exhibit F hereto.
(f) Seller and SAGA shall have executed and delivered the Cooperation
Agreement.
- 32 -
(g) The Company shall have received the resignations of (i) all of the
directors of the Company, other than Xx. Xxxxx Xxxxxxx and Xxxxxx Xxxxxx, (ii)
all of the officers of the Company, other than Xxxxxx Xxxxxx, and (iii) all of
the directors of SAGA, other than Xxxxxx Xxxxxx, in each case effective as of
the Closing.
(h) Seller shall have executed and delivered to the Company and Xxxxxx
the Release.
(i) Seller and the Company shall have executed and delivered to Xxxxxx
the Tax Matters Agreement.
(j) The Products and Research and Development Operations Transfer
Agreement dated as of December 5, 1993 between Seller and SAGA shall have been
amended in a manner satisfactory to Xxxxxx.
(k) Buyers shall have received from Seller and the Company such other
documents confirming the accuracy and completeness of the representations and
warranties of Seller as Buyers may reasonably request.
7.3. Conditions to the Obligations of Seller
The obligations of Seller under this Agreement are subject to the
satisfaction at or prior to Closing of the following conditions, but compliance
with any such conditions may be waived by Seller:
(a) The representations and warranties of Buyers contained in this
Agreement shall be true and correct, in all material respects, at and as of the
Closing, and Buyers shall have performed and complied with all the covenants and
agreements and satisfied all the conditions, in all material respects, required
by this Agreement to be performed or complied with or satisfied by Buyers at or
prior to the Closing.
(b) No order, judgment or decree shall have been issued restraining or
prohibiting the consummation of the transactions contemplated by this Agreement
or any of the Related Agreements .
(c) All required consents and approvals shall have been obtained, all
other requirements prescribed by law which are necessary to the consummation of
the transactions contemplated hereby or by any Related Agreement shall have been
satisfied, and all statutory
- 33 -
waiting periods in respect thereof shall have expired or been terminated.
(d) Seller shall have received from Buyers such other documents
confirming the accuracy and completeness of the representations and warranties
of Buyers as Seller may reasonably request.
ARTICLE 8.
TERMINATION
8.1. Termination
This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date, only as follows:
(a) By the mutual consent in writing of Seller and Xxxxxx;
(b) By Xxxxxx in writing, if Seller or the Company has, or by Seller in
writing, if any Buyer has, in any material respect, breached (i) any covenant or
agreement contained herein or (ii) any representation or warranty contained
herein, and in either case if such breach has not been cured by the earlier of
15 business days after the date on which written notice of such breach is given
to the Party committing such breach or the Closing Date;
(c) By any party hereto in writing, if the Closing Date has not occurred
by the close of business on May 1, 1997, unless the failure of the Closing to
occur by such date shall be due to the failure of the Party seeking to terminate
this Agreement to perform or observe the covenants and agreements set forth
herein; or
(d) By Seller or Xxxxxx in writing, if any Governmental Entity of
competent jurisdiction shall have issued a final non-appealable order enjoining
or otherwise prohibiting the transactions contemplated hereby.
8.2. Effect of Termination
In the event this Agreement is terminated pursuant to Section 8.1 hereof,
this Agreement shall become void and have no effect, provided, however, that
nothing herein shall relieve any Party from liability for the breach of any
representations or warranties or the breach of, or failure to perform, any
covenant made by it herein.
- 34 -
ARTICLE 9.
MISCELLANEOUS
9.1. Survival of Representations and Warranties
The representations, warranties and covenants contained in this Agreement
shall survive the Closing and any and all investigations and inquiries by the
Parties made prior to the Closing Date in connection with this Agreement and the
transactions contemplated hereby. The representations, warranties, covenants
and agreements of the Parties contained in this Agreement and the Related
Agreements shall not be affected by or diminished in any way by any
investigation (or failure to investigate) made at any time by or on behalf of
the Party for whose benefit such representations, warranties, covenants and
agreements were made.
9.2. Amendment
This Agreement may be amended or supplemented at any time by the mutual
agreement in writing of Seller, the Company and Xxxxxx. Seller and the Company
agree to approve, execute and deliver any amendment to this Agreement and any
additional plans and agreements requested by Xxxxxx to modify the structure of,
or to substitute parties to, the transactions contemplated hereby; provided,
however, that no such change shall (i) alter or change the amount or kind of
consideration to be delivered to the Seller in connection with the transactions
contemplated hereby, or (ii) materially impede or delay the consummation of the
transactions contemplated by this Agreement. Notwithstanding anything to the
contrary herein, Xxxxxx shall have the right, at any time prior to the Closing,
to modify or amend Exhibit A hereto without the consent of any other party
hereto, provided that (x) Xxxxxx shall provide notice of any such amendment or
modification to all the other parties hereto and (y) no such amendment or
modification shall increase the Equity Contribution of any Manager without such
Manager's consent.
9.3. No Waiver of Rights
No failure or delay on the part of any Party in the exercise of any power
or right hereunder shall operate as a waiver thereof. No single or partial
exercise of any right or power hereunder shall operate as a waiver of such right
or of any other right or power. The waiver by any Party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or
- 35 -
subsequent breach hereunder. Except as otherwise expressly provided herein, all
rights and remedies existing under this Agreement are cumulative with, and not
exclusive of, any rights or remedies otherwise available.
9.4. Expenses
Each Party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated in this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel.
9.5. Entire Agreement; Successors; Third Parties
This Agreement and the Related Agreements contain the entire agreement
between the Parties with respect to the transactions contemplated hereunder and
thereunder and supersede all prior arrangements or understandings with respect
thereto, written or oral, other than documents referred to herein or therein.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the Parties hereto and their respective successors and permitted
assigns. Except as specifically set forth herein or in any Related Agreement,
nothing in this Agreement or any Related Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto and thereto,
and their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities.
9.6. No Assignment
No Party hereto may assign any of its rights or obligations under this
Agreement to any other Person, except that Xxxxxx may assign its rights and/or
obligations to an affiliate of Xxxxxx.
9.7. Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, by
facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
- 36 -
If to Seller to:
Software AG
Xxxxxxxxxxxxx 00, X-00000
Xxxxxxxxx, Xxxxxxx
Attention: Xx. Xxxxx Xxxxxxx
Facsimile: 00-0000-000000
with a required copy to:
Software XX
Xxxxxxxxxxxxx 00, X-00000
Xxxxxxxxx, Xxxxxxx
Attention: Xxxxxxxxx Xxxxxx
Facsimile: 00-0000-000000
If to the Company:
Software AG Systems, Inc.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Facsimile: 000-000-0000
If to Xxxxxx:
Xxxxxx Equity Investors, III, L.P.
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
With a required copy to:
Xxxxxx & Xxxxxx
000 Xxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxx, Esq.
Facsimile: (000) 000-0000
If to any of the Managers, to the address set forth beneath the signature of
such Manager on the signature page hereof.
All such deliveries shall be deemed effective when received by the Persons
entitled to such receipt or when delivery has been attempted but refused by such
Person or Persons. Any Party may change the Persons or addresses to which such
deliveries shall be made with respect to such Party by delivering notice thereof
to the other Parties hereto in accordance with this Section 9.7.
- 37 -
9.8. Captions
The captions contained in this Agreement are for reference purposes only
and are not part of any such agreement.
9.9. Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
9.10. Governing Law and Venue
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia
applicable to agreements made and entirely to be performed within such
jurisdiction. The Party bringing any action under this Agreement shall only be
entitled to choose the federal or state courts in the Commonwealth of Virginia
as the venue for such action, and each Party consents to the jurisdiction of the
court chosen in such manner for such action.
9.11. Severability
The provisions of this Agreement are severable, and the unenforceability
of any provision of this Agreement shall not affect the enforceability of the
remainder of this Agreement. The parties acknowledge that it is their intention
that if any provision of this Agreement is determined by a court to be invalid,
illegal or unenforceable as drafted, that provision should be construed in a
manner designed to effectuate the purpose of that provision to the greatest
extent possible under applicable law.
9.12. Specific Performance
The rights of the Parties under this Agreement and the Related Agreements
are unique and the failure of a Party to perform its obligations hereunder or
thereunder would irreparably harm the other Parties hereto. Accordingly, the
Parties shall, in addition to such other remedies as may be available at law or
in equity, have the right to enforce their rights hereunder by actions for
specific performance to the extent permitted by law.
- 38 -
9.13. Further Assurances
Subject to the terms and conditions herein provided, each of the Parties
hereto shall use reasonable efforts to take, or cause to be taken, such action,
to execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and the Related
Agreements and under applicable law to consummate and make effective the
transactions contemplated by this Agreement and the Related Agreements.
9.14. Publicity
Any general notices, releases, statements or communications to employees,
suppliers, distributors, licensees or customers of the Company or Seller, or to
the general public or the press, relating to the purchase price of either the
Shares or the Repurchase Shares pursuant to this Agreement, shall be made only
at such times and in such manner as may be mutually agreed upon by Seller and
Xxxxxx.
- 39 -
IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed as of the day and year first
above written.
SOFTWARE AG
By:
----------------------------------
Xx. Xxxxx Xxxxxxx
Chairman of the Board
and
By:
----------------------------------
Xxxxxx Xxxxxxxx
Board Member
SOFTWARE AG SYSTEMS, INC.
By:
----------------------------------
Xx. Xxxxx Xxxxxxx
President
XXXXXX EQUITY INVESTORS, III, L.P.
By: TC Equity Partners, L.L.C.,
its General Partner
By: /s/ Xxxx Xxxxxxxxxx
------------------------------
Xxxx Xxxxxxxxxx
Member
- 40 -
MANAGERS:
/s/ Xxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxx
0000 Xxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
/s/ Xxxxx XxXxxxxx
-----------------------------------
Xxxxx XxXxxxxx
00000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
/s/ Xxxxx Xxxx
-----------------------------------
Xxxxx Xxxx
0000 Xxxxxxxx Xx.
Xxxxxxx, XX 00000
Facsimile: (7O3) 391-6980
/s/ Xxxxx Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx
00000 Xxxxxx Xxxx Xxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
/s/ Xxxx Xxxxx
-----------------------------------
Xxxx Xxxxx
0000 Xxxxxxxxx Xx.
Xxxxx Xxxx, XX 00000
Facsimile: (7O3) 391-8111
/s/ Xxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxx
00000 Xxxxx Xxxxx Xxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
- 39 -
IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed as of the day and year first
above written.
SOFTWARE AG
By: /s/ Xx. Xxxxx Xxxxxxx
-------------------------------
Xx. Xxxxx Xxxxxxx
Chairman of the Board
and
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Xxxxxx Xxxxxxxx
Board Member
SOFTWARE AG SYSTEMS, INC.
By: /s/ Xx. Xxxxx Xxxxxxx
-------------------------------
Xx. Xxxxx Xxxxxxx
President
XXXXXX EQUITY INVESTORS, III, L.P.
By: TC Equity Partners, L.L.C.,
its General Partner
By:
---------------------------
Xxxx Xxxxxxxxxx
AMENDED EXHIBIT A
Equity
Contribution
Buyers ($)
----------------------------------- ------------
Xxxxxx Equity Investors III, L.P. 30,392,662.86
Managers
Xxxxxx Xxxxxx 299,908.98
Xxxxx XxXxxxxx 299,908.98
Xxxx Xxxxx 124,894.71
Xxxxx Xxxx 159,655.05
Xxxxx Xxxxxxx 99,834.93
Xxxxxx Xxxxxx 149,954.49
----------
Total Equity Contributions: 31,526,820.00
