INDEMNITY AGREEMENT
AGREEMENT dated as of October 16, 1997, among Xxxxxx
Acquisition, LLC, a Delaware limited liability company ("Parent"), Xxxxxx
Acquisition, Inc., a New York corporation ("Sub" and collectively with Parent,
"Acquisition"), the parties listed on SCHEDULE I (the "Xxxxxxxx
Shareholders"), the parties listed on SCHEDULE II (the "Benach Shareholders"),
the parties listed on SCHEDULE III (the "Aboodi Shareholders") and the party
listed on SCHEDULE IV (the "Xxxxxxx Shareholder"). Each party listed on
SCHEDULES I, II, III AND IV shall be referred to individually as a
"Shareholder" and collectively as the "Shareholders" and each of the Xxxxxxxx
Shareholders, collectively as a group, the Benach Shareholders, collectively
as a group, the Aboodi Shareholders, collectively as a group, and the Xxxxxxx
Shareholder shall be referred to as a "Group of Shareholders" or "Shareholder
Group."
RECITALS
WHEREAS, the Shareholders are the beneficial owners of
shares of Common Stock, par value $1.00 per share (the "Common Stock"), of
Xxxxxxxx Corporation, a New York corporation (the "Company"), and in order to
benefit the Company and its public shareholders, the Shareholders entered into
a certain agreement dated as of June 26, 1997, as amended on July 14, 1997 and
August 11, 1997 (the "Frydman Shareholders Agreement"), with Xxxxxxxx
Acquisition, Inc. ("SAI"), a corporation controlled by Xxxxx Xxxxxxx
("Frydman"), in connection with which, among other things, the Company entered
into an agreement and plan of merger (the "Frydman Merger Agreement") dated as
of August 11, 1997 with SAI and Stonemerger, Inc. ("MergerSub") and prior to
entering into the Frydman Merger Agreement (and in connection therewith), SAI
and/or Frydman agreed to cause a substitute letter of credit to be posted;
WHEREAS, on August 21, 1997 the Company delivered a notice
to SAI and MergerSub terminating the Frydman Merger Agreement as a result of
the failure of SAI to receive a financing commitment reasonably acceptable to
the Company and to deliver a substitute letter of credit as required;
WHEREAS, Xxxxxxxx and Sub have concurrently herewith entered
into that certain Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which, among other things, subject to the terms and conditions of
the Merger Agreement, Sub will make a tender offer (the "Offer") to purchase
all of the issued and outstanding shares of Common Stock of the Company and,
following consummation of the Offer, Sub will merge with and into the Company
(the "Merger"), which will be the surviving corporation ("Surviving
Corporation") of the Merger (capitalized terms herein not otherwise defined
herein shall have the meanings ascribed thereto in the Merger Agreement);
WHEREAS, in order to benefit the Company and its public
shareholders by inducing Acquisition to enter into the Merger Agreement, the
Shareholders have agreed to bear 50% of any
Losses and Permitted Expenses over $1,000,000 arising out of a Frydman Claim
(as such terms are defined below);
WHEREAS, the Shareholders and Acquisition have consequently
agreed that the first $1,000,000 of any Losses and Permitted Expenses shall be
borne by Acquisition and that any Losses and Permitted Expenses over
$1,000,000 shall be borne 50% by the Shareholders and 50% by Acquisition; and
WHEREAS, this Agreement shall become effective only upon the
consummation of the Offer under the Merger Agreement, and from and after
consummation of the Merger under the Merger Agreement all obligations and
liabilities of Acquisition hereunder shall be obligations and liabilities of
the Surviving Corporation;
NOW, THEREFORE, the parties hereby agree as follows,
effective upon consummation of the Offer:
1. Certain Definitions.
For purposes of this Agreement, the following terms
shall have the meanings ascribed to them below:
(a) "Losses" shall mean any and all liabilities,
losses, costs, damages or Permitted Expenses incurred by or imposed upon any
Party from and after the date hereof resulting from or arising out of a
Frydman Claim and all amounts paid in a Permitted Settlement of a Frydman
Claim. Any amount actually reimbursed by insurance shall not be a Loss or a
Permitted Expense (as such term is defined below); the Acquisition Parties
shall use reasonable efforts to collect any available insurance but shall have
no obligation to use litigation or other extraordinary measures to collect
such insurance.
(b) "Permitted Expenses" shall mean all reasonable
attorneys' fees and expenses and other reasonable expenses incurred by any
Party from and after the date hereof in the defense, investigation,
prosecution or settlement of a Frydman Claim; provided, however, that for all
periods from and after consummation of the Offer the selection of the
attorneys to undertake the defense, prosecution or settlement of a Frydman
Claim shall (except as provided in Section 3(c) below) be made only upon the
joint approval of the Shareholders on the one hand and Acquisition (or, after
consummation of the Merger, the Surviving Corporation) on the other hand.
(c) A "Frydman Claim" shall mean any claim, demand,
action or proceeding (including a claim in arbitration) brought against any
Party by Xxxxx Xxxxxxx, SAI or MergerSub or any of their respective
affiliates, shareholders, successors or assigns resulting from or arising out
of, or alleged to arise from, any matter relating to any of the Frydman
Documents or the facts or alleged facts relating to the Frydman Documents,
including, without limitation, a tort claim.
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(d) The "Frydman Documents" shall mean the
documents listed on SCHEDULE V hereto.
(e) The "Shareholder Parties" shall mean the
Shareholders and their respective affiliates, partners, shareholders,
directors, officers, employees, counsel, financial advisors, agents and
representatives and all of their respective successors and assigns. The
"Acquisition Parties" shall mean Acquisition, the Company and the Surviving
Corporation, the respective affiliates, shareholders, members, directors,
officers, employees, counsel, financial advisors, agents and representatives
of Acquisition, and insofar as the Company or the Surviving Corporation is
liable for any Losses and Permitted Expenses thereof, the affiliates,
shareholders, directors, officers, employees, counsel, financial advisors,
agents and representatives of the Company and the Surviving Corporation, and
all of their respective successors and assigns, but shall exclude the
Shareholder Parties. The Shareholder Parties and the Acquisition Parties are
collectively referred to as the "Parties."
(f) A "Permitted Settlement" shall mean any
settlement of a Frydman Claim permitted under Section 3(d) below.
2. Indemnification and Expense Reimbursement.
(a) Acquisition and, following the Merger, the
Surviving Corporation shall indemnify and save the Shareholder Parties
harmless and defend each of them from and against, and pay or reimburse the
Shareholder Parties promptly as incurred or imposed for any and all Losses and
Permitted Expenses incurred by or imposed upon any Shareholder Party until the
Losses and Permitted Expenses incurred by or imposed upon all Parties (whether
Shareholder Parties or Acquisition Parties) shall equal $1,000,000 in the
aggregate (the "First $1,000,000 of Losses and Expenses").
(b) In the event that the Losses and Permitted
Expenses incurred by or imposed upon all Parties exceed $1,000,000 in the
aggregate, the Shareholders, on the one hand, shall bear 50% and Acquisition
and, following the Merger, the Surviving Corporation, on the other hand, shall
bear 50% of such aggregate Losses and Permitted Expenses in excess of
$1,000,000 ("Excess Losses and Expenses"). In order to effectuate the
foregoing and Section 2(a) above, the Shareholder Groups (in the fashion set
forth under Section 2(c) below) shall promptly make such payments to the
Acquisition Parties, and Acquisition shall promptly make such payments to the
Shareholder Parties, so that at any given time (i) the First $1,000,000 of
Losses and Expenses shall have been borne entirely by Acquisition and (ii) any
Excess Losses and Expenses have been borne 50% by the Shareholders and 50% by
Acquisition. In order to appropriately allocate among the respective
Shareholder Parties any payments provided by Section 2(a) above and this
Section 2(b) to be made to the Shareholder Parties, the Shareholders shall
designate the proportions or dollar amounts of the payments provided under
Section 2(a) above and this Section 2(b) to be made by Acquisition to the
respective Shareholder Parties. In order to appropriately allocate among the
respective Acquisition Parties any payments provided under this Section 2(b)
to be made to the Acquisition Parties, Acquisition (or, after consummation of
the Merger, the Surviving Corporation)
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shall designate the proportions or dollar amounts of the payments provided
under this Section 2(b) to be made by the Shareholder Groups to the respective
Acquisition Parties. Such designations by the Shareholders may be conclusively
relied upon by Acquisition and the Surviving Corporation, and such
designations by Acquisition or the Surviving Corporation may be conclusively
relied upon by the Shareholders.
(c) All liabilities and obligations of the
Shareholder Groups under this Agreement shall, notwithstanding anything to the
contrary contained in this Agreement but subject to the last sentence of this
Section 2(c), be borne severally and not jointly among the Shareholder Groups
pro rata in accordance with the percentage amounts set forth on SCHEDULE VI
hereto. Within each Shareholder Group, the Shareholders of such Shareholder
Group shall be jointly and severally liable for such Shareholder Group's
proportionate share of the liabilities and obligations of such Shareholder
Group under this Agreement. No member of a Shareholder Group shall have any
liability for any liability or obligation under this Agreement of any member
of another Shareholder Group, except that Xxxx and Xxxxxxx Xxxxxxxx shall,
notwithstanding anything to the contrary contained in this Agreement, be
jointly and severally liable for all liabilities under this Agreement of all
Shareholders (whether Xxxxxxxx Shareholders or otherwise).
(d) All liabilities and obligations of Acquisition
under this Agreement shall be joint and several liabilities of Parent and Sub.
3. Indemnification Procedures.
(a) The rights and obligations of each Party
claiming a right to indemnification hereunder ("Indemnitee") from the another
party or parties ("Indemnitor") shall be governed by the following rules.
(b) The Indemnitee shall give prompt written notice
to the Indemnitor upon any receipt of a Frydman Claim, providing a copy
thereof or, if the Frydman Claim is oral, a reasonable description thereof. No
failure to give such notice shall affect the indemnification obligations of
Indemnitor hereunder, except to the extent such failure materially prejudices
such Indemnitor's ability successfully to defend the matter giving rise to the
indemnification claim.
(c) In the event any Frydman Claim is brought
against a Party, then the selection of attorneys to undertake the defense of
all Parties and for the settlement of claims against all Parties shall be made
only upon the joint approval of the Shareholders on the one hand and
Acquisition (or, after consummation of the Merger, the Surviving Corporation)
on the other hand. Each Party shall have the right to employ his, her or its
own counsel in addition to the jointly selected counsel provided for in the
immediately preceding sentence in any such case, but the fees and expenses of
such counsel shall be at such Party's own expense unless there has been a
failure of jointly selected counsel to undertake the defense of such case
against such Party.
(d) No settlement of any Frydman Claim may be made
by any Party without the joint written approval of the Shareholders and
Acquisition (or, after consummation of
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the Merger, the Surviving Corporation) (which, with respect to money payments
only, shall not be unreasonably withheld), except that any settlement
providing for payments (when added to all other Losses and Permitted Expenses)
by all Parties equal to or less than an aggregate of $1,000,000 may be entered
into by Acquisition (or, after consummation of the Merger, the Surviving
Corporation) on behalf of all Parties; provided that such settlement entered
into by Acquisition on behalf of all Parties (i) provides for no relief or
remedy against any Shareholder Party, (ii) contains no admission of any
wrongdoing by any Shareholder Party, and (iii) contains an unconditional
release reasonably acceptable to the Shareholders of all Frydman Claims in
favor of all Shareholder Parties.
(e) The Shareholders on the one hand and
Acquisition (and, after consummation of the Merger, the Surviving Corporation)
on the other hand shall reasonably cooperate with the other in the defense and
settlement of any such Claim, shall consult together at reasonable intervals
as to matters pertaining to matters pertaining to any Frydman Claim, shall
keep each other fully informed as to any such Claim, shall make available to
the other all books and records of such Party relating to any such Claim, and
shall render to each other such assistance as may be reasonably required by
the other in order to ensure the proper and adequate defense of any such
Claim. Except as provided in Section 3(d) above with respect to certain
settlements, all decisions with respect to the defense and settlement of any
Frydman Claim shall be jointly made by the Shareholders on the one hand and
Acquisition (or, after consummation of the Merger, the Surviving Corporation)
on the other hand.
(f) Either of Xxxx or Xxxxxxx Xxxxxxxx (each a
"Shareholder Representative") may, but need not, give all notices, make all
determinations and give all approvals on behalf of all Shareholder Parties,
which notices, designations, determinations and approvals, so made or given by
a Shareholder Representative (all of which notices, designations,
determinations or approvals are hereby ratified and approved by all
Shareholders) shall be conclusive and binding upon all Shareholder Parties and
may be conclusively relied upon by Acquisition (and, after consummation of the
Merger, the Surviving Corporation). Neither Shareholder Representative shall
have any liability to any Shareholder Party for any act or omission in
connection with the immediately preceding sentence.
4. Miscellaneous.
(a) No Waiver. The failure of any party to exercise
any right, power or remedy under this Agreement or otherwise available in
respect of this Agreement at law or in equity, or to insist upon compliance by
any other party with that party's obligations under this Agreement, shall not
constitute a waiver of any right to exercise any such or other right, power or
remedy or to demand such compliance.
(b) Notices. All notices and other communications
hereunder shall be in writing and shall be delivered personally or by next-day
courier, to the parties at the addresses specified below (or at such other
address for a party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon receipt thereof).
Any such notice shall
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be effective upon receipt, if personally delivered or one day after delivery
to a courier for next-day delivery.
(i) If to any or all of the Xxxxxxxx Shareholders, to:
Xxxxxxxx Properties Corp.
1271 Avenue of the Americas, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
(ii) If to any or all of the Benach Shareholders, to:
Xx. Xxxxx Xxxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxx Xxxxx Xxxxxxx, Xxxxxxx 00000
(iii) If to any or all of the Aboodi Shareholders, to:
Alpine Capital Group
1285 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx Xxxxxx
(iv) If to the Xxxxxxx Shareholder, to:
Xxxxxx X. Xxxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx Xxxxx, Xxx Xxxx 00000
in each case, with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
(v) if to Acquisition or the Surviving Corporation, to:
c/o Xxxxxxxx Xxxxx Company
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxxx X. Xxxxxxx
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with a copy to:
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx, Esq.
(c) Descriptive Headings; Interpretation. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
References in this Agreement to Sections or Schedules mean a Section or
Schedule of this Agreement unless otherwise indicated.
(d) Entire Agreement; Assignment. This Agreement
(including the schedule and other documents and instruments referred to
herein), together with the Merger Agreement, constitute the entire agreement
and supersede all other prior agreements and understandings, both written and
oral, among the parties or any of them, with respect to the subject matter
hereof. This Agreement is not intended to confer upon any person not a party
hereto (other than Shareholder Parties and Acquisition Parties) any rights or
remedies hereunder. Except as otherwise expressly provided herein, this
Agreement shall not be assigned by operation of law or otherwise; provided
that from and after consummation of the Merger the obligations and liabilities
of Acquisition hereunder shall be obligations and liabilities of the Surviving
Corporation.
(e) Remedies Cumulative. No remedy conferred upon
or reserved to any party herein is intended to be exclusive of any other
remedy and every remedy shall be cumulative and in addition to every other
remedy herein or now or hereafter existing at law, in equity or by statute.
(f) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
giving effect to the provisions thereof relating to conflicts of laws.
(g) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
(h) Exclusive Arbitration. All disputes or
controversies arising hereunder shall be settled exclusively by arbitration,
conducted in New York, New York, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The prevailing party
shall be entitled to reimbursement by the non-prevailing parties of all
expenses, including reasonable attorneys' fees and expenses incurred in
connection with any such arbitration proceeding (including, any demand
thereon).
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IN WITNESS WHEREOF, this Agreement has been executed by the
parties as of the date first above written.
XXXXXX ACQUISITION, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
__________________________________
Name: Xxxxxxxx X. Xxxxxxx
Title: President
On behalf of each of the
XXXXXXXX SHAREHOLDERS
c/x Xxxxxxxx Properties Corp.
1271 Avenue of the Americas, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
By: /s/ Xxxx Xxxxxxxx
___________________________________
Xxxx Xxxxxxxx
By: /s/ Xxxxxxx Xxxxxxxx
____________________________________
Xxxxxxx Xxxxxxxx
On behalf of each of the
BENACH SHAREHOLDERS c/o
Xxxxx Xxxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxx Xxxxx Xxxxxxx, Xxxxxxx 00000
By: /s/ Xxxxx Xxxxxx
___________________________________
Xxxxx Xxxxxx
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OEA PARTNERS
c/o Alpine Capital Group
1285 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx Xxxxxx
By: /s/ Xxxx Xxxxxx
_________________________________
Name: Xxxx Xxxxxx
Title: General Partner
KADIMA PARTNERS
c/o Alpine Capital Group
1285 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx Xxxxxx
By: /s/ Xxxx Xxxxxx
__________________________________
Name: Xxxx Xxxxxx
Title: General Partner
/s/ Xxxx Xxxxxx
___________________________________
XXXX XXXXXX
Alpine Capital Group
1285 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
/s/ Xxxxxx X. Xxxxxxx
___________________________________
XXXXXX X. XXXXXXX
000 Xxxxxxxxx Xxxx
Xxxxxxx Xxxxx, Xxx Xxxx 00000
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