EXHIBIT 99.5
INDEMNIFICATION AGREEMENT
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INDEMNIFICATION AGREEMENT (this "Agreement") dated as of May 8, 1997
among AMERICAN BRANDS, INC., a Delaware corporation ("Parent"), ATIC GROUP,
INC., a Delaware corporation and, as of the date hereof, a direct wholly-owned
subsidiary of Parent ("ATIC"), XXXXXXXX GROUP LIMITED, an English private
limited company and, as of the date hereof, a direct wholly-owned subsidiary of
Parent ("New Xxxxxxxx"), and XXXXXXXX LIMITED, an English private limited
company and, as of the date hereof, an indirect wholly-owned subsidiary of
Parent ("Xxxxxxxx"). (ATIC, New Xxxxxxxx and Xxxxxxxx are herein sometimes
referred to individually as an "Indemnitor" and collectively as "Indemnitors".)
W I T N E S S E T H :
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WHEREAS, Parent, ATIC, New Xxxxxxxx and Xxxxxxxx have entered into a
Distribution Agreement dated as of May 8, 1997 (the "Distribution Agreement");
WHEREAS, the execution and delivery of this Agreement by the parties
hereto is a condition to the willingness of the parties to the Distribution
Agreement to consummate the Distribution (as defined in the Distribution
Agreement); and
WHEREAS, each Indemnitor will benefit from, and therefore desires to
facilitate the consummation of, the transactions contemplated by the
Distribution Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual
agreements, provisions and covenants contained in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Indemnification. Subject to and conditioned upon the Distribution
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(as defined in the Distribution Agreement) becoming effective, the Indemnitors
agree, jointly and severally, to indemnify Parent, its affiliates and each of
their respective officers, directors, employees, stockholders, agents,
representatives, successors and assigns, against and hold
them harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such indemnified
party arising from (i) any claim, investigation or proceeding alleging personal
injury, (ii) any claim, investigation or proceeding alleging fraud or (iii) any
other claim, investigation or proceeding, in the case of each of clauses (i),
(ii) and (iii), arising from smoking and health or fire-safe cigarette matters
relating to the tobacco business of Xxxxxxxx or any of its predecessors, present
or former subsidiaries, joint ventures or minority owned enterprises, including,
without limitation, any such matter arising from or related to the development,
manufacture, packaging, labeling, production, delivery, sale, resale,
distribution, advertising, marketing, promotion, use or consumption of, or
exposure to (whether occurring before, on or after the date hereof), any tobacco
products of Xxxxxxxx or any of its predecessors or research in respect of
smoking and health or fire-safe cigarette matters.
2. Procedures Relating to Indemnification Claims. (a) If any person
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(the "indemnified party") entitled to indemnification under this Agreement
should have a claim against any Indemnitor under this Agreement, the indemnified
party shall deliver notice of such claim with reasonable promptness to New
Xxxxxxxx, as the representative of the Indemnitors. The failure by any
indemnified party so to notify New Xxxxxxxx shall not relieve the Indemnitors
from any liability which they may have to such indemnified party under this
Agreement, except to the extent that the Indemnitors shall have been actually
prejudiced as a result of such failure (except that the Indemnitors shall not be
liable for any expenses incurred during the period in which the indemnified
party failed to give such notice).
(b) If a claim for indemnification hereunder relates to an action,
suit, investigation or proceeding against or involving the indemnified party,
New Xxxxxxxx shall assume the defense thereof with counsel selected by New
Xxxxxxxx. From and after the time that New Xxxxxxxx assumes the defense of such
matter, the Indemnitors shall not be liable to the indemnified party for legal
expenses subsequently incurred by the indemnified party in connection with such
defense. The indemnified party shall have the right to employ counsel, at its
own expense, separate from the counsel employed by the
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Indemnitors, but such counsel shall not have any right to participate in the
defense of such claim and New Xxxxxxxx shall control such defense in all
respects but Parent and such counsel shall have the right to be kept fully
informed of the progress of such defense. The Indemnitors shall be liable for
the fees and expenses of counsel employed by the indemnified party for any
period during which New Xxxxxxxx has failed to assume the defense of such matter
(other than during any period in which the indemnified party shall have failed
to give notice of the matter to the Indemnitors as provided herein). The
indemnified party shall not unreasonably withhold or delay its consent to any
settlement, compromise or discharge of such matter which New Xxxxxxxx may
recommend. The indemnified party shall not settle, compromise or discharge any
claim covered by this Agreement without the prior written consent of the
Indemnitors.
(c) The indemnified party shall cooperate with the Indemnitors in
their defense of any matter covered by this Agreement, at the expense (including
reasonable legal fees and expenses) of the Indemnitors. Without limiting the
generality of the foregoing, the indemnified party shall, at the expense
(including reasonable legal fees and expenses) of the Indemnitors, (i) provide
or cause to be provided to the Indemnitors with such information and assistance
as any Indemnitor may reasonably request to defend any matter covered hereby,
including without limitation in the case of Parent, the assistance of officers
and employees of Parent and, to the extent that Parent is reasonably able to
cause it to be provided, the assistance of directors, agents and others acting
on behalf of Parent, when reasonably considered necessary by any Indemnitor to
defend such matter, (ii) supply with reasonable promptness to the Indemnitors
copies of all correspondence and documents relating to or in connection with
such claim received or transmitted by the indemnified party and (iii) take or
cause to be taken such action as the Indemnitors may reasonably require to
defend a claim covered hereby. Except as required by law or legal process,
Parent shall not, and, to the extent within Parent's reasonable control, shall
not permit any of its affiliates, officers, directors, employees, agents or
others acting on its behalf to, take any action or make any admission which
adversely affects or could reasonably be foreseen to adversely affect the
defense of any matter covered
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hereby or that could reasonably be foreseen to be covered hereby and shall not,
and shall not permit any of its affiliates, officers, directors, employees,
agents or others acting on its behalf to, make any adverse public statement
regarding any such matters.
(d) If an indemnified party shall have received full payment (an
"Indemnity Payment") required by this Agreement from an Indemnitor in respect of
any indemnifiable losses and shall subsequently actually receive proceeds of any
insurance policies or other amounts in respect of such indemnifiable losses,
then such indemnified party shall pay to such Indemnitor a sum equal to the
amount actually received (net of increased insurance premiums and charges
related directly and solely to such indemnifiable losses and any expenses
(including reasonable attorneys fees and expenses) incurred by such indemnified
party in connection with seeking to collect such insurance proceeds or other
amounts, and up to but not in excess of the amount of any Indemnity Payment made
hereunder). The parties acknowledge that an indemnified party shall not be
required to seek recovery of any proceeds of insurance policies. An insurer who
would otherwise be obligated to pay any claim shall not be relieved of such
responsibility, or have any subrogation rights with respect thereto, solely by
virtue of the indemnification provisions hereof, it being expressly understood
and agreed that no insurer or any other third party shall be entitled to any
benefit they would not be entitled to receive in the absence of the
indemnification provisions hereof.
(e) In determining the amount of any indemnifiable losses, such amount
shall be (i) reduced to take into account any net Tax (as defined in the Tax
Allocation Agreement between Parent, New Xxxxxxxx and Xxxxxxxx) benefit realized
by the indemnified party arising from the incurrence or payment by the
indemnified party of such indemnifiable losses and (ii) increased to take into
account any net Tax cost incurred by the indemnified party as a result of the
receipt or accrual of payments hereunder (grossed-up for such increase), in each
case determined by treating the indemnified party as recognizing all other items
of income, gain, loss, deduction or credit before recognizing any item arising
from such indemnifiable losses.
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3. Representations and Warranties of the Indemnitors. The
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Indemnitors jointly and severally represent and warrant to Parent as follows:
(a) New Xxxxxxxx is a company incorporated and existing in England
under the Companies Xxx 0000, Xxxxxxxx is a company incorporated and existing in
England under the Companies Xxx 0000 to 1980 and ATIC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Each Indemnitor has all requisite corporate power and authority to
enter into this Agreement and to perform its obligations hereunder. All
corporate acts and other proceedings required to be taken by each Indemnitor to
authorize the execution, delivery and performance of this Agreement have been
duly and properly taken. This Agreement has been duly executed and delivered
by each Indemnitor and constitutes a legal, valid and binding obligation of such
Indemnitor enforceable against it in accordance with its terms, subject to the
qualification, however, that enforcement of the rights and remedies created
hereby is subject to bankruptcy and other similar laws of general application
relating to or affecting the rights and remedies of creditors and that the
remedy of specific enforcement or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
(b) The execution and delivery of this Agreement by each Indemnitor
does not, and compliance with the terms hereof 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 to any person under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any person under, or result
in the creation of any lien, claim, encumbrance, security interest, option,
charge or restriction of any kind upon any of the properties or assets of it
under, any provision of (i) its articles and memorandum of association, (ii) any
material notice, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment, agreement or arrangement to which it is a party or by
which any of its properties or assets are bound or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to it or its
properties or assets, other than, in the case of clause
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(ii) above, any such items that, individually or in the aggregate, would not
have a material adverse effect on the ability of it to perform its obligations
hereunder. No consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, is required to
be obtained or made by or with respect to each Indemnitor or any of its
affiliates in connection with the execution, delivery and performance of this
Agreement by it. Parent acknowledges that it is aware of the terms of the
various contracts which have been or will be entered into by the Indemnitors in
conneciton with the Distribution Agreement and transactions associated
therewith, including those material contracts set forth in the Listing
Particulars prepared for the introduction of ordinary shares of Xxxxxxxx Group
Plc to the official list of the London Stock Exchange.
4. Covenants of the Indemnitors. The Indemnitors jointly and
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severally agree as follows:
(a) Subject to Section 4(b), each Indemnitor will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence in accordance with its respective organizational documents
and all laws applicable to the maintenance of its corporate existence; provided
that ATIC may liquidate and dissolve as provided in the Distribution Agreement.
(b) An Indemnitor shall not consolidate with or merge into any other
person unless (i) the person formed by such consolidation or into which the
Indemnitor is merged shall be duly organized and existing under the laws of the
jurisdiction of its organization and shall expressly assume, by an instrument
supplemental hereto, executed and delivered to Parent prior to or
contemporaneously with the consummation of such transaction, the performance of
the obligations of the Indemnitor under this Agreement; and (ii) prior to and
immediately after giving effect to such transaction, the Indemnitor shall not be
in default in any material respect of its obligations under this Agreement.
(c) With the exception of bona fide charitable contributions, an
Indemnitor shall not license, convey or transfer any assets on other than
commercially reasonable, arm's length terms.
(d) An Indemnitor shall not convey or transfer, or cause to be
conveyed or transferred, any portion of the "brand assets" of the Indemnitor,
consisting of existing and future trademarks, trade
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names, package dress, blends and know-how, to any person or persons, unless (i)
the person or persons acquiring such brand assets by conveyance or transfer
shall be duly organized and existing under the laws of the jurisdiction of its
organization and shall have expressly assumed, by an instrument supplemental
hereto, executed and delivered to Parent prior to or contemporaneously with the
consummation of such transaction, the performance of the obligations of the
Indemnitor under this Agreement in respect of any existing or future liability
arising out of or in any way associated with the brand assets being conveyed or
transferred; and (ii) prior to and immediately after giving effect to such
transaction, the Indemnitor shall not be in default in any material respect of
its obligations under this Agreement. The restrictions set forth in this Section
4(d) shall also apply to the conveyance or transfer of the shares of a more than
50% owned subsidiary that directly or indirectly owns such brand assets, but
shall not apply to conveyances or transfers of brand assets that are or were
used exclusively in connection with a tobacco product brand "house" or franchise
that, at the time of such conveyance or transfer, represents less than 0.5% of
the unit volume of the Indemnitor in the U.K. in respect of such tobacco product
or to the conveyance or transfer of the shares of a subsidiary that directly or
indirectly owns such brand assets and no other brand assets. For purposes
hereof, it is expressly acknowledged that the name of the manufacturer of a
tobacco product, when used as such and not as a trademark element, is not of
itself an indication of a single brand "house" or franchise.
(e) An Indemnitor shall not license, or cause to be licensed, to any
person or persons any U.K. cigarette brand asset that is or was used in
connection with a brand "house" or franchise representing more than twenty
percent of the Indemnitors' collective cigarette unit sales in the U.K. at the
time of such license, unless the Indemnitor shall have complied with the
provisions of Section 4(g). The provisions of this Section 4(e) shall not apply
to licenses of trademarks or trade names outside the U.K., European Union,
European Economic Area, European Free Trade Association and countries otherwise
subject to the free movement of goods principles as established under the Treaty
of Rome, or of package dress, blends and know-how incidental to such trademarks
or trade names wherever situate.
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(f) Except for (i) transactions in the ordinary course of business
(including bona fide charitable contributions); (ii) transactions the proceeds
of which are reinvested in the business of the Indemnitor; or (iii) the payment
of dividends or share purchases or redemptions out of "profits available for
distribution", as currently defined in the Companies Act of 1985; an Indemnitor
shall not convey or transfer, or cause to be conveyed or transferred, in one or
a series of transactions in any period of ten years, an aggregate of more than
25% in market value of the business or assets (including brand assets) of the
Indemnitor, unless the Indemnitor shall have complied with the provisions of
Section 4(g). For purposes of this Section 4(f) the value of the businesses or
assets conveyed or transferred shall be taken at the respective dates of their
conveyance or transfer and the limit (i.e., 25% of the market value) shall be
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calculated at the date of the last such conveyance or transfer. In calculating
the value of the businesses or assets conveyed or transferred for purposes of
this Section 4(f) there shall be excluded any conveyances or transfers to which
Section 4 is not applicable by virtue of the application of Section 4(h) and any
transaction where the provisions of Section 4(g) have been observed.
(g) An Indemnitor shall not engage in any transaction that is
restricted under Section 4(e) or 4(f) unless, in each such instance, (i) the
person or persons acquiring assets by such license, conveyance or transfer shall
be duly organized and existing under the laws of the jurisdiction of its
organization and, in addition to any assumption of obligations required under
Section 4(d), shall expressly assume, by an instrument supplemental hereto,
executed and delivered to Parent prior to or contemporaneously with the
consummation of such transaction, the performance of the entire obligations of
the Indemnitor under this Agreement; and (ii) prior to and immediately after
giving effect to such transaction, the Indemnitor shall not be in default in any
material respect of its obligations under this Agreement; provided, however,
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that the acquiring party's assumption of obligations hereunder, exclusive of its
separate obligations, if any, under Section 4(d), shall be limited in the
aggregate to the total consideration paid by the acquiring party in respect of
such license, conveyance or transfer.
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(h) The restrictions on consolidations, mergers, licenses, conveyances
and transfers in this Section 4 shall be applicable to transactions with any
parent, subsidiary or affiliate of an Indemnitor as well as transactions with
any unrelated person or persons, but shall not be applicable to a transaction
with a person (including an Indemnitor) who has previously assumed, without
limitation, the performance of all the obligations of the Indemnitors under this
Agreement or transactions with a wholly-owned subsidiary of an Indemnitor
insofar as such subsidiary is subject, without limitation, to the constraints of
this Section 4.
(i) Notwithstanding any other provision of this Section 4 to the
contrary, no conveyance, transfer or license requiring the transferee to assume
indemnification obligations under this Agreement shall be valid unless Parent
may directly enforce the provisions of this Agreement against the party to whom
the assets are being conveyed, transferred or licensed notwithstanding that
Parent is not or may not be a party to such conveyance, transfer or license.
(j) No consolidation, merger, license, conveyance or transfer
permitted under this Section 4 shall limit or affect the obligations of any
Indemnitor hereunder.
(k) At the request of any party that is or may become subject to the
terms of this Agreement, Parent agrees to discuss in good faith the modification
of the provisions of this Section 4.
(l) For the avoidance of doubt nothing in this Section 4 shall
prohibit the conveyance and transfer of the assets of ATIC in accordance with
the Distribution Agreement, in the course of its liquidation and dissolution,
and no such conveyance or transfer shall be taken into account under Section
4(f).
5. Notices. All notices, requests, claims, demands and other
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communications required or permitted to be given hereunder shall be in writing
and shall be delivered by hand or sent by prepaid cable or telecopy or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, cabled or
telecopied, or if mailed, ten days after mailing (two
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business days in the case of express mail or overnight courier service), as
follows:
If to Parent:
American Brands, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to
American Brands, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Secretary
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to New Xxxxxxxx, Xxxxxxxx or ATIC:
Xxxxxxxx Group Plc
Members Hill
Brooklands Road
Weybridge
Surrey, KT 00 0XX
Xxxxxxx
Attention: Group Legal Advisor
Telephone: 000-00-0000-000-000
Facsimile: 011-44-1932-832-536
With a copy to
Xxxxxxxx Group Plc
Members Hill
Brooklands Road
Weybridge
Surrey, KT 13 0QU
England
Attention: Company Secretary
Telephone: 000-00-0000-000-000
Facsimile: 011-44-1932-832-536
or to such other person or address as the addressee may have specified in a
notice duly given to the sender as provided herein.
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6. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
7. Entire Agreement. This Agreement contains the entire agreement
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and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. None of the parties hereto shall be liable or bound to any
other party hereto in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein.
Notwithstanding the foregoing, nothing contained in this Agreement shall be
construed to relieve New Xxxxxxxx from any other indemnification obligations it
may have under the Distribution Agreement and the Tax Allocation Agreement but
an indemnified party shall not be entitled to recover in excess of the
indemnifiable losses it suffers.
8. Jurisdiction. Parent and the Indemnitors each irrevocably submits
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to the nonexclusive jurisdiction of (a) the Supreme Court of the State of New
York, New York County, and (b) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement. Each of Parent and the Indemnitors agrees that
service of process, summons, notice or document by hand delivery or U.S.
registered mail to such party's respective address set forth in Section 5 hereof
shall be effective service of process for any action, suit or proceeding brought
against Parent or such Indemnitor in any such court. Parent and the Indemnitors
each irrevocably and unconditionally waives any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement in (i) the
Supreme Court of the State of New York, New York County, or (ii) the United
States District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
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9. Applicable Law. This Agreement shall be governed by and construed
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in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.
10. Amendment; Waiver. No amendment, modification or waiver in
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respect of this Agreement shall be effective unless in writing and signed by all
parties hereto. No delay or failure on the part of any party in exercising any
rights hereunder, and no particular or single exercise thereof, will constitute
a waiver of such rights or of any other rights hereunder.
11. Titles and Headings. Titles and headings to sections herein are
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inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
12. Severability. Any provision of this Agreement which is
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prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. Warranties. Each party hereto acknowledges that it has not been
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induced to enter into this Agreement by any representation or warranty other
than those contained herein and, having negotiated and freely entered into this
Agreement, agrees that it shall have no remedy under this Agreement in respect
of any other such representation or warranty except in the case of fraud.
14. Rights. The rights, powers, privileges and remedies provided in
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this Agreement are cumulative and are not exclusive of any rights, powers,
privileges or remedies provided by law or otherwise. No single or partial
exercise of any right, power, privilege or remedy under this Agreement shall
prevent any further or other exercise thereof or the exercise of any other
right, power, privilege or remedy.
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15. Successors and Assigns. This Agreement and all of the provisions
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hereof shall be binding upon and inure for the benefit of the parties hereto and
their respective successors and permitted assigns. None of the Indemnitors may
assign its rights and benefits under this Agreement, either in whole or in part,
without the prior written consent of Parent. Parent may assign its rights and
benefits under this Agreement, either in whole or in part, provided that (a) the
person or persons acquiring the benefit of such rights and benefits shall be
duly organized and existing under the laws of the jurisdiction of its
organization, (b) prior to or contemporaneously with the consummation of such
transaction, the Parent delivers to each of the Indemnitors (i) an instrument
duly executed and delivered by the assignee(s) for the benefit of the
Indemnitors containing the agreement by the assignee(s) to be bound by and to
observe and perform the provisions of this Agreement and (ii) an opinion of
counsel in form and substance reasonably satisfactory to the Indemnitors that,
from and after such assignment, the assignee(s) will be bound by and required to
observe and perform the provisions of this Agreement and that the Indemnitors
may directly enforce the provisions of this Agreement against the assignee(s)
notwithstanding that the Indemnitors are or may not be parties to such
assignment and (c) prior to and immediately after giving effect to such
transaction, the Parent shall not be in default in any material respect of its
obligations under this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
AMERICAN BRANDS, INC.
By /s/ Xxxxxxx X. Xxxxxxx, XX
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Name: Xxxxxxx X. Xxxxxxx, XX
Title: Senior Vice President
and General Counsel
ATIC GROUP, INC.
By /s/ X.X. Xxxxxxx
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Name: X.X. Xxxxxxx
Title: Vice President
XXXXXXXX GROUP LIMITED
By /s/ C.T. Xxxxxxx
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Name: C.T. Xxxxxxx
Title: Director
XXXXXXXX LIMITED
By /s/ X.X. Xxxxxxx
--------------------------------
Name: X.X. Xxxxxxx
Title: Director and Secretary
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