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PRINCIPAL SHARE PURCHASE
AND VOTING AGREEMENT
THIS PRINCIPAL SHARE PURCHASE AND VOTING AGREEMENT (this "Agreement") is
made and entered into as of December 6, 2001 among ▇▇▇▇▇ Systems Group, Inc., a
Delaware corporation ("ASG"), ASG Sub, Inc., a Virginia corporation ("ASG Sub"),
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (the "Principal Shareholder"), a shareholder of
Landmark Systems Corporation, a Virginia corporation ("Landmark"). Capitalized
terms used and not otherwise defined herein shall have the respective meanings
set forth in the Merger Agreement defined below.
RECITALS
A. Principal Shareholder is the owner of record of the number of Shares
indicated on the signature page of this Agreement ("Principal Shares");
B. Concurrently with the execution and delivery of this Agreement, ASG,
ASG Sub, and Landmark have entered into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which ASG Sub and Landmark will be merged, and
each Share that is (i) issued and outstanding immediately prior to the Effective
Time and (ii) not owned by ASG, ASG Sub or Landmark will be converted into the
right to receive the Merger Consideration; and
C. In order to induce ASG and ASG Sub to enter into the Merger Agreement
and consummate the Merger, Principal Shareholder has agreed to execute and
deliver to ASG this Agreement, pursuant to which Principal Shareholder has
agreed to (i) sell, exchange and deliver to ASG, immediately prior to the
conversion of the Shares pursuant to the Merger Agreement, the Principal Shares
in return for (a) the Share Consideration as defined herein and (b) a guarantee
by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "Guarantor") of all amounts due to Principal Shareholder
under this Agreement pursuant to that certain Guarantee and Promise to Pay (the
"Guarantee"), attached hereto as Exhibit A (the "Sale"), (ii) grant ASG or ASG
Sub an irrevocable proxy with respect to the issued and outstanding Principal
Shares, and (iii) make certain representations, warranties, covenants and
agreements in connection with the Sale.
THEREFORE, in consideration of the mutual covenants herein set forth, in
consideration of ASG and ASG Sub entering into the Merger Agreement and in
consideration of Guarantor entering into the Guarantee, the parties agree as
follows:
1. Purchase and Sale of Principal Shares
(a) Sale. Subject to the terms and conditions of this Agreement, at
the Share Purchase Closing referred to in Section 1(d) hereof, Principal
Shareholder shall sell, assign, transfer and deliver the Principal Shares to ASG
free and clear of all Liens.
(b) Consideration. In consideration of the sale, assignment,
transfer and delivery of the Principal Shares, ASG shall pay to the Principal
Shareholder the following:
(i) One Dollar, plus
(ii) an amount equal to 9.41% of the Landmark Product Line
Cash Receipts (the "Contingent Payments"), payable semi-annually in
accordance with Section 1.3(c) below. The obligation to make the
Contingent Payments shall continue until the Principal Shareholder has
received from ASG (or, on behalf of ASG, from the Guarantor pursuant to
the Guarantee) an amount equal to the sum of (A) the number of Principal
Shares multiplied by the Merger Consideration, as further adjusted
pursuant to Section 15 hereof (the "Contingent Consideration"), plus (B)
thirteen percent (13%) annual interest compounded semi-annually on the
unpaid balance of the Contingent Consideration (the Contingent
Consideration plus interest, the "Total Contingent Consideration"), at
which time the Contingent Payments shall cease. The Total Contingent
Consideration, together with the One Dollar to be paid to the Principal
Shareholder pursuant to clause (i) above, shall be defined herein as
"Share Consideration".
(iii) For purposes of this Agreement, the term "Landmark
Product Line Cash Receipts" shall mean all cash receipts obtained by ASG
and its Affiliates after the Effective Time in respect of maintenance,
upgrade, portfolio, access and license fees, and any and all like fees
(not including professional service fees such as consulting fees and
customization fees for services performed by ASG or its Affiliates),
relating to the Landmark Product Line. The "Landmark Product Line" shall
mean all products of Landmark existing immediately prior to the
Effective Time, including, but not limited to all TMON, TMON for
Websphere, TMON for Linux and other TMON-related products, and all
derivative works thereof. If, at anytime during the term of this
Agreement, any product in the Landmark Product Line is licensed to a
third-party customer or otherwise along with any other software product
or service in a bundle, Landmark Product Line Cash Receipts attributable
to such license shall be calculated based upon the proportion of the
relative list prices of all products and services in the bundle
allocable to the Landmark Product Line product or products.
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(c) Procedure for Payment of Contingent Payments.
(i) Within thirty (30) days following the end of each
six-month period commencing after the Effective Time ("Statement Period"), ASG
shall furnish the Principal Shareholder with a calculation in reasonable detail
of the Landmark Product Line Cash Receipts and a calculation of the Contingent
Payment due (the "Payment Statement"). At the same time as ASG provides the
Payment Statement to the Principal Shareholder, ASG shall pay to the Principal
Shareholder the Contingent Payment in the amount set forth in the Payment
Statement. In addition to the foregoing semi-annual payments, if ASG has not
made the second semi-annual payment by March 31, 2003, ASG shall make a payment
on March 31, 2003 of the Contingent Payments due to Principal Shareholder for
the period through February 28, 2003. For the avoidance of doubt, the second
semi-annual payment shall be due at the same time as if the March payment had
not been made but shall cover only Contingent Payments due for the period
between March 1, 2003 and the date such second annual payment would otherwise be
due.
(ii) The Principal Shareholder shall have a period of thirty
(30) days after receipt by the Principal Shareholder of the Payment Statement
and the payment (the "Notice Period") to notify ASG of his election to accept or
reject (and in the case of a rejection, there shall be included in such notice
the reasons for such rejection in reasonable detail) the Payment Statement. In
the event no notice is received by ASG during the Notice Period, the Payment
Statement shall be deemed accepted by the Principal Shareholder and final and
binding on the parties hereto. In the event that the Principal Shareholder shall
timely reject the Payment Statement, ASG and the Principal Shareholder shall
attempt to make a joint determination of the Landmark Product Line Cash Receipts
for the Statement Period and such determination shall be final and binding on
the parties hereto.
(iii) In the event the Principal Shareholder and ASG are
unable to agree upon a joint determination of the Landmark Product Line Cash
Receipts for the Statement Period, then within sixty (60) days after receipt by
the Principal Shareholder of the disputed Payment Statement and payment, ASG and
the Principal Shareholder shall submit the dispute to ASG's nationally
recognized independent public accountant. ASG and the Principal Shareholder
shall request that such independent public accountant render its determination
prior to ninety (90) days after receipt by the Principal Shareholder of the
disputed Payment Statement and payment and such determination and any required
adjustments resulting therefrom shall be final and binding on all the parties
hereto. The fees and expenses of the independent public accountant incurred
pursuant to this Section 1(c) shall be divided evenly between the Principal
Shareholder and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, unless the amount of any adjustment in favor
of the Principal Shareholder shall exceed 10% of the Contingent Payment, in
which case all of such fees and expenses shall be paid by ASG.
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(d) Share Purchase Closing. The closing of the transactions
contemplated by this Agreement (the "Share Purchase Closing") will take place at
the offices of Steptoe & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇ on the same date as, and immediately prior to, the Effective Time.
(i) At the Share Purchase Closing, there will be delivered
to Principal Shareholder by ASG (A) the consideration referred to in Section
1(b)(i) hereof; (B) the Guarantee; and (C) all previously undelivered documents
required to be delivered by ASG or ASG Sub at or prior to the Share Purchase
Closing in connection with the transactions contemplated by this Agreement.
(ii) At the Share Purchase Closing, Principal Shareholder
will deliver to ASG or ASG Sub (A) duly endorsed stock certificates transferring
ownership to ASG Sub of the Principal Shares; (B) an executed subordination
agreement in the form attached hereto as Exhibit B; and (C) all other previously
undelivered documents required to be delivered by the Principal Shareholder to
ASG at or prior to the Share Purchase Closing in connection with the
transactions contemplated by this Agreement.
2. Agreement to Retain Principal Shares and Options.
(a) No Transfer. Principal Shareholder agrees not to transfer, sell,
exchange, pledge or otherwise dispose of or encumber any of the Principal Shares
or Options held by such Principal Shareholder, or make any offer or agreement
relating thereto, at any time prior to the earlier of the Share Purchase Closing
or the Expiration Date. Principal Shareholder understands and agrees that if
Principal Shareholder attempts to transfer, vote or provide any other Person
with the authority to vote any of the Principal Shares other than in compliance
with this Agreement, Landmark shall not, and Principal Shareholder hereby
unconditionally and irrevocably instructs Landmark not to, permit any such
transfer on its books and records, issue a new certificate representing any of
the Principal Shares or record such vote unless and until Principal Shareholder
shall have complied with the terms of this Agreement. As used herein, the term
"Expiration Date" shall mean the earlier to occur of: (i) the Effective Time,
(ii) the date of termination of the Merger Agreement in accordance with the
terms thereof (other than pursuant to the terms of Sections 7.1(b)(iii) or
7.1(e)), and (iii) December 31, 2002 (if the Merger Agreement is terminated in
accordance with the terms of Sections 7.1(b)(iii) or 7.1(e)).
(b) New Shares and Options. Principal Shareholder agrees that any
shares of capital stock or voting securities of Landmark or any Options that
Principal Shareholder purchases or with respect to which Principal Shareholder
otherwise acquires record ownership after the date of this Agreement and prior
to the Expiration Date shall be subject to the terms and conditions of this
Agreement to the same extent as if such shares were, and shall be considered for
purposes of this Agreement as, Principal Shares or Options owned of record by
the Principal Shareholder as of the date hereof.
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3. Agreement to Vote Principal Shares and Take Certain Other Action.
(a) Voting. Prior to the earlier of the Share Purchase Closing or
the Expiration Date, at every meeting of the shareholders of Landmark at which
any of the matters set forth in this Section 3(a) is considered or voted upon,
and at every adjournment or postponement thereof, and on every action or
approval by written consent of the shareholders of Landmark with respect to any
of the following matters, Principal Shareholder shall vote all of the Principal
Shares: (i) in favor of adoption of the Merger Agreement and the terms thereof,
and each of the other transactions contemplated by the Merger Agreement, and any
matter which would, or could reasonably be expected to, facilitate the Merger;
(ii) against approval of any Takeover Proposal and (iii) against any other
proposal or action which would, or could reasonably be expected to, prohibit or
discourage the Merger, including any amendment of the articles of incorporation
or bylaws of Landmark not previously contemplated under the Merger Agreement
which would dilute in any material respect the benefits to ASG or ASG Sub of the
Merger or change in any manner the voting rights of any shares of Landmark
capital stock. Prior to the earlier of the Share Purchase Closing or the
Expiration Date, Principal Shareholder, as the holder of voting stock of
Landmark, shall be present, in person or by proxy at all meetings of
shareholders of Landmark at which any matter referred to in this Section 3 is to
be voted upon so that all of the Principal Shares are counted for the purposes
of determining the presence of a quorum at such meetings. This Agreement is
intended to bind the Principal Shareholder only with respect to the specific
matters set forth in this Section 3(a).
(b) Takeover Proposals. Until the earlier of the Share Purchase
Closing or the Expiration Date, the Principal Shareholder will not (and will use
all reasonable efforts to cause Landmark or any Subsidiary, officer, director or
employee of, or any financial advisor, attorney, accountant, agent or other
advisor retained by Landmark or the Principal Shareholder, not to), directly or
indirectly: (i) solicit, discuss, or engage in negotiations with, or provide any
information to any Person, other than ASG or ASG Sub and their respective
representatives, concerning any possible Takeover Proposal. Notwithstanding the
foregoing, nothing contained in this Agreement will prevent the Principal
Shareholder from furnishing information to or entering into discussions or
negotiations with any unsolicited Person or taking any other action that may be
required of him in order to exercise his fiduciary duties, as a member of the
Landmark Board of Directors, under applicable laws. In the event any Principal
Shareholder shall receive or become aware of any Takeover Proposal subsequent to
the date hereof, Principal Shareholder shall promptly inform ASG and ASG Sub as
to any such matter and the details thereof.
(c) Further Assurances. Principal Shareholder agrees not to take any
action that would make any representation or warranty contained herein untrue or
incorrect or have the effect of impairing the ability of Principal Shareholder
to perform its obligations under this Agreement, or preventing or delaying the
consummation of any of the transactions contemplated hereby.
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4. Irrevocable Proxy. Principal Shareholder hereby agrees to timely deliver
to ASG or ASG Sub a duly executed proxy in the form attached hereto as Exhibit C
(the "Proxy"), such Proxy to cover the issued and outstanding Principal Shares
in respect of which Principal Shareholder is the record holder and is entitled
to vote at each meeting of the shareholders of Landmark (including, without
limitation, each written consent in lieu of a meeting) prior to the Expiration
Date. In the event that Principal Shareholder is unable to provide any such
Proxy in a timely manner, Principal Shareholder hereby grants ASG a power of
attorney to execute and deliver such Proxy for and on behalf of Principal
Shareholder, such power of attorney, which being coupled with an interest, shall
survive any death, disability, bankruptcy, or any other such impediment of
Principal Shareholder. Upon the execution of this Agreement by Principal
Shareholder, Principal Shareholder hereby revokes any and all prior proxies or
powers of attorney given by Principal Shareholder with respect to voting of the
Principal Shares on the matters referred to in Section 3 and agrees not to (a)
grant any subsequent proxies or powers of attorney with respect to the voting of
the Principal Shares, (b) deposit any of the Principal Shares into a voting
trust, or (c) enter into a voting agreement with respect to any of the Principal
Shares, until after the earlier of the Share Purchase Closing and the Expiration
Date.
5. Representations and Warranties of Principal Shareholder. Except as set
forth in the disclosure letter delivered by the Principal Shareholder to ASG and
ASG Sub concurrently with the execution of this Agreement (the "Principal
Shareholder Disclosure Letter"), Principal Shareholder represents and warrants
as of the date hereof and the Effective Time as follows:
(a) No Encumbrances. Principal Shareholder is the record and
beneficial owner of the Principal Shares, with power to vote the Principal
Shares or cause the Principal Shares to be voted and, except as otherwise set
forth on the signature page hereto, (i) Principal Shareholder (A) has held such
Principal Shares at all times since the date set forth on such signature page,
and (B) did not acquire any Principal Shares in contemplation of the Merger;
(ii) the Principal Shares set forth on the signature page hereto constitute
Principal Shareholder's entire interest of record in the outstanding capital
stock and voting securities of Landmark; (iii) no other Person not a signatory
to this Agreement has any beneficial interest in or a right to acquire such
Principal Shares or any portion of such Principal Shares; (iv) Principal
Shareholder has complete and unrestricted power and the unqualified right to
sell, assign, and deliver to ASG, and upon consummation of the transactions
contemplated by this Agreement, ASG will acquire, good, valid and marketable
title to, the Principal Shares, free and clear of all mortgages, pledges, Liens,
security interests, conditional sales agreements, encumbrances, hypothecations,
voting trusts, options, calls, warrants or charges of any kind; and (v)
Principal Shareholder's address is accurately set forth on the signature page
hereto.
(b) Legal Capacity. Principal Shareholder has full power and legal
capacity to execute and deliver this Agreement and the other Transaction
Agreements to which he is a party and to perform his obligations hereunder and
thereunder. Each of this
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Agreement and the other Transaction Agreements to which Principal Shareholder is
a party has been duly and validly executed and delivered by Principal
Shareholder and constitutes the valid and binding obligation of Principal
Shareholder, enforceable against Principal Shareholder in accordance with its
terms (except as enforcement hereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium and similar laws, both state and federal,
affecting the enforcement of creditors' rights or remedies in general as from
time to time in effect or (ii) the exercise by courts of equity powers). The
execution and delivery of this Agreement and the other Transaction Agreements to
which Principal Shareholder is a party by Principal Shareholder does not, and
the performance of Principal Shareholder's obligations hereunder and thereunder
will not, result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any right to terminate, amend, accelerate or cancel any right or obligation
under, or result in the creation of any lien or encumbrance on any Principal
Shares pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Principal Shareholder or Landmark is a party or by which Principal Shareholder
or the Principal Shares are or will be bound or affected.
(c) Securities Matters.
(i) Principal Shareholder is an accredited investor, as that
term is defined pursuant to Regulation D under the Securities Act of 1933, as
amended ("Securities Act"), because Principal Shareholder (i) had individual
income of more than $200,000 in each of the most recent two years, or joint
individual income with his spouse in excess of $300,000 in each of those years
and he reasonably expects to reach the same level of income in the current year;
or (ii) has an individual net worth, or has a combined net worth with his
spouse, in excess of $1,000,000.
(ii) Principal Shareholder has agreed to invest in the
Contingent Payments for Principal Shareholder's own account, not as a nominee or
agent and not with a view to the resale or distribution of all or any part of
his interest therein, and Principal Shareholder has no intention of selling,
granting any participation in, or otherwise distributing his interest in the
Contingent Payments.
(iii) Principal Shareholder understands and acknowledges that
the Contingent Payments will not be registered under the Securities Act or under
any applicable state blue sky or securities laws on the grounds that the
offering and sale of the Contingent Payments are exempt from registration
pursuant to Section 4(2) of the Securities Act and/or Regulation D and the rules
and regulations under the Securities Act, and exempt from qualification pursuant
to comparable available exemptions in the various states, and that ASG's
reliance upon such exemptions is predicated upon Principal Shareholder's
representations set forth in this Agreement.
(iv) Principal Shareholder understands that he may not be
able to sell or dispose of his interests in the Contingent Payments because of
the restrictions
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referred to above and because there is no public trading market for the
Contingent Payments and no such market is contemplated.
(v) Principal Shareholder has such knowledge and experience
in financial and business matters that he is capable of evaluating the merits
and risks of an investment in the Contingent Payments. Principal Shareholder is
able to bear the economic risk of the investment in the Contingent Payments
(including the complete loss of this investment) and has determined that this
investment is suitable for him in light of his financial circumstances and
available investment opportunities.
(vi) Principal Shareholder, or a person acting on his behalf,
has had the opportunity to ask questions of and receive answers from ASG and its
officers concerning the terms and conditions of the Contingent Payments and
concerning ASG and ASG Sub, the operations of ASG and any other matters relating
to the Contingent Payments; and has had access during the course of the
transaction and prior to sale, to all information which he required in order to
determine whether or not to enter into this Agreement and vote in favor of the
Merger; and has had the opportunity to obtain any additional information which
ASG or ASG Sub possesses or can acquire without unreasonable effort or expense,
necessary to verify the accuracy of the information about the Contingent
Payments provided by ASG or ASG Sub to the Principal Shareholder; and Principal
Shareholder has received answers to all inquiries he has put to ASG's and ASG
Sub's officers relating thereto; and Principal Shareholder has been supplied by
ASG and ASG Sub with such additional information, including original source
documents, as he may have requested.
(d) Broker. Except as set forth in the Merger Agreement, no broker,
investment banker, financial advisor or other Person, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission, nor
to any fee that is contingent on closing of the transactions contemplated hereby
or that is based on a percentage of the transaction value, in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Principal Shareholder.
6. Representations and Warranties of ASG and ASG Sub. Except as set forth
in the disclosure letter delivered by ASG to the Principal Shareholder
concurrently with the execution of this Agreement (the "ASG Disclosure Letter"),
ASG and ASG Sub represent and warrant as of the date hereof and the Effective
Time as follows:
(a) Organization, Standing and Corporate Power. ASG is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. ASG Sub is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of ASG and ASG Sub is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or
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leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed
individually or in the aggregate would not have a Material Adverse Effect on
ASG.
(b) Authority. ASG and ASG Sub have all requisite corporate power
and authority to enter into this Agreement and the other Transaction Agreements.
Subject to receipt of the approvals, consents and clearances relating to the
filings described in Section 6(c), ASG and ASG Sub have the authority to
consummate the transactions contemplated by this Agreement and the other
Transaction Agreements. The execution and delivery by ASG and ASG Sub of this
Agreement and the other Transaction Agreements and the consummation by ASG and
ASG Sub of the transactions contemplated by this Agreement and the other
Transaction Agreements have been duly authorized by all necessary corporate
action on the part of ASG and ASG Sub. Each of this Agreement and the other
Transaction Agreements has been duly executed and delivered by ASG and ASG Sub
and constitutes a valid and binding obligation of each such party, enforceable
against each such party in accordance with its terms (except as enforcement
hereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
and similar laws, both state and federal, affecting the enforcement of
creditors' rights or remedies in general as from time to time in effect or (ii)
the exercise by courts of equity powers).
(c) No Consent. No waiver, consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity or any
other Person is required by or with respect to ASG or any of its Subsidiaries in
connection with the execution and delivery by ASG or ASG Sub of this Agreement
or the consummation by ASG or ASG Sub, as the case may be, of any of the
transactions contemplated by this Agreement, except for (i) such consents and
approvals required pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") or other antitrust laws and any similar filings and
approvals required under foreign jurisdictions, and (ii) such waivers, consents,
approvals, orders, authorizations, registrations, declarations and filings as
would not individually or in the aggregate (A) have a Material Adverse Effect on
ASG (B) materially impair the ability of ASG and ASG Sub to perform their
respective obligations under this Agreement or (C) prevent ASG and ASG Sub from
consummating, or materially impair the ability of ASG and ASG Sub to consummate,
any of the transactions contemplated by this Agreement.
(d) Noncontravention. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of ASG
or any of its Subsidiaries under (i) the certificate of incorporation or bylaws
of ASG or any of its Subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to ASG or any of its Subsidiaries or
their respective
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properties or assets or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to ASG or any of its Subsidiaries or
their respective properties or assets, other than, in the case of clause (ii) or
(iii) of this sentence, any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not (x) have a Material
Adverse Effect on ASG, (y) materially impair the ability of ASG or ASG Sub to
perform their obligations under this Agreement or (z) prevent the consummation
of any of the transactions contemplated by this Agreement.
(e) Absence of Certain Changes or Events. Since September 30, 2001,
ASG and each of its Subsidiaries has conducted its business only in the ordinary
course, and there has not been (i) any change in accounting methods, principles
or practices by ASG or such Subsidiary materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
GAAP, or (ii) any material revaluation of any of ASG's or such Subsidiary's
assets, including, without limitation, writing down the value of capitalized
inventory or writing off accounts receivable, other than in the ordinary course
consistent with past practice.
(f) Compliance with Laws. ASG and each of its Subsidiaries has in
effect all Permits necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted, and there has occurred no
default under any such Permit, except for the lack of Permits and for defaults
under Permits which individually or in the aggregate would not have a Material
Adverse Effect on ASG. ASG and its Subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for noncompliance which individually or in the
aggregate would not have a Material Adverse Effect on ASG.
(g) Broker. Except as set forth in the Merger Agreement, no broker,
investment banker, financial advisor or other Person, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission, nor
to any fee that is contingent upon the closing of the transactions contemplated
hereby or that is based on a percentage of the transaction value, in connection
with the transactions contemplated by this Agreement, based upon arrangements
made by or on behalf of ASG or ASG Sub.
(h) Litigation. There is no suit, action or proceeding pending or,
to the knowledge of ASG, threatened against ASG or any of its Subsidiaries, nor,
to the knowledge of ASG, is there any reasonable basis therefor, that
individually or in the aggregate could reasonably be expected to (i) challenge
or seek to enjoin or seek damages with respect to ASG's or ASG Sub's entering
into and performing this Agreement or that impair the ability of ASG or ASG Sub
to perform its obligations under this Agreement or (ii) prevent the consummation
of any of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator pending, or to the knowledge of ASG, threatened against ASG or any of
its Subsidiaries having, or which is reasonably likely to have, any effect
referred to in the foregoing clauses (i) or (ii) above.
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(i) Financial Statements. The financial statements of ASG attached
hereto as Exhibit D have been prepared in accordance with GAAP (except, in the
case of unaudited statements, as permitted by the rules and regulations of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of ASG and its Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Neither ASG nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which are, individually or in the aggregate, material to the
business, results of operations or financial condition of ASG and its
Subsidiaries taken as a whole, except liabilities (i) provided for in the most
recent consolidated balance sheet included in Exhibit D, (ii) incurred since the
date of such balance sheet in the ordinary course of business consistent with
past practices, or (iii) incurred since the date of such balance sheet in
connection with the transactions contemplated by the Merger Agreement.
(j) Disclosure. No representation or warranty by ASG or ASG Sub in
this Agreement or in any Transaction Agreement executed as of the date hereof,
or to be executed at the Share Purchase Closing, contains any untrue statement
of material fact, or omits at the time of execution to state a material fact
necessary to make the statements contained herein or therein not misleading. To
the knowledge of the chief executive officer of ASG, there is no fact that has
not been disclosed to Principal Shareholder in writing that has had, or insofar
as such chief executive officer can now reasonably foresee, may have a Material
Adverse Effect on the ability of ASG or ASG Sub to perform fully its obligations
under this Agreement or any Transaction Agreement.
7. Covenants of ASG.
(a) ASG hereby agrees that, until the Total Contingent Consideration
and any and all amounts owed to Principal Shareholder pursuant to Section 8(d)
of this Agreement are paid to the Principal Shareholder, ASG shall:
(i) use all reasonable efforts to preserve relationships
with customers of the Landmark Product Line;
(ii) not sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any material portion of the
Landmark Product Line (including Intellectual Property), except to customers in
the ordinary course of business or pursuant to the Credit Agreement (for
purposes hereof, the "Credit Agreement" shall mean the Credit Agreement dated
April 26, 2000 among ASG, ASG Sub, Inc., the financial institutions that are or
may from time to time become a party thereto and LaSalle Bank National
Association, as a lender and the administrative agent and KeyBank National
Association as a lender and the syndication agent, as such agreement may be: (i)
amended, supplemented, renewed, extended or otherwise
-11-
modified from time to time, or (ii) replaced by a new credit agreement in which
the existing debt is refinanced, refunded or replaced);
(iii) not, except in connection with the Credit Agreement,
incur an indebtedness for borrowed money or draw down on any credit facility or
arrangement or guarantee any indebtedness of another Person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
ASG or any of its Subsidiaries, guarantee any debt securities of another Person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having the
economic effect of the foregoing with the exception of any royalty obligations
or contingent payment obligations related to intellectual property other than
the Landmark Product Line (any such event or occurrence, "New Indebtedness"), if
the amount of such New Indebtedness would exceed an amount equal to four (4)
times pro forma earnings before interest, taxes, depreciation and amortization
("Pro forma EBITDA") for ASG, as calculated on the date on which the New
Indebtedness is incurred. For purposes of this Agreement, Pro forma EBITDA shall
be determined by giving effect to the New Indebtedness and the transaction or
transactions to be funded by the New Indebtedness.
(iv) keep proper records, books and accounts in conformity
with GAAP of all dealings and transactions in relation to the Landmark Product
Line.
(b) ASG hereby agrees that, until the Total Contingent Consideration
and any and all amounts owed to Principal Shareholder pursuant to Section 8(d)
of this Agreement are paid to the Principal Shareholder, ASG shall not:
(i) at any time while ASG is in default of its Contingent
Payment obligations hereunder, (x) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its capital stock, other
than dividends and distributions by any direct or indirect wholly-owned
Subsidiary of ASG to its parent or (y) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) pursue any merger, consolidation, restructuring,
recapitalization of ASG or any ASG Subsidiary that derives annual revenues equal
to five percent or more of ASG's total annual revenues (a "Material Subsidiary")
or otherwise take any actions (including seeking or soliciting corporate
approvals) directed towards seeking to liquidate or dissolve ASG or such
Subsidiary; provided, however, that ASG may liquidate or dissolve any such
Subsidiary if all of the assets of such Subsidiary in existence immediately
prior to its liquidation or dissolution are transferred to ASG or a wholly owned
Subsidiary of ASG as a result of such liquidation or dissolution;
(iii) take any action that would cause or constitute a
material breach of any representation or warranty made by ASG or ASG Sub in this
Agreement or any other Transaction Agreement; or
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(iv) change the principles or practices of ASG or any of its
Subsidiaries related to the characterization, collection or receipt of Landmark
Product Line Cash Receipts in any material respect, except as required by GAAP.
8. Additional Covenants of ASG. ASG hereby agrees that, until the Total
Contingent Consideration and any and all amounts owed to Principal Shareholder
pursuant to Section 8(d) of this Agreement are paid to the Principal
Shareholder, and in the case of Section 8(a) of this Agreement, at any time
thereafter, ASG shall:
(a) file tax returns (including information returns) reporting the
payment of the Contingent Payments in a manner that is not inconsistent with the
Principal Shareholder's intention to characterize the Contingent Consideration
to be paid under this Agreement as gain from the sale or exchange of the
Principal Shares, except to the extent required by the IRS upon audit of ASG's
returns after giving the Principal Shareholder notice of the audit and an
opportunity to defend the position that the Contingent Consideration should be
treated for federal income tax purposes as paid for the acquisition of the
Principal Shares;
(b) keep a register in which all Landmark Product Line Cash Receipts
(including any and all adjustments thereto) are recorded and make such register
available for inspection by the Principal Shareholder or his representatives at
such times during normal business hours as the Principal Shareholder shall
reasonably request;
(c) prepare and deliver to the Principal Shareholder, on a monthly
basis, a royalty report listing the Landmark Product Line Cash Receipts and use
commercially reasonable efforts to prepare and deliver to the Principal
Shareholder, on a monthly basis, a listing of all new contracts and arrangements
relating to the Landmark Product Line for the preceding month;
(d) pay or reimburse the Principal Shareholder for all his
reasonable, direct, actual out-of-pocket costs and expenses incurred in
connection with the enforcement of any of his rights under this Agreement if the
Principal Shareholder prevails in the enforcement of such rights;
(e) subject to the written consent of the creditors under the Credit
Agreement, cause any cash received by ASG from the sale or other disposition of
any material portion of its property, whether now owned or hereafter acquired,
in excess of amounts due to the creditors under the Credit Agreement, to be paid
to the Principal Shareholders pro rata to reduce the remainder of the Total
Contingent Consideration not yet paid;
(f) subject to the written consent of the creditors under the Credit
Agreement, cause any cash received by ASG from any refinancing or refunding of
the debt owed by ASG under the Credit Agreement, in excess of amounts due to
such creditors, to be
-13-
paid to the Principal Shareholders pro rata to reduce the remainder of the Total
Contingent Consideration not yet paid;
(g) pay, discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all its material obligations
of whatever nature, except where the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books of ASG
or the Surviving Corporation, as applicable, or where the failure to comply with
such obligations could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on ASG;
(h) (i) preserve, renew and keep in full force and effect its
organizational existence and (ii) take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business, except, in the case of clause (ii) above, to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect on ASG; and
(i) comply with all contractual obligations and requirements of law
except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect on ASG.
9. Conditions to Principal Shareholder's Obligations. The obligation of
Principal Shareholder to effect the transactions contemplated by this Agreement
shall be subject to the satisfaction or waiver on or prior to the Share Purchase
Closing of the following conditions:
(a) the representations and warranties of ASG and ASG Sub contained
in this Agreement and in the other Transaction Agreements that are qualified as
to materiality shall be true and correct, and the representations and warranties
of ASG and ASG Sub that are not so qualified shall be true and correct in all
material respects, in each case, as of the date of this Agreement and as of the
Share Purchase Closing, with the same effect as if made as of the Share Purchase
Closing, except that the accuracy of representations and warranties that by
their terms speak as of a specified date will be determined as of such date;
(b) all the conditions to Landmark's obligations to effect the
Merger pursuant to the Merger Agreement shall have been satisfied or waived; and
(c) ASG, ASG Sub and Guarantor shall have executed and delivered the
Transaction Agreements to which it or he is a party.
10. Conditions to ASG's and ASG Sub's Obligations. The obligations of ASG
and ASG Sub to effect the transactions contemplated by this Agreement and the
Transaction Agreements shall be subject to the satisfaction or waiver on or
prior to the Share Purchase Closing of the following conditions:
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(a) the representations and warranties of the Principal Shareholder
contained in this Agreement and in the other Transaction Agreements that are
qualified as to materiality shall be true and correct, and the representations
and warranties of Principal Shareholder that are not so qualified shall be true
and correct in all material respects, in each case, as of the date of this
Agreement and as of the Share Purchase Closing, with the same effect as if made
as of the Share Purchase Closing, except that the accuracy of representations
and warranties that by their terms speak as of a specified date will be
determined as of such date;
(b) all of the conditions to ASG's and ASG Sub's obligations to
effect the Merger pursuant to the Merger Agreement (other than Section 6.2(i))
shall have been satisfied or waived; and
(c) Landmark and the Principal Shareholders shall have executed and
delivered the Transaction Agreements to which it, he or she is a party.
11. No Right of Set-Off. ASG shall not have the right to deduct and/or
set-off against amounts owed to Principal Shareholder pursuant to this Agreement
any amounts ASG determines are owed to it based on, arising out of or relating
to a breach or alleged breach by (a) Landmark of any representations,
warranties, covenants or agreements of Landmark contained in the Merger
Agreement or (b) the Principal Shareholder of any representations, warranties,
covenants or agreements of the Principal Shareholder contained in this
Agreement. ASG hereby waives any and all defenses which could exist in its favor
in connection with any right of set-off against amounts owed to Principal
Shareholder that ASG may otherwise have.
12. Additional Documents. Principal Shareholder, ASG and ASG Sub hereby
covenant and agree to execute and deliver any additional documents necessary or
desirable, in the reasonable opinion of ASG or ASG Sub on the one hand or the
Principal Shareholder on the other hand, to carry out the purpose and intent of
this Agreement and the Transaction Agreements.
13. Consent and Waiver. The Principal Shareholder hereby gives any consents
or waivers that are reasonably required for the consummation of the Merger under
the terms of any agreement to which the Principal Shareholder is a party or
pursuant to any rights the Principal Shareholder may have, provided, however,
that Principal Shareholder shall not be required by this Section 13 to give any
consent or waiver in his capacity as a director or officer of Landmark.
14. Termination. This Agreement shall terminate on the earlier to occur of
the Share Purchase Closing or the Expiration Date, and shall forthwith become
void and have no further effect, without any liability or obligation on the part
of any party or its directors, officers or shareholders; provided, however,
that, nothing in this Section 14 shall relieve any party to this Agreement of
liability for any breach of this Agreement.
-15-
15. Outstanding Loan from Landmark. At the Share Purchase Closing, Principal
Shareholder shall repay to Landmark the full principal amount of the loan, plus
any accrued and unpaid interest thereon, made by Landmark to Principal
Shareholder as listed in Exhibit E (the "Loan Amount"), such repayment to be
made by reducing the Contingent Consideration by the Loan Amount.
16. Loan from Principal Shareholder. In the event that the certificates
representing the Shares identified on Exhibit F are submitted by the holders
thereof to the Paying Agent for payment before the date that is one month after
the Effective Time (the "Special Conversion Date"), Principal Shareholder shall
promptly loan to ASG an amount, in immediately available funds, equal to the
product of the number of such Shares multiplied by the Merger Consideration.
Such loan shall be repaid by ASG on the Special Conversion Date without
interest.
17. Survival. All representations and warranties, covenants and agreements
made herein herewith shall survive the Share Purchase Closing.
18. Miscellaneous.
(a) Severability. If any term or other provision of this Agreement
is ruled invalid, illegal or incapable of being enforced by any rule of law or
by public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
(b) Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by any
party without the prior written consent of the others.
(c) Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties hereto
acknowledge that ASG and ASG Sub will be irreparably harmed and that there will
be no adequate remedy at law for a violation of any of the covenants or
agreements of Principal Shareholder set forth in Section 3 or Section 4 of this
Agreement. Therefore, it is agreed that, in addition to any other remedies that
may be available to ASG or ASG Sub
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upon any such violation, ASG and ASG Sub shall have the right to enforce such
covenants and agreements by specific performance, injunctive relief or by any
other means available to ASG and ASG Sub at law or in equity and Principal
Shareholder hereby waives any and all defenses which could exist in its favor in
connection with such enforcement and waives any requirement for the security or
posting of any bond in connection with such enforcement.
(e) Notices. All notices, requests, demands or other communications
that are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given (i) when delivered, if
delivered by hand, (ii) one business day after transmitted, if transmitted by a
nationally recognized overnight courier service, (iii) when telecopied, if
telecopied (which is confirmed), or (iv) three business days after mailing, if
mailed by registered or certified mail (return receipt requested), to the
parties at the following addresses:
(i) If to Principal Shareholder,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(ii) If to ASG or ASG Sub, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
▇▇▇▇▇ Systems Group, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
General Counsel
▇▇▇▇▇ Systems Group, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Steptoe & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
(f) Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Virginia without giving effect to the principles of conflicts or choice of law
rules of any jurisdiction.
(g) Entire Agreement. This Agreement, the other Transaction
Agreements and the Proxy contain the entire understanding of the parties in
respect of the subject matter hereof, and supersede all prior negotiations and
understandings between the parties with respect to such subject matter.
(h) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(i) Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
[SIGNATURES BEGIN ON THE NEXT PAGE]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
▇▇▇▇▇ SYSTEMS GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
ASG SUB, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
PRINCIPAL SHAREHOLDER
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Total Number of Shares of Landmark Common Stock owned directly on the date
hereof: 3,453,500.
All such Shares of Landmark Common Stock have been held since prior to: August,
1999.
For purposes of Section 2(a) only:
LANDMARK SYSTEMS CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
-19-