EXHIBIT 10.1(e)
INDEMNIFICATION AGREEMENT
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THIS INDEMNIFICATION AGREEMENT, dated as of November 7, 1996 ("this
Agreement"), is by and among Motors and Gears Holdings, Inc., a Delaware
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corporation, Motors and Gears, Inc., a Delaware corporation, Motors and Gears
Industries, Inc., a Delaware corporation, The New Imperial Electric Company, a
Delaware corporation, New Gear Reseach, Inc., a Delaware corporation, and The
New Xxxxx Motors Company, a Delaware corporation (all collectively referred to
as the "Indemnitors") and Xxx X. Xxxxxx ("Indemnitee").
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WITNESSETH
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors, executive officers, or in other
capacities unless they are provided with adequate protection through insurance
and indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation; and
WHEREAS, the current difficulties or virtual impossibility of obtaining
adequate insurance and uncertainties relating to indemnification have increased
the difficulty of attracting and retaining such persons; and
WHEREAS, the Boards of Directors of the Indemnitors have determined that
the inability to attract and retain such persons is detrimental to the best
interests of the Indemnitors's stockholders and that the Indemnitors should act
to assure such persons that there will be increased certainty of such protection
in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Indemnitors
contractually to obligate themselves to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to serve
the Indemnitors free from undue concern that they will not be so indemnified;
and
WHEREAS, the Certificate of Incorporation (the "Certificate") and the
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Bylaws (the "Bylaws") of each of the Indemnitors provide for the indemnification
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of the directors, officers, agents and employees of the Indemnitors to the full
extent permitted by the General Corporation Law of the State of Delaware (the
"Act"). The Certificate, the Bylaws and the Act specifically provide that they
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are not exclusive, and thereby contemplate that contracts
may be entered into between the Indemnitors and the members of their Boards of
Directors and their executive officers with respect to indemnification of such
directors and their executive officers; and
WHEREAS, this Agreement is being entered into as part of Indemnitee's total
compensation for serving as a director and/or an executive officer, as the case
may be;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Indemnitors jointly and severally on the one hand and
Indemnitee on the other do hereby covenant and agree as follows:
SECTION 1. Service by Indemnitee.
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Indemnitee agrees to serve as director of the Indemnitors and/or executive
officer of the Indemnitors if so designated by the Indemnitors and appointed by
the respective Boards of Directors, and agrees to the indemnification provisions
provided for herein. Indemnitee may at any time and for any reason resign from
such position (subject to any other contractual obligation or other obligation
imposed by operation of law), in which event the Indemnitors shall have no
obligation under this Agreement to continue Indemnitee in any such position.
SECTION 2. Indemnification.
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The Indemnitors shall indemnify Indemnitee to the fullest extent permitted
by applicable law in effect on the date hereof, notwithstanding that such
indemnification is not specifically authorized by this Agreement, the
Certificate, the Bylaws, the Act or otherwise. In the event of any change,
after the date of this Agreement, in any applicable law, statute or rule
regarding the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, such changes, to the extent that they would expand
Indemnitee's rights hereunder, shall be within the scope of Indemnitee's rights
and the Indemnitors's obligations hereunder, and, to the extent that they would
narrow Indemnitee's rights hereunder, shall be excluded from this Agreement;
provided, however, that any change that is required by applicable laws, statutes
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or rules to be applied to this Agreement shall be so applied regardless of
whether the effect of such change is to narrow Indemnitee's rights hereunder.
Without diminishing the scope of the indemnification provided by this Section 2,
the rights of indemnification of Indemnitee provided hereunder shall include
indemnification in respect of Motors and Gears, Inc.'s proposed $170,000,000
Series A Senior Note exchange offer pursuant to that certain Offering
Memorandum, dated November 1, 1996, and shall not be limited to those rights set
forth hereinafter, except to the extent expressly prohibited by applicable law.
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SECTION 3. Action or Proceeding Other Than an Action by or in the Right of
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the Indemnitors.
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Indemnitee shall be entitled to the indemnification rights provided in this
Section 3 if he is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative in nature, other than an action by or
in the right of the Indemnitors, by reason of the fact that he is or was a
director, officer, employee, agent or fiduciary of the Indemnitors or is or was
serving at the request of the Indemnitors as a director, officer, employee,
agent, partner, trustee or fiduciary of any other entity, or by reason of
anything done or not done by him in any such capacity. Pursuant to this Section
3, Indemnitee shall be indemnified against reasonable costs and expenses
(including, but not limited to, counsel fees, costs, judgments, penalties,
fines, ERISA excise taxes, and amounts paid in settlement) (collectively,
"Damages") actually and reasonably incurred by him in connection with such
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action, suit or proceeding (including, but not limited to, the investigation,
defense or appeal thereof), if, in the case of conduct in his official capacity
with the corporation, he acted in good faith and in the Indemnitors's best
interests, and in all other cases, he acted in good faith and was at least not
opposed to the Indemnitors's best interests, and with respect to any criminal
action or proceeding had no reasonable cause to believe his conduct was
unlawful, except that no indemnification shall be made in respect of any claim,
issue or matter as to which Indemnitee shall have been finally adjudged to be
liable for (i) negligence or misconduct in the performance of his duty to any of
the Indemnitors unless and only to the extent that the court in which such
action or suit was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such expenses as such court shall deem proper or (ii)
the indemnification does not relate to any liability arising under Section 16(b)
of the Securities Exchange Act of 1934, as amended, or any of the rules or
regulations promulgated thereunder. Notwithstanding the foregoing, the
Indemnitors shall be required to indemnify an officer or director in connection
with an action, suit or proceeding initiated by such person only if such action,
suit or proceeding was authorized by the Board or a committee thereof. No
indemnity pursuant to this Agreement shall be provided by the Indemnitors for
Damages that have been paid directly to Indemnitee by an insurance carrier under
a policy of directors' and officers' liability insurance maintained by the
Indemnitors.
SECTION 4. Actions by or in the Right of the Indemnitors.
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Indemnitee shall be entitled to the indemnification rights provided in this
Section 4 if he is or was made a party or is threatened to be made a party to
any threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative brought by or in the right of the
Indemnitors to procure a judgment in their favor by reason of the fact that he
is or was a director, officer, employee, agent or fiduciary of the Indemnitors
or is or was serving at the request of the Indemnitors as a director, officer,
employee, agent, partner, trustee or fiduciary of any other entity by reason of
anything done
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or not done by him in any such capacity. Pursuant to this Section 4, Indemnitee
shall be indemnified against Damages (as defined in Section 3 of Agreement)
actually and reasonably incurred by him in connection with such action or suit
(including, but not limited to the investigation, defense, settlement or appeal
thereof) if, in the case of conduct in his official capacity with the
corporation, he acted in good faith and in the Indemnitors's best interests, and
in all other cases, he acted in good faith and was at least not opposed to the
Indemnitors's best interests, except that no indemnification shall be made in
respect of any claim, issue or matter as to which Indemnitee shall have been
finally adjudged to be liable for (i) negligence or misconduct in the
performance of his duty to any of the Indemnitors unless and only to the extent
that the court in which such action or suit was brought, or any other court of
competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses as
such court shall deem proper or (ii) the indemnification does not relate to any
liability arising under Section 16(b) of the Securities Exchange Act of 1934, as
amended, or any of the rules or regulations promulgated thereunder.
Notwithstanding the foregoing, the Indemnitors shall be required to indemnify an
officer or director in connection with an action, suit or proceeding initiated
by such person only if such action, suit or proceeding was authorized by the
Board or a committee thereof. No indemnity pursuant to this Agreement shall be
provided by the Indemnitors for Damages that have been paid directly to
Indemnitee by an insurance carrier under a policy of directors' and officers'
liability insurance maintained by the Indemnitors.
SECTION 5. Indemnification for Costs, Charges and Expenses of Successful
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Party.
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Notwithstanding the other provisions of this Agreement, to the extent that
Indemnitee has served as a witness on behalf of the Indemnitors or has been
successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Section 3 and Section 4 hereof, or in defense of any
claim, issue or matter therein, shall be indemnified against all reasonable
costs, charges, and expenses (including counsel fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
SECTION 6. Partial Indemnification
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If Indemnitee is only partially successful in the defense, investigation,
settlement or appeal of any action, suit, investigation or proceeding described
in Section 3 or Section 4 hereof, and as a result is not entitled under Section
5 hereof to indemnification by the Indemnitors for the total amount of
reasonable Damages actually and reasonably incurred by him, the Indemnitors
shall nevertheless indemnify Indemnitee, as a matter of right pursuant to
Section 5 hereof, to the extent Indemnitee has been partially successful.
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SECTION 7. Determination of Entitlement to Indemnification.
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Upon written request by Indemnitee for indemnification pursuant to Section
3 or Section 4 hereof, the entitlement of Indemnitee to indemnification pursuant
to the terms of this Agreement shall be determined by the following person or
persons who shall be empowered to make such determination: (a) the Boards of
Directors of the Indemnitors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined); or (b) if such a quorum is not
obtainable or, even if obtainable, if the Board of Directors by the majority
vote of Disinterested Directors so directs, by Independent Counsel (as
hereinafter defined) in a written opinion to the Board of Directors, a copy of
which shall be delivered to Indemnitee; or (c) by the stockholders, but shares
owned by or voted under the control of directors, including the Indemnitee, who
are at the time parties to the proceeding may not be voted on the determination.
Such Independent Counsel shall be selected by the Board of Directors and
approved by Indemnitee. Upon failure of the Board of Directors to so select
such Independent Counsel or upon failure of Indemnitee to so approve, such
Independent Counsel shall be selected by the Chancellor of the State of Delaware
or such other person as the Chancellor shall designate to make such selection.
Such determination of entitlement to indemnification shall be made no later than
sixty (60) days after receipt by the Indemnitors of a written request for
indemnification. Such request shall include documentation or information which
is necessary for such determination and which is reasonably available to
Indemnitee. Any Damages incurred by Indemnitee in connection with his request
for indemnification hereunder shall be borne by the Indemnitors. The
Indemnitors hereby indemnify and agree to hold Indemnitee harmless therefrom
irrespective of the outcome of the determination of Indemnitee's entitlement to
indemnification. If the person making such determination shall determine that
Indemnitee is entitled to indemnification as to part (but not all) of the
application for indemnification, such person shall reasonably prorate such
partial indemnification among such claims, issues or matters.
SECTION 8. Presumptions and Effect of Certain Proceedings.
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The Secretary of the Indemnitors shall, promptly upon receipt of
Indemnitee's request for indemnification, advise in writing its Board of
Directors and the Boards of Directors of the other Indemnitors or such other
person or persons empowered to make the determination as provided in Section 7
that Indemnitee has made such request for indemnification. Indemnitee shall be
presumed to be entitled to indemnification hereunder and the Indemnitors shall
have the burden of proof in the making of any determination contrary to such
presumption. If the person or persons so empowered to make such determination
shall have failed to make the requested indemnification within 60 days after
receipt by the Indemnitors of such request, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be absolutely entitled to such indemnification, absent actual and material
fraud in the request for indemnification. The termination of any action, suit,
investigation or proceeding described in Section 3 or Section 4 hereof by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
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its equivalent, shall not, of itself (a) create a presumption that Indemnitee
did not act in good faith and in a manner
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which he reasonably believed to be in or not opposed to the best interests of
the Indemnitors, and, with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was unlawful or (b)
otherwise adversely affect the rights of Indemnitee to indemnification except as
may be provided herein.
SECTION 9. Advancement of Expenses and Costs.
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All reasonable expenses and costs incurred by Indemnitee who is party to a
proceeding (including counsel fees, retainers and advances of disbursements
required of Indemnitee) (collectively, the "Expense Advance") shall be paid by
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the Indemnitors in advance of the final disposition of such action, suit or
proceeding at the request of Indemnitee within twenty (20) days after the
receipt by the Indemnitors of a statement or statements from Indemnitee
requesting such advance or advances from time to time. Such statement or
statements shall reasonably evidence the expenses and costs incurred by him in
connection therewith. The Indemnitors's obligation to provide an Expense
Advance is subject to the following conditions: (i) if the proceeding arose in
connection with Indemnitee's service as a director and/or executive officer of
the Indemnitors (and not in any other capacity in which Indemnitee rendered
service, including service to any related company), then the Indemnitee or his
representative shall have executed and delivered to the Indemnitors an
undertaking, which need not be secured and shall be accepted without reference
to Indemnitee's financial ability to make repayment, by or on behalf of
Indemnitee to repay all Expense Advance if and to the extent that it shall
ultimately be determined by a final, unappealable decision rendered by a court
having jurisdiction over the parties and the question that Indemnitee is not
entitled to be indemnified for such Expense Advance under this Agreement or
otherwise; (ii) Indemnitee shall give the Indemnitors such information and
cooperation as it may reasonably request and as shall be within Indemnitee's
power; and (iii) Indemnitee shall furnish, upon request by the Indemnitors and
if required under applicable law, a written affirmation of Indemnitee's good
faith belief that any applicable standards of conduct have been met by
Indemnitee. Indemnitee's entitlement to such Expense Advance shall include
those incurred in connection with any proceeding by Indemnitee seeking an
adjudication pursuant to this Agreement. In the event that a claim for an
Expense Advance is made hereunder and is not paid in full within twenty (20)
days after written notice of such claim is delivered to the Indemnitors,
Indemnitee may, but need not, at any time thereafter bring suit against any of
the Indemnitors to recover the unpaid amount of the claim.
SECTION 10. Remedies of Indemnitee in Cases of Determination not to
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Indemnify or to Advance Expenses.
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In the event that a determination is made that Indemnitee is not entitled
to indemnification hereunder or if payment has not been timely made following a
determination of entitlement to indemnification pursuant to Sections 7 and 8, or
if expenses are not advanced pursuant to Section 9, Indemnitee shall be entitled
to a final adjudication in an appropriate court of the State of Delaware or any
other court of competent jurisdiction of his entitlement to such indemnification
or advance. The Indemnitors shall not oppose
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Indemnitee's right to seek any such adjudication or any other claim. Such
judicial proceeding shall be made de novo and Indemnitee shall not be prejudiced
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by reason of a determination (if so made) that he is not entitled to
indemnification. If a determination is made or deemed to have been made pursuant
to the terms of Section 7 or Section 8 hereof that Indemnitee is entitled to
indemnification, the Indemnitors shall be bound by such determination and is
precluded from asserting that such determination has not been made or that the
procedure by which such determination was made is not valid, binding and
enforceable. The Indemnitors further agree to stipulate in any such court that
the Indemnitors are bound by all the provisions of this Agreement and are
precluded from making any assertion to the contrary. If the court shall
determine that Indemnitee is entitled to any indemnification hereunder, the
Indemnitors shall pay all reasonable Damages actually incurred by Indemnitee in
connection with such adjudication (including, but not limited to, any appellate
proceedings).
SECTION 11. Other Rights to Indemnification.
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The indemnification and advancement of expenses (including counsel fees)
and costs provided by this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may now or in the future be entitled under any
provision of the By-laws, provisions of the Certificate, vote of stockholders or
Disinterested Directors, provision of law or otherwise.
SECTION 12. Counsel Fees and Other Expenses to Enforce Agreement.
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In the event that Indemnitee is subject to or intervenes in any proceeding
in which the validity or enforceability of this Agreement is at issue or seeks
an adjudication or award in arbitration to enforce his rights under, or to
recover damages for breach of, this Agreement, Indemnitee, if he prevails in
whole or in part in such action, shall be entitled to recover from the
Indemnitors, and shall be indemnified by the Indemnitors against, any reasonable
expenses for counsel fees and disbursements actually and reasonably incurred by
him.
SECTION 13. Duration of Agreement.
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This Agreement shall continue until and terminate upon the later of (a) 10
years after Indemnitee has ceased to occupy any of the positions or have any of
the relationships described in Section 3 or Section 4 of this Agreement or (b)
the final termination of all pending or threatened actions, suits, proceedings
or investigations with respect to Indemnitee. This Agreement shall be binding
upon the Indemnitors and their successors and assigns and shall inure to the
benefit of Indemnitee and his spouse, assigns, heirs, devisees, executors,
administrators or other legal representatives.
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SECTION 14. Severability.
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If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, all portions of any paragraphs of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
are not themselves invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
SECTION 15. Identical Counterparts.
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This Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original, but all of which together
shall constitute one and the same Agreement. Only one such counterpart signed
by the party against whom enforceability is sought needs to be produced to
evidence the existence of this Agreement.
SECTION 16. Headings.
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The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
SECTION 17. Definitions.
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For purposes of this Agreement:
(a) "Disinterested Director" shall mean a director of the Indemnitors who
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is not or was not a party to the action, suit, investigation or proceeding in
respect of which indemnification is being sought by Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member of a law firm
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that neither is presently nor in the past five years has been retained to
represent (i) the Indemnitors or Indemnitee in any matter material to either
such party or (ii) any other party to the action, suit, investigation or
proceeding giving rise to a claim for indemnification hereunder. Notwithstanding
the foregoing, the term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Indemnitors or Indemnitee
in an action to determine Indemnitee's right to indemnification under this
Agreement.
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SECTION 18. Modification and Waiver.
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No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
SECTION 19. Mutual Acknowledgment.
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The Indemnitors and Indemnitee acknowledge that, in certain instances,
federal law or public policy may override applicable state law and prohibit the
Indemnitors from indemnifying Indemnitee under this Agreement or otherwise. For
example, the Indemnitors and Indemnitee acknowledge that the U.S. Securities and
Exchange Commission (the "SEC") has taken the position that indemnification is
not permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and acknowledges that the Indemnitors have
undertaken or may be required in the future to undertake with the SEC to submit
the question of indemnification to a court in certain circumstances for a
determination of the Indemnitors's right under public policy to indemnify
Indemnitee.
SECTION 20. Notice by Indemnitee.
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Indemnitee agrees promptly to notify the Indemnitors in writing upon being
served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any matter which may be subject to indemnification
covered hereunder, either civil, criminal or investigative.
SECTION 21. Notices.
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All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if (i) delivered by hand
and receipted for by the party to whom said notice or other communication shall
have been directed or if (ii) mailed by certified or registered mail with
postage prepaid on the third business day after the date on which it is so
mailed, to the following addresses:
(a) if to Indemnitee:
c/o Motors and Gears, Inc.
ArborLake Centre, Suite 550
0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
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(b) if to any of the Indemnitors:
c/o Motors and Gears, Inc.
ArborLake Centre, Suite 550
0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
or to such other address as may have been furnished to Indemnitee by the
Indemnitors or to the Indemnitors by Indemnitee, as the case may be.
SECTION 22. Other Agreements.
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This Agreement restates and supersedes, but does not limit or negate, any
indemnification, rights or interests of Indemnitee under any prior agreements
between the Indemnitors and Indemnitee.
SECTION 23. Governing Law.
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The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
MOTORS AND GEARS HOLDINGS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
MOTORS AND GEARS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
MOTORS AND GEARS INDUSTRIES, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
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THE NEW IMPERIAL ELECTRIC COMPANY
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
NEW GEAR RESEARCH, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
THE NEW XXXXX MOTORS COMPANY
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
INDEMNITEE:
/s/ Xxx X. Xxxxxx
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Name: Xxx X. Xxxxxx
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