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Exhibit (7)
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is entered into
as of December 21, 1999 by and among XXX Xxxxxxxxxxx, a Massachusetts
corporation ("Parent"), Eagle Merger Corp., a Delaware corporation and a wholly
owned subsidiary of Parent (the "Purchaser"), and Computer Concepts Corp., a
Delaware corporation (the "Major Shareholder"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings ascribed in Section
1 hereof.
WHEREAS, Parent, Purchaser and Softworks, Inc., a Delaware
corporation (the "Company"), are parties to an Agreement and Plan of Merger
dated as of December 21, 1999 (the "Merger Agreement") which provides that,
among other things, upon the terms and subject to the conditions thereof,
Purchaser will be merged with and into the Company, with the Company continuing
as the surviving corporation (in such capacity, the "Surviving Entity"); and
WHEREAS, Parent, Purchaser, the Major Shareholder and Xxxxx
Xxxxxxxxx, Xxxxxx Xxxxxx and Xxxxxxx Xxxx, as trustees (the "Trustees") under
the Voting Trust Agreement, are parties to a Stock Tender Agreement dated as of
December 21, 1999 (the "Stock Tender Agreement") which provides that, among
other things, the Major Shareholder and the Trustees will take such actions as
may be necessary to tender the Shares held by the Major Shareholder pursuant to
the Offer, grant Parent an option to purchase such Shares under certain
circumstances and grant Purchaser a proxy with respect to the voting of such
Shares, all upon the terms and subject to the conditions set forth in the Stock
Tender Agreement; and
WHEREAS, Parent, Purchaser, the Company, the Major Shareholder
and State Street Bank and Trust Company, Inc., a Massachusetts trust company, as
escrow agent (the "Escrow Agent"), are entering into an Escrow Agreement dated
as of December 21, 1999 (the "Escrow Agreement") which provides that, among
other things, a portion of the consideration received by the Major Shareholder
in consideration of the purchase of the Shares held by the Major Shareholder
pursuant to the Offer be deposited into escrow, upon the terms and subject to
the conditions set forth in the Escrow Agreement; and
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WHEREAS, as a condition and inducement to Parent and Purchaser
entering into the Merger Agreement, Parent and Purchaser have requested that the
Major Shareholder agree, and the Major Shareholder has agreed, to provide
indemnification to Parent, Purchaser and the Surviving Entity, upon the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Parent, Purchaser and
the Major Shareholder hereby agree as follows:
1. Certain Definitions. For purposes of this Agreement, except as
otherwise expressly provided or unless the context clearly requires otherwise:
(a) "Closing" shall mean the consummation of the purchase by
Purchaser of Shares in the Offer.
(b) "Escrow Amount" shall mean $10 million.
(c) "Governmental Entity" shall mean a court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, whether domestic or foreign.
(d) "Loss" or "Losses" shall mean any loss, liability
(including any liability for Taxes), damage, deficiency, fine, penalty, cost and
expense (including reasonable expenses of investigation, amounts paid in
settlement, interest, court costs, reasonable fees and expenses of attorneys and
accountants and other costs of litigation).
(e) "Offer" shall mean the cash tender offer to be made by
Purchaser pursuant to Section 1.1 of the Merger Agreement to acquire any and all
issued and outstanding Shares at $10.00 per Share net to the seller in cash, or
such increased amount, if any, as the Purchaser may offer to pay as contemplated
by Section 1.1(a) and Section 5.5(b) of the Merger Agreement.
(f) "Person" shall mean a natural person, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Entity or other
entity or organization.
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(g) "Shares" shall mean the shares of common stock, par
value $.001 per share, of the Company.
(h) "Subsidiary" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (a) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or (b) such party or any other Subsidiary
of such party is a general partner (excluding any such partnership where such
party or any Subsidiary of such party does not have a majority of the voting
interest in such partnership).
(i) "Tax" or "Taxes" shall mean all taxes, charges, fees,
duties, levies, tariffs, imposts, penalties or other assessments of any kind
imposed by any federal, state, local or foreign governmental authority,
including, but not limited to, income, gross receipts, excise, profits, ad
valorem, net worth, value added, service, special assessments, workers'
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, real or personal property, sales, gain, use,
license, custom duty, unemployment, capital stock, transfer, franchise,
payroll, withholding, social security, minimum estimated, and other taxes, and
shall include interest, penalties or additions attributable thereto; provided
that "Tax" or "Taxes" as used herein shall not include (i) any amounts arising
as a result of the filing of any amended tax return filed by the Company unless
such amendment is required by applicable law, rule or regulation or (ii) as a
result of the negligence of Parent or Purchaser.
(j) "Voting Trust Agreement" shall mean the Voting Trust
Agreement, dated as of August 3, 1998, between the Company, the Major Share-
holder and the Trustees.
2. Indemnification.
(a) (i) The Major Shareholder shall indemnify and hold
harmless Parent, Purchaser, the Surviving Entity and their respective
Subsidiaries and officers, directors, employees and agents (the "Indemnified
Parties") from and against and in respect of any Loss incurred or sustained by
any of them as a result of any breach (A) by the Company of any of the
representations or warranties relating to the Company contained in Sections 3.3,
3.9, 3.10, 3.11, 3.12, 3.13, 3.16 and 3.18
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of the Merger Agreement and (B) by the Major Shareholder of any of the
representations and warranties relating to the Major Shareholder contained in
Section 11 of the Stock Tender Agreement. The Major Shareholder shall not be
required to indemnify any Indemnified Party under this Section 2(a) unless and
until the aggregate Losses with respect to which the Indemnified Parties are
entitled to indemnification hereunder exceed $100,000, in which case the
parties incurring the indemnification obligations with respect to such Losses
shall be responsible for the entire amount of such Losses. In no event shall any
Indemnified Party be entitled to indemnification for any Losses incurred by such
Indemnified Party to the extent that such Indemnified Party has already actually
received payment for such Losses pursuant to this Section 2(a). No investigation
made by Parent or Purchaser or any other Person shall affect any representation
or warranty of the Company or the Major Shareholder contained in the Merger
Agreement or the Stock Tender Agreement.
(b) To secure the indemnification obligations described in
Section 2(a) hereof, the Escrow Amount will be deposited into escrow with the
Escrow Agent in accordance with Section 2 of the Escrow Agreement. The Escrow
Amount will be subject to delivery to Parent upon the terms and subject to the
conditions set forth within the Escrow Agreement.
3. Procedure for Indemnification.
(a) An Indemnified Party shall give prompt written notice (a
"Claim Notice") to the Escrow Agent, with a copy to the Major Shareholder, of
any claim or event known to it which does, or in its reasonable judgment may,
give rise to a claim for indemnification hereunder (an "Indemnifiable Claim") by
the Indemnified Party against the Major Shareholder; provided that the failure
of any Indemnified Party to give Claim Notice as provided in this Section 3(a)
shall not relieve the Major Shareholder of its obligations under this Agreement,
except to the extent that such failure has materially and adversely affected the
rights of the Major Shareholder. A Claim Notice shall specify the basis for and
estimated amount of such Indemnifiable Claim. In the case of any claim for
indemnification hereunder arising out of a claim, action, suit or proceeding
brought by any Person who is not a party to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall also give the Major Shareholder copies of
any written claims, process or legal pleadings with respect to such Third-Party
Claim promptly after such documents are received by the Indemnified Party.
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(b) The Indemnified Party shall be entitled to control the
defense of any Third-Party Claim; provided, however, that the Major Shareholder
may elect, at its own cost and expense, to participate in any Third-Party Claim;
provided further, however, that the Major Shareholder shall not take any action
with respect to such Third-Party Claim before consulting with, and receiving the
consent of, each Indemnified Party involved. The Major Shareholder shall
reasonably cooperate in the compromise of, or defense against, such Third-Party
Claim. The Major Shareholder shall pay its own costs and expenses incurred in
connection with such cooperation. The Indemnified Party shall not consent to
entry of any judgement or enter into any settlement without the prior written
consent of the Major Share holder (which consent shall not be unreasonably
withheld).
(c) If the Indemnified Party elects not to compromise or
defend against a Third-Party Claim, the Major Shareholder shall pay, compromise
or defend such Third-Party Claim at the Major Shareholder's own cost and
expense. Major Shareholder shall, within ten days (or sooner, if the nature of
such Third-Party Claim so requires), notify the Indemnified Party of its intent
to pay, compromise or defend such Third-Party Claim, and such Indemnified Party
shall reasonably cooperate in the compromise of, or defense against, such
Third-Party Claim. The Major Shareholder shall pay the Indemnified Party's costs
and expenses incurred in connection with such cooperation. The Major Shareholder
shall not consent to entry of any judgment or enter into any settlement without
the prior written consent of each related Indemnified Party (which consent shall
not be unreasonably withheld), unless such judgment or settlement provides
solely for money damages or other money payments for which such Indemnified
Party is entitled to indemnification hereunder and includes as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such Third-Party Claim. After
notice from the Major Shareholder to an Indemnified Party of its election to
assume the defense of a Third-Party Claim, the Major Shareholder shall not be
liable to such Indemnified Party under Sections 2 or 3 hereof for any legal
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof; provided that such Indemnified Party shall have the right to
employ one counsel of its choice to represent such Indemnified Party if, in such
Indemnified Party's reasonable judgment, a conflict of interest between such
Indemnified Party and the Major Shareholder exists in respect of such claim, or
if there is a reasonable likelihood that a Third-Party Claim may have a material
adverse effect on an Indemnified Party, and in that event the reasonable fees
and expenses of such separate counsel shall be paid by the Major Shareholder.
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(d) If the amount of any Losses shall, at any time
subsequent to payment pursuant to this Agreement, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the Indemnified
Party to the Major Shareholder.
4. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
sent by facsimile (if confirmed) or mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, as specified below):
(a) if to Parent, Purchaser or the Surviving Entity, to:
XXX Xxxxxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Vice President, Corporate Development
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
XXX Xxxxxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Office of the General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
and a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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(b) If to the Major Shareholder:
Computer Concepts Corp.
00 Xxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx XxxXxxxxx, Xx., President
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) If to the Escrow Agent:
State Street Bank and Trust Company, Inc.
0 Xxxxxx xx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxxx Xxxxx, 0xx Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
The address of a party for the purposes of this Section 4 may be changed by
giving written notice to the other parties hereto of such change in the manner
provided herein for giving notice. Unless and until such written notice is
received, the addresses as provided herein shall be deemed to continue in effect
for all purposes hereunder.
5. Entire Agreement; Binding Effect. This Agreement and the
agreements, documents and other instruments referred to herein (a) constitute
the entire agreement, and supersede all other agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof and (b) shall not be assigned by any party (by operation of law or
otherwise) without the prior written consent of the other parties.
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6. Applicable Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles thereof relating to conflicts of law.
7. Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the Commonwealth of Massachusetts or any Massachusetts state court in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a Federal or state court sitting in the Commonwealth of
Massachusetts.
8. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective successors
and permitted assigns, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
9. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which,
when so executed and delivered, shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10. Interpretation. The section and other 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." Unless otherwise indicated herein or
the context otherwise requires, the masculine pronoun shall include the feminine
and neuter, and the singular shall include the plural. The word "or" shall not
be deemed exclusive.
11. Severability. In case any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal or unenforceable
by a competent court in any jurisdiction, the validity, legality and
enforceability of the remaining terms, provisions, covenants or restrictions, or
of such term, provision, covenant or
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restriction in any other jurisdiction, shall not in any way be affected or
impaired thereby.
12. Amendment and Waiver. No amendment of any provision of this
Agreement shall in any event be effective, unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party, but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provision
hereof or to take any such action.
13. Termination. This Agreement shall terminate two years after
the date upon which the Closing occurred; provided, however, that if prior to
such date, the Major Shareholder or the Escrow Agent shall have received a Claim
Notice in accordance with Section 3(a) hereof, this Agreement shall not
terminate until such outstanding Indemnifiable Claim has been finally resolved.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement under seal as of the date first written above.
XXX XXXXXXXXXXX
By: /s/ Xxxxxxx X. Xxxx
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Name: Xxxxxxx X. Xxxx
Title: Vice President, Corporate Development
EAGLE MERGER CORP.
By: /s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
Title: Secretary
COMPUTER CONCEPTS CORP.
By: /s/ Xxxxxx XxxXxxxxx
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Name: Xxxxxx XxxXxxxxx
Title: Chairman
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