OPTION ROLLOVER AGREEMENT
Exhibit 10.8
This OPTION ROLLOVER AGREEMENT dated May 1, 2006 (this “Agreement”), is made by and
between Lone Star Holding Corp. (“Lone Star”), Activant Solutions Holdings Inc. (the
“Company”) and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the “Investor”). Unless expressly provided
otherwise in this Agreement, capitalized terms defined in the Merger Agreement (as defined below)
when used in this Agreement shall have the same meanings provided to such terms in the Merger
Agreement.
WHEREAS, the Company entered into an Agreement and Plan of Merger dated as of March 12, 2006
(the “Merger Agreement”) with Lone Star Merger Corp. (“Merger Sub”) and Lone Star,
pursuant to which and subject to the terms and conditions thereof, Merger Sub shall merge with and
into the Company, with the Company as the surviving entity (the “Front-End Merger”);
WHEREAS, immediately following the Front-End Merger, the surviving entity of the Front-End
Merger shall be merged with and into Activant Solutions Inc. (“Activant”), with Activant as
the surviving corporation (the “Back-End Merger”; and, together with the Front-End Merger,
the “Mergers”), such that Activant shall thereafter be a wholly owned subsidiary of Lone
Star;
WHEREAS, in connection with the consummation of the Mergers and the transactions contemplated
by this Agreement, the Investor shall become a party to a stockholders agreement in the form
attached hereto as Exhibit A (the “Stockholders Agreement”); and
WHEREAS, the parties hereto desire to make certain agreements, representations, warranties and
covenants in connection with the Mergers, the Merger Agreement and the Stockholders Agreement and
the transactions contemplated hereby and thereby (collectively, the “Transactions”).
NOW, THEREFORE, in consideration of the mutual covenants and conditions as hereinafter set
forth, the parties hereto do hereby agree as follows:
I. Assumption and Rollover
1.1 No Option Payment. On the terms and subject to the conditions of this Agreement,
the Investor hereby agrees that effective at the Closing of the Front-End Merger, Activant
Solutions Holdings Inc. shall not cancel and terminate those outstanding Options listed in Table 1
below that were previously granted to Investor under the Company’s stock option plans (the
“Company Options”) and shall not convert any part of the Company Options into a right to
receive the Option Payment with respect to the Company Options, which Option Payment would be
$1,000,000 (such amount, the “Option Consideration”) but for the terms of this Agreement.
The Investor understands and agrees that, pursuant to the terms of this Agreement, he or she shall
have no right to receive the Option Payment with respect to the Company Options.
Table 1
| Number of | ||||||||||||||||
| shares subject | ||||||||||||||||
| to Company | ||||||||||||||||
| Options not | ||||||||||||||||
| Company | being cashed | Exercise price | Spread value (at | |||||||||||||
| Grant date | option plan | out | per share | $4 per share) | ||||||||||||
2/16/2000 |
2000 | 125,000 | $ | 1.00 | $ | 375,000 | ||||||||||
1/1/2001 |
2000 | 25,000 | $ | 1.00 | $ | 75,000 | ||||||||||
1/1/2002 |
2000 | 25,000 | $ | 1.00 | $ | 75,000 | ||||||||||
6/30/2004 |
2000 | 50,000 | $ | 2.25 | $ | 87,500 | ||||||||||
2/1/2005 |
2000 | 221,429 | $ | 2.25 | $ | 387,500 | ||||||||||
Total number rolled: |
446,429 | Total spread: | $ | 1,000,000 | ||||||||||||
1.2 Assumption and Granting of Rollover Options. In consideration for the Investor’s
agreement to forego payment of the Option Consideration, Lone Star hereby agrees to assume the
Company Options as of the Closing and automatically convert the Company Options into stock options
to acquire an aggregate of 333,334 shares of Lone Star common stock, par value $0.01 per share (the
“Rollover Options”), as set forth in Table 2 below. The Rollover Options will be fully
vested, non-statutory stock options, and except as otherwise set forth in this Agreement, will be
subject to the terms and conditions of the Company stock option plans under which they originally
were granted. The per share exercise price of each of the Rollover Options is equal to 25% of the
“Subscription Price” (as defined below). The number of shares of Lone Star common stock subject to
each of the Rollover Options has been determined by dividing (A) the total option spread for each
respective Company Option (i.e., the product of (i) the difference between $4.00 and the exercise
price of such Company Option and (ii) the total number of shares of Common Stock subject to such
Company Option) by (B) 75% of the Subscription Price. In making this adjustment, the adjusted
number of shares of Lone Star common stock subject to the Rollover Options has been rounded up to
the nearest whole share, to the extent necessary. For purposes of this Agreement, the term
“Subscription Price” shall mean $4, which is the per share price paid by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Capital Partners V, L.P., a Delaware limited partnership, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Capital Partners V
(Parallel), L.P., a Delaware limited partnership, and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Capital Associates V, LLC,
a Delaware limited liability company (collectively, the “H&F Parties”), ▇▇▇▇▇ ▇▇▇▇▇▇▇ Fund
VII, L.P., a Delaware limited partnership, ▇▇▇▇▇ ▇▇▇▇▇▇▇ Fund VIII, L.P., a Delaware limited
partnership, and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Friends Fund VIII, L.P., a Delaware limited partnership
(collectively, the “TCEP Parties”), and JMI Equity Fund IV, L.P., a Delaware limited
partnership, and JMI Equity Fund IV (AI), L.P., a Delaware limited partnership (collectively, the
“JMI Parties”) to subscribe for shares of Lone Star common stock on the Closing Date. You
will not be issued new option agreements for your Rollover Options.
Table 2
| Company | Number of Lone Star | Exercise price | ||||||||||
| Grant date | option plan | shares | per share | |||||||||
2/16/2000 |
2000 | 125,000 | $ | 1.00 | ||||||||
1/1/2001 |
2000 | 25,000 | $ | 1.00 | ||||||||
1/1/2002 |
2000 | 25,000 | $ | 1.00 | ||||||||
6/30/2004 |
2000 | 29,167 | $ | 1.00 | ||||||||
2/1/2005 |
2000 | 129,167 | $ | 1.00 | ||||||||
| Total shares: | 333,334 | |||||||||||
1.3 Compliance with Applicable Laws. The parties contemplate that the assumption of
the Company Options and the conversion thereof into Rollover Options will qualify as a transaction
satisfying the requirements of Section and 409A of the Internal Revenue Code of 1986, as amended,
and the regulatory guidance promulgated thereunder (the “Code”).
1.4 Condition to the Obligations of the Investor. The obligations of the Investor to
consummate the transactions contemplated by this Agreement shall be subject to the following
conditions:
(a) the Company shall determine that all conditions to the Company’s obligation to close under
the Merger Agreement shall have been satisfied, or waived by the Company, on or before the Closing
and the Company shall confirm to the Investor that the Mergers shall occur on the Closing Date; and
(b) the Company, Merger Sub, the H&F Parties, the TCEP Parties and the JMI Parties shall have
executed and delivered the Stockholders Agreement.
1.5 Termination. This Agreement shall be terminated and the transactions contemplated
herein shall be abandoned at any time prior to the Closing by any of the parties hereto if the
Merger Agreement shall have been terminated in accordance with its terms. In the event of any
termination of the Agreement as provided in this Section 1.5, this Agreement shall forthwith become
wholly void and of no further force or effect (except Article IV) and there shall be no liability
on the part of any parties hereto or their respective officers or directors, except as provided in
Article IV. Notwithstanding the foregoing, no party hereto shall be relieved from liability for
any willful breach of this Agreement.
II. Representations and Warranties
2.1 Representations and Warranties of Lone Star and Merger Sub. Each of Lone Star and
Merger Sub represents and warrants to the Investor that it has the full power, authority and legal
right to execute, deliver and perform this Agreement and to consummate the transactions
contemplated herein. This Agreement has been duly executed and delivered by such company and
constitutes its legal, valid and binding obligation, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’
rights generally.
2.2 Representations and Warranties of the Investor; Acknowledgments of Investor. The
Investor represents and warrants, severally and not jointly, to each of Lone Star and Merger Sub
that:
(a) The Investor has full legal capacity, power and authority to execute and deliver this
Agreement and to perform his or her obligations hereunder. This Agreement has been duly executed
and delivered by the Investor and is the legal, valid and binding obligation of the Investor
enforceable against it in accordance with the terms hereof, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights generally.
(b) The Investor has been furnished and has carefully read this Agreement, the Merger
Agreement and the Stockholders Agreement and understands that the Rollover Options and any shares
of Lone Star common stock purchased upon the exercise thereof will be subject to the terms and
conditions of the applicable Company stock option plan(s) under which the Company Options were
granted and the Stockholders Agreement. In the event of any conflict between the original terms of
the Company Options and the terms of the Stockholders Agreement, the terms of the Stockholders
Agreement will govern and prevail.
(c) To the full satisfaction of the Investor, the Investor has been furnished any materials
the Investor has requested relating to Lone Star and Merger Sub and the shares of Lone Star common
stock that may be acquired upon the exercise of the Rollover Options, and the Investor has been
afforded the opportunity to ask questions of representatives of Lone Star and Merger Sub concerning
this Agreement and to obtain any additional information necessary to verify the accuracy of any
information provided to him.
(d) The Investor has, independently and without reliance upon Lone Star and Merger Sub, any
Affiliate of the foregoing or any agent of them, and based on such documents and information as the
Investor has deemed appropriate, made his or her own appraisal of and investigation into the
business, operations, property, financial and other condition of Lone Star and Merger Sub and made
his or her own investment decision with respect to the investment represented by the Rollover
Options and the shares of Lone Star common stock that may be purchased upon the exercise thereof.
The Investor has consulted, to the extent deemed appropriate by the Investor, with the Investor’s
own advisers as to the financial, tax, legal and related matters concerning an investment in the
Rollover Options and the shares of Lone Star common stock that may be purchased upon the exercise
thereof and on that basis understands the financial, legal, tax and related consequences of an
investment in the Rollover Options and the shares of Lone Star common stock that may be purchased
upon the exercise thereof, and believes that an investment in the Rollover Options and the shares
of Lone Star common stock that may be purchased upon the exercise thereof is suitable and
appropriate for the Investor.
(e) The Investor has been advised that shares of Lone Star common stock for which the Rollover
Options are exercisable have not been registered under the Securities Act of
1933, as amended (the “Securities Act”), or any state securities laws and, therefore,
cannot be resold unless they are registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration requirements is available. The
Investor is aware that, except as otherwise provided in the Stockholders Agreement, Lone Star is
under no obligation to effect any such registration with respect to such shares of Lone Star common
stock or to file for or comply with any exemption from registration. The Investor has such
knowledge and experience in financial and business matters that the Investor is capable of
evaluating the merits and risks of the transactions contemplated by this Agreement and understands
that any investment in the Rollover Options and the shares of Lone Star common stock that may be
purchased upon the exercise thereof is a speculative investment that has limited liquidity and is
subject to the risk of complete loss.
(f) The Investor has received a copy of the Confidential Preliminary Offering Memorandum of
Merger Sub dated April 14, 2006 with respect to the offering of Senior Subordinated Notes due 2016
and has read all of such Confidential Preliminary Offering Memorandum, including, without
limitation, the section titled “Risk Factors.”
III. Other Covenants
3.1 Merger Agreement. The parties hereto acknowledge and agree that Lone Star will
have sole discretion with respect to (i) determining whether the conditions set forth in the Merger
Agreement have been satisfied and/or whether to waive any of such conditions pursuant to the terms
of the Merger Agreement, and (ii) the manner and timing of the compliance by Lone Star and Merger
Sub with the covenants applicable to each of them under the Merger Agreement.
3.2 Agreement to Cooperate; Further Assurances. Subject to the terms and conditions
of this Agreement, each of the parties hereto shall use all reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including providing information and using reasonable best efforts
to obtain all necessary or appropriate waivers, consents and approvals, and effecting all necessary
registrations and filings.
3.3 Execution of Stockholders Agreement. At or prior to the Closing, the Investor
agrees to execute and deliver to the other parties thereto the Stockholders Agreement.
3.4 Transfers. The Investor agrees not to enter into any plan, agreement, arrangement
or understanding to transfer the Company Options or the shares of Common Stock subject thereto
prior to and including the Closing, other than as expressly contemplated hereby.
IV. Miscellaneous
4.1 Notices. Any notices and other communications required or permitted in this
Agreement shall be effective if in writing and delivered as provided in the Stockholders Agreement.
4.2 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts entered into and performed entirely
within such State.
4.3 Assignment. This Agreement may not be assigned by the Investor without the prior
written consent of the Company. Any assignment or delegation in derogation of this provision shall
be null and void. The provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, executors and administrators of the parties hereto.
4.4 Entire Agreement. This Agreement and the other agreements referred to herein set
forth the entire understanding among the parties with respect to the subject matter hereof.
4.5 Amendment. This Agreement can be amended only by an instrument in writing signed
by each of the parties hereto. Any provision of this Agreement may be waived if, but only if, such
waiver is in writing and is signed by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The rights and remedies
provided herein shall be cumulative and not exclusive of any rights or remedies provided by law.
4.6 Survival. All covenants, agreements, representations and warranties made herein
shall survive the execution and delivery hereof, the granting of the Rollover Options, and the
purchase of any shares of Lone Star common stock upon the exercise thereof.
4.7 Counterparts. This Agreement may be executed in two or more counterparts, and by
different parties on separate counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
4.8 No Employment Rights. None of the assumption of your Company Options, the
issuance of the Rollover Options or the entry into this Agreement is intended to constitute an
employment contract or agreement, and neither should be interpreted to prohibit you, Lone Star or
Activant from terminating your employment or services at any time, with or without cause.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.
| LONE STAR HOLDING CORP. | ||||||
| By: | ||||||
| Name: | ▇▇▇▇▇ ▇▇▇▇▇▇▇ | |||||
| Title: | President | |||||
| ACTIVANT SOLUTIONS HOLDINGS INC. | ||||||
| By: | ||||||
| Name: | ▇▇▇▇▇▇▇ ▇▇▇ | |||||
| Title: | Vice President, General Counsel & Secretary | |||||
| INVESTOR: | ||||||
| ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | ||||||
Exhibit A
Form of Stockholders’ Agreement